Trade Policy

Floor Speech

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Mr. DAVIDSON. Mr. Speaker, prior to coming to Congress 2 years ago, I spent 15 years building manufacturing companies. I have been personally on the receiving end of bad trade policy and bad trade practices. So, in 2016, when President--then candidate, now President--Trump talked about making America great again by dealing with bad trade deals and bad trade practices, frankly, he energized me and many other people in my industry, in the manufacturing sector, and, indeed, all across the country because America has lived with bad consequences of bad trade deals.

In fact, America has built its history on trade. Truly, economic liberty is as much a part of America's history as religious liberty and other forms of liberty. We were the world's largest trading country. We are a great trading power in every way you can measure it. We do have trade deficits with some countries, but we have to pay attention to the right metrics.

So when we talk about bad trade practices and bad trade policies, we talk about, to use an analogy, watching basketball. Think how the sport would change if there were no fouls called and no one could shoot free throws. These are the kinds of things that happened with the WTO. Eventually, after, sometimes, years of filing a complaint, the WTO will adjudicate a subsidy practice by China on steel, for example, and then they will say: Hey, you have to stop.

Well, the moment a complaint is filed, the Chinese company just dumps faster because they know that it is going to be turned off. The trouble is there is no consequence for this bad conduct.

So what I had hoped we would be doing is we would be using our great relationships around the world to unite our allies, our best trading partners, frankly, people who are also the victims of these bad trade practices and bad trade policies, to take action against those bad practices so that we can define what is a foul and what is the effective free throw. What are the consequences?

I believe that the President's goals are being poorly served by some of his advisers and I hope that the President will change course, because what we are doing has resulted in failure in every type of war studied, from Sun Tzu through World War II, through more modern wars.

When you multiply your enemies, you are not winning, and we are doing that with the practices that some of the administration is implementing, things that implement uniform tariffs, things that distort the very definition of a national security issue to call German luxury autos a national security issue.

We have tools in the kit bag that could be very effective, tools like sanctions. When we engage in warfare, when we engage with enemies of our country that are strategic enemies, we have sanctions in place against Russia, sanctions in place against Iran, and sanctions in place against North Korea.

The beauty of sanctions is they can be targeted not just as a country or a sector; they can be targeted to companies and even individuals. We can use these things to restrict the flow, and we can define what is illicit finance.

We can use these tools that the world uses already against bad actors and, frankly, some of the worst actors in the world to unite our allies and to define a better way for trade going forward.

So we shouldn't confuse this with a critique of the objective. The objective is, indeed, noble and necessary. Past trade practices, past Presidential policies have left America on the short end. True, as Milton Friedman said:

If countries want to subsidize the cost of a good, let them. They are just lowering the cost for our consumers.

But we can't simply be a nation of consumers. We need people to put capital at risk in America to thrive, and for our great industries, whether it is agriculture or manufacturing or technology, for the intellectual property to flourish here. We have the best markets for goods, services, intellectual property, capital, and we need to make sure that we defend that.

I applaud President Trump for being passionate about putting America first in these practices, but I do believe that we need to look at the tactics that have been employed by many who have advised him and say, ``Is this multiplying our enemies?'' And, in fact, it is.

I hope we can move forward in a better way and we can serve this great country by restoring trade to its right and proper place as a vibrant part of our economy. Exports drive our economy, but imports can benefit our economy. Trade is exactly that.

Trade is something of value for both parties. Both profit when trade is there. A zero-sum understanding is not the right way to look at trade. We benefit and so do others; and it is okay that they benefit, because then they are able to buy more from us in trade.

The practices that are in place today give us a chance to assess the progress, and I think it is vital that we do that. It is vital that we keep this economy doing the great things that it has under President Trump's leadership, under congressional leadership.

We were told that the new normal was a 1.5 percent growth rate, that we couldn't grow at the high rate. With regulatory relief and tax reform, our economy is growing higher than 3 percent, and we certainly don't want to do anything that would derail that momentum.

I am encouraged by Mr. Hill's dialogue tonight, and I thank the gentleman for the opportunity to speak. I know we have other colleagues who would like to as well.

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Mr. DAVIDSON. Mr. Speaker, I thank Mr. Hill.

I want to agree with the importance of bringing allies to the table to address those practices.

There are four, and there are several others that we would probably agree on. In a way, I think the thing that our President respects about China is they put China first. They have used all the resources of their nation really since 1989, since Deng Xiaoping transformed China's economy to a more market-oriented economy.

