On June 17th, U.S. Trade Representative Robert Lighthizer appeared at two Congressional hearings on The 2020 Trade Policy Agenda. Lighthizer met with the House Ways & Means Committee in the morning, and the Senate Finance Committee in the afternoon.  After hours of testimony, and some contentious moments, we want to share with you some of the major trade issues discussed yesterday. 

The hearings definitely provide insights into the thinking of the Administration.  For example, in response to questions about PPE and tariffs on medical equipment, Lighthizer said he thought the Administration “has done an amazing job starting with basically an empty closet and then filling it up and getting an enormous supply in a totally unprecedented circumstance.”  He also made clear that the Administration is going to try to use trade policy – and particularly to use tariffs - to promote more manufacturing investment in the United States.  “In the long run, I think part of the solution ought to be rewarding people manufacturing the product in the United States. Two ways to do that, maybe you do both. One is subsidies … the other is to have tariffs. Personally, I think you probably need both.”

CHINA

China remains a key issue for the Administration and the Congress.  After press reports quoted Ambassador Lighthizer saying that the U.S. would not "decouple" from trade with China, President Trump weighed in to say that all trade policy options are still on the table.  See the tweet from the President at the end of this FIA. Aside from that discussion, many of the lawmakers focused on the Administration’s Phase One Agreement with China. When questions were raised on China's ability to meet their purchase commitments under the agreement, Lighthizer said the Administration is in constant communication with China and they fully expect China to meet their commitments within the calendar year. 

Several Democratic lawmakers criticized the section 301 tariffs on China and the heavy financial burden the high tariffs place on American consumers, as well as problems many companies have had with the 301 Product Exclusion process.  Lighthizer was not sympathetic and suggested that tariffs are bringing manufacturing back to the U.S., and that companies that may be struggling with tariffs and the exclusion process should look for alternate options for destinations. He also clarified that the Administration is not planning to extend any of the Product Exclusions beyond December 31st.  

OTHER TRADE DISPUTES

Ambassador Lighthizer said the Administration will not be shy to initiate more trade disputes.  Several disputes were discussed.  The Administration will move forward with the 301 case targeting ten countries that have in place, or plan to put in place, Digital Services Taxes.  [The targeted countries are: Austria, Brazil, The Czech Republic, The European Commission, India, Indonesia, Italy, Spain, Turkey, The United Kingdom. There already is a 301 case with France over DST.]

During discussion about the trade negotiations with the European Union, both lawmakers and Lighthizer criticized Europe's food standards as protectionist.  Lighthizer noted his interest in launching a 301 investigation into these restrictions.

GSP RENEWAL 

Several lawmakers spoke in favor of renewing the Generalized System of Preferences (GSP) duty-free program, which is set to expire on December 31, 2020.  However Lighthizer suggested that the Administration would like to see substantial changes to GSP. He particularly criticized the fact that some GSP-eligible countries still maintain high duties on U.S. exports, and also that it is unfair that some countries have improved access because they have negotiated free trade agreements with countries other than the U.S.

TRADE AGREEMENTS 

USMCA

Democratic and Republican lawmakers both expressed concern over enforcement issues as we approach USMCA's July 1 entry into force date.  Lighthizer said the Administration will be aggressive to enforce the USMCA commitments, especially the labor commitments.  The Administration recognized the challenges for companies to deal with USMCA implementation while they are still dealing with the fallout from COVID-19 but expressed hope that USMCA will help reduce the negative effects of COVID-19.

UK 

Lighthizer says the U.S. - U.K Free Trade Agreement is unlikely to be finalized this year but the Administration is confident that a comprehensive deal will be reached.  

Kenya 

Negotiations for a U.S. - Kenya Free Trade Agreement (FTA) will launch the first week of July. The Administration confirmed that an FTA with Kenya will serve as a model for FTAs with other African countries. 

Japan

Lawmakers expressed support for the U.S. - Japan agreement last year. However, lawmakers also expressed their dissatisfaction with the lack of consultation with Congress. 

DE MINIMUS LEVELS 

Lighthizer proposed lowering de minimus levels for U.S. imports. As you know, the de minimus level for U.S. imports is $800, and Lighthizer complained about the EU threshold of $150 and the Chinese threshold of $7. "This results in massive numbers of shipments to the U.S. receiving duty-free treatment and virtually no screening. The disproportionately high volume of these shipments indicates China and others are likely exploiting the high U.S. de minimis threshold to avoid paying duties." 

WTO REFORMS 

Several Republican lawmakers reiterated calls for structural reforms to the World Trade Organization (WTO) especially in regards to the Appellate Body.  Lighthizer said the Administration holds the same concerns and called for radical reform to better protect the interests of the United States.