Section 232 Product, Country Exclusions, NAFTA's Fate Concern Congress
House of Representatives appropriators want to know whether the Commerce Department will be able to make prompt determinations on steel and aluminum tariff product exemptions if the agency receives 4,500 applications, as it projected. The Appropriations subcommittee that handles Commerce's budget heard from Secretary Wilbur Ross on March 20. Ross said that the fiscal year 2019 budget request does ask for more staffing. "We believe we can handle the influx," he said.
The last time the department instituted broad tariffs on imported steel, the product exclusion process was finished before the tariffs took effect. The exclusions are designed to eliminate tariffs when purchasers cannot get that product domestically, either because of quantity or quality issues. The agency will have 90 days from the time of filing to make a determination (see 1803190028). Because the exclusions will be done only after each company requests them, some companies could avoid tariffs on the same tariff line that other companies are still paying. Rep. Derek Klimer, D-Wash., sought reassurance from Ross that companies with ties to the administration will not be favored.
Ross told the subcommittee: "We want to minimize the inconvenience any of the affected parties will suffer." He also told the members that the department will be able to manage the workload at the same time it continues to analyze antidumping and countervailing duty requests. There are more than 85 cases pending, and 38 are for steel products, he said. "If we design the 232s right, there should be fewer such cases in the future."
Former Committee chairman Hal Rogers, who has an AK Steel plant in his Kentucky district, told Ross that if the 232 is successful in bolstering the steel industry, they should toast its success with bourbon. Ross joked, "Bourbon may be more readily available if the EU responds." The European Union has threatened to put retaliatory tariffs on Kentucky bourbon, as a way of bringing political pressure on Senate Majority Leader Mitch McConnell, also from Kentucky (see 1803160026). The U.S. trade representative is in charge of giving country exemptions.
Rep. Matt Cartwright, D-Pa., noted that he had supported the 232 investigation, but now that the president chose a broad application of tariffs, rather than the one aimed only at dumpers and countries suspected of transhipment, he's having second thoughts. "We wanted to go after the bad actors, not our friends and allies," he told Ross. He said he's worried this is the start of a trade war, that it will hurt those who work at firms that use steel and aluminum, that it will raise prices, and that it will "undermine the international trading system."
Ross responded that countries "that are playing by the rules" should not be harmed. "The problem is, not everyone who is a defense ally is playing by the trade rules." Cartwright acknowledged in a brief interview after the hearing that even higher tariffs against a narrower group of countries would have raised prices for steel consumers. But the tariffs' design matters, he said. "I do have an abiding sense of fairness and justice. Punishing good actors -- it's counterproductive on many levels."
Congress members also pressed Ross on the status of NAFTA talks, as all who spoke about it want the pact to continue. "The president has said his first choice is not to withdraw, his first choice is to get a better deal," Ross said. But he defended the president's threats to leave. "Unless you are, at the end of the day, known to be willing to take an extreme measure if it's a lousy deal," you won't win what you want at the negotiating table, he said. Ross added that the president would not have granted Canada and Mexico a temporary exemption from 232 tariffs unless he thought "there was a reasonable chance" that a satisfactory NAFTA agreement would be reached.
"In my view, if we don't have a resolution in the next month or so," a NAFTA deal will have to move to the back burner for quite a while, Ross said, because of the Mexican national election as well as the U.S. midterms and Canadian provincial elections.