Two Republican members of the House Ways and Means Committee – Darin LaHood (IL) and Carol Miller (WV) – have introduced the U.S. Trade Leadership in the Indo-Pacific and China Act. The bill has two parts, one addressing the Indo-Pacific and one addressing China. In this piece, we examine the details of the legislation, beginning with the Indo-Pacific part but then focusing on the part that relates to China.
As LaHood and Miller describe it in a press release, "[t]he bill would provide a blueprint for Congress and the Administration to advance U.S. trade leadership in the Indo-Pacific region and with China." The bill states its overall purpose as: "To promote United States trade leadership in the Indo-Pacific region and to require a report [from the Office of the United States Trade Representative] on the long-term economic and trade relationship between the United States and the People’s Republic of China."
Title I of the bill addresses U.S. "trade leadership in the Indo-Pacific region." In its "findings" section, it begins by stating:
Rising authoritarian powers that adhere to non-market principles for managing their economies are challenging the United States’ strategic influence in the Indo-Pacific region. These mercantilist policies, which include predatory industrial planning to subsidize exports and support national champions at the expense of foreign competitors, conditioning market access on both forced and voluntary technology transfers, and intellectual property theft, among other unfair policies, are contrary to the interests and values of the United States and its Indo-Pacific allies and directly challenge the United States economic and trade interests in the region.
The bill doesn't mention China explicitly here, but it clearly has China in mind. After a brief discussion of the TPP, the findings section then concludes with this: "United States withdrawal from the TPP has undermined its ability to promote United States-led rules, norms, and standards, and has paved the way for increased non-democratic state-driven economic and political presence in the Indo-Pacific region." The bill then calls for the United States to pursue specific objectives, including the following:
- "a sustained and long-term leadership role in establishing and ensuring an open, rules-based trading system in the Indo-Pacific region," including by: "urgently consider[ing] the merits of negotiating entry into the CPTPP with improved standards or a similar plurilateral trade agreement"; "urgently consider[ing] the merits of negotiating new, high standard bilateral trade agreements in the region"; and "urgently consider[ing] modernizing and updating existing trade agreements in the region."
- "The United States and its allies should utilize new or updated, high-standard trade agreements to maintain rules-based and market-based policies in the Indo-Pacific region ... "
In its Title II, the legislation then turns more directly to China. This section is entitled "Report on the long-term economic and trade relationship between the United States and the People’s Republic of China." Its "findings" section offers a general overview of the Phase One agreement, and then offers the "sense of Congress" that:
(1) the United States should successfully and fully implement the Phase One trade agreement, ensuring that the PRC fully complies with its stated commitments both to make legal and regulatory changes in various sectors and to purchase additional United States goods and services;
(2) the Office of the United States Trade Representative should take expedited and concrete steps toward thorough consultation and coordination with Congress and key United States private sector stakeholders wholly consistent with the spirit and letter of the law as prescribed under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 regarding implementation of the Phase One trade agreement and any further trade negotiations with China;
(3) the United States Government should analyze all positive and negative effects on the United States economy of the current tariffs in place against the PRC under section 301 of the Trade Act of 1974, including the effects on United States workers, businesses, and consumers and an analysis of the benefits of such tariffs providing sufficient trade leverage on the PRC, in comparison to these tariffs’ harm to the United States economy;
(4) consistent with such analysis, the United States Government should immediately modify such tariffs to ensure that they meet the intent of the statute and provide leverage on China without harming the United States economy;
(5) the Office of the United States Trade Representative should articulate a long-term trade and economic plan with the PRC, which may include proposed new enforcement tools to address the PRC’s ongoing economic and structural challenges, including the PRC’s use of massive industrial subsidies that are inconsistent with WTO norms and rules and create global price distortions in critical supply chains, bilateral engagement with the PRC to obtain changes to the PRC’s policies, and working with allies to pressure the PRC on these same issues;
(6) the Office of the United States Trade Representative should take expedited and concrete steps toward better consultation and coordination with Congress and key United States private sector actors regarding the drafting of its comprehensive report on the long-term economic and trade relationship between the United States and the PRC;
(7) efforts to enforce the Phase One trade agreement should not delay initiatives to address other issues in the trade relationship, especially longstanding, systemic issues that disadvantage United States companies or injure United States interests, that have been identified for negotiation by previous administrations, but that were not addressed in the Phase One trade agreement.
