Portman’s Bipartisan Trade Security Act Requires the Department of Defense to Justify National Security Basis for New Tariffs Under Section 232 

WASHINGTON, D.C. – U.S. Senator Rob Portman (R-OH) delivered remarks on the Senate floor on new bipartisan legislation he introduced this week called the Trade Security Act, which will rein in misuse of the Section 232 trade law while preserving this trade remedy tool when there is a genuine threat to national security. 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 increase congressional oversight of this process.   

Transcript of his remarks can be found below and a video can be found here.

 

“Today I want to talk about U.S. trade policy. This is something that affects every one of us. It affects all the families I represent. It affects our economy in big ways. It affects our relations with other countries in significant ways. We’re fortunate right now to have a strong economy. When you look at the numbers, it’s very encouraging. The tax reforms that were put in place at the end of 2017 and the pro-growth regulatory relief that’s been put in place is actually doing exactly what many of us thought it would do. When you look at the growth projections before the tax bill and the growth projections now, we’ve had a dramatic increase. If you look at the job projections, a dramatic increase in jobs, almost two million more jobs projected after the tax reform bill was passed. Why? Because the tax reform bill was pro-growth and pro-jobs, helps middle-class families but also helps small businesses like the ones I visit all across my state of Ohio, all of whom have told me this is a nice shot in the arm for us. It gave us the ability to invest more in our equipment, in our people, in retirement savings. Tomorrow I’ll see it again. We have a roundtable discussion at an Ohio manufacturer. This company makes tooling that’s used in the aviation industry. They have already told me that they like the tax bill. I’m going to ask them tomorrow what I ask all these companies I visited with over a dozen, several dozen Ohio small businesses since the tax reform bill was passed. I’ll ask them tomorrow specifically what happened to your bottom line? And what are you doing with the extra tax savings you’re getting? And what I’ll hear, I think, is what I’ve heard in other places, which is we’re investing more in people, we’re investing more in equipment, and that’s great. The latest jobs report reflects all this. 

“When you look at the jobs report from last Friday, it was from the January time period. It shows an impressive 304,000 new jobs. Way beyond expectations. 304,000 new jobs in January. It also showed, which I think is more impressive, wages going up. In Ohio, I will tell you wages have been pretty flat. In fact, for the last decade and a half, on average wages have not gone above inflation. So when people say they’re feeling the squeeze, they are. Expenses are up. Health care costs are up. Other expenses are up. And yet wages have been flat. I think that’s one reason people feel like despite working hard and doing everything as they were asked to do, they were not able to get ahead. Now they can feel like they’re getting ahead a little bit. If you look at the numbers on Friday, it indicated 3.2 percent growth in wages for supervisory jobs and nonsupervisory jobs, you might think of as more blue-collar jobs, 3.4 percent increase in wages. That’s what you want, you want to see these wages start to go up. This is above inflation. By the way, the wage growth over the past 12 months is the highest it has been since a decade ago before the Great Recession. So finally we’re sort of climbing out of this Great Recession and we’re seeing the kind of numbers we all hoped for. This is all good news. And again, a lot of it is due to the fact that in this body and in the House we passed legislation that helped to stimulate more economic growth, more jobs and higher wages. 

“What I’m concerned about is that we now not do something to jeopardize that economic growth. And this is where trade policy is a risk. Some would say it’s already putting a damper on what would otherwise be even stronger growth. But here’s what I’m concerned about more than anything, and that is the possibility that as a country, we start to put more and more tariffs in place without showing that the imports coming in from other countries are being traded unfairly. 

“That’s my concern with section 232, the national security exception to our trade laws. Do I think it’s a tool we ought to have in the toolbox? Absolutely. I think if there is a true national security concern that we ought to have section 232 there to ensure that we can respond. If we’re in a time of war, as an example, and we need to be able to produce tanks in this country and we didn’t have any steel production here, it would be appropriate for us to put some tariffs in place, in my view, and to help a domestic industry be able to provide that steel. And, frankly, you know, that’s another avenue that other countries would do to us if they had a true national security concern. So there’s a sort of level playing field there. It’s permitted to do that under the World Trade Organization rules, and other countries would do it as well. But the way we have used it the last couple of years is a little different, in my view. 

