Lighthizer Says If a China Trade Deal Inked, China's Retaliation Will End
U.S. Trade Representative Robert Lighthizer, who is leading the China trade talks, downplayed the possibility that President Donald Trump and Chinese President Xi Jinping will sign a trade agreement a month from now. Lighthizer, who testified before the House Ways and Means Committee Feb. 27, was asked by Chairman Richard Neal, D-Mass., if he sees a package coming in the next few weeks. "I’m not foolish enough to think there’s going to be one negotiation that’s going to change all the practices in China," Lighthizer replied. "At the end of this negotiation, if we’re successful, there'll be a signing." But that's the beginning of a long process to monitor China's compliance with what it promises to do.
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Neal had said in his opening statement: "While this administration confronts the same challenges with China that previous administrations faced, it has chosen to use tactics and tools that previous administrations -- of both parties -- did not. The Trump administration tariffs have been sweeping, disruptive, controversial, and painful. The administration’s promise is that its high-risk approach will yield high rewards.
"My concern is that we are about to see the administration use the same, ineffective playbook it used in the past. ... It must hold out for a good deal -- a structural deal. The future of America’s economic prosperity is at stake."
Neal asked Lighthizer if tariffs on $250 billion in Chinese imports will be held in abeyance if an agreement is reached. "Certainly it is an objective of the Chinese that tariffs go away," Lighthizer said. He was more definitive on the question of the retaliatory tariffs China implemented because of Section 232 tariffs on steel and aluminum, and because of these Section 301 tariffs. When Rep. Jimmy Panetta, D-Calif., complained about the tariffs on almond farmers in his district, Lighthizer said: "If we get an agreement, those tariffs will come off."
Trump tweeted a few days ago that the 10 percent tariffs on $200 billion in imports will not increase to 25 percent on March 2, as was scheduled. Lighthizer said a Federal Register notice will go out in the next day or so to make that a reality.
Rep. Jackie Walorski, R-Ind., asked Lighthizer if he would be able to meet the deadline set by the recent spending bill of establishing an exclusion request process for that largest list. He not only did not commit to getting it done within 30 days of passage, he didn't even say it will happen. "I understand there are people in Congress who want us to have an exclusion process, it’s something we’re looking at," he said. He noted his view has been that one isn't needed for a 10 percent tariff, and said there's been a 7 percent to 8 percent devaluation of the Chinese currency, so the effect on importers has been muted. He implied that a deal would roll back the 10 percent tariff when he said, "Our hope is we can deal with that in the context of our negotiation."
She also asked when more exclusion request decisions could come for lists one and two. "We’ve already granted almost a thousand," he said. "Things sort of slowed down because of the [federal government] shutdown. We expect another tranche to come out fairly soon."
Many members asked him how a deal would be enforced, if one is arrived at. Lighthizer said there would be monthly meetings at the office director level, quarterly meetings at the vice-ministerial level, and semi-annual meetings between the USTR and the vice premier of China. At those meetings, the U.S. would bring up complaints from companies, which could remain anonymous, as well as systemic problems.
"Hopefully, in most cases, they’ll be resolved at the first or second level," Lighthizer said, but if he isn't able to resolve it once it rises to his level, the U.S. will act unilaterally. "This is not something that has a lot of precedent," he said. He did not respond to a question from Trade Subcommittee Chairman Earl Blumenauer, D-Ore., on whether that unilateral response would mean levying across-the-board tariffs.
While most of Lighthizer's testimony focused on manufacturing and agriculture, he did talk about Chinese barriers to services, and said they're making progress on a number of fronts. He said insurance, credit rating, banking, electronic payments and express delivery are all being negotiated.
Whatever agreement there might be, Lighthizer said, it will not be submitted to Congress for a vote. It became a bit of an open question because Trump said this is a trade agreement, not a memorandum of understanding. Rep. Lloyd Doggett, D-Texas, told Lighthizer if it's a binding trade agreement, it has to come to Congress for approval. Lighthizer disagreed. "We’re not changing any tariff lines, we’re not using [Trade Promotion Authority]. This is a settlement of the [Section] 301 action," and therefore is a purely executive action, he said.