They are not a market-oriented economy. That was one of the things they committed to do as part of joining the World Trade Organization. They are a command-driven economy in many respects. They have made great progress since 1989 to being market oriented. Frankly, since 2008, they have gone the other way in some of their practices.

If you look at the revolutionary idea, though, the idea that lives can be changed by trade and capitalism, China under Deng Xiaoping, at the peak, they were using communism with Communist principles, and he introduced to them communism with Chinese principles, which was essentially capitalism as long as we can stay in charge.

It is a corrupt, subsidized form of capitalism, but at its peak, it was lifting 1 million Chinese people a month out of dollar-a-day poverty.

Trade was a key part of this, inflows of foreign direct investment to reach this massive market. Today General Motors sells more cars in China than they sell in the United States of America.

This is a better path than the one I expected. When I graduated from high school in 1988, Mr. Gorbachev had not torn down the Berlin Wall. By the end of 1989 when I was there, unfortunately bad things had happened in Tiananmen Square in China, but, thankfully, great things happened at the Berlin Wall. I was fortunate to be able to see people there. I met a man who was from East Germany in his first hours of freedom who said: Is it like this everywhere?

We were in the Ku'damm district--kind of like Times Square is in New York--in Berlin. I thought he meant how big the city was. But what he really meant was the stores were open at night, and there is fresh milk, as he said. He was astonished that regular people, even foreigners, could go in, and the shelves had stock.

This is the idea of economic liberty. This has produced abundance wherever it has been tried. Where the other ideas, the redistribution that Mao tried every version of Marxist Communist ideology that he could think of, and they all failed. They produced scarcity, poverty, and depravity. By engaging in the world, China transformed their economy. That is something to respect. I think the President admires the way that they put China first.

But the reality is in putting China first, they have engaged all the resources of the country to where in 2014 we saw that President Obama had to take action against hackers. In fact, they were indicted. But did President Obama cut off all relations and trade with China? He did not. He engaged in diplomacy with China.

I think it is great that we engage with Russia. Perhaps even Russia will see a market-oriented economy. They started out that way in the 1990s. But they also proved that deficits do matter. This is something that the whole West wrestles with, and it is another thing that we could unite in agreeing with.

I hope we can also get to ways we can unite here, because, as Mr. LaHood mentioned, the Global Trade Accountability Act is not an adversarial bill. It doesn't even go retroactive to the actions that have occurred in the past. It does get Congress engaged. It gets Congress engaged because the same benefits of cooperation, the same benefits of multiplying our allies instead of multiplying our enemies, could happen here in Congress where we multiply the people working on the problem.

We want to join our President in taking action against bad actors and in making our trade policy better than it has been even with the Canadians--they have bad trade practices that we can improve. Even with the Europeans; they have bad trade practices that we can improve upon.

Great friends work through problems and I feel like that is the reality that we have with our friends. Here in Congress, the President has great friends. I would consider the three of us some of his great friends, not adversaries, in the goal we are concerned, I think, about the means of getting to that, and the Global Trade Accountability Act would simply say that Congress works with the President who leads the negotiations similar to the REINS Act. Where Congress can come alongside and say we do it, what would that mean? Well, that would mean that the President is more engaged. But it's really the President's advisors. Men like Peter Navarro, instead of refusing to come talk to Ways and Means, would engage with our chairman, would engage with our committee dealing with trade, and would, in fact, develop a plan instead of criticize their own failure to plan after the fact.

How do we know this?

This is an example. We have a uniform tariff policy that probably never should have been implemented, that has got a chance for exclusions. We have over 20,000 companies that want exclusions right now. Commerce is doing them not sector by sector, but company by company; not commodity by commodity, but company by company.

There are only six people working on this massive task. Were there to be required engagement, I believe there would have been a better plan in that collaborative approach, and perhaps a different course of action.

I look forward to seeing other ways that you all might think that we could collaborate and make the great cause of making our trade agreements better and more productive.

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Mr. DAVIDSON. Mr. Speaker, I think we have made great progress towards that end in uniting on trying to take a difference course of action. Just recently, we passed updated export controls and CFIUS regulation to try to give more tools to the kit bag.

Who is going to execute this? The executive branch. But the legislative branch passed the law, the House, the Senate. We are working to get the final package to agree on language--not just against China, but anybody who would steal our intellectual property, anybody who would take targeted action to harm our economy or put their citizens in a position to do that harm--and also try to strike the balance.

Here is the thing. We can have perfect security for America's intellectual property by exporting zero of it, but we can't do that. What we have to do is find a balance that says: We want you to innovate in the United States of America; we want the ideas to continue to originate here; we want the capital to be invested here to create those great ideas; but we do want to have some concern.