 

“I’m pleased to say that yesterday a group of us introduced legislation to try to get back to the original purpose of section 232. It’s called the Trade Security Act. I introduced it last year. We reintroduced it again yesterday. I introduced it along with my colleagues Doug Jones, Joni Ernst, Diane Feinstein, Lamar Alexander, Deb Fischer, Todd Young, Kyrsten Sinema and Roger Wicker. Not a group of members you would see on every piece legislation, some on the left, some on the right, some Democrat, some Republican, but a group that all agrees that in this case it’s best for us to have some constraints on 232 to take it back to its original purpose, which is really for national security. With regard to steel and aluminum and the 232 tariffs that were put in place back in 2017, you may know this, but when the administration was asked to opine on it, the Department of Defense said it’s not a national security threat. That’s now public. The memo from the Department of Defense said we have enough steel production in this country to take care of our military needs. It’s not a national security issue for us. The Department of Commerce had a different view. Their view was this is, broadly speaking, a national security threat, and we should put these tariffs in place, again, without having to show injury or damage or without having to show unfairness. Our legislation is a response to that. It doesn’t affect what’s happened in the past. It’s prospective. But what it does say is that going forward we ought to have to prove that it’s a national security threat. 

 

“All three of the big U.S. auto manufacturers are against extending 232 to automobiles, and that’s why they are supportive of our legislation. I want to see more cars made in Ohio. I’m okay if they are made in other states too. But I want to see them made in America. I don’t want to see more cars being made offshore, and that’s what I’m concerned will happen if those tariffs go into place. Why? Because it is going to be a lot more expensive to make cars here. These cars are global cars now, and the supply chains are all over the place. They end up being made in our states, including in Ohio, where we have a strong auto industry – and we love that – and strong suppliers, but they bring parts in from around the world. The analysis that I’ve seen shows that if we put 232 tariffs on automobiles, it would increase the cost of making a car in the United States by about $2,000 a car. For imported vehicles, the cost would likely increase to about $6,000 a car. So think for a moment about the impact on the families we talked about earlier who are finally seeing their wages begin to creep up. These are working families who have played by the rules, done everything right, and finally they’re seeing a strong economy. There’s wage growth happening above inflation, and now they are told guess what, you want a new car? $2,000 more for your new car. That means that car payment is going to be a lot more. I think a lot of people will delay buying a car. That’s not good for the auto industry. I think it’s something that we should try to avoid. Second, compounding these costs is the fact that guess who’s going to be in the crosshairs of retaliation if this happens? The auto industry. Guess what our number one export is from the United States of America in value, number one export of any product? Cars and auto parts. So automobiles and auto parts are our number one export. 

“It’s very likely if we levy these tariffs on a national security basis, not because of unfairness, not because of the surge, not because of domestic industry being materially damaged – which is part of the international rules that people understand – but if we do it because of our national security exception, it is very likely we’re going to see retaliation. That’s tariffs going up on their side, which, again, is going to hurt our country because one of every five cars and light trucks built in America is built for export.  And we export a lot of auto parts, number one export. So I’m worried that it’s going to put a target on the auto workers in Ohio and elsewhere if we move forward with this. The Peterson Institute for International Economics estimates that section 232 auto tariffs would put 195,000 American jobs at risk. They also say when retaliation is included, that jumps to potentially 624,000 American jobs on the chopping block. That is the Peterson Institute for International Economics. 

 

“After the Finance Committee’s hearing on section 232 last summer, I asked the Commerce Department a question for the record about whether they believed that there was any industry in America that could not meet the national security criteria in section 232. Their response indicated that they believed potentially every industry in America could meet that criteria. It could move from autos to other industries, as far as they are concerned, even when, again, there’s no sense that that industry is under pressure, is materially injured, or that there’s unfairness in the trade. I think that is a huge departure from what this Congress meant 57 years ago when they wrote section 232. It was meant to be for national security. Let’s keep it to that. Let’s use other trade laws appropriately and aggressively in other instances. 

“During the debate over section 232, Chairman of the Ways & Means Committee, that’s the committee in the House that deals with trade, a representative named Cooper from Tennessee underscored the importance of the statute as a national security tool. He said the purpose of the national security exception is, ‘To protect and preserve the national security. That is its sole purpose. It is not intended to serve as a device to afford protection to those industries who might claim it.’ But don’t take the chairman’s word for it. I refer you to the cabinet task force report on oil import control. In 1970, President Richard Nixon directed the Secretary of Labor George Schultz, a friend of  mine who was later Secretary of State, to conduct a comprehensive analysis of the national security implications of oil imports and it remains today the best historical resources we have on the proper meaning of section 232. The report states, ‘No determination under section 232 or its predecessors have ever been made on the grounds of economic impact alone. In a generally healthy economy it cannot be presumed that unrestricted trade in any one sector would by itself impair the national security.’ 

“That was George Schultz.  As I see it, with our economic growth and job creation right now, a trade deficit alone in automobile parts would appear insufficient to trigger restrictions based on national security. With this history in mind, it’s worth noting the 232 statute has been used infrequently since 1962. We can find only a half dozen cases when it has been used. There have been 26 investigations. Only six times did the president take action. The last one, by the way – before this administration took action in 2017 – was 33 years ago in 1986. 

