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American Shipper

Ross: No ‘unlimited patience’ in deferring tariffs

As the United States and China continue discussions on trade after U.S. and Chinese tit-for-tat tariff threats in March, Commerce Secretary Wilbur Ross noted talks are still early, but won’t continue to suspend tariffs with no agreement.

   A bilateral negotiation in which the United States is seeking fairer
treatment for its companies doing business in China remains in an early
phase, but Commerce Secretary Wilbur Ross doesn’t have “unlimited
patience” as the Trump administration deliberates initiating tariffs on
about $50 billion to $60 billion worth of imports from China, he told American Shipper on Thursday.
   Top Chinese government officials plan to visit Washington “within the
next week or two,” Ross said during a Senate Appropriations Commerce
Subcommittee hearing, as the Trump administration continues to seek a
resolution of grievances after the Office of the U.S. Trade
Representative (USTR) on March 22 released a 215-page report following an investigation that found unfair commercial practices by China.
   Section 301 of the Trade Act of 1974 spells out several potential
options for responding to unfair overseas commercial practices if found
by the United States. USTR’s investigation resulted in President Donald
Trump recommending tariffs on a range of U.S. imports from China.
   USTR is accepting comments on the proposed tariffs through Friday and
will host an interagency public hearing on Tuesday at the International
Trade Commission as the administration gathers input on whether and
what tariffs should be finalized against China.
   “We have to play it by ear” on the timing of any final tariff decision if talks don’t pan out, Ross told American Shipper after the hearing. “I do not have unlimited patience. But we’ll have to see; it’s the early days of the negotiation.”
   Ross, U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Steven Mnuchin visited China last week for a total of about 30
hours of high-level negotiations with a Chinese government delegation
led by Vice Premier Liu He and including Commerce Minister Zhong Shan
and Finance Minister Liu Kun, as well as other representatives of
China’s Ministry of Commerce and central bank, Ross said.
   Among the U.S. requests are for China to reduce its $337 billion
trade surplus with the United States by $200 billion by 2020 and to cut
subsidies under its comprehensive “Made in China 2025” economic plan.
   Among China’s asks is for the United States to lift “restrictions [on] high-technology exports” to China, the South China Morning Post reported.
   Agriculture also was featured “prominently” in the United States’
written requests submitted to China before last week’s meetings and in
the talks themselves, Ross said.
   Despite Chinese complaints that the United States’ requests before
the meeting weren’t specific enough, the U.S. made “some very specific
requests, product by product, quantity by quantity,” particularly on
agriculture, during meetings with the Chinese, he said.
   “In a subsequent session, the Chinese responded in kind,” Ross said. “I don’t mean to say kindly, but in kind.”
   There remains a wide gap between U.S. and Chinese requests, but the
“good news” is that Chinese officials soon will visit Washington and
that there have been clear asks from both sides, he said.
   In another effort to address China trade issues, Sen. Marco Rubio,
R-Fla., introduced and promoted his Fair Trade with China Enforcement
Act on the Senate floor Thursday.
   Among other things, the bill would increase taxes on multinational
corporations’ income earned in China at a rate similar to the lost value
of stolen U.S. intellectual property (IP) and technology, impose duties
and Chinese investor shareholding caps on U.S. companies producing
goods targeted by the “Made in China 2025” plan and ban the sale of
sensitive technology and IP to China, according to a summary of the
bill.
   “We have these large, multinational, United States companies that
have very valuable intellectual property and technology who partner with
Chinese firms, and they know their [IP]’s going to be stolen,” Rubio
said on the floor. “But they don’t care, and they don’t care, number
one, because they’re not going to pay the full cost of the loss of this
[IP] that’s going to be borne out by the entire country.”
   During the hearing to examine the Commerce Department’s Fiscal Year
2019 budget request, Sen. James Lankford, R-Okla., noted that there have
been about 9,000 requests for product exemptions from generally global
duties of 25 percent on steel and 10 percent on aluminum since
