Good morning, everyone, and thank you for being here.  We're
holding this hearing on the
president's executive order
13786 date ed March 31st, 2017.
The executive order calls on the
Department of Commerce and the
United States Trade
Representative to prepare and
submit to the president an
omnibus report on significant
trade deficits.
This report is due to the
president by June 30th.  Though
we intend to submit it somewhat
before that.
We've asked the public to
comment and to file comments
that they have concerning the
causes of the trade deficit with
the 13 trading partners that
have the largest trade deficit
causes for the United States.
The purpose of today's hearing
is to receive public testimony
relating to the written comments
we received.  Approximately 150
 organizations or individuals
submitted public comments on a
range of topics and a range of
trading partners         
partners.  Input was received
from U.S. manufacturers, trade
associations, agriculture and
fish groups, think tanks and
academia, foreign governments,
business groups and individuals
individuals.  The
most common themes from these
submissions included trade value
s, unfair competition, trade
agreements and currency.  Among
those comments concerning trade
barriers and unfair competition
competition, the
most frequently referenced issue
s were subsidy ies, regulatory
issues, tariffs and other im   
import restrictions.  However, a
 very diverse set of issues was
raised by stakeholders as no one
 issue was referenced in more
than 25% of the submission
           submissions.  Before
we begin this hearing, though, I
'll briefly summarize the
background of this matter,
provide some procedure al and
administrative instructions and
introduce other agency
representatives joining me in
conducting the hearing.
The main goal of this report is
to produce a comprehensive
analysis of the economic
reality ies and details of
America's trading patterns.  In
2016, our good trade deficit
stood at about
735.5 billion, a slight
decrease from the 735.7 billion
recorded in 2015.
A trade with China accounted for
half of the deficit and Japan,
Germany and Mexico combined
accounted for an additional
quarter.  The last time the U.S.
had a surplus was in 1975.  
Long before cell phones and
Internet.  We set up 10 panels
today from organizations,
companies, trading partners and
individuals who requested to
testify.  We put them by general
 topic, but I suspect we'll hear
a lot of common themes.  Each
panelist will be given five
minutes to speak.
Please adhere to that.  Because
with so many people, it's not
fair not to let everyone be
heard.
The U.S. Government panel will
then ask questions and will go
from there.  We have a lot of
speakers today, and I hope you
will find both the discussion
and the testimony interesting.  
We are streaming the hearing on
online and doing a
transcript.  So you'll be able
to review the testimony later.
Thank you again for being here.
I now would like to ask the
honorable Congressman Lou
Barletta to be the first speaker
.  He represents the 11th
district of Pennsylvania and
serves on a number of key
committees in the House of
Representatives.  Let's give him
a good welcome.
[Applause]
LOU BARLETTA:  Thank you for
the opportunity to appear before
you today.  I'm pleased that
President Trump has recognized
the need to address unfair trade
 practices that are hurting the
U.S. industry and United States
workers.  I would like to speak
about more commonly known as
Hard Call.   Aftersight used in
various industrial applications,
 including steel and charcoal
manufacturer has the highest
energy content of all coal.
This means that it burns cleaner
 and hotter than other types
present throughout the United
States.
Although it accounts for a small
 portion of total domestic coal
production, the industrial value
 makes it a critical component
in our national energy portfolio
.  Further, as a president,
recently acknowledge ed, steel
is directly tied to our national
security.  Given the unique
role in steel production, it is
no stretch to say that our
ability to produce this coal is
critical to protecting our home
land.  It has been mine ed
commercially in northeastern
Pennsylvania for more than 150
years.  As a lifelong resident
of the region       region, I
have seen the decline of this
industry firsthand and witnessed
the devastating effects it has
had on local communities that
rely on the industry for their
livelihoods.  While anthrocyte
coal reserves in Pennsylvania
are among some of the largest in
the world, last year of the
production of the United States
anthrocyte accounted           
accounted for 1.75% of the world
's consumption.  Why is it that
American anthrocyte industry
despite having abundant reserves
 is not leading the globe in
production?  There are several
factors at play.  First like
many industry ies, anthrocyte
coal produce ers are the victims
of unfair and predatory trade
practices by a few nations.
For example, according to
reports in 2014, state support
for the Ukrainian coal industry
amounted to 600 million.
The subsidy ies in price
supports given to Ukrainian coal
companies at that time had a
significant impact on domestic
anthrocyte produce ers.  In the
wake of suppressed prices we saw
the closure of mines and loss
of good-paying American jobs.  
For those mines that managed to
survive this influx of foreign
coal, most operators were unable
 to hire new workers and invest
in new equipment.  I hope this
administration will immediately
take action to address such
unfair practices and assure that
American anthrocyte produce ers
 are able to compete on an even
playing field.
Second, even with sanctions to
prevent cheating, foreign nation
s find ways around the rules by
moving their goods throughout --
 through third-       
third-party companies locate ed
in country ies that have trade
agreements with the United
States.
We know that last year roughly
37,000-tons of anthrocyte were
shipped to the United States
from Switzerland.  This is a
little suspicious because
Switzerland has no known
anthrocyte reserves.
Europe's largest supply of
anthrocyte is locate ed in the
dispute ed territory of Crimea,
Ukraine and Russia.  Clearly
something is going on behind the
scenes.
It is therefore crucial that
once duties are put in place to
address unfair trade practices,
the administration remains
vigilant in ensure ing those
duties are enforced.
Lastly, as a member of Congress
Congress, one of the
things I consistently hear from
businesses back home is about
how difficult it is to initiate
a trade remedy case.
Most of the people I represent
don't have the spare time or the
 millions of dollars for the
legal expertise necessary to
pursue such a case.
For these Americans, putting up
with foreign cheating is a way
of life.  And unfortunately it  
 it's the reason many of these
family owned businesses end up
closing their doors.
The anthrocyte industry is no
different.  Many of the
operations in my district have
been owned by family ies for
generations.  They take pride in
 ensure ing employees have a
good living, the average mine er
 wage is $50,000 plus benefits
and they put any money that is
left over back into their
businesses.
Hard-working Americans simply
cannot afford to pursue cases
against Ukraine or other foreign
governments.  I hope that the
administration will take this
into account as they look at way
s to address our trade deficits
and unfair trade practices.
Again, I thank you for the
opportunity to testify before
you today.  I look forward to
working with the administration
to address these issues so that
we can provide relief for the
American anthrocyte industry.  
Thank you very much.
[Applause]
 Good morning, everybody.  
We're going to proceed with the
rest of the hearing, if Panel 1
could come on up, please.
Panel 2, sorry.
 Good morning.  We're going to
get started with this panel, if
I could ask the panelists to
introduce themselves and start
with testimony.
 William Jones, president of
Pennsylvania united technology
          technologies.
 Roddey Doud chief executive
officer chart pipe
foundry.
 Thank you very much, gentlemen
for joining us today.  Turn it
to the coalition to begin,
please.
 Thank you.
 Could you pull the microphone
a little closer.
 Is that better?  Okay.  
Usually I don't have a problem
talking loud enough for people
to hear.
I would like to thank the
Department of Commerce, the USD
USDR, ITA and everyone for
the opportunity to speak before
you today.  And discuss
significant trade deficits in
the problems they pose for U.S.
economy. , U.S. industry and
American workers.  As I
mentioned my name is Dan DiMicco
, chairman of the coalition for
prosperous America that unites
farm groups and interested
individuals representing over
2.8 million people.  Before I
retired, I mentioned I was CEO
of... we'll go through that.
The specifics of that is that I
I've had a lot of experience
dealing with the trade that goes
on in the world, unfortunately.
American companies thrive in
competitive markets, however,
today international competition
is anything but fair.  Our trade
 deficit and goods is running
about 750 billion a year,
approximately half of that
deficit is accounted for by one
nation, China, as you heard
Wilbur Ross, the secretary,
mention a minute another.  
Another quarter is accounted by
other companies.
All of these nations benefit
from unfair advantages and are
trading relationship which put
U.S. industry at a severe
disadvantage and a cost million
        millions of jobs over
the last 20 years.  The core
issue the previous year's
administration failed to
recognize is that many largest
trading partners are operating a
 mercantileistic business and
economic strategy they identify
key industrial sectors where
they intend to be world leaders
and net export       exporters.
The industry ies I'm talking
about include steel, aluminum,
autos, chemicals, computers,
solar panels, and now
semiconductors and airplanes.
The tools they use include
billions of dollars of
government subsidy and drill I
don't understand of dollars in
currency ies to unfair levels.  
Taxes and tariffs, trade
barriers to keep our products
out of the markets.  These
nations have been highly
successful capture ing large and
 growing shares of the world
market and the U.S. market of
many industries.  In 16 years
since 2000 China's automobile
production has risen 1200% to
make China the largest producer
         producer.
Tariffs on foreign vehicles,
approximately 10 times the rate
of our tariffs on Chinese
vehicles.
Some people will tell you this
is all about labor costs.  I use
a very highly technical term
called hogwash.  It's not true.
And those same 16 years,
Germany, auto workers are paid
today more than the U.S. auto
workers has increased its
vehicle output by 10%.  The
German market is protected by e
euro exchange rate far too low
given productivity of German
economy.  Meanwhile here in the
United States auto industry
employment is strong by no less
than 377,000 people since the
start of this century or 29%.  
According to CPA written
testimony partial accounting of
direct subsidy ies           
subsidy ies paid by Chinese
governments amount to about 59
billion a year.  The true figure
, industry ies taken into
account is many times that.  And
 past month ago Chinese
companies revealed long distance
 airplane and new military
aircraft carrier.  Almost all of
 these events Chinese government
officials proudly call out the
goal of achieving self-
sufficiency.  Key understanding
here.  Many products in industry
.  While American economists
speak of free trade and joy of
depending on others for key
products.  Our number-one
trading partner speaks openly of
 self-      self-sufficiency as
a goal.
What the Chinese don't say is
that they deliberately build
excess capacity in many
industries driving down prices
in the west, giving them more
market share and causing more
pain inside the western
companies.  What are the
effect       effects on the
United States?  We have lost 5.8
 million manufacturing jobs and
30% of the total since 2000.  
Some 10 million Americans
withdrawn from labor force and
see no hope finding a job with
pay, conditions that meet
expectations.  Entire
communities are run down,
hanging on for dear life,
families are struggling as
parties lose good jobs and turn
to low pay part-time work.  We
read about opioid epidemic
addiction people escape to drug
     drugs.
The best place to start to
tackle these problems is with
the trade deficit.  A major
reduction in trade deficit is bi
lateral and global, American
industries, American workers and
American economy as a whole
      whole.  I would like to
call your attention to four
facts that are direct result of
our trade deficits.  One,
accumulated deficits of the '  
'90s is over $13 trillion
accumulated.  Since 2000,
average GDP is -- growth rate is
 less than 2%.  60% plus of all
the jobs create ed since 2008
are low wage low hour service
jobs.  Low wage, less than $18
an hour, low hours, less than 30
hours a week.
Finally, end result of a lot of
this is household medium income
today is still less than it was
in 1999.
Ladies and gentlemen, I thank
you for your time.
 Thank you very much.  Mr.     
Mr. Dowd from Charlotte Pipe
and Foundry Company, please.
 Yes, ma'am.  Thank you,
members of the panel.  We
appreciate having the
opportunity to testify today.  
I'm the CEO of Charlotte pipe
and foundry, a privately held
116-year-old manufacturer of
cast iron pipe and fittings used
in commercial and residential
plumbing systems, and we're a
proud member of the U.S. metal
casting industry.  Which is the
sixth largest industry in
America in the second largest
supplier of castings in the
world after China.
Our company is also the largest
producer of plastic pipe and
plumbing fitting systems in the
United States.
Metal castings are integral to
virtually all U.S. manufacturing
activities.  In the U.S.
castings are use ed to produce
90% of all manufacture ed
durable goods in nearly all
manufacturing machinery.  The
American foundry society of AFS
AFS, is a major trade and
technical association nor the
American metal casting industry
         industry.  This
association has 8,000 members
representing metal
casting firms, their suppliers
and customers.
It is down from 2800 facility
ies in 2000.
The simple math, a loss of 44%
of metal casting facility
ies.
Our sector makes castings from
iron.
In addition to underpinnings,
energy transportation aerospace
and defense industries,
countless sectors in the U.S.
depend upon the existence of
metal castings including
automotive, construction,
agriculture al, medical supplies
, et cetera, et cetera.
American metal casting industry
provides employment for more
than 190,000 people directly
down from 250,000 in 2000.  And
we support thousands of other
jobs indirectly.
We are an energy intensive trade
exposed industry that supports
a payroll of more than $9
million and sales of more than
$30 billion.  Metal plastic
plants are predominantly small
businesses with 80% of domestic
metal cast     casters having
fewer than 100 employees.  U.S.
metal casting facilities are
located in every state of the
country, however the majority of
 77% are locate ed in 10 states,
Alabama, Illinois         
Illinois, Indiana, Michigan,
Ohio, Pennsylvania, Tennessee,
Texas, Virginia and Wisconsin.
Iron foundry ies are a mainstay
of national defense.  All sector
s of the U.S. military are
reliant on iron castings for
munitions, ships, tanks       
tanks, trucks weapon systems and
other vital operations.  
Automobiles and other
transportation equipment utilize
 31% of all castings produced in
the U.S. including engine block
s, crank shafts, cam shafts, et
cetera.  All of those are found
in military vehicles.
Imported castings now comprise
nearly 25% of the market, and of
that 25% of those imports are
coming from China.  As a result
of the increase in volume
unfairly create ed imports from
China, the domestic iron
industry production sales and
ability to maintain the
employment of its workforce have
suffered as have industry
         industry's
profitability.  According to a
recent AFS survey, 88% of our
members stated they were
negatively impacted by foreign
competition with China being the
 largest source of foreign im
ports.  For decades China has
pursued export oriented growth
strategy which they rely upon
the United States and other
markets to consume their exports
 rather than increasing their
internal consumption.
China's metal castings industry
remains government owned
primarily and controlled and
heavily subsidized.  China
continues to protect and
increase by manipulate ing
currency, raw material markets
and border measures for metal
castings.
The U.S. must take aggressive
action to combat unfair trade
practices to strengthening
manufacturing base which is
critical to meeting national
security requirements.
The 844 U.S. foundries since 2  
2000 has led to substantial
unemployment, loss of skilled
workers and capital investment
and displacement of domestic
products by excessive imports.
The import
ation U.S. jobs are eliminate
ed, dramatically reducing the
United States critically
important industrial base.  The
negative impact of foreign
competition on economic welfare
of domestic iron foundry item is
 clear.  If this is allowed to
continue U.S. manufacturers of
military equipment machinery
could be forced to import
components from China and
elsewhere.
We are pleased to see the Trump
administration recognize the
close relationship between the
economic welfare of our nation
and our national security and is
considering making use of
existing enforcement in dispute
resolution mechanisms such as
232 that are forward-looking
proactively protect other key
sectors necessary for national
defense, energy and
infrastructure.
Thank you very much for this
opportunity to testify today.
 Thank you, Mr. Dowd.  Now we
return to Leo Gerard from United
Steelworkers, please
 Thank you very much.  The
United Steelworkers actually
represent about 800...
[ stream offline ]
 You may get academics that
present multinational
corporation apologists who are
going to say that we shouldn't
worry about these trade
deficit        deficits.  
They're all okay because we get
a benefit from cheap stuff.  
Well, if you don't have a job,
it don't matter how cheap the
stuff is.  Since 2008, 60,000
factories in this country are
closed.  Since 2009, there's
been five separate discussions
with the Chinese over over-
capacity in steel.  In 2009 they
 had produced about a little
over 550 million-tons of steel
in five different sets of
meetings between then and 2016.
 Every time they promised they
would reduce over-supply, over
    overcapacity they went from
500 million-tons to 1.2
billion-tons.  During that time,
the steelworkers have filed
close to 75 trade cases of which
we won almost every one.  If
you look at the track record of
the 388 orders filed for trade
violations at USTR, more than
50% of those were against China.
  Now, if someone is going to
tell you that the macroeconomics
 of cheaper televisions warrants
that, I would tell them that
they're smoking something better
than you can buy even in
Colorado.
And then the reality is that
when we have the kind of trade
deficits that Dan DiMicco
referred to, that is a huge
wealth transfer, and anybody who
 says that trade deficits are
okay, I ask that you ask them
the questions, if trade deficits
are okay, why doesn't any other
 nation want one?
Why do other nations work to get
 balanced trade?
Why is it that only three that I
 know of advanced industrial
democracy are satisfied having
these substantial trade
deficit        deficits?  
American, Canada and Great
Britain, who all followed the
same economic model.  All
factories are closing and
workers are getting laid off.
One of the things that we want
to be able to say is, well, with
all due respect, those that
have been USTR, that have to
enforce the trade laws, the
trade laws don't work.  I'm
going to give you two examples.
 In the paper sector we filed a
case on coded free sheet paper,
the high gloss paper for catalog
s.  We succeeded in proving that
 China in particular cheated on
every set they could get.  But
the company was still making
some money on their other paper
products.  So there was no
remedy assigned.
We came back with the same case
three years later.  We now
succeeded.  And we got a remedy
remedy.  But we lost 7,000
 jobs.
We filed a case on truck and bus
 tires.  We succeed.  Had the
help of the administration on a
421 case.  We succeed and there
's a three-year declining remedy
.  At the end of the third year
within six months, the Chinese
put 50.7 million tires into the
market, depressed the prices.  
Where did those tires come from
so fast?  Why are we prepared to
 be the Apaches for this.  So
that from the point of view of
the people I'm privileged to
represent, trade deficits aren't
 economic indicators of cheap
goods.  Trade deficits are
economic indicators of lost
jobs.  I'll make one more point.
  Made a lot of publicity
recently.  Carrier.  Decided to
move their operations from
Indiana to Mexico, to Monterey.
They had the gall to tell the
workers, it was nothing about
them.  It was about that they
would get the same product made
in Mexico for the total
equivalent of $6 an hour versus
our 21 bucks an hour.  What were
they going to build in Mexico?
 Furnaces.  Do you really think
Mexicans are going to buy a lot
of furnaces?
Those furnaces are going to get
made in Mexico and shipped back
to the U.S. and we have lost
1200 workers making the best
furnaces on the planet.
The trade laws don't work.  And
it's important that as we look
at the trade deficits, that we
look at how do we employ the
trade deficits so that there's
an ability to enforce and get a
conclusion.  Not long ago, I
guess or much longer ago,  
Senator Doyle prepared a comment
at the WTO, three strikes and
you're out.  I think we ought to
start thinking about that.  As
I said     said, we file ed --
we, the Union      Union, file
these cases, and we won 81% of
the time.  That's because they
cheat all the time.  I'm going
to leave two pass-outs with you,
 one about the five years or
five meetings of steel over
capacity and the other one is
what the Chinese are currently
doing in steel and tire and
aluminum, in glass and cement.  
They're producing domestic cally
more than they can consume
because their objective         
objective, as Dan said is not
only export the product, but
export unemployment through us.
I thank you for your time.  
Hopefully we'll have a chance
for questions, but the members
I'm privilege ed to represent,
many of the tens of thousands
that have lost their jobs
because of these trade deals and
trade deficits, to them a macro
economic view of trade policy
doesn't replace a job.  And if I
 can't work, I don't give a damn
how cheap the TV set you're
trying to get me to buy is.
So thank you very much.
 Thank you, Mr. Gerard.  And
now Mr. Jones and united
technology ies, please.
 WILLIAM JONES:  Thank you.  
I'm William Jones, president of
Pennsylvania united technologies
 incorporated, medium sized
manufacturer locate ed in
Pennsylvania.  We thank
secretary Ross and the
Department of Commerce and the
national trade administration
for this opportunity to testify
about the 2016 trade deficit,
and I also want to comment, I
appreciate the comments of the
other three panelists.  We have
620 employees that specialize in
 high precision manufacturing
solutions in many industries.  
Our company would employ nearly
twice as many people in family
sustaining jobs if it not for
unfair trade.
The problem is not our inability
to compete against foreign
produce ers.  Unfair trade is
the reason our company and all
manufacturers in America are
losing market share to
competitors in China, Mexico
Mexico,
and even the EU.
In 2016 we lost at least $7
million of business to foreign
competitors, mostly from China,
because of unfair trade.  The
unlevel playing field is the
main cause of the huge decline
of manufacturing in the U.S. and
our over $500 billion trade
deficit in 2016.
Special carve-outs recently
negotiate ed with China may slow
the growth of U.S. trade
deficit, but this still does not
level the playing field for
domestic manufacturers.  To grow
manufacturing in America again
and bring the balance of trade
under control requires new and
better solutions.  Since tax
reform is on the table, the new
tax system must eliminate the
disadvantage im   imposed on us
by foreign border adjusted taxes
, the BATs.
The BAT problem is a major cause
of our company's continuing
loss of electronics business to
Mexico, China, and Europe as
well.
Our foreign competitors pay no
tax when they sell in the U.S.  
Therefore no matter how low our
tax rate may be, we are
significantly disadvantage ed
against foreign competitors here
in our own backyard.
The same kind of thing occurs in
foreign markets since nearly
all of them have a BAT.  When we
compete there, we pay both, our
 U.S. taxes plus the foreign BA
T.
But our competitors pay only
once.  Either their home BAT or
the other foreign BAT.
A revenue neutral U.S. border
adjusted tax that is used to
replace payroll taxes would be a
 powerful boost to domestic
manufacturing and the economic
growth and global competitive
competitiveness of
the U.S.  And it would go a long
way toward rebalancing trade.
We also need an effective
solution for illegal trade
subsidy ies beyond the reach of
the current trade remedy laws.
Finally, one way or another, the
Chinese government has managed
to delay its obligation under
the IMF Article 4 to permit
currency to correct trade
imbalances.  Once their obvious
goal continue to run trade
surplus, particularly with the
U.S.  We are not protectional
lists.  We can compete with
foreign manufacturers on a level
playing field.  We look forward
 to helping this administration
to level the playing field to
bring U.S. trade back in balance
.  Thank you very much.
 Thank you very much.  We're
going to proceed to the question
ing period of this panel.
 Could you bring the mic closer
?
 Sure.  My name is Ann Driscoll
, Octobering secretary for
industry and analysis for the
U.S. Department of Commerce and
I will ask the panelists as they
 -- when they ask their first
question to please introduce
themselves and turn it over for
the first question to my
colleagues.
 Thank you very much.  My name
is Steven Vaughn, general
counsel for USTR.  I want to
thank all the panelists.  I know
we really appreciate your
coming in.  This is obviously a
very important topic for the
administration.  The president
has asked us to assemble
information to put together a
report on the issues with
respect to the trade deficits,
and I really appreciate all your
 powerful testimony and we thank
you again.  I have a question
for Mr. DiMicco.  I appreciate
the evidence that you have given
 us regarding particularly a lot
of the issues relating to China
.  You also reference Japan,
Germany, Mexico, South Korea,
and you gave a little bit of
detail on that, but I would like
 to invite you to, A, give us
any other information that you
think is particularly relevant
with respect to those countries.
  And, B, talk to us a little
bit about Japan and Germany and
why you think their trade
balance ends up being so much
different from ours given they
are also high wage developed
manufacturing countries.
DAN DiMICCO:  Well, I'd like to
 take the latter question first,
if I could.
The reason why Japan and
Germany don't seem to suffer,
evenr even though they are
developed high wage countries is
because they are true
protectionists.  And they use
currency manipulation, either
direct or indirect.  In the case
of Japan, it is direct.  In the
 case of Germany        Germany,
it's by virtue of the fact that
 the euro is under-       
under-valued, because of the
diversity of economy ies in the
E  EU, many of which drive the
value of the euro down.  When
Germany was on its own two feet
     feet, because they're very
efficient, productive,
successful economy, the currency
would be stronger and they
wouldn't lose that advantage
they get by being involved with
the euro.  That's a fact.  A lot
of what goes on in Germany is
supported by state-owned banks,
same thing happens in Japan.  
The business community and the
government are one when it comes
 to generating economic growth
and export activity both in
Germany and in Japan.  That is
not the case in the United
States.  It is unfortunately not
the case.
These are some of
the things that allow them to
do better because of their high
wage society.  And as far as all
 the other countries that I
mentioned, as contributing to
the trade deficit, not certainly
as much as China, but
significant.  Japan and Germany
for the reasons I just gave.  
You heard us talk about the
value-added cash, border
adjustmentadjustable
taxes.  Not only do we have to
deal with them exporting it to
our country and not having to
pay that tax, okay, but they get
a rebate of the tax in their
home country.  So basically what
you see with border adjustable
type taxes that the rest of the
world has and we don't -- we are
 virtually the only one that
doesn't -- is that exports are
subsidized to the tune of a
value-added tax by the rebates
that they get.  If they sold it
in their own market they would
not get that.  And the fact that
when we ship our products in to
 their countries, they put a 16
to 20% tax on our products.  
Okay?
So they're subsidize ing the
exports and putting a tariff,
which is what it is, on our im  
 imports.  That's not the way
the system should work.  And how
 we've got negotiate ed that way
we can talk about forever, but
we let them get away with that.
That has to change.  There has
to be a method to neutralize the
tariff that goes on every
product, that comes into the
United States or goes out of the
 United States someplace else
that makes it un   uncompetitive
.
Shortly after we signed NAFTA
what did they do, in good faith
faith, raise the value-
added tax from 10 to 16%.  Total
ly undermined what NAFTA was all
 about.  Not only that, but
massive amounts of product come
into Canada, Mexico and other
countries, like you heard with
the coal coming through
Switzerland where they don't
have coal in the ground.
Parts come into the United
States via China for automotive
and go to Mexico and they came
directly into the United
States       States, would have
a tariff put on, because we won
that case at the WTO, but they
circumvent and allude those
things.
All of these countries do some
of this to one extent or another
 and benefit from these subsidy
ies and tariffs that is
separate of other things they do
in terms of non-fair barriers
which are many times are more
difficult to deal with than
tariffs and taxes.
I hope I answered your question
         question.
 That's extremely helpful.  
Thank you very much
.
 Thank you.  I'm Doug Bell,
deputy assistant secretary for
trade investment policy at the
treasury department.  On behalf
of the department, welcome you
and all of the other future
speakers.  We appreciate your
taking the time today to share
your views with us.
Mr. DiMicco, I also have a
question for you.  You highlight
ed the role of currency
manipulation.
I was wondering if you can give
a sense for kind of the relative
weight that you see or would
attribute currency issues
relative to some of the other
factors that you have identified
as trade barriers.
DAN DiMICCO:  Over the past 15
years up until 2014-15, I would
have given that probably 50%.  
Of the problem.  Now, as Wall
Street and the Wall Street
Journal and my fellow alumni at
Ivy League colleges in the
economics areas tell us, they're
 not currency anymore, which is
hogwash, again, another highly
technical term.
And they're manipulate ing it.  
They're just making sure that it
's stronger, okay in
The reality is today we're using
a failed formula that the IMF
and elsewhere to measure
currency manipulation and
relative value and under-       
under-valuation of currency ies.
  And the CPA is going to put
out a paper that discusses that
shortly and we'll present it to
Wilbur Ross next week and to the
 administration.  It has to do
with what the baseline is for
determine ing manipulation and
deficits.  China has like a 3%
allowance for a trade deficit
with us.  Which makes no sense
in today's world.
But today, in my book, they're
still manipulate ing the
currency         currency.  Why?
  Because it's not flee-floating
.  They want to be a free market
 economy and they're not.  
They're owned by the government,
 manipulate ed by the government
, driven by the government,
subsidized by the government,
most of their big industries.  
And what do they do today?  
Instead of pegging the currency
to the dollar the way they did
since 1995 to 2015, they peg it
to a basket of currency ies,
which the dollar is the major
makeup.  In addition to that,
they put in narrow trading range
 that they allow the currency to
move in.  Whether they are
manipulate ing it to make it
stronger or not, right, whatever
 happens in that very narrow
trading range is the equivalent
to me spitting in the ocean and
raising the level of the ocean.
 Until their currency -- until
they adopt true open market free
 market principles, they, in my
book are still manipulate ing
the currency and help you people
understand why when this paper
comes out, but it's still a
major part of it.  If you take a
 look at the analysis we're
going to provide and outearned  
s out there, including the world
bank pricing parity index and
the somewhat jokingly Big Mac
index, you'll see the currency
today is still somewhere around
35 to 45% undervalued.  But you
cannot with a straight face,
although people do, I mentioned
who they are earlier, that
they're not manipulate ing the
currency, they certainly are and
maintaining a strong under-
       under-valuation and that
is a killer.
So I would tell you today that
that may be going on from 50% of
 the problem to 35% of the
problem, still a big part of the
 problem.
 Thank you.  We look forward to
 seeing your paper as well.
 
DAN DiMICCO:  Thank you.
 Good morning, my name is Keith
, I'm the chief economist of the
Department of State and I want
to thank you all for your
testimony as well.
I have a question for you Mr.
Mr. DiMicco, if I may.  In
your written testimony, you note
ed that many of the United
States largest trading parceners
have high savings rates, which
in at least come cases you argue
is attempts to suppress
consumption.
I wonder, conversely, the United
 States has a relatively low
savings rate at about 19% in
gross terms.  I wonder if you
think that we should be making
attempts to raise the American
savings rate and if we did so
what that might do to the trade
deficit
DAN DiMICCO:  It might surprise
you I would say yes, but
totally different reasons you
would be allude ing to.  We need
 to raise the savings rate by
creating higher paying jobs and
less low service low pay jobs so
people have the income to put
it in the bank and provide for
their retirement in their
savings.  Trade deficits destroy
the earning capability
           capabilities I
discussed in my presentation for
 the average American.  The rich
have gotten richer, which I am
one.  The Wall Street bankers
are doing very well.  Either
side of the trade, okay?  And
the average U.S. worker does not
 do well at all.  And that's why
the election results turned out
 to be what they were for
President Trump winning.
I would tell you that it is the
result of those savings rate --
the low savings rate is result
of the massive trade deficits
and job destruction that we've
had and income disruption that
we've had.  Not the cause.  I
would also tell you that when
people said we've lot 5.8
million jobs due to the trade
deficit, you need to double or
triple that, because what has
happened is we have -- we should
be creating jobs.  We should
never have lost the 5.8 million
or most of those and we should
have been creating more jobs
because of our overall
productivity, improvements, gain
s, like in the steel industry,
most efficient in the world.  We
should be creating more jobs in
 the 20-year period not losing
5.8.  And we didn't do it.  The
jobs we did create are low pay
subsistence wages
.
 I wanted to mention Dan's
comments but.  Put a personal
touch to it.
We have a little over 3,000
collective bargaining unions in
America, steelworkers.  Some are
 done by sector, steel industry,
paper industry, tire and rubber
.  And every one of those
negotiations in the last 10 to
12 years, at some point as we go
through the bargaining, we end
up being told we have to compete
with the Chinese.  We have to
compete with the south Koreans.
We have to compete with the
Mexicans.  So we can't do this.
So if you look at it in real
terms, workers' wages are flat
since 1977.  There's been no
real appreciate ed wage growth.
Yet when I was younger coming
up and they said when
productivity goes up, wages go
up.  Productivity has gone
through the roof, whether it's
the steel industry, tire and
rubber, productivity has gone
through the roof and workers
wages have been flat and there
      there's a good reason for
it.  It's the growth and trade
deficits that have happened in
every major sector of the
economy.
One other thing, while the
Department of State is here, I
asked the question a lot of
times, why did we need a trade
deed with Columbia?  Why did we
need a trade deal with South
Korea?  We need a trade deal
with Columbia because of
Venezuela.  We needed a trade
deal with South Korea because of
North Korea and China.  At the
same time we are killing our
jobs.  The South Koreans built a
 brand-new state of the art mill
for building drill pipe.  U.S.
steel invested almost $300
million in a mill in Ohio.  That
 mill is shut down.
The South Koreans don't drill
one inch of drill in their
country.  That mill was built to
 target America and they're
closing our pipe mills, our
drill mills.  And we've said,
that's okay.  We've tried to
follow trade case against them
but there's no measure ing stick
 because we can't measure what
it would sell in their home
market because they don't sell
any.  The trade laws in that
area don't work.  When you talk
about savings rate, if you don't
 have a Jo you can't save.  If
you get a job like Dan is
talking about, under 30 hours
and slightly above minimum wage
not only can't you save, you can
barely make ends meet if you're
 lucky enough and probably not
get to send your kids to college
 anyway, so they have huge debt.
