tv U.S. Trade Representative on 2019 Budget CSPAN July 27, 2018 1:09am-4:00am EDT
hearing on capitol hill. later this morning, remarks from retiring so bring court justice anthony kennedy. here is what is live on friday. on c-span, we will continue our look at the opioid crisis. congressman cummins and warrants will lead a conversation in baltimore with local state and federal officials. u.s. a panel discussion on relations with syria and iran. and a 2:00 eastern we get an update on the u.s.-north korea nuclear talks. on c-span2, the head of the u.s. customs and border protection will talk about agency operations and challenges at the border. that begins at 9:30 eastern. u.s. trade representative robert lighthizer said the trump administration does not intend to give federal aid to any businesses except for farmers who might be hurt by foreign tariffs.
>> good morning, everyone. the hearing will come to chairman: good morning, morning. our witness today is ambassador robert lighthizer, the u.s. trade representative. welcome, thank you for the moment we had a few minutes ago, to have a conversation. i thank you for coming here to testify before our subcommittee today. the office of the u.s. trade representative is responsible for coordinating u.s. international trade, commodity and overseeing trade negotiations with other countries.
week, representatives from mexico and the eu are in washington for various trade discussions. that tammy is appropriate. -- the timing is appropriate. trust a great opportunities for higher standards of living for es anders, business farmers. u.s. tr tor the succeed, congress nice to make sure the necessary resources are available to carry out their important mission. the administration has requested $53 million for ustr in its fy 19 budget request. we consider the funding needs, we must also be mindful of the administration's trade strategy.
ambassador let heiser, and or your leadership, we have witnessed a significant increase in the u.s. trade activity in what i consider to be a major policy.n for example, you issued a letter on may 18, 2017, shortly after your confirmation, addressed to congressional leaders about the ustr's intention to renegotiate nafta. you stated that nafta was "out dated and does not reflect modern standards." wasthat i the ustr committed to renegotiating with timely results. more than a year later, the process is still underway. we look forward to an update on these efforts of ongoing negotiations. i do not think it would be a surprise to you that many were concerned or are concerned about efforts to renegotiate nafta, especially considering the administration's seemingly nonchalant attitude toward potential termination of that
agreement. understandably, many are even the concerned about administration's direction today, because in addition to nafta, the ustr is at the heart of a trade this youth with china, following u.s. findings by an investigation in section 301. i applaud the administration's effort to crack down on china's unfair trade actresses and i hope you can update us on how negotiations are going with china. that tactics we now see, where the united states proposes tariffs, china response, and so forth, appears to have gotten china's ascension, but more tariffs can best china's attention, but more tariffs can not be the answer. to u.s.l cause harm farmers, manufacturers, u.s. families, workers and businesses. those very people that the ustr is designed to help. the effects of the currrent tariffs are real, and many
farmers in my home state of kansas and throughout the united states are feeling the pressure. a former in kansas, fifth-generation family of farmers where they gross way beans, corn, wheat and also raise cattle -- they and many of their neighbors will begin fall harvest in a couple of months. the increased prices was. have already reduced from income, which has fallen by 50% in 2013. it is driving kansas farmers like them to the edge. all told. estimated $361n million of kansan exports being threatened by these terrorists. bottom line, trade and exports are hardly earn a living in kansas, and farmers, ranchers and our nations manufacturers cannot afford a prolonged trade war. thank you for joining us this morning, i look forward to your
testimony. i would now like to recognize the ranking member of this committee, senator shaheen, for her opening remarks. sen. shaheen: thank you for being here this morning, i appreciate it the opportunity to speak with you early this week. the senate commerce bill for provides $57.69 million for the united states trade representative, as well as an additional $50 million for the trade enforcement trust fund. in total, the bill provides nearly $73 million for ustr. level with the $10 million more 2014 omnibus bill, and the $10 million more than requested in the fiscal year 2019 budget proposal. as you know, ustr can play an role innstrumental creating a level playing field for american businesses and workers, and at this time, expanding markets for u.s. companies and removing foreign trade barriers.
unfortunately, like senator moran, i'm concerned that these tools are being used in a way that is hurting american businesses and antagonizing allies and letting other countries set the rules of the road for global trade. as we discussed, i appreciate the need to get tough with countries that cheat or abuse the rules but we can't cause an unnecessary trade war with our allies and puts american companies at a disadvantage. chairman moran outlined the impacts that the trade war with china has had on farmers in kansas. we are seeing some similar negative effects in new hampshire. i have heard from a number of small businesses in my home state who have had deals canceled and market access shrink. last week, i visited a small business in new hampshire called moon light eatery. meatery.
they had a deal killed by the retaliatory effects on american wine. this would have doubled their output, and for a small business, that meant a lot. what is happened, is that they have had to lay off employees and they have been hit by the increased cost of aluminum because of the tariffs on steel and aluminum. another new hampshire small business little bay lobster company, that sold 50,000 pounds of lobster to china each week -- that is quite a lot of lobster -- can no longer find a buyer after ustr imposed the section 301 terrorist. china retaliated with a 25% tariff that drove up the price of u.s. lobster. meanwhile, canadian lobster companies can sell their products to china at a much lower price and little bay is worried they'll lose their market permanently. when it is not just the agriculture sector. -- section 301 tariffs. i'm hearing from high-tech, value added manufacturing companies about the negative effects of the administration's trade policies. these are well paying jobs and
growing sectors in new hampshire like the aerospace and defense industry. industries in which we have a competitive edge in the global market that are now being disadvantaged by retaliatory tariffs and higher costs of raw materials. so, for example. manufacturing solutions corporation is a manufacturer of circuit boards. this company was close to winning a $5 million contract to build circuit boards here in the united states. but as a result of the tariffs imposed by the administration, the contract will likely go to a chinese competitor, creating chinese jobs. that ifately, i worry we continue in this direction, this will just be the tip of the iceberg, and that if left unchecked, the trade war will have dire ramifications for the american economy.
so, ambassador, we clearly have a lot to discuss the riyadh i look forward to your testimony and to having you here today. thank you. >> senator shaheen, thank you. ambassador lighthizer again , welcome to our subcommittee. i expect a robust conversation. we'll begin with your comments and testimony this morning. robert mr ambassador, you need o turn on your microphone, please. robert: members of the subcommittee, it has been 14 months since i was confirmed as the united states trade representative. it's been a very busy year for our agency. i'd like to take you through a few of the highlights. we have been renegotiating the north american free trade agreement at an unprecedented speed. this would be the first comprehensive renegotiation of the u.s. trade agreement. as part of this process, we have consulted with congress as required by the tpa.
hopefully, we are in the finishing stages of achieving an agreement in principle, that will benefit american farmers, workers, ranchers and businesses. we are also finalizing revisions to the u.s./korea free trade agreement. we have arrived at an agreement with the koreans to strengthen the domestic truck manufacturing here in the u.s., allowing more trucks to enter their market without regulations and fix a whole host of related issues related to agriculture, pharmaceutical products and other products. we are actively engaging in efforts to commence new trade agreements including the newly announced eu initiative from yesterday. after the confirmation of my deputies in mid march of this year, i instructed ambassadors mahoney and garris to work with congress and work with their
foreign counterparts to find future partners for future agreements. we are speaking with a number of countries in southeast asia and sub saharan africa. i will be happy to talk about that further. if you're interested. we have taken two action on two investigations, one for solar products, and the other for washing machines. these are the first investigations since 20001. 1. both cases involved a tremendous amount of work, each resulted in an affirmative itc recommendation with the president largely accepting the recommendations of the international trade commission. we have seen success in domestic manufacturing as a result of those actions. at the direction of the president, ustr has been leading the section 201 efforts to combat unfair chinese intellectual property practices. in march of this year, we published our report and identified several major
problems, including forst technology transfer, none practices,censing state-funded strategic acquisitions of u.s. technology, and cyber theft. in response to the chinese actions, the president directed implementation of several measures including a wto case which we brought. targeted tariffs, strengthen export controls and rigorously addressing direct investment in critical technologies. we are also pursuing and defending numerous actions at the world trade organization. we are actively litigating ten offensive disputes. defending 21 disputes and participating as third party in another 20 cases. in addition to these major initiatives, ustr runs a host of other programs and deals with many trade issues on a day to day basis. we operate the generalized system of preference program,
the african growth and opportunity act program, we monitor the many trade agreements we have in place, we prepare and publish numerous reports on trade, we lead the interagency process for developing trade policy, and we work on a daily basis with our foreign country hearts, to reduce barriers to u.s. trade around the world. finally i would like to touch on the budget of ustr. in fy 2017, we were appropriated $62 million. with an option of deriving funds from a trust fund that was set up in 2015. our appropriation for 2017 was 57 point $6 million, plus $50 million in the trade enforcement thrust fund. we are grateful for the added appropriation and we are focused on making the best use possible of it.
$1557.6 million, plus million in the trade enforcement thrust fund. we are grateful for the added appropriation and we are focused on making the best use possible of it. for fiscal year 2019 the president's budget request $63 million to support this staffing increasing and focus on priority areas. i thank the committee members for your time and i look forward to answering your questions and discussing the president's trade agenda. >> ambassador, thank you. we will not begin a series of questions by members of the subcommittee. particularly with a focus on japan and asia. we have written testimony submitted to the committee on finance this year, and it stated that ustr would aggressively pursue other free trade agreements. that's something i fully support. japan is one of the united states' largest markets for eat and other products. japan is currently negotiating and enacting new trade agreements with eu and canada and other trading nations. how is ustr ensuring a level playing field specifically with
regard to japan, when they are completing free trade agreements with other nations, to the exclusion of the united states? perhaps you can speak more broadly as to the ongoing efforts to establish new free trade agreements. robert: on the issue of new ftas, i did state as you said in the beginning, that it is the president holocene. when he decided he did not want to stay in the tpp that he would negotiate ftas with other countries in that region, as well as in other areas, that process was delayed somewhat by the fact that our deputies were not confirmed until about three months ago. since then, we have one deputy who is worrying about talking to
congress and talking to potential trading partners in east asia and another in sub-saharan africa. we have divided it up. he spent a fairmont of time with respect to both. it is not -- we spent a fair amount of time with respect to both. it's not appropriate for given tpa to announce what we'll do because we're still in the process and we have to consult with the congress, then we have to make an announcement, and wait 90 days before we can negotiate. but, i will say that we are close to beginning negotiations in each area. there are a number countries if , if you deal first with east asia, who are interested. some have different advantages over the others. one that we particularly liked , is the philippines. i think it would be a good first agreement. it is in a good location and there are a lot of advantages to it. of sub-saharan
africa, we have talked to a number of countries and a number have asked rest interest. we are trying to make the decision of which want to start with. our view is that you want to have a model agreement. we want one where there are clear advantages to u.s. manufacturing agricultural sales and what is in the model is something we can use with other people. so it's something we are actively doing, as i tried to date in my opening statement. we are very busy, and we are not a huge agency. having said that, this is a very high priority. in terms of japan, our relationship with japan is a very good relationship. the president met with the prime -- a couplea of months ago in mar-a-lago. they have had several meetings. in that meeting, he was quite clear about the nature of some of our trade problems. we have had a chronic trade deficit with japan. had, in that case,
what we consider to be unfair barriers to u.s. exports in a number of areas. one that would come to mind in your case, of course, would be beef, because that's a principle one when you think of the tpp , but also primarily japan. we set up a structure where we take, we are involved in the negotiations on that. we'll have a meeting probably in the next, certainly in the next 30 days. it is being set up right now. we have a fairly aggressive agenda. right now, it is the japanese position that they don't want to enter a new fta agreement with the united states. but, they are willing to work through a variety of issues and that's something we would expect to do. our sense is that we ought to be negotiating the fta with japan. me getambassador, let another question in, before my time is fully expired. i applauded the administration
for successfully concluding negotiations in a china in 2017 to allow u.s. beef act exports resumption into china after they were blocked in 2003. however, the 25% retaliatory whichs on u.s. beef, stems from that investigation threatens to halt those exports , and certainly any expansion. so on one hand, we had the opportunity to high 5 and brag about beef going to china. that opportunity seems to have disappeared, and most concerning is what the growth potential that exists in china, what it does to our opportunities to sales.ing u.s. beef can -- let me i speak for a second about beef with china. i think it's a good example of what we are facing with china. so, the president's strategy, was the strategy of prior
administrations, was to initially engage in a dialogue with china. we clearly have a chronic problem with china, we have a trade deficit with china. at my than $175 billion, a lot of which is not the result of real economics, but really, a result of state capitalism. so ten years ago as a result of negotiations because of their unfair practices, china agreed to allow u.s. beef in, 10 years ago. over the course of the next ten years, they didn't let that the in, because they've made that promise, but they did not keep the promise. the president during the 100 day period, when he decided, i will try a dialogue first, had a dialogue. as a result of that they agreed to let beef. let's be clear though. the amount of u.s. beef that was eligible to come in was less than 3% of u.s. production, so it wasn't meant
to be a panacea, although a lot of people thought it would. the result the last time i saw the numbers this was something like $60 million worth of beef sold in all of china. i guess to me, the china beef situation is one example of what we are facing with china, mesh it is more an example of what we're facing with china than it is actually a solution. we really thought -- we really thought that we would be able to sell beef with hormones and the normal u.s. production of beef into china for a long period of time. we don't think they have a wtr right to keep us out. so while we made some headway in there, you are right, they did take it away. the question not with beef, but with all of the members and all of the retaliation, this may not be the appropriate time to raise eight, i will do it on somebody else's time, if you would like, but, we have to discuss why
we're doing any of this. because there clearly is pain associated with what we're doing and the president is very sympathetic to not only cattle ranchers, but to everyone else. a lot of ag and a lot of over people who are being, who are we believe, unfairly treated as a result of our attempt to level the playing field. >> ambassador, i am sure this issue will come up among my colleagues. senator from new hampshire. you, mr. chairman. that was a good segue into my question. as i mentioned in my opening comments, i had opportunity last week to visit one of the small businesses that as you point out is being hurt by the policies of the administration. moonlightmpany called meatery. they make a beverage classified as a wine, from honey. i talked to the owner about the fact that we're having this hearing and you're coming before ,he committee, and i asked him what he would like me to ask you about the administration's policy. and as you can see, i have
posted it, he said -- i'd like to ask them what the plan is. i'd like to ask them why are they asking small businesses to bear the brunt of this policy. it doesn't seem fair. so, how do you respond my small business owner? robert: first of all, we talked to the same small businesses and farmers and ranchers a lot. the president is very sympathetic and i'm personally , i'm very sympathetic. it is certainly not our plan to small businesses, or agriculture or anyone else in america, feel the brunt of a change in trade policy which is designed to make the u.s. stronger and richer and help our exports and help small businesses, and farmers and ranchers. that is our objective. sen. shaheen: sorry to interrupt. but do you have a time frame for when you think this objective is going to be achieved? robert: let's talk about that.
