On Senate Floor, Portman Discusses Phase One China Trade Agreement, USMCA, and 2020 Trade Priorities
WASHINGTON, DC – Today on the Senate floor, U.S. Senator Rob Portman (R-OH) highlighted the economic benefits of two trade agreements: the U.S.-Mexico-Canada (USMCA) Trade Agreement, which is expected to pass the Senate tomorrow, and the phase one trade agreement with China signed by President Trump earlier today.
Portman has been a leading advocate for USMCA, which will create at least 176,000 new jobs, expand opportunities for agricultural trade, encourage new opportunities for auto jobs in America, and add a new section on digital trade to make online sales easier. Portman also touted the phase one trade agreement with China as a good first step towards rectifying unfair trade imbalances and creating a more balanced and durable economic relationship between the United States and China. At the signing ceremony on the China trade agreement today, President Trump praised Senator Portman for his leadership and work on trade.
The transcript of his remarks can be found below and a video can be found here.
“I’m here on the floor today to talk about international trade and, what a week it’s been. In the same few days, we’re seeing the culmination of nearly three years of effort by this administration to deliver wins for American workers, for businesses, for farmers, and for consumers, and this is with regard to really our three biggest trading partners -- China, Canada, and Mexico. So this is a big week. While the media is focused on impeachment -- and I can say that because as I walked in, that’s all the reporters wanted to talk about -- here we are on the floor talking about something that directly affects the constituents we represent.
“I think it’s very positive in all three areas -- China, Canada, and Mexico. In a way, it’s like the World Series and the Super Bowl of trade all in the same week because these are big agreements that make a big difference. The U.S., Mexico, and Canada agreement is being finalized, it will be voted on tomorrow. And then second, today, the signing of phase one of the China agreement, something that many of us have been focused on over the past few years and wondered whether we would get here. And here we are.
“As a former trade lawyer and as the former U.S. Trade Representative under George W. Bush and as someone on the trade committee, which is the Finance committee here, I follow these issues closely. And most significantly, I come from Ohio, which is a state that depends on trade and depends on that trade being fair to our workers and our farmers, our service providers, our small businesses. We’ve got a lot of manufacturing, a lot of agriculture. In fact, 25 percent of our state’s factory workers have export jobs, 25 percent of them. One out of every three acres planted in Ohio is planted for export. So think about that. When you drive through our beautiful state and you see the corn and the soybeans out there in the field, one of every three acres is being planted to be exported somewhere else. That’s great for our farmers. It gives them markets, and it raises prices for their product at a time when they really need it. And by the way, these trade jobs are good jobs, too. Jobs dependent on trade pay on average about 16 percent more than other jobs, and they’ve got better benefits.
“So we like to be able to send more to the rest of the world. We’ve got about 5 percent of the world’s population here in this country, and we’ve got to be sure that with 25 percent of the world’s economy here and 5 percent of the people that we are selling stuff overseas to the other 95 percent. It’s always in our interests to open up overseas markets for our workers, our farmers, our service providers. While promoting those exports, we also need to ensure we are protecting American jobs from unfair trade, from imports that would unfairly undercut our workers, our farmers. Simply put, we want a level playing field. And with that level playing field, when you get fair and reciprocal treatment from other countries, we’ll do just fine. American workers and businesses can compete and they can win if it’s fair. That’s all we’re asking for.
“To me, the sweet spot is balanced trade, where we’re able to send our exports overseas without high tariffs and other barriers and that we’re able to see imports coming in fairly traded into the United States. If we do that, we’ll be fine. And the good thing about this week is both of these agreements -- the new USMCA, which replaces NAFTA, and this phase one of the China agreement -- are exactly focused on that, how to have balanced trade. At times, recently, other countries have been wondering whether the United States was going to make progress on trade, to be frank. So this week is also important because the world is watching. And what the world is seeing is that we can fulfill our stated interest in renegotiating and improving trade agreements and trade relationships. Concluding these two agreements proves that the United States can get to ‘yes’ on these very big issues. We’re able to work through our partisan differences here at home -- we just saw this on the floor this afternoon where Democrats and Republicans alike are talking about their support for USMCA -- and in tough negotiations with our trading partners. We’ve had some tough negotiations with Canada, Mexico, and China. We can reach outcomes that benefit our country and help to create that more effective balance for American workers.
“There’s perhaps no better example of this balance than USMCA. Without it, by the way, we go back to the status quo, which would be NAFTA. That’s a 25-year-old agreement that had to be updated. Just doesn’t reflect the realities with the modern economy. Thanks to important measures designed to strengthen our economy, create jobs and increase market access for American exports, this new USMCA is going to help to level that playing field we talked about. First of all, USMCA means American jobs and economic growth. The independent International Trade Commission has studied it. They have said that this new agreement will create at least 176,000 new jobs, and that it will grow our economy.
