1 March 2019
Lighthizer Resists Congressional Calls for Expanded Section 301 Exclusion Process
U.S. Trade Representative Robert Lighthizer discussed the recently completed round of discussions with mainland China at a three-hour hearing held on 27 February before the House Ways and Means Committee. At the hearing, he resisted calls by lawmakers to expand the exclusion process currently in place for mainland Chinese goods subject to additional duties under Section 301 of the Trade Act of 1974.
In his opening statement, Lighthizer was not as sanguine about prospects for the negotiations as President Trump had been at a 22 February White House meeting. He listed multiple problems the United States needs resolved, including technology transfer issues, failure to protect intellectual property, subsidies, and cyber theft of commercial secrets. Lighthizer’s remarks also featured an excerpt from an April 2000 statement by now Speaker of the House Nancy Pelosi referencing prior “broken promises” as a concern when Congress was about to vote to grant permanent most-favoured nation treatment to mainland China.
Lighthizer said the United States is still working to reach a satisfactory solution on the issue of enforceability to be able to “have an agreement that helps us turn the corner in our economic relationship with China.” When asked by several lawmakers for clarification, he responded that “there will be a process that has been agreed where at the office director level there will be monthly meetings” to address complaints raised by individual companies, especially if multiple complaints reveal systemic problems. There will also be quarterly meetings at the vice-ministerial level as well as semi-annual meetings at the ministerial level. Lighthizer added that “if there’s disagreement at my level then the United States would expect to act proportionately but unilaterally to insist on enforcement” and pledged to work with Congress during this process.
Lighthizer also responded to lawmakers’ questions on the currency agreement Trump had referenced at the recent White House meeting, noting that “in terms of currency, it is certainly our objective … that there be commitments not to do competitive devaluations.” Moreover, he stressed the importance of passing the U.S.-Mexico-Canada Agreement, warning that if the agreement is not approved “there is no trade program in the United States” and “everything else is kind of like a footnote.”
Notably, when asked by Rep. Jackie Walorski (Republican-Indiana) about whether the Office of the U.S. Trade Representative would meet a 30-day deadline to establish an exclusion process for mainland Chinese products currently subject to additional duties of ten percent under Section 301, Lighthizer signalled that USTR would not move forward with such a process unless the ten percent duties are raised to 25 percent. While a joint explanatory statement on the recently enacted Consolidated Appropriations Act instructs USTR to establish an exclusion process for the aforementioned products by 17 March, expressing the sense of Congress on this issue, the explanatory statement is not part of the actual legislation and, as such, is not legally binding on USTR.
Then again, Sens. James Lankford (Republican-Oklahoma) and Chris Coons (Democrat-Delaware) introduced legislation in the Senate on 27 February to require USTR to establish such an exclusion process and a companion bill was introduced in the House on 28 February by Reps. Walorski and Ron Kind (Democrat-Wisconsin). According to a press release issued by Coons’ office, the Import Tax Relief Act would exempt from tariff imposition items for which there is no commercial access outside of mainland China, items for which the tariff would increase the cost of living for low- and middle-income families in the United States, and items that do not directly benefit from mainland China’s non-market-based policies.
According to the Congressional Research Service, as of 21 February U.S. importers had paid US$12.2 billion to the U.S. government as a result of tariffs imposed on mainland Chinese goods under Section 301. By comparison, tariffs imposed on steel and aluminium products under Section 232 of the Trade Act of 1974 totalled US$5.8 billion as of that date.