Transcripts For CSPAN Forum Considers Future Of U.S. Trade Policy 20170721

Of our Host Institution for today, the Georgetown Center for business and public policy. I will tell you that we are delighted today to have a discussion on something very important and near and dear to the Georgetown Center. That is the subject of trade policy. In particular, we are going to examine the issue of whether remedy unfair trade practices or are they themselves simply protectionist policies . Todays panel is going to be moderated by my colleague. Bob is a senior industry fellow at the center. Wonderfully in promoting and advancing the georgetown hill series that has clearly gotten so popular over the years. I will say that we are glad to have you here. I will not steal bob steiner, but in terms of introducing the panelists, i will some police say that its an extraordinarily blueribbon group of people that will be talking today. I will also say that when we looked at the list of registrants for today, we saw a number of experts in the audience. We won to make sure to have ample time for questions and answers. In that regard, let me tell you that we would love to hear from you so be forming your questions as you hear the panelists speak. When it is time for q a, please do the following. Please raise your hand and wait for a microphone to be brought to you. 30s is an event being recorded for posterity s sake and being broadcast live from. This is an event being recorded for posteritys sake and being broadcast life. Bob thanks everyone for being here. Its a great group. We are writing a germanic wave of change in u. S. Trade policy. Some think it is going well and others thinkable rip the fabric of our legal and business relationships that are deemed to be taking a binge of the u. S. , such as entreaties like nafta. I call your attention to an editorial in todays wall street journal. At the core of this controversy is the role of trade remedies. These are provisions in u. S. Law that allowed the u. S. To remedy the Foreign Trade practices that may threaten the nations security. These provisions have been enacted by congress over decades. While they were an accepted pillar of u. S. Trade policy, many believe at the end of the day that they do not benefit the u. S. Economy. They have always contain provisions that allow the executives and the president to provide a restraint and impact of these remedies in the national interest. Now we are in a position where the president seems not to be interested in restraint. I quote his remarks to a Business Group on monday. For decades, washington has allowed other nations to wipe out millions of american jobs through unfair trade practices. Wait until you see whats up for you. Today we have a panel representing sharply different viewpoints. I like to introduce briefly the members of the panel, starting on my right. The first is chad, who is at the Peterson Institute as a senior fellow. These bios are in your hand out. Served previously as senior economist for International Trade and investment at the white house on the council of economic advisers and most recently as a lead economist at the world bank. Partner andis a former trade council to the house ways and Means Committee on trade. Im glad to say ive been able to work with him for a number of years. At a firm with policy client. Is tom, who is the president of the committee to support u. S. Trade laws. He asked me not to pronounce that. Its an organization of workers and others dedicated to the enhancement of u. S. Trade laws. He has been heavily engaged in particular the u. S. Steel policy for number of years. Reich, aave phil distinguished fellow where he works principally with the trade policy initiative. To search for a long time he served for a long time as president of the national Foreign Trade council. He was an assistant secretary of commerce. I have known him for a long time. We both worked for very distinguished senators. He worked with senator john heinz of pennsylvania and i was senator john chafee of rhode island. Finally we have nelson cunningham. Ofis president and cofounder laguardia associates, a Prominent International Strategic Advisory firm. Prior to that, he served in the white house as special advisor to president clinton in western Hemisphere Affairs and his general counsel to the White House Office of ministration. Nelson is a very wide and well established reputation in this field and we are very glad to have him and others here with us today. We will start with opening remarks from each of five to seven minutes. When that is completed, we will turn to the audience for questions. Again, thank you all for being here. Turn tomoment, i will mr. Benton. Tocan i remind you speakers punch her green light . As john said, this is all being televised live. Thanks, bob, and georgetown for the opportunity to be here. Im a senior fellow at the Peterson Institute. My life in research is essentially on this topic of trade remedies. What are trade remedies . Historically trade remedies, we think of them as being antidumping, countervailing duties. Antidumping is a restricting policy that governments used to deal with unfair trade and lowpriced imports. Countervailing duties are unfair trade that subsidized imports. A Global Safeguard is nothing unfair necessarily. Theres just a lot of imports, a surge in imports. These are policies of the United States has used for decades and policies that governments around the world use as well for. There are rules that allow governments to use these. In particular, it was the world trade organization. This is nothing really new. 15 or so done for last years of my career, ive built a database that is out there that folks can look into these things that they want. I would describe what it is that we are seeing in the data and what this might mean for the United States, the Global Economy, especially in light of changes that are happening right now under the chubb Administration Trump administration. Even before the Trump Administration came into effect, governments used antidumping and countervailing duties quite a bit and the United States is no different. Over the last couple of years, the United States has used these to restrict slightly more important than normal, but nothing really outside of the ordinary. The United States has not used them all that much. With one exception the exception is to do with imports from china. The main target of the United States use of both antidumping and countervailing duties is chinas succession into the deputy of wto. Really for United States, these trade remedy policies have been an antichina policy to deal with imports coming in from china. Even though chinas export growth has been tremendous, by my estimates as of the end of 2016, about 9 of u. S. Imports from china are being dealt with through these types of