You won't get them there
anyway.  So the erosion is like
a cancer on the economy, these
growing trade deficits, and I
ask the question again, if trade
 deficits are so good, why
doesn't another nation want one
   one?  If we keep going this
way    way, if we keep going
this way for the next 25 years
like the last 25 years, ask
yourselves what will America
look like?  If we keep de-
industrialize ing and giving a
cross to the folks that cheat?
 I'd like to speak to that as
well.
When Dan presented the idea
that we have to be -- from the
opposing
crew that somehow savings rates
 are what causes the trade
deficit, that's about the most
obtuse, perverse idea I have
ever heard of.  And I go back
and I will support Mr.      Mr.
Gerard.  You look at North
Carolina, the Chinese targets
architecturals and furniture.  
You can take a string and go
into 75-mile radius around
Charlotte, North Carolina and
you see empty mill after empty
factory after empty mill after
boarded-up downtowns in these
small villages and towns, and,
hell, no, they can't save
because they don't have a job.  
Now, my people can save.  
They're getting paid $30 an hour
and 35% benefits.  We don't lay
 off.  They save a lot    lot.  
I see their 401(k) savings rate.
  But the deficit comes because
we're not running full, and the
Chinese -- this is a great
example.  It doesn't take an
economists to figure this out.
Scrap iron or scrap steel is a
world commodity.  Last month
traded $322 a ton, roughly give
or take five bucks, compared on
your exchange rate.  322.  We
had finished goods, test iron,
pipe, $422 a ton sale price.
So somehow -- and they actually
use pig iron over there, which
is more expensive -- somehow
that hunk of iron turned itself
into a finished group and was
transported to a Chinese port
and put on 40-foot container
which cost 2500 or $3,200 for a
40-foot container.  Made its way
over the Pacific through the
Panama Canal into the port of
New York for $100.
Now, that don't hunt, as we say
down south.  And something has
got to be done.  And right now
only recourse we have is plead
with your conscious, and then
you file a dumping case.  You   
 You've got to be on a gurney
bled out before you can bring a
successful case at the commerce
department.  That's why this 232
 is the first.  But it is so
frustrate ing to go to commerce
and say -- just to Bill's
comment about, you know, oh,
well, you're still profitable.  
I mean, that's just -- that's
even more perverse than this
savings thing.  I mean, do you
want -- do you guys want us to
deliver a dead factory to you in
 thousands of unemployed people?
That's not right.
 The other piece of what Dan
said that needs to be touched on
 is the productivity.  As
productivity in the steel
industry has gone to
astronomical levels anywhere
from half of man hour per ton to
man hour and a half per     per
 ton, the American steel
industry in the same period I've
 been talking about, where I
talked about the Chinese
increasing their capacity, the
American steel industry went
from producing 125 million-tons
to 85 million-tons.  During that
 time imports steel from China,
South Korea, others, flooded our
 market and we got none, hardly
any of that productivity growth.
  That was going on.  We still
consume more than 125
million-tons but we don't make
it anymore.
 If I can add one thing to
that.  Foundry industry that  
Rod is talking about in China
doesn't make any profit.  They
lose money.  The steel industry
in China for most of the last 15
 years has made less money than
new corp corporation and we have
 not made a lot of money.  In
fact, they have made no money.  
They lost money up until
recently.  That's what we're
dealing with.  We're dealing
with competitors who don't care
about profits.  They don't have
shareholders to report to.  They
 just have the government to
report to.
And we need laws an we need
systems that allow us to negate
that crooked system, and if you
think they're never going to
cheat on the banking side and
the finance side and on the
credit card side, listen, this
is what they do.  It works for
them.  They're not going to stop
doing it until we make it so it
 doesn't work for them anymore.
If the banks think they're
going to have a field day in
China, I will guarantee you that
 they will lose out just like
the manufacturing did and guess
what, it's easy ier to shift
information via electronic bytes
 and data than it is to ship a
ton of steel from China to here.
  A lot less expensive.  Things
will happen faster on the
service side.  When they get to
that.
 Thank you very much.  I would
like to thank all the panelists
and.  In an effort to stay on
schedule we have to close down
the panel.  I think the
discussion could go on a long
time.  Thank you very much for
your time and thoughtful remark
       remarks.
 Thank you for the opportunity.
[Applause]
 We'll need to be expeditious
and keep the time schedule, so
please the audience be
respectful of the time
constraints we have.
I'm the U.S. Trade
Representative for trade policy
and economics.  Can I ask our
second panel to introduce
themselves.
KATHIE LEONARD: Kathie
Leonard        Leonard, Auburn
Manufacturing.  Andrew Nichols,
Elmet Technology, Brian
O'Shaughnessy
O'Shaughnessy, Revere Copper
Products.
 MARTIN RAPAPORT:   Martin
Rapaport, Rapaport Group
 Thank you for coming to panel
today.  We appreciate the work
you put into this and look
forward to hearing your
testimony.  Ms. Leonard.
KATHIE LEONARD: My name is
Kathie Leonard, president CEO
and founder of Auburn
Manufacturing incorporated.  We
are a leading developer,
manufacturer and marketer of
industrial textiles products.  
AMI is headquartered in Maine.  
We are the largest U.S. producer
 of industrial grade amorphous s
ilica fabric or ASF, a type of
synthetic fabric used in welding
and hotwork activity         
activity.  One of the major uses
of ASF is for welding
protection during ship building
or maintenance and repair of
naval ships performed either by
the navy or by defense
contractors that have been
awarded contracts by the navy.  
Although AMI sales ASF directly
for use by the navy, the
significant portion of sales
have shifted away from the navy
to defense contractors.
For years AMI has been losing
significant sales to Chinese im
imports of ASF.  Ultimately
in January of 2016AMI was compel
compelled to file anti-
dumping countervailing duty
petitions against ASF imports
from China.
These investigations just
concluded in March 2017 with a
finding that combine ed dumping
in subsidy levels of between 200
and 300% materials injured the
U.S. industry.  Given our
experience, AMI believes one of
the major causes of trade
deficits with China is the in   
injurorious dumping by Chinese
companies and the subsidy
practices of the Chinese
government.  Nevertheless, other
 unfair trade practices by China
also cause imbalance trade.  
One is the berry amendment.  AMI
has been fighting for years to
ensure that the berry amendment
and the buy American act are
enforced properly with regard to
acquisitions funded by the
Department of Defense.  It
requires funds appropriate ed to
 the Department of Defense for
procurement of synthetic fabric
or coded synthetic fabric among
other items shall be used only
for procurement of such items
produced in the United States.  
AMI has experienced no issues
with when the navy purchase
synthetic fabric for repair and
maintenance of naval ships.  
However, when the navy out    
outsources the same work to
defense contractors, the navy
takes the position that defense
contractors do not need to
comply with the berry amendment
or buy American requirements
unless the synthetic fabric is
incorporate ed into a ship or
being delivered to the navy as
an end product.
That's right.  Everybody though
our tax dollars are being
appropriate ed by DOD for the
repair and maintenance of a
naval shim, according to the
navy defense contractors can
purchase Chinese synthetic
fabric and that is what we
believe has been going on in the
 marketplace for many years.  To
me, this is an absolutely
absurd interpretation by the
navy.
Obviously, when the navy allows
defense contractors to thwart
the goals of the berry amendment
, only China wins.  This in turn
 creates trade imbalances.  In
addition it drives smaller
businesses like mine out of
business, causing further
defamation of the U.S. defense
industrial base.
This administration happily
recently issue ed an executive
order regarding buy American law
s, including the berry amendment
.  The mandate of executive
order is for all agencies
including DOD to maximize the
use of products and materials
produced in the United States
given this mandate AMI urges
this administration to require
defense Christianity force to
comply with the berry amendment
and buy American domestic
preference requirements for any
project funded by DOD that
include an item of synthetic
fabric that is used in the
repair, maintenance, and
building of naval ships.
Regardless of whether it is
incorporate ed into the ship.
Finally a new other comments
regarding trade practices that
result in increased deficits
from China.  First with regard
to marketing of the product.  In
the industrial fabric business,
 we see all the time that
Chinese goods are not properly
marked with country of origin.  
During the hearing before the
U.S. international trade
commission in our ADCB case, a
major
competitor testify ied that it
duds not tell customers the
country of origin unless asked.
 ITC confirmed that importers of
Chinese product failed to
comply with the customs marking
requirement to the end user.
In addition, in our comments we
gave an example of a very recent
 and blatant attempt to trans-
ship ASF fabric already.  
Obviously illegal schemes to
change the country of origin
need to be shut down.  In fact,
it results in an understatement
of the true bilateral trade
deficit with China.
Finally, now that the ADCDV
orders are in place against
China we are worried that the
same importers will switch to
other countries such as Beirut
and Latviia, other produce ers.
These compete with imports from
China, thus we encourage this
administration to self-initiate
ADCDV investigations if it sees
that imports from these
countries are replacing the
unfairly traded ASF imports from
China.
Thank you very much for this
opportunity to provide comments
on these important topics.
 Thank you very much.  Mr.     
 Mr. Nichols
 ANDREW NICHOLS: Good morning.
 I'm the CEO of Elmet
technologies.  Elmet is the last
 fully integrated only U.S.
owned and operated refractory
metals left in the United
States.
I want to provide stable
employment living wage jobs for
four generations of American
workers numbering thousands of
unskilled work laborers through
Ph.D. scientists and engineers
during our 90-year history..
Through our headquarters it's
locate ed in Maine, about 70% of
our products, balance of 30%
produced in Covington, Georgia.
I'm pleased to have the
opportunity to testify today to
be able to inform the commission
 that the future of the 90-
-year-old U.S. manufacturing
business is in jeopardy due to
unfair practices of foreign
competitors and governments.  
These metals are critical to
enable ing technology in a wide
variety of defense, aerospace,
medical, electronic,
semiconductor, touch screen
display and lighting, automotive
and medical applications.  A
few examples.  Tungsten are
manufacture ed in heat syncs,
diodes and internal components
for high reliability components
used in electronics.  Mali is
enable ing for all touch screen
displays.  These products are
used in manufacturing many
specialty metal alloys, high
temperature forge ing dyes, wind
 screens, advanced composites
and weapon systems components
used in aerospace and defense.  
This is a big deal.  These
materials are critical to
aerospace and defense.  The
products are the only materials
able to withstand harsh
environments, processes used to
produce certain micro-electron
ics.
Tungsten are the enable ing
technologies of medical dying
know tick, treatment therapy and
 applications and devices, so
many markets.
The manufacturers require
specialize ed expertise,
processes and manufacturing
assets due to extremely high
melting points and generally
these products start with metal
powder followed by pressing to
make ingets and chemical
processing to make mill products
.  And we go beyond that in
finished goods.
The deficit rate with China is
largely result of systematic
unfair trade practices by
Chinese produce ers and the
government of China.  The
Chinese government is encouraged
and financed massive over-
building of capacity in our
industry.  The manufacture
manufacture of these products
like Tungsten through the use of
 government subsidies.  The
Chinese government directly
finances and sponsors research
and development in these
materials through state-owned
enterprises and large institute
          institutes in order to
accelerate Chinese position in
the world market.
In addition, Elmet believes they
 are selling Tungsten and
products like wire sheet and
foil into the U.S. market at
prices below their cost of
production.  And in some cases
Elmet believes the Chinese
produce ers sell their down
stream mill products at prices
even lower than the price of the
metal powder used as the
primary input.  Unbelievable.
As a result of over-capacity and
 dumping, world prices for most
products have fallen at least
40% in the last four years.  
Elmet faces an unlevel playing
field when attempting to sell
products into China.  We have
done so and we have been shut
down.  The combination of
Chinese 70% plus imports tariffs
up 8% effective          
effectively result in 25% trade
barrier against U.S. products.  
Conversely when Chinese produce
producers sell products
into the U.S. market there is no
VAT and the ordinary tariff
levels are very low.  Chinese
produce        producers compete
 unfairly by other means with
help of U.S. and foreign-owned
companies that resell into the
U.S. market.  Elmet these resell
ers break over packages of im
ported Chinese goods, repackage
with the country of origin label
ed obscure or removed altogether
.  Some products may be
illegally shifted we're third
countries.  And in some cases
U.S. import       importers
illegally enter Tungsten under
the wrong categories.
A Chinese import incorrectly
identify as organic pigment in a
 clear effort and knowledge ed
effort to short-circuit the
customs clearance process.
Finally, Elmet has ha difficult
competing for defense contracts
in several instances.  Much of
the Tungsten and products used
in defense applications are
supplied by foreign competitors
including European and even
Chinese suppliers           
suppliers into defense
applications.  They make their
products using below cost as
input.
Unfortunately, our materials are
 not classified as specialty
metals for the purposes of our
amendment but they should be.  
As a result Elmet is not entitle
 ed to domestic preference
purchasing requirements under
the berry amendment.  Other
cases they have exploited
loopholes to get around
requirements.
Elmet applauds the
administration executive order
on buy American hire American.  
In order to close the loopholes
encourage requirements to flow
down to defense contractors.  In
 our experience and in some
cases contracting officers have
been reluctant to allow
companies like Elmet to compete
for contracts because it's easy
easier for them to continue
 purchasing through the foreign
products that they have worked
with in the past a rather than
giving domestic companies an
opportunity to bid.
All the above unfair trade
practices contribute to the U.S.
trade deficit in our industry.
 I urge the administration to
take all necessary steps to
level the playing field to
ensure the continue ed survival
and viability of a secure U.S.
supply base supported by
companies like ours.  Thank you
you.
 Thank you very much.  Mr.     
Mr. O'Shaughnessy.
BRIAN O'SHAUGHNESSY:  Thank you
for allowing me to testify here
 today for such an important
undertaking.  My name is Brian
O'Shaughnessy and I serve as
chairman of Revere Copper
Products.  My company was
founded by Paul revere in 1801
and we believe we are the oldest
manufacturing company in the
USA.  Please do not confuse  
Revere with Revereware that
subsidiary was sold 30 years
ago.
Since the year 2000 over 30% of
the facility ies Revere shipped
product to have shut down as
their production moved offshore
offshore.  There is no
time today to present my entire
paper which explains some of the
 mercantile strategies employed
by trading country competitors.
 Let's not naively call them
partners as the U.S. suffers the
 large trade       trade
deficit        deficits in the
history of the world, and
associate ed tremendous loss of
employment.  This is a list of
what you'll find in my paper.  A
 description of the most
sophisticate ed vat system in
the world which the U.S. should
adopt and how to make it work.
Why dumping cases need to impact
entire supply chains.  How
China's non-market economy by
scrap copper, a specific example
 how the negative interest rates
of foreign governments spur
their exports.  How foreign
acquisition of U.S. firms under
mine development of U.S. policy
to solve the trade deficit.  
Specifically examples of how
U.S. national defense is
dependent on a strong U.S.
manufacturing base.
And how the business judgment
rule spur     spurs offshore.  
And finally why multinationals
and banking firms should recuse
themselves from directing U.S.
trade and monetary policy.
Multinationals have marketing
channels in the USA and can
increase earnings by offshore
production facility ies to
mercantile economy ies.  
Incentives are as powerful as
they are designed to be.  
Similarly, Wall Street
investment firms benefit and
boast in financial statements
that as much as 70% of earnings
are associated with their
investment banking activity ies
with China.
This should not be that surprise
 ing.
As the business judgment rule
requires U.S. corporations
executives and boards of
directors to represent the best
interests of their shareholders,
 no stakeholders such as
employees, communities or
country, but simply their
shareholders.  This directed
self-interest for public
corporations must be changed.  
Compare that requirement for
public corporations with this
portion of Revere's mission
statement.  "Our future will
consider equally our employees
and our shareholders, our
customers and our country."
This confluence of interest
means what is best for a multi
multinational company or a
 Wall Street investment banker
is not necessarily best for the
USA.  The preparation of this
omnibus report needs to weigh
the merits of advice on matters
of international trade that
comes from such prejudicial
sources.
I represent the best interests
of Revere and employee owners.  
Many of them members of the
united auto workers union.  
After all is said and done, what
is best for Revere and employee
 owners is best for the country.
I would be glad to answer any
questions this morning and more
than willing to answer follow-
       follow-up questions as
you prepare your report.
 Thank you very much.  Mr.     
Mr. Rapaport.
 MARTIN RAPAPORT:  My name is
Martin Rapaport, chairman of the
 Rapaport Group based in Las
Vegas, Nevada.  We have involved
 in the diamond industry doing
four things.  We're involved in
research, primary source of
diamond price information for
the worldwide industry.  We have
over 20,000 clients in the area
.  We run the largest diamond
trading in the world with daily
listings and 1.2 individually
listed diamonds.  We work with
the gemlogical standards
institute and the larger re
cycler in the world selling
5,700,000 pounds of diamonds
mostly coming from the United
States to other markets around
the world.  You talk about the
diamond industry but about
Indiana, sometimes to get an
understanding of the big picture
 one must see a smaller picture.
I'm going to talk about India
today and the diamond industry.
First of all    all, I am a
friend of India.  We have 85
people working for us in India
and two different offices and
I'm seeking rather than just sit
 here and complain I'm here
today to provide realistic
solutions and suggestions of
what we should do about specific
 problems.
I'll talk about four major
problems.  First of all if we
just take a -- maybe a little
bit of background.  The United
States imports about $10 billion
 of diamonds from India and we
export about 5 billion back and
run a trade deficit of about
$5.4 billion in 2016 in diamond
s, and that's trading with India
.
So there's about a $5.5 billion
trade deficit specifically with
India.
Our overall trade deficit with
India is $24.3 billion, about
16% of our -- let's say about
23% of the overall trade balance
, trade imbalance with India is
related to diamonds, gems and
jewelry.  Diamonds gem    gems
and jewelry is also the largest
export from India to the United
States.
The four issues I would like to
speak to is first of all the
trade -- the import duties.  It
   It's absurd.  I don't know
how we got here, but when it
comes to jewelry, we charge 5.5%
im   import tax, the Indians
charge us 31.56.  I don't know
how we could possibly, having
all the wonderful people working
for us and the United States
Trade Representative and
everybody, how did we ever get
this situation?
In the case of polished diamond
        diamonds to 2.56% charge
and we're at zero.  I would
like to suggest that we go to
zero/zero          zero/zero.  I
 believe that India will be a
major market for America.  We
have 1.2 trillion -- billion,
sorry      sorry -- consumers
looking to buy our products and
rapidly expanding economy.  More
 than 50% of the Indian
population is about 25 or 26 and
 under.  This is a country we
should be seeking to develop
stronger relationships with and
what better way to do it than to
 have a free trade policy of
zero/zero taxes.
Second point is a national
security interest point.  
Diamonds come from all over the
world and a lot of them come
from very, very troublesome
areas of Africa.  For example,
just this week we read about the
United Nations sending troops
into areas of the Congo which
are diamond mine ing centric.
Now, India imports diamonds.  I
want to emphasize, I'm not
against India, but India im   
imports diamonds from a lot of
different places, cuts those
rough diamonds into polish and
exopod the polished diamonds to
the United States.  Who here
wants to buy a beautiful diamond
engagement ring when the rough
for that diamond is possibly
involve ed in money laundering
or terrorist.
Not just the reputation of the
jewelry industry which employs
millions of people around the
world but direct threat to the
security of the United States of
 America.  So one of the things
that I want us to do is to enter
 into negotiations with the
Indian government, empower the
United States Trade
Representative to do this and to
 talk about reasonable effective
ways to ensure that the diamond
s being exported to the United
States, those polish       
polished diamonds -- because
that's mostly what it is -- are
not source ed from questionable
areas where there is not a
reasonable compliance system in
place for money laundering and C
TF, conflict in terrorist
fighting.  We need to do
something about this.  I raise
this issue.  It's about human
life.  I'm not talking about the
human rights issues, which are
also very important.
Claims of the Kimberly process
resolve this issue are false.  A
third issue very interesting, a
 few weeks ago the Indian
customs decided to hold up $60
million of diamonds.  Remember I
said we work with the
gemological institute to grade
diamonds in the United States.  
We have them graded in the
United States and bring them
back to India so the Indian
community can sell the diamonds.
  It's really great for the
Indian community.
$60million of diamonds held up
for over 60 days.  Missing the
jewelry shows.  Pain.  Literal
pain.  Somebody said, we can't
control customs, we can't do
this and that.  I've had
conversations with the United
States Trade Representative who
works with India, and this is
not an isolate ed, excuse me, we
 made a mistake.  Previous year
we had a situation where customs
 decided all diamonds coming
back in India had to be measure
ed within 1/100th of a
millimeter.
Maybe I can agree with them.  I
think we have to be realistic.  
Countries have protectionist
policies, national security or
domestic reasons, but we need to
have a realistic relationship
with customs so when we
negotiate something with the
Indians, the Indian government,
there are clearly aligned with
custom regulations not
arbitrarily changed on an on
going basis.  This is very
serious issue, because on the
ground -- I also would like to
recommend here that the USTR be
given real power.  I hate to say
it.  I'm embarrassed, but when
the USTR calls -- they just
laugh at us.  We're a big joke
in India.  We have no power.  
What I would like to call for,
when the trade representative
says there's an issue we should
be able to hold up imports into
the United States of course
subject to controls of Congress
and the administration.  But if
the UST    USTR has no power
other than to   to -- I don't
know, you can play around with
the trade organization or what
have you, if he has no power,
let's stop fooling ourselves.  
Customs in India should not be
stopping the flow of diamonds
from the United States from
India.  Should not give a high
tariff rate especially when we
are kind enough to give them a
5.6 billion trade surplus which
is fine.  I have no problem
doing business in a fair level
playing field.  Finally there is
 something the United States can
do.  Dividends are double taxed
.  One solution for American
jewelers and people that would
like to do business with India
is have factories in India, to
spread apart the world, to be
able to do more international
business.  But American
companies such as ours cannot do
 business in India when we are
double -- we can do business but
 we are double taxed on
dividends.  This is something
that I ask of the United States
government, not of the Indian
government.  I ask the United
States government to recognize
the idea that we should, in
fact, provide a tax credit for
dividends that are paid to the
Indian government in dividends.
So that's the specific area.  
Four things, four solutions.  
Zero/zero trade policy with
India.  We should establish a
committee, incorporate ing the
private sector to negotiate with
 India.  And then I would just
like to say, if I can, two more
words about the overall policy
of the United States.  I'm a
firm believer that we have to
have values, and the values of
reciprocity have to be applied.
It's nice to have a value but
if you don't apply it, it's
meaningless.  We also have to
talk about America first and
even India first.  We have to
recognize our trade partners
have priority ies.  That will
put them in a position where
they do have to implement
protectionist policies.  And I'm
not an expert in the world
trade organization, but I feel
that we are balanced.  Since you
 tied my hands and feet and
threw me in a swimming pool.  
Very difficult to operate.  I
can't reach out at higher levels
 of government to make decisions
about do we do bi   bilateral
trade agreements.  I'm calling
on the Indian situation for a bi
lateral trade agreement,
straight and simple.  The idea
that everybody has to agree
about everything before anything
 can be done is a bad deal.  
It's a bad idea.  But then again
, we already have a culture, we
have a world of interaction.  So
 this is over my head.
Finally what I would like to say
 is that our views shouldn't be
just to sit here and complain.  
We have to come up with solution
s.  We have to make trade
relations with India cornerstone
of how we reach out to the
world.
The largest democracy in the
world, the greatest opportunity
for us to move forward and to
develop a wonderful trade
relations.  After the terrorist
attacks in mum buy, I was
scheduled to speak in India in
office.  It was three weeks
after attacks.  My own people
were there in hotels getting
shot at.  And I went. I
traveled.  I was the only --
maybe two or three westerners
who actually participate ed.  
And it was only Indians.  And I
was there.  And so I had lunch
with then chief minister.  He's
a reasonable man.  He implement
ed a scenario where he did demon
      demonization, disallowed
all the rupi notes.  He's a
commit       committed person.  
So I believe we have a window of
 opportunity now to create an
incredibly favorable
relationship with India.  I know
a lot of issues, do we hire
people and military issues and
strategic issues.  But I say let
 us take one piece of this
business.  Let's take that
jewelry business, let's create a
good vibe.  Let's create a
momentum where we're doing good
business with India and I am
confident that this will grow
and this will develop.
Thank you for giving me your
time to discuss these important
issues.
 Thank you all very much.  It
has been a diverse and
informative and helpful panel.  
Let me turn to the first
question.
 Thank you all for your
testimony.  I'm filling the
duties of the deputy assistant
secretary for manufacturing here
 at the department.
My question is for Ms. Leonard
and Mr. Nichols.
 I'm sorry?  Can you hear me
now?
You both mentioned the need for
specific actions to close
loopholes in the Buy America  
Berry Amendment laws for federal
government projects to ensure
that only products made in the
United States or by an American
manufacturer were used     used.
Can you provide any specifics
on the specific hoop holes to
the buy American provision you
think should be addressed
?
KATHIE LEONARD: I'll go first.
I think the Berry Amendment
from my perspective with regard
to textile is clear.  The berry
amendment is clear.  As I goat
goated from it, it's
synthetic fibers and fabrics.  
Where it has gone astray is when
 it's included or not
included in contracts that are
made between Department of
Defense and defense contractors.
  Those become prime contractors
and in my experience, what
happens there is that there's no
transparency in those
contracts.  So when the defense
contractor goes out to bid, and
there's -- as far as Buy
American in the RFQs, but yet   
 yet -- and it's in the Berry,
it has to be over $150,000 to be
 Berry, to have Berry compliance
come into play, so at that
point, that's where we   we --
if we don't get the -- we'll bid
 on it and if we don't get that
contract there's no transparency
 to find out who got it.
So there should be, I believe,
transparency in the contracting
area.
I'll let you go next.
 ANDREW NICHOLS: I have three
specific answers for you,
suggestions.  The first one is
provide more clarity.  What we
find is -- I don't know that it
it's malice.  I believe it's
just ambiguity.  There is a lack
of clarity at the prime contact
 force on this issue.  So I've
heard everything from, well, if
you consider the entire system,
it's greater than 50%, it is buy
 American, so I don't need to
worry about the materials in the
 system.  That includes the
labor I use on design.  That
clearly doesn't seem right to me
given I have a family member
that is in the military, right?
It doesn't make sense.  I don't
 want one of my family members
working with a weapons system
partially made in China.  It
just doesn't make sense.  So
providing clarity through some
kind of directive policy memo or
 through the appropriate agency,
you all would know that better
than me.
And then I think getting clarity
 on what the expectations are in
terms of the systems and what
does it mean, right?
How do you define that?
Because the devil is in the
detail and the definitions.  So
making it very clear that Buy
American means this.  Hire
American means that.  We can
give you specific ideas, if
that's helpful to you on how we
would do it.
We're just one voice.  The last
one is, hopefully with the
coming into sequestration,
funding will be available to
qualify U.S. suppliers.  Many
times what we hear is, I would
like to, I don't have the money
to do it, I don't have any
choice.  Recent example we
qualified for a new weapons
system and worked with the prime
-- they really like ed what we
had to say, currently buying
from a European supplier.  We
quoted the job, proved to them
we had the capability.  They
came back and said, we were
amazingly gettive as a U.S.
supplier versus European
supplier, meaning we were lower
cost.  We were told, we'd love
to work with you, but guess what
, we have to put you out two
years, because we're going to be
 a two-year order on the
Norwegians and you can call us
back in 2019 or 2020.  I may not
be around to call them in 2020
if this continues.  Again, I can
give you more as well.
 Thank you very much.  We'll
follow up.
 Good morning.  My name is
Peter and I am the associate
administrator for international
trade at the small business
association.  I want to thank
each of you and your companies
for spending the time and the
resources throughout the entire
process to be able to
participate in the panel today.
Ms. Leonard, my question is for
you.
At the SBA, our role is to help
small businesses compete more
effectively against imports, and
in your testimony you mentioned
 examples of misleading labeling
and trans-       trans-shipment
 on the part of China.  What I
wanted to know, do you have any
recommendations of actions you
would like to see the U.S.
Government take to be able to
better counter these market
distortions?
KATHIE LEONARD: As far as I'm
concerned, it's in the
enforcement of the laws
regarding labeling to the end
user, okay?
That is the supply chain I think
someone else mentioned, the
supply chain needs to be looked
at.  These materials are coming
into the U.S.  They might have
labels on them when they come
into customs, but then they are
re-package ed and the labels
come off and these materials are
then sold in the marketplace to
 end users like large defense
contractors that may or may not
know that the material is not
U.S. made.  So there has to be a
 higher level of enforcement.  
At this point, I know that
during our anti-      anti-dump
ing case, I think 100 and -- it
was like 90 -- I think it was
questionnaires that went out to
all the companies that are pre
tending to be manufacturers.  
And it turned out there's really
only a handful of real
manufacturers
manufacturers.  That's because
there's so much confusion in the
marketplace because of labeling
 and advertise ing.  Anybody can
put up a website with a picture
 of a building and it looks like
they're just the same as me,
you know, that has two plants in
Maine.  We look exactly the
same.  And so it causes a lot of
market confusion.  So that's my
 only thought on that, is that
it's enforcement by customs and
borders protection.
 Thank you
.
 Good morning.  Thank you all
for appearing here today.  And
for your interesting testimony.
My name is Ann.  I represent
the Department of Labor at
international affairs bureau.  
My question is directed at Mr.
Mr. O'Shaughnessy.  Thank
you for the interesting history
of your company.
You note ed that the company
predominantly supplies to U.S.
domestic companies but has
shipped to some companies in
Asia.  Can you tell us what led
to those decisions and if any of
 those Asian partners or trading
partners, the subject of this
hearing, as well as the effects
-- any effects on the growth of
your company?
BRIAN O'SHAUGHNESSY:   
Basically what happened in that
case was an American company
moved offshore, to Asia, and
they laid off thousands and
thousands of workers in the
United States.  And they got a
whole lot of new supply lines
from Asia.  One product that
they needed to make their
product, the quality of the  
Revere product was so high that
even though it wasn't patented,
there's no one that can
duplicate it.
So we are able to keep that
market and indeed they have made
 presentations to us showing if
they bought this part from a
China -- a supplier in China,
that they would be able to buy
it 67% cheaper than our price.  
It's interesting to me that if
we look at 40% currency
manipulation in the 17% value-
added tax -- excuse me, it was
57% cheaper, that it exactly
matched the difference between
our cost and their cost.  But
that's why.  It has to do more
with our quality that we're able
 to do that.
 Will O'Shaughnessy, I have a
follow-up question for you as
well.
You talked about the vat and I
would be interested if you could
 elaborate more on how you see
that benefiting U.S. employment,
 prosperity, and associate ed
impact potentially on the trade
deficit.
BRIAN O'SHAUGHNESSY:  Thank you
 for the question.  I was hoping
one of you would ask that.  You
 know, the VAT goes back before
the WTO, and basically the use
of a VAT was grandfathered
because if you look at a
traditional vat, it applies to
domestic production and applies
to imports and it's rebate ed or
not charge ed on exports.  And
so where is the impact there on
international trade?  There is
none.
However, over the years, many
mercantile ist economy ies have
become very strategic about how
they use the VAT.  One example,
I remember being at a meeting of
 the board of directors of the
copper and brass fabricate
          fabricators council, a
copper trade industry
association here in Washington,
and the presidents of all the
other fabricating companies like
Revere, they were gathered
there and excited because China
had just announced they would no
 longer rebate the VAT on their
exports of copper sheet and
strip and coil like Revere
produces and the other ones all
produce.  I explained to them,
you don't understand.  The
rebate ing the VAT on the
consumer product that they're
shipping in, they're trying to
take the whole supply chain.  
That's more strategic thinking.
The design of a VAT, in my
opinion, it's -- I mean, after
you hear it, you'll understand
.  The most efficient, if you im
   imposed a VAT of say 12% in
the United States, that would
pretty well match the income
from payroll taxes.  And so if
you applied the VAT to the
payroll taxes or the proceeds of
 the VAT were used to offset the
payroll taxes, now you've
applied the VAT to domestic
production but it's offset.
So only imports then are left
with the added cost.
And when you export, even though
you've offset the cost of the
VAT, you rebate it anyway.  So
that's a pure subsidy on exports
.
Now, that's what really smart
companies, like Germany and
China do with their VAT.  It's
really, really strategic and it
it's really, really smart.  
And it makes it work.  And so
the U.S. could do that, you can
put on a VAT of 12%, eliminate
payroll taxes and then subsidize
 ing exports and the im   
imports have to pay 12%.  Here
is what is interesting.  What
would happen to the market?  
Consumers would have to pay 12%
more.  Well, no, because first
of all, our costs, like at  
Revere and other manufacturing
companies, they would be offset
offset, so we don't have
a price pressure to increase our
price.  We only have a market
pressure.