first of all, you have to start with the proposition that you think there's a problem. you think that an increasing deficit is a problem. that's the first thing we believe there is. and something different has to be done. you have to kind of divide it up. if you look at nafta, i believe we are very close. if somebody asks about that, i can take some time to talk about that. sen. shaheen: please do. robert: then there are a whole lot of other actions that we're taking. but on the specific question of china, the reality is, it is going to take time, i believe. sen. shaheen: can you talk about what's, what is our trade deficit, because as i have looked at the numbers, if you add in services it isn't a deficit, it is actually a surplus. robert: with respect to, i'm sorry -- sen. shaheen: the total robert: the numbers are approximately $800 billion. good deficits we have about a 250 services surplus. so we have a substantial deficit any way you cut it.
now, there are some countries where the argument that you are making comes up. somebody might have raised it in that concept, countries rather is this data point, and we make that point. but overall, it is clearly a very negative trade situation. but if you do not accept that, then everything we are doing doesn't make sense. but we think it is clear, that in the case of china, they are acting inappropriately. taking advantage of an open u.s. using state capital, taking u.s. jobs and u.s. wealth area and we think it's clear and -- u.s. wealth. we think it's clear and something has to be done to defend u.s. workers and this company. sen. shaheen: so you have the administration has, the administration has proposed $12 billion in aid to farmers who are being hurt by this policy. are you also talking about aid the small businesses like those
in new hampshire, being hurt by this policy, and how do you distinguish between the two? robert: well, i think there are a lot of people across the economy that are being negatively affected. we believe, unfairly, by predatory practices. particularly by china, but also other people. we don't think anybody was otherwise to take up a kind of action -- i would take a step back and say, a lot of these same companies and agricultural producers are also negatively affected by all the auditory practices that have led to the $800 billion goods traded deficit. i don't want anybody to think that would have some kind of level playing field. these are the same people who are suffering as a result of our bad trade deals and bad trade policy over a long pair word of time. i don't know this person's business of course, by not a lot about agriculture and other businesses. there are a lot of other people
facing unfair trade, and their own businesses are suffering. but it is kind of like the status quo, they haven't really focused on it. it is the view of the administration that agriculture has been particularly targeted by retaliation as a result of the kinds of actions we are doing to try to level the , and therefore, the president, the secretary of a culture in place this program. sen. shaheen: so, you are not contemplating that type of assistance for other small businesses that are being hurt or this trade war? robert: not at this time, no. sen. shaheen: thank you. i'm out of time, many chairman. mr. chairman. >> senator alexander? sen. alexander: welcome. mr. ambassador, until yesterday, the tariff taxes that the administration had placed began to look like i have got a problem so i'll shoot myself in one foot. i have a problem, so i will shoot myself in the other foot. for those who think that it is not hurting, the wall street
journal this morning says, rising commodity prices from early steel, shaved about $300 million from their second-quarter results. most of it, they blamed on the metals tariffs. both companies by almost all there's deal from you as juicers their steel from u.s. producers. steel accounts for 53% of the material in typical automobile , and aluminum, 11%. in tennessee, that is bad news, because it had 929 auto parts suppliers. they almost all use steel and aluminum. three big car companies, that's 100 36,000 workers, a third of our manufacturing force. -- 136 thousand workers, a third of our manufacturing force. that's not good for us. it's not good for a lot of other people in tennessee and electrolux canceled an expansion because of steel prices going up, even though they buy all their steel in the u.s. our big tire companies have to buy cord for the tires from
overseas, because it is not made in the united states. so they pay an extra price to riyad. bush brothers cans their beans in the united states and the steel plated cans they have to buy, we have a company in dixon, tennessee, that chose between china and the u.s. moved to tennessee. then suddenly, on their gas grills, steel prices are up 40% because of us and retaliatory tariffs raise it even more. so they're making a loss on every gas grill they export to europe and canada. they wish they had moved to china instead of the united states. now, that's the bad news. the good news is, that what the president that at the g7, what he said about a week ago, and what he said yesterday, is that we are headed to what is zero tariff, zero subsidy policy. that is what it should be, he said.
i agree with that, no elected ask you a couple of things about how we get there. obviously, we are familiar with such a thing. the north american free trade agreement is essentially a zero tariff agreement with a few exceptions. it took us a couple of years to get to that point, but we got there. japan and europe are negotiating the same kind of deal. so, as we take a step toward a zero tariff agreement which we in tennessee, and i imagine in this country, would a reasonable step one be to make the tariffs the same between the united states and europe on cars and trucks, which should be , the tariff on trucks, led trucks, and 2.5%, the tariff on cars? and as we begin to do this, my second question, and i will let you take the rest of the time, how quickly than, when we get rid of the steel and aluminum tariffs? because if we're moving toward a zero tariff policy obviously we
, obviously, we don't want to raise the price of steel 40% in the u.s., which would have this year according to the steel in this is, because you cannot make a truck in tennessee with steel up 40%, and sell it competitively in the united states or export it to europe. so how, would that first step seem reasonable to you, the one i just described? and steel and aluminum tariffs number two, how quickly can we get rid of the steel and aluminum tariffs so we can be competitive in the zero tariff environment? robert: thank you, senator, for that question. first of all, the basic philosophy that we have, is that we want free trade without their ears. that is what the president wants. it.on't see we see ourselves as being treated unfairly. so then the next question is, what do you do about that? one idea is to talk and see if over a period of time you can
make change. our sense is that's been tried and tried and tried and tried, and the deficit goes up and up and up and up. so, the president check or idea idea- the president's is we have to do something more dramatic. >> in the short time we've got what about the idea of the same tariff for cars and trucks in the united states and light trucks in the european union? robert: i would say first of all, the idea of zero subsidies, but also we need zero standards. you can't have nontariff barriers to trade. we could have the same tariff and not be able to sell anything to somebody because they have a trade tariff there we my opinion, you cannot cherry pick specific -- you have to be careful cherry picking specific , becausers or trucks some countries have an advantage over others, and some don't. but you picked steel and aluminum, you did that and you drove the price of it up 40% since genera generally.
robert: i will talk separately about the steel and aluminum but , but philosophically, you have to have agriculture as part of it. you can't just do trucks and cars, which i believe, would greatly favor the european union as opposed to the united states are a lot of other manufacturing products that would greatly benefit the united states, and agriculture for sure. agriculture is one of the areas where we make class x. and a lot of other product that we make. so i think the idea, i agree with you that it is completely right, the idea is to pick a number of things, we have a balanced package, and moved to an environment where you don't have tariffs, when you don't have subsidies. because that is an important part. you cannot compete with someone who subsidizes. you can't compete with someone who is subsidized. then you have to worry about nontariff barriers to trade. it is a little complicated, but you cannot have zero tariffs, you can't ship there.
the final thing i would add is, you have to do something on services to make a balanced package, because that is another area that the united states has a huge advantage. the idea of doing trucks or cars by themselves would favor europe and lead to the increase in the trade market. and it would hurt the u.s. automobile manufacturers. 232 ourssue of the objective is, the president's objective is as we do these deals that we, we have done this in the case of korea and other countries, we set up a mechanism whereby they don't pay the tariffs as long as they don't take all the benefit that's supposed to go to the steel and aluminum producers. they can ship duty free in the united states up to the historic level so they don't get the benefit of it.
but on the section 232, generally, the first question you have is, you have to conclude that there is a problem. they, aluminum and that were in jeopardy, the presses were unfairly low. the action doesn't make sense. the president believes that was a necessary step. therefore after that, the objective is to try to accomplish what we believe to be a good -- and in the next round, i would be have a to talk more about this. i think the basic -- you and i have talked about these things. the basic idea, i ink, is exactly what the president was to do. he wants to get to a position where the u.s. is competing with countries,'s specifically on phases,l -- bilateral and on a no barrier bids, and then let the united states, let pure economics make the decision. if that's the case he's convinced, i'm convinced and i
know that you are convinced, that we're going to win. we'll do just great in an environment like that. chairman: senator manchin. sen. manchin: thank you, mr. ambassador. i appreciate you being here. a lot of questions to be asked. i come from the state of west virginia, got destroyed with nafta. so we might look at it differently and people might be surprised at my take on all this. i don't disagree with the president taking the tough stand, and the very unorthodox way that he is going about it. i want to make sure that's fairness to the trade deal. i want free to be fair. with all that said, do you believe that these deals that we make around the country or around the world if you will, should be more bilateral than multilateral? some countries are taking advantage by tacking on a country that we might be trying to help. the other part of the question would be, do you believe that there should be a sunset review on these, because nafta has been what, 27 years?