policies, through antidumping countervailing duties. Trumpclaims by the administration that no Previous Administration had ever done anything about imports from china is just patently untrue. Even dating back to the Bush Administration and obama and ministration, these policies have been used to slow down imports from china. Now there are current problems in the Global Economy that we can attribute some of them to china. We can talk about the overcapacity problem in steel, the overcapacity problem in aluminum. These are really just kind of symptoms of deeper problems, which are that china is fundamentally a different type of economy than the United States, western europe, japan, korea, market oriented economies. ,hen china came into the wto there was an expectation that china might become more like this, more market oriented, but it has not happened automatically. We are at a critical juncture today, 15 or 16 years after chinas entry into the wto, about what to do about the fact that china has not become a market economy. Are the rules of the trading system adequate to deal with that . Those problems would have been there regardless of who won the 2016 election. And whether or not we had these issues of steel and aluminum overcapacity. , otheri mentioned administrations have used antidumping and countervailing duties. Whenhubb administration the came into office has chosen to do things a little differently. They are using antidumping countervailing duties. Oftheir use of these storks source of import reducing policies, they are increasing the rhetoric. These are flying under the radar and they do not generate political attention. The Trump Administration has change that. Most recently it was respect with cases against canada and of lumber andcs sugar. The political escalation to the level of the secretary of commerce, even let alone the president , is rather unprecedented. Of foreignhe issue leaders also have and get involved in these types of issues and being less technocrat it. That is one distinction with this and ministration. The second is that they have pushed the more traditional trade remedies that are well known and understood and used by countries around the world and not just the United States. Its pushing into use laws that we have not really utilized. What i have in mind here is the section 232 investigations, the , the threaturity that steel imports or aluminum imports are somehow a threat to the United Statess National Security. The investigation is currently ongoing under the section 232 law. The last time we saw an investigation was back in 2001. Its a rarely used law and it provides tremendous discretion for the president to invoke sweeping set of trade barriers if you were to so choose. We can come back to this discussion about whether we think there is a National Security argument for stopping imports of steel or aluminum. Im not of the view that there is. I would reason that argue for that is that most of the steel and aluminum that we currently import into the United States is not from our military adversaries. Because of policies like antidumping and countervailing duties, we have halted much of the steel and aluminum that we might import from china from coming in. Most of steel and aluminum we import comes from canada. Steele also comes from mexico, germany, japan. These to my mind are not military adversaries, and at least historically have been allies of the United States. Administration in the 232 cases was the government self initiated the cases. Its extraordinarily rare. Typically it is companies or labor unions that come forward and file these cases. By the Trump Administration self initiating the cases, they have essentially changed the playing field. They said the business that were open for protection. We are open for trade barriers if you wanted. In my mind has led to the next outcome, which as we have also seen the initiation of cases under the third trade law, the Global Safeguard law. Here we have two new cases with one on solar panels and one on washing machines. The last section 201 case was also back in 2001 on steel. Much like today, we had an overcapacity problem in the Steel Industry. The george w. Bush administration utilized the section 201 law to do with that come of import surge coming in globally and post a set of import restrictions. It was done through normal channels and did not escalate out of control and different from what were seeing today. The last point that i wanted to make about trade remedies in order to set the table to highlight just how important they are in a contemporary discussion is what happened this week when the u. S. Trade representative released their negotiating objectives for nafta. The new nafta that the Trump Administration is going to negotiate with canada and mexico. On page 14 of that sin of negotiating objectives, there is a subsection called trade remedies. They had two main proposals. One is to eliminate something called chapter 19, which is a special dispute Settlement Forum in which any of the nafta countries can challenge when investigating or investigate countervailing antidumping duties. Extra Check Balance to make sure the abuse of those remedies doesnt happen. The second was to potential and a current provision of nafta, which is to say that when countries impose a Global Safeguard under the section 201 law and the United States that they generally end up exempting other nafta countries. When we think back of the Bush Administration, it was a 30 import tariff imposed on countries around the world with the exception of our Free Trade Agreement partners, with the exception of imports coming from canada and mexico. The Trump Administration would like to remove these elements, which to my mind are a negative signal in that it really suggests that one of their main interests are making it easier to reimpose trade barriers against canada and mexico. And potentially hurt trade in the north american region and hurting potential supply chain activity in the north american region. So with that, i will stop. Hopefully that sets the stage for some of what we are seeing out there. Thank you. Bob thank you very much, chad. Sorry, tom, please,. Tom im very pleased to be here under the offices of my two favorite institutions Georgetown University and the house of representatives. Very good years in both places. Im going to make three pedestrian points that are think will help us keep everything in context for the later conversation. The first point is that everybody is for rulesbased trade but we reserve the right to pick the rules that we like and dont like. In the case of the remedy rules and im going to speak exclusively of anti dumping and countervailing duties, there is a defining line dividing line and its on how you answer the following question. To trade remedies distort free trade or protect and