Lighthizer Comments on USMCA, China, EU

Posted on 12/17/2019 9:42 AM

Interview with Mario Bartiromo of Fox Business Network

U.S. Trade Representative Bob Lighthizer was interviewed this morning on the Fox Business Network show, Mornings with Maria featuring anchor Maria Bartiromo. The following is a digested transcript of the interview:


Regarding the labor attaché issues with Mexico relative to the USMC:

     “A whole variety of agencies have them, so I think there was a misunderstanding down there about what their function was so that was easily taken care of.”

     Regarding the USMCA, Lighthizer said it is “a really, really, really good agreement for manufacturers and workers and farmers that should pass with a big number.”

Bartiromo said, “Tell me about that because farmers get to see more of a market in terms of their dairy (sales to Canada). You've got manufacturers also seeing more work and of course the auto workers. Tell us the most important points of the USMCA.”

     “It's going to bring back manufacturing jobs to the United States. Before the president directed me to start this process, eight of the previous 11 auto manufacturing facilities created in North America were built in Mexico. There was a huge flow down towards automobile industry. We've now turned that around. At the same time, it's good for Canada and Mexico. It's not just good for the United States. I think we're going to bring back around 80,000 jobs directly and indirectly in the auto industry, create some $25 billion or $30 billion of new investment. In the agriculture area, there's new market opportunity, as you say the dairy problem particularly as Canada was a huge problem. Remember those stories about those dairy farmers going out of business? We've turned that around. We have new access in in wheat and poultry and eggs. So, you know, there's just an awful lot in there for a lot of people and then we have a whole new economy. We have what is really the absolute gold standard on digital trade and financial services stuff that's never been done before. So, this will be the template, I think, for new trade agreements going forward, and hopefully they'll be more balanced. We have a big trade deficit problem where we lost jobs for years in a variety of places including China, and the president ran on trying to bring these jobs back.”

Lighthizer was asked to comment about a story in the Wall Street Journal titled “North American damage control” that noted some of the negative items in the USMCA, commenting this new deal is worse than NAFTA and that it is managed trade to steer auto investment with New Rules of Origin that 75% of the cars contents must be made in North America and that this raises the cost of manufacturing, making North America products less competitive worldwide. Opponents also note a problem with the biologics, saying President Trump bowed to the House Democrats’ demand to remove the 10-year protection for data exclusive to biologics and that would be a blow to one of America's growth industries.

     Lighthizer’s response: “Well, first of all, clearly, getting rid of the biologic provision was a step backwards, and that was a compromise… you know there are consequences as the Democrats control the House and that was necessary and I'm sorry about that. With respect to everything else in that negotiation, I think it made the bill better. In terms of the Wall Street Journal, there's two approaches to trade. One is that the objective of trade is purely market efficiency and protecting investors, and that’s what we do and that's the Wall Street Journal's view. The president's view is we have to get addition to that. Think about the effect on manufacturing workers and farmers and the people that are involved in this process, and that our real objective is more wealth and better lives for working class people and farmers. That's what the president's view is. He believes in market efficiency, but he also believes we have a broader responsibility. And I understand that people that believe in just protecting investors and market efficiency are not going to be happy because we are making it more expensive to operate in some other areas and less expensive in the United States. The president's objective is to help manufacturing workers in this country, farmers in this country. Global efficiency is a nice objective, but he always says he got elected president of the United States, not president of the world. He has a different philosophy and, hopefully the Wall Street Journal understands that … they seem to acknowledge that a number of the things in this bill or even by their standards are good examples, including the digital trade and these sorts of things. So look, there's a little different philosophy. The president is taking care of American workers and farmers and that's what his objective is and that's what he told me to do.

     “On biologics, my objective was to have Mexico and Canada have a higher standard than they have right now. I think there's some general trend towards higher standards and it's important that we protect intellectual property rights in the United States. One of our great, great competitive advantages is innovation where we're a country of innovators the biologics area and the farm area are great examples of that. I always tell these people that criticize these companies: What happens when your child gets sick, you're going to want to have this medicine available. Yeah, so, so there's a balance there but look, this is a spectacular deal for the American economy. It will raise the GDP somewhere between a third, and a full percent. It will create somewhere between 175,000 to 500,000 new jobs. I think more towards the high end. And it's going to set the template, a trajectory for our trade that should be dealt with in the future. It really, really, really is good for America and that's a big boost to GDP.”

     Asked to be more specific as to timing of a U.S. boost for GDP, Lighthizer said, “I think you're going to see a real growth and I'll let (NEC Director) Larry Kudlow other economists talk about when. What the ITC (International Trade Commission) said at the high end when fully implemented, it will create 1.2% of GDP at about over 550,000 jobs, so when it is fully implemented, it will clearly have a big impact.”

Regarding China, White House economic advisor Larry Kudlow says that the U.S. exports to China will double with this agreement which could be signed next month. Bartiromo said what she is concerned about is the internet intellectual property issues. “China as you know just came out with these new rules… I feel like they're coming at us at all at all ends with new rules to change the dominance and continued dominance. After all these cyber security rules are in place, no foreign company may encrypt data so that it cannot be read by the Chinese central government and the Communist Party Chinese officials will be permitted under Chinese law to share seized information with state enterprises. So does this deal protect intellectual property in the U.S.?”