afterd think that about five years, you should have a review. did it meet the intent of what we did the deal for? there is a reason to these trade deals. we don't want to do any harm to anyone in the united states. we want to make sure we're helping ourself too. that would be my first question. i'll go on to my second one after that. if you could answer on that one, there? robert: thank you, senator. first of all, i would say that the president believes, and i believe, and both of us for a long favored of time, believe that the united states is better off in bilateral deals. we have more leverage. if we were in a position where we were a small country, we'd be far better off getting with other people. sen. manchin: everyone says there was a mistake for not staying in the tpp. i wasn't a fan of tpp, because of that. robert: we gave up a lot of our leverage. and they're much harder to enforce. you're in a position with 5 countries. you are in an agreement with
five countries and if you have a problem with them, what do you do? you don't get out of the agreement, right? because it messes up the agreement. if you have an agreement with one country, and you're the united states of america, you can enforce your rights under that agreement. so, to me, it is pretty clear. on the issue of sunsetting? sen. alexander: i'm not saying sunsetting. i said the sunset review. we review we met the intent, the findings of why we did the deal. robert: yes, i think we should have a sunset review, absolutely. i think the basic idea of a free trade agreement is this. : we are not talking about mfn trade, we're not talking about a level playing field. what we're saying to the country is, we will give you better access and we are giving the rest of the world, and you give us approximately an equal amount of that are access. it's not mfn. mfn is at the wto. what we're saying in the nta
notionally is, we will give you an advantage in our market. you give us an approximately equal advantage in our market. it is reasonable to say that after a period of time and after economies change and evolve, to say, did we give them approximately or equal to what got? it will be good for some people, for sure, right? but over all for the country, because of the nature of an fta you should sit down and review whether or not it was the deal you wanted. sen. manchin: i know some of my colleagues in different states are getting hurt in different ways and they'll express that today, as you already heard. i don't think it in what he intends about to the. but can we have a correctness to this unfairness? and what type of a time period do you think it would take? the president has taken an unorthodox approach to it. he hit some hard things, it to make some adjustments, i am looking for results. do any harm want to to american manufacturers, producers, growers, whoever it may be in the categories. the thing about china that i knew about, they're telling me that we basically only imported about 2% of chinese steel. so china produces 50% of the world's steel.
they were basically using every gimmick they could to get to our markets through other venues. camouflaging that. was that parte had with china and the $500 350-500,000,000,000 dollars trade deficit that exasperated it? robert: the answer to that is yes. let's talk about steel with china, because it's not just a steel problem with china, but an example of the chinese industrial policy. for noneconomic reasons they created a beyond enormous steel industry. not for economic reasons. they basically did the 3 state capitalism. to give you a relative idea, in the united states, we make something just south of 100 million tons of steel. they make 1.1 billion tons. i mean, and they have created all of this in the last few years. sen. manchin: what do you they consume? what does china consume of what they produce?
robert: i am going to guess that their conception, they probably have $300 billion worth of excess capacity. one million tons, 400 million tons. sen. manchin: so they're intentionally overproducing? robert: basically what they did is, they created it largely to get rid of imports and then they kind of, as if things do, it got out of control. then they ended up so big that they swamped the entire market. the entire world. then everywhere you look, ever wrote you look in every country -- every country you look, chinese excess capacity has heard the steel industry. it is across the board, everywhere in the world. in first, there is a group, the steel forum. that is all they do, they meet and talk and complain about this. i say it's more an example of the problem. you have the same thing with aluminum and with solar. the same thing with any number of high-tech products. in a review, you cannot be in a position where we are the
residual of chinese state capitalism. we have to stand up for ourselves and make sure that market forces determine who survives and who doesn't survive. the steel industry is a classic example of that. the world steel problem is entirely a chinese problem. sen. manchin: i know my time is up, but you see a timetable on basically the correction of this unfairness of trade? because we don't want to trade war. i think we definitely need a correction, and there is some pain ongoing with this correction. can you give us an idea of some time? robert: tamika might have to kind of take it, problem by problem. renegotiating nafta -- i think we are close to a point that we'll have that finished. we had problems of a much smaller scale with korea and we have resolved that issue. i have a whole list of smaller ag but no one is going to give me the time to
read, but notionally, know that it is there. senator, you already heard the list so i'll let you tell your colleagues. but there's a lot going on. that's all by way of saying that china is a longer term problem. that isn't to say we'll be in a trade war with china in my , in my judgment. but i think we have to change the dynamic. the direction we're going in right now, these are numbers, $375 billion in goods and deficits. and every piece, not as a result of economic forces. those are numbers that are not sustainable, never even heard of in the history of the world. they are just such cataclysmic numbers, that something has to be changed. what the president focused on, because it's the most important our study that alluded to, which is the basis for all of these terrorists -- it is a study started in august, -- i apologize for running over -- it was a study for eight it to yourommend staff, to read it. many of you already have.
this is the basis, the reason we're putting tariffs on in this area. because i had worked on the hill, in the back i put in nine charts so that members could go through the charts and not have to read the thing. so that they understand the basis. we are taking this action, because technology is the future of the american economy. this is our ultimate competitive advantage is technology. , is technology. and, if we don't change the direction, our kids are not going to have the kind of economy we want. this is a study that i really commend, because it's the basis , and it is really a well done study. a lot of people who don't agree with us on trade have read this study and said, you are right. sen. manchin: thank you. i'll take your assurance that my colleagues were delighted what say, and therefore, will not take any additional questions. senator collins? sen. collins: thank you, mr. chairman. welcome, ambassador. let me say thank you for sending
maine last month to meet with our lobstermen, dealers and processors. since that visit, regrettably, the situation for the lobster industry has worsened. china is admittedly a very bad actor when it comes to trade. but we have to be sure that the actions we take don't end up hurting our own domestic producers. china, since that meeting, has slapped a retaliatory tariffs on maine's lobster, our state's largest export. it generates about $1.5 billion in economic activity in my state. exports of maine lobsters to china had nearly tripled during the past 3 years. compounding the problem facing the industry, is the new trade agreement between canada and the european union.
it is known as ceda. it has eliminated and phased out tariffs on frozen, live and processed canadianaian lobsters, canadian lobsters that go into the european union. so american lobster exporters are at a serious disadvantage, because they're now facing tariffs of between 8% and 30% to sell into the european union, which used to be a very profitable market, accounting for approximately 15% to 20% of the annual american lobster exports. so when you combine what's happening with canada with the , with the retaliation by the chinese, my lobster industry is saying to me, how are we going to survive while the administration works out its long term plan? that's my question to you.
robert: well, thank you, as you. i am of course, know, very familiar with the problem, and the issue. ambassador mahoney who was behind me, was my deputy who wants to maine, and you are of .ourse -- who went to maine you are of course completely right, lobste lobster men from maine are both targets of the chinese, but also have this unfortunate circumstance that the relationship between the between the eu and canada has also taken away one of their markets. the good news is, this is something we can now focus on in our talks with the. it's very much something that's -- focus on in our talks with europe. it's very much something that's on our mind and something that hopefully we can rectify in the context of those talks. the european part of it, the
china part of it is the same problem we have in all the things that they targeted. by the way, i want to make it too, there is no wto. that's no international trade law justification for them taking the actions. they did it completely as rogue nations. we brought a wto action against them for that. in the case of china and the specific retaliation, we are always willing to talk to china. we think managing that is not be, not just for the lobster industry, but for others , managing the relationship will nequire a lot of effort and a attempt to try to minimize the effects as we move forward on all the industries that are targeted by them. but i do thin'n the european side in the not too distant future that we can rectify that problem. that's before other things that started.
there were certainly because of you and some of your colleagues, it was something that was very much on our radar screen. sen. collins: thank you. the second question, i will have to ask you to respond for the record, since my time will be up at the time i have finished the question. it has to do with the section 232 national security tariffs on steel and the impact on american small american manufacturers. i'd like to give you a specific example from the maine. it is a 183-year-old family owned business called hussy seating" in northborough work, maine, and it manufactures seating for distribution across the globe. this is what is happened. prices for domestically sourced steel have risen significantly to match the tariff price of imported steel. so, over all, steel costs for
the company have increased approximately 45% over the same. last year. the problem is, this small manufacturer has locked in contracts well before beginning project, but it did not anticipate a 45% increase in the cost of steel. there are other companies that my state stone well , kitchens, in york, maine, our maple syrup industry, blue are processors, they worried about the retaliation from canada in risk runs to the 's section 232 decision. my question for you is, aren't we risking doing tremendous
damage to our own domestic industries by using the national security justification against some of our closest allies? and i know my time has expired,, but if i could have an answer for the record, i would really appreciate that. thank you. chairman: thank you, senator collins. senator reid? sen. reed: that thank you, mr. chairman. i think i'm going to follow-up up on senator collins' threat is there a threat to justify section 232? robert: so -- sen. reed: is that a yes or a no? robert: well, that was the beginning of the answer. you have to start with the proposition that you think you need to help the steel industry , for example. if you're going to do it, you have to do it globally. you can't help the industry by just putting on tariffs against one country. because -- first of all, we have
terrorists on china, and the problem comes in from other resources. so, if your decision is, we will have the u.s. pay higher prices steel, to save an industry, you make that decision, where the price increases are worth the pain -- people have different ideas of where that pain is, but this is logically how you would do it -- you cannot be in a position where all the benefits of that, for example, come into or go to the canadian steel manufacturers. you have to be in the position where the benefit, if we are paying the price, the benefit goes to the united states steel producers. so you have to do something to stop -- it's another long had a great comment, which was, if you have one hole in the net, all the official swim through if you give it enough time -- you have to be in a position not to have a hole in the net.
not to suggest that we think army tanks are going to come in from canada. but, if you made a decision that it is in the national interest to say the steel industry, then you have to put in place a program that works, that requires not having holes in the net. now we are down to a yes or a no? is canada a national security threat to the united states justifying section 232? robert: because of the steel, yes. otherwise you have a problem. reed: you have identified a country, the basis for the action against canada is a threat to the national security of the u.s.. you have walked around that question for the last several minutes in the income the whole program has to go into effect. let me put it another way, ok? this is a country that has sent forces to afghanistan, those of themsome
unfortunately, have given their lives in a joint effort to the states. it is a country since the 1950's has been maintaining our early warning for attack from the soviet union, and now, russia. this is a country who uses our equipment, this is a country who has been with us every step of the way, and i guess, again, are they a national security threat to the united states justifying legally the imposition of this 2 32? robert: and, my answer is, if you are of the of any and that the 232 is justified, because of the need to preserve, then you have to put in place a provision , a program that actually works. and that means, every country has to have, you cannot let, you cannot let all the steel come in from another country, otherwise the program doesn't make any sense. that is the context. nobody is declaring war on
canada, or say that they are on unfriendly neighbor. they are obviously not. they're a great ally. certainly one of america's closest friends and closest trading partners. but if you decide that you need to protect an industry, you can't be in a position where the protection is of no value. sen. reed: but your decision is based -- you decided that you for theo do something industry, or not do something for the industry, then you have climbed onto section 232, because it's the only available legal status of the president. that ms is the national security of the united states area i don't know what kind of data or information you have that would show that canadian of steel or any other products, would impair the functioning of our steel industry. i don't think it has a good legal basis, what you are doing. robert: i mean, that's the fundamental question. the fundamental question, do you think, it's not, in my judgment,
-- it is not about canada or mexico, or europe, it is about -- the think having a steel industry is a national security issue? if you conclude it is, then you have to put it, if you conclude to -- then you don't need sen. reed: no, that is not true. listen, ambassador. mr. ambassador, ok. what else can we invoke 232 for? robert: i'm sorry? sen. reed: can we use it 232 to protect hollywood or the entertainment industry? robert: i'm sorry? sen. reed: can we use 232 to protect the entertainment industry? because we want to maintain the entertainment industry in the united states? china is a threat to us. france is a threat to us. those new wave films are just cutting the heck out of us -- you are using national security as kind of a generalized
premise -- and i don't think a afterpremise, -- to go individual countries that are frankly, ironically, contributing more to our national security than, well, they're contributing a lot. let me stop the want to talk about secret tariffs. it has clearly rattled my state. our seafood-- industry is the number one in salmonte and with our exports, our salmon went to china over the last five years.
about a third of our salmon has been exported to china. of our card went the china. us. is very significant to we are trying to figure out what this means not only to our fishermen, but our processors and the just six industry. the 10% retaliatory tariffs puts even more pressure on our seafood processes because many of our fish and shellfish that are harvested are then process -- processed in china before reimported back to the united states for domestic distribution. in many ways, we are looking at this and it is imposing a 10%
tax on our own seafood which is tough to reconcile. pretty well inng china, making significant steps towards reducing the tariffs imbalance we had seen. headed is a drop to about 6% and everything , again, a month or so ago. wehave been doing everything can to further that trade toationship with china really help balance things out and it seems that the plane we backon has now been set and has been set back in really a debilitating way. keep in mind, this follows on
the heels of russia cost retaliation to u.s. sanctions back in 2014 when there was an embargo on american seafood import. haselt the impact of that been about a $40 million loss. the previous administration did not take any steps to address that. we have that we are dealing with now. we're looking at these additional foreign markets at risk and i listen to senator andins and her description what she has going on with tender. it is akin to what we are seeing here. my fishermen and processes, everyone is part. what is the plan?