enable free trade . Now that divide has created a lot of sharp opinions on one side and the other. For example, if you believe trade remedies distort free trade, then the other side consists of lazy incompetent throwbacks, unable to cut it in the Global Economy and selfishly driving up costs for everybody else. If you believe remedies enable free trade, then the other side consists of naive audio logs who would probably vote to repeal the antismuggling laws and take stealing property out of the criminal code. Few people have been known to cross that line. I will say this the 232 if nothing else has certainly called down a lot of the antiadc bd when whic language. For the first time in 15 or 16 years, ive heard something favorable said about the steel 201. A number of organizations that have weighed in against the 232 have spoken favorably of the adc bd lost. Im just 21 and this is from a group not known to be advocates. Wellestablished pursue jural requirements for determining injury and assessing the appropriate scope of the level of remedies. The only people up actually changed their mind on the subject or crossed that they divide have fallen to one of three categories. One is some address changed jobs. Weve had someone at the Steel Institute who want to the American Institute for International Steel come which put them on the opposite side of the chasm. Problems were feeding his arguments because we use this old papers against him. [laughter] industrial people who had their own products brought into play. That goes down stream and upstream. Theres a lot of steel users and people who form it into their products have always been opposed to steal something and 60 cases because it raises the price of their input. Now theyre filing their own cases because china has lowered some of its targets and to the downstream market. Similarly, we had a steel executive one time or just joined a isi who called up in a fit of anger because the pharaoh alloy industry had filed a trade case. This would raise the price of his input and what were we going to do to kill it . We find that where you stand in the chain of the movement of that product for raw material into the consumers hands has a lot to do with how you see the trade laws. Finally, there are elected politicians who have been known to change the mind on the trade laws, usually in response to political forces. If anyone today changes their mind from the other side to my side, i will buy you a real lunch. Makeecond point i want to is that strict enforcement of strong trade laws has a disproportionate impact on Popular Support for trade liberalization. The specifics of certain cases fly beneath the radar screen, but dont for a minute think that the people dont have a sense of whether they are being cheated out of their jobs and whether the government is doing anything about it. Theres been a lot of talk since the election that the jobless is economyownsizing of the or productivity gains or that people just dont realize how much they benefit from liberalized trade. All that is absolutely true, but it would be a mistake to underestimate the impact of the knowledge that theres unfair trade in the market and it has not been adequately addressed. As a group called the alliance manufacturing, which ive been involved in, they conduct a poll about attitudes about american manufacturing. They have been doing this long before the last election. Every year uniformly there is a super majority of americans answering that survey saying they believe yes, they believe some trait is unfair. Yes, they believe the government ought to be doing something about it. Yes, they will vote for a politician who feels that way about it. Yes, they will vote against a politician who doesnt feel that way about it. These polls have been shared with political campaigns every year. Yearsally in president ial , but this past year, both major candidates finally read them and embraced them. There was a bidding war on trade enforcement that we have been tried to instigate for decades. The fact is that one of the candidates read the gut and explained it better than the other and here we are. The third point is that besides Popular Support, there is pronounced Political Support and here we are under the office of an Academic Institution arguing whether remedy laws are protectionist or not. It is almost an academic exercise and will be for the next 23 years. The fact is that the congress, even long before this election, the congress has repeatedly made clear that it is the congressional intent that these laws be kept strong and strictly enforced. There are about five examples i could get into, but let me give you one. Five years ago, a federal judge said that the Commerce Department had never been authorized by congress to bring antisubsidy cases against a nonmarket economy, china. , if the congress meant to do that, they should pass a law. Two months later, at the beginning of 2012, which was the electionyear for president obamas reelection, totally partisan environment, that law passed. Unanimous consent in the senate. Suspension in the house. 101 ratio. 37039. But who is counting. It makes sense that members of congress would feel that way about the trade laws. They did not want to trade laws undermined. They beefed up the energy test. Day, the House Appropriations committee embraced secretary rosss request for more money for enforcement and compliance. Unbidden, they made the following language in the report , the committee instructs the ita that Congress Make the am forstmann the highest the enforcement the highest priority and recommends that the ita focus on expeditiously reducing case law backlogs and the really investigating the extent to which trade law evasion harms domestic industries. So, i will leave it at that. , from a Popular Support point of view and a Political Support point of view, we are in an arrow where you can ,xpect aggressive prosecution either self initiated or not. I think we better find a way to understand how that contributes to Popular Support for free trade. It ran out of support in the last year and weve got to earn it back. Thank you. Thank you, bob. It is an honor to be back here on the hill. Im going to deal with the question of whether the remedies correct unfair processes and change behavior that we dont like. By talking about economic effects, political effects, and he gave your effects. Side,k on the economics using the term correction may be asking too much. Aboutlking primarily this, but im alluding to some of the others. Has alwayscation been that the purpose is to offset the impact of the unfair act. The duties are imposed to the extent of the dumping of substances asian subsidization. Subsidization. You have to prove harm and the crime, as it were. The added terrorist is not a penalty. There is a fairly abstruse academic argument that