Total alignment

USTR pick Lighthizer hammers home Trump trade agenda points during Senate hearing    Robert Lighthizer, President Trump’s nominee to be U.S. Trade Representative, pledged during his Senate confirmation hearing last week that the administration will aggressively fight to rollback unfair trade practices by China that jeopardize U.S. jobs.
   That vision includes addressing massive subsidies for the steel industry that have allowed Chinese companies to dominate the global aluminum and steel markets.
   During his testimony, Lighthizer reiterated that the White House’s top trade priorities include addressing inequities in the North American Free Trade Agreement (NAFTA), protecting intellectual property and expanding agriculture exports through a mix of tougher enforcement and efforts to open foreign markets to American goods.
   “I agree with President Trump that we should have an America first trade policy and that we can do better in negotiating our trade agreements and be stronger in enforcing our trade laws,” Lighthizer said at the hearing. “I further believe we need an international trade system that functions the way it was negotiated and that the United States must be ready to work with like-minded trading partners to ensure fair trade and to encourage market efficiency.”
   Trump has signaled he intends to upend decades of U.S. trade policy by upgrading or exiting NAFTA because of its perceived role in diminishing manufacturing jobs, initiating trade deals with individual nations instead of participating in multilateral agreements such as the Trans-Pacific Partnership or pursuing a deal with the European Union, potentially imposing some form of emergency import tariffs, and more aggressively enforcing existing trade laws.
   The White House also must decide whether and how to continue negotiations through the World Trade Organization (WTO) for a Trade-in-Services agreement and an Environmental Goods Agreement.
   “Every action we take with respect to trade will be designed to increase our economic growth, promote job creation in the United States, promote reciprocity with our trading partners, strengthen our manufacturing base and our ability to defend ourselves, and expand our agricultural and services industry exports. . . . We reject the notion that the United States should, for putative geopolitical advantage, turn a blind eye to unfair trade practices that disadvantage American workers, farmers, ranchers, and businesses in global markets,” the USTR office said this month in a report on the administration’s trade policy objectives.
   The annual report is required by Congress and the USTR office said it would submit a more detailed version after there is a confirmed U.S. Trade Representative.
   The paper set out the administration’s main trade goals as defending U.S. sovereignty at the WTO, strictly enforcing U.S. trade laws using all possible legal measures, using all possible leverage to convince other countries to open their markets to American goods and services, and negotiating better trade deals that are more fair to American workers.
   Senators on the Finance Committee also expressed concern during the hearing about China, securing digital rights in India and other nations, gaining market access for dairy and other products in Canada, and currency manipulation.
   The United States needs to reset trade relations with China, which has illegally subsidized certain industries and enabled companies to engage in predatory pricing in overseas markets in order to gain market share or drive out competition, Lighthizer insisted.
   The U.S. trade deficit with China was $347 billion last year, according to the U.S. Census Bureau. The Trump administration plans to bring suits against China at the World Trade Organization, as well as self-initiate anti-dumping and countervailing duty investigations rather than wait for aggrieved domestic manufacturers to file complaints, the USTR nominee said.

We need an international trade system that functions the way it was negotiated and that the United States must be ready to work with like-minded trading partners to ensure fair trade and to encourage market efficiency.

