May 14,2015

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Hatch Welcomes Senate Action on Bipartisan Trade Bills

In Speech Utah Senator Outlines Support for Trade Preferences & Customs Legislation

WASHINGTON – In a speech on the Senate floor today, Finance Committee Chairman Orrin Hatch (R-Utah) welcomed floor action on Finance Committee-passed trade legislation - the Trade Preferences Extension Act of 2015, also known as the preferences bill, and the Trade Facilitation and Trade Enforcement Act of 2015, known as the customs bill.

Both of these bills have been in the works for some time.  They were among the four trade bills we reported out of the Senate Finance Committee last month.  As a principal co-author of both of bills, I am very glad that we’ve found a way to get them to this point,” Hatch said.

Hatch expressed concern for a currency amendment attached to the customs bill, but reiterated his support for passing the bill through the Senate:

“Despite the reservations I have about the flawed currency manipulation concepts and language and the unfunded mandate on employers, I believe it’s important that we vote to move the customs bill forward,” Hatch continued. “Overall, this is a good bill.  A lot of work has gone into it and I know that it reflects the priorities of a number of our members here in the Senate, including myself.  That being the case, I plan to vote in favor of passing this legislation later on today and I urge my colleagues to do the same.” 

The complete speech, as prepared for delivery, is below:

            Mr. President, today the Senate will vote on two pieces of important trade legislation. 

            Both of these bills have been in the works for some time.  They were among the four trade bills we reported out of the Senate Finance Committee last month.  As a principal co-author of both of bills, I am very glad that we’ve found a way to get them to this point. 

            The first bill we’ll be voting on is the Trade Preferences Extension Act of 2015.  This bill will reauthorize and improve three of our trade preference programs: the Generalized System of Preferences, or GSP; the African Growth and Opportunity Act, or AGOA; and tariff preferences for Haiti.  

            I’d like to take a few minutes to talk about each of these programs individually, starting with the GSP.

            The GSP is a program designed to promote trade with developing nations by providing for non-reciprocal, duty-free tariff treatment of certain products originating in those countries.  The program helps beneficiary countries advance their economic development and encourages them to move toward more open economies and eliminate trade barriers for U.S. exports. 

            But, the GSP does more than provide assistance in the developing world. 

            It also assists hundreds of businesses here in the United States.  Across our country, manufacturers and importers benefit by receiving inputs and raw materials at a lower cost.  Approximately three-quarters of U.S. imports under GSP are raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture goods here at home. 

            Unfortunately, because the program expired in 2013, these U.S. businesses have had to deal with high tariffs on these imports for the last two years.  Last year alone, without the GSP program in place, American companies paid over $600 million in tariffs. 

           Businesses in every state have been affected by the expiration of GSP and have a vested interest in the renewal of the program. There are businesses in my home state of Utah and around the country that have been left with difficult decisions about downsizing, hiring freezes, and employee layoffs in the absence of GSP. 

           Today, I expect the Senate will take a big step toward ending this problem.

           Also included in the preferences bill is the renewal of the AGOA program, which encourages African countries to further develop their economies by lowering U.S. tariffs on their exports.

           Since AGOA was enacted in 2000, trade with beneficiary countries has more than tripled, with U.S. direct investment growing more than six-fold in that time.  The program has helped to create more than a million jobs in Sub-Saharan Africa. 

           I worked with my colleagues on the Finance Committee to craft reauthorization language that will improve on AGOA’s past success, to remove obstacles to trade in Sub-Saharan Africa, and allow both that region and our job creators here at home to benefit from expanded market access.

           I share many of my colleagues’ belief that benefits under AGOA should go to countries making good faith progress toward meeting the program’s eligibility criteria.

           For example, I am very concerned that officials in Republic of South Africa recently indicated they will attempt to renegotiate commitments made under the General Agreement on Trade in Services to require foreign owned companies to relinquish 51 percent ownership and control to South Africans.

           South Africa also developed a draft policy that proposed changes to intellectual property rights laws, which contained significant shortcomings, including inadequate protections for patents, trademarks, and copyrights. I hope very much as they redraft this policy, it will include recognition of how important protection of intellectual property is to supporting economic growth.

            But it’s not just South Africa.

            For example, I understand other beneficiaries under the program continue to impose barriers and limitations to cross-border data flows or otherwise limit digital trade.

            Because of these concerns, we thought it was important to create a mechanism under the AGOA program which would allow for benefits to be scaled back if a country is found to not be making good faith progress on these and other issues.

