Ambassador Tai, welcome back to the committee. It’s good to see you.
My first question is about the connection between tariffs and inflation.
As we all know, inflation is a serious problem with various interlocking causes on both the supply and demand side.
The Peterson Institute recently published a report stating that a “feasible package of trade liberalization measures” could result in a reduction in inflation of around 1.3 percent.
That amounts to almost $800 dollar per U.S. household. That certainly doesn’t fix the problem, but it’s a meaningful step. For families and businesses, every dollar counts.
So, two related questions:First, do you think 232 tariffs, 301 tariffs, and Congress’s failure to reauthorize the GSP program are, taken together, contributing to higher prices for American consumers? Second, to your knowledge, has USTR, Commerce, or another federal agency conducted an assessment of the impact of U.S. tariffs on prices and the impact that removing or relaxing these tariffs might have?
My next question involves the GSP program. As you know, GSP waives otherwise applicable U.S. tariffs on certain imports from 119 lower-income countries to encourage U.S. firms to source products from those nations.
GSP is an important tool to advance foreign policy objectives, promote international development though trade, and strengthen our domestic economy.
The geostrategic significance of GSP has only increased in recent years, as U.S. policymakers seek to encourage American companies to move supply chains out of China and into other countries.
Both the House and Senate China competition bills would reauthorize GSP.
Congresswoman Walorski and I have introduced legislation that would update the GSP program’s Competitive Need Limitation rules, or CNL.
CNLs are arbitrary caps that serve to remove tariff-free treatment for specific products from specific countries, and tariff-free treatment is almost never restored.
As a result of CNLs, nearly $10 billion in trade was excluded from tariff-free treatment in 2021.
For some big GSP countries like Brazil, more trade is excluded from GSP than remains eligible.
Our legislation makes small but important changes, such as stating that GSP benefits should be restored if imports fall back under the threshold, while preserving USTR’s discretion to continue excluding products where warranted.
USTR is responsible for ensuring that countries comply with the GSP eligibility criteria. Country practice reviews may lead to bilateral negotiations that cause a country to make reforms in order to maintain their GSP status.
Ambassador Tai: do you support the GSP program and wouldn’t USTR’s ability to incentivize other countries to make reforms be strengthened if we were to make these modest updates to the CNL rules?
My final question involves Section 301 tariffs.
I’ve made it crystal clear that I think the tariff policy adopted under the previous administration has been an utter failure.
I’m pleased USTR is finally taking steps to remove or relax Section 232 tariffs on our key allies and partners.
However, a wide range of Section 301 tariffs on China are still in place, as are Chinese counter-tariffs.
In my view, these tariffs have caused significant harm to the U.S. economy, and have not led to meaningful improvements in Chinese behavior.
I cannot escape the conclusion that we are continuing this failed policy largely because political leaders are afraid to look “weak” or “soft” on China, even though the policy is hurting us more than it’s hurting them.
Ambassador Tai, I know there is a lot of focus on the exclusion process, and that’s fair. But I’d like to focus on the foundational issue. Tell me why you think the benefits of 301 tariffs for our national interests outweigh the very significant costs?