“Again, one reason it’s hardly used is because it is viewed as an exception to our trade laws. You don’t have to show injury to a domestic industry, you don’t have to show a surge or unfair trade in any ways, you don’t have to show there’s something under the international rules that gives you the ability to impose those tariffs that then don’t result in retaliation from others. I remember after President George W. Bush was elected, there was concern about doing something to help our steel industry at the time, and we needed help in the steel industry, and section 232 was looked at. They investigated it at the president’s request. And in that case the Commerce Department said it’s not a national security issue so the president used another part of the trade law, an appropriate part, where he had to, again, make some of these showings about material damage to the industry which is section 201 of the trade laws. So section 232, again, has been narrowly defined until now, and we need to get back, I think, to that proper definition. That’s exactly why we need this legislation. 

“Misusing section 232 and the national security rationale not only leads to other countries increasing tariffs, but it also, in my view, risks us losing the tool all together. I think we ought to keep the tool. I think it’s an important tool to have as part of our response if there is a true national security threat. If you misuse it, I believe what’s going to happen is that the World Trade Organization is going to find we no longer have this ability. Why do I say that? There are already cases in the WTO against the United States. These cases are saying that 232 has been improperly used. They are saying because they filed these cases against us that they would like to have a decision by the WTO. I think we run a greater risk of losing this tool if the administration moves forward with autos and auto parts. And I think that’s a real problem. The WTO could end up saying the United States can no longer use this national security tool. I’d rather have us use it properly and be able to keep the tool. So yesterday when we introduced this legislation, we addressed the misuse of this tool. We said we wanted to preserve it for national security threats. 

“I want to thank in particular Chairman Chuck Grassley of the Finance Committee for his very positive comments that he has made about the Trade Security Act, consistently, last year and again this year. Earlier this week, he talked about how he would like to work with us to get this proposal done. So what does the proposal do? First, it ensures the proper experts and governors determine at the outset whether it’s a national security threat or not. I mentioned right now that’s housed in the Commerce Department. It should be at the Department of Defense. They should determine the national security basis for import restrictions. Under our legislation, if the Department of Defense does determine through their research that there is a national security threat, it then goes to the Commerce Department, and the Commerce Department is in charge of the remedy, which is appropriate. And again, by the way, with regard to steel, we know the Department of Defense said this is not a national security issue. At the end, of course, the president still makes the decision, but it’s a two-step process to get there, which I think is very important. Second, the bill gives Congress a voice in this. It allows Congress the opportunity to disapprove of a section 232 action by passing a joint resolution. Currently, Congress can disapprove a 232 action through a joint resolution, but only with regard to oil because when this was last used back during the oil embargoes, Congress reacted by saying with regard to oil, you have to have our approval after the fact. Now, I will tell you our bill is not the only legislation on this topic. 

“Other legislative approaches go further. And I think effectively take away the tool as a national security tool by saying instead of a motion of disapproval after the fact, there has to be a motion of approval by Congress in order to move forward. I believe under the Constitution, the Congressional Article I responsibilities, including commerce between the nations, require us to have a voice in this, but I also believe that the administration needs to have the ability to react and react quickly to a true national security threat and not have to go through Congress, which sometimes, as you may have heard, takes a long time. And we tend to get tied up in knots up here quite a lot. So I like our approach better. I think it’s about protecting auto states, export states from the consequences of misusing 232 in the future but it does it in an appropriate way. It’s about stopping retaliation against our farmers and our workers. It’s not retroactive, but it is prospective, saying let’s get the broadest consensus possible among industry, among members of Congress, and within the Finance Committee to get something done here that takes us back to the original intent of section 232. When properly used, again, it can be an important part of our trade enforcement arsenal for real national security concerns. We want to keep it for that. But it should not be used inappropriately as it has been in my view without showing the national security threat. 

“My hope is that this legislation now can move quickly through the Finance Committee, and through the Ways & Means committee, so that we can put in place something that makes sense to refocus on the original intent. Ultimately, I believe the economic and legal case for 232 tariffs on automobiles going forward cannot be made. I believe that’s why we need reform. So let’s restore this important tool to Congress’ original intentions. Let’s be sure section 232 is used appropriately and selectively for genuine national security reasons. The strength of our economy, as I talked about earlier, comes from the right policies but ultimately comes from hardworking and innovative Americans. In the shops and the plants, as I will see tomorrow in Ohio in the plant tour I mentioned earlier, the farms around our states that send products all around the globe, we want more of that. They deserve a level playing field. We should give them that, the chance to compete. Let’s be sure our trade policy doesn’t result in escalating tariffs that hurts those very workers, those very farmers, and their families. Let’s find the right balance, including restoring an important national security tool by not misusing it. I urge my colleagues to join us in supporting the Trade Security Act to help do just that.” 

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