we thought we had a pretty good plan and now everything has been called back. how can you give that assurance that iseafood industry not just critical to alaska, but to so many of our states? >> thank you. we have heard from a number of problem.at have a that is very unfair to the thate much in the same way agriculture has been targeted, but also -- for a >>ay interrupt because they have been impacted as you say, similar to farmers, is it my understanding that any
of this aid that is directed to corporal commodities, i look at that and i don't see there would be any allowance for a fisherman. don't get me wrong. looking for ort supporting what they consider to be this bailout. they are interested in knowing would this encompass them as well? because of the impact they have seen?
if there is going to be relief, we would assume that someone looked at these reliefs. it is my understanding they are .sing existing programs agriculture expert. >> but some of those existing funds, for instance in the purchase and distribution program have been used in the past to actually help alaskan markets purchased surplus that is then donated. if you are taking from this program to benefits that would go exclusively to the agriculture sector, then you are putting us at further
disadvantage. i don't mean to be rude or interrupting. >> i understand completely why it is an important program -- important problem in specifics to your state. a legitimate question. i'll -- is there a plan for seafood? i will do that. the other thing, i guess, i would say is that it is -- it's no comfort to the people that are in that position, but we can't -- the chinese -- what the chinese are doing, if you agree with us that it's intolerable or if you take it to another step and say it involves some other national -- some national security issue, it's -- we have to figure out some way so specific people are not targeted, but we can't be in a position where china has the
on/off switch whether we do things at our natural interest by being able to unfairly attack various constituents. that's the nub of the problem, but on the specific question about the program and seafood specifically, i'll go to the department -- we'll go to the department of agriculture and get back to you with an answer. i mean, i'm not -- i -- i agree, you're raising significant and important questions. my time has expired. senator schatz. thank you, ambassador, for being here.
i want to follow up on senator reed's question under 242 for steel tariffs and follow up because you are considering automobile tariffs. and i quote, because, imports are weakening our internal economy. it does seem to me that you're looking at using 232 because it's sufficiently broad and gives you discretion to assert not that we need to secure our own supply and our own capacity, for example, for industrial ship building if we have to do a war buildup, but rather the basic argument is anything that hurts our economy, hurts our national security and, therefore, can -- hang on. first of all, am i getting that right? >> i don't think it's fair to say anything that hurts our economy is national security, personally.
so it's a question of scale, but it's -- hold on. it's a question of scale but not a question of category because when people think that 232 is being invoked for the purpose of steel, there's a kind of nexus you may infer. i thought you were saying initially that we may be able to build our own stuff in case we need to build up for a war. you didn't make that assertion. you said anything that hurts our economy sufficiently is a national security issue. which is why you're movinging to automobiles. it seems like anything that's large enough, even if there is no direct nexus to national security, even if we're offending our greatest allies, that you are now in a position where you're arguing we're going to use 232 with near impunity. >> well, i guess in the first place i'm not arguing at all and i'm certainly not arguing that we use 232 on everything in the economy. if i gave you that impression, i want to change that impression right now. that's not my position at all. with respect to the action the president took on steel -- why don't we cover automobiles. you can tell me why automobile
tariffs should be justified under the national security process. i will also just layer one more question, which is, did this actually go through the nsc? did this go through a proper national security process? because the reporting about it, and i'd love for you to correct the reporting if necessary, is that this originated from the white house and usdr and then they sort of papered over it to comply with the statute. but there's not a lot of national security professionals that think this is -- was leng legitimately done. >> just so all the members understand, 232 has nothing to do with usdr. it didn't give with usdr because this is the department of commerce program. it has nothing to do with the united states trade representative's office. i didn't do the study. i was involved in policy discussions about what the solution should be, as were the national security adviser, all the appropriate national security -- the department of -- you should that statute. it's want my statute. i'm not responsible for it. under that statute it's a decision -- the study is done by the department of customers in consultation with the department of defense. so, the defense secretary -- i
>> i know how the -- i don't have a lot of time. i want to get one more question in. >> i'm sorry. >> the question i have, following up on senator murkowski and senator shaheen's questions, it seems we're playing chicken with china. and the fundamental disadvantages that we have are numerous, but among them are that they take a 50 or 100-year view, and because we're a democracy, we take every two years view. and we are trying to stare these folks down. now, we freed up $12 billion, which we're going to borrow from china, right, to soften the blow of our own policies because we just drove our own prices down by 20% and somehow, we've decided that that increases our own leverage. but if i'm china, i'm looking at the united states saying you
have bipartisan upset, you have farmers and ranchers and fisheries and manufacturers and just about everybody across the country in a panic about this. and i would wait us out because why would you stare down a non-democracy? they can incur more pain over more time than we can because we all have an obligation to our own small businesses and large businesses who are not just on the edge of having a bad year, but on the edge of shutting down or losing contracts forever. so, even if you come back and it's, you know, 18 months from now and the price of soybeans are now 14 bucks up from 8, we've lost our contract. so, how do we have leverage in a situation where they have unending patience and we have almost none? >> that's a long question and
i'm prepared for a long answer. first of all, you say the chinese are clever because they have a 50-year view. we should be clever and have a two or three-year view. that doesn't make any sense to me. >> i believe that -- >> no, i'm saying we have a democracy so we take a shorter term view because we're responsible to our voters periodically. so, does that mean that democracies always lose to authoritarian government? does that mean the state capital -- no, sir, it just means you don't pick stupid fights. look, if your conclusion is china taking over all of our technology and the future of our children is a stupid fight, then you are right. my view is that's how we got where we are. i don't think it's a stupid fight. i don't know a single person that's read this report that says china should want be able to come in and steal the future of american industry.
to me, that doesn't make any sense. >> i'm not suggesting we have any disagreement about our end goal, but that's like telling me -- you're like a golf pro saying, hit it in the middle of the fairway. everybody wants to hit it in the middle of the fairway. everybody wants better trade deals. we're doing it badly right now. that's what's happening. >> tell me what to do, senator. i've run out of time. thank you. >> senator boozman. >> excuse me. thank you, chairman. thank you, ambassador, for being here. first of all, i want to congratulate you and the president, the team that worked on the european situation and hopefully now that we have a framework, we can get in a very timely fashion, actually get that nailed down, which is so, so very important. i'd like to talk to you a little
bit about some specific things going on that are really dislocating short-term and long-term. just this week a constituent contacted me regarding the hardwood lumber manufacturing industry. virtually all the quality u.s. hardwood lumber, which is primarily manufactured in the south and appalachia is exported to the chinese market. since u.s. tariffs have gone into effect their purchases of our u.s. hardwood lumber have not decreased but, essentially, have ceased. prices are in free-fall, markets have collapsed, mills will be closing unless the issue is resolved fairly soon. it's been said that short-term pain, long-term gain. we understand that and i don't disagree with what you were saying just now. you know, we have to get these problems done, but in these real arkansas towns, these really rural arkansas -- not only arkansas, but these rural towns throughout the south, it's not a matter of the mills just shutting down, you know, these are very rural areas that the community shuts down. so, i guess what i would like to
know, if you're aware of that particular issue, and the way that we can allay that is to open other markets to take the place of the chinese market. i guess i would like to know what we're doing in regard to that until we get this sorted out. >> well, yeah, thank you, senator. first of all, thank you for being there and supporting the president when we made our announcement yesterday. and i do think it's a significant decision. a significant initiative and hopefully one that will come to fruition in as brief a period of time as reasonable. not just the ones because of china but other trade problems is to find new markets, is to open up new markets. and the president is committed to doing that. he's committed to doing it on a bilateral basis.
the effort has, as i say, been delayed somewhat because it took -- i won't get into the process, but it took a long time to get people confirmed. in my own case it took a number of months. in the case of my deputies, it took even longer. but ultimately they're in place. it's a very high priority for us to open up markets in east asia, but in other areas, too. the european initiative is an approach we have, as i say, negotiations going on with japan and opening up markets in these specific areas is something that we have as an objective and something we should do. i should say this just generally to members, or to member staffs, that to the extent there are business people that come in and have specific problems, i know you bring them to us, but everyone should bring them to us, part of what we do is try to solve these issues as they come up, but the other part is we put in the specific company situations into the metrics we use to negotiate with other people. because there are situations where when we're trying to
decide -- i'm saying, who should we negotiate with in east asia, for example, initially, and you look at a situation where there are real sales by real u.s. companies that can benefit from it. i mean, kind of a classic -- like an example of the problem is not one that affects your situation, but a classic example of the problem is you look and you say, the philippines imports cars from japan because they have an agreement that they can come in duty-free. our cars can't come in duty-free. therefore, we can do an agreement with the philippines where we can now ship our cars there and it won't cost the philippines anything at the margin because we'll get the benefit, take market share away -- can you talk to uses quickly, there's lots of situations where there simply aren't other products being made in the country. j.b. hunt was up here testifying yesterday about the containers. there are no domestic manufacturers here of that product. we have another company that
makes drill bits. they're the only company in the united states that make the drill bits. they're stuck with a 25% tariff on the stuff they use to make the drill bit. it comes from the uk. their competitors, though, are able to bring that in with the drill bit being made in the uk and so, you know, they're at a tremendous disadvantage. what happens with these companies that there is no other supply in the united states? how do we get around that? i would say, now we're talking about the steel program specifically. well, again, this is not a steel. this is just another component that's gotten caught up in this. >> so, if there are -- if it's a product coming in involving steel or aluminum, there's an exclusion process. in the case -- >> but is the exclusion process, is that done in a timely fashion? >> well, that exclusion process -- i'm sorry for being long about this but i want to be clear.