Commerce’s Bureau of Industry and Security (BIS) set forth the process
for exemption requests on March 19.
   While companies may request exemptions anytime, comments on BIS’ interim final rule (IFR) setting forth the process are due May 18.
   The IFR said BIS’ review period normally won’t exceed 90 days. BIS
will hit the end of the first 90 days of the exclusion process on June
17.
   BIS currently has a backlog for product exclusions of about 2,200
inquiries, and some individual company requests have been “enormous,”
including one that seeks 1,167 product exclusions, “which kind of
boggles the mind, but we’ll see how warranted they are,” Ross said.
   With the IFR comment deadline only a week away, “you’ll be starting to see approvals and denials come out,” he said.
   If the House and Senate both “very quickly” approve a Commerce
request for a reprogramming of $3.3 million to fund 15 full-time
equivalents to help handle the “surge” of exemption requests, Commerce
should be able to process exemptions within the 90-day window outlined
in the IFR, Ross said.
   But if Congress doesn’t OK that request, “it’s going to be a stretch,” he said.
   Commerce can’t make product exclusions retroactive because that would
add a layer of complexity to U.S. Customs and Border Protection’s
(CBP’s) duty collection process, Ross said in response to a Lankford
question.
   The format of the existing exclusion process “is what we thought was
the best balance of the needs of the respondents and the needs of [CBP],
because they need a finite date,” Ross said. “There are a whole bunch
of considerations we had to take into account.”
   The Trump administration is negotiating for steel and aluminum import quotas with several countries that export a large amount of those metals to the United States, including with the European Commission, Ross said.
   The EU appears to be considering agreeing to quotas, and there’s a “real chance” the U.S. and EU can make a deal, Ross told senators.
   But “the whole thing’s a work in progress, and until you have a deal on everything, you don’t have a deal on anything,” he told American Shipper after the hearing.
   Ross added that he and EU Trade Commissioner Cecilia Malmstrom talk
several times per week, and they will talk early next week on the issue
of steel and aluminum quotas.
   Other countries that export significant amounts of steel and aluminum to the United States include Canada and Mexico, and steel trade with those nations is balanced, by and large, Ross told senators.
   Canadian aluminum exports to the United States help fulfill U.S. consumption needs, and Canada isn’t dumping the metal here, Ross said.
   Along with price growth, quotas over time usually spur more value-added trade, as companies seek to limit their amount of bulk commodity imports, which are more naturally inclined to consume larger portions of quotas, Center for Strategic and International Studies Scholl Chair in International Business Bill Reinsch said in an interview with American Shipper.
   That doesn’t happen as much with tariffs, which are associated with across-the-board price increases, he said.
   Further, with quotas, “there’s a tendency on the part of shippers to ship early to make sure you get it in before the deadline, and what that tends to produce is a flood in the first half of the year and then shortages in the second half of the year, as quotas are met and there’s no more room,” he said. “Quotas would make [supply] less even for [downstream suppliers] and also more expensive.”
   Addressing global safeguard tariffs on solar cells that Trump ordered in
January, Sen. Chris Van Hollen, D-Md., asked Ross whether there was any
analysis showing that the duties would cause a net U.S. job increase,
citing Solar Energy Industries Association data indicating that Maryland
has lost 784 solar industry jobs since the tariffs were imposed and
projecting nationwide net losses of 23,000 solar jobs.
   Ross said it is a complex question of how many jobs will be gained or
lost with the tariffs in place, which will progressively decrease from a
current rate of 30 percent to 15 percent in January 2021 before they
are scheduled to expire in January 2022.
   Ross also noted that some foreign solar providers have announced plans to open facilities in the United States.
   Some groups are estimating that solar industry growth will probably
slow this year, Ross said. Yet one estimate that he saw is forecasting
approximately 11 percent of growth year-over-year, he added.
   “What makes it complicated is there were some tax benefits that
expired last year, so you have a whole series of activities that were
driven by trying to get [product] in under the deadline” before tariffs
took effect, he said.