the amount of the additional duty should only be that sufficient to offset the injury, rather than sufficient to offset the dumping. The rules permit offsetting the full amount of the dumping and that is what the law provides for. Do they work . I think that depends on what you mean by work. As it offsets, they have limitations. They intend to offset the crime. To save not intended the industry, restore it to its former glory, solve all the problems. That might happen, but that would be a happy side effect. That is not really the purpose of these provisions, despite what some people will say about their intention in filing cases. The more important thing to say about whether or not they work is they dont work if they are circumvented. And that makes enforcement a very large part of this issue. There are a lot of ways to circumvent orders. Are illegal under most countries domestic laws because they involve fraud like mislabeling or lying about the contents of the container or Something Like that. Other things like shipping the goods to a third country and relabeling them and having them originate in that country is a popular activity, particularly in steel. In all as making changes second country to something not covered by the order and then shipping to the United States. There are a lot of ways to get around them. Andou have good enforcement the last several administrations, certainly the last one, clearly this one are determined to put a lot of resources into law enforcement. You can probably have a much greater likelihood of them actually achieving their objective. Work, the next question is what does work mean . I think occasionally people talk about working in terms of their effect on the number of imports, market share, or Something Like that all of which is relevant but i think the more important indication is do they produce a price effect . That is the point. The purpose of adding the tariff is to raise the price of the imported product, to get it out of the dumpster range and put it at a level where the domestic product can compete. Back in the dark ages, when i started doing this, the biggest orderst against these was that they were inflationary. That they would increase the price of downstream products, your car is coming your toasters your cars, your toasters, your refrigerators, that they expensive. Ecome more i could tell you would joke about that involving georgetown, but in the interest of time, i think i will skip it. We dont worry quite so much about inflation now. If you are the petitioner, you want to see a price effect. That might or might not happen in the real world. The domestic seller might choose to eat all or part of a tariff by making less money to stay competitive. Preferences might be based on something you buy. Tend to work best in the case of fungible products. Steel and exceptionally good case for this kind of thing. Complex products sold directly to the consumers like respond,es might not the pricing might not respond, the market might not respond the same way. The size of the added terrorist also matters tariff also matters in the real world. Each,cados are one dollar a 10 dumping margin would make them 1. 10 each. Chap might know something about the price elasticity of avocados, but i dont. My sense is that raising the price from one dollar to 1. 10 is not going to make a huge change in the market. Realworld effect is a little thanarder to predict academic world effect. I should say in passing that the laws are not the import relief alone. S there is also section 301, which you may be hearing more about as time unfolds. There was an article this morning inside u. S. Trade, i believe, that got into this. It got into it in some detail as a potential steel course of action. President the opportunity to take action against unfair trade practices by other countries. There is not an adjudicatory process. The president has wide latitude to try to persuade the offending country to change its practice. It is not really designed to offset the practice. It is designed to impose a penalty that will persuade a country to change its practice. This was a widely used strategy in the 80s. It has not been much to use much used then. This is something that might appeal to the current president , the initiated investigation was an enormous piece of leverage. You announce that you have identified a country is engaging in this practice and you are going to investigate. If you find that that has happened, that usually starts in negotiation. In negotiation usually ends in some accommodation by the offending country. Process that has its limitations, which i wont get into right now. , you haveo mentioned other things not designed to deal with unfair practices. All of these things have mixed records and we can talk about that. ,n terms of political effects these things are widely used. There is a political safety valve. They can deflect from constituents. That way your congressman does not have to sponsor a bill for protection. You can go to his constituents and point to the administrative process. That will address your problem. Is they that the party first resort rather than the last resort. The offending action was usually taken for domestic political reasons at home. It does not mean there is no hope. Steel is a good example. Chinese steel imports have reduced into the u. S. , but they have also been pushed into other countries. They pass them on to us via circumvention or processing. The remedy solves the problem, but contributes to other ones and did not address the central issue, which was also the case, which is overcapacity. That is why we are talking about 232. I wont, in the interest of time, get into the question of viability of 232. I do have views about that. I would say that the right answer, putting aside all answerality, the right is probably a multilateral agreement on overcapacity. Meetingthat the hamburg got it right. Lets give some relevance to the global forum. Lets give some thumb give them some deadlines. For the president , it is the process that spins out over time. Easy the right answer, the answer. Everybody can say they are not the target, that everybody is the target, so it is not the chinese part of the american plot to encircle and destroy them. It is part of a multilateral problem. Everybody is taking a hit. Everybody is making concessions. I think it is also a more feasible remedy. With that, i will stop. Thank you very much, bill. It is good to be back on the hill after only having been gone for five months. I know. I found my way around quite well. Also just to clarify, im speaking on my own behalf, not on behalf of any clients. The one thing about coming after a number of speakers who have already gone into depth on the issues is what do you talk about . I want to hit a few things rather quickly. First is to answer bobs question