   Initial focus on steel. A heavy focus of questioning by senators was on global overcapacity in steel due to China propping up state-owned steel producers that are flooding the market with cheap steel and aluminum. China controls more than half the world’s steel production capacity, according to the German Steel Management Association.
   Domestic demand for steel has fallen in China since 2013, but with pressure to maintain national employment Chinese officials have found it difficult to close even old and obsolete plants, American steel industry officials say. Instead, Chinese steel producers continue to overproduce and sell the excess in foreign markets.
   Lighthizer, who spent much of his career in private practice filing petitions with the government on behalf of U.S. steel producers to raise duty rates on Chinese steel, said the administration would challenge China at the Global Steel Oversupply Forum to reduce its artificial capacity support, enforce U.S. trade laws, encourage other countries to enforce their trade laws, create “more imaginative” remedies at the WTO, and develop other undisclosed tools to make it more expensive for China to support capacity that isn’t economically justified.
   “I don’t believe the WTO is set up to deal effectively with a country like China and their industrial policy. I just feel it was never really intended to deal with those kinds of situations,” he said.
   The overcapacity has lowered global steel prices and forced countless plants in the United States and other countries to close. U.S. Steel recently announced plans to idle a tubular steel line at its plant in Lorain, Ohio.
   Sen. Sherrod Brown of Ohio, a Democrat from the progressive wing of the party who has been an outspoken critic of U.S. trade policy, met with Commerce Secretary Wilbur Ross in his office Tuesday evening to discuss how the government can provide relief for the steel industry.
   Last year, U.S. Steel, Nucor, ArcelorMittal and AK Steel, won trade cases against Chinese imports with the help of 2015 legislation introduced by Brown that strengthened anti-dumping and countervailing duty laws. The “Leveling the Playing Field Act” codified Commerce Department practices to infer adverse intent when a suspected overseas company does not cooperate with an investigation.
   It also clarified that Commerce has authority to investigate voluntary respondents in the course of AD/CV duty investigations after several foreign companies were able to appeal their way out of investigations. The act also increased the number of factors the International Trade Commission considers in evaluating injury to domestic companies, as well as the period of time analyzed.
   In a letter to Trump shortly after he won the election in November, Sen. Brown asked Trump to instruct the Commerce Department to investigate currency manipulation in countervailing duty cases when alleged by U.S. petitioners and last month he urged the President to act quickly to treat currency manipulation as an unfair subsidy in trade cases brought by U.S. manufacturers, especially steel companies.
   But Trump, who whipped up on China during the campaign for artificially holding down the value of its currency to make its exports appear cheaper, has yet to take any action against China on the currency front. Economists now generally acknowledge that China is doing little to lower the value of the yuan to boost exports.
   Sen. Debbie Stabenow, D-Mich., questioned whether Trump has gone soft on currency manipulation because of business interests in China, including 38 trademarks granted by the Chinese government to the Trump Organization this month.
   Brown has also asked Trump to maintain China’s non-market economy status until the country fully transitions to a market economy without government control over many industries. Granting the country market economy status, according to Brown, would limit American manufacturers’ ability to use trade remedy law to seek relief when Chinese competitors dump goods or sell illegally subsidized products in the U.S. market.

I don’t believe the WTO is set up to deal effectively with a country like China and their industrial policy. I just feel it was never really intended to deal with those kinds of situations.

   NAFTA and Agriculture. Lighthizer appeared to signal that NAFTA needs to be reworked rather than ripped up, but at the same time said no decision has been made on whether to conduct trilateral discussions or hold individual talks with Canada and Mexico.
   The latter scenario would mean the U.S. government intends to discard NAFTA in favor of bilateral deals, something Trump has hinted at by harshly criticizing Mexico and its $60 billion overall trade surplus. He’s characterized the Canadian trade relationship, meanwhile, as one that only requires some tweaking despite long-standing differences over U.S. restrictions on Canadian softwood lumber and U.S. dairy access to Canada.
   “I think there’s a general consensus that NAFTA needs revision,” especially to help the manufacturing sector and to add chapters on electronic commerce and data flows, Lighthizer testified. “It’s clearly outdated at this point.”
   Senators from farm states expressed deep concern that reopening the free trade agreement and seeking concessions from Mexico would result in retaliation aimed at the agriculture sector, which has been one of the primary beneficiaries of NAFTA. The United States exported $17.7 billion worth of corn, soybeans, dairy, pork, beef and other products to Mexico in 2015, making it the third largest agricultural export market, according to Agriculture Department figures. Since NAFTA’s inception, agriculture exports have quadrupled thanks to the elimination of tariffs and quotas, and reduction in red tape at the border.
   Lighthizer reassured lawmakers that negotiations with Mexico could be done without damaging U.S. agricultural exports south of the border.
   “During the course of those negotiations we have to be careful not to do something that adversely affects those who have been winners,” he said. “I believe we can renegotiate NAFTA in a way that benefits both countries and doesn’t put agriculture in a precarious position.”
   Mexico exports similar amounts of agriculture products to the United States, “so we have some leverage,” Lighthizer added.
   The veteran trade attorney promised to be a champion for agricultural exports and opening up closed markets overseas. Last year, the United States exported $103 billion worth of food and feed products, generating a sector trade surplus of $20 billion.
   “It’s hard for me to understand how we tolerate so many barriers to agriculture trade when America is the number one producer of agriculture products,” Lighthizer said. “We are the best in the world. And if you believe really in trade and market efficiency you have to believe agriculture should be more of a positive than it is. It’s market distortions that are keeping it from happening.”
   He noted that agriculture would have been a major beneficiary of the Trans-Pacific Partnership agreement that Trump withdrew from in January, but that the administration plans to approach countries like Japan and South Korea about recreating those terms in one-on-one trade deals. More broadly, Trump’s pick suggested that the TPP negotiated by predecessor Michael Froman was very strong in certain areas and could be used as a template for future trade talks.
   Lighthizer promised robust intellectual property protection, such as working to lengthen the duration of patents and speed up patent cases, and initiate cases against IP theft in the WTO and in domestic courts.
   “Anything less stifles innovation and science, and compromises a competitive advantage of the United States,” he said. “Innovation is the central nervous system of the modern economy.”
   As for protecting the digital sector in new trade deals, Lighthizer said he would build on TPP to include provisions that ensure the free flow of data and prevent governments from requiring information technology companies to host servers on their soil.

