On Senate Floor, Portman Discusses U.S.–China Trade Talks, USMCA, & the Need to Level Playing Field for American Workers

May 23, 2019 | Press Releases

WASHINGTON, DC – Last night on the Senate floor, U.S. Senator Rob Portman (R-OH) discussed the latest developments in the trade negotiations with China, and the need to create a level playing field on behalf of American employers and workers. Portman supports the Trump administration’s efforts to hold China accountable for violating prior commitments to not coerce the transfer of intellectual property to Chinese companies as a condition of doing business in China, and engaging in nonmarket practices like subsidization and state-owned enterprises. He supports efforts to negotiate a new agreement that will bring greater equity and balance to the U.S.-China trade relationship.

In addition, Portman reiterated his support for the U.S.-Mexico-Canada Agreement, or USMCA, calling it an improvement over the existing NAFTA pact with our neighbors to the north and south. He also highlighted his bipartisan Trade Security Act, which reforms the Section 232 tariff process and requires the Department of Defense, rather than the Department of Commerce, to justify whether certain imports constitute a national security threat.  He looks forward to promoting healthy and fair trading relationships with our allies so that the U.S. can build international support for resolving its differences with China. 

A 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, a very complex issue but also a really important issue to our country. Our goal with trade should be pretty simple. It’s to level the playing field for America’s workers, America’s farmers, and America’s businesses.

“One, we have got to be sure they aren’t hurt by unfair imports coming into our country. So that’s really a fairness issue and a trade enforcement issue. But second, we should expand our exports. Opening up more foreign markets to our products is great for America. That’s the balance.

“As a trade lawyer and as the U.S. Trade Representative in the George W. Bush administration and as a member of the Finance Committee, which has jurisdiction over these issues, I’ve worked on trade matters quite a bit, and it’s really important to my home state. Ohio has products that are manufactured by our workers and crops grown by our farmers that are shipped all around the world. In fact, in Ohio, one of every three acres is now planted for export. So our farmers are dependent on trade. And 25 percent of our factory workers, our manufacturing workers, have their jobs because of exports. Twenty-five percent is a big part of our manufacturing economy. And these jobs aren’t just good for Ohio’s economy. They’re great for the people that have them.

“Trade jobs pay on average 16 percent more than other jobs, and they have better benefits. So we want more of these jobs. And with 95 percent of the world’s population living outside of our country, we want to sell more of our stuff to the rest of the world to continue to grow and maximize the potential of our economy. So in my state and a lot of others the manufacturing and agriculture jobs that are the bedrock of our economy depend on balanced trade.

“That goes for our trading partners around the world, but particularly for our two biggest neighbors -- Mexico and Canada. They are by far Ohio’s biggest trading partners. Since 1994, we’ve linked our economy to Mexico and Canada in the form of the North American Free Trade Agreement, or NAFTA. In 2018, Ohio shipped 39 percent of our exports to Canada, more than twice the national average. Along with our trade with Mexico, this accounted for $28 billion in trade, and in all, trade with Mexico and Canada now supports 450,000 jobs in Ohio. So it’s important. We all know that the existing agreement, again called NAFTA, has to be updated. It is 26 years old. It needs to be modernized, it needs to be improved. We need to be sure that we are doing a better job of leveling the playing field that we talked about and reflecting the nature of the 21st century economy. Think about it, back when NAFTA was negotiated there was no digital economy. We need to have new rules with regard to the digital economy as we do in our more recent trade agreements.

“Also as an example, there were no biologics, so we have no protections in the NAFTA agreement for biological pharmaceuticals. Of course we need to have that in a new agreement. But it’s more than that. Labor standards and environmental standards that have been in all the more recent trade agreements need to be incorporated into the NAFTA agreement. So there are lots of reasons for us to update the North American Free Trade Agreement and to improve it.

“Although no trade agreement is perfect, the new USMCA does those things. And, by the way, according to a recent study by the independent International Trade Commission, the new USMCA, which is meant to replace NAFTA, is estimated to raise wages and add 176,000 jobs to the U.S. economy. So that’s good. I support this USMCA.