The market pressure is relieved
somewhat because imports would
now have a VAT tax on them of
12%.  What would they do?  Would
they increase the price 12%?  
No, they would eat probably
about half on a macro-       
macro-basis.  Some would eat
none and some eat all but they
eat about half the VAT cost.  
And they account for 12% of the
production.  So it's 1/8 of a
half of 12.  That's the impact
on the consumer in the United
States.  So even the stuff you
hear, oh, put it on and it will
hurt... but the other thing it
will do in the United States is
is, if we had such a VAT, I
would immediately hire 10% more
workers in my plant, and I can
immediately begin producing more
product and this would happen
all across the United States,
because Revere is a really good
indicator of manufacturing
activity in the United States.  
I met with  Greenspan a couple
times and it was interesting
what Revere did    did, and
these were private conversations
.  As manufacturers and plants
shut down we can ramp right up
over     overnight and hire
people and ship more.  And you
can do that with a VAT.  And if
you want to ask a question about
 how it -- how VATs might be
offset by currency and so on, I
'll go into that too, but we can
do that later
 We probably don't have time
for that.  Thank you very much
for your insights.
 Unfortunately, he is correct,
we are at the end of the panel.
This has been really
informative and really helpful.
Thank you all very much for
making the trip to Washington.  
Particularly of note my mom is
from upstate New York as well.  
And thank you all and we will
look forward to further
conversations.
[Applause]
 Thank you for coming and
participating in this hearing.  
I would like to start with the
macroeconomic panel.  I would
ask the panel to introduce
themselves and then we will
start with Linda Dempsey as the
first panelist.
LINDA DEMPSEY:  I'm Linda
Dempsey, vice president for
international economic affairs
at the National Association of
Manufacturers.
JOSEPH GAGNON:  I'm Joe Gagnon
Gagnon, Peterson
Institute for International
Economics.
EVA HAMPL:  Eva Hampl,
investment and financial
services at the United States
Council for International
Business.
ROBERT SCOTT:  I'm Robert Scott
, Senior Economist at the
Economic Policy Institute in
Washington.
 If you could get started.
LINDA DEMPSEY:  Thank you for
the opportunity to be here today
 to share the views of the
National Association of
Manufacturers canning the N     
, the oldest
manufacturing in the United
States.  We represent 14,000
manufacturers in all 50 states
in every manufacturing sector
from consumer food and beverage
products to transportation
medical devices and chemicals
and major industrial
manufacturing, like the broader
manufacturing sector, more than
90% of members are small and
medium sized companies.  
Building on the detailed
submission, I want to focus on
four key points.  First, exports
are critical to manufacturing
success.
Manufacturers in the United
States produce more than ever
before, and more than half of
that output is exported,
supporting more than 6 million
manufacturing jobs across the
country, jobs that pay
substantially more than non-    
non-export related jobs.
I will talk about imports in a
moment, but it is critical to
understand the role that exports
play, including for our small
manufacturers.  We have small
manufacturers producing advanced
 medical rehabilitation products
in Maryland, fire trucks in
Ohio and Wisconsin.  They
produce more than they can sell
in the United States.
Indeed several small businesses
have explained to me how the
facts that they are able to
export has enable ed them to
maintain payrolls in the United
States when our economy has
slowed and U.S. demand is weak.
 As the world's most productive
manufacturing sector and note
that productivity in
manufacturing has increased 61%
since the year 2000,
manufacturers in the United
States need opportunities to
expand sales at home and abroad
to continue to grow and to
continue to add jobs.
Second, manufacturing is
certainly growing globally.  
With hundreds of millions of new
middle class consumers added to
 the world economy and world
trade and manufacturing goods
over $11 trillion, manufacturers
in the United States have
greater opportunities than ever
before.
Yet the expansion of the global
middle class is due in
significant part to growth in
manufacturing worldwide.  In
some cases creating partners and
customers overseas and other
cases creating competitors.
The NAM has long called for
trade policies to promote open
and fair trade because
businesses understand that fair
market based competition without
 government distortions makes us
stronger.  Just as free trade
among our 50 states promote ed a
massive growth and innovation
of U.S. manufacturing.
In many cases imports can
provide overall benefits from
manufacturers and the economy by
 providing necessary inputs to
manufacturing processes, to
boost our competitive including
particularly when imports
represent products not available
or manufacture ed in the United
 States.  Yet as you heard this
morning, some import competition
 is fueled by foreign government
market distorting, anti-
competitive and discriminatory
trade practices that unfairly
disadvantage manufacturers,
workers and communities across
America.
In these cases, the NAM has long
 supported robust U.S.
Government action to address the
 underlying causes of these
distortions and full enforcement
 of trade agreements and trade
rules.  Just last year the NAM
worked with other industry
leaders in the steel and wire
industry ies to ensure enactment
of a new anti-evasion
legislation.  While this process
is still being implemented and
needs improvement, it is a very
strong step to make sure that
trade enforcement is more
effective and timely.
Third, the trade deficit is a
complicate ed measure that
arises from several factors.  
Including economic conditions,
standards of living, consumption
and savings, exchange rates,
domestic tax, regulatory
policies, and to some extent
international trade openness and
barriers.  Notably        
Notably, though, trade deficits
increase as the U.S. economy
grows and fall during periods of
economic weakness.  
Unemployment operates in the
opposite direct.  Unemployment
falls when the economy expands
and the U.S. trade deficit
increases.
Fourth, as manufacturers see it
  it, many different indicators
are relevant in assessing
individual trading relationship
relationship.  I
detailed many of those in my
written testimony, from the
existence and implementation of
trade agreements, trade and
investment flows, to the size
and economy of our foreign
trading barriers and the
partners, and the barriers they
impose.  Consider, for example,
the U.S. commercial
relationships with Canada and
Mexico.  These two countries are
 outside purchasers of U.S.
manufacturing goods any way you
put it.  Together these two
countries purchase more than our
 next 10 foreign trading
partners combined.
They are exports to these
countries, make up the biggest
share of their worldwide import
import, not to mention the
 fact that these economies are
much smaller than that of the
United States.  Multi-facetted
and comprehensive analyses are
critical for the assessment and
the development of ways to
improve our trading relationship
.
We look forward to working with
Department of Commerce hand the
entire Trump administration to
grow manufacturing in the United
 States through robust trade
policies that are focused on
first the negotiation of
advanced trade agreements to
open markets, break down
barriers and raise standards.  
Second, modernization of U.S.
trade tools to boost U.S.
competitiveness and, third, the
implementation of more robust
trade enforcement consistent
with the international rules
system that the United States is
self-led in creating.  Thank
you.
 Thank you.  I would invite you
 to deliver remarks.
JOSEPH GAGNON:  Thank you for
giving me an opportunity to
comment today.  First, I would
say that it's critical for you
in drafting this report to
decide if it is to be about the
causes of the overall U.S. trade
 deficit or a catalog of unfair
foreign trade practices that
distort trade balances in
specific categories of trade.  
If it's the latter, then it
would seem to have a lot of over
lap with the USTR's
comprehensive annual national
trade estimate report on foreign
trade barriers.  I'm going to
focus on the former topic, the
overall trade deficit reflects
our net borrowing from the rest
of the world, and U.S. net debt
to foreigners is rising at un   
unsustainable rate.  We should
take steps to narrow the overall
trade deficit and to stabilize
our international debt.
I know in passing that focusing
on bilateral trade deficits does
not help to understand the
overall trade deficit.  For
example, we have a bilateral
trade surplus with Singapore.  
But Singapore in turn has trade
surpluses with many countries
with which we have trade
deficits.  It's a country's
overall trade balance that
ultimately matters.  Singapore
has one of the largest trade
surpluses supported to a large
extent by currency manipulation
that holds the dollar up.  It is
a significant contributor to
the U.S. overall trade deficit
despite the fact that we have a
bilateral surplus with them.  
Now, I don't dispute that unfair
 foreign trade practices do harm
U.S. produce ers and you will
undoubtedly hear a lot about
that today.  But unfair foreign
trade practices have no measure
able effect on the overall U.S.
trade deficits.
To understand why, consider im  
 imposing a prohibitive tariff
or outright ban on all U.S.
steel imports worth about $34
billion last year.
You might think this would
narrow our trade deficit by $34
billion, but this policy also
would cause the dollar to rise
about 1%, not a large amount.  
Yet it is enough to cause non-
steel imports to rise and all
exports to fall by a combined
$34 billion, leaving the trade
deficits unchanged.
Thus protection does help the
protected industry both here and
 abroad, wherever it occurs, but
at the cost of all other
industry ies in that country.
Two charts in my submitted
comments show the different
measures of trade barriers have
no discernible coalition with
trade balances across countries
         countries.  Countries
with higher tariffs do not have
higher trade surpluses.  So if
trade barriers have no effect on
 overall deficit, what does?
My new book...
[ Laughter ]
... talks about the most
important factor behind
imbalances in recent years,
mainly currency manipulation by
foreign governments.  We
estimate that in 2007 at the
peak of imbalances all of China
     China's surplus and 35% of
the U.S. trade deficit could be
explained by currency
manipulation, another 25% of
U.S. trade deficit was explained
by the U.S. Government budget
deficit.
Two charts in my submitted
comments display strong positive
correlation of currency
manipulation and budget balances
with trade balances across
countries.  So why do these
policy ies matter so much?  The
key is that they affect savings
and investment as others are
going to tell you at this
hearing, we cannot have a trade
deficit unless we invest more in
factories and houses than we
say, borrowing the difference
from the rest of the world.  
Government budget surpluses are
part of natural savings so
budget deficits are negative
savings, supporting trade
deficit.  Currency manipulation
is a flood into U.S. financial
markets of capital from foreign
government           
governments.  This pushes the
dollar up, causes the fed to
hold interest rates down, low
interest rates encourage
investment in the U.S. and
discourage savings, thus
supporting trade deficit.  
Although currency manipulation
is not nearly as widespread
today as a few years ago, policy
 actions we proposed, including
countervailing intervention
would help immediately to narrow
the trade deficit by pushing
the dollar down somewhat.  A
major factor holding the dollar
up right now is the market
expectation that foreign
governments are waiting in the
wings to resume buying dollars
if needed to maintain their
trade surpluses.  In the event
of any future pressure on the
dollar, such official purchases
would allow private investors to
unload portfolios with only
minor losses.  This effective
dollar put option makes dollars
less risky to hold keeping the
dollar over     overvalued.  If
we eliminate expectations of
future currency manipulation to
the policy actions we propose it
would eliminate the dollar put
option I mentioned and this
would cause the dollar to
decline immediately.
Another thing that would help is
 if the president and treasury
secretary would formally
renounce the policy instead
adopt an appropriate policy
keeping the U.S. trade balance
reasonably close to zero.
Thank you.
 Thank you very much.
EVA HAMPL:  Good morning and
thank you for the opportunity to
 testify here today.  The United
States Council for
International Business
represents about 300 multi      
multinational companies law
firms and business associations
            associations.  Our
core function is representing
U.S. business internationally,
including the international
Chamber of Commerce, the OECD,
international labor organization
 and other UN organizations and
agencies.
International trade and
investment policy has long been
a primary focus of the work and
with access to unparalleled
network of international partner
business associations, we have
been a strong and consistent
voice both here at home and
abroad for open and competitive
trade systems.  In that we have
supported an effort of various
U.S. administrations to open
foreign markets and ensure a
level playing field for U.S.
business.  While ensure ing that
trade and investment delivers
the widest benefit for most
people here at home.
The administration should make a
priority of removing barriers
of all kinds as well as unfair
trade practices that undermine
American jobs as they compete
for customers at home and around
 the world.
The three points I would like to
 make here today are one
bilateral trade balances are not
 a useful metric to determine
the economic health of the
United States.  Two, services
must be included when talking
about trade balances and trade
deficits are much lower with
countries with which we have an
FTA and three, as companies
today operate in global value
chains, not simply bilateral
trade relationship domestic
value added can, for example,
come from imports.  On the
specific issue of trade deficits
, particularly bilateral
deficits with individual
countries, we support the view
of mainstream economists that
trade deficits are product of
broader macro      macroeconomic
 factors, not trade policy and
the trade balance should not be
viewed as a straightforward
indicator of a country's
economic health.
While it is useful to address
trade barriers that impede
access for U.S. goods and
services exporters to specific
markets, we should not set up
bilateral trade balances as the
metric for successful trade
policy ies.
It is also important to include
services trade in any analysis
of trade balances, as I'm sure
you're going to hear in more
detail later today in the U.S.
services account for almost 80%
of GDP and services jobs account
 for more than 80% of private
sector employment.
Accordingly, a trade policy
focused solely on trade deficit
        deficits in
manufacturing is misleading.
Free trade agreements also play
an important role focusing just
on U.S. trade with our 20
existing FTA partners in 2015
while the U.S. ran a merchandise
trade deficit of $64 billion we
 had a services surplus of $71.8
billion yielding overall trade
surplus of $7.8 billion.  In
contrast the largest deficits
were with countries with which
the U.S. duds not have FTAs.
So they have been beneficial to
the U.S. economy.  In addition
to providing concrete economic
benefits they serve the purpose
of raising the standards of the
role of law in other markets to
approach those we have here in
the United States.
FTAs therefore provide the
opportunity for the U.S. to
write the global rules on issues
that are important to our
businesses.
The way business is done here at
 home and around the world has
also changed over the years.  
Trade relationships are no
longer simply bilateral in
nature, rather companies operate
within global value chains
where the different stages of
production processes are locate
 ed across different countries.
This also means that the value
added by any particular country
on any particular good or
service has become more
difficult to determine.
The OACD with whom we worked
attempted to address this issue
in a joint initiative with the W
TO called trade and value added
or TAVA.  It covers 63
economy ies and 34 unique
industrial sectors including 16
manufacturing sectors and 14
services sectors.  And provides
insight into various issues
including domestic value added.
In summary when it comes to
trade deficits, we have five
recommendations for the
administration.  One, examine
the trade deficit within the
broader set of macroeconomic
factors but determine and
include all the elements of
trade in the analysis instead of
 focusing solely on bilateral
manufacture ed trade balances.  
Two, work with experts in the
U.S. Government and
international organizations and
academia to get the best data
possible, to have a guide for
best policymaking.  We need much
 better measurements of real
trade flows and value added
including scale able supply
chains and services.  We need
better data on FTI flows both in
word and out word.
Thirdly move aggressively to
open foreign markets and
identify foreign trade barriers
to increase U.S. exports and
improve our trade balance.  We
support the use of appropriate
enforcement tools including the
WTO, bilateral and regional
trade agreements, U.S. trade law
us and efforts to open those
markets and to combat illegal
foreign subsidy ies and dumping
into the United States.  Four,
accelerate the U.S. Government
commercial diplomacy efforts to
support U.S. companies competing
 to win deals overseas and
finally perform the U.S.
Government economic policy which
includes tax reform, regulatory
 reform, energy development, to
bolster the competitiveness of
our firms allowing them to win
more and bigger deals overseas.
 That concludes my testimony
today.  There's further detail
in my written comments.  Thank
you for the opportunity to
comment and I look forward to
your questions.
 Thank you very much.  Mr.     
Mr. Scott.
ROBERT SCOTT:  Thank you for
allowing me to testify today.  
Executive order 13786 calls for
review of trade policy and
potential harm to U.S. workers.
This examination is welcome and
 long overdue, however, the
specifics of the review offered
by the president mean that it's
unlikely to provide any help to
American workers, in part
because it asks the long
questions.
The order requires the secretary
 and agencies represented today
to identify every form of use
and non-     non-reciprocal
trade practice that contributes
to trade deficit. .  On a
country by country and product
byproduct basis.  But the trade
deficit is not a product-by-
product or country-by-country
problem as we've heard already
here on this panel.  We know it
is caused by and what should be
done about it.  I want to
address those broader causes
here briefly in my oral remarks
and then more extensively in my
written submission.
First, we know what the major
causes of the trade deficit are.
Unfair trade, currency
manipulation and currency
misalignment
misalign have placed commerce at
an unfair disadvantage.  As a
result increases in exports do
support demand for domestic
produced goods and do increase
domestic employment.  I would
agree with that remark.  It is
also true that increased im   
imports reduce demand for
domestic cally produced goods
and reduce domestic employment
and therefore changes in the
trade balance are the best
overall measure of impact or
trade on the output of domestic
goods by manufacturers and
employment in those industries.
The consequences of unfair trade
 include growing trade deficits
with China and other surplus
countries and eliminate         
eliminated millions of jobs in
U.S. manufacturing.  In the past
two decades alone, as I have
shown in my prior research
research.  Overall we
lost about 5.2 million
manufacturing jobs since January
 of 1998, a decline of nearly
30%.  In addition, although I
don't have in my written
statements, the loss of jobs to
unfair trade has had a
tremendous depressing effect on
wages of not just manufacturing
workers but all workers with
similar skills, essentially all
non-college educate ed workers.
 I can provide more details on
that after the hearing if you're
 interested.
Unfair trade has reduced U.S.
production capacity in
manufacturing.
And countries, as we already
heard from Joe this morning,
countries engaged in systematic
currency manipulation, China and
many other countries in Asia,
or which have remained
persistently undervalued
exchange rates by other means,
such as Germany are engaged in
behavior which is effectively
exported unemployment in
manufacturing and other trade
goods industries to the United
States other deficit countries
and we lost millions of jobs as
a result in manufacturing and
related industries.
Now, in my written testimony I
address a number of specific
issues raised in the executive
order on issues such as non-    
 non-market economy ies, the
effects of over-capacity which
are significant, role of
subsidies, the impacts of free
trade agreements and so on.  I
would like to address a couple
of specific points in the time I
have remaining.  In terms of
other factors, I think it's
important to
recognize that the broad
patterns of widespread
government intervention through
unfair trade, for example,
creation of massive amounts of
overcapacity, in at least 20
major industries identified.  
The widespread use of subsidies
and dumping and other unfair
trade practices, not just
problems in those industries.  
They have had a pernicious
effect on the cost of production
 throughout any industries as a
result of countries like China
have now achieved and
essentially unfair advantage in
a wide range of industries that
use these inputs, such as
automobiles and aircraft, other
transportation equipment, all
kinds of equipment.  So we can't
just use fair trade policies to
 address these problems.  We
need a broader tool, as I say in
 my statement, you can't but the
genie of unfair trade back in
the bottle by attacking unfair
trade.  You need a broader tool.
  In my view that is currency
realignment.  I think it is the
only tool available broad and
powerful enough to provide
redress for a generation or more
pervasive widespread unfair
trade practices.
And as I say in my statement, I
think as a result, products in
specific trade policies are
unlikely to have a significant
impact on U.S. trade deficits.  
In part, the reason Joe has
given, example steel industry, I
 think it's very relevant, in
part because you just can't
engage in enough unfair trade
cases to significantly affect
the trade balance.  The problem
is too big and pervasive.  We
need a broader tool.
The trade deficit is also a
result of global trade imbalance
s and I identify ten major
countries surplus countries that
collectively have trade surplus
 of about $1.5 trillion.  This
is three times as large as the
U.S. trade deficit.  Those are
the problem countries.  I should
 note as I point out in my
statement, countries like Mexico
 and Canada actually run global
trade deficits.  They're not
contribute ors to our problem.  
Our trade problem is not a
bilateral problem.  It is a
global problem imbalances.
And lastly, on the issue of
currency ies, I believe it's
been shown that currency can be
re   realigned, major currency
ies last achieved following the
plaza accord in 1985 and this is
 the acceptingle most effective
way to rebalance global trade
flows.  Such an agreement is
needed to increase a realigned
exchange rate of major surplus
countries relative to the U.S.
dollar which is today heavily
over     overvalued.  The dollar
 gained almost 20% in real terms
since mid 2014 alone or at
least that was true three days
ago and dropped a bit since
then.  But it still remains
heavily over-      over-valued,
and it's been shown that even a
10% appreciation of a dollar
will have a large impact
increasing U.S. trade deficit by
 over $200 billion.  So we need
to get the dollar down in order
to rebalance trade.  This will
create millions of jobs not just
 in manufacturing but all the
industries that are support  
      supported by manufacturing
.  Manufacturing has large
multipliers.
So I would conclude by noting
have two charts in my written
statement that show the large
trade deficits and the close
correlation between the trade
deficit of the United States and
the real value to have U.S.
dollar.  The dollar explains
about at least I would say about
 80% of the movement in the
trade balance.  If you want to
address trace deficit, the
single most important factor is
realigning the U.S. dollar an I
would concur what Joe suggest in
 his book and we may need to be
more aggressive in doing that.  
Thank you
 Thank you very much, Mr.      
Mr. Scott.
I'm the acting assistant
secretary for industry and
analysis at the Congress
department and we're going to
open up the questioning part of
our panel today.  I'm going to
turn it over to my colleague
from the safety department for
the first question and ask the
panelist to introduce yourself
the first time you speak.
 Thank you all for your
testimony.  I'm the chief
economist in the Department of
State.
This is a question I would like
to put to all of you, if any of
you would like to respond.  We
talked here, your testimony
about determine ing the
aggregate trade imbalance.
The executive order that leads
us to be here today, though,
really focuses much more on
bilateral trade imbalances.
So economists often argue
bilateral trade deficits may be
the result of structural factors
such as simple comparative
advantage.  Vertical supply
chains, even demographic trends.
  So I would like to ask if you
have thoughts about the
importance of such factors in
explaining U.S. bilateral trade
deficits.
LINDA DEMPSEY:  Happy to give
it a start.  Certainly from our
perspective bilateral trade
deficits, overall trade deficits
are a result of many factors,
not just one or two, not just
trade distortion, although trade
 distortions can play an impact,
but of many factors, including
sizes of economy, price
competition in those economy ies
 and structural issues, and that
is true with some of these
bilateral relationships as well.
We see differential patterns
as we note ed in our testimony.
We had some trade deficits with
 countries that also have very
significant manufacturing
investment in the United States
States, we have a
manufacturing investment surplus
that supports millions of jobs
in the United States, at the
same time that we have a trade
deficit with some of those
countries.
It is a complicate ed measure by
far and from our perspective,
an individual country
relationship and even an economy
-wide relationship such as the E
U needs to look at multiple
factors, including the size and
openness of these economy ies,
participation in the world
economy.  Our share of their
market in some of these
countries we do far better and
other countries we don't do very
well at all, and why is that?  
Trade agreements, there are
multiple factors because of that
, and those are the types of
issues that we would like to
work with all of you to improve
our position in every single one
 of those countries.
JOSEPH GAGNON:  I'll give one
quick example.  We have a
bilateral trade surplus with
Australia and Australia has a
bilateral trade surplus with
China.  If we were sitting in
Australia now we would be
looking at bilateral trade
imbalances and say China is
great, they're buying all our
stuff, they're wonderful and the
 U.S. is terrible because they
have a big surplus and we have a
 deficit with the U.S. , they
must be acting badly.  That
would be the wrong conclusion.
EVA HAMPL:  I will just add
that I agree with what my
colleagues have said so far.  We
 don't dispute that bilateral
trade deficits play a role or
that there are various factors
involved, but that is why part
of my comments focused on the
importance of collecting
additional data.  We just do not
feel these provide a complete
picture that provides the
solution.  If we want to find a
solution to problems that we can
all agree we see and that exist
, we need to ask the correct
question, and in our reviews,
simply talking about bilateral
trade deficits just does not
provide a complete picture.
ROBERT SCOTT:  I would agree
that we should be focusing more
broadly on global trade flows,
but with respect to explaining
the bilateral imbalances I think
 a lot has to do with history.  
We chose to engage, for example,
 in -- to create the NAFTA
agreement in 19 -- 1994.
That particular thing favored
create ed outsourcing.  We lost
thous of factories in the U.S.
That was growing bilateral
trade deficit with Mexico.  We
had a balance trade with Mexico
before NAFTA went into effect.  
That went away.  For better or
worse that agreement is history.
It has taken place, factories
have moved, we can't change that
.  We could improve that
agreement.  For example, by
raising the so-called domestic
content of production within the
NAFTA countries that could help
 all three countries and we
could improve labor standards
that would help working people
in all three countries.  We make
 choices and make policy
decisions and NAFTA we made
choices that favored outsource
outsourcing and
foreign invest       investors.
We could make choices that
favor jobs and workers in the
United States.  Those are policy
 choices we do face.
 Thank you.  I'd like to turn
it over to my colleague from the
council of economic advisers.
 I'm a Senior Economist at the
council of economic advisers.
This is a question for all of
you, again.  To the extent that
trade deficits are due to macro
     macroeconomic factors, what
particular actions or policy,
some of which we already heard
discussed a little bit today, do
 you believe would be the most
effective in reducing the
deficit?
LINDA DEMPSEY:  Do you want to
start or you?
ROBERT SCOTT:  I'm happy to
start.  As I argued I think
realignment of the dollar is the
 single most effective tool.  It
can be used to reduce trade
deficits and increase employment
in manufacturing and the rest
of the economy.  I think that
Joe has suggested two tools, one
 tool actually talked about
today, account of currency
intervention or the threat of
that, the economist John Hanson
suggested the possibility of im
posing what is called a market
access charge or a tax on
capital inflows that reduce the
inflow of capital into the U.S.
that would reduce the demand for
 the U.S. dollar.  That could be
effective.  I think it may be
necessary to go further.  We may
need to ban inflows of capital
from some countries such as
China where it's difficult to
distinguish between what is the
activity private investors and
activity of the state.  They
could be investing here simply
to increase the value of a
dollar or control of U.S. assets
.  I think the simplest way to
address that is simply ban some
of those purchases.  Much more
broadly I think of those tools.
EVA HAMPL:  My final comments
focused on recommendations for
the administration, I will
elaborate on one or two of them.
  We follow trade barriers very
closely.  Our companies are
having many issues in that space
and one issue, for example, is
that of local      localization.
That is one of the trade
barriers that we have worked
with international Chamber of
Commerce on to provide some
policy and in order to combat
those policy ies just to name
one of them, the second issue
would be on the enforcement side
.  There are many, many tools
that we have that we have in
place that we can be using that
are not fully being utilized
right now, including our trade
agreements or the WTO as well,
and so we continue to work in
that direction with the tools
that we already have, and that
would be a start.
JOSEPH GAGNON:  I would say
that two policies seems to me
that matter the most are
currency exchange policy and
fiscal or budgetary policy
.  Our budget deficit is now
getting a little out of line
with what other countries are
doing and this is starting to
support our trade deficit, also
the state of the business cycle
is encourage ing private capital
 in.  We could try to discourage
that, as Rob said, through
capital measures.  I wouldn't
propose that right away.  The
other thing is that we probably
should be a bit more activists
in our currency intervention
policy.  And as I said, in the
book, we recommend announcing a
policy of -- against the G20
countries at first, start with
the big ones that matter.  
They're not currently manipulate
ing currency ies.  It's a good
time to introduce a new policy
that would say for the future
you have promised the G  G20
statements not to hold your
currency -- manipulate currency
for competitor advantage, we'll
hold you to that.  If you do,
we'll counter intervene by equal
 amount and neutralize whatever
you do.  I think that would be a
 good first step and important.
It might not be enough.  We
could talk about further moves.
I think we should have a
broader sense of what the
purpose of foreign exchange
intervention is around the world
.  It should be to minimize
imbalances, and we need IMF to
be the central place where these
 discussions are held.
And that's where I would focus.
 But widening the budget deficit
at this point is certainly a
step in the wrong direction.
LINDA DEMPSEY:  Let me answer
that more broadly, because I
think there is, you know, a lot
of different ways, as I said,
the trade deficit is a
complicate ed measure and
therefore addressing it has
complicate ed implications but
also how it correlates to jobs
and output in the United States
is not as clear cut as explained
 in detailed testimony          
testimony.  I would say that
what we would like to see from a
broader macroeconomic level is
the type of policy ies to
improve U.S. competitiveness,
and I would start with items
like tax reform and
infrastructure investment and
regulatory -- dealing with
regulatory red tape and a more
robust trade policy as a piece
of all that addresses barriers,
that addresses currency
manipulation but also keeps our
market open to trade and
investment, which has been a
huge strength for manufacturing
in this country.  We have
millions of jobs in this country
 dependent on international
trade, we see problems obviously
 and challenges as I identified
and we identified for country
after country, many of the same
ones that my colleagues have
identified.  But we need a much
broader look at how our system
is -- our entire economy is.  In
December my organization put
out 12 blueprints called "  
"competing to win" on each and
every one of the innovations,
workforce.  Consider we have
350,000 jobs in manufacturing
today that are unfilled, right?
 So we don't have -- our
companies aren't able to find
workers that have the right
skills.  And some of it is STEM
     STEM, the higher level.  
Some of it is electricians that
our companies can't get to come
to their factories in rural
America or different parts of
America.  We've got to deal with
 all of this.  Because by 2025
we are estimating over 2 million
 jobs that will be open in
manufacturing for which we will
have -- we will not have the
skilled workforce to meet.  That
 is a big structural issue that
our economy needs to deal with.
 All of these issues are really
important as we think about it
from that broad macroeconomic
level.  If we can get our own
house in order, if we can get a
tax policy, a comprehensive tax
reform, get our rate lower, deal
with the issue for our small
businesses, capital cost
recovery, R&D;, all of that and
all the rest of these policies,
then our country is on the right
 track and we will, again, be
producing the high quality jobs
across our sector and other
sectors that we all really want
to do at the end of the day.
 Thank you very much.  I think
we're running out of time.  This
has been -- I want to thank the
 panelists for the very interest
ing discussion we had and I wish
 we could progress it, but we've
run out of time.  Thank you
very much.
 Thank you for coming.  My name
 is Steve Wilson, the deputy
director of the fisheries office
 of international affairs in
seafood inspection and asked to
lead this panel today.
If you please, would you please
start with the end here and
introduce yourselves and your
affiliation.  John Connelly with
national fisheries senate.
 David Veal, American shrimp
processors association.
 Danny Walker, Heartland
Catfish Company.
 Thank you very much.  Mr.     
Mr. Connelly, start with your
testimony.
 The National Fisheries
Institute represents harvesters
in Alaska, America's largest
fishery, importers supplement
the catch and put fish in a form
 that we eat, distributors
retail and restaurant groups
that ultimately sell us the
seafood we enjoy.
We are committed to ensure flow
of fish to and from United
States because the two are link
linked.  To start with
supply and demand.
The U.S. supply of fish cannot
meet demand.
Let me role through some
number       numbers.
Because of benefits, doctors and
 dietitians in the U.S.
Government encourage Americans
to eat seafood two to three
times per week.  We need 13
billion pounds of seafood to
meet that public health goal.
The American supply of fish is
comprised of U.S. cod ingrown
fish plus imports minus exports
exports.
The Magnus and Stevens act
controls the catch of fish in
American waters to ensure we
have fish now and for the future
.  We catch about 2.5 billion
pounds of seafood in American
waters, about 19% of the need.  
Our climate does not enable a
major production of farm fish
other than catfish        
catfish.  Our region -- other
regions of the world have
climate for growing fish just as
the U.S. has a better climate
for growing pork and exporting
the product.  And we would like
to see a powerhouse fish farming
system offshore in the U.S.
there are lots of barriers.  
There are legal barriers and
states that have natural
infrastructure for fish farming.
There are regulatory barriers
for permitting, and there are N
 NMBI barriers in coastal
communities.  We are not going
to grow our way out of a fish
deficit.
In our company's export fish,
because other markets will pay
more for some fish or parts of
fish than will Americans.  We
export about a billion pounds of
fish because Koreans will pay
for our row and North American
and northern Europeans will pay
for genuine Alaskan Pollack and
salmon.  These represent a trade
 deficit.  Seafood is different.
We do not have and never will
have the raw material fish
needed to meet the demand.
So while this agenda calls --
this agenda is a fisheries panel
, it may have been more
appropriate to call it a seafood
 panel, as the jobs in the
seafood sector don't stop at the
 boat, at the water's edge or on
the docks.
Last week the Department of
Commerce published data
indicating about 1.2 million
jobs in America are in the
commercial -- in and around the
commercial seafood sector.  
About 650,000 of those jobs
result directly from domestic
         domestically caught and
processed fish.
But another 550,000 jobs result
from processing, distributing
and selling fish from elsewhere
elsewhere.
The administration should value
as much the woman who right now
is processing imported shrimp in
Brunswick, Georgia as in the
northern Pacific.
They both create income for
American families and I
guarantee they think their check
 is worthwhile.