that exclusion process of steel and aluminum is done at the department of commerce. i'm not involved in it. but i -- but it needs to be done in a timely fashion. with respect to the chinese tariffs, so we have -- the president announced -- this is slightly complicated and i apoll gisz. he announced $50 billion in tariffs we could take because of the theft of intellectual process. it was made by economists. this is one part of what the chinese did that was calcuable was $50 million. so he announced a series of measures. he says -- one to put in place is $50 billion worth of tariffs. here's an ail-- and then we have a hearing. people in this situation come forward and say, hey, this has
this peculiar circumstance on us, as you would suggest. and as a result of that hearing, we had three days of hearings, now i'm at usdr, not the other thing. as a result of that, we took $16 billion out of the 50 and said, no, we don't want to do this because people came in and made the argument you're making. this is not going to effectively help us, it's going to hurt us. we'll say we'll take the 50, reduce it by 16 and we put the 34 in place. that's what we did. and then we said, now, to make up that, we're going to go to the rest of the chinese imports and find another 16 using the same algorithm. with respect to the 34 that's in place, people can come in and make an exclusion process that we have at the -- at ustr who have peculiar circumstances. so, that's one answer to that --
to your question. the other answer is, there are people who will come in and say, i'm having this effect and this downstream product is in the same circumstance. we should have a tariff on them, too. there's a small element of that where people will come in. when we're looking at this, we try to do this. all of this is complicated and only justified if you think the objective is justified, right? if it's -- if it's not worth the battle, then none of this makes any sense. if you think it's significant, then we have to go through this to make it as painless and as fair as we can make it. that's basically the process we have. thank you. thank you, mr. chairman sdmroop
thank you for giving me the opportunity to explain that because i wanted to lay that out a little bit. we've been very lenient in our time. it's important to hear what you have to say and it is a very complicated subject matter. senator van hollen. >> thank you, chairman. thank you, mr. ambassador. i agree with your analyses about china's long-term plan to essentially steal a lot of u.s. advanced technology. and as you said, they do this over a long period of time. some of the most egregious examples of chinese companies that have stolen u.s. technology is waway and zte. here's what tech crunch said about zte just a couple months ago. quote, to get a sense of just how egregious zte's behavior truly is, we need only to consult pacer, the national index of federal court cases, a search of pacer reveals that in the u.s. alone, zte has been sued for patent infringement in astonishing 126 times just in the last five years. they go on to give other examples of how zte in collaboration with the
government of china has engaged in wholesale theft of u.s. technology. which is why there was bipartisan support here in april when secretary ross and the department of commerce imposed the denial order on zte. and i was astonished when we let them off the hook. and i want to know why we let them off the hook. here's what president trump tweeted out. he said, quote, too many jobs in china lost. commerce department has been instructed to get it done. and then he ordered the department of commerce to reverse the denial order on zte. one example of where we actually hit them where it hurts as opposed to them hitting us where it hurts, like on agriculture and fisheries. the congress on a bipartisan
basis in the nda bill, we passed legislation to reimpose the original order. the administration lobbied furious furiously against it. zte hired a lobby firm here in washington that spent $1.3 million in a few months and got their way. they thought it was money well spent and, damn right, it was well spent. as a result of the administration's actions, they took that provision out of the ndaa bill, which has come to the floor of the senate now. now, you were asking senator schatz what he would do differently. and i want to know why we let zte off the hook when they have an astonishing record of engaging in exactly the kind of wrongdoing you talked about while every national intelligence and defense person says they pose an espionage threat, and why after they were caught violating our sanctions against north korea and iran, flagrantly and repeatedly, we finally did the right thing, and then for god knows what reason the president changes his mind. it's exactly the kind of
situation you're talking about. where we had an opportunity to really send a strong message. why did we reverse that decision? >> well, first of all, senator, i agree with you that zte is a bad actor. they were determined to be so by the obama administration and they took action against them. and they were determined to be so by the trump administration. now, you can make an argument as to where the line is, what you end up, what you do. they were punished, in your view, in the view of a lot of other people, is that it wasn't a sufficient punishment. it was the largest fine in history. it was requiring them to change their management and it was putting in place the first time ever a monitoring system inside the company -- mr. ambassador, i'm aware of what they did. it was a large fine. look, this is a company that just spent $1.3 million in a
couple months to lobby. i mean, this is a slab onp on the wrist given where we had them. we had them caught red-handed, not only with sanctions but it was an opportunity to address the issue that you have been talking about very passionately. and i appreciate it. they have been exhibit at"a" of flagrant violators. if we're serious about this, how can we let them off the hook? did you support the decision to let them off the hook? >> i guess what i'm arguing is that they're not let off the hook. what did we get for it? what did we get in terms of your efforts? >> i don't think we should be trading away national security, but i want to know is when we let them off the hook because the department of commerce had imposed the denial order. they imposed it. it was going to be in effect for eight years. now it's not. now they get to go back to doing business. yes, there will be some more oversight. but i want to know what we got
for it? what did we get for it, mr. ambassador? i guess he don't know what you mean by what we got for it. these are negotiations. they are retaliating against us on a whole range of issues with regards to the steel tariffs. this is something president xi was personally upset about, the denial order on zte, the export denial order. and i want to know why we backed up and since we backed up, what we got for it in this negotiation. well, i guess i would say the question is, what's the nature of the remedy. it's an enforcement action. it's not -- if your question is, was there a tradeoff in the context of what i do, no, there was no tradeoff in anything i do.
>> here's what i'm worried about. were you surprised when china retaliated, imposed retaliatory tariffs on agriculture and fisherfish fisheryies and all these things? did that surprise you? >> no. >> ok. you did file something at the wto where you said they were violating the wto rules, right? and i believe they are, right. and you weren't surprised they did that, right? i'm sorry? you were not surprised that they violated wto. i don't think they've lived up to their wto obligations in almost -- i don't want to say in almost, but in many, many respects. here you're talking about these
negotiations. we have them in little boxes. you're doing this. secretary of commerce doing this. i don't know why we would ever let them off the hook on zte when it was the one thing where we really had them squeezed. what you're telling me is that was in anybody else box and we got nothing out of it. here's the other thing president trump tweeted out. when you're in a position like united states where you're losing on trade, trade wars are good and easy to win. he tweeted that out just a few months ago. after hearing the testimony about the retaliatory tariffs that have been imposed by china and your inability to say when this is going to end, and i agree with you. it's really hard. do you disagree this is going to be, quote, easy to win? i think, senator, what the president's -- i just -- is it easy to win? and what is winning? well, i -- i mean, to me, winning is opening up their
market. that's right. have them stop stealing our technology and to change their -- i won't want to say change corporate capitalism -- i mean, state capitalism. i don't think you're ever going to do that, but change its negative effects on us. that's what we have to do. and we have to manage that over a period of time. and i think what the president is saying is when you -- when things have been going so badly for so long. and, you know, this is not -- we have to remind ourselves, this is not a situation that we created. this has been going on -- i could bring the charts and show them to you. i could if you want. you can see we have a pattern of how we reacted to chins in this case. i'm really not contesting that. i'm not disputing the fact that for a long period of time we've been put at a disadvantage. what i'm arguing is that it's, number one, not easy to win. and i think you've said that. we got to figure out a strategy. but it's damn sure not easy to win when you let them off the hook on a company like zte that has been one of the most flagrant violators in terms of stealing u.s. technology, is an espionage threat and violate our
sanction laws repeatedly and flagrantly. if we're really going to be in this, let's be in this and not play ping pong on issues when the costs are so potentially high in the united states. thank you, mr. chairman. senator van hollen, thank you. senator caputo. thank you, ambassador, for being here. i come from state of west virginia. senator manchin said it correctly, trade agreements have not been traditionallily very helpful to our small state. that's why i join you in advocating for fair trade and protecting american jobs. i want to talk a little about the auto tariff and frame it. we have a toyota company, a toyota plant in our state, 1600 employees. we have peripheral businesses associated with that. but if you track what happens in that supply chain, the raw aluminum comes from canada. it goes to a toyota plant in tennessee that makes the engine
block. the blocks come to west virginia, where we make the six-cylinder. very well. we make the six cylinder engines as well as the transmissions. half of those engines go from west virginia back to canada where they're dropped into the lexus rx and brought into this country for sale. we have a lot of cross-border -- crisscrossing the borders. we have a supply chain that is wholly wrapped up with us and our ally, the friendly nation of canada. i'll go back to what is the essence of a lot of questions we've had which is, what is the end game here? if people are looking at making additional investments, which we through our tax reform bill, that was a large part of our tax reform bill, was to bring about more investment in this country. we're seeing that happening. we don't -- we're finding a chilling effect because people aren't seeing an end game. so, my question is, you've addressed it slightly in saying, there is an end game, particularly as. comes to canada and mexico. i'm not looking for a date certain, but i'm looking for some more certitude in your statements to help lay these issues to rest. >> thank you, senator. i would say i think the --- we have a whole -- we have a whole variety of problems.
i think the one you're addressing is the nafta issue generally. it is our hope -- i'm meeting this afternoon with the mexican side on the nafta deal in a discussion, including the representatives of the new -- of the newly elected government in mexico. my hope is that we will, before very long, have a conclusion with respect to mexico and that as a result of that, canada will come in and begin to compromise. i don't believe they've compromised in the same way the united states has or mexico has. in terms of timing with respect to nafta, i would say the following -- if you assume that you're going to have president nieto sign an agreement, a new agreement with the united states, which is to say the current president of mexico,
there has to be 9s 00 days' notice before, so he loses office on december 1st. if you go back 90 days, that takes you to around the end of august. so, if we're going to have him sign it with the consent, of course, of the newly elected president and the president of the united states signing it and hopefully the canadians, you're looking at having a conclusion some time during the course of august. my sense is that's not an unreasonable time frame if everybody wants to get it done. that's what our hope is, senator. >> thank you. that's much more definitive. on the statements yesterday, the president talked about the eu markets opening up to american energy.
something i'm very interested in with the lng markets. i'm curious to know on that aspect, in terms of the eu obviously wanting to diversify their energy mix, we know they've been reliant on russia for a lot of their natural gas. i guess, is that a geopolitical decision by the eu to -- something we can provide a good bargaining chip for us? is that how that whole thing is coming about? well, i tend to just stay in my own lane and guessing at their geopolitical objectives is something i'm probably not very good at. having said that, there is always discussion about their reliance on energy coming from the east and they're spending a lot of money to create infrastructure to deal with lng. once again, that's not my area to guess, but it certainly is logical to think they would want to do that and there was a lot of discussion about their infrastructure and the kind of
thing they -- they committed to spend that money to be able to bring in -- and then get it through their distribution system. so, it seems to be something they have an objective, but i don't want to comment on their relationship, obviously, with -- right. my time's up. >> senator coons. thank you, chairman. thank you, ambassador lighthizer, to come before the subcommittee to discuss the activities of ustr. i'll mention two things of real interest and concern to me and move to a home state concern and tariffs and our overall trade policy. first on intellectual property in the section 301 actions. i spent eight years in-house for a global manufacturer. we had all sorts of problems with ip theft from china. i think eng president trump is absolutely right to prioritize being aggressive in pushing back against china's maligned trade activities that have gone on for far too long. i appreciate them being made a priority. i do, however, have real concerns about the consequences of tariffs being misapplied in a way that doesn't marshal but has negative secondary consequences. second, as a result of brexit, we have an opportunity to
negotiate with the uk. senator portman and i have created a u.s./uk trade caucus. we met with the british secretary for trade, whom you also met, to talk about bilateral trade relations. i want to ask, do you support a pro brexit u.s./uk trade deal and do you plan to inform congress of your negotiations as ttp requires? the answer is, yes and yes. great. at the appropriate time. i mean, they have their own system -- right. march of next year. >> the answer is yes and yes. i think there are preliminary conversations we can have but this is the chance to show modern -- i look forward to working with you on that. and i look forward to working with you and the caucus. in my home state of delaware we are all about chicken.
our agricultural sector is very heavily focused on poultry and soybeans and corn are the main feedstock for chickens. soybean farmers in delaware, who are already facing a disaster declaration because of both flooding and previously drought, have contacted me because soybean prices are at the lowest they've been in nearly a decade. i just want to tell you a short story about how these section 232-based tariffs on steel, national security justified, are harming our relations and may be harming our export opportunities. senator isaacson of georgia is a dear friend of mine. they export more soybean and sussex county, delaware, exports more chicken. we tried to break down the barrier of exports of chicken into south africa.
we're shipping a significant amount of u.s. poultry into that economy, after years of effort. we had a difficult meeting with their trade minister. they do export a very small amount of steel into the u.s. market. they applied for a waiver. they don't see themselves as a national security threat to the united states. much like other countries i've also recently met with their foreign ministers of canada, sweden, who are wondering why these long-time trusted allies are facing steel sanctions. in the specific case of south africa, they're going to be justified in imposing countervailing duties that may well close the door to this newly opened market for our poultry. i started by saying, i agree with you that we should be fighting china's aggressive mercantileists action. i disagree with the strategy -- i've heard colleagues,
republicans and democrats, say, where's the strategy in imposing tariffs in ways that may shut the door to critical export markets? let me ask about the tariff strategy. as senator schatz memorably suggested, a central planned economy like china may have more staying power than a democracy where all of us face constituencies in our home state that are increasingly upset about the impact of tariffs. i'm struck that the administration is proposing to dip into $12 billion borrowed from china through an fdr-era program to try and provide support to farmers. and i know my soybean farmers might be interested in that. they would rather have long-term contracts than short-term payments. but is there a plan to figure out -- i heard the seafood sector championshiped by senators from maine and alaska. i've got small and medium manufacturers that make things
out of steel, filing cabinets and manufactured steel products. will there also be payments available for those businesses harmed by the tariffs in all sorts of sectors? and how do you make those decisions, mr. ambassador? well, thank you, senator. first of all, i would say that ustr spends a lot of time worrying about poultry and working on poultry, as you know. >> thank you. >> yes. i would also say among the actions of china that are unfair to the united states is actions that they take to limit our exports of poultry as well as corn and wheat and a whole other variety of issues we can talk about, because we tend to focus on the technology, because that's where the tariffs are coming from, but the reality is while they're a culture market, they should be much better
because they take a number of steps and we have a number of wto cases against them for unfair actions. >> but the point i was making, mr. ambassador, was, yes, i agree with you, china, we have all sorts of problems with, but you're now taking the unprecedented step of providing cash payments to support those farmers harmed by countervailing duties. are you going to provide those to other sectors and how will you decide that? since i have folks in my states suffering from steel cost rising and how long will we sustain these tariffs? will we sustain them for months? for years? what prospect do we have of china caving on our core trade issues with them before it collapses our vital alliances with countries like canada or sweden, whose foreign ministers have recently expressed directly to me their sense of grievance or hurt at having been the subject of a national security-based tariff? >> so, i apologize for giving long answers but they seem to be questions that require long answers. i'm sorry about that. in terms of how long will it take with respect to, for example, canada and steel and aluminum, just to take that issue in a silo by itself, if we end up with a successful nafta
negotiation with canada, as part of that we expect there to be an agreement on steel and aluminum with respect to canada. we don't have a similar process going on with respect to sweden, but we do have a process which we began yesterday with respect to the european union. and the view would be that if we are successful in coming to a conclusion on that, that we would also solve the steel and aluminum problem with respect to the european union. so, that's kind of -- to answer those questions, that's more or less where we are on that part of the issue. on the question of how long will it take to resolve the issue with china, my guess, candidly, it's going to take longer because i think they do take a longer view, which, by the way, i think is the right view.
it's to the extent, we can, we ought to be taking it. i realize we have a political system that makes it difficult, but nonetheless, reality is an awful lot of our senior politicians do take a long view. it's not fair to say that every politician is dictated to by -- his next election. a lot take risks and do the right thing. i don't know the answer to the question on china. i just know i believe we have a strategy. i believe it's one that worked. i don't think the president created the problem with china. i think it was created over time by benign neglect and i think it's a situation where you have to make a change can or the consequences are grave for the country. that's where i come from. >> let me conclude, if i might, because i have one more colleague. mr. ambassador, let me summarize, if i can your answer and the areas we agree and disagree.