“Last week President Trump and his administration took a major step toward realizing USMCA by announcing they would be lifting the so-called Section 232 tariffs on steel and aluminum imports coming from Mexico and Canada. This is really good news. It is something that I had advocated – as have others in order to pass the USMCA here – but also to be sure that the other countries, Canada and Mexico, could ratify the USMCA. It ends the retaliation by Mexico and Canada on made in Ohio exports to our northern and southern neighbors. And this was really starting to bite in my home state and around the country. It also, by the way, protects against import surges and transshipments, particularly with regard to steel and aluminum. We worry about transshipments coming from China into countries like Mexico and Canada and then being shipped or snuck into the United States. You don’t want that. That protection is in there as well.

“I think this is a good agreement. Tariffs, by the way, especially on our allies, ought to be something that we try to avoid – used tactically, sparingly, and targeted when we’re going to use them. There’s been a lot of talk recently about the use of these Section 232 tariffs by the administration, not just on steel and aluminum, but also with regard to automobiles and auto parts. Section 232, the law that this would be done under, is really an exception to our trade laws. The trade laws say if you unfairly trade with us, in other words, if you subsidize your products overseas of if you dump them, meaning that you sell them at below their cost, then that is illegal and we get to retaliate by adding tariffs to your product. We also have laws that say if there is an import surge that domestic industries are substantially harmed by that, that’s a time for us to step up.

“But our other trade laws require one of those two things, either a finding of injury to a U.S. industry or some kind of unfair trade. Under Section 232, which is an exception to that, you don’t have to do that. You can block imports by simply saying it is a national security issue. It’s a pretty powerful thing that the executive branch has but it has been used very infrequently and that is how Congress intended it. Congress intended it just to be used for true national security purposes. The agency in charge of investigating these 232 tariffs is the Commerce Department. A recent Commerce Department investigation concluded that imported automobiles under the 232 criteria would be a national security threat. I think that’s not accurate. I think that minivans from Canada, as an example, aren’t a national security threat to us. It may be they are unfairly traded. We should enforce our trade laws. It may be that there’s an import surge that hurts our domestic industry. Then go after them. But to use this tool in that sort of way I think is not appropriate.

“By the way, that’s why over the past 50 years since this has been in effect, the tool’s only been used a few times. In fact it has never been used in the last 33 years. One president tried to use it, George W. Bush, for whom I worked, and his Commerce Department said that is not a national security issue and so he used another trade provision that, again, required you showed substantial injury to a domestic industry. 

“That’s the 232 issue. I think it is important to have the tool. I think if it is a true national security concern, it’s good to have it in the toolbox and we ought to be able to use it, but we have to be judicious about it and not misuse it. One reason to be careful is that if you are to impose tariffs on cars and automobiles as the Commerce Department has said you could do, it would really cost U.S. consumers and businesses. First, U.S. cars would cost about $2,000 more on average, and that’s a conservative estimate I’m told. We don’t want that. Second, if you put theses 232 tariffs on cars and auto parts with no fairness rationale, the retaliatory tariffs on our exports would be swift and painful. And finally, if you misuse this 232, I think you risk losing it all together.

“The World Trade Organization might not have too much influence these days, but they do have the ability to say whether something is legal or not under international trade rules -- they have an exception for these national security waivers, but not if they’re misused. So, I think we have to be careful on how we use it. President Trump and his administration made a decision over the last several days that I applaud them for. They decided not to move forward on these 232 tariffs against auto parts and automobiles. They decided to put it off for six months. I commend them for that. Again, I would hope that we would never go there, but I think it’s really important that we put that off for six months so that we can, not just get the U.S.-Canada-Mexico agreement accomplished, but that we can also focus on other things, and specifically our issues with China.

