On Senate Floor, Portman Discusses His Bipartisan Trade Security Act

August 2, 2018 | Press Releases

Bipartisan Legislation Addresses Misuse of Section 232 Trade Remedy, Preserves It for Genuine National Security Threats

 

WASHINGTON, D.C. – Last night on the Senate floor, U.S. Senator Rob Portman (R-OH) discussed his recently-introduced bipartisan Trade Security Act with Senators Doug Jones (D-AL) and Joni Ernst (R-IA). This legislation will reform Section 232 of the Trade Expansion Act of 1962 to better align the statute with its original intent as a powerful trade remedy tool for the president and Congress to respond to genuine threats to national security. This legislation addresses concerns that misuse of Section 232 will harm jobs and the economy and likely result in a loss of this trade remedy tool, either at the hands of a World Trade Organization dispute settlement panel or as the result of other congressional action. In keeping with the original intent of Section 232, this bill makes common-sense reforms that require the Department of Defense to justify the national security basis for new tariffs under Section 232 and increases congressional oversight of this process. 

Said Portman in his speech: “This legislation will help guide our trade policy and ensure that we keep national security and trade issues separate. The strength of America’s economy comes from hardworking and innovative Americans in the shops, plants, and farms that send products across the globe. We want more of that. They deserve a level playing field and the chance to compete. Let’s be sure our trade policy gives them that—and not escalating tariffs for their exports and higher costs for their families. Let’s find that right balance—including restoring an important national security tool by not misusing it.” 

A transcript of the speech can be found below and you can watch the video here. 

 “Today I want to talk about an issue that has gotten a lot of attention recently—and that is our U.S. trade policy. It’s an important topic that affects every one of us. It affects our economy, it affects jobs, it certainly affects our foreign policy. I have followed it pretty closely over the years. I was a trade lawyer when I first started practicing law. I was U.S. Trade Representative, or USTR, under the George W. Bush administration, and now I’m a member of the Senate Finance Committee, which has jurisdiction over these trade issues. Most importantly, of course, I’m a senator from Ohio, a state which has a big manufacturing sector, a big agriculture sector, and a state where a lot jobs depend on having a good trade policy. In fact, in Ohio, about 25 percent of our state’s factory workers are export workers. In other words, they make products that get exported. Today in Ohio, about one out of every three acres planted by Ohio farmers are exported – soybeans, corn, wheat. These are good jobs, too. Trade jobs pay, on average, 16 percent more than other jobs and provide better benefits. So, it’s really important to our economy in Ohio to have these export jobs. 

“In America, we’re about five percent of the world’s population, and yet we have 25 percent of the world’s economy. So it’s really important to us to have access to the 95 percent of consumers who live outside of our borders. We want to sell to them more, we want to open up markets for our workers, for our farmers, and for our service providers. While promoting exports, we also need to ensure we protect American jobs from unfair trade—from imports that would unfairly undercut our workers, farmers, and service providers. Simply put, we want a level playing field where it’s fair and we have reciprocal treatment between countries. If we have a level playing field, I believe American workers will be just fine. Our workers and our businesses can compete—and we can win—if we truly have a level playing field. We want a balanced approach: we want to open up new markets for U.S. products—while being tougher on trade enforcement so we can compete. 

“With my colleagues, over the past couple of years, I have co-authored a number of laws in this area, one’s actually called the Leveling the Playing Field Act. And it does just that. The other is called the ENFORCE Act. These are both bipartisan laws that are helping right now to crack down on unfair trade that hurts U.S. jobs. The Leveling the Playing Field Act helps on the front-end by making it easier for workers and businesses to win cases when foreign companies send us products that are unfairly traded because they are sold below their cost—or dumped—or because they’re subsidized illegally. This makes it easier to put anti-dumping or countervailing duties, also known as tariffs, on those unfair products. That’s a good idea, and by the way, it’s sanctioned by the international trade enforcer—called the World Trade Organization—and this law has worked over the past couple of years to raise tariffs on those unfair imports. 