     Lighthizer: “Let me take a step back again here. We have two different systems. We have a free market system; they have a state-run socialist system. We have to find a way for these two systems to work together. And that's what we're starting to do… the relationship has been very unbalanced for a long period of time. For the United States, we have huge trade deficits and we have other problems. The president, two and a half years ago, said we're going to take this on. We've had a plan that we followed consistently. We put out a report that took eight months to write. We put in place a variety of tariffs over a period of time. We've tried to negotiate. There's been ups and downs… there's been damage. You followed it very closely. This is a very, very important issue for the United States, not only now but in the years ahead. We've now gotten to the point where we have a very good Phase 1 agreement. And we're going to find out whether or not it works: Is this agreement going to solve all the problems because I'd say for sure it will not. But it has real, real structural change. It's not just about purchases. It's really important that people understand that this has real protection on IP, real protection against tech transfer, financial services opening, currency provisions. There are agricultural barrier eliminations and then there are these purchases. And yes, we expect this to just about double overall exports to China, which is really important, and and particularly for some of our constituents that have had problems in the agriculture area. There will be between $40 billion and $50 billion worth of sales. It's totally enforceable. We're hoping that it works, but ultimately that's going to depend on what happens in China. If the hardliners in China are in control and they don't make changes, that's one case. If you see the reformers who really want to have China adopt some of the Northern principles of trade, then I think you'll see a different outcome. We're hopeful, we're hopeful.”

“Can you walk us through exactly how these details are emerging on how China will increase imports to the U.S. by as much as $200 billion over the next two years, what are they going to be buying and what is the commitment?”

     Lighthizer: “First of all, we still have tariffs on approximately $380 billion worth of Chinese goods. There's plenty of leverage on both sides to make sure that this agreement works. I think we made a really, really good deal now on the purchases. There's an agreement over the next two years to purchase $200 billion worth of new products. They're in four categories: manufacturing, energy, agriculture and then services. In the agriculture area, let me tell you how we get to $50 billion… $24 billion is the base from 2017, that's what we had before all this… the high-water mark before all this recent change. In addition to that, China's agreed to buy $32 billion worth of products over the next two years, so that would be $16 billion. That would get you to $40 billion. They are striving to take an additional $5 billion. And then there are other products that this will be written out that get you to $50 billion in areas that are agriculture, but sometimes are classified as other manufacturing. Let me give you an example of that: forest products… hardwood lumber. So there are a variety of issues that gets you up to $50 billion. We're very excited about it because that's just about doubling our agricultural sales and it's going to be good for farmers across the board. And by the way, it's going to be good for China because we (U.S.) have the best agricultural products, we have the best prices. So we're really excited about that part of it but I want to emphasize this is not just about purchasing, this isn't just about structural change. This is about taking the first big step to determine whether or not two different systems can work together in the future to their mutual benefit and that's what the president has asked us to do and then we'll move forward. We'll see how this goes. We'll see how it’s implemented, and we'll move forward and find a way that we can both, both get rich.”

Lighthizer was asked about to comment about human rights abuses in China and whether this is a side conversation of not part of the current discussions in terms of trade and open access for financial services companies within China.

     Lighthizer’s response: “I’m not trying to solve all the problems in the world. Trade is really important to our workers, our farmers. It has a real effect on Americans or other people working on other things. And if you try to get it all balled up together, you literally will accomplish nothing. Let's remember it took a long time to get to where we are. No other president did anything on this… they all talked about it. No president did anything like this. The president has taken on a very, very difficult task. He's done it with a plan; he's done it over two and a half years now and this is a very, very significant step forward. We'll see how it works out.”

Asked what is next in terms of priorities...

     Lighthizer said:
“The president tells me what my priorities are, I don't tell him, and he has a lot of priorities. For sure, the U.K. is a priority. As soon as they get their objectives, we will start talking. It will take a while before it all comes into effect because of their circumstance, but it'll be a really big deal. We're looking forward to the negotiation. We also have issues with the WTO; we have issues with Europe. And then there are a lot of other countries we're talking with, so there's a lot on the. This is something the president cares about and thinks about it every day. He wants manufacturing jobs back here; he wants service workers to make more money; he wants farmers to reverse this trend in income, so there's a lot a lot to do. Trust me, I don't go a day without him, you know, keeping the pressure on.”

     Regarding Europe, Lighthizer noted the WTO “decided in in favor of the United States after many years of a litigation on this Boeing Airbus case and we put in place tariffs on $7.5 billion. Our objective is to get some kind of negotiating solution, but we have a very unbalanced relationship with Europe. It's about $150 billion, maybe even this year $180 billion in the negative. That can't continue. There are a lot of barriers to trade there. And there are a lot of other problems that we have to address, so dealing with Europe is something. This is very important. We put tariffs in place on a variety of products and we're going to continue to focus on that because it's something the president cares about. You can't get the global trade deficit down without getting the trade deficit down with Europe, so that's a really important focus for us. But we have a very good relationship with Europe. I don't want to make it look all negative. There's a lot of trade between the two bodies and that's very positive. But we're fixing the trade imbalance with Europe or the US economy because of higher prices paid for vehicles here. We have a basic trade problem with Europe; we have to figure out a way to sell more in Europe, and I think we're going to undertake that, but on the other hand, there’s two-way trade."

Returning to USMCA, Bartiromo noted that House Speaker Nancy Pelosi (D-Calif.) is at least trying to take a lot of the credit for the success, but I know you've been working incredibly hard…”

     Lighthizer: “I would say we improved it but let me say this: From the very beginning, we worked with the Democrats. This is not like the Democrats came in at the end. We worked from the very beginning. These are the working men and women supported the president, very, very strongly. These are his constituents too. So in terms of our negotiation, should the speaker get credit? Of course, she should get credit. So should [House Ways and Means Chairman Richard] Neal, and [Finance Chairman Chuck] Grassley, and [House Ways & Means Ranking Member] Kevin Brady, and GOP congressional leadership. The thing about this is it has business, agriculture, Republicans, Democrats and labor union support. That is the way forward.”


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