The legislation then calls for USTR to submit a report on these issues not later than 60 days after the date of the enactment of the Act, and annually thereafter. It specifically asks for the report to do the following:
(1) describes progress toward addressing the issues identified in Trade Representative’s report titled, ‘‘Findings of the Investigations into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974’’, dated 7 March 22, 2018;
(2) comprehensively reviews current tariffs in place against the PRC under section 301 of the Trade Act of 1974—
(A) to assess whether such tariffs continue to meet the requirements of such section and provide leverage to encourage the PRC to change its unfair practices without undue harm to the United States economy; and
(B) to recommend removal of such tariffs that harm United States industry competitiveness in which data does not clearly demonstrate that the tariffs have substantially and directly alleviated discriminatory, restrictive, or burden some PRC trade practices, or where any benefits that can be clearly linked to the tariffs are less substantial than the costs the tariffs have imposed on United States entities;
(3) evaluates the PRC’s compliance with its Phase One trade agreement commitments and identifies those provisions in the agreement that have yet to be implemented;
(4) lists and explains proposed new enforcement tools that will address and compel the PRC to complete structural reforms to its economic and trade regimes;
(5) articulates new market access objectives with respect to the PRC;
(6) identifies key United States goods and services that have the ability to provide long-term benefits to the PRC’s economic growth, including energy, carbon capture, agricultural goods and services among other sectors, without impeding United States national security interests; and
(7) identifies key PRC goods and services that have the ability to provide long-term benefits to the United States’ economic growth, including tourism and education goods and services among other sectors.
LaHood and Miller explained these items in more general language in their press release as follows:
[The legislation requires] USTR to submit a report to Congress that articulates and identifies (1) a long-term trade and economic plan with China that details our progress in combating China’s coercive economic practices; (2) a comprehensive assessment of the current Section 301 tariffs in place against China and their efficacy in combating Chinese forced technology transfers and intellectual property theft; (3) a complete scorecard of China’s compliance with its Phase One commitments; (4) a listing of new enforcement tools that will require China to make further structural reforms; (5) new market access objectives with respect to China; and (6) key sectors in which increased U.S. exports would be mutually beneficial for the United States and China.
In their remarks at a December 2 House Ways and Means Committee hearing on "Supporting U.S. Workers, Businesses, and the Environment in the Face of Unfair Chinese Trade Practices," both LaHood and Miller elaborated on their goals with the legislation.
LaHood explained that the bill "focuses on the need for a proactive and strategic U.S. trade presence to counter China." It was designed to "develop a plan to address the ongoing trade challenges with China in a proactive way, incentivizing and compelling USTR to work in an expedited, transparent and clear manner when laying out a long term trade strategy that serves U.S. economic and national security interests." He also noted "the need for more information from USTR as it relates to China," and he said "we lay out six different provisions in there, requiring them to report to Congress on a number of these items."
Miller added later that our bill "instructs the administration to outline a clear long term economic strategy for our trading relationship with China, particularly as portions of the Phase One comes to a close."
In broad terms, the report that is requested under this legislation appears designed to encourage USTR to evaluate its current trade policy towards China. It identifies a number of specific aspects of the existing policy that have been questioned and criticized in recent years, and asks USTR to explain and defend them. As an example, it would press USTR to provide analysis of the effectiveness and impact of the Section 301 tariffs and the Phase One agreement.
In terms of what this USTR report would actually provide, the explanations from LaHood and Miller in their press release are more specific and detailed in some ways than what is set out in the legislation itself. As a result, it may be the case that USTR would provide more limited information than what is identified in the press release.