Turning to disadvantages we now
face, I'd like to share an
anecdote from the lobster
industry with whom we work.  The
Canadians and Europeans
recently completed a trade
agreement which will eliminate
tariffs lobsters being sent to
Paris or Rome or Madrid.  But
Maine lobstermen will pay a
tariff on their lobsters sent to
 Europe.  That means our folks
are automatic price disadvantage
 when selling to their market.
This is not Canada's fault.  
This is not Europe's fault.  
What we are likely to lose
business and only add to the
trade deficit if the U.S.
Government does not act or
expand our trade with Europe and
 elsewhere.
So while there will be calls for
 more trade barriers to trade,
the harvesters and processors we
 represent ask the
administration to think
carefully about that path and
instead consider the jobs create
 ed         create ed in Georgia
or Texas or Florida when
processing fish from elsewhere.
We also ask administration to
act aggressively on trade
agreements with Europe as Maine
lobstermen and fisherman
fishermen are seeing
countries filling the market
that we once so dominated.  
Thank you.
 Thank you.  Mr. Veal.
 DAVID VEAL:  As I said, my
name is            my name is
David Veal, I'm the director of
the shrimp processors
association.  Processors account
for vast majority of shrimp
produced and processed in the
southern United States.  We
represent firms across seven
states which together provide
thousands of good jobs for our
coastal communities.  Our
workers understand the
importance of strong trade
enforcement on their livelihoods
.  For decades our industry has
faced surge ing imports of
shrimp produced overseas.  90%
of shrimp consumed in the U.S.
is currently imported in volumes
 continue to increase.  Shrimp
imported from India, Indonesia,
Thailand, Vietnam, Mexico, China
, Malaysia, countries being
investigated today, account for
77% of the 4.5 billion deficit
the U.S. shrimp in 2016.  While
shrimp imports have seize ed
U.S. market share, our domestic
produce ers have not been able
to achieve anything close to
similar penetration in foreign
markets.  In 2016, the U.S. im
ported $297 worth of shrimp from
 India, Indonesia, Thailand,
Vietnam, Mexico, China, Malaysia
 for every dollar we exported to
those countries.
In the first three months of
2017 the U.S. imported $325
worth of shrimp for every dollar
exported.
As a result our trade deficit in
shrimp is substantial and
growing.  The trade deficit in
all seafood was $10.5 billion
last year, greater than the
deficit of either raw iron,
steel or aluminum.
The deficits in shrimp from
India, Indonesia, Thailand,
Vietnam, Mexico, China, Malaysia
 alone was 3.4 billion in 2016.
And increased 44% since 2012.
The shrimp deficit is largely
the result of a legal trade and
tax practices that encourage
shrimp exports to the U.S.  As
was fought hard to level the
playing field to trade remedy
laws.  Earlier this month the
international trade commission
vote ed to continue an existing
anti-dumping order on shrimp
from China, India, Thailand and
Vietnam, commerce agreed that
revocation could lead to dump
dumping margins as high as
112%.  The orders have provided
important discipline but import
      imported shrimp continue
to be dumped on our market due
to limited coverage in evasion.
The orders also do not address
the unfair subsidies foreign
shrimp produce ers receive from
their governments.  Aqua culture
crops up as an important source
 of foreign exchange earnings
and foreign produce ers, export
orientation has transformed
shrimp from a luxury item to a
low priced commodity.  Despite
documenting millions in
subsidies, our industry has been
unable to adequately -- to seek
 adequate relief under existing
trade remedy laws.  Government
subsidies continue to fuel
increasing foreign production
which already dwarf domestic
capacity. these practices are
exacerbate ed by value added
taxes on imports, labor rights
and substandard health and
safety laws in these countries.
 Which place the U.S. producer
at a competitive disadvantage.
Unfairly traded imports hinder
hindered the growth and
stability of the domestic
industry.  We're forced to
compete with imports in the
market every day squeezing
profit margins and preventing
much needed investment.  Our
industry has already faced
declining prices, landings,
employment and shipments without
concrete measures to address
underlying distortions that
drive the U.S. trade deficit in
shrimp, we'll continue to
struggle.
On behalf of the industry, we
look forward to working with the
 Department of Commerce and USTR
in any other agency to address
all of the issues identified in
the study in the omnibus report.
  We thank you for the
opportunity to participate today
 and I look forward to your
questions.
 Thank you.  I'm going to
butcher your name.  Nicks.
 NAZAK NIKAKHTAR:  Close enough
.  My name is Nazi nicks.  On
behalf of the industry we
appreciate the engagement on
this trade deficit issue.  With
me is Danny Walker, CEO of
heartland catfish, a large
catfish producer and processor
in Mississippi.  Production is
concentrate ed in the southern
states of Mississippi, lams,
Louisiana and Arkansas and
employs thousands of workers.  
It provides to U.S. consumers
food source in the USA, high
quality products that Americans
can be proud of.
Danny will testify about how the
 catfish industry has been
devastate ed by the unfairly
traded frozen filet products
from Vietnam.  In the year 2000
U.S. produce ers held over 90%
of the domestic market share
here.
Now they're clinging on to the
17% they have left.  And that
market share is dwindle ing
every single year.
The trust industry absolutely
has capacity to produce more and
sell more products but shut out
 of the market because of cheap
Vietnamese imports.  I want to
share additional remarkable
statistics.  Over 91% of the
seafood consumed by Americans is
imported and overall seafood
deficit is over $11 billion.
As trade deficits and natural
resources go, this is second
only to crude oil.  This means
over the years we have been
allowing other countries to
displace our seafood industry.
Our seafood deficit with Vietnam
 in particular is $854 million.
Almost half of that pertains to
 catfish.  That's $387 million.
What is causing the trade
deficit?
Widespread distortions in
Vietnam's economy have over     
overstimulate ed seafood
production and for nearly two
decades directed the flee of
cheap Samese catfish filets into
the U.S. market.  These are
coming in as substantially less
than American manufacturers'
costs.  Our processors are among
the most efficient in the world
 but the industry can't compete
at such depressed prices.
Let me give you examples.
The world Vietnamese catfish
filets collapsed since 1998 by
40% to a dollar and ten cents
per pound today.  We see the
same trend in the U.S. as price
      prices of Vietnamese im
ports again decline 40% of the
same period since 1998 to $1.34
per pound today.  Samese over-  
    over-production has for a
long time suppressed prices and
de   destabilize ed the catfish
industry both in the United
States and globally.
Our produce ers are not only
struggling to survive on their
own home turf because of the low
 prices, but we can no longer
export Vietnam has shut U.S.
produce ers out of the Vietnames
e market and world market.  This
 is a direct result of Vietnames
e government policies that en
courage over-      
over-production of catfish
products and it's worked.  
Currency manipulation encourage
Vietnam seafood exports to
skyrocket from $1.5 billion in
the year 2000 to $7 billion last
year.  That's almost a 400%
increase.
And this export trend is project
ed to grow even more in 2017.  
The Vietnamese government also
keeps costs low by owning and
managing land, controlling the
prices of commodities, including
fish feed, and through the
operation of numerous state-
owned companies.  Plus the
Vietnamese government has
infused hundreds of millions of
dollars in the seafood sector to
keep industry increasingly
export oriented.  Vietnam now
dominates 90% of the world's
catfish market and 80% of the
U.S. market.  This share is
growing at an unrelent         
unrelenting pace.  This type of
pervasive government
intervention encouraged the
flooding of our markets and
world markets with two products
and its distorted prices.  And I
'll end on this note.  Danny
Walker of heartland catfish will
discuss the industry attempt
for relief for unfairly Vietname
se imports through dump     
dumping measures.  I want to
underscore an important fact.  
Anti-dorping measures by the
commerce department, over 75%
this year on dumped Vietnam
product.  That's a lot of dump
     dumping. although the
measures have somewhat mitigate
ed the decrease in import prices
, prices are in serious decline
nonetheless.
This is because the oversupply
of cheap Vietnamese catfish
worldwide depressed world price
     prices and these depressed
world prices have lowered the
benchmark prices the department
uses for antidumping analysis.
So that the final duties
ultimately calculate ed and im  
 imposed by the commerce
department on Vietnam imports
are far less than otherwise
would be.  This in effect means
that Vietnam trade distorting
policies have weakened the
United States ability to utilize
its own trade remedy tools to
effectively combat unfair trade.
Vietnam's action       actions
 if unaddressed will destroy the
catfish industry in a matter of
 years.  We can't let this
happen.  The American seafood
industry is worth saving.  We
ask the U.S. Government to stent
 this industry and hold Vietnam
accountable from manipulate ing
the trading regime when
assessing response to the
deficit with Vietnam.  And we in
tend to work with the
administration to find solution
solutions.  Thank you.
 Mr. Walker.
 DAVID VEAL:  Good morning.  
 Good morning.  Thank you for
the opportunity to come and
speak on behalf of the U.S.
farming catfish industry.  I'm
the CEO of Heartland Catfish
Company.  We are a processor in
the state of Mississippi.  We
process whole live catfish into
filets you buy at the grocery
stores and restaurants all
across the United States.  
Catfish is among the top ten
most consumed seafood products
in the United States.  I've been
in the catfish industry over 30
 years and have been the CEO of
Heartland Catfish Company since
its inception in 1996.  Our
industry produces farm raised
catfish principally in
Mississippi, Alabama, Arkansas
and Louisiana.  We have come to
Washington today to let you know
 that our industry has been
significantly harmed by Vietname
se imports of frozen fish filets
and the trade deficit the U.S.
has with Vietnam.
The U.S. catfish industry has
been struggling in the U.S.
market due to the unrelenting
flood of unfairly low priced
Vietnamese imports.  Those im   
imports cripple ed our industry.
This industry is extremely
important to our states.  It
employs thousands of workers and
 many economically vulnerable
regions and poorest states in
the country.  Our employees work
tirelessly to make quality
products for customers and they
deserve to be protected from
unfair trade.  They deserve the
opportunity to keep their jobs.
In the late 1990s, the
Vietnamese catfish industry was
in its infancy.  In 2000 the
Vietnamese government decided to
 bolster the industry and
infused capital and granted tax
credits, extended preferential
import programs to catfish
produce ers to increase
production and dominate export
markets.  Our industry filed an
antidumping case against im   
imports of frozen fish filets
from Vietnam in 2002 because we
feared not being able to survive
without the appropriate trade
relief.  Since '02 the
Vietnamese government has
rapidly grown industry for
exports.  Its exports exploded
from 68 million pounds in 2002
to 3.7 billion pounds in 2016.
This is a 5,300% increase.  
Domestic production never
recovered from the initial blow
of dumped Vietnamese imports and
 production decreased over the
same period from 100 million
pounds down to the current
volume of 60 million pounds of
frozen filet Ms. We lost a
significant portion of market
share to Vietnamese and thousand
s of farming acres and jobs.
In 2000 the U.S. industry farmed
190,000 acres of catfish ponds.
  Today we are down to 63,000
acres.
The Vietnamese government's goal
is to flood the U.S. market
with cheap agriculture products
to completely disrupt our market
.  It's working.  And they're
choke ing our industry.  In 2000
 we held over 90% of U.S. market
share.  Since then the industry
 has contracted to a dangerously
low level.  We now hold only
17% of the U.S. market.  80% of
the market is now dominate ed by
 the dumped Vietnamese product.
We are the verge of non-
existence.  We know our markets
are the most open in the world
but I want to emphasize the
Vietnamese catfish industry has
taken advantage of our open
borders.  The Vietnamese
government has encourage ed
produce ers to flood our markets
 with cheap products and
displace produce ers.  At the
same time the Vietnamese shut us
out of their markets entirely.
 They lowered the prices of
their products to levels far
below our cost of production.  
We can't export to their markets
 at such low price      prices.
We can't export other markets
because the domination of
Vietnamese products overseas
        overseas.
This isn't fair competition and
we ask the administration to
defend our industry against this
 type of unfair trades.
Finally I want to raise the
issue of Vietnamese industry
dishonest participation in the
antidumping case.  Although over
the past year the commerce
department made important
decisions to address the unfair
trade practices by the
Vietnamese industry in the case
     case, the Vietnamese have
double ed down on their efforts
to gain the system in response.
They have preengineered industry
 participation in the commerce
proceeding, misreport          
misreported critical information
to the agency and have used
various tactics to avoid paying
antidumping duty tariffs to
customs.  We are fighting tooth
and nail to defend our industry
against assault by the
Vietnamese on all those fronts.
The millions of pounds dumped
Vietnamese product into the U.S.
 market worsens trade deficit
with Vietnam each year, while
trading relationship with
Vietnam is important as is our
trading relationship with every
country, the same must also be
said for the United States'
ability to guard its industries
against unfair trade and prevent
such significant trade deficit
s.  The status quo does not
level the playing field for U.S.
 industry ies.
To be clear, there will be no
U.S. industry if cheating is un
unabate ed and trade deficit
we have with Vietnam is un   
unaddressed.
We need and will continue to
need our government to defend
our industry ies against
Vietnamese predatory trade
practices.  If we don't fight
back, our industry will become
extinct, workers in the
Mississippi delta, Arkansas
delta, and the Alabama black
belt deserve better and the
United States need to be able to
grow its own food.  Thank you.
 Thank you.  We'll move into
the question phase of the
testimony.  I'd like to start
with our colleague from the
Department of State.  Please, as
you ask your questions,
introduce yourself.
 Sure.  Hello, everyone.  I'm
Carol from the economic bureau
at the state department.  Thank
you for your testimony.  I have
a broad question for the group.
Which barriers tend to be the
most significant in terms of
hampering expansion of U.S.
seafood exports?  For instance,
does the U.S. industry compete
on price where tarrifs would be
particularly important or
meeting health and safety
regulations the biggest
constraint?  And what extent
does this differ agross the
industry?
 I think I'm the exporter in
the panel.  I'll start.  And
non-tariff in Europe are a
challenge, but five years ago we
 had a situation which the
scallop industry faced a
discriminatory barrier from the
European Union working with
state USTR and others.  We were
able to overcome that.  Just
last year, the lobster industry
was facing a potential ban on
live exports -- excuse me --
exports of live North American
lobsters to the European Union
based on concerns about invasive
 species.  Working with the
government we were able to
convince Sweden to pull back
from that -- excuse me, European
 Union and member states -- we
were able to do that.  There are
 non-tariff barriers that the
commerce department and others
help us with, but the FETA, free
trade agreement between Canada
and the U.S. will have a
significant impact on shellfish
exports, any shellfish exports
and salmon, particularly as the
lobster imports are going to
have a difficult time, and not
only because of the basic
agreement but also because of
some of the rules of origin that
are associated with how lobster
 is defined as to where it's
grown, where it's harvest       
 harvested or packed or what is
called crate ed.
So absence, as I'm meeting with
the lobster industry next week,
unfortunately my answer will be
until the U.S. Government acts
on some kind of agreement with
Europe, we're screwed, to be
blunt about it.  And exports
into Asia are primarily Alaskan
products, although if Europe
does close down the lobster
industry is very likely to turn
to China, which is a massive
market for our lobster industry.
And European exports tend to
occasionally non-tariff barrier
comes up, registration of
certain vessel types for fish
meal or fish oil was an issue.  
Russia obviously is a major
concern of ours when they closed
 out their market for us.  So
those are -- primarily are non-
tariff barriers before for the F
ETA work, obviously.
 I have a variety of things,
and I think it probably depends
on the country we would be
talking about or the region of
the world we're talking about.  
They can range from everything
to tax barriers, particularly
value added taxes, to issues
like sustainability and trace
traceability, the kinds of
 things that are require ed here
in this country and in Europe.
 I think the most difficult
problem for us is the world
price of shrimp.  With
production and in particular in
European -- or in Asian
countries, the price worldwide
has been depressed and it is
very difficult for a U.S.-based
firm
to compete in price-wise with
Asian production.
 NAZAK NIKAKHTAR:  Thank you
for your question.  The U.S.
catfish industry, the answer to
the question is quite simple.  
As I mentioned the trade deficit
 with Vietnam on catfish
products is 387 million.  The
U.S. does not export any
products, any catfish products
to Vietnam anymore.  It used to.
In early 2000.  It stopped
exporting because the U.S.
industry simply cannot compete
with the cheap product -- cheap
prices of the Vietnamese
products worldwide.  As I
mentioned the cheap prices are
driven by government policies.  
They're cropping up industries
that otherwise shouldn't be
surviving.  In the United
States, because of the unfair
trade, we've lost number of
industries.  Vietnam isn't
willing to lose any industries.
 The government continues to in
infuse capital to profit
industries and drive world price
s lower when you have economic
conditions like that, it's clear
to see how the U.S. industry
can't compete against in its
home turf in the U.S. can't
compete abroad.  On the last one
I mentioned before, we   we've
tried to address -- use dumping
measures to address trade
distortion behavior, but the
commerce department used the
surrogate value methodology
where it looks third country
pricing in Vietnam because it's
still a state-controlled economy
, while the flood of Vietnam
products worldwide has depressed
 those prices too, so when
commerce goes to third country
prices, the dumping margin it
calculates is otherwise lower
than it otherwise should be.  So
the bottom line, we can't
export to other countries.  We
can't survive in our own home
market, and we don't have -- the
trade remedy tools we're using
right now are inadequate because
of the actions of the
Vietnamese and flooding the
market with cheap products and
driving the prices lower.
 I can speak to heartland
catfish companies, our exports
are virtually zero.  We do have
national chain accounts that
will export some of our product
to their restaurants that they
have in other countries, but
that is very minimal.  And just
a little bit in count goes.  
Several years I went to China to
look at China to see if they
could be a potential in that
marketplace for U.S. farm-      
farm-raised catfish.  You know,
we saw retail grocery stores in
that area that the entire store
was nothing but U.S. product.  
There was no other products in
the entire chains of grocery
stores there.  But the worldwide
barrier price of Vietnamese was
 so great that they could not
consider U.S. farm-raised
catfish, the price difference
was tremendous.  So the
worldwide price is the single
largest barrier that we have
where they're looking at an
industry that they want to
completely dominate entirely and
prices where they're going to
do it with.
 Thank you.
Assistant trade representative
 for policy and economics.  
Several testimonies mentioned
sub si addition of foreign
agriculture as a factor behind
imports of a number of seafood
products.  Could you further
elaborate on the types of sub si
addition?  Do these expire?  Do
 they remain active?  Can you
tell me more about that topic?
 We've been looking at on
behalf of the catfish industry,
we've been looking at sub     
sub si        subsidy.  We
mentioned a couple laws
promulgate ed by Vietnam.  So
the challenge with Vietnam is
that certainly it's not an ---
the government isn't open.  It's
not transparent.  So what we in
 the U.S. have available to us
is essentially the laws and the
rules that the Vietnamese
promulgates which is restrict
         restrictive because
they withhold a lot of
information opinion
With that said, in our paper, we
 said -- we mention a number of
laws what the Vietnamese
government is doing is basically
it's putting a lot of money
into industry, a species of
catfish, for simplicity I'll
call "catfish" ," basically
putting a lot of money into
industry to help it operate to
help reduce costs by the
government giving them a lot of
extra money.  It's driving down
the input prices because it's
subsidize ing those industry ies
 to   to -- feed is a huge
driver in production cost of the
 catfish, the actual fish, and
hence the filets.  They're
subsidize ing those feed mills,
feed produce        producers
too and essentially giving them
tax credits.  They are giving
them production incentives, just
by giving them sort of raw
money.  And investing in those
industries.  They also have
state-owned enterprises that are
funded by the state.  So they
have extremely low costs.
So it's a -- and in our paper we
 talked about exports too, but
in terms of what is happening in
 the industry in Vietnam, it's
just infusing -- it's just a
blatant infusion of capital into
these industry ies to prop them
 up.  Tax credit and just
straightforward infusion of
money.
 In 2013, the American shrimp
industry filed a countervailing
duty case against seven
countries, Ecuador and six
southeast Asian companies.  The
Department of Commerce ruled we
we, in fact, were right, and
determined there was more than
$200 million a year in trade
illegal subsidy ies in those
seven countries.  Unfortunately
the time period that the
international trade commission
considered to determine damages
included the deep water horizon
       Horizon, and the
subsequent increase, the short
age of gulf shrimp that year and
that year     year's increase
in the shrimp prices distorted
the economic         economic --
 the snapshot picture of
economics for the gulf.  Our
efforts to get them to change
the review period were un
successful, so the trade
commission rule ed that we did
not or had not suffered material
damage from those countervail
ing duty cases.  So far as I
know, all of those and
additional subsidy ies are still
in place.
We'll be happy to get you the
detailed information about those
 subsidy ies that we identified.
And what we know about whether
 they're still in place or not.
We believe they are, and that
that -- and that the effort of
the level of sub     subsidy
iation has increased.  
Supplements to a farmer to
produce shrimp to export subsidy
ies.  And everything in between
.
In their defense, that is a
viable economic activity.  The
question is whether those
activity ies should devastate --
and that's what is happening.  
Devastate a domestic industry
that is on the receiving end of
the product that is produced.
 And I think to that point
another note to point out is
that, you know, on one hand
somebody could look to say, why
don't you guys just bring
countervailing subsidy cases as
the shrimp industry did, but the
 big challenge there is that
when that is on the table, the
Vietnamese government is going
to withhold more and more
information.  When the United
States government and when the
United States industry doesn't
have access to adequate
information to bring case,
that's just throwing, you know,
good money after bad.  Our hands
are tied because the Vietnamese
 government is not an open and
transparent government so we
can't effectively use the laws
we have and the trade tools we
have to combat that because they
withhold that information from
us.
 Thank you very much.  My name
is Lori, I'm the deputy director
for trade and regulatory reform
 at the United States Agency for
International Development.
Some of your testimonies
mentioned labor issues as well
as health and safety standards.
Can you elaborate on that,
please, and how these problems
affect your industry ies?
Thank you.
 Labor is an issue
that -- obviously they have an
advantage on us with labor, but
that is a small, small part of
the overall cost of production
when you look at catfish.  The
primary cost is the cost of the
raw material.  You know, our fee
 that we feed our catfish is
made of soybeans and corn since
2006 we've seen the price of soy
beans and corn skyrocket.  We
have seen the cost of feed that
we feed our cattle, we feed our
chicken, our swine, our catfish,
we feed our pangac       
pangacees, we've seen that cost
skyrocket.  In turn the price of
 U.S. farm raised catfish has
gone up.  We have to pass that
raw material on.  The price of
pangacees during that time has
gone down tremendously.  There
is no correlation between the
price of the raw material input
inputs and the price of
the end product they produce.
You know, if the price of crude
oil goes up 100%, the price I
pay at the gas pump cannot go
down 50% and make sense.  But
that's what we see in the
catfish industry.
 NAZAK NIKAKHTAR:  I'll add in
our paper we talk about child
labor issues in Vietnam and we
provide a bit on that.  And with
respect to food safety, it   
it's a politicize ed issue about
catfish product inspection with
 the FDA and the USDA, and we
don't need to get into that, but
 I will mention that recently
the U.S. Government found -- I
think it was 2,000 cartons of
contaminate ed seafood        
seafood -- catfish filets that
came from Vietnam.  There are
issues -- the issues are
continuing with products that
have carcinogens and contaminant
s banned by the U.S. Government.
  That is an ongoing issue and
we don't see any decline in that
 being a big issue for the
health and safety of U.S.
consumers.
 For shrimp, that is a huge
issue for us, and I think we all
know and agree about the forced
 labor issue and child labor
issue that has occurred in some
particularly southeast Asian
countries.  The health and
safety of the product is another
-- the level of inspection in
this country is abysmally low by
FDA.  And in the order of 1-2%
now, I think up to 2%.  We see a
-- have seen, when the levels
increase from 1 to 2% this past
year, a significant increase in
the amount of rejection for
shrimp.  Now, is it a major part
 of it?  No.  As a consumer, any
is too much.  I think what we
would like to see is what we've
always talked about, and
everybody talks about it, and
that's the level playing field.
 If there are a set of rules and
regulations that apply to food
production in this country, they
need to apply to food
production everywhere.  And we
ought to expect everybody to
obey those and ensure that they
obey those.
Every consumer, all of us here
and our children have the right
to that.  Not for somebody to
tell us that it's probably safe
or it's not really bad for you.
If the standards are there,
they're there.  And that ought
to be the bottom line for us.
 Level playing field is
complete red herring.  Complete
red herring.  FDA has regulated
seafood for the last 25 or -- 22
 to 25 years under the process.
It is a model that Congress
used for the implementation or
the expansion of FISMA to all
other foods.
HASUP requires domestic and im  
 imported processes to use the
same models of analysis.
So the domestic catfish industry
and the import catfish industry
 has used HASUP for the last 20
years and to suggest that im
ported is substandard from a
food safety standpoint, both
regulated by FDA which suggests
the domestic catfish problem had
 problems, regulated under the
same process, same thing with
the shrimp industry.  The
domestic shrimp industry and the
 domestic -- excuse me import
shrimp industry both operate
under HASUP, and the requirement
s for affirmative controls, that
 is the basis by which Congress
expanded HASUP      HASUP --
excuse me, expanded FI   FISMA,
and that's the process.  The
results are even more telling.  
CDC collects the data on
illnesses reported.  They had
390,000 injury ies for
hospitalizations over a ten-    
ten-year period.  About 10,000
were attributable to imported
food.  About 1200 were
attributable to imported seafood
.
Now, .13% I will take those odds
, .13%.  Anything is wrong, any
illness is wrong, but to say
this is an unlevel playing
field, this has been the same
playing field since HASUP was
introduced.  I would like the
last word on this because I've
had to listen to this.
 NAZAK NIKAKHTAR:  We're happy
to supplement with facts should
you require it, substantial
facts to address those comments.
 Thank you.  Thank you.  I'm
afraid we're at the end of our
question and answer period.  I
thank the panel for coming and
very much appreciate all the
comments.  Thank you very much.
 
 
 I would like to ask our
panelists to introduce
themselves and then we will turn
 to your testimonies.  
 I'm bob Denin         Bob
Denine, president and CEO of the
renewable fuels association.
 Ann Stukel.
 And I'm bob com       Bob
Comings,  with the rice
reditation            fede
ration.
 Thank you for your time
today.  We will turn it over to
you.
 Thank you, I thank you for
the opportunity to be here today
 and to testify today on what I
believe is a very timely hearing
 on an important subject.  I
have provided a slide deck for
you and we have provided the
department detailed comments.  
I'm just going
to TOUMP       touch on a few it
ems today.   
So in October, of 2010, that is
when China launched its first
anti-dumping investigation.   
And our industry had
participated in that
investigation process, we
responded to their audits, we
spent millions of dollars in
that process for the         
that lasted about 18 months
when, finally, in the summer of
1220      2012, China said, eh,
we are going to have it go away.
It was never official that they
had not found any incidents of
dumping, but I think they
realized that, hey, they really
did not our feed product and
poultry farmers in chine a   
China were asking the
government to put that aside.   
So trade continued to grow
again.    and, in facts,        
farcts        fact, by 2014,
distillers fee to China
represented half of our total
exports of that product.   
Again, China decided that they
were importing too much U.S.
feed, so Christmas time in 2014,
 they sum     sumayoraly  
summarily cut off
shipments from the U.S. and
required a certification process
 for MRI, a trait that farmers
had used.  It is a root worm
trait, it helps them produce, as
efficiently as they are.       
 have.  
And root worm traits have been
available for years, one company
had completed the certification
 process, there was a real
question scientifically as to
whether or not China could
identify that trait,  but,
nonetheless, they decided that
they had found it.  We couldn't
replicate their finding, and
trade began to drop off.  
Then China decided that they
would require a certification
process, and U.S. producers had
to certify that, no, we didn't
have that trait in our distille
r's feed.  And ethanol producers
 don't necessarily know what
traits are in the corn that they
 are processing, and we didn't
have a mechanism to require
formers         farmers to c
ertify whether they used that
trait or not, so distiller's fee
exports to China eVAP
  vaporated, by the fall of 201
4, there were no exports to
China.  So he had gone from
essentially a billion dollar exp
ort market to nothing because
China said they could find a
trait that we couldn't identify.
China approved the use of MIR
and sales again began to grow.
UK S exports, or imports, were
beyond what they were comforta
ble with, they then embargoed
several distiller's grain
shipments without explanation,
SERFBLT         several months
later they then began an anti-d
umping investigation, which
concluded last fall u with      
 , with a 33 percent anti-dumpin
g duty imposed.  
They then imposed an additional
duty on top of that, and they
have essentially eliminated
distiller's feed opportunities
from the United States.  
We continue to fight that, we
have not seen any evidence of
yet that there actually was
dumping.   , and the process has
been exoPRORT     TRORD      t
raordinarily one-sided and
unfair.   
And going to the last chart that
I have, then, just to talk
about ethanol, because the story
is very much the same.  We were
 building an ethanol export
market for STHINE        China,
last year it had been our third
largest export MARPTH        
market, and our fastest-growing
narcotics           market.  We
exported about 200 million
gallons ofeths nol         ELTH
     ethanol to China.  In
January, they decided without
WRARNG and without             
WRARNG        warning and
 without any process to impose a
30 to 40 percent tef     tar
RF   rif on U.S. ethanol.  It
has eviscerated the markets, we
            market, we have not
shipped a dropped         drop
to China since.  It is a source
of great fusteration, our
industry, like many other
industries that we testified
before you today, need access to
markets.  Farmers, who are
being asking        asked to
sell commodities below the cost
of production need fair and free
trade, and I would maintain
that consumers across the globe
need access to the lowest cost,
highest octane, highest performi
ng motor fuels that are availab
le and U.S. ethanol is indeed
one of those.  So I thank you
for having these higher        
hearing, I thank you for your
commitment to the mission of
addressing these very serious
issues, and we look forward to
workingwealth you           with
 you in the future as we go
about making sure that, you
know, farmers and ethanol
produce RZ   rs and biofuel
produce recalls across      
rs across the globe
have free and open access.  
Speaker: Thank you.  Ms. Stekl?
KBLRBLSH            
Speaker: Thank you for having me
 today, I'm Ann Stekl with the
bi    national biodiesel board,
we represent renewable diesel
producers in the United States.
 Our members include feed stock,
feed stock processer
organizations, biodiesel
suppliers, distributeers, and
technology processors.  So
anybody in the process is a
member of ours.   
As you may know, biodiesel is a
reNEEBL,      newable, clean-b
urning diesel replacement, made
from ingredients SAUCH as re    
such as recycled Greek
      grease and animal fats.   
We share the concern between the
 growing trade and goods deficit
between the U.S. and Indonesia.
  This is fueled by increasing
volumes of unfairly traded  
      traded imports from
Indonesia, it is impacting our
workers and the farmers that
supply much of the feed stock
for our industry.  The U.S.
strayed         trade deficit
with endo    Indonesia is the
highest it has ever been, reachi
ng 16.   $16.2 million in       
bill           billion, the
highest increase since 2014.  
This grows from imbalance
between policies that discourage
COURJ     courage       c
ourage U.S. ecports         exp
orts and stimulate endo
   Indonesian imPORLTs.   
Increased                     p
orts.   
Increased imports is a major
factor in this trade impall    B
ALF.       balance.  Biodiesel
is one of the top 14 products
contributing to the trade
deficit.  Between frequent
2014 and 2016, the
trade imbalance with respect to
bipo         bi    to biodiesel
has grown 95 percent.  
The only other good on par is
sports footwear.  It warrants
close examination.  Unfair trade
 practices has causeed a   a
certainly of              surge
of imports, and national sub sid
iization by the indonesian
government, and these practices
have threatened to continue
injureing U.S. biodiesel
producers that we represent.   
The in  endo    Indonesian
government maintains a biodiesel
 subsidy fund that gives grants
to producers.
subsidy this program OORPS
has           has given billions
in grants.  The government emp
loyed other tactics, including a
high tax on crude palm oil,
preferential finapsing          
finals    nancing, and taxes
from supporters.  By taking
advantage of these subsidies
     sidy ies, indonesian exp
orters are taking a greater
share of our U.S. market.  These
count for a substantial
proportion of imported biodi
esel.
rs FNT     financial
contribution has gone back,
causing the U.S. to pull back in
 expansion in what continues to
be a growing market.   
This situation is untenable and
likely to worseen.  Low capacity
 utilization in Indonesia, 34
percent, leaves unused capacity
for increased production that
can be exported to the U.S.   
This threatens the U.S. biod
iesel industry and its
availability to contribute to
the U.S. energy security.  
Action must be taken.  
If the administration commits
itself to rigorous in forcement
of the anti-dumping and counter
veiling duty laws, and the inves
tigations initiated by the
comRSS   merce department, it
will help protect    TECKT
    tect American manufacturers
and workers in the biodiesel
industry, and help to restore
the balance of strayed         
trade.  Thank you for the
opportunity to testify.  We look
 forward to working with the
administration to address this
important issue.  
