India Negotiations Could Lead to GSP Restoration, Bound Rates Could Rise, USTR Says

U.S. Trade Representative Robert Lighthizer told two senators concerned about retaliatory tariffs in India that the U.S. is working on restoring India to the Generalized System of Preferences benefits program, but that it's slow going. “We’re in the process of restoring it if we can get an adequate counterbalancing proposal from them,” he told Sen. Maria Cantwell, D-Wash., who had complained that American apples are now taxed at 70% in India because of Section 232 tariffs on metals from that country.

Sen. Steve Daines, R-Mont., asked Lighthizer what the status of talks with India is, since Montana lentils face high tariffs there. India recently temporarily lowered its 30% duty on lentils for all countries other than the U.S. to 10%, and lowered the tax on U.S. lentils from 50% to 30%. Lentils were also part of the retaliatory tariffs for Section 232 tariffs.

The “tariffs that India has are extremely high on pulses and just about everything else,” Lighthizer complained during the Senate Finance Committee hearing June 17, saying it's a result of World Trade Organization policies. “We’re ongoing with the negotiations. It’s clearly taking longer,” he told Daines. “They are dogged and insistent on keeping their tariffs, and we’re dogged and insistent on getting a good deal.”

At another point, when asked about negotiating free trade deals in Asia, Lighthizer said, “We have a big negotiation with India potentially moving to an FTA at some point.”

But Lighthizer, as he had during a morning hearing at the House Ways and Means Committee (see 2006170008), cast doubts on the future of the GSP program that is the carrot to get India to liberalize. “Obviously, the GPS expires at the end of the year, and we have to decide what we want to do with it,” he told Sen. Bob Casey, D-Pa., who wants participation to be tied to the status of women in the workplace. “I have some problems with it right now, to be honest with you,” Lighthizer said.

Lighthizer also expressed interest in convincing Congress to change legislation on de minimis levels, something he referred to in submitted testimony to the House, but did not bring up during hours of testimony. Sen. John Thune, R-S.D., a primary defender of the $800 de minimis level, asked him about it. Lighthizer said that with the exception of Australia, the U.S. level is 20 times higher than other countries'. “I would like to study the issue,” he said. “I think it’s costing far more jobs than it is helping.” He said a million packages a day come in from China under de minimis. “They basically avoid Customs. To me, it’s a real, real problem,” he said. Thune said he would welcome Finance Committee participation in a study.

Although he suggested Europe as an example to follow on de minimis, he rejected advice from Cantwell and Sen. Pat Toomey, R-Pa., to eliminate tariffs on N95 masks (7%), face shields (5.3%) and gowns (5%), an initiative the European Union offered at the WTO. Cantwell asked why not abolish all the tariffs on protective gear until the pandemic is over, and asked him why the Section 301 tariffs on these medical items were only waived through the end of the summer. “In my judgment, 7% tariffs doesn’t have any real impact,” Lighthizer replied.

Sen. Rob Portman, R-Ohio, brought up another item in submitted testimony that talked about a reset of tariffs at the WTO. Portman, a former USTR, asked Lighthizer: “What is the future of bound rates?” Lighthizer said the U.S. has no room to spur new negotiations at the WTO because its bound rates are so low now, and he said it would be better if “we do a reset on tariffs and everybody needs to come down.”

Portman replied, “I like the idea of everybody coming down. I don’t like the idea of everybody coming up.” Lighthizer said, “Maybe we’ll have to meet in the middle, I don’t know.”

The U.S. can ask to raise bound rates this year at the WTO, but other countries can then ask for compensation in return. If the U.S. doesn't agree, it's not clear what the next step would be.

Finance Committee Chairman Chuck Grassley, R-Iowa, told Lighthizer he's concerned about groups asking the government to reinstitute Section 232 tariffs on Canadian aluminum, and expand 232 with tariffs on downstream products. He asked if the USTR would brief the committee before consulting with Canada over an alleged surge in imports. Lighthizer said there is a surge of both steel and aluminum coming from neighbors, and they're already talking to Mexico and Canada about it.

Also on the topic of disputes with NAFTA neighbors, Lighthizer called it “unacceptable” that the Mexican government hasn't approved any biotech applications in agriculture for 18 months.

“We’ve raised it with them, we’ve complained about it,” he told Sen. Pat Roberts, R-Kan. “We agree with you it’s a violation of USMCA, and we expect to bring an action if the situation continues.”

Sen. Tim Scott, R-S.C., also brought up Mexican agriculture, in this case, his view that Mexican fruits and vegetables are sold too cheaply here, and it's eating into S.C. growers' sales. “I expect to have our plan out in 60 days, and I really would like to work with you and your staff on putting that together, because [seasonality] is a very, very serious problem and it's at least four or five states where it's having a huge impact, and it's billions of dollars in sales,” Lighthizer said.

Under U.S. law, antidumping cases cannot be brought unless a majority of producers agree, and in the case of seasonal competition, growers outside the Southeast do not agree. Scott has a technical fix bill for USMCA to allow the merchandise processing fee to be refunded post-entry, and he asked Lighthizer if he's on board with that. Lighthizer said yes.

Lighthizer was also asked about USTR officials who wrote the auto rules of origin for USMCA and began advertising their consulting services for complying with those rules before they left the government, as reported in a Bloomberg story. Lighthizer said the men consulted with the ethics officials at USTR, and they were told it was all right. “I had the same sort of reaction that you did in terms of the propriety of it,” he said. The USTR said he would follow up on the issue.

Lighthizer knocked down arguments that China is not on track to meet its agricultural purchase commitments under phase one throughout the day, and said that former National Security Advisor John Bolton's claim that Trump asked the Chinese president for those purchases as a way to get re-elected “never happened.”

But Lighthizer kept his cool until Sen. Sherrod Brown, D-Ohio, said that the U.S.-China phase one deal is weak and that the changes to NAFTA won't bring back auto jobs. On China, he said, “I disagree with every single thing you said, senator, I think it’s so unfair! We’re being lectured by Democrats who literally did nothing for eight years! I feel like I’m being Churchill being lectured by Chamberlain.”