>> i absolutely agree. we should be taking aggressive action against china to defend america's innovations and ip and to make sure we have fair market access, particularly for the chickens of delaware and many other states. but by slapping tariffs all over the world on other countries that are not directly engaged in this, we reduce the number of our allies who are working with us against china's maligned actions and we grow the number of trade disputes and problems we have. the example of south africa possibly closing off soon our poultry export access to their market, something that's not even on your menu, strikes me of one of a dozen unintended consequences of a misguided policy that instead of marshalling our allies to boek focus on challenging china has instead stirred up a hornet's nest of problems in other parts of the world with trusted allies. my concern, sir, is that i agree with you, china is taking the long view and so should we. if our strategy is to pay more and more and more directly from the if erg tofederal government to farmers and fishermen and manufacturers, we're moving from a market economy to one where we're borrowing tens of millions
from china to pay those sectors in the united states who suffer as we try to to see who will blink first. i'm concerned that's not a sustainable strategy. >> thank you. >> senator lankford. >> thank you. you inherited a trade worldwide. they all need to be cleaned up. the grand challenge is how do we actually get this done. what i would like to hear from you is, what has been done to date? what are some of the wins you've already had on trade issues? and then what are the priorities? specifically for us and for me in particular, what are we trying to get to? it looks like we're trying to increase tariffs everywhere. is the goal to increase tariffs or get tariffs down everywhere? so, the wins and the goal. thank you, senator.
first of all, we -- i think the biggest single thing is we're -- and i've said this, we're close to having a deal with mexico. hopefully that will lead to a deal with canada. we have negotiated a successful renegotiation, of course. and then one of the things that i alluded to before that we don't give credit to is a whole variety of things that we have done. i'll just mention briefly. we have opened up guatemala to poultry. we have gone in there and negotiated, rice in nicaragua. we have changed the -- gotten the eu change the way they treat u.s. citrus in a beneficial way. distilled -- dry, distilled grain is something that's important to a lot of people. we have opened up the market in a lot of places and even in china got rid of countervailing
issues. corn to colombia. pork, arnlg tinaeen arnlg tina lifted their ban they had in place for years and years and years and now accepting u.s. pork. disindustrialed dray grain exports in vietnam they closed our market in 2016. i could go on. there's a whole bung of these things. lamb in japan. they had a ban on lamb in japan. these are things no one knows about or reads about but they're things we do every day to help agriculture. many of them, by the way, are coming to us at the request of congress because of their constituents. we're spending a lot of time on them and have a number of successes. >> in terms of -- the second question -- the second question is the goal.
more tariffs, less tariffs? are we on offense trying to find more markets or fix broken markets? >> i mean, what the president wants to do -- the president's fundamental belief is that if we have an environment in which we're competing based on economics, not based on artificial barriers to trade, not based on tariffs, not based on subsidyiessubsidies, that the united states will do very well. economics will determine these things. who ends up succeeding and who doesn't in our own economy. that's the way it should be. the question is, when you don't have that circumstance, what do you do? what's your reaction? until now i believe the problem has been basically -- the solution has been one of nibbling around the edges. i think that's what's happened. i followed this for a long, long time. i can talk about it for years and years and years. not that anybody was selling us down the road.
they were just dealing with problems at the edges. and i think this president's views is we've now gotten to the point where we have the trade deficits so extreme at $800 billion that we can't nibble around the edges. particularly with respect to china, it's bigger than the gdp of most countries. it's enormous. so what his objective is, and i think he stated it yesterday, he has stated it on a number of other kitchens,occasions, he wants to be in an environment, and we'll do whatever we have to do to it, we don't have u.s. producers, farmers and ranchers don't have to do it unfairly. this is his way of trying to do it. i would tell you for the ag folks in my state, they're looking for more markets and more places to get into. they already have markets they're in now. now there's the tariffs and issues they're facing as a result of response. they want those to be fixed but they're still looking for the new places. more places they can take product. as you and i have talked about
before, the steel tariffs are helping steel companies in the united states, but they're not helping actual construction in the united states. whether you're building products or whether are building small offices or stores, whatever it may be, because the cost is going up and now the cost of construction, once it's done, exceeds the value you can actually sell into that area. so, all of those things do have a real effect. you and i have talked about issues like soft wood lumber coming from canada and some issues there, paper products coming from canada and so many other issues that are out there. the target goal is how to get some of these resolved long term so we can go start fighting for the new places in the new countries to do business and be on offense again. >> i completely agree with you. more importantly, the president agrees with you on the fundamental direction. i agrees with most members about how to get there, but it's sort of -- it's not an easy thing. directionally, we completely agree. >> thank you. the very patient senator kennedy. >> thank you, mr. chairman. mr. ambassador, i'm not here to criticize you.
i'm just trying to understand you. here's what i think's going on. just based on my observations. you're a smart guy. and president trump is a smart guy. and you both understand that the only way to win a trade war is not to fight. but you're trying to negotiate us better trade deals. and that causes anxiety. because it impacts markets. it impacts investment decisions and causes anxiety because it's risky. i mean, we could lose. that's why they call it risk taking. otherwise they'd call it sure thing taking. i mean, is that basically what your strategy is? >> well, i think -- >> briefly. >> yes. i think you're right. it creates anxiety. >> ok.
how long -- how long -- and i know you can't give me month and day. >> is it going to take years? >> in my opinion, the -- as you've heard me say patiently -- >> yes, but is it going to take years? >> i think some will be dealt with in a short period of time and i think directionally we're going to have a problem with china that's going to go on for years. that's not to say that what we're doing now will be in place, but -- >> i know you can't predict the future. so you think it will take years with china? i believe that to be true. >> ok. year or years? >> once again, i can't predict the future. but the way i analyze it, senator, they are -- they have a system and their system is challenging our system, in my opinion. >> well, i'm not going to defend china.
i mean, we let them into the wto on december 11, 2001. they started cheating december 12th and all the cultured, cosmopolitan, you know, consumers of bacon-wrapped shrimp, you know, who live in the condos with the high ceilings said, oh, this is great. china is going to embrace democracy. didn't work quite like the experts said. so, i'm not going to defend china. let's suppose senator moran was elected president of the united states. hypothetically his first policy was, i am going -- i'm really upset about the current account. >> about what? i'm sorry. >> about the current account. >> right. >> our exports are way below our imports. so, i'm going to declare the moral equivalent of war on
imports. we're going to flip that ballot. is that goes to make us richer? >> no, i don't believe that's -- i don't believe that's the -- the way to get the trade deficit down is to demand fairness. and market outcomes and increase -- i would say increase exports, but i think imports will in a fair market also come down because there are circumstances where u.s. companies will be -- >> let me ask you this. i'm not trying to be rude or cut you off, but i'm trying to get to the meat of the nut here. if i buy something from japan, i give them dollars, right? what happens to those dollars? >> well, there are a lot of things that can happen to the dollars. i mean, they can keep the dollars -- >> would they just put it under
their mattress or would they buy treasuries? >> well, sometimes they, in some cases, they put it under the mattress and sometimes they literally build up their reserves, so that happens. they spend it, a lot of times, on petroleum, which they get from someplace else or other imports. pe spend it on other things in order to build up their own economic strength. in some cases they come in and buy productive assets of the united states -- >> sorry for interrupting again. what i'm getting at, as you probably know, is the relationship between the current account and the financial account. it's got a balance, right? >> the answer is, yeah, of course. >> ok. so, if we're running a negative in our current account, our, our financial account has to be positive, right? >> well, so -- >> which means those dollars are
coming back to the united states and they're being invested, right? the -- in the first place, at some point the dollars circulate back to the united states. and that then raises another issue. so the fundamental -- there's a great article, if you're ever interested in this issue enough, if you google warren buffett "squanderville," it will come up, a short article he wrote, i don't know -- >> let's get back to the relationship between the furniture account and the financial account. if you've got more imports than exports you're running a negative current account. but that means you've got to be, at least the way you economists describe it, you have to be running a positive in your financial account, otherwise your balance of trade, it doesn't balance out, right? isn't that money coming back here and being invested? i mean, if toyota, we buy a bunch of stuff -- strike that the toyota park. we buy a bunch of stuff from
japan, more than we sell. those dollars are going to come back, right? sometimes through foreign direct investment from japan. >> sometimes it's buying our debt. >> yeah. >> good thing they do, huh? >> sometimes it's buying our assets and sometimes it's creating new jobs, but it could be all of the above. right. >> do you believe, generally speaking, that exports are better than imports and that current account surpluses are always better than current account deficits? >> yes, i do believe that and if you look at the countries that have the best economic growth over years and years and years -- once again, i'm not a congressman, i'm a lawyer, but if you look at the countries who have read it, germany has run a surplus 7.7% of gdp --
the morale then equivalent of imports would not make us richer? >> i think you get more efficiency out of having more experts, -- exports, but i think you'll have -- >> am sorry to interrupt you, but i'd like to have an answer. how come it exports are better than imports, we're going to stop buying stuff from countries to give them dollars to buy weapons to try to kill us, we are going to make it here in america. policy --hat hypothetically, here -- will not make us richer? >> is a general matter, we are better off making it in america, the mostnk that efficient allocation of resources around the world is to have trade in a situation where there are no --
>> i want to go back. i'm sorry, i don't mean to interrupt you, but you are a good witness. you can stretch it out. if i can make -- >> what do you want me to admit, senator? i will admit it and we can go home. >> i'm not trying to get you to admit anything. i just want to understand. half as --can buy twice as inexpensively from england then we can stop and make it? should we stop and buy it? >> i have heard of ricardo, yes, i have. the problem where it breaks down is where you have multiple countries, and you have trade barriers. if you are saying do we want ultimately market efficiency, of course, we do and do we want to make mostly the things that we do best here and buy the stuff that someone else -- of course, that makes everybody richer. it makes everybody in the world richer, but what do you do in a
circumstance where you have a country with a $12 trillion gdp that does not agree with that tackle what do we do with them? how do we stop them from subsidizing? your view would be that in 100 years, there model is not sustainable or 200 years, whatever the number is. my view is i'm not going to be around in 200 years -- >> i don't think you know what my view is, with all due respect. -- why don'tu this we just go to europe and say let's just cut all tariffs? >> but we have said that. when we make that our objective with all the countries with which we negotiate? >> of course, that is our objective, but it cannot just be tariffs, all right? because there are other non-tariff barriers. >>" is. -- and quotas.
>> all tariff barriers, and also cities. >> of course, and that is what the president's objective is. that is precisely what our objective should be, and in that environment, if you can get to it -- i personally don't think you will get to it very soon, but the direction we ought to be working in. in that environment, everybody gets richer. that is the theory, and my guess is that is reality. >> what if congress passed a law that said you can do business -- this is america. we believe in freedom. you can do business with china all day long, but it's illegal, just like it is illegal to give a chinese official of pride to it isiness with you, illegal to let them have your technology.