            The legislation also includes new consultation and notification requirements, keeping Congress informed of beneficiaries’ progress. And, there are new mechanisms for stakeholders to petition the administration to raise awareness about potential eligibility violations. The bill will require these petitions to be taken into account when determinations are made regarding a beneficiary’s status and in regular reporting.

             I know the AGOA program has a lot support here in Congress among members of both parties.  I think we’ve been able to make some improvements that will broaden that support even further.

            Finally, the preferences bill would extend preferential access to the U.S. market for Haiti.

            Haiti is one of the poorest economies in the Western Hemisphere. The Haiti preference programs support well paying, stable jobs in a country saddled with poverty and unemployment.

            I hope this extension will encourage continued economic development and support democracy in Haiti. 

           This is a strong preferences bill, Mr. President.  I expect a strong vote in favor of passing it later today.

           Next, the Senate will vote on the Trade Facilitation and Trade Enforcement Act of 2015, which includes important provisions to reauthorize and modernize the operations of Customs and Border Protection, or CBP, and significantly improve intellectual property rights protection in the U.S. and around the world. 

          The customs bill will facilitate the efficient movement of merchandise destined for the United States by formalizing in statute programs such as the Centers of Excellence and Expertise.  It will also ensure that U.S. customs and trade laws are uniformly implemented nationwide and help ensure that the private sector and CBP work together.

          With this bill, we will also ensure that the Automated Commercial Environment and the International Data System are completed so that trade documentation can finally be submitted electronically and importers will no longer be required to submit the same information to numerous government agencies. 

           In addition, the bill will modernize the drawback process by moving from a labor intensive paper-based system to an electronic claims process that will significantly free up resources in the private and public sector.  And, it will increase the de minimis level from $200 to $800, reducing needless burdens on small businesses importing into the United States.

          Additionally, the bill strengthens our trade remedy laws and our ability to respond to imports that pose a threat to the health or safety of U.S. consumers. 

          When crafting this customs legislation, I was particularly interested in beefing up our enforcement of intellectual property rights. The bill includes the strongest possible provisions with regard to intellectual property rights enforcement. 

          For example, our bill will establish in law the National Intellectual Property Rights Coordination Center to coordinate federal efforts to prevent intellectual property violations.  It will also significantly expand CBP’s tools and authorities to protect intellectual property rights at the border by requiring CBP to share information about suspected infringing merchandise with right holders. 

          Our bill will also provide CBP with explicit authority to seize and forfeit devices that violate the Digital Millennium Copyright Act, and require CBP to share information with right holders who are injured by these unlawful devices. 

          The bill also contains provisions to establish a process for CBP to enforce copyrights while registration with the Copyright Office is pending and to significantly improve CBP’s reporting requirements to hold the agency more accountable for its enforcement efforts with regard to intellectual property. 

          The bill will strengthen CBP’s targeting of goods that violate intellectual property rights, improve CBP’s cooperation with the private sector and with foreign customs authorities on enforcement, and require an education campaign at the border. 

           I’m particularly fond of that last part. 

           At my insistence, the bill includes provisions that will require all versions of the customs declaration form that everyone fills out when they enter the U.S. to contain a warning that the importation of goods that infringe on intellectual property rights may violate criminal and/or civil law and may pose serious risks to health and safety. 

           In addition to enhancing protection at our borders, our customs bill will provide USTR with additional tools to improve protection of intellectual property rights by our trading partners overseas in order to stop infringing goods at the source. 

           For example, the bill will establishes a Chief Innovation and Intellectual Property Negotiator, with the rank of Ambassador, to ensure intellectual property rights protection is at the forefront of our trade negotiation and enforcement efforts and to enhance USTR’s accountability to Congress on these issues.

          On top of that, the bill will give USTR more tools to increase enforcement for trade secrets, and to ensure that countries that consistently fail to protect intellectual property meet specified benchmarks for improvement. 

          I’m a big fan of this bill, Mr. President.  It includes a number of my top trade enforcement priorities and I’m very glad we’ll get a chance to vote on it today.

          Of course, it’s not perfect.  Some of the amendments that were added in committee leave me with some reservations. 

          Most notably, the bill now contains provisions that purport to deal with currency manipulation that are, in my view, very problematic. 

         One provision sets up an avenue for a countervailing duty investigation or review to determine whether some measure of a currency manipulation is effectively a subsidy, either “directly or indirectly” to a country’s exports.   If the government finds that the manipulation, once again either “directly or indirectly,” an export subsidy, sanctions can follow. 

         This provision is problematic for a number of reasons.

         First of all, it is likely not compliant with our existing international trade commitments.

         It would effectively require the imposition of trade sanctions that, under the language of the legislation, could be based on presumptions without support.  And, it will almost certainly invite retaliatory trade sanctions from our trading partners who will argue, and in fact have already argued, that actions taken by the Fed constitute currency manipulation.

