On February 27, 2019, the House Ways and Means Committee held a hearing on US-China trade policy. The sole witness was U.S. Trade Representative Robert Lighthizer.

United States and Chinese officials have been meeting to forge a trade deal ahead of a previous March 1 deadline to avoid an escalation of US tariffs, though President Trump tweeted February 25, "I have … agreed to delay U.S. tariff hikes. Let's see what happens?" The hearing was characterized by bipartisan agreement that the United States had to press China for structural changes to its trade practices, but there was some disagreement as to the tactics to achieve those changes.

In his opening statement, Chairman Richard Neal (D-MA) stated his assessment of China trade policy in blunt terms that were repeated by a number of other committee members of both parties. "China's trade and economic policies are coordinated through five-year and 10-year plans. Those plans are backed by China's resources. They are aimed at fostering national champions, advancing China's economic and technological ambitions, and ensuring full employment in China. And they are implemented at the expense of other economies, through the theft of others' intellectual property, and without regard to the global trade rules or human or workers' rights."

Ranking Member Kevin Brady (R-TX) noted the importance of enforceable standards to any agreement. "A new era of fairer trade between China and the U.S. is in everyone's interest. The solution must be enforceable at every level of Chinese governance, measurable and subject to corrective action should it fall short of commitments. And it should provide as much predictability as possible for our American job-creators seeking to serve China's market."

In his testimony, Ambassador Lighthizer stated that the US economy is strong but that the trade practices of China pose a real threat to the nation's economy. Structural changes are needed, but above all, any agreement has to be enforceable to be effective, he said. Lighthizer was particularly concerned about the theft of intellectual property and technological transfers. He stated that the United States currently has the advantage in technological development but warned a continuation of current trade practices could see a loss of that advantage to China. He said that the loss of US manufacturing jobs to China was not the result of market forces but of state involvement.

During the course of questioning, several themes emerged. Every committee member agreed on the need for structural changes in China's trade policy and the need for enforceable standards. Several members expressed regret that the US had not tried to recruit other countries in this effort directed at China to increase leverage. A number of Committee members, both Democrats and Republicans, voiced concern with the use of tariffs and the harm they have brought to the US both in terms of increased costs for imported goods and decreased exports due to retaliatory tariffs from China — particularly on increases in building materials and lower agriculture exports. As one member put it, tariffs were more of a blunt instrument than a precision-guided one. Ambassador Lighthizer responded that the first question that had to be asked was if there was a problem with China trade practices and whether they pose a long-term threat to the economy. If so, then the actions to try and force change may be disruptive but worth it in the long run.

The barriers to services industries were also raised throughout the hearing. The US has a trade surplus in services but China has imposed some impediments to the banking, electronic payments, and insurance industries.

During questioning by Rep. Lloyd Doggett (D-TX), Lighthizer said that any agreement with China would not be submitted to Congress for approval because it would stem from the section 301 trade case and not a Trade Promotion Authority agreement.

On the subject of Congressional approval, at several points in the hearing when the USMCA trade agreement was mentioned, the Ambassador emphasized that it was essential for Congress to approve the trade agreement or else the US would lose credibility on future trade agreements and leverage with China.

The subject of currency manipulation was raised by several members of the committee. Lighthizer stated that China's currency had increased in value for the past two years, however, he had spent a good deal of time on the subject. He reminded the Committee that currency manipulation is an issue with respect to countries other than China.

Testimony is available here.

———————————————