at the beginning of our trade remedy laws, are they a remedy, or are they protectionist . In true lawyer fashion, i will say it depends. Applied in an unfair way, and in proper way, be it an environmental law, criminal law, tax laws. Whether one makes a judgment on how the trade remedy laws are being applied, does that mean that the laws in and of themselves are bad things . Are they, in and of themselves, protectionist . I would say no. I would say that in and of themselves, they are there to trade that, for a long time, not in the United States, but many of the countries have viewed to be detrimental to be unfair. These laws go back, way back, to write before and after world war i. Wereriends, the canadians the first to have an antidumping duty law. The u. S. Law is based on the trade act of 1930. We have had antidumping duty for a long time because it has been recognized that economic circumstances can occur that you need to have some type of remedy. As far as dumping goes, selling a product in the u. S. At an unfairly low price, possibly because a country has overcapacity because of other things, essentially exporting unemployment, there is a need to respond to that, to remedy it. You are remedying subsidies. Is it fair for a u. S. Company to have to compete essentially against a Foreign Government who is providing either free electricity, free capital and other support, to its foreign competitor. Again, the purpose of the remedy is to offset these. Are deep policy reasons for having these laws. There are deep political reasons for having these laws. As tom pointed out, there is wide support in congress for unfair trade laws. Why is it there . I think most members see the policy value. But there is a political value. Laws have trade allowed nominally protrade legislations to go through, most recently when trade Promotion Authority was reauthorized. There was another set of laws that amended the antidumping duty laws. Those who put themselves in the freetrade cant, you should not have to do that. You should not have to pay off people to support free trade. I think you should look at on to the freetrade cant. If you guys did a better job in promoting the trade, you would not have to do it. Start every argument for free trade by quoting a scottish guy who died every 200 years ago, you have already lost 95 of your audience in 2017. It is amazing how much that is still done. So, there is a very important political aspect. Real quickly, some of the more recent aspects of how these laws have been applied, particularly , are theseought up inherently antichina . There has been an increase of cases against china. There have been a decrease in cases against japan, south korea , other asian countries. And exports to the u. S. Of shifted from those countries to china. As the volume of exports in china to the u. S. Have increased, the potentialities of trade frictions and of these types of problems coming up will also increase. I think it is natural that it would be accompanied with these types of cases with chinese influence. How much are the number of these cases with the nature of these cases a reflection of any given administrations trade policies or its own initiatives . I would say not very much. 99 of the cases in the u. S. Are brought by companies, not by the government, not by the administration. It is not the administration who decided to bring a case against lumber which started under the Previous Administration. It was not their decision to bring a case against sugar from mexico. These are excellent examples from this. We havethe fifth time had cases against canadian lumber. There is an intrinsic policy problem between the u. S. And canada on softwood lumber that goes back beyond the 1980s when the first case was brought. These are not issues. The same thing with sugar from mexico. There was an agreement, the sugar industry was already finding problems without the agreement was being enforced on the mexican side long before President Trump was elected. Does this really reflect a Trump Administration initiative . Not really. So, the main thing to keep in mind, i think, as you look at what is going on is to separate the rhetoric from the reality. This administration talks in different words, but the reality of the fact is that there is not really that much of a difference. When this administration said we dont have to follow wto decisions, every administration has said that back to the clinton administration. Other doates and any not have to follow wto decisions and yet the world still turns. There are wto decisions that other significant economies have not followed for years and yet the trade system still exist. I think it is important not to get hyperbolic about it. To really try to see what is beingon versus how does talked about. I will stop there. Thank you. That is very helpful and very interesting. Nelson . Although steve and i did not planned this, his sending meshes perfectly with my beginning. Im going to pull the lens back and give you my idea of what is actually going on with this administrations trade policy to put a context around the issue of protectionism and the issue of trade remedies. I see it differently than you do. I think this administration is deadly serious about changing the way that we trade about changing the way that we deal with our trading partners. The evidence i would argue out there is manifest in their words and is beginning to be manifest in their actions. I want to start with a document that i think all of you should go take a look at. It is an oped that h. R. Mcmaster and gary cohen did in 31 wall street journal may right after the president returned from his first trip to europe. Isyou are going to think it a little early to talk about a trump doctrine, read this oped because i think it lays out the way that isne in a very specifically relevant to trade. Firstentitled america doesnt mean america alone. It says while meeting with european leaders, the president concerns about our trade deficits with many european nations. Put, americans will treat others as they treat us. They lay out the president s organizing vision. President also had a clear outlook that the world is not a global community, but for nations, nongovernmental actors, and businesses engaging and competing for advantage. Does not approach discussions with allies as community as partons, but rather of being an arena where we are competing. Then they go on. We come the United States, bring to this for him unmatched military, political, cultural, and moral strength. Rather than deny this elemental nature of international affairs, we embrace it. The world is an arena. We are the biggest guy in the arena, we are going to use every bit of air force for our advantage. That is a very different view of the United States in the role in the world since the end of world war ii. , how