There are a lot of real good ideas in the 53-page report, but there are a few things we think need some work.
One of the big stories on Capitol Hill this past year has been the diligence of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, or the Select Committee on the CCP. Since it is a “select” committee, the panel doesn’t have the power to advance legislation, and instead is charged with investigating and studying the relationship between the U.S. and China.
But the panel certainly took its work to heart, holding several prime-time hearings — the first of which featured Alliance for American Manufacturing President Scott Paul as a witness — to help draw attention to the urgency of the issues driving America’s competition with China. Notably, Chairman Mike Gallagher (R-Wis.) and Ranking Member Raja Krishnamoorthi (D-Ill.) appeared to develop a good working relationship, and the committee often worked in a bipartisan manner, taking its work seriously rather than devolving into the partisan squabbles that sadly dominate many other congressional proceedings.
On Tuesday, the committee revealed the summation of much of its work, a 53-page bipartisan report that outlines nearly 150 policy recommendations that serves as “a strategy to fundamentally reset the United States’ economic and technological competition with the People’s Republic of China.”
There’s a whole lot packed into the document. Some of it is good, some of it needs improvement. But for those of us who have long argued that opening trade with China was a strategic mistake — and have been calling for a U.S.-China reset ever since — the fact that a high-profile, bipartisan committee is calling for substantial changes to China-facing economic and technology policy is a pretty big deal.
With nearly 150 policy recommendations, there’s a lot to dig through in the report. Here’s what stood out to us, from good ideas to items that need revision.
What We Like
Renew Section 421: This refers to Section 421 of the Trade Act of 1974, and is also known as the “China Safeguard.” Essentially, this law allows the International Trade Commission (ITC) to determine whether goods imported from China are coming in “increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products.” If the ITC makes an affirmative determination, it can propose a remedy, such as a tariff. Section 421 has been an essential trade tool for American manufacturers and workers like those in the domestic tire industry in countering China’s trade malfeasance. The committee is correct to call for its renewal.
Pass De Minimis Reform: We’ve covered this maddening trade loophole quite often over the past year, and are pleased to see that the committee is calling for action. De minimis allows imports valued under $800 to bypass tariffs when entering the United States, and is designed to make it easier for tourists to bring back souvenirs from abroad. But as the committee’s own investigators found, Chinese companies like SHEIN and Temu have exploited de minimis to dodge tariffs and trade inspections; neither paid a single tariff in 2022. That is giving these brands, who stand accused of a host of bad practices, including using forced labor, an unfair advantage. There are a couple of proposals in Congress for closing the loophole — AAM backs legislation introduced by Rep. Earl Blumenauer (D-Ore.) — and we think it’s time to finally get the job done.
Enact the Leveling the Playing Field Act 2.0: We’re big supporters of this bipartisan, bicameral legislation, which would create a new, modernized set of trade tools to take on China’s predatory trade practices. It’s important to remember that China is constantly making adjustments to distort the market and counter U.S. enforcement efforts; it’s time to improve our trade remedy laws to better take on this trade cheating.
Enact the COOL Online Act: Did you know that while in-person, brick-and-mortar retailers are required to include country of origin information on every product they sell, online retailers aren’t? That’s why it can be so hard to find out where a product is made when shopping online. Legislation like the COOL Online Act, introduced by Sen. Tammy Baldwin (D-Wis.), would simply hold online retailers like Amazon to the same standard as their brick-and-mortar counterparts. It’s worth noting that Americans are supportive of such legislation, with 83% of respondents voicing approval in an October poll conducted for AAM by Morning Consult.
Supporting Trade Adjustment Assistance (TAA): The committee recommends modernizing and reauthorizing the TAA program to “support workers that may be displaced and create a set of robust training and reemployment services to support any such workers; reentry into the workforce.” TAA is an successful and cost-effective program that gives American workers the tools and training they need to get good jobs after being laid off by no fault of their own. It’s a no-brainer to reauthorize it.
What Needs Improvement
Section 232: The committee calls for the U.S. to limit Section 232 action to “countries of concern while limiting applicability to allies and partners.” We strongly oppose any attempt to dilute Section 232, which is a national security action that sometimes requires broad application. This was the case when Section 232 tariffs were applied in 2018 on steel imports, a move that ultimately stabilized an industry critical to our national security. While China’s massive steel overcapacity drove that crisis, other nations — including some of America’s traditional allies like the European Union — were also contributing to the problem, and thus broader action was needed. It would be a massive mistake to weaken Section 232.
Fast Track Free Trade with Japan: The committee recommends the United States enact “legislation setting negotiating priorities and a process for congressional consideration of comprehensive bilateral trade agreements” with countries like Taiwan, the United Kingdom, and Japan. The problem is that while Japan is a U.S. ally, the United States has also had a very rocky trade relationship with Japan, which has engaged in bad trade practices like currency manipulation and other market distortions. These practices could impact major U.S. industries, including autos. We don’t think the U.S. should rush into any free trade deal, but we’re especially concerned about fast tracking one with Japan.
Where We Are Cautiously Optimistic
Moving China to a New Tariff Column: This is the recommendation garnering the most attention, and it’s a big one. The committee acknowledges in the report that granting the People’s Republic of China (PRC) permanent normal trade relations status (PNTR) “did not lead to the benefits expected for the United States nor did it lead to the structural reforms in the PRC that Congress expected. Instead, it has ceded critical U.S. economic leverage in our relationship with the PRC.” Based on that analysis, the committee proposes moving China to “a new tariff column that restores U.S. economic leverage to ensure that the PRC abides by its trade commitments and does not engage in coercive or other unfair trade practices and decreases U.S. reliance on PRC imports in sectors important for national and economic security. This shift should be phased in over a relatively short period of time to give our economy the time necessary to adjust without avoidable disruptions.” While this recommendation isn’t quite as straightforward as revoking China’s PNTR status for good, it is a step forward in leveling the playing field for American producers. However, we will note that implementation must be handled properly to ensure some of the essential tariffs already placed on Chinese goods remain should this new structure be created; the result ultimately cannot be to lower rates on Chinese imports if certain products are deemed critical to national security, for example.
There’s a lot more to dive into in the proposal, of course, and ultimately the committee’s recommendations will remain just that until Congress as a whole decides to act. We’ll continue to monitor things closely, and provide updates should any of these recommendations be put into action.