“The second law, the ENFORCE Act, helps on the back-end by ensuring that once workers win trade enforcement cases, the new duties are actually enforced. It is designed to keep countries from circumventing the new tariffs by selling a product to a third country that then sells it to the United States to get around those tariffs. We don’t want people to evade our tariffs, that’s the purpose of the ENFORCE Act. It needs a little work, honestly, on its implementation. We need to strengthen it. But those two together, the Leveling the Playing Field Act and the ENFORCE Act, are working. 

“Since I came to the Senate in 2011, I have been involved in more than 40 trade cases where American workers and producers were seeking relief from unfair foreign competition. I am proud to have received the American Iron and Steel Institute’s Steel Champion Award in 2015 for my ongoing work to allow steel workers to compete on that level playing field. In 2016, the Leveling the Playing Field Act was used to secure three big wins against China and several more against other countries, in the sector of steel, particularly rolled steel—hot-rolled, cold-rolled steel, and corrosion-resistant steel. This is the kind of steel used to make cars and trucks, among other things. Rolled steel from China now faces tariffs of up to 265 percent thanks to our legislation, thanks to our cases and winning them. 

“This is how trade enforcement should work. It shouldn’t just be about saying we’re going to raise tariffs just because we can because then other countries will do the same thing to us—raising tariffs—which are like taxes. And risking a trade war with escalating tariffs would leave everyone worse off. Any enforcement actions should be focused on countries engaging in unfair trade practices and violating our trade laws or the commitments that are required under the World Trade Organization. We want a level playing field, we want reciprocity so we can open up more markets for our workers, and we want what other countries send us to be fairly traded. It’s pretty simple. We need to be careful about taking actions that increase barriers to trade. If we impose higher tariffs without justification, we invite retaliation and higher tariffs on our exports. My concern is that we are beginning to do just that, and it threatens the impressive economic gains we’ve seen this year. Since the tax reform and tax cuts were enacted, and since important regulatory relief has been implemented by the Trump administration, we’ve seen the economy grow. 

“After a couple of decades of stagnant growth and flat wages, our economy is actually increasing, wages are starting to increase, and American workers and businesses are benefitting. Just last week, the Commerce Department released the economic numbers for the past three months, and our economy grew by 4.1 percent in the second quarter of this year. Pro-growth federal policies have resulted in this kind of a strong and growing economy that is creating more jobs and higher wages. We want to continue building on that momentum that we’ve already started this year with these good fiscal policies. I’m concerned that some of our decisions on trade policy provides a real headwind to that growing economy. That’s why when I see the Commerce Department considering putting tariffs on automobiles and auto parts, I become concerned. According to one estimate, a 25 percent tariff on autos and auto parts could cost 624,000 American jobs. 

“Right now, the administration is doing a lot on the trade front—they have a lot of balls in the air. As far as our trade policy is concerned, I think it’s causing a lot of uncertainty out there in the economy. First, the administration is still renegotiating the North American Free Trade Agreement, or NAFTA, with Mexico and Canada, which are our biggest trading partners in Ohio. Canada is number one and Mexico is number two. I support updating NAFTA, I think it’s a good idea. I support what USTR Bob Lighthizer is trying to do, but after 15 months of talks and uncertainty, I’m concerned. We need to see some light at the end of the tunnel. I hope we will soon, particularly as it relates to Mexico. 

“Second, the administration is raising tariffs on Chinese imports using Section 301 of our trade law after conducting a thorough investigation demonstrating the number of anti-competitive ways—from administrative approval processes, to joint venture requirements, to outright cyber theft—that China effectively steals American intellectual property. 

“And then, third, the administration is using a national security waiver to our trade rules—called Section 232—to raise tariffs as a matter of national security on steel and aluminum imports from all but four countries. By the way, that means those tariffs are being imposed on a number of our strong allies. 