Lighthizer said he would build on TPP to include provisions that ensure the free flow of data and prevent governments from requiring information technology companies to host servers on their soil.

   Chairman Orrin Hatch said priorities for the USTR include strengthening U.S. intellectual property rights abroad; taking advantage of existing Trade Promotion Authority to move quickly on updating existing agreements and negotiating new ones; better market access for farmers and ranchers; and ensuring future trade deals have strong provisions for anti-corruption and protection of trade secrets.

   Trade rule enforcement. Ranking member Ron Wyden of Oregon said the Trump administration needs to deliver on promises to enforce trade rules, starting by quickly identifying and penalizing foreign dumping and subsidies that harm domestic manufacturers, and blocking the entry of goods made with forced labor or illegally harvested wood products.
   In fact, CBP during the past 18 months has stepped up anti-dumping and countervailing duty investigations, as well as goods made with forced labor. The agency has taken advantage of new investigative tools bestowed by Congress in the Trade Facilitation and Enforcement Act (TFTEA), which went into effect a year ago.
   The law, for example, eliminated a loophole that allowed imports of products made by forced labor if there was not enough supply to meet domestic demand and the agency has blocked the entry of peeled garlic and several other products from China. TFTEA also gave the agency more authority to follow up on whistleblower allegations of shipments being disguised to evade anti-dumping and countervailing duty orders and to go after intellectual property rights violations.
   The Trump administration must also hold other countries to commitments under existing trade deals, including the enforcement of labor and environmental obligations, and discrimination against U.S. digital goods and services, Wyden said.
   He criticized as “short-sighted” President’s Trump executive order that freezes hiring across the government, with exceptions for positions associated with national security or public safety, because it prevents the USTR from adequately staffing up the organization to investigate trade complaints and launch dispute settlement cases.
   The hiring freeze “suggests that the tough talk on trade is nothing more than talk. I hope that the president’s forthcoming budget doesn’t take even more trade enforcers out of the game, endangering good-paying American jobs, just to fund a $54 billion giveaway to defense contractors,” Wyden said, referring to the administration’s proposed increase in defense spending.
   Lighthizer said he hopes Congress appropriates the $15 million authorized under TFTEA for a trade enforcement trust fund because the USTR and other departments have a lot of work to do on the enforcement front.
   Trade policy must go further than protecting U.S. companies from unfair trade practices to include knocking down barriers to U.S. exports in other countries, Wyden said. He urged the administration to get started negotiating trade deals that meet high U.S. standards before other countries form economic alliances that cut out the United States.
   The senator reiterated that the President should disclose his foreign business interests so the American public knows that trade policies are being made on their merits. Wyden recently introduced legislation to require President Trump to disclose any income, assets or liabilities with respect to countries with which the United States is negotiating a trade or investment agreement, or that could be subject to enforcement action or be eligible for trade preference programs.
   “The bottom line is that the administration has talked a big game when it comes to trade, but now it’s time to act,” Wyden said. “That means more transparency, a full court press on trade enforcement, and being on the offense in overseas markets.”