         While authors of the currency manipulation provision in the customs bill may believe that there is a clear delineation between monetary policies used primarily for domestic economic stabilization and policies used to gain trade advantage, there is not.

         When Japan engages in quantitative easing to boost its economy and inflation expectations, sometimes at the very urging of U.S. officials, is that manipulation? 

         When the Federal Reserve engages in quantitative easing, with part of the expected benefit being downward exchange rate pressure and boosted exports, is that manipulation, or just domestic stabilization? 

        Is Germany’s persistent trade surplus somehow partially caused by ongoing quantitative easing activities at the European Central Bank? 

        And, with respect to detection, despite the intent of the authors of the manipulation provision in the customs bill, accuracy is evidently not a concern. 

        I am sure that everyone has looked at the recent exchange rate assessments for 2013 from the International Monetary Fund External Sector Report. 

        For Japan, one IMF method suggested 15 percent yen overvaluation, while another method suggested 15 percent undervaluation.  Yet, under the currency manipulation provision in the customs bill, IMF models and methods are what we’re supposed to use to set trade sanctions.

        For South Korea, the two IMF methodologies suggested undervaluation between around seven percent and 20 percent.  So, when we set a punitive countervailing duty, what do our authorities do?  Assume that South Korea benefited from currency undervaluation of seven percent, or 20 percent, or some random number between the two?

        Who knows?

        This provision, unfortunately, simply won’t work, since it assumes accurate knowledge and abilities to determine some fundamental equilibrium exchange rates that the IMF and the economics profession simply do not have. 

        Under the questionable provision of the bill which allows for investigation of currency undervaluation, and potential ensuing trade actions, I believe that the authors of the provision were overly heroic, and mistaken in their belief about the precision of currency valuation technology.  The provision would appeal to models and methodologies, as described in IMF documents.

        The problem is that even the IMF does not use those models and methodologies to make definitive judgements about appropriate currency values, which are inherently some of the most difficult things for economic models to identify.  

        It would not be difficult for our trading partners to use precisely the same models and methodologies to make countervailing cases against Federal Reserve monetary policy, resulting in retaliatory trade sanctions, and perhaps defensive currency interventions. 

        This is a clear road to trade wars and currency wars replete with competitive devaluations.  Such a road is paved by the offending provision in the customs bill, which basically gives our trading partners a template for their own accusations about currency manipulation and ensuing trade sanctions.   

        This is problematic, Mr. President.   And while Senators in this chamber would like to simply decree that that our monetary policies are just domestic economic stabilization, while foreign monetary policies that may look similar are manipulation, self-evaluations will not be acceptable in international trade and agreements.

        I understand the desire among many of my colleagues to address currency manipulation.  And, I want to work with them on this issue.  But, I am convinced that the currency manipulation provision in the customs bill simply won’t work, and, when tried, it will simply give ammunition to our trading partners to consider engagement in trade wars, currency wars, competitive devaluations, and beggar-thy-neighbor monetary policies. 

       This isn’t what we should be shooting for with our nation’s trade policy. 

In addition to the currency language, I am also concerned about a provision in the bill – which was added during the markup – that would require employers to report occupational classification data to state agencies when filing their quarterly wage reports. 

        This is an entirely new burden that would be placed employers throughout the country, added to all the other reporting burdens they already face, and would require brand new systems for reporting and collecting information. 

        And, in the end, it’s not readily apparent just how valuable this newly collected information will be. 

        According to CBO, this new requirement would cost employers throughout the country more than $200 million between 2016 and 2020.  That may not seem like much compared to the numbers that get thrown around here in the Senate.  But, when we’re talking about small businesses who struggle from month to month to cover their payrolls, it’s a burden that, at least to me, doesn’t appear to be necessary.  

        So, once again, I’m concerned about this provision and the impact it might have.

        Despite the reservations I have about the flawed currency manipulation concepts and language and the unfunded mandate on employers, I believe it’s important that we vote to move the customs bill forward. 

        Overall, this is a good bill.  A lot of work has gone into it and I know that it reflects the priorities of a number of our members here in the Senate, including myself.  That being the case, I plan to vote in favor of passing this legislation later on today and I urge my colleagues to do the same. 

        Once again, Mr. President, I’m very glad to see that we’re making progress on moving these bills through the Senate.  I want to thank all of my colleagues – particularly those on the Finance Committee – who worked so hard on these bills to get them to this point. 

        These are important votes we’re going to take today, Mr. President.  I expect that both of these bills will receive broad, bipartisan support.