“Because of that, and the retaliation it has invited, this Section 232 has been the focus of a lot of attention recently. I agree with President Trump that we must crack down on countries that cheat on trade like China, and we need to make sure we do it in a smart and targeted way. China does steal our intellectual property, and they have been doing it for years. China tilts the playing field against American firms, innovators, and workers and gets the technology they need to leapfrog the competition.

“I support stronger action against unfair Chinese trade and investment practices, and I was glad to hear today that serious talks with China may start soon. As we go into these talks, we need to be clear about our objectives—clear about what we’re looking for as Americans. Is it just trying to address the trade deficit and having China buy more of our exports, like soybeans or LNG—liquefied natural gas? Or is it asking China to actually make some changes strucuturally so that we can have a more fair trading relationship between two mature trading partners? We also need to be sure, as we are making clearer objections, that we don’t continue to raise tariffs without having these negotiations and direct talks. 

“My biggest concern is the administration’s broad use of this powerful national security tool known as Section 232. Section 232 comes from a trade act that was passed back in 1962. It was intended to be used purely for national security purposes and, thus, has been invoked only rarely—only a few times—the last being in 1986, 32 years ago. Section 232 is really an exception to our trade laws—because you neither have to show injury to a domestic industry nor any surge or unfair trade with regard to the targeted imports, as you would under the other trade laws. In other words, under the other laws you have to show that there is material injury to a domestic company, or there’s a surge coming in of imports, or often that there is unfair trade, like dumping we talked about earlier—selling it below cost—or subsidizing it illegally, you don’t have to show that under 232. 

“One reason it has hardly ever been used is precisely because it doesn’t require showing any negative impact or any increase in imports or unfair trade. This means other countries, when we use this tool, if it’s not used for real national security reasons, are likely to respond in kind—simply putting tariffs on our exports for no reason. And that’s exactly what’s happening. Using Section 232, we have now put a 25 percent tariff on steel and a 10 percent tariff on aluminum imports from nearly every country in the world—across the board—most of whom are our allies. The only exemptions are Argentina, Brazil, Australia, and South Korea. We’ve negotiated quotas with them. For all other countries in the world, we have these tariffs in place, including again, a lot of our close allies. Take Canada, for example. They are a stalwart ally. They’ve had troops in Iraq with us, they’ve had troops in Afghanistan with us, a good neighbor, and Ohio’s biggest trading partner—the number one export destination for the workers and farmers I represent. 

“We actually send, as a country, more steel to them than they do to us, and remember, these are about steel and aluminum national security tariffs. But they are targeted by Section 232 as a national security threat for steel. They have responded, as you would expect, with tariffs of their own on our exports. All kinds of exports across the board. According to one publication, Business Insider, Ohio is their number one targeted state. That’s the state I represent. They have slapped tariffs on our Ohio workers and farmers of more than $1.7 billion. 

“Now, let’s back up for a second and talk about steel and aluminum. Is there an issue with unfair imports? Yes there is, I think, particularly in regard to steel. We have a global glut of steel, and China is the reason. About 15 years ago, they had about 15 percent of global steel production, today they have about 50 percent of the global production of steel. They don’t need it, so they’re subsidizing it and sending it out below its cost, that’s dumping. That’s why we’ve been using our other trade laws to go after these exports, and we need to do more of that to stop the transshipments where they send a product to another country where they then process it and send it to us. 

“For certain countries and certain products, I believe there is a national security issue with steel. Let me give you an example of that, electrical steel, something that is critical to our electric grid. Electrical steel is something we absolutely need. There is only one U.S. manufacturer left of electrical steel, and imports have increased in the last year alone by about 100 percent. This is an example of how I believe Section 232 could be used: in a targeted way that directly relates to our national security. And, again, we have other trade enforcement tools at our disposal, including the Leveling the Playing Field Act and ENFORCE Act I mentioned earlier. These are more precise tools to hold our trading partners accountable that should be strengthened and used before Section 232 where appropriate. 

