USTR Says Administration Working to Stop 50% Tariffs From Europe and Supports Renewal of GSP

U.S. Trade Representative Katherine Tai, in her second day of testimony on Capitol Hill, heard again and again from members of Congress who are hearing from companies in their districts that they want Section 301 tariff exclusions back. She heard repeatedly that the 9% countervailing duties on Canadian lumber are making a bad situation worse. And she heard that the Miscellaneous Tariff Bill and Generalized System of Preferences benefits program should be renewed. On each topic, both Democrats and Republicans shared concerns, though on GSP, Republicans only spoke of the cost to importers, while Democrats worried about the effects of GSP on the eligible countries. Tai testified for more than four hours in front of the House Ways and Means Committee on May 13.

Tai gave few hints of timing on a decision on China tariffs or exclusions, but told Rep. Jackie Walorski, R-Ind., that although the administration wants to be thoughtful about its China policy, it's clear to her "time is of the essence. I hope to be able to come back to you soon with more specifics."

Even more urgent is the question of how the U.S. can convince the European Union not to go forward with a doubling of retaliatory tariffs over 25% tariffs on European steel exports in place now for more than three years. That deadline is June 1. "This date Is looming. This is something we’re talking actively to the Europeans about," Tai said as she responded to Rep. Gwen Moore, a Democrat who has Harley-Davidson's Wisconsin headquarters in her district. Harley is one of the targets of the EU, likely because the House speaker at the time the Section 232 tariffs began was from Wisconsin. There, too, Tai said she hopes to have a more concrete response soon.

Fellow Wisconsin Democrat Rep. Ron Kind, who reminded Tai that he has introduced a bill in the past that would give Congress more say before Section 232 tariffs are imposed, asked her how hopeful she is about resolving the tariffs, which he said hurt both cranberry exporters and Harley exports and purchasers of aluminum and steel.

He told Tai he was "very displeased when the previous administration started slapping these tariffs on our closest friends and allies under the guise of national security."

Tai said the 232 tariffs "come up on almost all of my calls with my foreign counterparts," and she acknowledged their limitations but also said they've "been effective in addressing an existential threat to our steel and aluminum industries."

She told Kind that she'd like Congress to write new legislation that could address overcapacity or other unfair trade practices.

Rep. Darin LaHood, R-Ill., asked Tai what tools the U.S. has to counter China's trade distortions besides tariffs and sanctions. She said the ban on imports of goods made with forced labor is one, but she also suggested there should be tariffs that could be imposed before subsidized imports hurt domestic manufacturers. "As we look at China’s industrial policies we can see where the next set of anticompetitive challenges are going to be," she said.

Using USMCA to address trade barriers for exporters came up repeatedly at the hearing, whether it was dairy restrictions in Canada or bans on genetically modified corn or glyphosate in Mexico. Tai said she is bringing those issues up, and knows well that Congress cares about them.

On the Generalized System of Preferences benefits program renewal, ranking member Kevin Brady of Texas was joined by several other Republicans saying the lapse is hurting American businesses. Rep. Lloyd Doggett, D-Texas, asked Tai if environmental criteria would be added to the list of eligibility requirements under GSP. Tai noted that's Congress' call, but added that "from my perspective, the administration is fully supportive of taking this opportunity in 2021" to update GSP, including an environmental criterion.

Moore asked Tai if GSP is really helping countries develop economically, "and what are we going to do to enhance it?" Tai said she'd like to work with Moore on that question, and said, "the administration will support efforts to renew GSP, to update GSP."

Three Democrats and a Republican on the committee brought up the high price of lumber, with Rep. Mike Thompson, D-Calif., specifically saying it's making it harder for his constituents to rebuild after wildfires, and they want the countervailing duties on Canadian lumber removed. Tai said trade in softwood lumber has been an irritant with Canada for 40 years, but she said she'd like to ask Canadians, "Hey, is there anything else that hasn’t been tried before?"

Several Republicans asked about renewing Trade Promotion Authority, and many members from both parties talked about their desire to progress on a United Kingdom or Kenya free trade agreement, or some kind of successor to the Trans-Pacific Partnership.

While Tai cautioned that the country is "still struggling to get through a pandemic," she also pushed back against members' arguments that the administration should not wait until its domestic economic policies bear fruit to start trade negotiations. She said the administration has proposed billions in domestic investments already, and Congress should help make them a reality. And she said the administration is open to a TPA and an approach to trade in Asia, as long as both can win broad support in both parties, as USMCA did.

Rep. Jimmy Gomez, D-Calif., asked a question about the use of the rapid response mechanism on labor rights in Mexico, one of the aspects of USMCA that won over longtime trade skeptics in the Democratic Party.

Gomez asked Tai if the agency would wait and see how the GM and Tridonex rapid response cases would play out before initiating any other complaints.

"Any time there is a claim, a petition, a fact pattern that is credible and sufficient and provides us with evidence this mechanism can be and should be activated, we will activate it," Tai said.

Gomez responded that he tells colleagues that if Congress is pleased with how USMCA is implemented, it will make it easier to get future free trade agreements through Congress.