>> than the first place, if you are referring to our study, in our study, there is theft of technology which u.s. companies are not participating in. >> yeah, but sometimes we give it to them. side effect, but it's also setting up business and technology, having them go in and steal technology. >> what i'm getting to is we go to them and say we want to -- i'm about done. >> you said that earlier. >> when we go to them and we say -- our business people say, look, we want to do business here, and they say give us your technology, and they say swell. technology element you are a firm to, and one of the ways we are addressing that is through export control and to try to stop that. industry key, it is hard, as you
know, but there are ways to do it. sorry, i have gone on way too far. thank you, mr. chairman. >> ambassador, thank you. thank you, senator kennedy. i'm going to do a second round of what i hope is rapid questions, what i think is generous both to you and our colleagues to make sure that this important topic is explored, and then we need to conclude. i expect there will be a vote call shortly. ambassador, what tools other than tariffs does the united states have to combat china's of our technology, their cyber attacks against our infrastructure, and there pursuit of our business secrets? other than tariffs, what tools do we have? both have export controls, in terms of product but also in terms of technology. we have limitations on investment because capitalism is
buying these kinds of assets, congress is in the process of passing an act we think will help us fight this battle. in addition, this criminal statutes and the like that do not involve us, but in my opinion in the technology area, ,xports, controls, tariffs investment restrictions, and then it's going to the wto, and by the way, all of those things we have done in here except for the criminal part of it. >> in addition to tariffs, what non-tariff trade barriers would you expect china to use and pursue in regard to the united states? beam sorry, that just cannot a short answer because they are doing a whole lot of things. we get from the embassy every day a variety of things. they slow up inspections. they require people to do things
-- companies bringing in products that are designed to do nothing but slow things of or on technical or even incorrect reading. >> maybe the summary of what i think your reasoning is is there is a set of other tools china can utilize in addition to tariffs. expect more to come beyond tariffs, i would guess you would tell me. >> i would say with respect to many and probably almost all of variousings, and contexts, they were already doing an extent to which it was beneficial to them. >> the conversations the white house announced yesterday in regard to the eu, those are encouraging. it seems to me it is a framework by which we agree we will at the battle -- that's not the right word, the trade were at the moment. we would take a cause and see if we cannot negotiate an end to that. that is a good ring in my view, the possible that
trade agreements with the e.u., that the eu wants to extend u.s. agriculture from any agreement. your reaction to that? >> my reaction was in the discussion, in the first place, agriculture is an issue everywhere in the world and is equally difficult in the european union given the fact that they have plenty of countries and all the problems. our view is we are negotiating .bout agriculture >> would we negotiate an agreement that leaves agriculture out of the discussions are other discussions out of the results? >> i certainly would not recommend that. >> you talked about the $12 billion aid package and announced by the administration earlier this week for farmers. ustr, youat role played in those discussions, the announcement, was there coordination that occurred?
>> i was aware of it, but it's not a program that i have expertise in or was any kind of a knowledgeable participant. >> am coming to a conclusion. i want to ask you to reiterate something i think you said earlier to the response to a question i think of senator capital about the staff -- status of nafta renegotiations. would you tell me again, tell the committee again what you expect this timeline to be and what you said about august cap then the first place, agreement depends on everybody being reasonable, but it depends on the timeframe. if you assume it will be signed by the current president of exit on december is out days, you move back 90
because we cannot sign until we have agreement in principle 90 days before. then you would have to more or less have agreement in principle which is the way these things work, sometimes in august. >> i think finally, is it possible that you and ustr would address section 232 tariffs, again, the department of jurisdiction -- are these part of nafta negotiations? >> yes. technically, they are not part of nafta, but the expectation is a resolutionuld be of those in the context of nafta, yes. >> the tariffs are negotiable items that occur in the overall discussion of a nafta agreement? >> that's correct. >> senator shaheen. >> thank you, mr. chairman. ambassador, i was pleased when we spoke by phone to hear you talk about the willingness of ustr to take trade enforcement "bring med you said
any cases that you know of and we will explore those and try to take action." one question that i have is have you brought any cases to address labor violations by our trading partners. as i understand, there have been a number of labor violations to our agreement -- some of our agreements. you mean nafta negotiated? >> am talking any agreements we have that would involve labor standards. cases tobrought any address any violations of those labor standards? >> there have not been that many heavily but we are very negotiating unlabeled -- labor to set up a system
where labor rights will be substantially improved. >> it is actually my understanding you have not brought any enforcement actions to address labor violations and i would hope you would be able to explore if that is in fact true and share that with the committee? >> i believe it is in fact true. if there are labor violation cases to be brought, we are certainly willing to bring them and people bring them to us. in the context of nafta, there's an effort to try to set up a system a little easier to monitor. >> i appreciate that. i think that is important because as we look at how our american workers are impacted by some of those agreements, as you heard from the panel, that could continue to be an issue. pleased, as i'm sure all
of us were, to see the president's press conference yesterday and the effort to cool tensions with europe. understand why we started tensions with europe in the first place. i think we were engaged in negotiations that would have significantly reduced tariffs, as i understand the europeans under those negotiations were offering to reduce 87% of all tariffs to zero. but i would like to know if you can share with us if there were any concrete decisions made yesterday as part of that -- those discussions and that announcement or what specifically happens next. >> we are just one day into this agreement. what the president and president to was that we would set up a variety of groups, basically one group to
do with the process of getting to zero on tariffs and zero on subsidies at another group to deal with this rather complicated issue of getting standards to the point where, hopefully, there is some equivalency and we can move sanders as a trade barrier. i have met independently with the commissioner who is responsible for trade, and, when you say this is a one-day -- this is one dale news, but we are in the process to set up a structure. we have already allocated .esources as you suggest, there is some basis on which to have these discussions because we have history and we can talk at another time about what happened with it, or at least what my perception is on what happened with it. >> but i guess the question i'm asking is there wasn't anything, as i understood the announcement in the analysis that i heard, there wasn't anything specific
that was agreed to yesterday to talkn agreement further and set up these kinds of working groups. >> i would say that in terms of the trade part, there was that, but there was also agreement on the energy park, which was one of the paragraphs in the agreement, the lng part and what they are going to do on that. there was a separate one on increases in soybean purchases, but there were not, like, contracts signed or that. >> in fact, the eu has to rely on the countries within the eu to agree to things like increases and soybean purchases. am i correct in that? >> i think -- yes, the answer is yes. agreethe eu really cannot to that and those discussions? could not agree to increase soybean purchases in that discussion? signey could not
contracts, but the reality is ker came with a mandate from member states, so i imagine for what theyis agreed to. >> and let me -- my time isup, but i just wanted to make a point that i think hascome out from several people who haveasked questions. you said thatseveral times with respect to thingslike zte and some of the otherissues that were brought up that werenot directly under the ustr thatyou stay in your own lane and don't deal with those issues. but it seems tome that one challenge that we've got right now is that we haven't recognized thatwhat's good for national security is often good for theeconomy. what's good for the economyis often good for national security and that we haven't looked at the toolsof diplomacyand of internationalactivity in the context ofa coordinated strateg.
and i guess that's a concern ihave about these tariffs. i appreciate the arguments you're raising but it doesn't seem it's part of a coherent, coordinatedstrategy that's looking at the role of the united states and the world and it seems to methat presents real challenges for us going forward. thank you, mr. chairman. >> let me respond to that. i would suggest that what we've tried to do is the opposite of that. we have tried to coordinateit, and the president's national security strategy, which waspublished in maybe february goes through this and talks about economic securityas part of national security. it's a really gooddocument. i would recommend it toanyone. and it is -- really, it's, i believe, the first timeanyone has ever tried tointegrate national security with --and economic security is an essential part of -- if wedon't have a strong economy, you're not prepared fornational security.
that's kind of the essence of what it is. that document. so i think we're, you know, in agreement with you. maybe i'm -- an agreement with you. >> maybe i'm faulting the implementation rather than the strategy then. mr. ambassador, to follow up on senatorshaheen's comments. you don't need to respond. i'm happy to stay afterwards, but there's a belief that europe is naturally going to be buying more soybeans. as a result ofour loss of markets inchina, those are being replacedby argentina and brazil and as thosesoybeans in argentina and brazil are movedto china, where europe has currently been buyingfrom argentina and brazil, we'll become a naturalmarket. we want to make certainwherever the market is, it's at a price and in volume thatoffsets or grows the current opportunity we have to exportsoybeans around the globe, particularly tochina.
senator alexander. >> thank you, mr. chairman, for the opportunity. mr. ambassador, you have been there a long time so thank youfor coming today. i want to talk about aluminum which is a part ofthe national security justificationfor that tariff. what's the goal of puttinga tariff tax onaluminum? is it to create an environment in whichthe united states producesmore aluminum? >> i think the objective is to have a viable aluminum industry in the united states. and i think there was -- >> well, now, let me just -- there aredifferent parts to an aluminum --i know a little about this because i grew up near alcoa, tennessee,and my father worked foran aluminum smelting plant. and you make aluminumby running a lot of electricitythrough boxite and then makean inget and from that ingot, you make pots
and pans and, well, theyroll it out. then they make pots and pansand aluminum foil and all that kind of thing. i assume we're not putting a tariff on in order to create more aluminumfoil plants ormore pot andpan plants. i assume the national security worry would be that we're not producing enough ofthe basic aluminum ingot, and if we don't produce any of it that's a national securityproblem. would that be right? >> in my view -- and once again, this was not a report that i wrote -- >> what you say this is all coordinated. you are the trade representative. >> what i said was i am involved in the process. >> yeah, i know. you just said it was coordinated. i heard that part. but what is the goal of it? you want to produce more aluminum ingots daca is that the idea?
>> no, our view is that there is certain kinds of aluminum you need in national defense and if you don't have some kind of an aluminum industry -- >> i don't want to run over my time. well, but all you need to produce that is an aluminum ingot. you can then have an american plant that can produce whatever you want, right? >> am sorry, i'm not following. >> what i'm saying is we have a pretty robust aluminum industry in the united states. we can make about anything. it would seem to me the worry is that -- do you know how many aluminum smelter's we have in the united states today? >> we have very few. >> we have seven. do you know how many people work s? those aluminum smelter' >> i don't know the answer. >> 4,000. so we have 7.2 million people working in the auto industry,
you can see that in the paper. 11% of every car is aluminum. ford and gm are saying they're not going to make as muchmoney because of the tariff on aluminum and it looks like we're doing that toprotect 4,000 jobs in aluminum smelting business, and we're not going to get those back. the reason wedon't have aluminum smelting is because of the cost ofelectricity. alcoa produces half of the aluminum produced in the united states. 46%. they have three smelters and one that's curtailed, which means it could openup, if it wanted to. a 10% tariff is not enough to offset theincreased price of electricity. so what are we going to do? go to 20% and 30% and 40% so that we have enough aluminum ingots madein the united states n at the same time continue to add to the price increases forauto motive? >> so the answer is there's no plan to go to 20%, 30%, 40%. then, what's the justification for any tariff on aluminum if it's not enough to create an incentive for aluminum companies to create more
aluminum? >> i don't about alcoa's situation specifically, but the calculation was made at the department of commerce that 10% tariffon aluminum at the margin would make a differenceso that you would ed up with a sustainablealuminum industry in the united states. that was the calculation. >> well, i would like for us to talk to them because that doesn't make any sense at all because because we only got sevensmelters. we got one curtailedsmelter. unless we are going to deliberately increase the price of basic aluminum ingots in the united states by 20%, 30%, 40%, we are not going to be able to make ingots. we get 40% of our aluminum from canada, which needs to my next question.
did i understand you a minute ago that if you are able to resolve the nass that agreement -- the nafta agreement, that could be coordinated with the aluminum tariff, and as a result, there might not be a tariff on canadian aluminum ingots coming into the united states? >> yes, senator, resolving the nafta issue, we would expect that we would resolve this deal and aluminum issues with both mexico and canada. >> well, that might not resolve the aluminum price issuein the united states because, as we know, whenever youraise the price of any imported steel oraluminum it raises the price of everything else. at least it would deal withthe supply. what i'd like to ask you tolook at is whether it makes anysense to put any tariff on aluminum when the only reason we don't have aluminum ingots in the united states is because of the price ofelectricity. and it's that -- canada hasa lot of water so they can make electricity a loteasier and so can othercountries in the world.
the last question i have,if i may, i would assume that whatwe're going through rit now is a substantialreview ofnafta. then why do we need a sunset clause? you are reviewing nafta today, and it seems to me -- there are a substantial number of republicans, includingme, who are likely to not vote forany nafta agreement with a sunset clause because we don't think it's worth anything. i'm over my time buti would hope you'd take that back tothe negotiations and know that -- i hope that presents a real obstacle to having asunset clause in any final nafta agreement. >> senator kennedy. just asuggestion, you'll gain credibility if you leave the moran presidency out ofyour questioning. [laughter] and it would also make me feel morecomfortable. inaudible -- more comfortable.