“Misusing the Section 232 statute and its national security rationale not only leads to other countries increasing tariffs on all of our exports to them, but it also risks the World Trade Organization stepping in and us actually losing what I believe is an important national security tool. In other words, by misusing it, my fear is we will be taken to WTO by other countries, it’s already happened. They’ve already filed cases against us. The WTO at some point could indeed rule, which they never have before, that we cannot use Section 232 in the way that we have and take away that tool. That would be a big problem because I think it is a tool we should have in our tool box. And I believe we run an even greater risk of losing this tool when the administration suggests that imports of cars threaten our national security. That’s the most recent case that is now working through the system. 

“I want to see more cars made in America, but tariffs like the Commerce Department is suggesting would make it even more expensive to make a car here. We’re told by the auto industry—and by the way the three big automakers oppose the 232 on automobiles—we’re told it would increase the cost of a car by about $2,000.That is why I believe we must reform the Section 232 statute and ensure that any 232 actions are based on a legitimate national security justification and that Congress has a larger role to play in its oversight. 

“A few hours ago, my colleagues Senators Doug Jones, Joni Ernst, and I introduced bipartisan legislation that will help do just that. Our bipartisan bill, called the Trade Security Act, will reform Section 232 to better align the statute with its original intent. First, it ensures the proper experts in government determine at the outset whether there is a national security threat. Our bill requires the Department of Defense—not the Department of Commerce—to assess the potential threat posed by imports of certain products to justify the national security basis for new tariffs under Section 232. If the Department of Defense says a threat is found, then the department would send its report to the president. The president would then direct the Secretary of Commerce, in consultation with Congress, the Secretary of Defense, and the USTR, to develop recommendations for how to respond to the threat. After receiving the remedy recommendations from the Secretary of Commerce, the president would decide whether to take action. So it creates a two-step process. The first step is determining whether there is a national security threat, done by the appropriate office and the appropriate experts in the federal government. Then the second step would be the Commerce Department coming up with the appropriate remedy. As opposed to now where the Commerce Department makes that national security recommendation. 

“The bill will also expand the role of Congress by giving Congress the opportunity to disapprove of 232 action by passing a joint resolution. Currently, Congress can disapprove of Section 232 actions through a joint resolution—but only when it covers oil or petroleum products. It’s interesting, under the current 232 statute, the disapproval process works but only as it regards to oil or other petroleum products. Our bill—the Trade Security Act we introduced today—would expand that process to include all products. The oil and petroleum products exceptions is a vestige from the last time 232 was used, about 40 years ago, because it was used in regards to oil from Libya and Iran. 

“Misusing our trade tools not only hurts our exports, workers, and farmers, but also our consumers. I urge my colleagues to join me in supporting this legislation to increase congressional oversight on one of our most important national security tools. 

“When he signed the Trade Expansion Act of 1962, that included Section 232, into law, President Kennedy said, and I quote, ‘This act recognizes, fully and completely, that we cannot protect our economy by stagnating behind tariff walls, but that the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods. Increased economic activity resulting from increased trade will provide more job opportunities for our workers.’ So that was the context in which 232 was passed. In other words, saying, we don’t want to put up more barriers, we want trade to be fair and reciprocal.  Neither the president nor the Congress intended that Section 232 would be used to put up more barriers. In order for Section 232 to apply, said a Finance Committee Chairman, ‘The products must be involved in our national security.’ Whether it’s the president or whether it’s the Congress, the intent was clearly to tie this to national security. 

“Let’s restore this powerful and important tool to Congress’ original intentions when it crafted the law and ensure Section 232 is used appropriately and selectively for national security purposes. This legislation will help guide our trade policy and ensure that we keep national security and trade issues separate. The strength of America’s economy comes from hardworking and innovative Americans in the shops, plants, and farms that send products across the globe. We want more of that. They deserve a level playing field and the chance to compete. Let’s be sure our trade policy gives them that—and not escalating tariffs for their exports and higher costs for their families. 

“Let’s find that right balance—including restoring an important national security tool by not misusing it. 

“I urge my colleagues to join us in support of the Trade Security Act to help do just that.” 

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