“It also says that with regard to the auto industry, it’s going to create tens of thousands of jobs. That’s, again, very important to Ohio. We’re a big state for auto production. These jobs are going to mean a lot to workers in my state. Part of the way it’s going to create jobs is by leveling the playing field with enforceable labor standards. We just heard about this from the senator from Oregon and the senator from Ohio, my colleague from Ohio, about how this agreement has new enforceable standards with regard to labor. It also, though, has higher content requirements for U.S.-made steel and auto parts. This is important. To give you an example, USMCA requires that 70 percent of the steel and 75 percent of overall content in USMCA-compliant vehicles come from USMCA countries. In other words, other countries can’t come in and take advantage of the lower tariffs that we’re providing under USMCA by adding too much to the content of those vehicles. The 75 percent overall content requirement is up from 62.5 percent in NAFTA. That makes it, 75 percent, the highest percentage of any trade agreement we have. And it means more jobs, more jobs in the United States in particular, fewer imports, and fewer imports from countries like China, countries like Germany, countries like Japan that otherwise would come in and take advantage of this.
“Now, some have criticized these content provisions saying that that’s somehow protectionist. I disagree. We’re saying to those countries, ‘If you want to have freer trade with us, enter into a trade agreement, lower your barriers, give us access to your markets as we’re giving Mexico and Canada access to our market. That’s what a trade agreement is all about. If you don’t want to do that you shouldn’t be able to free ride on our USMCA.’ So, I think this makes sense. Why should Japan, or China, or Germany be a free-rider on our agreement with Canada and Mexico? This will incentivize good jobs in America, but it also incentivizes these other countries to enter into trade agreements with us. Because they can see, if you do an agreement with the United States, it’s balanced, it’s fair. You’ll have some benefit as well.
“The International Trade Commission also expects that USMCA is going to grow our economy by double the gross domestic product of what was projected to be increased under what’s called the Trans-Pacific Partnership. I say that because TPP, Trans-Pacific Partnership, is one that members, particularly on the other side of the aisle, have talked about as being such a great agreement. Well, this grows the economy by more than double based on the ITC estimate. So again this is a big deal.
“USMCA also means important new rules of the road for online sales. So much of our commerce today takes place on the internet but there’s nothing to protect it or promote it in NAFTA. So the status quo, because it was done 25 years ago when there was hardly any internet business, doesn’t have any protections. This USMCA was written to fix that, and it does. It prohibits data localization requirements by banning tariffs on data online and by raising the de minimis level on customs duties on sales for Mexico and Canada. This means they can’t require that servers be in Canada or Mexico, as an example, for our digital economy here in the United States, which is one of our great advantages.
“For a lot of small companies in Ohio and around the country, for start-ups that do business online, rely on smaller shipments, this is very important. The relief from the customs burdens and also the data localization requirements and the inability for other countries to put tariffs on data, really important. So this is great for us as a country.
“The third thing I want to mention is that American farmers are going to see unprecedented levels of access to new markets in Canada and Mexico under USMCA. And between bad weather, low prices even going into the bad weather, and the tariffs that were in place to get to this agreement with China in particular, farmers have been hit pretty hard, and so this is the light at the end of the tunnel. This gives them a chance under USMCA to get some new markets. That’s why nearly 1,000 farm groups around the country have announced publicly that they strongly support this agreement.
“A lot of politicians and pundits have their views on who won the negotiations over USMCA that we’ll vote on here tomorrow on the floor. I will just say, you can go back and forth on that, but in my view, thanks to the hard work of U.S. Trade Representative Robert Lighthizer, thanks to President Trump pushing on this, the winner here is the American people. That’s who I think benefits the most. They’re going to benefit from a new, more modernized trade agreement that’s going to replace an agreement that’s shown its age with unenforceable labor and environmental standards, nonexistent digital economy provisions and outdated rules of origin provisions that allow more automobiles and more auto parts to be manufactured overseas rather than being manufactured here in the United States. So I think it’s the American people who benefit. We all benefit.
“I’m glad we’re going to finally have a chance to vote on this landmark trade agreement and I urge that tomorrow we pass it on a bipartisan basis. And I think we will. Getting this to the finish line is a significant achievement. But to do it while also signing on to the phase one agreement with China today is really incredible. So again it’s been a strong week. Again, I want to congratulate Bob Lighthizer, the Trade Rep, President Trump and others who worked to bring this win to the finish line.
“When I was U.S. Trade Rep for George W. Bush, we conducted the first ever economic relationship review with China. We issued a report and it concluded that our trade relationship with China lacked equity, durability, and balance. Equity, durability, and balance. And guess what? 13 years later, China still doesn’t play by the rules, so much of that continues. One reason the trade deficit with China has grown to be the largest in the world is because of that. In 2018 we sent China about $180 billion in exports and they sent us about $560 billion in exports. Meaning we had a resulting trade deficit of about $380 billion – The biggest trade deficit in the history of the world. So that’s a problem.