Speaker: Thank you.  Mr. Com
   cummings?   
Speaker: Thank you, I welcome
the opportunity to appear before
you to offer comments on an
important topic, the causes of
significant trade deficits.  
U.S.A. rice is the global at    
advocate of the U.S. rice
industry to promote and protect
TECKT     tect rice producers
, millers, and allied business
es.  It contributes $34 million
in annual economic activity, it
provides jobs and income for
rice producers and processors,
and for all involved in the
volume     alue chain, contribu
ting 128,000 jobs.  The U.S.
rice industry is open to intern
ational trade, half of each
year's rice crop is exported,
and 85 percent of all the rice
that is consumed donestically
mestically is produced
in the U.S. Our members have
offensive and defensive market
interest in the majority of the
13 SCUNT       countries listed
ain the   TH        in the
federal register.   
The industry is efficient, with
exports exceeding imports by an
average of $1  1 $1.2 billion.  
Rice is one of the most heavily
protected crops in terms of
domestic support, border prot
ection, and export controls.  A
majority of the listing of the
countries in the federal
register notice, including
India, Japan, China, Taiwan, n  
intervene heavily in the rice
market and the result is
restricted access for U.S. rice
and unfair computation in
foreign markets.   
U.S. rice joined with other
groups to look at the export
policies of several advanced
developing countries, including
China, innedia, and   SX       
India, and VEETt         
SX  and Vietnam.  
That report, and NAUL low-      
       SX  and follow up
analysis, found flagrant
violation of the country's WTO
obligations in the form of
excessive PRORDer support
producer
supports, with the effect of
boosting domestic rice pro
duction.   
The impact of China's policies
is significant and relevant.  
China's domestic support of rice
 prices has disdort    torted
the internal market, with PR
IGES        PRISEZs         
prizes well             prices
well above world levels.  The
result is a surge of imparts,   
Z      ports, China is an exp
orter of 2 to 3 million tons.  
U.S. exporters are unavail
able         able to take
advantage of this demand
because China officials will not
 sign a U.S.-son  ino protocol
yield       about yields, even
though it it was           it
was agreed on in between        
 2014.   
Perhaps 50 metric tons per year
initially, growing to 250,000
tons.  Chine a's inaction is
contribute to the U.S. trade
deficit.  
The U.S. international trade
commission in April of 2015
published the results of a
comprehensive study called rice:
 Global competitiveness of the
U.S. industry, at the request of
 the committee on ways and means
.  
The U.S. examined rice policies
in many countries of
interesttide     today and
reached a similar conclusion to
U.S.A rice analysis.  
The export would have been 1.3
metric tons higher if tar RFs
and        rifs aps     were not
 put in place.   
These agreements are key to the
rice industry andry   reducing
trade deficits.   
When there are good trade agreem
ents, increased exports follow.
 Look at the Uruguay agree      
agreements, the establishment
of the WTF, NA     and NATO.
NAFTA made mex   Mexico the
number one exporter for rice.  
The U.S.-columb u      LUM B
    lumbia deal created a new
market for U.S. exports.   
Strong use of dispute settlement
mechanisms are key to prie
sthooding               produci
ng exports.   
Without the right to enforce the
rules through binding dispute
settlement, it would be
difficult or impossible to
address XHAEN       many of the
obstacles standing in the way of
 increased exports.   
U.S. rice exports in isolation
will not SAEVL       solve the
trade deficits identified in the
 federal register notice in the
subject of today's hearing.  
Action by the U.S. government to
support exports from America's
highly efficient agriculture
sector is an important part of
the solution.  This means that
first and foremost comprehensive
 trade agreements, that open m
arkets and provide for commer
cially-meaningful access.  
Rigorous enforcement goes hand
in hand with trade agreements,
these policies are essential to
achieving the level playing fiel
d of free and fair trade, which
U.S. rice and agriculture seek.
Thank you for your time.  
Speaker: I would like to thank
the panelists for their comments
 today and will turn time over
to my colleagues on the panel
here to ask questions, ask each
of THERT       them to introduce
 themselves when they address
the panel.  We will start with
our colleague from USGR.   
Speaker: EdGres  SRKS         Gr
essor with USGR.  Mr. Cummings,
some of our major exports are
those with free trade agreements
, such as Mexico and Columbia,
can you talk about the features
of those aGRUMENTs        g
reements that are BENL      
beneficial and give a QUAUNL
Tification                  
quantification as to how much
they helped the industry.   
Speaker: Well, Mr.Gress     G
ressor, each agreement is dif
ferent for each of the countries
 involved, and they reflect
generally, however the sensi
tivity of rice in the countries
that we have a trade agreement
with.  
Rice is sensitive in most countr
ies, and the trade agreements
that result tend to have very
specific provisions for rice,
they tend to be very heavy on
ter     tarrif quotas and prov
ide for long phase-outs of dutie
s before we get to free trade.  
The most recent agreement is
with Columbia, a phase out of 18
orphony year ez              19
 years, and it is dependent on a
tar RF-     Purchase ri    
        rif free quota that a
llows the U.S. to export
competitively.  
So, we have on the one hand TRQs
 that are used in the CAFTA
agreement, in Mexico, in NAFTa,
it           NAFTA, it was a
10-year phase out of duties.  In
 Mexico      mex   Mexico, you
are facing a smaller industry.  
So while politically sensitive,
it had less the political impact
 than the industry in Columbia.
agreement and the opening that
happened there, we are dealing
with initially two, and then
followed by Taiwan when it joine
d the organization.  
Countries that were very high
income had very high costs of
production, and a lot of politi
cal protection for rice, also
heavy involvement by the governm
ents of those countries.  SO
THAT AGREEMENT SET UP A SYSTEM
WHERE BY GOVERNMENTS IN EACH
COUNTRY WERE COMMITTED TO IMPORT
A SET AMOUNT OF RICE FROM WTO
MEMBERS.  
AND SO, WE ARE DEALING IN THAT
CASE WITH STATE ACTORS, WHOSE I
NTEREST IS PROBABLY -- THEIR
LAST INTEREST IS PROBABLY DEALI
NG WITH FOREIGN SUPPLIERS, THEIR
 FIRST INTEREST IS TO THEIR OWN
CON STITCH WBTS  WANT           
 CH      STITUENTS.  THAT SETS
UP A CONSTANT VIGILANCE TO MAKE
SURE THOSE AGREEMENTS ARE IMPLE
MENTED.   
SO I WILL STOP THERE, I DON'T K
NOW IF I ANSWERED THE WHOLE
QUESTION, IF THERE ARE PARTS I
DIDN'T, PLEASE LET ME KNOW.  
      
SPEAKER: THANK YOU.  I HAVE A
QUESTION FOR MS. STECK       
STEKL.   
IT IS OUR UNDERSTANDING THAT
INDONESIA'S MARKET SHARE IN THE
U.S. OF THE BIODIESEL FUEL PULL
DECREASED IN 2016.  ARE THE EGIN
AL        ELIGIBLE EPA EXPORTERS
THAT YOU CITRIX        CITE AT
INCREASED CAPACITY IN 20PHONY
IS?
          17?
              17?
 I REFERENCED 2014-2016, AND
THOSE ARE THE ELIGIBLE REPORTERS
 THAT CAN USE THE U.S. PROGRAM
THROUGH EPA.
 GOOD, YES, MR. DINAN.  YOU
STATED CHINA IS   'S DISCRIMIN
ATORY POLICIES HAVE ADVERSELY
AFFECTED U.S. EXPORTS OF ETHANOL
 AND DISTILLED GRAINS.  YOU ALSO
ASKED THAT REFORM OF THESE
POLICIES BE INCLUDED IN ANY POTE
NTIAL UPCOMING TRADE NEGOTIATIO
NS WITH CHINA.  WHAT SPECIFIC CH
ANGES ARE YOU SEEKING TO ADDRESS
 THESE CUNTD       KINDS OF
TRADE-DISORTED     TORTING PRACT
ICES?   
SPEAKER: WELL, WE ARE LOOKING
FOR ACCESS.  SO WHEN CHINA WILL,
YOU KNOW, ANYTIME IT LEAVES  
BELIEVES                BELIEVES
U.S. IMPORLT     PORTS ARE TOO
HIGH, OR THEIR OWN DOMESTIC CORN
AND FEEDS ARE GROWING, THEY --
YOU KNOW, SOMEWHAT ARBITRARILY
SHUT OFF TRADE U AND SOME      
     , AND SOME CONSISTENCY.  
YOU CANNOT PLAN AS AN INDUSTRY,
AS A BUSINESS, WITH WHEN ONE
WHEN ONE OF THE
MAJOR TRADING PARTNERS CAN UNIL
ATERALLY, AT A MOMENT'S NOTICE,
JUST DECIDE, NO, WE ARE GOING TO
CLOSE THE DOORS.  
SO, YOU KNOW, WE JUST NEED SOME
CONSISTENT AND ENFORCEABL
E REGULATIONS THAT WILL ALLOW US
 TO COMPETE.  

       .   
SFEEKER:            
SPEAKER: GOOD AFTERNOON, I'M LOR
I BROCK WITH THE UNITED STATES
NATIONAL DEVELOPMENT.  MR. CUMM
INGS, YOU STATED THE NEED FOR
COMPREHENSIVE TRAITED         
TRADE AGREEMENTS THAT WILL RED
UCE THE DEFICIT.  DO    IS THERE
 A PREFERENCE, OR DO YOU HAVE AN
IDEA FOR THE BILATERAL OR MULTI
-LATERAL, WHEN      WHAT ARE THE
BENEFITS OF ONE OVER THE OTHER
IN THE INDUSTRY?
        
SPEAKER: SORRY, I DID NOT HEAR
THE END PART OF THE QUESTION.   
SPEAKER: DO YOU FEEL THERE'S A
PREFERENCE FOR YOU BETWEEN THE
BI-LATERAL OR USING THE MULTI-L
ATERAL SYSTEMS FOR THE TRADE
AGREEMENTS.   
SPEAKER: AS AN INDUSTRY, WE HAVE
 BENEFITED FROM BOTH, I WOULD S
AY.  
SO I THINK THAT, I DON'T THINK
THAT WE ARE HOLDING FASTLY TO
ONE OR THE OTHER, EITHER BI-L
ATERAL OVER MULTI-LATERAL.  WE
ARE LOOKING FOR NEGOTIATIONS,
WHICH HAVE THE OPPORTUNITY TO
BRING REAL ACCESS FOR OUR INDUS
TRY AND FOR AGRICULTURE.  
I THINK THAT'S DEPENDENT UPON
THE NEGOTIATING CIRCUMSTANCES AT
 HAND, AND SO WE DON'T, FRANKLY,
GET TOO HUNG UP ON ONE OR THE
OTHER.  WE ARE FIND OF LOOK   
KIND OF LOOKING AT
WHERE WE ARE GOING IN, AND DOES
IT LOOK LIKE ALL OF THE PARAM
ETERS ARE THERE, ALL THE INGR
EDIENTS ARE THERE, TO PROVIDE
FOR A SUCCESSFUL OUTCOME ON THE
OTHER HAND      END.  SPRAEF
SPEAKER:                 
SPEAKER: THANK YOU.  
SPEAKER: OKAY, I THINK WE HAVE
REACHED NEAR THE END OF OUR PANE
L.  WE WILL THANK THE PANELISTS
FOR EACH OF THEIR TESTIMONY AND
TIME, WE LOOK FORWARD
TO THE CONTINUING THE DIALOGUE
WITH THEM.  THANK YOU.  
SPEAKER: THOUR       THANK YOU
VERY MUCH.  
SPEAKER: THANK YO
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 Good afternoon.  I'd like to
thank you all both for the
comments you've already put in
and for coming today to give
your testimony.  This is our
next panel on manufacturing.  So
just for structure of the panel
, if we could I would like to
ask that each of you to briefly
introduce yourself, your name,
where you're from.  Just go down
 the line.  And we'll start back
at the beginning.  You can give
 your testimony and then we will
move to questions.
 PAUL CICIO:   Paul Cicio,
president of industrial energy
consumers of America.
 KEVIN DEMPSEY:  Kevin Dempsey
        Dempsey, senior vice
president public policy general
counsel for American Iron and
Steel Institute
 CELESTE DRAKE:  Celeste Drake
Trade Policy Specialist for AFL
    AFL-CIO.
 STEPHEN EZELL:  Hi, I'm
Stephen Ezell, vice president of
Global Innovation Policy
Information Technology and
Innovation Foundation.
 MARC FASTEAU:  Marc Fasteau,
coalition for prosperous America
.
 JESSE GARY:  I'm Jesse Gary.  
Century Aluminum.
 I'm part of the manufacturing
division.  And I think we'll
introduce ourselves as we do the
questioning so we can get right
 to the testimony.
 Good afternoon, my name is
Paul Cicio, president of the
Industrial Energy Consumers of
America.  And we are a trade
association, member companies,
energy intensive and trade
exposed.
We have combined revenues of
over a trillion dollars and
employ 1.6 million people.
The price of natural gas and
electricity largely determine
the ability of these companies
to compete, especially with
foreign companies who are often
state-owned enterprises and
subsidized by their countries.  
The purpose of this testimony is
to thank President Trump for
his support of the manufacturing
sector and to warn the
administration that further
approvals to increase exports to
 non-free trade countries is a
terrible mistake        mistake.
  It will cost manufacturing
jobs and exports.
Approval of exports to non-free
trade countries, reward them for
 not having a free trade
agreement or fair trade
agreement.
It reduces the administrations
leverage in negotiating
bilateral fair trade agreements
that opens markets for U.S.
manufacture ed goods and reduces
 and actually eliminates the
natural gas cost advantage that
domestic manufacturers have.
Total export approvals have
grown significantly to 96% of
2016 consumption.  Let me repeat
 that.  What has already been
approved for free trade and non-
free trade equals 2016
consumption of gas in the United
 States.  This is a stunning
significant amount of natural
gas.  And the Trump
administration has signaled
support for many more approval
s          approvals.
Decisions being made today
approve -- decisions being made
today to approve more export
volumes for periods up to 30
years, once these approvals are
locked in legally, it's too late
 to stave off future potential
crushing demand and higher price
s.
The Obama administration failed
to legally conduct public
interest determinations under
the natural gas act by not
addressing cumulative negative
impacts of LNG export volumes to
free trade and non-free trade
volumes.
It is for this reason that we
are advocate ing to the Trump
administration to halt approval
        approvals and create a
safety valve for domestic
consumers.
The Natural Gas Act reflects the
 full intent of Congress and
consistent with President Trump
      Trump's view for America
First.
It is timely to note that at
this very moment the Australian
government is restricting LNG
exports to address their
domestic shortages of natural
gas.  The Australian government
failed to put in consumer
safeguards in place and as a
result LNG exports have driven
up domestic prices.  Australian
manufacturing company
competitiveness has been greatly
 damage ed and power companies
in Australia have switched from
gas to coal.
Key points.  Number one, the LNG
 market is not a free market
market.  It's not a fair
market       market.  Buyers of
LNG are state-owned enterprises
or they are electric utility ies
or gas utility ies of these
countries that can pass all of
their costs on.  They are
insensitive to price unlike U.S.
manufacturers.
Number two, EIA data confirms
that the so-called 100-year
supply of natural gas is a myth.
EIA says there's only 53 years
of supply.  At current demand.
Number three, EIA data confirms
that already approved LNG export
volumes to non-free trade
countries only, 19 point
cumulative demand, only 33 years
 away, consumes up to 80% of
U.S. technically recoverable
natural gas resources.
Point number four, EIA, AEO2017
is predicting Henry hub natural
gas prices increase 51%.  And
118% by 2025.  And this price
forecast only assumes 10BCF a
day of LNG exports.
Number five.  EIA2017 combine ed
 with the October 2015DOE LNG
export report suggests that LNG
exports accelerate consumption
of low cost shell natural gas
with a breakeven cost all the
way up to $20 by 2050.
Lastly, number 6, October 2015D
October 2015DOE
LNG export study concluded that
LNG exports increased domestic
prices, lowers natural gas price
s for our foreign manufacturing
competitors, especially in Asia.
A lose-lose for manufacturing.
Thank you again for this
opportunity to speak with you.
 Thank you very much.
 KEVIN DEMPSEY:  Thank you.  
Again, I'm Kevin Dempsey with
the American Iron and Steel
Institute, the trade association
for the U.S. steel industry
also represent iron or   ore
produce ers.  The U.S. steel
industry today employs about
140,000 people.  That's down
some 14,000 people in just the
last two years because of a
number of very significant
unfair trade practices.
The United States runs
significant trade deficits in
goods with many foreign
countries.  While there are many
 factors that influence
international trading patterns
and deficit levels of principle
concern to AISI are foreign
practices including subsidy ies
and trade distorting policy ies
that have fueled repeated surges
of dumped and subsidized steel
imports into the U.S. as well as
policy ies and practices that
burden or restrict U.S. exports
of steel and steel-       
steel-containing goods.
I would like now to review our
comments with respect to several
countries with whom we have
significant trade deficits in
goods.
We must start with China, where
significant trade distortions
have caused by Chinese
government policies contribute
to a massive trade imbalance
that has impacted the American
steel industry both in terms of
direct trade in steel and in
terms of the significant number
of imports of steel containing
manufacture ed goods that have
disrupted the entire steel
supply chain in the United
States and reduced domestic
demand for steel in the United
States.
The large volume of Chinese
steel exports in recent years
has been fueled by massive
Chinese steel over capacity,
which is the direct result of
distorted Chinese industrial
policies and wide range of
subsidy ies.
In the case of Korea, we are
concerned about both the large
auto trade deficit, given the
American steel industry's role
as a major supplier to the U.S.
auto industry, but in addition
we're concerned about the
significant U.S. steel trade
deficit with Korea that has been
driven by large volumes of dump
ed and subsidized steel im   
imports.  While there have been
a number of orders imposed on
Korean steel products,
unfortunately the level of
relief granted in many of these
cases has been too small to have
a significant effect on the
volume of Korean imports.  In
addition part of the Korean
steel trade problem, we believe
is related to China, as the
Korean steel market has been
flooded with imports of cheap
Chinese steel products that have
distorted their own market and
market prices and have fuel     
fueled exports of dumped down
     downstream steel products
where Korean produce ers are
taking Chinese products for the
processing and exporting on to
the U.S.
With respect to Japan, the large
 U.S. trade deficit in auto
parts -- in auto products has
been a significant matter of
concern to industry.  As you
know there are a variety of non-
tariff barriers that traditional
ly impede ed access to the
Japanese auto market, and also a
 significant trade deficit in
steel with Japan as Japan has
been a significant exporter of
dumped steel products into the
U.S. and we have had great deal
of difficulty exporting much
steel to the Japanese market.
A new player in terms of trade
deficits in steel is Vietnam,
where we saw a very significant
increase in the steel trade
deficit just last year in 2016,
as steel imports from Vietnam
increased dramatically, growing
by over 330% in just the one
year.
Part of this -- of the increase
in Vietnamese imports we believe
 is due to Chinese efforts to
circumvent the anti     
antidumping and countervailing
duties on steel sheet products
from China by shipping those
Chinese steel products through
Vietnam for further minor
processing, but in addition the
Vietnamese government also has
an explicit industrial policy
plan to promote the growth of
its own steel industry and to
increase its exports.
Similarly, in India, the U.S.
steel trade deficit is due to
some more Indian government
policies to provide protection
and support to its domestic
steel industry, the Indian
industry operates in a highly
protected and controlled
environment characterized by
high tariffs on steel imports,
substantial subsidy ies,
government control over prices
and state allocation of resource
s through its ministry of steel,
the Indian government has
developed a series of national
steel policies coordinate ing
government assistance and
dramatically increasing steel
production.
Finally, turning to our North
American neighbors with respect
to Mexico, we'd like to note
that while the U.S. has a
bilateral trade deficit,
significant portion of that
deficit is due to trade in
automotive automobiles and
machinery to steel intensive
goods categories where American
steel is a major input.
In fact, the United States had a
steel trade surplus with Mexico
 of $1.7 billion in 2016 and
U.S. steel exports to Mexico
have averaged $4.2 billion a
year over the last three years.
 Mexico is, in fact, the U.S.'s
second largest steel export
market African da. -- African
da.
Finally with respect to Canada,
we know this is top market for
U.S. manufacture ed goods
primarily and American steel.  
Exports steel to Canada have
averaged $5.5 billion a year for
 the last three years and we run
a small trade deficit in steel
products in value terms with
Canada as well.  I think this
reflects the strength and
balance of the U.S.-Canada
relationship and strength of
supply chains.
Thank you for the opportunity to
testify and I would be happy to
 answer any questions.
 Thank you.
 CELESTE DRAKE:  Mr. Chairman,
members of the committee, good
afternoon.  I appreciate the
opportunity to testify on the
causes of significant U.S. trade
deficits.  I submitted written
testimony and will highlight
particular issues here for the
record.
The federation of America's
trade union, we assist 12.5
million working men and women to
 exercise their voice in the
workplace.  We work globally to
ensure that governments and
firms respect fundamental labor
rights and enact sustain        
sustainable growth policy      
 policies to promote broadly
shared prosperity.  For decades
U.S. workers have been battered
by near-sighted U.S. trade
policy that responds to the
insatiable desires of global
corporations that use the U.S.
as a flag of convenience to
access ever-lower labor costs,
ever-fewer regulations and risk
free profits.  U.S. trade and
tax policies, shunting the risk
     risks of trade on families.
Racking up record trade
deficit        deficits, U.S.
trade policies have utterly
failed to support decent family
wage jobs and a growing middle
class in the U.S.  The large
sustained structural U.S. trade
deficit both with the world and
with individual countries
including China, Japan, Germany,
Ireland, Vietnam, Mexico, Korea
 and Canada, cost jobs, pushes
down U.S. wages and contributes
to our historically high ine    
inequality.  To put it in visual
 terms that many can relate to,
inequality in the U.S. is far
worse than that portrayed in the
recently ended PBS series "Dowt
on Abby" ."  Working poor are
far worse off that servants.
Trade deficit with China alone
cost 3.4 million jobs from 2001
to 2015.  Most in manufacturing.
Manufacturing jobs are
especially valuable because of
their multiplier effect and role
 when combined with sufficiently
dense trade unions as an
effective pathway to the middle
class.
This job led to labor market
with more slack than it should
have, making it harder for
workers to organize and collect
        collectively bargain for
better wages.  Even in industry
 ies that don't directly lose
jobs to im   import competition.
The importance of labor unions
to build ensure prosperity and
more inclusive economy has been
given a nod in U.S. trade policy
 even as other rules were put in
place in NAFTA, CAFTA and U.S.
Korea and other deals that made
it harder for workers to form
unions and raise wages.  We urge
the U.S. Government to reverse
the cycle, working with Congress
you have the power to reform
U.S. trade and economic policy
ies in ways to reduce trade
deficit, create jobs and raise
wages.
These same policy ies will help
address the secular stagnation
that is still holding back
demand and economic growth
globally.
The single most important thing
the U.S. can do to reduce the
trade deficit with Mexico is to
raise Mexico's wages.
This means not only updating and
 strengthening the labor
provisions in NAFTA but other up
grades to reduce excessive
corporate power, including
eliminating investor to state
dispute settlement, adding new
provisions that prevent tax base
erosion, protecting public
interest regulations and
promoting public infrastructure
investment.  To address $347
billion trade deficit with China
, the most important thing the
U.S. Government can do is
address currency manipulation
and misalignment.  This would
affect our trade balance not
only with China but with other
Pacific countries whose currency
values are strongly influenced.
While it is true that China's
most recent interventions have
been to prop up rather than
reduce the
value, in addition we recommend
 the administration pursue
comprehensive and vigorous trade
 enforcement including but not
limited to dumping, illegal
subsidy ies and labor and
environmental regulations,
strictly hold China to world
trade organization obligations
including regarding state-owned
and state-supported enterprises
            enterprises.  Market
access, national treatment, and
 intellectual property
obligations.  Address China's
overcapacity, particularly in
steel and aluminum, which
present threats to both our
economic and national security.
 Ensure China continues to be
classified as a non-market
economy.  And implement a
comprehensive manufacturing
policy here, including support
for advanced manufacturing,
infrastructure, worker training
training, clean energy
initiatives and export promotion
and eliminating tax policy ies
that reward companies for moving
U.S. jobs offshore.
I thank the committee for its
time and would be pleased to
answer any questions you have.
  Thank you.
 STEPHEN EZELL:  Good afternoon
.  I'm Stephen Ezell with the
Information Technology and
Innovation Foundation, a non-
profit non-partisan economic
think tank here in Washington.
I commend the administration for
undertaking a serious
investigation of the causes of
U.S. trade deficits, which for
too long have been dismissed as
a problem by the prevalent
Washington consensus.  Long-
Long-term trade deficit,
like a large federal debt,
represent a debt that future
generations of Americans must
repay.  Also see challenges to
U.S. competitive            
competitiveness as well as
possibly the presence of system
systemic unfair trade
practices by America's trade
partners.
As it undertakes its
investigation, I would commend
the administration to keep three
 core focuses, first of trade
sectors, event technology
          technologies and third
innovation mercantile ist.  
First we urge you to consider
trade balances not just in goods
 but across all sectors which
compete in international
marketplaces and sold to non-
non-residents othe nation,
not just manufacturing but also
services sectors like software
and the Internet and content
like music, movies and video
games.
Second, the investigation should
 recognize that not all trade
deficits are create ed equally
and place primary focus on
countries aggressively using
unfair innovation mercantile ist
trade practices to disrupt
global markets and disadvantage
U.S. competitors.  This means a
substantial focus on China.  A
country single handedly
responsible for 50% of the U.S.
goods trade deficit in 2016 and
46% of the aggregate U.S. global
trade deficit in goods over the
 past eight years.  America's
347 billion trade deficit in
goods with China in 2016 is five
times greater than the level
with Mexico and far more than
the pittance of a $13 billion
deficit with Taiwan or
Switzerland last year.
China represents a systemic
threat both to the U.S. economy
and to the entire international
economic system.  The country
fills every form of mercantile
mercantilist
imaginable, from technology
transfer as a condition of
market access to massively
subsidize ing industries, sector
s like solar to glass to steel
to auto parts.
Moreover and more importantly,
China fundamentally rejects the
notion of comparative advantage
on which global trade is based.
 And it seeks absolute advantage
in virtually all advanced
technology industries.  Nowhere
is this more clear than China's
national integrated circuit
strategy, which calls by 2025
for the development of a
completely closed loop
semiconductor manufacturing
development ecosystem within
China and explicitly calls for
having U.S. export in China 50%
in ten years and eliminating
entirely by 2035.  This is a
country that wants to close
access to U.S. and other foreign
 competitors while maintaining
for itself un   unfettered
access to global markets.  
That's not sustainable.  More
than that, as colleagues have
note ed, China      China's use
of unfair mercantile ist
policies compels other nations
in the region to feel they have
to emulate these policy ies in
order to keep up with China's
growth.
And while unfair, these policy
policies have had a clear
effect.  China has surpassed the
United States now as the world
's largest exporter of high
technology products with 24%
global share, and shockingly in
2011, the U.S. im   imported
560% more advanced products from
China than export       
exported to that country.
That trade imbalance as my
colleague said has led to 3.4
million jobs being lost in the
U.S. economy, three quart      
quarters in manufacturing, over
the past decade.
We'd also like to add that the
focus needs to be not just on
trade deficits but trade
barriers and we should go after
countries, mercantile ist
policies whenever they affect
America's advanced industries
whether we run trade deficit
with those countries or not. so
Canada and its promise doctrine
doctrine, which has led
 to the invalid addition of 25
pharmaceutical patents over the
past decade, this caused U.S.
pharmaceutical companies $1
billion in lost sales.
Finally, we hope this analysis
leads to better trade and
manufacturing policy on the part
 of the U.S.  We would call for
the creation of a national trade
 sector component strategy that
looks holistic cally how to
improve policy to bolster the
trade sectors.
Two more points.
We think that a new tool to
understand the effects of other
companies mercantilist policies
can tillist practices on America
's economy is needed.  We should
 create
these and putted them together
to identify the countries doing
harm to the U.S. economy.
Finally while we do have allies
with some faults like Canada,
Japan and Europe, we have to
recognize we need to work with
these companies in the future to
develop trade agreements and
collectively push back against
unfair practices of China.  
Thank you.
 MARC FASTEAU:  Thank you very
much for the opportunity to
present CPA's views on the over
     overvaluation of the U.S.
dollar and its effect on the
trade deficit.  The U.S. dollar
is over-valued at least 26%
against the trade weighted
basket of non-U.S. dollar
currency ies and even more
against other particular major
currency ies.
This over-valuation is a major
cause of the trade deficit and
makes imports cheaper and makes
our exports more expensive.  
It   It's important to note that
 this effect is greatest on
manufacturing companies and
their jobs since manufacture ed
goods are the largest component
of the trade deficit,
approximately $750 billion in
2016.
So the gains from ending this
evaluation would be very large.
For example, a 20% de-valuation
 would increase net exports by
about 3% of GDP or $560 billion
based on 2016 economy.
Well, why is the dollar over-
      over-valued?  Several
causes.  Really that's a key
point.  One is currency
manipulation.  You    You've
heard a lot about that.  China
did it on a massive scale from
2004 to 2014.  Japan also.  Many
other countries continue to do
it today.  Maybe not the major
ones, but this is a tactic.  It
is very likely to resume when
these countries want to offset
increases in the values of their
currency or for one reason or
another want to push the value
of their currency ies down
further.  It's not off the
table.
Another very important and not
that well recognized cause of
dollar over-valuation is private
capital flows into the U.S.
security ies markets.
Foreigners consistently buy more
 U.S. dollar denominate ed
security ies than they sell and
to do so they sell their own
currency ies to buy dollars, so
they can buy these securities.
What this does is create buying
pressure that drives up the
dollar against all other
currency ies.
Private capital inflow is very
large from 2000 to 2010, it was
3.8 times larger than the
amounts that foreign central
banks spent to drive up the
dollar and from 2010 to 2015,
the average net private inflow
was $150 billion a year while
during this period central banks
 were not buying, they were
actually selling over 100
billion of U.S. securities a
year.
So this is a big factor.
Now, why are these private
capital flows taking place?
First of all, the dollar is the
leading reserve currency in the
world, and this makes it
enormously attractive store of
value for investors.  Secondly
the U.S. securities markets are
the largest and the most liquid
       liquid.  Pi their too
safest in terms of the rule of
law and especially attractive in
period       periods like now
when interest rates are liar and
rising fast     faster in the
U.S. than in other markets.
What are the policy implication
            implications of this
picture?
I mean, the big takeaway is that
we need an array of tools to
deal with dollar over      over-
over-valuation.  No single
 tool or policy is going to get
it done.  We need manipulation
by particular companies, we need
countervailing duties.  We
should treat it as a countervail
ing subsidy under the WTO rules
and also a threat to national
security under U.S. domestic
trade law.
The key here is to be proactive
         proactive.  Impose the
countervailing duty, then defend
 its legality.  Not the other
way around.  The other way
around is prescription for
remedy ies that come far too
late while damage continues to
take place.
Another technique we need to
have in the toolkit is
countervailing currency
intervention.  This is very
simply, when other countries
hold and horde U.S. currency or
go into the market to buy
dollars to push the dollar up,
either our fed or treasury can
do exactly the same thing.  It  
 It's permissible under
relatively new changes in the I
 IMF rules and it's something we
should be prepared to do, and I
 think someone suggested on an
earlier panel we should signal
that we're prepared to do this
under the proper circumstances.
Finally, for systemic over-     
over-valuation due to private
capital flows, we should
strongly consider something
called a market access charge.  
This proposed by John Hanson,
former world bank economist and
expert on this.
Here is how it would work.  It
would charge each foreign buyer
of a U.S. dollar security from a
U.S. resident a small
percentage of the purchase
price.  This would lower the
effective yield for the buyer of
the security, making it less
attractive and thereby reducing
demand for U.S. dollars.  This
would mean less buying pressure
on the dollar and that would
cause its value to fall against
all other currency.  This is
systemic remedy rather than
targeted at a particular country
 or currency.
The charge would start small,
say, 50 basis points, and adjust
up or down as needed to move
the trade deficit in the right
direction.