does this apply to trade . Clearlyident has said over and over and over again that he wishes to undo the unfair trade deficit he believes have existed against the United States for decades. He has said this during the campaign. He said it repeatedly during his presidency. He has tweeted about it. Is very bad for having a trade deficit with us. He has talked about trade deficits with mexico, china, and others. The response i hear from some is, well, look at the actions, not the words. Sometimes the president changes his mind, he says Different Things at different times, he can embrace different arguments. I would argue on trade, i have looked at his thinking on these , he hasor many years been remarkably consistent. Trade and immigration are the rods that go through his thinking for decades. Immigration is ruining our country and our countrys character. Out de is halloween us out and we are the victim of trading practices by our partners. We have heard that from them over and over and over again every of how does he measure this . The measures it very simply in bilateral trade deficits. There are economists at this table and in this room, every economist i have talked to have said, that is not the way you measure imbalances. Reflectl trade deficits certain factors, they often reflect differences in savings patterns between the countries, but you should not look at trilateral bilateral trade practices as being indicative of unfair actions or of problems in a relationship. Nevertheless, the problems in an president keeps on coming back to this. Ok, he talks about it. Is he acting on this . I would argue that the evidence is becoming very clear. We are here in the dog days of august. A time when in washington, usually not much gets done. The fact that this room is full on a friday with hill staffers and others indicates that the dog days of july are actually a busy period. Just this week and next week, we things that ir would argue are going to help us understand where the president is on trade issues. One has already occurred, two have already occurred and two may come out and coming days. The first that occurred with the meeting with the chinese counterparts, with the vice premier of china, in the china sed. Everybody who has followed this has told me it is a disaster. As the meeting started, each side canceled the normal press conference that they deliver at the end where a talk about the progress that has been made. There has been very little said about the meetings, but the hallway chatter is that the bilateral discussions which are meant to discuss trade, trump and president xi met at maralago. They set a 100 days scheduled to address these issues. Here we are and the talks ended in failure. Two, the 232 steel we heard about this. Any day now, this will come out. Many suspect this will impose penalties on many of our trading partners, even those that many would argue our allies and not possible opponents in any sort of a military conflict. Deficit look at trading partners around the world. We dont know when this will come out. This is asian is that it will come out. List that the president will use, i would argue, to decide what countries to go after with trade deficit numbers he feels his administration can support and go behind. The fourth thing and i want to spend a little time on it are the nafta objectives. They were mentioned and came out on monday. This starts a 30day clock. This is the administrations objectives for the coming negotiations. Congress now has 30 days to congress. You now have 26 days to comment. The clock is ticking. In this report, which will start an historic renegotiation of an agreement that most would argue has worked quite well, the things that i two think are worth quoting. In this first objective 17page report, number one, improve the u. S. Trade balance and reduce the trade deficit with the nafta countries. There is a very small trade deficit with canada. If you include services, if you include the servicer plus, there is a goods deficit, a discount of a wash. The new nafta will be modernized to reflect 21stcentury standards and will reflect a founder deal addressing americas persistent trade imbalances in north america. The president has told are yourare, these market orders, to reduce the trade deficit. One is terrorists, what is quotas, one is managed trade. If those are put on the table, i dont see how our trading partners will continue. It is going to be. Ifficult if you take money out of mexican economy thats hugely significant. I lost my train of thought, pardon me. We are going to have the steel rod and President Trumps thinking. I dont think you understand the dynamics and scope, you there are 20 64 days for members to get their views of the nafta objectives. Arethe committees looking at this. All of you out there may have comments to make. Its is the very time to do in the dog days of july. And how theyre going to treat President Trump believes he was elected to upend the retreating on trade. He was elected to upend the status quo on immigration and think he is deadly serious about both of those and his team is deadly serious about both of those. If nafta negotiations arne arena we will bring back forum. There is moral strength in canada and mexico thank you. Thank you very much. I with nelson . [laughter] well, you know, and im not here to agree or disagree im glad you brought it up. The perceived problems on fair trade, the focus on the importance of the trade deficit, nafta not working, are not new. Candidate barack obama went after nafta. I could easily get a lot of floor statements from a lot of members of congress on both sides. Expose couple weeks ago we consume more, we save less. There is a lot of that is part of it. I find it ironic that a lot of the people who say now, i cant believe the prison comes to say anything. Other than things for a very long time. The feeds, for what were seeing today had been planted by others. Going after nafta going after trade deficits, processing that any kind of trade, there has to be an element of unfairness to it, now we are seeing the results of those several decades of this. Myif i may, that makes point. We are now seeing actions. Obama made an offhand comment about renegotiating nafta during a primary debate in ohio, but he of naftaeen a notice renegotiating objectives to congress. Session its a good point. Never in my experience since 1962 have i seen such a determined barrage. Is a really pronounced campaign backed by repeated them remarks by rhetoric, secretary ross. This is serious, not Just Campaign stuff. Im not objecting to a moderation, but i heard lets turn to the audience. [laughter] let me get out of the hot seat here. You can come back, we have more time. Anybody have a comments . Great here, joanne. Hi, thanks everybody. Im Joanne Thornton with policy connections