You mentioned the Clinton administration. One of the first actions Bill Clinton took as President was to move release authority for sensitive information from the Department of Defense into the Department of Commerce.

And what happened?

Swiftly, Hughes worked with China to be able to help send them launch vehicles off of one rocket. One rocket went up into the air, multiple low-Earth orbit satellites went around, precisely positioned in orbit around the Earth. The down side is that is the exact same technology that can be used to send warheads to multiple cities after one launch vehicle penetrates U.S. airspace. This is dangerous technology in the wrong hands.

So we have to find a way to review those things and keep America safe, but we also have to find a way to have the ideas and the intellectual property initiate here.

We can't shut down all these in the name of national security. We certainly don't want to shut down the production of luxury automobiles. But we might want to restrict the trade there.

China is actually targeting our entrepreneurs. We have some of the best education in the world, and the world comes here to become well- educated. Over 50 percent of our graduate and postgraduate students are not native-born Americans.

We allow, frankly, most of the world to come here to get educated. Unfortunately, we don't retain enough of that talent. So we send many of those people out of here with those skills that can be put to work in our marketplace.

But in the process, Chinese capital sometimes and, frankly, other foreign nationals are getting into venture capital. They are on our campuses. They are recruiting our talented people. They also are looking to buy our innovative ideas for dual use, but sometimes only to advance their own technology.

The challenge today is that China has had this mixed blend of aggressive behavior towards us. They have also seen the benefits of trade. They have seen the benefits of the flow of goods, services, capital, and, in some cases, people, and they have brought those to bear to benefit their own economy.

Today, nearly a third of initial public offerings are taking place in China. This is a challenge. And I would say we are better off finding a way to compete in the marketplace than as I thought I would as a soldier, which I never thought I would go to China without body armor and a rucksack full of ammo and night vision goggles and whatnot. I would rather trade with them.

I hope we can stay on friendly terms with them. I hope we can get on friendly terms with Russia, when it is possible. As much as it depends on us, we should live at peace with everyone.

But we do have to trade. We do have to enforce the rules. We do need law and order. We have made many of these commitments, including commitments in the WTO. We should insist that China live up to their obligation and become a market-oriented economy.

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Mr. DAVIDSON. Mr. Speaker, prior to being here, I worked in the manufacturing sector. I worked in metal stamping.

One of the challenges, as Mr. Hill highlighted, is the tariffs are only on the commodity. Frankly, they are blunt force. They are all steel, all aluminum.

The reality is some grades of steel, some grades of aluminum are commodity. Beverage cans, for example, are a commodity. We make it in the U.S.; they make it in Canada. Everywhere they consume lots of beverages, there is a significant ability to produce this grade of aluminum.

So the idea that we would target that isn't necessarily changing our market, but where it is, there are things like the grades of rod that your tire manufacturers are or a similar rod for welding wire. Welding wire is highly automated.

So we have got domestic welding wire manufacturers who already weren't the lowest cost provider. China, India, South Korea all heavily subsidize their welding wire manufacturers. Having domestic welding wire manufacturers probably is a national security issue.

We want the base rod to be made in the U.S. Some of those grades aren't. But soon, if we don't get exclusions to our domestic welding wire manufacturers, we won't have the manufacturer of welding wire either.

Meanwhile, their cost for the steel has gone up by 25 percent or more because of the tariffs and they are losing market share. They don't have a year or 2 to wait for the exclusions review. They are losing business now. And the size they are could kill their companies.

Some of these companies are big enough to just shift production offshore, as we have seen other people do, but some of the smaller companies don't have that option. They will live or die on whether or not they can get a government-mandated exclusion to a government- created problem that restricts their ability to buy the aluminum.

So we either have to put tariffs on the secondary goods--so you can see where this goes--and then they will put tariffs on the secondary goods, or we have to find a way where we say it is a national security issue for us to get this capability in the U.S. We want that capability, but we have to go about it the other way.

I believe passionately that it is the sanctions. As you alluded to your own articles in the sixties, you have to take sanctions action.

When you talk about how you deal with transshipments, we already deal with transshipments for national security purposes. And it is targeted.

The sanctions protocol offers a path forward. I hope we can engage on that. I hope we can pass the Global Trade Accountability Act to provide a check, and I hope that more of our colleagues will engage in this sort of discussion. I hope colleagues across the aisle can engage in it, not necessarily to be an attack on our President or our policies, but as a gateway to support economic liberty that has indeed made America the land of opportunity.

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