The max charge would not be
enough to discourage long-term
investment or foreign direct
investment, but it would reduce
short-term trading that adds
little or no economic value to
the U.S. economy.  It has
several other virtues, one of
the main ones is that unlike a
lot of other policy measures, it
 would be geared directly to
what really matters, which is
the trade balance, not some
intermediate financial
indicator.
So you move it and you see what
happens and you adjust it,
either slow it down and increase
 the effect or you get close
enough to balance and we know it
's never going to be zero, but
if you get within, say, a 1%
range, it would go directly to
zero.
Another good thing about it is
there's no need to prove
manipulation, which is very
tricky under IMF rules.  No name
 ing and shame ing, the United
States simply adjusting its own
currency toward balance.
And finally it would produce a
large pot of revenue that could
be used for any non-recurring
government purpose because over
time, four or five years, one
would hope this goes pretty
close to zero.
So this is -- I only hit some of
the high points in my testimony
, because limitations of time.  
I'd be happy to answer any
questions that you have.
Thank you.
 JESSE GARY:  Good afternoon.  
My name is Jesse Gary, executive
 vice president and general
counsel of Century Aluminum.  
Century is the largest producer
of aluminum in the United
States.  On behalf of my 1800
colleagues I would like to thank
 you for the opportunity to
testify today.
This hearing on trade deficits
comes at a critical time for the
 domestic aluminum industry.  
Century is one of only two
primary produce ers in the U.S.
in Kentucky and South Carolina.
 Five years ago there were 14
aluminum smelters in the United
States and today there are five
five.  Just last year there
 are three U.S. aluminum refine
ers providing smelters, today
there is one.
U.S. jobs and primary aluminum
production have fallen nearly
60% since 2013.  And conditions
have only worsened since.
This unfortunate situation is
largely the result of rapid
unnecessary government driven
capacity expansions by aluminum
produce ers in China.
Starting in 2001 when China
joined the WTO, Chinese
government planners made a
strategic decision to develop an
 aluminum industry using state
support.  The result has been an
 extraordinary buildup of
aluminum production that exceeds
 demand in China and elsewhere.
Chinese aluminum production
skyrocketed growing more than
1200% from 2000 to 2015.  This
rate continue ed to increase
since.  Chinese produce ers are
now responsible for by far the
largest share of aluminum
production in the world and
based purely on commercial
considerations this would not
have been possible without the
intervention of the Chinese
government.
Like other industry ies in China
, it's aluminum produce ers rely
 on substantial illegal
financing from Chinese
government control        
controlled banks.  Despite poor
financial performance and weak
balance sheets these un   
uncompetitive zombie companies
receive credit further fueling
China's massive aluminum
producing capacity.
For example, Hong Cho a private
aluminum producer
located in Ha   Handao province
.  In only a few years it's gone
from a textile company to the
world's largest aluminum
producer.  It was only able to
do this with massive government
subsidy ies.  After a report
earlier this year indicate ing
that the company had been
fabricate ing financial
statements for years through
under-reported costs and
government subsidy ies, the
equity was suspended and forced
to meet certain debt obligations
.
Rather than let debt-ridden
company fail, however, the
Chinese government through state
-owned and controlled banks
provided with sizable government
 bailouts.  Equity is still
suspended today.
It's been well-documented in the
press, they are not alone as
countless other state-owned
enterprises continue to be
propped up by the Chinese
government.
The result of this enormous
government support has been a
significant trade imbalance in
aluminum between the U.S. and
China.  Primary aluminum demand
is driven primarily by the
consumption of semi-finished
aluminum products such as sheet
and extrusions.  In China, much
of this consumption is driven by
 government directed stimulus
programs particularly in the
construction sector, but
production increased far faster
than demand in China, leading to
growing volumes of Chinese
aluminum exports.
Each ton of finished aluminum
exported by China replaces a ton
of primary aluminum that would
otherwise have been produced in
the rest of the world.
In the United States, imports of
Chinese semi-finished aluminum
products increased nearly 200%
from 2008 to 2015.
Over the same period U.S.
primarily aluminum production
saw more than 40% and fallen
further since.  United States
was the fourth largest aluminum
producer globally as recently as
 2013.  It was the tenth largest
producer last year and this
year it will be the 13th largest
.  This is all despite the U.S.
being the second largest
consumption market of primary
aluminum in the world.
Chinese over-production has
crashed aluminum prices.  As a
global commodity, aluminum price
s ultimately reflect total
global supply and demand for the
 metal regardless where it is
produced sold or store ed.
As a result China's unnecessary
and unjustified production
expansion has depressed an
suppressed aluminum prices both
inside and outside of China.
These trends have a huge
negative impact on the U.S.
aluminum industry, which has
seen dramatic declines in
capacity, production, revenue
and employment.  U.S. produce
ers of key inputs to aluminum
filters are suffering as well.  
In other words, adverse effects
of Chinese aluminum over-      
over-production are severe and
being felt throughout the value
chain in the U.S.
In January of this year, the
U.S. Trade Representative
requested WTO dispute
consultation with China
concerning the massive and
injurious subsidy ies that the
Chinese government provides to
primary aluminum produce ers.  
Century welcomes this case as a
promising step to address
harmful effectings of Chinese
aluminum over-production and
illegal subsidization.  The key
of this case is it directly
addresses root cause problem
facing our industry, namely the
illegal financial subsidy ies
and other state support that
enable       enables the Chinese
over-      over-production.  
Since the case was filed
aluminum prices stabilize ed and
 some what increased.  However,
more action is needed.
Almost immediately after the
case was filed, the Chinese
government responded with new
environmental restrictions to
cut production.  Yet China is
showing no real signs of cutting
 production just by the recent
commitments to do so.  
Significant additional capacity
has come online since these
announcements were made, and
Chinese aluminum capacity is
predicted to grow by 12
million-tons over the next few
years.  Just to give scope,
that's 20% of the current
worldwide market.
A significant percentage of this
 production was directly or
through circumvention will un   
undoubted       doubtedly target
ed in U.S. market if left un
restrained. .
Century greatly appreciates the
work being done by USTR and the
Department of Commerce to better
 understand the factors
contributing to U.S. significant
 trade deficit with China and
other countries, until Chinese
over-production effectually
address, over-      
over-production will persist and
workers continue to suffer.  
Appreciate your time.
Thank you.
 So we'll proceed to questions
questions.  We do have
 limited time, so I think we're
going to try to get the panelist
s each to get a question in and
hopefully get a question to each
 of you.
So I'll lead off, and if the
questioners could just state
their agency and names so that
we have it for the record.
So Mr. Cicio, for you in your
testimony you refer to estimates
of impacts financial gas
exports on U.S. national gas
exports and crisis and how this
impacts U.S. consumers as well
as manufacturing in general.
Do you have any estimates of how
liquefied natural gas exports
have impacted or will impact the
overall trade deficit
?
 PAUL CICIO:  We do not have a
study.  The only studies that
exist today are studies done
under the Obama administration,
the Obama administration did
three study ies as they
considered approvals.  But each
of these studies, as I have said
 in my testimony, failed to
account for estimate ed export
volumes to free trade country
ies and non-free trade
countries.  They only did a
study on non-     non-free trade
 export volumes, and so they did
not capture the potential
economic impact to manufacturing
jobs to the U.S. economy at
large.  They only got a small
piece of it.  So there's been no
 study and this is why we are
asking for a halt.  Let's do the
 appropriate public interest
determination study that is
called for under the Natural Gas
Act, combine those volumes and
then make decisions from there.
 Thank you.
 Hello, I'm Carol from the
economic bureau at the state
department.  I have a question
for Mr. Dempsey.  How do you
view the approach to engaging
China multilaterally on steel
overcapacity, specifically ily
the G20 global forum on steel
excess capacity?
 KEVIN DEMPSEY:  Thank you.  We
 view the G20 process the global
forum on steel over-      
over-capacity as a very critical
part of the effort that needs
to be taken to address the
underlying problem for the
global scale industry, which is
the massive over-      
over-capacity.  So we're very
pleased that, you know, that
group was set up and that there
is very broad support for the
U.S. Government position from a
number of our allies, from the
European Union, from Japan, from
Latin America.  Really from
most parts of the world.  So I
think it's a very positive forum
, however, it has its
limitations.  To date, China has
 really resisted even share     
sharing of data in the context
of the global forum, and has
slowed progress in that effort.
 So we're certainly interested
in doing everything we can to
make that process as effective
as it can be.  I don't think we
view the global forum by itself
as sufficient to solve the
problem.  So for us we certainly
want to continue and redouble
efforts working with our allies
on the global forum to address
the underlying excess capacity
problem.  But I think at the
same time we need to continue
with the strong enforcement of
U.S. trade laws and in
particular keeping remaining
treatment of China as a non-
market economy and en   
encourage ing trade partners and
key countries to do the same.  
And also as I mentioned in my
testimony, the problem is, while
 we are direct trade cases
against China have reduced the
amount of Chinese exports
directly to the U.S. , they have
 not had a big impact on global
Chinese exports.  Chinese
exports topped over 100 million
metric tons for the last two
years.  Vast majority is going
elsewhere and is leading to
further processing and then the
downstream products.  So I think
 it's critical for us also in
multilaterally to be working
with our trading partners to en
encourage as many of them as
possible to also exercise their
rights under the WTO to use
their trade laws to address
Chinese exports to those
markets.  It's only, I think
with that collective effort
we're going to be able to solve
what is truly a global problem.
 Thank you.  Next question from
my colleague.
 Good afternoon.  My name is
Ann.  I'm here representing the
U.S. Department of Labor at the
bureau of international labor
affairs specifically.  My
question is directed at Ms.     
 Ms. Drake.  In your testimony
you reference labor rights abuse
s in particular in China and
Mexico.  Can you elaborate on
that, in particular what through
sectors in industries and how
it affects your member       
membership most specifically?
 CELESTE DRAKE:  Absolutely.  
So the situations are very
different in China and Mexico
and in Mexico the major problem
are the sew-called protection
contracts or protection unions,
and really what it is are
employer dominate ed unions.  
They're not unions.  They come
in often before the plant is
built, before the first person
is hired.  They sign a contract
between the false union and
employer and say here is our
contract. usually what it says
is pay the minimum wages, abide
by national law.  And then when
workers get there and they say,
wait a minute, we're being paid
starvation wages we need to
organize to do more, the problem
is under Mexican law they can't
 because the law says you have a
union, there's nothing you can
do.  And that really has worked
with other rule of law problems
that pervade Mexico to keep
wages down there.
In China, the problem is there
there's the all China
confederation of trade unions,
which is really a branch of the
government and, again, doesn't
function as an independent trade
 union that represents workers
or worker interests.  And so the
 government puts down strikes
which workers start because the
government sanctioned training
doesn't represent them.  The
government doesn't make sure
that laws against child labor,
labor minimum wages, worker
safety are enforced, all these
things, and all of these are
really against international
norms.  They're against
obligations and U.S. free trade
agreements where those free
trade agreements exist, like in
Mexico.  And they push down
wages and make it harder for
workers here to organize and
lift their wages here.  And what
 we have found is that when
workers in the U.S. try to do so
, even, you know, barring other
deficiency ies in U.S. labor law
, the employers say, if you do
this, we will move your job to
another country where it's
cheaper.  And that's a real
threat because workers have seen
it happen.
So it really works to suppress
U.S. wages.
 Thank you.
A question from U  USTR,
please.
 Steven Ezell, you wrote in
your statement, contrasting
deficits with different partner
       partners and suggesting
different effects on the U.S.
economy, for example the deficit
of China versus the deficit
with -- in a more integrated
supply chain relationship with
Mexico.  Could you elaborate a
bit on the different effects you
 see in these relationships on
U.S. economy?
 STEPHEN EZELL:  So the intent
of that was to recognize that we
have integrated supply chains
in North America stretch        
stretching from Mexico to Canada
 for a number of advanced
technology ies, whether it's
information communicationings
technology products to
semiconductor to automotive,
there's a complementaryty there
between the ability to have
partners in Mexico do the
assembly on the high technology
products that we're developing
in the United States.  So what
we can see developing here is
integrated value chain for
advanced technology products
where we can be competitive
together.  I think the challenge
 we face broadly in a number of
advanced technology industries
is that supply chain      chains
have been completely hauled out
 and gone to Asia.  If you look
at things like the ability to
manufacture a kin Dell in North
America or the ability to make
folks, production equipment and
system       systems and
competency, expertise to do that
in North America has been
completely off    offshore ed to
Asia.  What we should think
about in America to constitute
the supply chains is by leverage
 ing the competency           
competencies and skills and
attributes that regional trading
partners can bring to bear so
that we strategic cally look to
bring back to North America some
 of these industrial supply
chains that we have actually
lost to Asia.  And I would make
one final point.  You know, it's
 said few people have the
imagination for reality, and I
think it's important for the
administration to understand
that China is fundamentally
using trade and economic
policies that those of us coming
from the United States and
traditionally neoclassical
background just don't imagine
the conception or possibility of
using things like industrial
policy.  When China came out
with its MLP, its multiyear plan
 for science and technology
technology, it took
America four years to identify
the existence of this document
and get it translate ed in
English and understand its
intent to capture shared
advanced technology industries.
 So we needed more assets within
the government, like national
industrial intelligence council
that would look out for the
world and see what the effect of
otherapy country's strategies
on technology in the markets are
and how they can respond to
that.
 Thank you.
 I am with the Department of
Treasury.  My question is for
Mr. Fasteau.  In your submission
you mention that the USOD
evaluation against currency is a
major cause of U.S. trade
deficit and I was interested to
know how you would assess how
large of a contribution currency
is versus other contributing
factors such as trade barriers
in the overall U.S. trade
deficit.
 MARC FASTEAU:  Well, it's been
 estimate ed by several
economists, I think, including
Mr. Scott and a few others to be
-- and Fred Bergstein at the
Peterson institute to be the
largest single cause, and the
number if I recall is something
over 50%.  So very large indeed
       indeed.
Now, the related issue, which
you hear about a lot is, well,
what about bilateral deficits?  
Should we be concerned?
What lies behind the question is
, overall, you want multi      
multilateral balance.  There are
 structural reasons why trade
between two countries is often
without any barriers and full
comparative advantage trading
will not come into balance even
though overall balance for if
country.
However, when we have surpluses
like China's with the United
States, it's cleaned of like
pornography. -- it's kind of
like pornography.  You know when
 trade barriers are having
effects.  So it's a combination
of things.  We definitely have
to look at the -- go after by
individual countries and we have
to deal with the structural
over-valuation of the dollar,
and we have to go after the
thousands of non-     non-tariff
trade barriers.  They're listed
 every year, 500 or so, this
panel and this group could come
up with another 30 if we worked
at it ten minutes.  And that's
the way it works.  The U.S. and
the UK are the only two
countries who really believe in
free trade.  As Stephen just
said, others believe in
industrial policy.  They believe
 in national champions.
We would be very unhappy if we
 balance trade by selling a
whole huge lot of commodity ies
and just bought our advanced
technology elsewhere.  That's a
long-term prescription for
becoming a colony.
 I have a question for you, Mr.
Gary.  So you spoke a great
deal of over-capacity in China
in your testimony.  Do you have
estimates on the degree of
aluminum over-capacity in China
      China's sector as it
currently stands?
 JESSE GARY:  Yes, we do and I
would be happy to provide
specific details and additional
testimony in other manners.
But I think that the key maybe
 to look at in terms of whether
we're looking at a point in time
 in terms of the over-      
over-production within China now
 or going forward is the problem
is large and the problem is
worsening quite quickly.  So
they had a net exports of
aluminum over 4 million-tons
last year.  So just to give you
an idea of scope again, that's
about 7.5, 8% of world
production they're exporting out
of China.  So that's one
measure of over-      
over-production.  The other
issue is that despite that over
over-production, they are
continuing to grow their
capacity at freighter rates than
 their own demand growth.  So
their supply growth continues to
 be double digit growth while
demand growth is quickly
following from the high single
digits to the mid single digits.
  And so when we look at China,
who has no comparative advantage
 in aluminum, in fact, the
largest input cost making
aluminum, which is energy,
they're paying, you know, close
to anywhere from 50, 60, 70, 80%
higher than other producing
regions in the world, we look at
this and it doesn't make any
sense.  There's no reason for
them to be continuing this over
     overproduction, these net
exports, and it's a net negative
 for the world as a whole.
 Thank you very much.  So I'd
like to thank you all for coming
today, both for your written
testimony and your time and
attention of this today.  Thank
you very much.
Our members employ 30,000 U.S.
production workers in dozens of
manufacturing facility ies
throughout the United States,
usually in rural areas.  The AE
   AEFTC is a subcommittee
within the AEC that serves as
the petitioning coalition of
U.S. extrude ers.  I would like
to thank you all for the
opportunity to testify before
you today on significant trade
deficits with respect to the
aluminum industry.
Our members
know firsthand the importance
of strong U.S. trade law
enforcement.  It was only a few
years ago that the U.S.
extrusion industry was on the
verge of collapse due to dumped
and subsidized Chinese
extrusions.  As a result we
successfully filed a trade case
and gained much needed relief.  
For years we were the first and
only segment of the aluminum
industry to successfully
petition the U.S. Government for
relief from unfair trade.  
While orders has been extremely
effective in helping our
industry get back on its feet,
the domestic industry is once
again facing rising levels of im
ports into the United States,
largely as a consequence of
China's rising over-capacity.  
Despite slowing home market
demand, China's primary aluminum
 industry has continue ed to
expand fueling additional growth
 in the Chinese extrusion
industry.  In 2015 the Chinese
had a surplus of over 3.8
million short tons of extruded
aluminum.  It is no surprise
then that China's global exports
 grew 50% between 2011 and 2015.
These exports will only continue
 to increase given current and
future capacity expansions,
including Chinese produce er
recent commissioning of 99 new
aluminum extrusion press lines
which will double its aluminum
extrusions capacity.  Because
China has flooded other global
markets with this excess
aluminum extruded capacity, we
have also seen an increase in
third country exports of
extruded aluminum to the United
States from Indonesia, Malaysia,
 Vietnam and elsewhere in recent
years.
U.S. imports have extruded
aluminum grew by 95% between
2011 and 2015 and are on the
rise.
Desperate to reenter the market
Chinese producers are
increasingly turning to
circumventing to do it.  They
are evading duties by making
minor alterations to the
products and trans-shipping
through other countries and
smuggling them into the United
States.
The Wall Street Journal has
reported on these schemes noting
 that Chinese aluminum extrusion
s may be entering the United
States marked as the product of
Mexico or Vietnam.  In response
to a petition from the U.S.
extrude ers, commerce is
currently investigating whether
certain Chinese produce ers
          produce ers are
circumventing the orders.  In
addition to these circumvention
schemes the massive excess
Chinese aluminum capacity and
production is also causing a
recent surge in im
ports from Indonesia, Malaysia
and Vietnam.  As we recently
note ed during the sunset review
 before the international trade
commission, the recent surge of
imports from these three
countries have consistently
under-sold the domestic industry
and begun to gain a greater
share of the U.S. market.  In
2015 imports from these three
sources under-sold the domestic
industry by as much as $400 per
ton.  This product is likely a
mix of trans-ship and circumvent
ed Chinese extrusions and
displaced Indonesia, Malaysian
and Vietnamese products making
matters worse for the domestic
industry as the U.S. delivery
premium for obtaining aluminum
billet.  As production as
declined the U.S. industry has
been forced to import greater
quantities of primary aluminum
billet and this caused the
regional premium to increase.  
Last two years the Midwest
premium increased by 70%.  As a
result U.S. aluminum extrude
ers           extrude ers have
become less competitive against
imports of low price Malaysian,
Indonesian and Vietnamese
extruded aluminum where the
Chinese aluminum continues to
depress aluminum prices and
premiums outside the U.S.  In
closing, no other factor so
greatly affects the global
competitiveness of the U.S.
industry than over-      
over-capacity.  China's
staggering aluminum capacity has
resulted in a significant
influx of extruded aluminum im  
imports from third countries.  
A dramatic decline in domestic
primary aluminum production and
overall decline in global
aluminum pricing, all of which
directly and adversely impacted
the United States aluminum trade
 deficit with China, Indonesia,
Malaysia and Vietnam        
Vietnam, unless aggressive
action is taken to address this
over-capacity, this deficit will
widen and the domestic industry
 and its workers will continue
to suffer.  Thank you.
 Thank you.
OWEN HERRNSTADT:  
 ZACH MOTTL:  I'm Zach Mottl, I
 own and operate Atlas Tool and
Die Works, a precision
manufacturer involved in sheet
metal fabrication, machine ing
and turning, as well as other
manufacturing services.
My company Atlas, we serve ed
the telecom industry for nearly
100 years.  Going back to
Western  Electric Company in
early 1900s in Chicago.  We grew
and evolved with that industry
and in addition most of the
technology behind the phone and
Internet devices we enjoy and
use today was developed at Bell
 Labs funded by the U.S.
Government or at the time when
the phone industry was a
monopoly funded by the American
people, all the technology that
was developed.  In the USA we
enjoyed the best and most add
vanned equipment in the world
and our telecom networks were
second to none.  We spread
advanced technology around the
world and caused a global
economic boom as a result.  
However, today, at Atlas our
business is nearly gone in that
sector and the once high-flying
technology equipment companies,
they're on the ropes.  Merging,
consolidate ing and attempt to
gain market share and gain
scale.
I believe -- and this is the
subject matter for today -- this
is because number one, global
telecom firms offshore
production.  Number two, China
required technology transfer as
a condition of manufacturing
there.  And number three, China
used that technology and know-
     know-how to grow their own
telecom industry at expense of
U.S. and other telecom companies
.  Over the years  Atlas made
housings, covers, brackets,
enclosures and all the metal
components in the phone industry
and in 1900s we made housings
for mechanical phone switches
and later housings for
electronic switches for AT&T; and
later housings and components
for optical switches.  In the '
'90s and the     the000s we
were a small company feeding
into the telecom industry.
Nearly every one of atlas
companies had some piece of the
business in the telecom industry
 and for atlas it was 80% of our
business.  Parts were designed,
 made and assemble ed and tested
in the USA    USA.  The work
was always considered advanced
manufacturing, high tech and
exactly the kind of jobs and
work that would remain part of
the U.S. manufacturing industry
industry.  But it
started in the '90s when the
Chinese government welcomed and
support        supported
contract manufacturing for the
telecom industries.  The
companies they started moving
their component and sub
component manufacturing to China
, the chips and boards and
little parts and pieces.  And
then they did that take
advantage of cheap manufacturing
 and cheap labor prices, also
all kinds of subsidy ies given
to build the plants and get
started there, low cost of
capital as well.  However, what
accelerate ed the problem was in
 2000 when the tech bubble burst
.  There was over-capacity and
it drove those global telecom
companies to push down costs to
survive.  So the Chinese
government along the way, they
always engage in a program of
forced technology transfers as a
 condition of doing business
there.  The more we move there
the more we taught and gave them
our secrets how to make these
advanced networks.  They could
also dangle the lure of an
opportunity to build the new
tiniest telecom network, right?
 That was going to be our next
big growth market for all the
established telecom equipment
companies.  Instead, though,
what happened was this transfer
transferred technology
provided Chinese companies the
means to create and subsidize
their own homegrown telecom
network because they knew how to
 make the parts and pieces.
They started manufacturing phone
 switches.  Later the company
expanded to building
telecommunication networks and
provided operational consulting
services and equipment to
enterprises both within China as
 well as globally.  Now, they
have become a major competitor.
 They have now merged with Nokia
Nokia, Tell Labs is again
and Sycamore, Nortel bankrupt
and gone.  Telecom deals we were
 part of and supposed to make
equipment for, they were going
to make the product in U.S. and
sell it in China as late as
2008, those were scuttle ed.  
After the Chinese decided to
make it themselves, and the
phenomenal growth was aided by
the tech transfer and embedded
by global companies so desperate
 to cut costs.  Now they have
been prevented by doing business
 by the United States government
because the house intelligent
committee issued a report
describing the company as a
national security threat.  U.S.
and EU officials accused the
company receiving subsidy ies to
undercut competition yet they
have a large and growing market
outside the U.S. and branched
from switches and now they make
smart phones and all kinds of
things.  They're direct
competitors subsidized against
our industry.  So today the
formerly large and robust supply
 chain in the U.S. it's almost
again.  My company has a very
small remaining legacy portion
of our business in the sector.  
Used to be 80% and now less than
5% of the business.  Most of
the manufacturing and assembly
along with innovation and
research and development it   
it's moved to China.  A little
bit of assembly has gone to
Mexico.  My company Atlas, if we
 maintained at the pre-2008
levels we saw or go back to pre
    pre-2000 levels we would
have 40% more workers if not
more.  As a result of the
comprehensive decades long
scheme to attract foreign
companies, force technology
transfer and subsidize the
growth of low cost homegrown
industries, the advanced
technology trade deficit with
China is exceedingly large.  
Good paying American jobs have
been lost and America is
starting to lose its ability to
innovate and build future
components, subcomponents and
communications products for
future of the global telecom
industry.  I don't blame the
established companies who look
to protect their bottom line and
did what the shareholders asked
 them to do.  Instead, I blame
the U.S. Government for failing
to see what was happening and to
protect our crowned jewel
companies from a predatory
government that used the lure of
 cheap labor and potential
government contracts to snatch
technology and jump start their
own homegrown competitors.  
These Chinese companies, they
have no need for profit.  
Instead they need to create
employment.  How can global
companies that must maintain a
healthy bottom line compete with
 that?  I worry for Boeing and
Airbus, the Chinese have flown
their first jet.  Predatory
governments can subsidize losses
 for decades until the industry
is in their control.  Telecom
was an early mover to China
starting in 1990s.  Since then
many more industries have
followed.  Because we can look
back and see what happened to
the telecoms over the past 30
years      years, I ask that we
take action now and prevent the
same mistakes in other
industries.  Thank you for your
time today.
 Thank you very much
.
 Thank you for receiving our
testimony today.  You have a
copy of my prepared remarks.  
I'm going to provide a summary
focusing on a couple of key
points for you.  And it's an
honor to represent the Alliance
for American Manufacturing here
today.  First, do trade deficit
deficits have real
economic elements?  You have
heard plenty of testimony
including from Dr. Robert Scott
to suggest that they do.  I want
 to offer additional evidence in
that respect.  David Otter, and
 others are argued that the
increase in U.S. imports from
China which accelerate ed after
2  2000 was a major force behind
 manufacturing employment
reductions and that through
input output linkages and
general equilibrium effects it
appears to significantly
suppressed overall U.S. job
growth.  Research shows that net
job losses of 2-2.4 million
workers stemming from the rise
of import competition from China
 over the period 1999 to 2011.  
By contrast, one who has done
research looking at the impact
of automation on net employment
effects discovered over a 17-
year period, that automation
displaced fewer than 700,000
manufacturing jobs.  So the idea
 that productivity and
automation have been the driver
       drivers of U.S.
manufacturing job loss since 2
000 are seriously misguided.
In addition, trade deficits have
 jeopardized American
innovation.  In 2016 the U.S. a
 amassed an $83 billion advanced
technology product trade
deficit with the rest of the
world.
China alone enjoyed a $120.7
billion bilateral surplus in
advanced technology products in
the United States.  Professors
at the Harvard Business School
have been able to determine that
 the loss of productive capacity
has in fact stifle ed U.S.
innovation in areas that face im
port competition more recently
Otter and his authors note ed
similar impacts on U.S. industry
.  So it's not only employment
effect       effect.  It's an
innovation effect that can have
profound impacts on our
competitiveness in the future.
And last, if you haven't seen it
, I would commend your attention
to research by Justin  Pierce
of the federal reserve and Peter
Shod that found that U.S.
employment losses have been
largely attributable to products
 for which China benefited under
the terms of its 2001 agreement
 to the WTO and the European
countries did not suffer a
similar steep decline in their
manufacturing sectors after
China's accession to the WTO.  
The next question I want to ask,
 does the U.S. have leverage to
address trade deficits with our
partners?  And I would argue
that we most certainly do.
The United States has
considerable economic leverage
to shrink trade deficits most
notably the $347 billion trade
deficit with China last year.  
U.S. exports to China account
for less than 1% of our GDP, so
we're not particularly leveraged
 in the Chinese market       
market.  Banks hold less than a
percent of their assets in China
and multinational companies
derive less than 2% of their
revenue there.  I should say
U.S.-based multi      
multinational companies.  By
contrast China could not live
without the U.S. consumer market
, which is the destination for a
good chunk in consumer goods up
 to 20% of its exports.
Have trade deficits beyond China
 also had impact on the U.S.
economy?  Again, I would argue
that they have.  With respect to
South Korea, the argument was
made during the passage of the
U.S.-Korea Free  Trade Agreement
 that would support up to 70,000
U.S. jobs and export American
goods up to 10 to $11 billion.  
Instead we see an expanding U.S.
 trade deficit with South Korea
up to
$15.1 billion and between 2011
and 2015 resulted  ing in the
estimate ed           
estimate ed displacement of
nearly 95,000 job opportunities
              opportunities.  I
can give you one concrete
example.  Korea exports a
product called oil country
tubular goods, currently subject
to dumping orders.  Korea has
no domestic market for that
product.  They export the entire
 bulk of it.  And it is heavily
subsidized by the state.  It
displaced extraordinary number
of steelworkers and resulted in
the closure of pipe and two
mills in the United States at
the same time our opportunities
in that sector were expanding.
With respect to Japan, trade
deficit with Japan fueled by
monetary policy ies and
customary business relationships
 is estimate ed to have
eliminate ed nearly 900,000 U.S.
 jobs as the deficit with Japan
reached
$78.3 billion in 2013.
Next I want to speak to some of
the causes of the trade deficit
with China because it was purely
for market reasons that would
indicate there's just a
competitive challenge that the
United States has.  I argue it
goes much deeper than that.  
First you heard testimony with
respect to China's capacity and
indeed China has massive
industrial over-capacity in
steel, in aluminum, glass, other
industrial commodity sectors in
 addition to high tech areas
like semiconductors.  Despite
repeated promises to reduce this
capacity a recent report shows
that despite China      China's
claims to be making progress
that net steel making capacity
actually increased in China from
 2015 to 2016.
Second, China's advantage is
aided by persistent dumping in
subsidy ies that are well-      
well-documented in the USTR's
national trade estimate report
for China.  So I will not go
into it here other than to say
our system is much more
responsive.  Once an industry
initiates a case and once a lot
of damage has been done,
irreversible damage has already
been done.
Third, China's advantage is
aided by non-compliance of labor
 and environmental standards.  
And I can speak to a specific
incidence within the steel
industry.  China's non-     
non-enforcement of its already
weak pollution controls with
respect to NOX and SOX and
particulate matter has given the
 Chinese steel making industry
an estimate ed $2 billion of net
 advantage over U.S. produce ers
who face modern environmental
regulations.
The next area -- and Zach touch
     touched on this a bit where
China enjoys an anti-      
anti-competitive advantage is
through its cyber theft.  We
believe it is critical for the
government to provide support
when foreign interest steal
American trade secrets to
manufacture products abroad and
send them to the United States.
 There are currently military
officers that face indictment in
 the western district of
Pennsylvania in China for
stealing material from companies
such as U.S. Steel, westing
house, ATI and other leading
manufacturers.
The Chinese economy is also very
state-driven.  Over half of its
 leading steel firms are owned
directly or indirectly by the
Chinese government.  And they
face no or low cost of capital
as opposed to American firms who
answer to shareholders and
quarterly earnings reports.
The government in China has
actively misaligned and
manipulate ed its currency and
obviously fluctuates from year
to year, but it has been a
consistent tool in the Chinese
toolbox to gain an advantage
that distorts the market.
I want to ask two additional
questions and answer them.  Is
there precedent for
extraordinary measures being
taken by a U.S. Government to
deal with imbalances like this?
And the answer is clearly yes
beginning with the Nixon
administration which imposed 10%
 import surcharge and
dramatically altered U.S.
monetary policy in the face of a
trade deficit that is much
smaller as a percentage of GDP
that we face with the rest of
the world right now.
The Reagan administration
established voluntary restraint
agreements with respect to steel
 and automobiles.  It instituted
aggressive tariffs on items
such as motorcycles and
semiconductors, and negotiate ed
 a broad currency agreement with
Japan and Western Europe known
as the plaza accord.  The Bush
and Obama administrations have
also taken some actions as well
with respect to requests from
the steel industry as well as
bolstering our domestic
automotive industry in the face
of a global crisis.  So there is
 clearly the precedent for
administrations to engage in a
wide variety of manners.  Now
which tools do I believe would
work with respect to China and
the trade deficit in particular
           particular?  First
priority ize trade enforcement
and self-      self-initiate
cases to reduce the burden on
U.S. industry.  Obviously large
companies have the resources to
hire both economists and trade
lawyers to adjudicate cases.  
