At Hearing, Portman Cautions Use of Section 232 to Enforce Trade Laws, Urges Different Approach

June 20, 2018 | Press Releases

WASHINGTON, D.C. – At a Senate Finance Committee hearing this morning, Senator Rob Portman (R-OH) urged the Secretary of Commerce, Wilbur Ross, to use different measures than Section 232 of the Trade Expansion Act to enforce trade infractions from foreign countries like China. Section 232 is a measure used in conditions of national security, and Portman stressed the fact that misuse could result in trade wars with America’s top trade allies.  Instead he urged the administration to vigorously use the tools at their disposal, such as the Leveling the Playing Field Act and the ENFORCE Act, which are working to crack down on foreign competitors that launder products through other countries to try to get around our trade laws. 

Senator Portman helped lead efforts to enact both laws.  The Leveling the Playing Field Act, which was signed into law in 2015, cracks down on unfair trade practices by restoring strength to antidumping (AD) and countervailing duty (CVD) statutes that allow businesses and workers in the United States to petition the Commerce Department and the International Trade Commission (ITC) when foreign producers sell goods in the U.S. below market price or receive illegal subsidies. The ENFORCE Act helps stop efforts by foreign countries to illegally import goods by setting up a process that gives domestic producers an opportunity to formally petition Customs and Border Protection to investigate possible antidumping and countervailing duty evasions.  

A transcript of his remarks can be seen below and a video can be found here:

Portman: “As you know, I’m supportive of cracking down on China, I think it’s necessary. I think what we’ve tried in the past has not been successful and my hope is that we will have more success. We have to be careful about an escalation there. I also support what we’re doing with regard to a better NAFTA accord. We need NAFTA, we need it badly, but we have to be sure that it’s updated. I also believe in leveling the playing field on trade generally.  I’m the author of the Leveling the Playing Field Act with Senator Brown, we’ve been winning cases consistently, including steel cases because of unfair trade dumping and subsidies. My concern is 232, and you and I have talked about this. It’s a very extraordinary remedy that ought to be used very carefully and very selectively. And it ought to be used for national security reasons, which is why it was drafted. Frankly, my concern is that the way we’re using it now is both misusing it and having negative economic impacts in certain sectors. But also, I think it risks us not having this tool in the future, because although the WTO has not yet adjudicated this case, if we’re pushing the envelope beyond national security, I think we lose a tool that could be very important for us in a true national security situation. 

“I’m deeply concerned about its application to Canada, as an example, our number one export market for Ohio. The country’s number two export market. Mexico, the E.U., I don’t see the national security perspective there. I’ve looked back to try and figure out, what did we mean back in the 60s when we came up with this bill. It’s only been used, as you know, a few times and it hasn’t been used in over 30 years. George Bush tried to use it, and his Secretary of Commerce said it wasn’t a national security concern with regard to steel so he had to use another measure. It doesn’t require any surge, it doesn’t require any showing of material injury, so it’s very unusual in terms of our trade laws and ought to be used for national security concerns. When you look back at the then chairman of the Ways & Means Committee and what he said, he talked about, ‘This needs to be used to be sure we’re helping our allies, not hurting them.’ He said, ‘Any modification of a duty on imports would inevitably result in a curtailment of exports, would not only be a burden on the domestic industry, an economic disadvantage, but could also be a disadvantage to national security.’ So that was the thought here, that this would be very narrow. 

Speaking of damages, Ohio, as you know, is disproportionally hit, we’re hit harder than any other state by the Canadian retaliatory tariffs, as an example, because of 232. So I get your argument that we have a global glut of steel, I agree with that. China is the reason, about 15 years ago they had about 15 percent of production, now they have about 50 percent of the world’s production. They don’t need it, they’re sending it out below its cost, that’s dumping. That’s why we win these cases, including an almost 300 percent tariff on some of the rolled product from China today. I believe that the ENFORCE Act ought to be used much more aggressively. This is something that I have worked on with Senator Wyden and others in this committee. It’s in law to stop these transshipments where China sends its product to one country and then it ends up coming to us. We’re not enforcing it in the way we should and Customs and Border has a huge role to play there. I think with regard to Canada and Mexico, there’s a solution that we ought to be looking to, one, the ENFORCE Act if you see a problem, two, let’s measure transshipment. My understanding is, we don’t know to the extent there’s any transshipment. We’re not even accusing them of that. We’re certainly not accusing them of any unfair trade practices, but if that’s true, let’s have a trigger in place so if it should that happen, we can react. It seems that would be a very appropriate part of the NAFTA negotiations. How would you feel about such an approach, where we could measure transshipments and then have a trigger in NAFTA as compared to having a 232, this blunt instrument.” 

The Honorable Wilbur L. Ross, Jr. Secretary of Commerce: “Well, at present there is no measurement being conducted because Customs and Border Protection aren’t very interested in things that are being shipped between two countries that have no tariff to each other. So, we simply do not have definitive data as to what is going on in the way of transshipment from China through Canada. We have seen all kinds of transshipment, with or without slight modification of product going on to get around the existing enforcement actions we’ve taken. You’re well aware we have some 440 trade actions in force, including the one we just put in on the welded large diameter pipe, mostly against China. But what happens is, the WTO rules, as you’re well aware of as former U.S. Trade Representative, require great specificity as to product and origin. So if they make a small modification, a steel bar like this, if they put a little tiny flange on it, we have to start all over.” 

Portman: “I would just say, Mr. Secretary, and I appreciate your response, that’s why we wrote the ENFORCE Act, precisely to be able to get at those kinds of situations. I understand you’re saying that Customs and Border Protection doesn’t prioritize this issue as much as you would like them to, apparently. We agree, that’s why we wrote the law, so it seems to me that before we take these extraordinary actions, and really risk the possibility of using the 232 in the future, in my view, because I think the next time in front of the WTO is going to be very problematic for us, given the way we’re using it without any national security connection. Let me go on to another one which is automobiles. What’s the basis for a national security concern with regard to automobiles?” 

Secretary Ross: “Well, we’re at the early stages of the investigation on the auto industry so we clearly don’t have conclusion. They are a few things however, that we are very concerned about. One of those is the auto trade deficit that we have been experiencing. If you look at the overall trade deficit, and we’re going to put up a chart to show you, why we think it’s so important and so dramatic. The blue bars, the vertical ones, are the amount of trade deficit each year. And you’ll see that starting about 1985, we had small trade deficits in autos, now we have a quite huge one, pushing about $140 billion a year. We have a similar one in auto parts.”

Portman: “Let me just save you because I’m over my time, maybe we can do a second round, I know you have to leave. My point is not that we don’t have a need to balance trade, it is what tools we use, and if we use 232, which if we look back at the legislative history has only been used three times since the 1960s when it was written and it hasn’t been used in over 30 years, because other Commerce Departments have said this is not a national security concern. I do think that you risk not only these huge retaliatory tariffs that will be upheld. By the way, our auto industry is now the number one exporter in America. Cars and auto parts are now the number one exporter, so losing those export markets is a big deal to the auto companies as well. It’s also a highly integrated industry as you well know given your background. So the supply chains are complicated, but they’re international, so they’re very concerned. I just hope, Mr. Secretary, that we continue to make progress on leveling that playing field, reciprocity, but doing it with the tools we have at our disposal to deal with unfair trade, deal with surges, that deal with countries that dump, deal with countries that subsidize and be very, very cautious in terms of how we extend beyond that because I think that will end up hurting our workers and our economy. I think you for being here today, and I look forward to working with you on this.”