USTR Won’t Commit to Suspending Tariffs if US Reaches Trade Pact With China

In testimony before the House Ways and Means Committee, Lighthizer also was asked repeatedly whether he plans to begin an exclusion process for the third tranche of 10 percent tariffs. He wouldn't commit and in so doing, seemed to ignore provisions requiring him to start a List 3 exemptions process within 30 days that were written into the spending bill enacted Feb. 15 to avert a second government shutdown (see 1902170001).

Does the administration “envision putting the tariff threat in abeyance” if the U.S. reaches a deal with the Chinese? asked Ways and Means Chairman Richard Neal, D-Mass. Lighthizer responded he won’t publicly discuss “specific provisions” of the looming agreement but offered to brief Neal privately. “Certainly, it is an objective of the Chinese that tariffs go away,” he said.

Lighthizer understands there’s much congressional support for a List 3 exclusion process, he told Rep. Jackie Walorski, R-Ill., who asked if he expects to meet the spending bill’s 30-day deadline for initiating one. “It’s something that we’re looking at,” he said.

Since the third tranche of 10 percent tariffs took effect Sept. 24, there has been a 7-8 percent “devaluation of the Chinese currency, so the effect has been less significant than fully 10 percent on those people who are affected,” said Lighthizer. “Our hope is that we can deal with this in the context of our negotiation with the Chinese.”

Rep. Judy Chu, D-Calif., pressed Lighthizer on the need for a List 3 exclusion process on behalf of iRobot, which is based in her Los Angeles-area district. The company employs 675 workers, she said, but its Roomba robotic vacuum is manufactured in China, so iRobot “is paying 10 percent in retaliatory duties.” It’s “very, very anxious about having some way of applying for exclusions for that third list, and I just hope that you can make that process happen,” she said.

“I have certainly taken the position that if we go to 25 percent” on the List 3 tariffs, “we will have made the commitment to have an exclusion process,” Lighthizer responded. “Short of that, I want to sort of see where we are, and I hope that they're thinking about ways to manufacture more in the U.S.,” he said of iRobot.

“While the 10% round three tariffs imposed last September have not been helpful to our business, and have resulted in price increases, we are relieved that tariffs will not be raised even further to the proposed 25% level,” emailed iRobot CEO Colin Angle. The company continues to work with the administration and members of Congress “to ensure that United States trade policy doesn’t disadvantage American firms,” he said.

IRobot is “grateful” to congressional members “who are advocating for the creation of an exemption process which recognizes and addresses the harm being done to American companies,” said Angle. As for Lighthizer’s suggestion that iRobot should be thinking about doing more U.S. manufacturing, Angle, in Sept. 6 comments, told USTR the company “cannot practicably adjust to source its vacuums” from countries other than China.

A Federal Register notice officially postponing the List 3 duty rate hike to 25 percent (see 1902260001) “is being worked on right now,” said Lighthizer. “It’s sort of in process in the next day or so.” Unless the notice is published by the Friday deadline, the tariffs would automatically increase in the wee hours of Saturday morning. The notice “will happen, and it will happen according to the normal course,” he said.

The administration has “engaged in a very intense, extremely serious, very specific negotiation with China on crucial structural issues for several months now,” said Lighthizer. ”We are making real progress,” he said, emphasizing that a deal is a matter of “if,” not when.

If the U.S. “can complete this effort” and land an accord with the Chinese, “we might be able to have an agreement that helps us turn the corner in our economic relationship with China,” he said. “Much still needs to be done.” What the administration seeks is a deal that promotes “fair trade that requires structural change, and it has to be enforceable.” he said.

The U.S. needs to “approach” the negotiations “with the view that there are reformers in China" who want to change allegedly unfair Chinese trade practices, "and we’re working together with them,” said Lighthizer. “If that’s the case, our hope is to have specific language on specific issues that is enforceable through a very clear process.” Lighthizer is “not foolish enough to think that there’s going to be one negotiation that’s going to change all of the practices or our relationship with them,” he said. His goal is to “take on the major issues” first, he said. “I view this as a process.”

The enforcement mechanisms that would be built into an agreement would include monthly meetings between USTR staff and their Chinese counterparts, plus quarterly and semiannual meetings among decision-makers from both sides higher up the chain, Lighthizer told Rep. Linda Sanchez, D-Calif. He wanted to answer her questions with "limited specificity" so as not to disrupt any sensitive negotiations, he said. “Individual companies will come to us with complaints about practices, and we’ll be able to work those through the process,” he said. Companies will be granted anonymity to encourage them to come forward without fear of reprisal, he said.

Any “patterns” the U.S. discerns from company reports of allegedly bad Chinese behavior “hopefully will be resolved at the first or second level” of meetings, Lighthizer said. If still there’s "disagreement" when the dispute gets bumped up to his level, the U.S. "would expect to act proportionately, but unilaterally, to insist on enforcement," he said. "Without that sort of thing, we don’t have real commitments.”

The administration has “no intentions” of submitting a China accord to Congress for approval, Lighthizer told Rep. Lloyd Doggett, D-Texas. “This is a settlement of a 301 action. The president is using his power under Section 301.” The accord would be an “executive agreement, which the Constitution gives the president the right to enter into,” without congressional oversight, he said.