There are dozens if not hundreds
of small firms that face
similar barriers that don't
enjoy that luxury.  Second
priority ize reducing global
industrial over     
over-capacity by setting
objective criteria and clear
timetables and consequences for
countries that have persistently
 large over-      over-capacity
in key industrial sectors like
steel.
Next maintain China's non-     
non-market economy status for
purposes of anti-dumping and
countervailing Kewpie proceeding
s.  Deter and penalize
manipulation by supporting
legislation to tree currency
manipulation as a subsidy under
domestic trade Laos and moreover
 consider benefits of broader
currency agreement to rightly
value the U.S. dollar at a much
more competitive level with our
trade competitors and partners.
Next priority ize manufacturing
job creation in trade
agreements.  Even the USITC and
reports that were supportive of
the transpacific partnership
note ed that the agreement was
projected to cost manufacturing
jobs over a ten-year period and
also increase our trade deficit
and manufactured goods.  
Reducing the trade deficit and
increasing manufacturing jobs in
multilateral and bilateral
trade agreements must be the
strong priority.  This can be
accomplished through stronger
rules of origin as we move
forward as well as for stronger
and much more ag impressive
enforcement mechanisms that the
U.S. and its industry could
deploy.
And finally, examine the impact
of Chinese state-owned
investment not only on exports
and imports but also when that
competition comes to the United
States and how that impacts
markets here.  I would close
with that and thank you again
for your time and attention
today.
 Thank you very much.
 FRANK YANG:  Thank you.  My
name is frank Yang, VP of
business developing and
marketing and co-founder for
Stion Corporation, a solar panel
 manufacturing in Mississippi
and also participate ed last two
 years as a member of commerce
committee.
Here today to highlight the
significant trade imbalance in
solar panel manufacturing and
importance of preserving U.S.
presence in this sector.
Unlike some other companies that
manufacture solar in the U.S.
or have done so in the past,
Stion does 100% manufacturing in
 the Hattiesburg, Mississippi
and pro cures supplies from U.S.
 suppliers as well.  We have 170
employees in that facility in a
 town of 45,000 people and the
average wage is $67,000 per year
, more than twice the average
wage in the state of
Mississippi.
U.S. solar manufacturing high
pay high skilled jobs in the
U.S. economy and solar
represents today the largest
source of new energy generation
in the U.S. not just renewables
but all forms of generation, 14
gigawatts store ed in 2016.  
Unfortunately, over 90% of solar
 panels installed in these
projects are imported.  Over 60%
 come from China and most of the
remainder come from southeast
Asian facility ies set up by
Chinese manufacturers to avoid
tarrifs.  Artificially low
pricing by Chinese vendors
forced more than 100 solar
manufacturers into bankruptcy
between 2009 and 2017 including
recent announcements by solar
world and Seneva which had
manufacturing facility ies in
the U.S.  In the past year
because of over-supply and
access of inventory from China
as well as slowdown in utility
scale project market there,
average selling prices for panel
s in the industry has declined
by over 40% in just the last 12
months alone.
Solar panels along with invert
      inverters represent
greater than 50% of the total
system cost of any solar power
plant.  These are also the most
technologically advanced
components in an installation.  
So if U.S. manufacturing were to
disappear completely, which is
a significant threat today based
on the economic conditions in
the industry, we would face
significant energy dependence
and security risks, particularly
on federal government projects.
Overall, the solar industry
began to grow rapidly in the
early 2000s.  Chinese government
provided hundreds of billions
of dollars in low interest loans
an subsidy ies to manufacturers
 and restructured numerous times
to keep companies in business.
Stion is the last manufacturer
housing majority of
manufacturing capacity in the
U.S.  We would recommend that
per the recent executive order
issue ed by President Trump
concrete actions be taken
immediately to tighten loopholes
and buy American clauses for
federal government projects
where products made in the U.S.
can be used.  This is a simple
and common sense tactic for the
government to immediately assist
the situation.  And we also en
  encourage the Department of
Commerce to continue evaluating
competition and pricing in the
U.S. solar market.  Including
the implications of using U.S.
tax dollars to buy product from
China produced in factories that
have poor environmental and
human rights track records.  We
also would ask you to kindly
consider other corrective
actions if they may be necessary
 given the competitive threats
in our industry today.  Thank
you.
 Thank you very much.
 Distinguished panelists, good
afternoon.  My name is Falan
Yinug from the Semiconductor
Industry Association.  On behalf
 of SIA, thank you for the
opportunity to testify today.
Semiconductors or microchips are
the brains of modern electronic
 products.  They enable advances
computing commercial and non-
commercial applications.  
Semiconductor technology has
made virtually all sectors of
the U.S. economy from farming to
 manufacturing more effective
and efficient.
The U.S. semiconductor industry
is a worldwide leader with U.S.
companies commanding about half
of global market share in 2016.
 The U.S. industry has sustained
this leadership position for
nearly two decades.
Semiconductors are America's
fourth ranked export product and
more than 80% of U.S.
semiconductor sales are to
overseas customers.
The industry directly employs
nearly a quarter of million
people in the United States and
supports more than a million
additional jobs throughout the
U.S. economy.
In addition, the U.S.
semiconductor               
semiconductor industry is one of
the world's most advanced
manufacturing sectors.
In short, the U.S. semiconductor
 industry is a key driver of
U.S. innovation, technology
leadership, and economic
strength.
I would like to make three main
points.  One, semiconductors are
one of the country's top
exports and United States
maintained overall trade surplus
 in semiconductors for the past
20 years.
Two, the U.S. trade surplus in
semiconductors is likely under
      understated and therefore
the U.S. trade balance may be
amiss leading metric solely for
determine ing competitive of the
 U.S. semiconductor industry.
Three, to maintain U.S.
leadership in a semiconductor
industry, the United States must
 work to enhance the competitive
ness of the industry as well as
curb unfair trade practices.
The U.S. currently has a trade
surplus in semiconductors as it
consistently has had for the
past 20 years.  Reflecting
industry strong industrial base
in technological leadership
position, United States has
consistently maintained overall
trade surplus in semiconductors
for the past 20 years.  Also,
the United States maintains
semiconductor trade surplus with
the 13 countries combined
identified in the Federal
Register notice and current
bilateral semiconductor trade
surpluses with six of the 13
countries identified in the
notice.
In addition, for those countries
identified in the Federal
Register notice where the United
States has a current bilateral
trade deficit in semiconductors,
these deficits are due mainly
to structural, industry and
supply chain factors rather than
 mercantile           
mercantilist reasons, and in
many cases these would be trade
surpluses if bilateral trade
were measure ed on a value-added
basis.
Second, the U.S. trade surplus
in semiconductors is likely
understated and therefore the
U.S. trade balance may be a
misleading metric solely for
determine ing the competitive of
 the U.S. semiconductor
industry.
The semiconductor fabrication
process is uniquely global and
disaggregate ed with distinct
production stages including
design, front-end fabrication
and back-end assembly test and
packaging that can occur in
multiple countries.
Given this globalize ed
manufacturing ecosystem, trade
statistics can often distort or
even omit where value is create
      created along these stages
of production.
For instance, the U.S. trade
balance in semiconductors does
not consider the following
factors:  First, the value added
 in semiconductor design which
U.S. semiconductor companies
lead this is not captured in
semiconductor goods trade at all
.
Second, significant share of the
 value of U.S. semiconductor im
ports is actually create ed in
the United States and earlier
stages of semiconductor
production such as design as
well as front-end fabrication.
Third, U.S. semiconductor im   
imports are often products from
a U.S. semiconductor firm not a
foreign competitor.
We recommend you look beyond the
trade balance exclusively and
adopt a holistic approach to
assessing the competitive    
        competitiveness of the
U.S. semiconductor industry.
Also, to capture more accurately
all forms of semiconductor
production that take place in
the United States       States,
especially semiconductor design,
SIA recommends the U.S.
Government implement goods
producer or FGP initiative which
 it planned to do for the 2017
economic census       census.
Third, maintain U.S. leadership
in the semiconductor industry
the administration and Congress
must work together to adopt a
competitiveness and innovation
agenda.
Such an agenda would include the
following components.
Free and open trade.  Creating a
pro-competitive tax code.  
Increasing federal investment in
precompetitive basic research.
 Strengthening America's
semiconductor workforce, and
ensure ing America        
America's trade partners provide
 fair access to markets in
compliance with global trade
rules and norms.
In conclusion, SIA appreciates
the opportunity to provide its
input regarding executive order
13786 on significant trade
deficits and we look forward to
working with the administration
on policy ies that will advance
the competitiveness of the U.S.
semiconductor industry
 Thank you very much.  I'm
going to turn to questions.  And
 so I'll lead off and then we'll
get all of this in.
Mr. Henderson let's start with
you and actually a question
where we ended the discussion on
the last panel.  You talked a
lot about over-capacity in China
's aluminum sector.  Do you have
 estimates what the over-
capacity looks like now or
looking into the future?
 JEFF HENDERSON:  Well, the
number that I cite ed in my
testimony was 3.8 million-tons
of excess extrusion capacity in
China.  3.8 million-tons.  And
that is before the announced
acquisition of 99 new extrusion
presses by Jong Wong the largest
in China.  To give that scale,
there's about 400 extrusion
presses in the United States
right now.  With one purchase
order they captured enough to
take on that much more.  So
there's no indication from what
we can see that their capacity
build is stopping.
 Thank you very much.  I'd like
to turn to a question from
treasury.
 I'm from the Department of
Treasury.  My question is for
you, Mr. Mottl.  You mentioned
in your statement the decline in
employment in your company from
 pre-2008 levels, and also some
of the changes in your industry
that started in the 1990s.  
Could you describe a bit how
your business changed prior to
2008 and what role you believe
economic events like the
recession versus trade barriers
have played on your business
since then?
 ZACH MOTTL:  That's a great
point.  I want to clarify, my
employment has started to grow
again because we found new
markets in new industries.  
We're in the aerospace industry
and defense industry and medical
industry, but I worry that the
same story that happened to me,
we've been 100 years and seen a
couple industries come and go
and I'm worried about the ones
I'm in now, if they go, where
will I find the next industry?
But I will also say that, you
know, in 2008 we were unusually
busy because, while other
companies were suffering because
 of the deal that I mentioned
where we were being telecom
equipment they planned to sell
to China that then got scuttle
ed.  So when that ended in 2008
we had another significant hit.
So throughout our 100-year
history we pretty much had
steady growth and employment
growth and it changed in the
late '90s.  The '90s were great
for a lot of people industry ies
 made money and didn't have to
try too hard.  But we had been
making money really well and
drawing up to that point, but
when the tech bubble burst for
us, that's when things really
changed.  Again, you heard from
the other folks here there were
a lot of other things happening
geopolitically.  China was
admitted to the World Trade
Organization so I think all
those things came together and
putting pressure on my business
now.
So we have grown but profits are
 strained still.  You know,
there ''s a lot of competition
and I just think if we could
have not lost those industries
my employment would be perhaps
1.5 to two times what it is now
and certainly my profits would
be a lot healthier.  Thank you.
 Thank you.  State department.
 Thank you.  I'm Carol from the
 economic bureau at the state
department.  My question is for
Mr. Paul.  You discussed the
importance of trade enforcement
but noted the cost and time with
bringing a case.  Can you
identify the most burdensome
parts of the process and if
possible could you quantify
these costs?
 SCOTT PAUL:  Thank you.  It
varies depending on the case and
 number of appeals and the level
of economic analysis that is
required, but there is -- we
often get cold calls into our
office from small and mid-size
businesses saying, how can I --
how can we do this?  And there
is some ombudsman service
available through the commerce
department but it only goes so
far.  The challenge with an
industry getting together a
trade case and adjudicating the
whole way through is one of
timing.  The injury has to have
occurred, and so you're catch
      catching industry ies in a
down cycle because of that.
So they're going to have to
spend resources in a time of
increased scarcity on filing a
case.
Second is the amount of time
that it takes to produce relief
in cases like this.  Which can
often extend into a year or two
depending on the type of action
that is taken.
I note that the commerce
secretary was quoted in a news
source within the last couple of
weeks saying that the commerce
department was looking at self-
initiating a greater number of
cases, and I think that both
from a -- both from an efficacy
point of view and also from a
practicality point of view,
that's a long overdue step.
A last barrier is that if you
were in an industry that is
somewhat globalize ed, it is
often a complicate ing factor in
terms of getting industry
engagement in a particular case
where there may be different
points of views among the member
companies.  And, again, that's
something where an intervention
through an administrative action
 can make a different.
The barrier for some small shops
 that -- even smaller than Zach
's shop can be extraordinary
once they -- I'd be happy to
submit more information about
that because it varies quite a
bit but a considerable an
stackcal that many face --
considerable obstacle that many
face
 Question from labor.
 Good afternoon.  I'm from the
international affairs bureau at
the U.S. Department of Labor.  
My question is for Mr. Yang.  
I'm interested in your estimate
of total number of jobs lost in
the solar manufacturing due to
harmful practices by trading
partners and then relatedly on
the flip side how might that
compare against the gain in
solar panel installation
maintenance due to lower price
s       prices.
 FRANK YANG:  Yeah, that's a
really good question.  So I
think if you look at the solar
industry dating back to the
inception really in 1978 with
the solar here in the U.S. , one
 point the U.S. had over 90% of
manufacturing in the industry.  
If you look at our industry
today, which is, you know, 14
gigawatts annually in size, you
know, that size of all the
product we're manufactured in
the U.S. , you know, that would
create well over
10,000 jobs in manufacturing.  
And I know that there have been
some reports that in the case of
 the solar industry as a whole
employees today over 250,000
Americans, you know, that number
certainly has some truth to it
but a lot of the installation
jobs are seasonal and I think
these people would otherwise
find work and not actually
working full time in the solar
industry         industry.  I
think our view is not only the
manufacturers panels but install
s of systems, I think there's a
happy medium for equilibrium
here in the U.S. where the
prices are fair and plenty of
room for install        
installers and project developer
, you know, including our own,
to operate a healthy business
and provide economical clean
energy.  But I think that the
industry cost structure in terms
of manufactured product needs
to become more rational because
it's a cost inventory data
coming out from China today is
not very accurate and not very
transparent and as a result I
think it's very hard to
determine, you know, how that
impacts pricing in the market.  
So I think, you know, to answer
your question, the net impact on
, I think, full-      full-time
skilled labor would absolutely
be, you know, positive.  You
know can, I think you could look
 at sort of the cost of kilowatt
hour of power in any of the
markets to estimate what the
impact may be in terms of the
market going down, if there is a
rise in price.  But I think
ultimately, you know, these
technology ies, whether it's
solar or Tesla, you know, all
these technologies have the
potential to be cost competitive
in the U.S. at a rational cost
structure.  So I think it's
about enable ing that
opportunity and creating a
window for those products to
even get into the market.
 Thank you.
All right.  U.S. Steel.
 You spoke in your testimony
about the importance of enforce
enforcing global trade
rules and norms, and in the
written testimony you're also
discussing the role of trade
agreements in the semiconductor
industries export performance.  
Can you give more detail on
those things?  What do you think
the major enforcement
challenges are and more
basically, what role have
agreements played and can they
play in the future in the
industry's export success?
 FALAN YINUG:  Sure.
I think because of both the
semiconductor industry's global
manufacturing process as well as
 the fact that over 80% of
semiconductors fail abroad, free
 and open markets are essential
for the semiconductor industry.
 We advocate ed very strongly on
behalf of agreements in the
past that have had a very
important impact in the regard.
 I would particularly note
the...
Which occurred a couple years
ago.  A lot of technology
products are moving faster in
terms of their development, in
terms of where they're
classified in the HS system,
frankly.  So to maintain zero
tarrifs and free and open
markets, it's important to be
sure that the tariffs and non-
    non-tariffs agreements
continue to be looked at and be
lowered.
I think -- because over 80% of
our sales are abroad, markets
such as China are very important
.  China is the largest single
country in the semiconductor
market and so being sure that
they abide by their agreements
under the WTO in particular
maintaining market access is
critical for our companies to
have free access to that market.
I think we often have said that
the U.S. semiconductor industry
is welcome to all competition
and happy to compete but we want
 to be sure that the playing
field is equal and balanced and
that's what we're trying to
ensure.
 Thank you.
Additional follow       
follow-up questions?
Thank you for your time and
input.  It's very valuable to
us.  Appreciate you coming out
today.
 Thank you.
[Applause]
...
 Hi, am the deputy assistant
secretary of commerce for global
markets and I gives me pleasure
 to welcome you to testify today
and thank you too for our
members in the audience who
stuck it out through a long day.
  This is the ninth and second
to last session and we are
grateful to have your
perspective on country specific
issues.
So I'm going to ask each panel
      panelist, starting from
the embassy of Thailand to go
through and introduce yourself
biographically and then we'll
return to you to present your
testimony.  And I would like to
ask that you all keep an eye on
the time.  We asked that your
remarks not exceed ten minutes,
so that leaves time for
questions and our intent is to
ask each of you at least one
question.
So with that, please allow me to
 once again thank you all for
being here and we may start with
 introductions.
PRAYOTH BENYASUT:  Good
afternoon.
I am Prayoth Benyasut and
minister of the office of
commercial affairs at the
embassy in Washington, D.C.  
Thank you.
PETER CHOW:  Thank you.  I'm
Peter Chow, from city university
 in New York.
LOTTA DANIELSSON:  I'm Lotta
Danielsson with the Taiwan
Business Council, a non-profit
membership based organization
that works to advance trade and
business relations between the
U.S. and Taiwan.
NANCY KIM:  Good afternoon, I'm
Nancy Kim representing the
Korea International Trade
Association.
BRIAN POMPER:  I'm Brian Pomper
, I serve on the Alliance for
Fair Trade with India.
 Thank you.  May we begin with
the first testimony.
PRAYOTH BENYASUT:  Thank you.  
This is Prayoth Benyasut and
thank you for the opportunity to
 talk to you about the trade
deficit testimony of Thailand.  
Thailand has provided extensive
written comments to the
Department of Commerce and UST
USTR.  My testimony today
will therefore summarize a few
of the important points made
therein.
First, Thailand wishes to
retaliate the consensus appear
appearing in many U.S.
Government publications that
cross-bilateral trade affect
countries in economic
relationship.
For example, global value
chains, trading activities such
as the trade of food
and commodity ies between two
countries.
This is especially true for
Thailand given that 59% of our
export in 2011 was actually
foreign content, about 8% of
U.S. origin, and that many U.S.
companies import goods from
Thailand for export or further
manufacturing.
In any event, the Thailand trade
deficit, only
18,920,000,000 U.S. dollars or
only 2.6% in comparison to the
overall U.S. trade deficit.
When compared to the GDP, which
is 18.56 trillion U.S. dollars,
the U.S. trade deficit to
Thailand is still .01%.
Beyond the balance, the U.S.-
      U.S.-Thailand relationship
, we are one of the allies and
we incorporate to our
1833.  The 2002 trade and
investment framework agreement.
Thai investors are investing
, and Thailand into the U.S.
grew dramatically between 2010
and 2016.
And 49Thai investment projects
 support jobs and growth.  You
may have heard about Chicken of
the Sea, Red  Lobsters
and many other Thailand goods
across the U.S.
However, U.S. market remain
steady about 1% since 2001.
U.S. exports to Thailand have
recently lagged U.S. exports to
the rest of the world.  These
trends expand not by unfair
trade practice by the lack of
U.S.-Thailand FDA decreasing
U.S. investment in Thailand and
our sub-par economic growth.
First of all, it is critical to
understand that Thai exports to
the U.S. do in fact complement
and contribute to U.S. goals and
jobs.  This is the most rate ed
 by three categories of Th   
Thai products that make up more
than half of the trade balance.
Finally, Thailand wishes to note
 effects about our trade regime.
Thailand is a free market
economy and tariff and non-     
non-tariff measures are fully
aligned.
Thailand has trade agreements
with 17 trading partners
.
Indeed about half of Thailand's
Thailand's... range
from zero percent to five
percent.  Approximately
30% are...
Second, Thailand is undertaking
serious unilateral change and
economic reform efforts on
tariff and non-tariff measures.
Dumping and subsidization,
including...
[
PETER CHOW:  Thank you for the
opportunity to be here.
Taiwan economic partnership.  
Taiwan graduate from the screen
in 1989.  Therefore,
the Taiwan with the United
States has been shrinking, cut
to more than one    one-half by
2015.
And the main reason for this is
because of its own structure,
imbalance, and that is Taiwan
has...
And the other point to realize
is U.S. has substantial trade
surplus with Taiwan.
If we look at the commodity
structure of the bilateral trade
 between U.S. and Taiwan, Taiwan
export to U.S. consistently
more than 50% are in parts and
components.  Parts in the
components.  And this will be
very complementary to the U.S.
industry trade and employment.  
In the book which I published
and stated in my statement I
used the index of
the...
for the purpose of export, to
under      undervalue currency.
The best way -- Taiwan has trade
 surplus, but one of the best
way to reduce Taiwan surplus,
overall surplus is to encourage
investment, therefore Taiwan
surplus will be reduced.
And because United States and
Taiwan has a strong
complementary trade relationship
, one of the best way would be
to have those countries to be
trade treaty ies, whatever you
call it. , to en   encourage
Taiwan's business confidence
to boost U.S.  U.S. investment
and investment over    
oversea.  And a trade treaty
with Taiwan it will increase two
way, in which you create more
job opportunity for American
workers and to improve U.S.
exports.
In simulations, I set up a
computer generate ed model under
the assumption that the U.S. ,
and only 20%, general tariff on
the commodity trade, only 20% of
 the de-regulation of the
receives sector between U.S. and
 Taiwan.
It creates substantial
employment, 20 increase in GDP
for the economy        economy.
 Because the simulation, I offer
and I'd be happy to share that
simulation with anybody.
So with the top constraint I
would argue that Taiwan is not a
rival to U.S. economy.  Taiwan
is a partner for the U.S.  
Taiwan is closely aligned for
the American people.
So therefore bilateral trade
treaty between U.S. and Taiwan
is going to further strengthen
the economic partnership between
these two countries.  Thank you
 very much for listening.
 Thank you very much.  And now
we turn to another testimony on
Taiwan.
LOTTA DANIELSSON:  Thank you so
much for the opportunity to be
here today.  The U.S. Taiwan
trade relationship is
significant given its relative
size and population, Taiwan
plays an out-sized role in both
global trade and as a partner
for the United States.
Over the last several decades
Taiwan has gone a general
lowering of tariffs and
dismantling of trade barriers.  
Taiwan is a member in good
standing of the WTO.  It's
generally not engaging in unfair
 or discriminatory trade
practices.  It's not punishing
the United States particularly
with its rules and regulations,
and it's working towards liberal
ize ing domestic trade policies
and improving transparency.
Now, there are still problems,
of course, in the U.S. Taiwan
trade relationship, poor exports
 from the U.S. to Taiwan has
been an irritant for a while and
 will continue to be so it looks
like and of course the USTR
tracked others as well.
But the Council believes that
these issues can be resolved and
there's still -- they're being
discussed under the trade
investment framework agreement
talks, and that is our primary
mechanism for trade dialogue and
 we believe this can be resolved
.
It's true that the U.S. has run
a trade deficit with Taiwan for
the last 30 years.  Now, the
size of that trade deficit has
remained relatively constant
despite the fact that overall
trade has grown.  And the
current deficit falls pretty
well within the traditional
historical range as well.
The U.S. trade deficit in goods
has its root causes, as Dr.     
 Dr. Chow talked about, in the
fact that Taiwan is such an
important link in the U.S. -- in
the supply chain for U.S.
companies, particularly the
technology sector.  Take
integrated circuits, for example
.  U.S. companies like Apple,
Qualcomm and NVIDIA that
contracted with Taiwan companies
, and the Taiwan side
manufactures, tests and package
        packages integrated
circuits to spec.  They are
shipped to the country for
further packaging and marketing
here.  So a large portion, as
Dr. Chow indicated, of Taiwan
exports to the U.S. are these
types of intermediate goods,
computer components, car parts,
fasteners and so on, and that
ultimately go into U.S. made
products.  They are not
competing with them as finished
goods.
So despite the consistent trade
deficit, we believe that the
U.S.-Taiwan trade and commercial
relationship is absolutely
mutually beneficial.  It is not
a zero sum game.  It   It's not
where we have to count exports
to Taiwan as wins and imports as
 losses, and also the trade
deficit with Taiwan should not
be the only gauge for how
important or how beneficial the
relationship with Taiwan is to
the U.S. economy.
Many of the components in this
overall relationship don't get
factored into the official trade
deficit data.  As Dr.      Dr.
Chow mentioned, trade and
services, for example, trade
surplus as well as technology
licensing where Taiwan is the
top ten source of intellectual
property payments to the United
States.
U.S. businesses, which is the
constituency that I represent,
they recognize the importance of
 Taiwan as a market for their
goods and services as a value-
       value-added technology
and innovation partner as well
as a source for foreign
investment in the U.S.
Hundreds of Taiwan companies
already have investments in the
United States and important
sectors such as financial
services, technology, biotech.  
And these are investments not
just in plants and production
locations but they also have
various venture capital
investments in the U.S.
including tech start-ups.
Our relationship with Taiwan
generally promotes the economic
growth of the United States.  It
 supports U.S. jobs across the
country and across a number of
industries, including in
important sectors such as
defense and aerospace.
Business-to-business
transactions and relationships
with Taiwan have contribute ed
to the fact that U.S. companies
have emerge ed as global leaders
 in high tech and cutting-edge
technologies such as the
Internet of Things, cloud
computing, wearables, virtual
reality and so on.
So the extent of U.S.-Taiwan
trade and commercial
relationship has been and will
continue to be a bedrock of the
overall bilateral U.S.-Taiwan
trade relationship which is also
excellent, and where Taiwan is
an important national security
partner for the United States in
 the region.  Thank you.
 Thank you very much.  Turning
to Korea.
NANCY KIM:  Good afternoon.  
I'm here today to provide
testimony on behalf of the Korea
 International Trade Association
known as KTA.  It is an
association of 71,000 Korean
company with diverse trading
interests in the U.S. and
globally.  On behalf of our
member companies I would like to
express support for the
relationship between Korea and
United States generally and
Korea U.S. free trade agreement.
It is a belief that it has
been a positive force in
knitting or countries together
economically to the benefit of
both economy ies.  We believe
that the United States
United States
trade deficit with Korea must be
viewed in the context of
increasingly close and mutually
beneficial relationship between
our two economy ies.  Let me
provide a few specifics.
The adoption of porous in 2012
brought about a significant
increase in trade between our
two countries while overall
world trade decreased by 13%
since 2011, trade between U.S.
and Korea increased by 12% buck
bucking the global trend.  
The increase in overall trade
has in fact been at least as
beneficial to the United States
as to Korea.
If you look at the share of
Korean imports accounted for by
U.S. merchandise, that has
increased by 2.14% from 8.5% in
2011 to 10.64% in 2016.
So U.S. companies are
increasing their exports to
Korea.
Meanwhile the Korean share of
U.S. imports increased by only
0.62% to only 3.19% of the U.S.
market share.  The U.S.
companies have been able to
especially be competitive in
industries such as automobile
industry, pharmaceutical
industry and the agriculture al
products as as a result of
implementation of the free trade
 agreement.  To be sure the
account balance is characterized
 by a trade surplus from Korea's
point of view and a U.S. -- and
 a deficit from the U.S. point
of view.
However, this is largely the
result of structural differences
 between the two economy ies.  
As well known, a country's
current account balance is
result of savings minus
investment.  Where savings
exceeds investment the account
is in a surplus and whereas if
investment exceeds savings the
account is in a deficit.
The U.S. is a higher consumption
 economy than Korea with savings
falling short of investment
meaning that structurally it's
gone in account deficit.  Korea
is a high savings economy with
savings exceeding investment.  
Although Korea's economy is
changing, various conditions
have led to Korean companies
favoring investment overseas
over domestic investment.  The
United States has been a
beneficiary of Korea's
relatively high overseas
investment in the form of Korean
investment in the United States
 economy, which I think totaled
$40 billion last year.
Second, manufacturing in Korea
has been a much more important
part of the economy that has
been the case in the U.S.  In
Korea, the manufacturing
industry accounts for over 30%
of its GDP while in the U.S.
manufacturing makes up only 12%.
  In contrast, service industry
ies account for a higher percent
 of the U.S. economy than they
do of the Korean economy.  Thus
while Korea rank     ranks
fourth among industrial economy
 ies in manufacturing
competitiveness, it ranks only
80th in the financial services
sector.  As a result the U.S.-
     U.S.-run deficit with Korea
in the manufacturing sector but
 it runs a substantial surplus
in the services sector.
Aside from these structural
differences, as mentioned, the
economic cycles of the Korean
and U.S. economies are not
precisely synchronize ed.  While
the U.S. enjoyed sustained
period of economic growth since
the Great Recession of 2009,
Korean economic growth has been
relatively sluggish.  This
disparity spur the United States
appetite for imports generally
while dampening Korea      
Korea's ability to import.  This
 will not always be the case.  
We believe when the economy ies
of the countries are in
different phases.  The United
States economy were under-
performing while the Korean
economy were in robust growth
the performances of the two
countries account balances will
be quite different.
Overall, we believe that the
increased growth in U.S. trade
resulted from chorus is positive
for both countries.
Korea's exports to U.S. and
investment in America have had
positive effects on American
industrial production jobs and
exports.  It has in short been a
win-win situation.
KETA hopes that the United
States will resist the
temptation to engage in
protection measures such as
artificial tariff and trade
barriers and instead look at the
 trade balance between our two
countries and the proper
positive light as evidence of a
growing partnership that is
creating jobs and contributing
to economic growth in the United
 States as well as Korea.  Thank
you.
 Thank you.  We now turn to our
final panelist.
BRIAN POMPER:  Thank you.  And
I apologize in advance for what
allergy ies have done to my
voice      voice.  I have to
cough.  Good afternoon my name
is Brian Pomper.  I serve as the
 executive director of the
Alliance for Fair Trade with
India or AFTI.  It is a
coalition of trade associations
that works to improve the U.S.-
U.S.-India commercial
relationship by supporting
increased action to address
barriers to trade and investment
U.S. companies are facing in
Indian.  AFTI serves as a
mechanism for engaging with U.S.
 policymakers on these issues.  
The diverse membership is
comprised of organizations
representing a range of U.S.
industries adversely impacted by
India's discriminatory trade
practices and policies.  In
light of the mandate I'm here to
 urge the administration to take
action to rectify India trade
barriers and secure market
access for U.S. companies in
India reciprocal to market
access that Indian companies
currently enjoy in the United
States.
When Indian prime minister took
office in 2014AFTI was hopeful
he would usher an openness that
would benefit the United States
and India.  He vowed to give the
world a favorable opportunity
to trade with India      India.
He pledge ed to improve
regulatory landscape for the
protection of intellectual
property rights in India.  But
after years of significant U.S.
investment and bilateral talks
the government has not take the
requisite steps to translate
promises into concrete actions.
The government has taken welcome
steps to overhaul the tax code
and open sectors to more foreign
investment but American
businesses continue to face an
evolve ing array of trade
barriers both longstanding and
new.
New price controls that target
agriculture al biotechnology and
 medical devices leading some --
leading American companies to
withdraw advance products from
the Indian market entirely.  New
 rules that band patents for
computer-related inventions.  
Measures in Indian law that add
an onerous and unnecessary
criterion for the patent ability
of medicines.  Unrealistic
security and testing requirement
s, that is fully implemented,
could close India to U.S.
exports of information and
computer technology equipment.  
Wide-      Wide-ranging tariffs
above 100% on autos, textiles,
distilled spirits and other
products and new tariffs in
tended to protect domestic
industry.  And weak copyright
protection policy ies and
enforcement that harm U.S. and
Indian property rights holders
alike.
These trade barriers are denying
 the benefits of the bilateral
trade relationship to the United
 States.  At the same time,
India takes full advantage of
open and fair U.S. markets to
grow its exports.  India is
depriving U.S. companies a fair
opportunity to access the Indian
 market and receive full value
of its products once they enter
the Indian market.  India im
ports less from the United
States than from much smaller
economy        economies like
Singapore and the United Arab
Emirates.  A few years ago the
commission did a pair of studies
on the U.S.-India trade
relationship.  The commission
found that if India were to
level the playing field and
match American standards on
tariff, tariff investment and
property rights, U.S. exports to
 India would rise by two-thirds.