“But it’s more than just a trade deficit. That isn’t the only way to measure trade. Beijing routinely uses subsidies, state-owned enterprises, and a lack of transparency about government control of their own economy in order to surpass the United States as the world’s economic and innovation leader. China’s current policies undercut critical commitments China has made both to the WTO, the World Trade Organization, and to us and to other countries -- agreements that they would open up their markets, protect intellectual property rights, adhere to internationally recognized labor rights and meet its WTO commitments on unfair trade practices such as subsidies, which they provide. I encourage you to read the U.S. Trade Representative’s Section 301 report on China. That’s the basis for this phase one agreement and the basis for the administration putting those higher tariffs in place on Chinese products over the past couple years.
“The report notes that in 2016 the multilateral Organization for Economic Cooperation and Development (OECD) ranked China the fourth most restrictive investment climate in the world. In the world. Despite them being the second largest economy in the world. Based on this OECD report, China’s investment climate is then nearly four times more restrictive than that of the United States. That’s why we needed to take some action and to have a negotiation with China to come up with something that was mutually beneficial. I’ve supported these 301 actions by President Trump to create this more level playing field for American workers, farmers, and business owners. The only significant leverage we had to be able to do that, by the way, was by controlling access to our own market by raising tariffs. Higher tariffs have collateral consequences, and we’ve seen that for our consumers and for some of our companies. But they have been necessary, a necessary evil to be able to hold China’s feet to the fire and force them to the negotiating table and to get the result that we’ve seen today. These tough measures are now paying off.
“Think about it in terms of what I said before -- equity, durability, and balance. In the interest of a more balanced relationship, phase one directly addresses that $380 billion trade deficit we talked about. China has agreed to increase its purchases of American products by at least $200 billion over the next two years, with additional increases likely in the future. That’s going to help reduce our trade deficit and provide some relief, particularly in the agricultural, manufacturing, energy, and service sectors.
“The agreement also includes provisions to make our relationship more equitable. That includes new commitments in intellectual property protection, new obligations on tech transfer, and a discipline on currency manipulation similar to that that’s in the U.S.-Mexico-Canada agreement. Specifically, Beijing has committed to eliminate pressure on U.S. companies to transfer their intellectual property to Chinese firms as a condition to doing business in China. This is a big deal and it is a critical step in addressing the IP theft that China has used to fuel its economic rise. Chinese companies aren’t forced to hand over their patents as a condition of doing business here in America, and American companies shouldn’t be forced to do the same in China.
“We will also be able to keep a closer eye on China’s currency manipulation. When the Treasury Department found evidence of manipulation to boost Chinese exports, they labeled China a currency manipulator for the first time since 1994. That designation was just lifted because of phase one. This new agreement contains new transparencies and accountability commitments to ensure that American trade enforcers can better monitor future manipulation. The phase one agreement is a good first step toward creating a balanced and more equitable relationship between our two countries, but our trade relationship will remain durable only if we enforce these agreements.
“That’s why it’s also very significant that this agreement includes the option to re-impose tariffs should China fail to live up to the commitments it’s made. Enforcement is critical. Just as the rest of the world is watching our success at getting to ‘yes’ on these trade agreements, they are also watching how aggressively we’re going to enforce these commitments. That’s why it’s imperative that the United States utilize its enforcement processes assertively and swiftly should it find evidence that China has violated its commitments. And Congress is watching.
“With such a big day for trade, especially only a couple of weeks into the new year, it would be easy to ask if anything else is left for the rest of the year. My answer is yes, there’s lots.
“Tonight we should celebrate our accomplishments but tomorrow continues to bring a host of challenges and opportunities to advance a bold trade agenda. Most importantly, the next step is to negotiate the phase two agreement with China that addresses additional structural issues I mentioned earlier. That’s the subsidies, the state-owned enterprises, the lack of transparency that make doing business in China an uphill battle. Resolving these issues will be critical to ensure our two economies are playing by the same set of rules, not different sets of rules. So between USMCA and this phase one agreement, 2020 has already been a significant year for trade but there’s even more progress we’re set to make.
“I look forward to phase two negotiations with Japan this spring, especially regarding new market access for Made in America automobiles. I look forward to potential FTA talks with Switzerland and with the United Kingdom post-Brexit, new trade agreements to open up more market access. And we want to ensure that the extension of the WTO moratorium of tariffs on data continues. I hope we’ll also see renewed efforts at the WTO reform efforts. We need to address America’s long-standing fundamental concerns about the appellate body, special and differential status, and the decline of the WTO’s negotiating function.
“So we’ve got lots to do. I hope Congress will consider new legislation to toughen our anti-dumping laws and countervailing duty laws this year to crack down on trade cheats. And I hope we’ll pass my Trade Security Act to return Section 232 to its original purpose of protecting genuine national security threats. Clearly there’s a lot of work we can do in 2020, and I look forward to it. But today we should pause. We should congratulate the Trump administration on these two successes we’ve talked about today. I’ve long advocated for balanced trade that prioritizes market opening and tough enforcement, and I believe that both the USMCA and the China agreement embody this philosophy of balanced trade. And most importantly, I believe our country is better off because of it.”