>> i will give whatever time i have [inaudible] >> you are not recognized for that purpose. [laughter] ambassador? yes, senator shaheen. >> i just have one more question, ambassador. we had the whole conversation about increasing exportsand that's one of the things that we would like todo in order to address the tradeimbalance. one of the things i hear consistently from newhampshire companies whoare -- have markets -- internationalmarkets who are anxious to continue to do trade deals ishow much theyare affected bythe inability of the ex/im bank atthis point to do big tradedeals because of not havingthe appointees they need inorder to geta quorum. can you tell me ifthe administration is working to address that and what you're doing and do you have any ideas for when that might be up and runningagain to do thosebigger trade deals?
>> i would say, first of all, i completely agree with your constituents those who saythe ex/im bank is important and we're losing deals becauseof it. the acting deputy is nothere. the president appointed him so that we'd have someone who is an acting president. in my view,the failure to havean effective ex/im bank is entirely with the united states senate. i don't think it has anything to do with the administration at all. i think it's the fact the senate won't confirm the people andif the did, we'd have an agreement -- >> i certainly fault the senate as well. i thought my question was, what is the administration doingto try and address that? are you talkingto the senators who are holding thatup, and we can namethem here. i won't do that, but the people who are preventing that are not on my side of the aisle. they are on the president's side of the aisle, so is there an
effort by the administration to try to persuade them of the error of their ways? >> at want to characterize it -- i don't want to characterize it as the error of their ways, but there certainly is aview and i personallyhave spoken with senators and other people are doing their ownthing because they agree we have to move forward. i agree to -- with thepeople who on the other side of us on this issue that thereare improvements we need tomake. we need reform and all that sort of thing. >> absolutely, but we should get it operating. >> i am a complete believer in what you're doing. if you're saying, is this something that i care about, am i active on? the answer is yes. >> thank you, chairman. >> thank you, senator shaheen, for your cooperation. we are pleased, ambassador, you are with us. thank you for taking the timeto do so. this hearing in part was intended to discuss with you your resource needs. you mentioned them at least in passing in your opening you were very articulate and
intelligent. i thank you for the attention you provided to responding to my colleagues. and my questions. if there is no further questions and there are none, this morning, senators may submit additional questions for the official hearing record. we would request ustr to respond to those in 30 days per the subcommittee stance and recess sergeant -- subject to collect the chair. thank you. mr. lighthizer: thank you, senator.
and the soybeans? what is the upshot to their of what you have? >> what i heard in this hearing -- thet the trade efforts that changing china's behavior, we should not expect any short-term consequence to these efforts. therefore, the difficulties we have in soybeans and grain sorghum would not be expected in regard to china to be resolved anytime soon. there was discussion on whether that meant year or years to the news yesterday, the announcement forn interest in pursuing, european interest in buying soybeans, i am pleased to hear that. necessary is a contract. the idea that the eu and the united states at least put a pause on the escalation of our
trade differences and created an opportunity for soybeans to be purchased in the european union is good news. we would expect there to be increase purchases because the soybeans,r demand for will now need to find a new market. an additional market. need to findwill additional markets because argentina and brazil has been , they are noweu supplying more and more of their beans to china. again, we want to sell everywhere. -- there is not expectation that we have opportunities in the eu as long as we are not in a tariff issue with them. reporter: is the eu market smaller than the china market for u.s. soybeans? sen. moran: it is at the numbers -- >> i don't know the numbers but yes. >> so there was an development
on soybeans yesterday. the european government does not by soybeans like egypt. the european government does not by soybeans. there is no european tax. sen. moran: these questions were pursued by my colleagues here. i think the answer was that a framework is in place for additional discussions about additional purchases. there was no sale of soybeans to the european union or european countries yesterday. impediment toward europe buying our soybeans now. >> just to be clear, it is private importers in the european union that make decisions about whether they will buy to the government does not lean on them to buy -- sen. moran: unlike china. it is a different market in which we are selling to individual businesses that make
decisions about where to buy. we need to make sure that neither of the european countries governments or the united states puts any impediments in the ability for that -- if that choice is to buy united states ibm's, that that actually occurs. an issue that i think is somewhat related to this, because markets can change coming you can be buying from one supplier and that changes to another supplier, based upon price, availability, transportation costs, one of the concerns i have with the idea that we will provide aid to farmers is that that is a short-term issue. but our markets are based generally upon long-term relationships. while they could change overnight, we spend money and time and effort in developing relationships with those people who by soybeans. who actually buy a great sort of. -- a grain sorghum. when these trade issues are behind us, i am fearful we will
becauset our purchasers there are now purchasing from somebody else rather than entities within the united states. that you can solely compensate agriculture producers by payment, that helps tide of those farmers and and make the next loan payment, the next payment on their note. but what we have been pursuing for a long time with individually and commodity groups, the united states, our trade efforts, through programs as long-term relationships with purchasers that will be damaged if we do not get out of the trade war quickly. >> american's voice he been association. you said they have been building clients in china for years and years. did it bother you at all -- was it concerning when mr. lighthizer said this trade war with china could go on for years?
it thisan: let me say way. my view and i have expressed this to the administration including in meetings with the white house with the president, that we ought to quickly resolve our differences with the european union and with mexico and canada. perhaps the -- if positive -- it is not an announcement and it is not definitive -- but the idea that it is potentially possible to have nafta or an agreement with forco resolved in time prior to the change of the administration of mexico, that is a positive development -- development that i heard today. it relates and china which we need to be aligned with canada, mexico, the european union, other countries in the world through are all interested in changing the behavior, the ill behavior of china in regard to their stealing of trade secrets. their cyber security attacks. patent infringements.
that is an issue the united states and our partners ought to be aligned in in pursuing changing behavior of china. that would be why it would be good for us to get those other trade issues resolved. then let's work in a specific way to change the bad behavior of china in a more unified way. it is not surprising to me to hear that the expectation is --t china trade agreements that the efforts to change china's behavior is a long-term issue, not a short-term issue. but the problem is that in the meantime, there is a lot of pain by not justtered farmers, but manufacturers and consumers. do you support putting nafta into two separate deals? sen. moran: i have not given a lot of thought to that.
that is an unlikely scenario of events. i could see we could reach an agreement with mexico, a creates greater impetus on the part of canada to more quickly resolve those differences. >> bilateral deals that have had the chance of that. sen. moran: i think there is additional pressure that occurs on canada if mexico and the united states have resolved -- has said that we've resolved our differences. >> [indiscernible] suppose that is the issues that are different -- the issues we have with mexico are different than the issues we have with canada. and perhaps the issues they have with -- isaiah may have -- with the united states, the magnitude or difficulty of those issues, the desire to reach an agreement. i am not smart enough to know about the politics of other countries. >> senator alexander suggested that if the new nafta has a
sunset clause, that many republicans including him will not support it. are you concerned that the concluded after could have difficulty getting through congress? sen. moran: i think -- i was not here when nafta was approved. i was not in congress when nafta was approved. i have been through tpp numerous times in my time in congress. these issues are very difficult. they are very difficult politically, even for individual members of congress who are supportive of trade. the politics of trade agreements are hard to overcome. the idea that we would renegotiate a trade agreement that will be hard to get approved in the first place, isry few years, is one that difficult politically, perhaps more importantly it creates greater uncertainty because again, our trading relationships are much better and stronger if they are long-term.
uncertainty is nothing -- is something no business, no farmer who plants a seat in the ground and borrows money to do so, or nobody -- no one who is purchasing that in china or mexico will pull out of nafta -- for canada or mexico, no one, the supplier or the provider, or purchaser wants the uncertainty of not knowing whether that relationship as long-term versus short-term. have aot a good idea to sunset provision in a nafta agreement. secondly, i hadn't thought about this topic about who would vote or not vote if it was in. was interested in what senator alexander had to say and it causes be to think about the issue. at this point i would say that i would advise the ambassador that a sunset provision is not a good solution or should not be included in the final negotiated
agreement. are your colleagues pressing for more information about when the u.s. and eu might agree to drop these tariffs? sen. moran: i think today's hearing indicates that while there was focus on fish, on seafood, on agriculture, soybeans, and green sorghum, there is also as much interest in aluminum and steel. getow -- as a kansan i asked about agriculture because of the stereotype. rightly so. it are airplane -- but are manufacturers, steel is important to them. it is important to the people they employ. anxious to have answers as to when this might come to an end. those are not answers that are easily receivable.
are not easily obtained. i don't know if you allow me to edit my words. not, -- didet did not come up very much. would you comment on that? again, the ustr has been funded in fy 19 to the extent that they have asked for the amount of money they have requested. >> [indiscernible] sen. moran: while the ambassador mentioned in passing about resources, i was expecting that there would be a request for additional dollars or at least the recognition that we may be backed as for my money. it is apparent to me that the task of ustr at a time when we are negotiating nafta, dealing with the european union, as you heard, at least for me and my colleagues, the desire that we want bilateral agreements negotiated now, not later.
issues, thee china workload of ustr has to be significant. view,e resources, in my -- i was surprised there was not a request at least for a forewarning that additional dollars might be necessary. >> after meetings with the today, thend hearing, and meetings with secretary perdue, is it your understanding if the china site is going on for years as an acid or light heiser has said, that the tariffs. on for years? we heard yesterday secretary perdue said this is a temporary thing for farmers. sen. moran: i heard both stories. i heard what was reported that secretary perdue said that this is a -- >> [indiscernible] sen. moran: i was not at the white house. i was not in that meeting. what i know about the $12 billion is almost exclusively what i have read -- are you all
print journalists? what i have read in regard to the program is. but we have -- and i think this is true of my colleagues, we have virtually no information other than what has been reported in the media. i don't -- i would expect secretary perdue to come to congress and explained. in fact, i am suggesting to my colleague, i serve on the agriculture preparation subcommittee, so we fund the usda. it will be my request that secretary perdue come and have a similar hearing as we had today on trade. but specifically on the topic of the $12 billion and what that program will be. need, today, we saw the for lobster. i don't know whether those things are included in an agriculture program. unsure my colleagues who represent alaska and maine and new hampshire are very anxious to know more about what that
would be. point, earlier everything that i have read suggests that this is $12 billion now. in a programoon, that is not expected to be ongoing. we heard today that the expectation is that negotiating an agreement with china that reduces tariffs, and and's the ever escalating dialogue and consequences of tariffs, is a long-term thing. longer than a year that presumably the $12 billion is available. >> [indiscernible] the process that you has the appropriate or don't know what the administration is doing with the money to help farmers that you represent? in. moran: i would say that think members of congress, myself included, would have suggestions if you want to help farmers, this is the way you can
do it best. faith in the secretary in secretary perdue. i appreciate his leadership at usda. i think it is important for any leader to have the input of those whose constituencies are so directly impacted by this program. to have our input and for us to have an understanding. part of what i do as a member of the united states senate is try to provide information to my constituents. my constituents are asking, what does this mean to me? what does this mean to my farming operation? to my ability to pay the bank or? at this point in time, i am unable to answer my constituents questions. i am anxious for the opportunity for secretary perdue and in the setting or in a meeting in my office to better explain to me so i can offer advice. but i can also tell my constituents what is forthcoming. >> thank you very much. sen. moran: thanks. before i get caught with press, could we figure out when i might
commissioner and fire chief discuss the crisis from the perspective of first responders. commissioner and fire chief iscuss the crisis from >> live on friday. on c-span 2, the head of the u.s. customs and border protection will talk about hallenges at the border. up next, president trump talks about u.s. trade policy.