In sum Indian does to the
provide U.S. businesses a fair
opportunity to access or operate
 in the Indian market.  That
hurts U.S. companies, limits
U.S. exports and depress        
depresses U.S. job creation. at
the urge of the administration
to priority ize India in review
of bilateral trade deficits and
to take action to rectify India
      India's trade and
investment barriers, including a
 robust special 301 action plan
to address deficiency ies in
India's domestic IP environment.
Thank you for allowing me to
present these views.  On behalf
of AFTI I'm happy to answer
questions
 I would like to thank the
panelists for coming today and
making such thoughtful
presentations.  We will now turn
to some questions.  I will
invite each of the panelists on
the U.S. Government side to
reintroduce themselves if they
haven't had a chance -- I will
ask them to all reintroduce
themselves, those that have
spoken earlier, but we have some
new ones.
So with that, we'll turn first
to my colleague from USTR to ask
 the first question from the
government of Thailand.
 Thank you.  I join in thanking
all of you for your testimony
today ed Dresser, representative
for policy and economics.  A
question for the doctor.  You
mentioned one of the long
lasting monument of diplomacy.
Can you tell us a bit about how
the treatment of U.S. business
under the treaty compares to the
 treatment of Thailand's free
trade agreement partners under
the respective agreements.
PRAYOTH BENYASUT:  I think this
 one is the treaty -- we have a
long story with the U.S. and I
think this one is the thing that
maybe gives the U.S. investor
into Thailand, but in detail I
can provide later with this one
with Thailand.  I think it will
facilitate our investor between
the two countries, especially
the U.S. into Thailand.  But on
the Thai side we have study ied
something and we found that
because the U.S. have the
federal and state level, so in
some sense, I mean     mean, in
some states, you have different
laws, rules, regulations, so I
think for Thailand maybe we are
looking for the benefit on that.
But for the U.S. side, because
 Thailand is a kingdom, there's
no state of federal -- we have
just the kingdom.  So I think
from your side you can enjoy the
 treaty as...
 Thank you very much.
PRAYOTH BENYASUT:  Thank you.
 I'll turn to my colleague from
 the treasury department.
  Thank you.  My name is Wan C
hang Department of Treasury.  
Thank you for your submissions
and testimony.  I have one
question for Professor Chow.  
Taiwan had a long history of
intervention to resist new
Taiwan dollar appreciation.  In
your opinion, why do you think
the central bank would intervene
in such asemi-finished aluminum
 metric manner over time?
PETER CHOW:  It was economy,
currency and evaluation, which
you call the currency
depreciation for Taiwan.
In fact, the same company may im
port the ingredient from abroad
in export.  If currency was
under-valued, then the companies
had to pay more to im   import
or to export.
I I this is a question that
can apply to a economy like
Taiwan, and from economic point
of view it would be much, much
better to go through the market
forces to determine what is the
exchange rate, you know,
particularly U.S. dollar with
Taiwan currency.  And I think
that the market can tell us and
the business men much more
information, any government
manipulation.  So Taiwan
understands, and the market will
 determine.
I'm not here as the government.
 I'm here as an independent
scholar from the city University
 of New York,
but the Central Bank may
intervene into the foreign
exchange market.  One reason for
 that is because Taiwan is
relatively small market,
relatively small to others.
And it's a major function for
the Central Bank to mitigate the
validity of the exchange rate
and not to jeopardize the
business confidence on
investment.
So I think that is a normal
function.  I want to engage
on Central Bank and Q1 and Q2
and Q3 and the globalization.
So I think as an academic
observer, I would say that the
Central Bank in Taiwan should be
 considered as one of...
And I don't want to get into
that, but, in fact, the
government of the Central Bank
was...
Thank you very much.
 I'll turn to my colleague from
the state department
 .  My question is for Ms.     
Ms. Danielsson.  Ms. Danielsson
               Ms. Danielsson,
you're written testimony you
note ed while Taiwan is working
towards liberalize ing domestic
regime some market protections
remain.  Could you please
explain which market protections
remain and how your member
firms are affected by them.
LOTTA DANIELSSON:  There are
definitely agriculture al market
protections.  I'm sure your
colleague from USTR has a much
better idea.  The issue of the
agriculture al market is
certainly one of the big ones.  
There are others, but I believe
like other issues, and I know
that the current government of
Taiwan has moved the office of
trade negotiation away from just
under the ministry of economic
affairs and moved it into an
executive level agency.  And
that they are working on some of
the issues that we see with the
 U.S.  And they are -- obviously
there's a lot of agriculture al
 businesses the U.S. who are see
ing Taiwan as a large market and
 they are being affected by some
of the protectionist measures
that Taiwan has in place.
Again, though, I do think that
we are confident that we can
work through them.
 I'll ask the next question for
 Ms. Kim.  What are the legal or
regulatory issues that make it
challenging for you as exporters
to access the Korean market?
NANCY KIM:  Legal and
regulatory challenges.
With the implementation of
Chorus and tariff and trade
barriers, U.S. exporters have
faired very well in being able
to increase exports to Korea and
 various industries such as auto
and wheel and pharmaceutical
and agriculture al products I
mentioned, but also a reduction
in non-tariff barriers and Korea
has opened its market to U.S.
law firms, legal services, and
to U.S. companies and insurance
and financial services, and U.S.
companies in telecommunication
s.  So a lot of those have been
enable ed by legal and
regulatory changes made by the
Korean government.  As well as
Chorus has provided greater
protection for intellectual
property rights.  So that has
resulted in an increase in
services to the U.S. -- to Korea
.  U.S. services going to Korea,
 such as in software and movies
and films and you have seen --
that's why U.S. has ha trade
surplus in services with Korea.
And as a result as well there
has been an increase in
bilateral investment between the
 two companies which has create
ed a greater integration and
global value chain.
I hope that answers your
question.
 It's helpful, but we still
hear a number of complaints from
time to time, so I was
wondering if you're aware of any
of those, if you could touch on
 those for work that we still
remain to accomplish despite
having the Chorus.
NANCY KIM:  I think with any
free trade agreement there are
always issues that need to be
worked out and as far as I'm
aware there have been over 30
works groups and committees that
have met and been able to
address a lot of these issues.  
And some of these issues are
still ongoing and still need to
be addressed.  But the Chorus
was implemented five years ago
and not all of these barriers
have been phased in.  So there
are still some barriers that
need to be phased in, I believe
a ten-year process when all the
barriers will be reduced.  Thank
you.
 Thank you.  I have a question
now for Mr. Pomper.  In your
written submission you note ed
that India's imposition of
unique standards contribute to
put U.S. commerce at an unfair
disadvantage.  Could you provide
some of the examples of
standards, regulations and
guidelines issue ed by Indian
regulators which unfairly impact
specific U.S. products and
companies?
BRIAN POMPER:  Sure, there are
quite a few.  I have details in
my written testimony.  There are
 -- well, the guidelines are
computer-related invention.  I
think make it very difficult to
patent software in India.  
That's harmful to U.S. export
exporters.  I would say
the existence of regulation of
section 3 (d) of the patent act
    act.  It makes it easy for
competitors of U.S. innovative
biopharmaceutical company to
attack patents in India and I
think this is a clear example of
something that would be extra
trips.  There are three
requirement in trips for
compatibility and this 3D
mechanism is a fourth
requirement, which I think the
United States should get.  There
 are also requirements for label
s ingredients in things like
distilled spirits that are
outside of the norm, outside of
international standards.  There
are security -- testing
requirements that have been -- I
would say threatened in India
for years.  Every April 1st it
seems they're due to come into
effect and delayed another year
year.  This is what I
referenced in my oral testimony
testimony, but if they
 were fully impacted, what those
requirements are that any ICT
product exported to India,
regardless whether it was tested
 for safety and reliability in
international lab like an Under
writers  Laboratory, that sort
of thing, would also have to be
tested in an Indian facility.  I
believe India would have
nowhere near the capacity to
test all the IC   ICP products
going into India.  This is not
something fully in place yet but
 it threatens and hangs over the
ministry.
The last thing I'll say is that
India recently, in the last six
months maybe, eight months, has
raised tariffs on a variety of I
CT products in ways that many
believe violate their commitment
s under the information
technology agreement.
These are all where the United
States is a competitive exporter
 and the impact on U.S.
companies trying to invest in
and export are an advantage.
 Thank you.  Did you want to
ask an additional question
?
 This has been an interesting
session.
 Can I make a comment?  Can I
make a comment about the
agriculture
al?
As a trade economist, I
understand that agriculture al
is very, very sensitive
political          politically.
 So I pay more attention to it.
My understanding, U.S.
department, Taiwan import nearly
331 million of agriculture
product from the U.S. and U.S.
agriculture surplus with Taiwan
       Taiwan.  Those are the
two factors.  And number three,
Taiwan government will purchase
more of American agriculture
product
.
And also, in general, the
agriculture product in Taiwan
puts a lot of pressure on the
farmer, but the government is
willing to, you know, make a
friendship with the U.S. by
doing some of the adjustment to
accommodate the farmers.
So therefore my observation is
that you as government, even the
Department of Agriculture al
representative, you can incyst
that             in --
...
 We're ready to go, so let's
start.
Let me welcome you to the
Department of Commerce and to
actually the very last panel of
the day of hearings into the
origins and causes and solution
         solutions to the U.S.
trade deficit.  This is a panel
that is devote ed to services.  
I am Maureen Smith.  I am the
director of the Office of  
Supply Chain and Professional
and Business Services here in
the depreciate -- of commerce.  
So I'm going to listen attentive
ly to your statements.  May I
suggest we start with at the
same time from the coalition of
service industry ies           
industries.  I'm going to ask in
 view of the time constraints we
are under today that you limit
your statement to ten minutes
each.  Thank you
.
CHRISTINE BLISS:  Thank you
very much.  I really appreciate
the opportunity to appear before
all of you from the Department
of State, Department of
Commerce, USTR and treasury.  
And it's a pleasure to be able
to meet with all of you today
and to testify on behalf of the
Coalition of Service Industry
ies           Industries, and CS
I, as you probably know or may
not know is the leading industry
association devote ed
exclusively to promoting
international objectives with
respect to the U.S. services
sector.  Our members include the
 broad spectrum of the services
industry ies from IT and
communication services to
financial services to
distribution, to express
delivery to professional
services.
And my testimony today is going
to explain why services is not
only to -- fundamental to the
U.S. and global economy ies, but
why it is a critical component
of U.S. trade policy in our
view.  And must be included in
our view to get a more
comprehensive view of the U.S.
economy.
CSI definitely recommends a more
 holistic view that includes all
types of trade flows, including
 services, to more accurately
represent the impact of trade in
 the economy.  I will also
highlight a few specific
examples just to illustrate how
pervasive the influence of
services is across the economy.
As I indicated, we are concerned
 by -- that an exclusive
focus on manufactured goods
deficits will not produce
results that will promote the
competitiveness of the American
economy as a whole.  This narrow
 focus completely excludes
services, which is a major part
of the U.S. economy that
accounts for over 75% of the
American workforce and nearly
80% of US GDP.  More
specifically nearly 10 million
U.S. jobs are tied to U.S.
services exports and investment
investments, which
means they are dependent on
trade.  Services jobs that are
in trade      tradeable sectors
which account for roughly 40% of
 U.S. services sectors require a
higher level of education and
have higher earning potential
than average manufacturing jobs
and wages.
In 2016 the average hourly
earnings in business and
professional services was $30
and 72 cents per hour compared
to an average manufacturing wage
 of $25.99 per hour.  So
expanding services exports in
investment can be an important
source of high wage U.S. jobs.
Services, including           
including digitally enable ed
services are a critical fabric
of the U.S. economy and allow
every single economic sector
from manufacturing to
agriculture to be more
productive, to reach more
customers in more foreign
markets and to ultimately create
 higher wages and greater
opportunities for all Americans
         Americans.
Simply you cannot grow it, make
it, move it, buy it, or sell it
without services.
Looking beyond the typical
examples, services are
everywhere.  And where I would
like to begin is with the U.S.
automative sector.  If you look
there specifically, 50% of the
cost of manufacturing is
attributable to services.  On
the manufacturing shop floors
generally moving beyond the auto
sector, companies both large
and small are depending
increasingly on software and
services such as predictive
analysis, machine learning and
cloud services to produce and
deliver better and more
efficient products to their
customers.
In the medical sector,
telecommunications technology
ies enable providers to serve
patients in remote areas while
big data analytics support
public health authorities in the
 fight against contagious
diseases.  Medical equipment
manufacturers are bundling their
products with services and
selling them as integrated
solutions.
In the agriculture sector,
farmers rely on crop insurance
in the face of weather-related
risks and new technologies are
embedded in their farm machinery
from tractors to enable them to
 collect realtime information to
keep their crops healthier and
to produce greater yields.
And in the energy space, wind
turbines are controlled and
monitored by a systems of sensor
s linked by cloud technology
ies.
Those are just a few examples,
and I think they're good ones
because there are areas where I
think we're all very familiar
with activities but we don't
necessarily associate services
with those activity ies.
The United States is the world
     world's largest exporter of
services and as a leader in
services trade, in fact, the
United States has maintained an
overall trade surplus since
1970, and in 2016 U.S. services
exports measured approximately
754 billion and United States
had a total services trade
surplus of 249 million.
And the picture for U.S.
international competitiveness in
 services is brighter still when
one consider services supplied
by foreign affiliates of U.S.
companies.
In 2014 the companies supplied
services worth more than $1.5
trillion, more than twice the
value of services delivered on a
 cross-border basis.  All of
which supports significant
employment in the United States
States.
This impressive growth in
services is also accountable end
 part due to emergence of
Internet and
arise of cross-       
cross-border data flows.  Data
flows have grown 45 times since
2005 and will have grown by
another nine times by 2020.
Now I want to look to some of
the specific markets that were
identified in the Federal
Register notice.
And I will note that the United
States holds a services trade
surplus with every one of those
markets with the exception of
India and Thailand.
Over the last two decades U.S.
services surplus with these
markets have increased or
deficits have turned to surplus
surpluses.  For instance,
 since 1999 the U.S.-China
services trade surplus has seen
a 28-    28-fold increase.
Over the last decade the United
States has turned its services
deficit with Taiwan into a
surplus owing to strong growth
in intellectual property and
financial services.  Looking to
Canada, neighbor to the north,
U.S. services surplus with
Canada has nearly quadruple ed
since 1999 and indeed because of
strong services growth owing to
 NAFTA the U.S. service
efficiency surplus offset the
U.S. goods deficit meaning the
United States has an overall
trade surplus with Canada of
12.5 billion.
With Mexico, the United States
has nearly 8 billion services
trade surplus, and Korea, U.S.
services export growth is more
than triple U.S. services im   
import growth, meaning that
since 2007 U.S. trade services
has grown by 198%.
Despite this promising picture
with many of the prominent
markets I just mentioned,
impediments still exist.  In
China, for example, there are
many severe restrictions on
foreign firms, which include
limitations on data flows,
equity cap restrictions and
bands on foreign investment.  
And with China soon to be
implemented cybersecurity law,
which is slate ed to go into
effect on June 1st, there's
significant concern that these
existing discriminatory barriers
 to U.S. service providers will
be even amplified and made
worse.
Further, draft China regulations
 combined with existing Chinese
laws would force U.S. cloud
service providers to transfer
valuable intellectual property
to the Chinese government,
surrender use of brand names and
 hand over operation and control
of their businesses to a
Chinese company in order to
operate in China.
And in many instances, in
addition to these, China uses
national security concerns as a
justification from imposing such
 restrictions on foreign firms.
And CSI members seriously
believe that this overarching
issue of national security as
implemented through China
cybersecurity law is not
effectively addressed it will
undercut virtually most existing
 services if not other
commitments as well in the trade
 arena.
With respect to India, one of
the few countries with whom the
United States holds a services
trade deficit, it maintains data
localization requirements on
cloud providers, investment cap
limits, notably in the insurance
 sector, and significant
barriers on telecommunications.
 And that's not a comprehensive
list but I think it effectively
highlights some of the major
restrictions.  In turning
elsewhere around the globe even
with European Union, while we do
 have a very, very significant
trade and investment flow in
services there are limitations
on data flows and regulatory
barriers that encumber U.S.
service providers.
CS it's written testimony goes
into greater detail on these and
 other barriers.
In closing, U.S. services sector
 has a large and positive role
in the U.S. economy and
international trade flows which
we believe should be included in
 the administration's current
analysis.  Expanding U.S.
services exports and investments
are supporting and creating
U.S.
jobs and perpetuate ing U.S.
trade surplus        surpluses.
Digital trade flows and
digitally enable ed services are
multiplying this effect.
Promoting services trade and
investment flows not only
ensures continue ed growth and
competitiveness of the services
sector but also the competitive
competitiveness of
manufacturing and agriculture
sectors as well.
It's for these reasons that CSI
believes that the U.S. services
and trade flows should be a key
component of U.S. trade policy.
Thank you.  And I'll be happy to
address any questions that you
have.
 Thank you very much.  We're
going to hold our questions
until -- after we've heard from
our other panelist this
afternoon.  So if you would
introduce yourself, please, and
JOCELYN MOORE:  Good afternoon
         afternoon.  My name is
Jocelyn Moore, senior vice
president of public policy and
government affairs at the
National Football League.  The N
FL appreciates the opportunity
to present testimony in
connection with the omnibus
report on significant trade
deficits.  My testimony this
afternoon will address Canada
discriminatory actions against
the NFL and interference with
NFL intellectual protocol rights
.  It may come as no surprise to
you but the Super Bowl is the
most watched television program
not only in the United States
but also Canada and has
tremendous value to Canadian
broadcasters.  As such the
licensing of the Super Bowl in
Canada is a source of important
revenue for the NFL and its
member teams and players.  Given
its broad and avid fan base,
Canada is a key market and
component of NFL strategic
initiative to grow the game
internationally.
In 2015, however, Canada took
the remarkable step of severely
restricting ability to secure
advertise ing revenue in Canada
for the Super Bowl broadcast
only.
In taking this step, Canada has
violate ed copyright protections
 owed to the United States under
the North American free trade
agreement.
Although the previous
administration raised this issue
with Canada several times      
times, Canada refused to
withdraw discriminatory measure
regarding the Super Bowl and the
NFL has already suffered
significant damage to the value
of its intellectual property
rights.
The NFL welcomes this
administration's commitment to
addressing unfair trade
practices and requests the
inclusion of Canada's
discriminatory action towards
the Super Bowl in the omnibus
report on significant trade
deficits.
While copyright owners typically
control the distribution of
their copyright          
copyrighted works, NAFTA allows
local Canadian cable companies
under certain conditions to re  
 retransmit U.S. broadcast
signals as well as distant
Canadian broadcast signals
without permission.  To
compensate for this anomaly
Canada's regulations require
Canadian cable companies at the
request of the local Canadian
broadcaster of the programming
to replace the US or distant
Canadian broadcast signal with
the local Canadian broadcast
signal when the same program is
shown at the same time.
This decades old practice known
as simultaneous substitution
enables the local Canadian
broadcaster to sell Canadian
advertise ing across all channel
s broadcasting that program at
the time.  Simultaneous
substitution protected U.S. and
Canadian copyright owners who
license their programming to
Canadian broadcasters as well as
the Canadian lie senee  s of
such programming who pay for the
rights to broadcast the program
 in Canada.
In 2015 regulators reviewed the
simultaneous substitution policy
and in January 2015 announced
plans to maintain simultaneous
substitution for all programs
except the Super Bowl.  This un
expected and arbitrary decision
denies the NFL the ability to
generate revenue from its
Canadian copyright license in
the Super Bowl in the same ways
as Canadian owners of copyright
in other programs.
Canada's discrimination against
the NFL clearly violates the
intellectual property protection
s guarantee ed in NAFTA      
NAFTA.
First, NAFTA guarantees that
U.S. copyright owners will be
treated no less favorably than
their Canadian counterparts.  As
note ed, Canada's decision
significantly impairs the rights
of a U.S. copyright holder, DNS
L in ways that the rights of
Canadian copyright owners are
not, namely the ability of the
NFL to generate revenue from its
 Canadian copyright license.  As
such Canada's action is
inconsistent with NAFTA's
national treatment requirement.
In addition, NAFTA requires
member governments to permit
transfer of intellectual
property rights and to allow
transferees of these rights to
enjoy fully the benefits derived
 from those rights.
Canada, however, is depriving
the NFL Canadian licensee of the
right to simultaneous
substitution which is a
significant benefit that derives
 from its copyright license in
the super       Super Bowl.
Canada's action
thus violates NAFTA copyright
protections for this additional
reason.
Canada has consistently appeared
on annual reports prepared by
the U.S. Trade Representative
identifying countries neglecting
 trade and intellectual property
obligations.  Canada's
discrimination against the NFL
has been cite ed in the two most
 recent reports.
Canada sometimes attempts to
justify its discriminatory
measures as permissible to
protect its cultural industry
ies           industries.  Such
 justification would be
unfounded in this instance, more
over, it would not prevent the
United States from exercising
its reciprocal rights under
NAFTA.
In fact, in the mid 1990s, the
United States invoked these
reciprocal rights when Canada
tried to block Country Music  
Television from operating in
Canada.  In the case of Country
 Music Television this forceful
action prompted Canada to
abandon its discriminatory
measure.
Canada's recent actions directed
at the Super Bowl and the Super
 Bowl alone resulted in an
immediate, direct and dramatic
drop in audience for NFL's
exclusive rights holder in
Canada in February 2017.  The
Canadian audience for Super Bowl
 51 broadcast was down nearly
40% from the 2016 audience.  In
light of the costly and NAFTA
inconsistent discrimination
against a U.S. copyright holder,
Canada's recent actions clearly
 warrant inclusion in the
omnibus report on significant
trade deficit.  In Canada
persists in discriminatory
conduct NFL would urge
administration to exercise its
full -- the full complement of
U.S. rights under NAFTA.
Thank you again for this
opportunity to present the views
 of the National Football
League.  I would be happy to
answer any questions.
 Thank you very much.  Now, we
will have some questions from
our panel.  Our first round of
questioning is for the coalition
of service industries and
Christine Bliss, I'm going to
ask my colleagues to introduce
themselves and then to pose
their questions starting with
Department of Treasury.
 Hi, my name is Wan Chang,
Department of Treasury and my
question is that you've observe
        observed that the United
States records a healthy trade
surplus in services trade.  
Which I guess that the current
trading conditions are
relatively favorable.  Is this
surplus assured or do you see
any risks on the horizon that
could create a more hostile
environment for services trade?
CHRISTINE BLISS:  I want to be
clear.  Are you talking about
the total U.S. global service
trade surplus or talking about
country specific?  I just want
to make sure I heard your
question clearly.
 I guess both.
CHRISTINE BLISS:  Okay.  Well,
I would say that while I think
that the -- you know, as I said
     said, the U.S. is basically
the most competitive service
supplier in the world.  We're
not resting on our laurels in
that regard, so we're always
concerned about the certainty of
 having continue ed market
access around the world and gain
ing new market access.
We're also continuing to be
trouble ed by certain trends
that we see -- probably one of
the most recent ones is the
proliferation of data local     
 localization requirements.  
Which has become an increasingly
 important issue really across
the board in services, because
of the degree to which digital
services are now predominate ing
 and supporting not only
services itself but other sector
s as well.
So I would say, you know, moving
 on the horizon, certainly
that's one trend that we're very
 concerned about.
Two, I would say that we are
broadly concerned about the
importance of United States
maintaining its leadership role
in supporting and observing
multilateral, bilateral regional
trade rules and we are
concerned that the surplus that
we now enjoy in services could
be jeopardized if the U.S. were
to withdraw from that particular
 position, particularly in the
global stage and arenas such as
the WT   WTO.  And thirdly, I
think that we see very important
 areas of opportunity ies where
we want to see binding
international agreements that
don't currently exist.  We may
have actual access now but it's
not necessarily bound, and I'm
thinking the Asia-Pacific region
in particular, and so I think
what we see looming on the
horizon is while services has
made significant inroads in the
Asia Pacific markets we would
like to see that mound and not
just as a matter of day-to-day
practice.
So I
think those are the ways
principally we remain concerned
concerned.  We don't
see that it's necessarily a sure
thing.
 Thank you very much.  USTR.
 I think actually your answer
covered a lot of the question I
was going to ask, so I'll pass.
 Thank you.
 Thank you.  My turn then.
Do you know of any analyses
that shows that liberalizing
services trade leads to
increased manufacturing trade?  
And if so, can you talk a little
 bit about the mechanism behind
and the magnitude of that
relationship?  Does the effect
differ across service industry
 ies?
CHRISTINE BLISS:  The studies
I'm familiar with and the areas
CSI have done specific research
generally document the
relationships between services
and manufacturing, so they
document the ways that services
support manufacturing activity
activities.  I don't
know that those studies
necessarily point to specific
increases in manufacture ed
exports.  I think they generally
 talk about the value of
services as an input overall to
manufacturing.  They talk about
the percentage of labor in terms
 of services, jobs, as an input
to manufacturing.  For example,
I think the OECD is a good
example of that.  They just did
a recent study on global value
chains.  And documented there
among OECD countries that the
percentage of input in
manufacturing that actually are
services jobs can range as high
as 60%.
So I'm not aware specifically of
 a study that shows because of
that services input there is an
increase,
but I can certainly say that is
 the case that a lion's share of
manufacturing activity and
particularly high end
manufacturing activity would
have great difficulty taking
place if those services were not
 supplied, and increasingly
digital related services.
 Thank you very much.  That's
very helpful.  Department of
State.
 Hello, I'm Carol from the
economic bureau at the state
department.  You note ed that
the United States has a services
trade deficit with one country
on the list that we were
reviewing, and that's India.
Many consider India to be a
center for outsource ing,
particularly in the technology
sector.  Should we be concerned
that the global U.S. services
surplus will disappear as a
result of outsource ing?
CHRISTINE BLISS:  Are you
thinking in relation to India
specifically?
 Starting with India but could
go beyond.
CHRISTINE BLISS:  No, I don't
think it's a trend.  Certainly
there are activity ies that can
be performed globally, because
they're tradeable services, so
there are services that can be
performed across-border basis,
but I don't think that you would
 find that generally those kinds
of outsource services are
services that tend to be
necessarily the higher end,
higher wage jobs.
So I think for -- particularly
 that 40% of business and
professional services that we're
 very focused on and the trade
here, where the higher wage jobs
 exist, I think that, you know,
that our view is for the most
part U.S. companies, U.S.
services companies are pretty
uniquely and competitively
situate ed, so they're either
providing those services from
the United States or as the
market dictates they're
providing them as a result of
investments in a foreign country
.  But they're providing
investments there because
otherwise the service could not
be provided, just because of the
nature of the service.
So, no, I don't think we would
view outsourcing as a
particularly trouble ing
phenomenon in terms of a loss of
 U.S. competitiveness or a loss
of U.S. jobs that couldn't
otherwise be replaced by
competitive and new jobs being
create ed in the services sector
.
And on that, if I can just -- it
's not directly related to your
question, but I think it's an
important point.
I know that one of the often
repeated arguments with respect
to the services sector is, well
well, jobs that are being
create ed are low wage low end
jobs.  And that's why one of the
 things that we want to make
very clear is that when we're
talking about the importance of
services to U.S. trade policy,
we are very specifically target
targeted at that 40% of
U.S. services sectors that do
have tradeable services and
where wages are significantly
higher.
 Thank you very much.  And my
colleague from USTR.
 You mentioned the potential of
data localization policy ies to
 reduce exploits of services.  
Do you think that potential
exists on a larger scale, data
localization, hold back overall
U.S. exports in agriculture and
other areas?
CHRISTINE BLISS:  I would say
it certainly has the potential
to be as cripple ing in services
sectors as it is in
manufacturing to the extent that
you might be engaged in an
activity where you would want to
be transmitting, store ing,
processing data in the United
States and keep it in the United
 States, and that's what is very
interesting about it.  Because
many companies have -- U.S.
companies have their serve      
servers located in the United
States and would like to keep
them there.  So foreign data
localization work against that
trend.  So it does complicate
things if you have to have a
server in every country where
you're doing business if there
is some aspect that involves
processing or storage of data.
So financial services is
certainly, I think, the
strongest example, where it can
have adverse impact, but I think
 there are other sectors as well
in things like logistics where
there can be an equally damaging
effect, and I would put
manufacturing in that category
as well and to give you an
example, in manufacturing, where
there's a sensor embedded in a
particular piece of a
manufacturer's equipment, if you
 can't process the data that is
being generate         generated
 by that sensor except by a
server that is locate ed in
foreign territory, again, that
can complicate or make operation
 of that piece of equipment more
expensive.
 Thank you.
 Thank you very much.  And now
our panel has some questions for
Ms. Moore from the NFL.  And
I'm going to start, if I may.  
Today's hearing is about the
causes of significant deficits
with our trading partners.  It's
 a reasonable expectation, I
think, that in the future there
will be hearings to discuss
trade negotiating priority ies
such as the concerns you raise.
in your statement.  Could you
please tell us about the role
that the NFL plays in supporting
 and promoting U.S.
manufacturing jobs.
JOCELYN MOORE:  Sure.  I think
in terms of the National
Football League we obviously
have thousands of direct and
indirect jobs.  And so we
support manufacturing not only
in local communities where we
are, you know, building stadium
        stadiums and all the
parts that go into those stadium
s, and we actually have several
stadiums under construction
right now, but we also have a
number of, you know, indirect
jobs that are create ed.  So I
don't have a downfiable number
right now but we're in the
thousands of jobs per community
that are being create ed or that
are existent around our NFL
facility ies.  And the other
thing I would say, not just
stadiums.  It's practice
facility ies, the headquarters
for our teams.  We actually do
create a significant number of
jobs per community.
 Thank you very much.  My
colleagues.
 Thank you.  I think from your
testimony it appear more
Canadians saw commercials for
U.S. products than in years past
.  Some may say increased
exposure has benefited U.S.
firms and could lead to
increased U.S. exports.  Do you
agree?  How do you respond?
JOCELYN MOORE:  I think the
opposite is true in many
instances.  There are a number
of U.S. companies that advertise
 during the Super Bowl     Bowl,
their products, whether brick
and mortar stores or products
aren't available in Canadian or
maybe they have different
regulatory requirements, where
healthcare products are
concerned.  And so I think most
Canadians would say, you know,
there was an advertisement for
either a product or a store that
I actually don't have access to
.  I can't get in my car and
drive to this particular store
or pick up this particular
product        product, so why
am I seeing these ads?  More
importantly, I think if you talk
 to the folks who are really
focused on the economy in Canada
, they would say, well, what
about the products, you know,
that we do manufacture in Canada
and the community there?  So
not trying to make an argument
for the Canadian economy over
the U.S. economy, but I would
say most     most -- a good
number of our ads are for
products that may not be
available in Canada so one would
beg the question, why are those
 ads there?  I would underscore
the point by saying, our
exclusive rights holder in
Canada sold advertise ing in
Canada, which is a challenge
under our contract.  That is how
 our contract was negotiated and
that's how it was intended
under simultaneous substitution
that the Canadian rights holder
could sell it in Canada because
they're in Canada and they're
not able to do that.  So I think
it's a challenge.
 Thank you.
Do any of my colleagues have
follow-up questions?
Let me invite our panel today,
do either of you have additional
comments to make?
CHRISTINE BLISS:  Actually,
there's one, and it's to -- it  
 it's a question, because we
addressed in our written
testimony and also in my oral
statement, but I think it's with
 emphasis and that is probably
the best illustration of the
impact of data -- foreign data
localization requirements and a
potential adverse impact, is
with respect to cloud -- the
increasing use of cloud
technology.  And that's where I
think your point about how would
it affect manufacturing, I
think that's where it really
could hit hard in the
manufacturing sector to the
extent that there is increasing
reliance on use of cloud
technologies, particularly by
small companies that may not
have their own data storage
capacity.
So I just want to throw that
example out there because I
think it's maybe the clearest
one.
 Thank you.
JOCELYN MOORE:  I have two
follow-up comments on the
question about jobs.  I would
just underscore the jobs create
      created in the
construction sector, but I would
 also say in the new economy we
do have a number of start-ups
that we helped to fund and
support, whether it's in the
medical research area where
we're looking at technology
around player health and safety.
We support a number of grants
that go to start-ups.  We have
competitions regarding
helmet technology and a number
of technologies that create an
incentive for companies to
innovate around player health
and safety.  Those are a couple
of examples and we'd be happy to
follow up with the panel with
more detailed manufacturing
numbers.
The second point I would make is
for us, this is really about
business certainty.  We have --