“I recently introduced a bipartisan bill on Section 232, by the way, it’s common-sense approach that says let’s be sure we’re going to the original intent of 232 – that we’re not misusing it. It’s really simple. It says that instead of having the Department of Commerce make the decision, it should be the Department of Defense. The Department of Defense has the expertise to determine whether something is a national security issue or not. By the way, with regard to the recent decisions on these 232 tariffs, the Department of Defense did not agree with the Commerce Department and thought that it was not a national security concern. They said that explicitly with regard to steel and aluminum as an example. So I think the men and women who are hired to protect our country ought to be the ones to decide if it’s a national security threat or not.

“Second, our legislation increases Congress’s oversight here. It allows for Congress to have an expanded role to provide a legislative path for Congress to disapprove one of these 232 tariff decisions if we think it’s the wrong way to go. I think that’s important to bring some of the power back to Congress where it resides in the Constitution. I hope my colleagues on both sides of the aisle will help us with this common-sense legislation and avoid the misuse of 232 on issues like auto and auto parts, but again, in the meantime the administration has made the right choice by delaying the imposition of these 232 tariffs on long-time allies with regard to autos and auto parts.

“As I said earlier, balanced trade is about enforcement, being sure that it is fair in terms of what imports are coming into this country for our workers, our farmers, and our service providers. It’s also about exports. And, you know what, because of that goal of balanced trade, I support what the Trump administration is doing vis-a-vis China. Unfortunately, when you look at what’s happened in our relationship with China, we have more and more reasons to say that China is not playing by the rules. China needs to make structural changes in our trade relationship in order for us to have that level playing field we talked about earlier. This U.S.-China economic relationship right now lacks equity, balance, fairness, it also lacks durability. The big trade deficits we have and the structural problems can’t last. To put it simply, China’s not playing by the rules.

“First, they unfairly subsidized their exports. We talked about this earlier, but it’s not fair for another country to say we’re going to use government money to subsidize what we send to the United States and then have our workers and farmers have to compete with that. Subsidies are unfair under international rules and under our trade laws. China does it in a number of ways. One, they have a bunch of state-owned enterprises and they’ve actually expanded their state-owned enterprises at a time when it looked as though China was going the other way – that they were going to have a more market-based economy where the government wouldn’t be controlling industries. But they’ve also committed massive subsidies to some of their favorite industries, companies, and technologies.

“Second, China does not grant reciprocal access to U.S. investors and engages in coerced technology transfer and intellectual property theft from U.S. companies. Often that intellectual property or technology then goes to a Chinese company. To be clear, as a condition of doing business in the huge Chinese market, U.S. companies regularly have to hand over their intellectual property, their technology, or their innovations like manufacturing processes, let’s say. That includes things like blueprints or designs, trade secrets and other things of value. Then typically a Chinese competitor uses these advantages to compete back against U.S. companies. Again, that’s just not acceptable.

“I would encourage you to check out the administration’s Section 301 report on USTR.gov and you will see the Section 301 issues that are laid out in that report. And it’s pretty clear if you want to learn more about it. Let me give you an example of how this technology transfer works. If a U.S. automaker wants to make cars in China, and a lot of them have wanted to and have made them there, China requires joint ventures in order to gain access to production technology that then helps foster China’s own domestic auto industry.  In a number of businesses China requires a 51 percent Chinese partner in a joint venture and again, that’s one way the technology transfer happens.

“At first China’s foreign investment catalog ‘encouraged,’ that was the word, foreign auto investment. I was in China back in 1984, I believe it was, maybe 1985, at a Jeep plant and I watched the first American vehicles go off the production line in China. I was there. I saw it. It was very positive. People were thinking, this is interesting, we’re going to be doing business with China, and those Jeeps can then be sold in China and other parts of Asia. It wasn’t to compete with the U.S. market. And this was good for Jeep and good for China. That was at a time when they were encouraging foreign auto investment.

