Republicans Say FTAs Answer To China on Trade; Dems Argue for AD/CVD, de Minimis Changes

At a House Ways and Means Trade Subcommittee hearing, Democrats talked up their legislative proposals -- two bipartisan, two not -- as answers to confronting China's trade agenda, and expressed skepticism of witnesses' advocacy for ending permanent normal trade relations with China, while some Republicans expressed interest in that approach, and one seemed cautious.

Representatives from agriculture-heavy districts -- most Republican, including the subcommittee chair, but also California Democrat Jimmy Panetta -- also talked about the lack of progress in getting China to accept biotech products and its nontariff trade barriers to ag exports. Chair Adrian Smith, R-Neb., said at the April 18th hearing that Congress should reauthorize trade programs that he said increase U.S. competitiveness, and pass Trade Promotion Authority so that the U.S. can partner economically in a "more consequential way" with allies.

Smith said in his opening statement: "Concerns about the Chinese Communist Party’s global influence and predatory trade practices are not only shared by every member of this Committee; these concerns are bipartisan and bicameral. We’ve seen firsthand how China seeks to weaponize trade to expand its influence and undercut U.S. workers and values."

The day after the hearing, the full committee passed a resolution that would reverse the administration's decision to delay duty collection for solar panels that the Commerce Department believes should count as Chinese products, though they were made in Southeast Asia, and therefore, be subject to antidumping and countervailing duties on Chinese solar panels (see 2304190052). The resolution had bipartisan support, though more Republicans than Democrats on the committee voted for it.

Rep. Greg Murphy, R-N.C., asked witness Jamieson Greer, former chief of staff to the previous U.S. Trade Representative, why the U.S. would undermine AD/CVD remedies in that way.

"It doesn't make sense to me, either," he replied.

"We are literally selling ourselves out when we know we're selling ourselves out," Murphy said.

Ranking Member Earl Blumenauer, D-Ore., pointed to a trade bill that passed the committee with only Democratic support in the last Congress as useful for tackling Chinese abuses. In his opening statement, he said that bill "closes the de minimus loophole, strengthens our trade remedy laws, creates an outbound screen for Chinese investments, and it updates the Miscellaneous Tariff Bill to exclude finished goods – more than half of which come from China and undercut American manufacturers."

When he had an opportunity to ask questions, he asked United Steelworkers Legislative Director Roy Houseman, the Democratic witness, if lowering the de minimis threshold is a priority of the union, and Houseman said yes, and said he knows a lot of the apparel sent directly to consumers from Chinese fast fashion firms uses cotton harvested by forced labor in Xinjiang.

Blumenauer told Smith that he hoped the committee would pursue a change to de minimis.

In Greer's opening statement, he said either the U.S. should withdraw China's most favored nation status or return to annual votes to renew normal trading relations, as was done before China joined the World Trade Organization in 2000.

Rep. Lloyd Smucker, R-Pa., asked Greer if he hopes for "a complete decoupling of trade with China" through ending PNTR, and asked if such a move is practical, with the high levels of both exports to and imports from China.

Greer said "It’s hard to imagine a world where we’re completely decoupled from China absent some significant geopolitical event," but suggested that the uncertainty of annual renewal could reduce the dependency on Chinese imports.

“Before 2000, before PNTR was granted, we didn’t have manufacturers going over to China as much, putting their factories there and exporting back here because they didn’t know they would have certainty of access in this market," he said. He suggested that the U.S. would have more leverage to get China to stop its intellectual property theft or distorting subsidies if China feared it might not "continue to have the same tariffs regime they’re enjoying -- 301 aside."

Panetta questioned this logic, arguing that the Phase 1 deal did not change China's approach on biotech imports. "Given the history of 301 tariffs, do you think [ending PNTR] will be successful? Why do we still have 301 tariffs? And why haven't they changed China's behavior?"

Greer said agricultural producers have to be taken care of because of the problem of retaliation, but also argued that Section 301 tariffs succeeded in diverting trade away from China. He said imports of goods from China that faced the 25% tariffs "decreased substantially."

Rep. Linda Sanchez, D-Calif., asked witness Matthew Goodman, senior vice president for economics at the Center for Strategic and International Studies, what the economic fallout would be from ending PNTR.

"This is a very complicated issue, because it's easy to understand why there would be an argument for not having a kind of a normal trade relationship with a country with these practices, but on the other hand, the reality is we do have this complex and large relationship," he said. "The fact is, it would be very disruptive if we move sharply away from that."

Witness Thomas Duesterberg, a senior fellow at the Hudson Institute, endorsed Greer's idea on PNTR, and said it was a mistake to allow China into the WTO. But he said ending PNTR isn't enough, adding that the U.S. should also sign other trade agreements, such as the Trans Pacific Partnership, and expand USMCA.

Committee Chairman Jason Smith, R-Mo., argued that "dialogues and frameworks are no substitute" for traditional free trade agreements in terms of confronting Chinese trade abuses. Rep. Darrin LaHood, R-Ill., who serves on the House Select Committee on China, also complained that the Indo-Pacific Economic Framework is insufficient.

Witness Mark McHargue, president of the Nebraska Farm Bureau, said in his opening statement: "Sitting back and allowing the rest of the world to finalize new real free trade agreements that increase market access and lower tariffs isn’t leading, and it sure doesn’t send the right messages to our competitors or allies. Rejoining the CPTPP and reengaging with the U.K. as well as Kenya on actual free trade agreements would be good places to start."

Rep. Terri Sewell, D-Ala., said during the hearing that she was joining Rep. Mike Bost, R-Ill., in sponsoring a bill that would, in her words, "increase civil penalties for fraudulent and grossly negligent violations of trade laws." She said she also would soon re-introduce Level the Playing Field Act 2.0., a bill that would make it easier for complaintants to win AD/CVD successor cases, would consider extra-territorial subsidies and make other changes to AD/CVD. She said the bill is bipartisan -- it will also be bipartisan in the Senate, where Sen. Todd Young, R-Ind., has agreed to co-sponsor with Sen. Sherrod Brown, D-Ohio. All these members have significant steel mills in their states or districts, and steel is a major user of AD/CVD remedies.

Houseman said USW supports both bills. "These successive cases ... are key items to address," he said.