international, a Global Business dialogue. Hank you all i wonder if we could talk a little bit about the arena that no some in the context of negotiation, as well as what other countries may or may not be doing with respect to trade remedy law their response to for example, in the nafta objective, it seemed like there were some important departures, some strengthening of the remedy laws beyond getting rid of chapter 19 and the safeguard extension. This was mentioned in the wall street journal article very thatse of made proposals together are completely acceptable. If anyone cares to explain what is going on that would be helpful or detrimental to us, that would be great. Great western. I would step back and try to thisrate, thinking about from the lens of trade remedies is a reaction. What we really need to think about is what the underlying problem is that we are trying to address trade the underlying problem arguably right now, is stemming back to dealing with china. China is a different Economic System van what we have in the United States, and in the special case of aluminum steel, we see these episodes of overcapacity time and time again. 15 with china, 12 years, years ago in 2002, it was in china. We had to deal with this then minus 1012 . Does this lay off workers like we have them in the United States, or does it try to export , not have to shut things down. The problem, issue that has to be addressed. We have artie is trade remedies in the United States to stop imports from china. We have a little unilateral leverage to deal with china because weve stopped in words from coming in. Now we have to deal with the fact that these exports from other countries are being transformed other countries could end up because they can use the chinese deal. We have to stop thinking about it in my mind, to amend trade amenities and target the problem. I think what came out of the g20 was essentially a solution. This voice it inform on overcapacity, getting countries to the table and dealing with the source of the concern here. Comment good question. Be, thecomment would politics of this have changed, the economics of changed, not sure the politics have caught up with it. , thenteresting thing internationalization of these remedies. For a long time, it was a u. S. And a youth a few european countries. Everybody has their own flaws. The countries that have been a target, the japanese, who were targets of forever, mostly by americans, they have their own law. I learned to use those laws in the same way that we have. Youve got everybody out there playing this game release to have a group of public victims, and the group felt that they were plaintiffs. Now you have both. In a world of Global Supply chains, you have a lot more complex domestically political session of her country. When i was in the an associate youeople that will and will one. Where petitioner one case, response and another. You tell me what our position is. You company after company after company is finding themselves in the position. What has not happened yet in the wto in order, which i dont quite understand, the all caps as cut up to that reality. Orticularly the japanese, worse than the chinese on this, are determined to got these laws basically. They perceive themselves only as victims, and not as beneficiaries. If you look at whats happening in the economy, thats not true, but they maintain the same position it has four years. I dont see anyone hereterm solution to this. I would say that the United States of chinese session they have refused to negotiate. The mandate for doing that has expired. Everybody thought has said so i think they have a right future. Eventually, because of universality of the remedy, politics will catch up with that. It may be easier to come to some conclusions that were produced some moderate changes. Degree thats subsidy cases are treating these symptoms another cause. That persistent overcapacity. And i dont agree that you chinese argument that they merely overbuilt and miscalculated what they would need for their 12 year fiveyear plan that is, in sequence, wherein we about going abroad. They clearly intend to dominate global fuel production. Its farther beyond what they would ever need. They have become excellent avoiding enforceable commitments without overcapacity. Their master rote dopers. I mean, i was involved in u. S. Steel China Dialogue many years ago. There was an old series of things under paulson and concentrated to restate cct meetings, all of which had overcapacity on the jump agenda. I must say, although i am sorry for all of the other industries and Service Organizations that wanted to get something out of the current comprehensive economic dialogue, i dont consider what happened in washington this week a disaster. For the first time, the u. S. Acyclic said this is at the top of the agenda and we are not going to start agreeing but go back and tell our industry why we raised. This was an important moment. We dont know what happened in that room, there were no press, and says, no readouts or something about race. Industries areny the weight came out during the not a bad thing. Many industries got what they wanted. The Steel Industry has been upset. , creatingversal leverage. I also dont believe you have no unilateral leverage left. A question right here. Here it is. Thank you very much. Bob fienberg to some extent the polls with antidumping and cvd cases, seems to be even more so with a 32 is antiamerica program. There doesnt seem to be discussion of retaliation, president we are setting. A buying american is great, then how do we react to europe saying by european . Im just curious to your retaliationut why effects on exports that she was export seems to be totally ignored. Thats a great point. Are starting to hear it in the media, will arrive before the g20, reporting by the Financial Times that the europeans have up there product list. They are going to go after the from kentucky, Dairy Products from wisconsin, florida orange juice. Strategies have been pursued in the past. What this administration has yet much more strategic into can be more economically costly and politically costly than the benefits of protection. See that in practice you dont realize it at the threats out there, i hope it will crystallize what the potential cost of these actions would actually be before the policy decisions are made. Any other comments just a quick, again. 