USTR: USMCA 'Landmark Agreement'; Review Must Prevent Free Riding

Sen. Tim Scott, R-S.C., said manufacturers should be able to import inputs from allies without paying tariffs.

Sen. Todd Young, R-Ind., homed in on products that "simply aren’t made in the U.S."

Sen. Michael Bennet, D-Colo., noted that small companies were able to get relief last time, and asked, "Are there particular categories of exemptions -- such as infant formula –- that you would consider providing as a matter of course?"

Senators from both parties asked about the criteria for granting relief.

In every case, Greer declined to take a position, saying he'd discuss the issue in greater depth in the future, and would raise the issue with the president.

Bennet also asked Greer about his goals for the USMCA sunset review. Greer said that review is a top priority, and he will solicit input from a variety of stakeholders. Bennet asked: "Would you agree that it is critical to ensure USMCA stays in place moving forward to preserve and build upon North American supply chains and better compete with China?"

Greer wrote, "The USMCA is a landmark agreement that establishes the rules of the road for trade and investment with Canada and Mexico. The Agreement must also be effective in strengthening regional supply chains, and preventing free riding from third countries, especially China. If confirmed, this will be a priority for me during the USMCA Review process."

Sen. Bernie Sanders, I-Vt., suggested that as part of the review, the passenger vehicle tariff should be hiked past 2.5% so it's more of an incentive to meet the rules of origin. (This question was submitted before the president hiked tariffs to 25% on vehicles, even those meeting USMCA requirements.)

Sen. Peter Welch, D-Vt., asked if Greer would recommend imposing 25% tariffs on Mexico and Canada (at the time, the fentanyl tariffs were on pause).

"As previously stated, the migration crisis and opioid epidemic are tragedies that should never have occurred. I support the President doing whatever it takes to address them, and I trust his judgment," Greer replied.

Sen. Raphael Warnock, D-Ga., asked that Greer use the USMCA review "to help stem" the increase in imports of seasonal fruits and vegetables that compete with Georgia farmers. Greer said he would include the issue in the review.

Bennet asked if USTR would not reinterpret CAFTA or other approved trade agreements "without seriously and substantively consulting Congress?" Greer said he would follow the law on consultation requirements, including on previously negotiated agreements.

Several senators, including Finance Committee ranking member Ron Wyden, D-Ore., asked Greer if the administration supports renewing the Generalized System of Preferences benefits program and the African Growth and Opportunity Act.

Wyden wrote that Greer, when talking to trade staffers on the committee, "referred to the African Growth and Opportunity Act (AGOA) as 'a giveaway.'"

Greer didn't take a position, saying merely that he would provide technical consultation if Congress seeks to restore or renew trade preference programs.

Bennet wrote that The North Face and other outdoor retailers have paid $1.53 billion in the more than four years GSP has been expired on goods that used to be GSP-eligible. "The program’s expiration continues to strain businesses of all sizes that are critical to my state’s economy. Would you commit to working with Congress on a bill to reauthorize the GSP, for which there is bipartisan support?"

Greer said he could not prejudge where the administration would land on GSP or similar legislative proposals.

Committee Chairman Mike Crapo, R-Idaho, noted that trade between Canada and the U.S. is the largest trading relationship the country has, and it's meaningful, but there are "some economic irritants to be resolved."

He asked if Greer should prioritize appropriate recourse for domestic lumber interests in the face of subsidized and dumped lumber, if he should address Canada's administration of its dairy tariff rate quotas, and tackle discriminatory digital services taxes. Greer said yes to all three.

Several senators asked questions about sectors that may end up with trade restrictions under national security Section 232 investigations, though at the time, they had not been formally launched.

Sen. John Cornyn, R-Texas, noted that U.S. aerospace has the largest surplus of any manufacturing sector, and asked him how he would ensure continued growth.

Greer said he would be investigating "unfair practices threatening the competitiveness of our aerospace sector. I will also seek to ensure that aerospace exports can fairly compete in foreign markets."

Sanders told Greer some generic drug companies have profit margins of 10% or less, and so, if a 25% tariff is imposed on imports, it "could cause generic producers to exit the market, leading to shortages. Will you ensure that tariffs are not imposed on generic drugs?"

Greer replied, "If confirmed, I will work to ensure that Americans have access to the medicines they need, and that critical supply chains are not disrupted by an overreliance on foreign manufacture[r]s not subject to American standards of production."

Sen. Elizabeth Warren, D-Mass., tried to point out the contradictions between using tariffs to raise revenue, induce behavior change in foreign countries or promote domestic industry.

Greer said they serve all three goals, and avoided answering how he would balance the objectives.

Sen. Catherine Cortez Masto, D-Nev., asked if, as part of the negotiations with Japan, the U.S. could offer to drop its 15% tariff on titanium sponge "in return for Japan reducing duties of their own that benefit U.S. exporters?"

He said he would like to talk to her after being confirmed and learn more about the issue.