Sen. Portman Says USTR Vague on How to Resolve Metals Tariffs on NAFTA Neighbors

Some of the meeting attendees asked Lighthizer if the only way Canada and Mexico can get out from under the tariffs is by accepting quotas, Portman recounted. "He was optimistic about resolving those issues. But didn't specifically say it would require quotas," Portman said. "That's what's worked out with regard to other countries, as you know. So that might be the way forward." Portman said he won't condition his vote on the NAFTA replacement on the lifting of steel and aluminum tariffs.

Portman, a former USTR himself, spoke to an audience at the Heritage Foundation Oct. 23 about how he believes the imposition of Section 232 tariffs to protect U.S. steel and aluminum production was a misuse of the statute, and he described his bill, which would give Congress the ability to block future executive branch uses of Section 232, such as on autos. It also would require that the decision on whether any action should be taken rest with the Department of Defense, since the tariffs are imposed under a national security rationale.

He noted that George W. Bush, who appointed him as USTR, sought to use Section 232 to protect steel, and the Commerce Department would not go along with it. Bush ended up raising tariffs on imported steel as a safeguard measure, but dropped the tariffs after a World Trade Organization panel ruled they weren't justified. Portman said he's hopeful his bill will get a hearing in the Senate Finance Committee, but Senate Majority Leader Mitch McConnell, R-Ky., has said repeatedly he won't allow a vote for trade bills that would constrain the president, since they are fated to be vetoed.

Some conservative voices -- including Portman's host at the Heritage Foundation -- say that the new NAFTA is worse than the old one, because it moves in the direction of managed trade in autos. Portman said he is not a "pure free-trader," and he likes the ways that Lighthizer changed the rules of origin to encourage more auto production in the region. Ohio is the No. 1 producer of engines and transmissions in the country, Portman noted, adding: "Take that, Michigan." Ohio also has the second-largest number of autoworkers. Portman suggested that NAFTA played a role in job losses in auto parts manufacturing over the last two decades. He said that before NAFTA, the U.S. had 350,000 more auto jobs than it does now, and Mexico gained 430,000 auto jobs since NAFTA came into being. He said automation affected the U.S. employment numbers, too, but said, "I do think some of the aspects of USMCA are going to help" mitigate outsourcing to Mexico.

Commerce Secretary Wilbur Ross points to those same employment numbers as a justification for opening the autos investigation. Portman strongly opposes tariffs on imported autos or auto parts, and said the side letter protecting Canadian and Mexican parts and vehicles up to a cap is perhaps the most important part of the U.S.-Mexico-Canada Agreement.

A panel of industry representatives who spoke after Portman disagreed with his characterization of the side letter as a "safe harbor" for Canadian and Mexican auto production. John Bozzella, who leads the trade group Association of Global Automakers for foreign automakers in the U.S., said it's quotas, not a safe harbor. He said if there were to be Section 232 tariffs on autos, it's not clear how the Mexican and Canadian quotas would be allocated to companies. "Quotas in some ways are worse than the tariffs, because there can be inequity in how they're applied," he said.

Ann Wilson, who represents 1,000 automotive suppliers at the Motor Equipment Manufacturers Association, disagreed, noting that with quotas, your supply can be interrupted entirely. Either way, though, "it's an unfortunate path we're going down," she said.