30,000 foot pulling the lens back. President trumps view of retaliation is, if you punch me i will punch you harder. This has been what you learned from right years ago when he was his lawyer. You punch me, im been a punch you harder. Think american industry goes to women says, we are afraid of retaliation. He will say, just you wait. Let them retaliate, see what i do. Right here. I was hoping i was hoping you initiationcaps off of commerce might work out. What problems is this address, whats driving is, and major expansion in these cases in the next couple years as a result of that. Thanks. I will pick that up. Soft initiating cases this has not been used very much. Over the past i would say 10 years, it has been talked about more and more. The perception is that to bring the case requires such an outline of resources and time m an industry that is already injured and not doing well allegedly, thats the unveilis too high to themselves from these laws and therefore the department of commerce should use its authority to initiate this. So thats the idea. No cases of themselves initiated yet. You get to look at where the. Hetoric meets reality theres a lot of talk about action, but so far there hasnt been any. Congress isrs that open to the idea, but as you know, even if i will say that companies, industries who think that this will be sorely disappointed. Theyre are still going to have to go to the International Trade commission and show them that , not only are they unfairly priced or subsidize, but there are cause of material injury. You do need to make two showings. One that the imports are unfair by price or subsidization, but also those actual causal nexus between the imports and the domestic industry being having to expend those resources for what you see. Theyre still going to be resources to participate at the process of the department of commerce, to comment on the information provided, things like that. My own personal view, it gets and brothers already report seeing resources or another question over here. And my name is trevor god. My question is for mr. Is based onrea bilateral surpluses. Somebody whos worked on north american issues since the late 90s, i think our relationship with mexico and canada is broader than any bilateral trade deficit that could begin there and then there is, not only a dangerous, not based in anything important. Look at our relationship with europe. We have a substantial deficit with europe. Theyre selling goods to us. About 150 billion more the year then we sell to them. Thats because they are taking advantage of us, or because they make machines and cars that we want to buy . Economists will tell you its about saving versus investment. If we here in this country saved less,invested more, spent that would take care of our trade deficit ilex really with most of our trading partners. I think any of them look at us and say, what are you punishing upset. Because you are a hyper consuming nation. Thats a fair question. This is a comment i think is brandnew. If you could divide the world into different bags, based on whether we have the deficit or not, thats contrary to any economist approach appreciation of the Global Economy. You dont just say, ok mexico, france, etc. , country by country, they are bad as we have deficit with them. Its very nearcited and dangerous. This is not a direct response. One thing i found particular , if youre trying to reduce the number, theres only two ways to do that. By lessor sell more. Buy or sell more. Buy less. What seems to be missing is export promotion. Politicallyng this is the easiest thing to do. The last three or four president s have all come in with a grand extra promotion plan. Its the secretary of commerce climbed aboard air force, whatever number it is, with whatever ceos signing deals. Going back and say, we just increased exports by 80 billion. Is not rocket science. I watch ron brown do it. All the successors have done it too. About tradealk promotion they dont talk about export promotion. Peopleuld decimate the in the government to do that. I says the former chair of the Advisory Committee at this bank i think i can point to this administrations lack of support for this bank is exactly what you are referring to. Thank you very much. About ou talked decision that came out of the and 20 summit g20 summit curious, what solutions did they come up . With what sort of enforcement could there be . Do you think it could be a precedent for how we deal with other issues, such as aluminum . Well, it would merely repeat what i said before. China has been good at sliding commitmentsmaking or fulfilling commitments. It seems to me that the cpd may of how to hands of how to do it. Once you create a new cause of action they can bring the debris on mere overcapacity. Maybe you pump up the trade laws are so that security has a higher margin theyre pretty high on china already. You can take overcapacity into account. This negotiation, we have to do it happened this is what we are talking about. When you not only commit to take this will anger a lot of americans. Those that are interested in exporting to china. Hasl now, nothing else worked. That is our leverage. Is like you to tell little story that is the conversation i was part of the senior official. Things were great up until the wto settlement. Wto we have our restraints, the developing world to not comply. They are right. We have lost leverage in trade negotiations. Guy, verysenior seriously we have to regain our leverage. We as trade restraints, remedies. Whichever works law applies. Go to this database, you will see. To them one at a time, rev up the engine. As leverage in negotiations. Whatever it takes to get that we have to get it. And thats what this senior guide said. If anybody disagrees with that i would like to hear it. With thet disagree theory. Disagree with the strategy. Well, ok. But i do disagree with the strategy. This issue again of, there needs to be a longterm strategy to deal with the new kid on the block, that is fundamentally different. Thats china. The Obama Administration had a strategy, whether you like it or not. Writing them a new 21st century trade agreement that would have rules to deal with china down the road. Digital trade, labor and anticorruption, lots of different issues. We havent seen with the trumpet administrations actual longterm plan to address the systemic issue that china is a fundamentally different type of the economy this could be lets retaliate, imposed trade barriers. I dont see what the end game is under that approach. Time has come to the end. If there is a closing comment by any member of the panel, lets go for it. Desert state gets a start. Heres a dirty secret, everybody else will hate me for saying it. Its not trade policy that gets rid of a trade deficit. Its tax policy, education policy, health care policy. Its labor policy. The very fact that the very fact that a retailers brought by matt on saturday life regarding tax policy, but not shows whatk it actually drives their competitiveness. Its important but not the most rtant the bipartisan agreement. Lets think everybody and close the session. [applause] [chatter] [chatter] as we have learned that sounds by sir has resigned today. 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