“But as China learned about auto manufacturing from these investments – in other words they got knowledge about how to manufacture automobiles themselves – the foreign investment catalog changed its position from ‘encouraged’ to ‘permitted,’ and then more recently in 2015 to ‘restricted.’ So, again, this is an evolution where initially they say bring it in, have a joint venture partner, and we’ll get the technology, thus it goes from ‘encouraged’ to ‘permitted’ and then finally to ‘restricted’ now that China has that technology. That’s kind of leapfrogging us, isn’t it. And, again, that doesn’t seem fair and it is certainly not reciprocal because we don’t do the same thing here in this country.

“This problem of fueling Chinese innovation with the hard work of U.S. companies is even more pronounced in the electric vehicle sector. There China tries to incentivize the production of vehicles in China rather than imports from overseas. We would love to sell American electric cars in China, but they prevent this with a combination of things: tariffs, which are relatively high, subsidies for domestically-produced electric cars, and a credit system that require all auto makers selling in China to produce a portion of their electric vehicles in China or face penalties. Again, we don’t do that.

“It’s clear from this experience that China’s unfair trade practices are at odds with the current rules-based multilateral trading system. I will continue to support the administration’s effort to increase pressure on China in order to reach a strong but fair and enforceable agreement. I would argue this is in China’s interest as well as our interest. They are now a mature trading partner. They are now the greatest exporter in the world. They have an economy that is growing, again, more sophisticated and more technological. They should want to protect their own intellectual property. They should want to be engaging with us and other countries around the world on a more fair basis.

“While I urge the United States to hang tough, the administration should work quickly to try to bring the negotiations to a close. Because a combination of the retaliatory tariffs on U.S. exports and tariffs on Chinese consumer products here in America is causing pain for our farmers, for our workers, for our service providers. So it would be good to bring these negotiations to a conclusion.

“We were very close to doing that only a few weeks ago, and the reports back were that China had changed its view on some of the concessions they were willing to make. Let’s get back to the table and let’s make a fair, enforceable agreement. As part of increasing pressure on China, as the new tariff increases are designed to do, the United States must also better leverage our allies. The European Union, Japan, Korea, Canada, Australia, not to mention Vietnam and lots of other countries in Southeast Asia all share our concerns that the administration has raised with regard to China. They are all experiencing the same thing. Leveraging our allies helps put pressure on China by demonstrating the broad consensus that exists among those who believe China often acts contrary to our rules-based multilateral trading system.

“When I was U.S. Trade Representative, I laid the groundwork for a number of successful World Trade Organization complaints against China by working with our allies. Key to our victory in those cases was our ability to rally, to come up with a posse. It was the E.U., Canada, Mexico, Japan and other countries to show China that the world was watching and cared. The administration’s work with the E.U. and Japan on WTO reform and subsidies right now is a good step in the right direction. It shows how it’s possible we can rely on our friends and, therefore, gain more leverage.

“It’s why it’s important we don’t adopt policies that actively undermine our ability to work with allies, also. It’s another reason I was glad to see the administration delay any tariffs pursuant to this 232 we talked about on automobiles and auto parts because a lot of those 232 tariffs would have been imposed on our allies. Not only do auto and auto parts from our allies, or anywhere else in the world, not threaten our national security, but it also invites retaliation on U.S. exports and poisons this well of goodwill we need with historic allies as we pursue a resolution of our differences with China.

“Let me end where we started about balanced trade. All America needs is a level playing field. We can compete. We have the ability to innovate. We have the ability to be flexible. We have a lot of advantages in this country, but we do need that level playing field. All we ask for is fair and reciprocal treatment from our trading partners. The sweet spot for America is that balanced approach. Again, opening up new markets for U.S. products while insisting on trade enforcement so that our workers can compete. As we’ve talked about today, right now we’ve got a lot of balls in the air as it relates to trade. It’s caused some uncertainty among our trading partners, with American businesses, workers and farmers that rely on trade. I get that.

“Let’s prioritize passing USMCA with Canada and Mexico. That will provide some certainty.  Let’s support the administration in bringing home a strong agreement with China. That will provide a lot of certainty.  And let’s not impose new Section 232 tariffs that will also provide some certainty and predictability. With that predictability and certainty further leveling the playing field, we can help American farmers, American workers, American businesses, and our economy.”

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