USTR Lighthizer Shines Light on USMCA Enforcement, Tariffs, and China
United States Trade Representative (USTR) Robert Lighthizer testified before the House Ways and Means and the Senate Finance Committees on June 17, 2020 to discuss the Trump Administration’s trade agenda. Ambassador Lighthizer’s testimony focused on the Administration’s trade successes over the past year, but Members raised concerns about Mexico’s compliance with the United States-Mexico-Canada Agreement (USMCA), the Administration’s use of tariffs, and China’s compliance with the phase one deal and future trade deals.
Amb. Lighthizer responded to concerns that Mexico will not be in compliance with the USMCA’s provisions regarding labor standards, biotechnology, and intellectual property rights when the agreement is fully implemented on July 1, 2020. For example, Senator Wyden (D-OR) asked how the USTR will implement the ‘rapid response mechanism’ to quickly enforce compliance with the USMCA. Amb. Lighthizer reaffirmed his commitment to enforcement of the USMCA, and stated: “We expect to be very diligent on this...after July 1st, I expect to consult with [the Senate Finance] Committee [and] with the Ways and Means Committee, look at complaints, and begin first some kind of a consultation process. And then, to the extent we have problems, I expect to bring cases. And I think Mexico understands that.”
Amb. Lighthizer was repeatedly questioned about the effects of tariffs on US companies that are reliant on foreign suppliers of materials, including steel and aluminum. Members of both parties pointed to China’s current high steel production capacity and questioned the efficacy of tariffs to support US manufacturing. In response, Amb. Lighthizer admitted that, while problems remain in the steel industry, the tariffs prevented a “catastrophe” and that “it scares [him] to think what condition our steel and aluminum industry would be in without those 232 tariffs.” Amb. Lighthizer made sure to note that the steel and aluminum industries were not explicitly part of the phase one deal with China.
Several Members of Congress also expressed concern that their constituents would be denied extensions of exclusions from Section 301 tariffs. Amb. Lighthizer responded, “If you have a year or two years to make a change then you should have made a change,” strongly suggesting that, going forward, extensions to 301 exclusions will be shorter and infrequently granted.
A recurring theme in both Committee hearings was concern regarding China’s compliance with the current phase one deal. Sen. Wyden cited statistics that China’s purchases of US manufactured goods were at 56% and purchases of US agriculture goods were at 38% of the target levels set in the phase one deal. Despite these shortcomings, Amb. Lighthizer stated that he believes that China is making a good faith effort to meet these target levels, especially given the hardships faced due to COVID-19.
In the realm of 5G, Amb. Lighthizer indicated that export controls will continue to be utilized to support US competitiveness and limit Chinese state-supported company Huawei’s access to US 5G infrastructure. These policies aim to protect current licenses, technology, particularly semiconductor technology, and future US manufacturing. Additionally, Lighthizer believes that tariffs need to be part of this solution in order to incentivize manufacturing in the United States.
June 18, 2020