USTR Lighthizer Ways and Means Hearing

On Wednesday, March 21, USTR Ambassador Lighthizer testified before the House Ways and Means Committee about the Administration’s trade agenda. Here are some highlights, provided by Janet Kopenhaver, AWPA Director of Government Affairs:

NAFTA ISDS Provision

Committee Chairman Kevin Brady warned Lighthizer that the NAFTA Agreement will have a hard time passing the House if Investor State Dispute Settlement (ISDS) language is not included. He asked the Ambassador his thoughts. Lighthizer responded that he remains very skeptical about ISDS for two primary reasons:

  1. It raises a serious question about sovereignty. He asserted that foreign nationals would have more rights in the US than many American companies because foreign judges can (if ISDS is implemented) overrule US court decisions. (This argument was directly questioned and opposed by Brady as not true.)
  2. Is an outsourcing issue. He argued that companies were asking the federal government to buy their risk insurance. He added that if a company wants to move an operation to another country, then it is their responsibility to get their own insurance. He concluded that inclusion of this language in the NAFTA Agreement would only encourage more companies to move to Mexico or Canada because the government would be paying their insurance.

Lighthizer stated that the Administration is looking at other remedies to this issue including state to state dispute settlement and advising companies to simply include arbitration clauses in their contracts when moving facilities to another country.

Brady countered that without ISDS, Americans’ property is in danger of seizure and unfair treatment. He is very concerned that Mexico and Canada are now negotiating a bilateral ISDS protections clause and leaving the US out. He reiterated that this provision is a key part in the ability of Congress to pass the NAFTA agreement. Brady concluded that every key industry in the United States supports ISDS inclusion.

NAFTA Sunset Provision

Several lawmakers expressed concern about the Administration pursuing the inclusion of a five-year sunset provision in the NAFTA Agreement. Lighthizer responded that the language simply allows the President, after five years, to review the agreement and ensure it is still in the US’s best interest to keep the agreement in place. He added that the President alone makes this decision and ending the agreement would not require Congressional action.

Rep. Kristi Noem (SD-At Large) asserted that the sunset provision would create uncertainty that directly and negatively impacts manufacturers and the agricultural community. Lighthizer responded that he did not agree the provision creates uncertainty. He added that if the agreement was so great, as people are saying, then there should be no problem because the President will simply renew it.

Section 232

Lighthizer clarified that Commerce will be taking the lead on product exclusions (although he did not think there would be a lot of them). USTR was taking the lead on country exemptions. He explained that Canada and Mexico have already been excluded from the tariffs that go into effect on Friday while the NAFTA negotiations are ongoing. He thought that Korea might also be exempt while the Korea Agreement negotiations are ongoing. Other countries that the US is currently talking with about exemptions are Brazil, Australia, Argentina and the European Union.

Lighthizer anticipates that all decisions about country exemptions will be made by the end of April. He added that the President alone determines the national security criteria for exemptions and he alone can make those decisions.

Rep. Erik Paulsen (MN-3) asked him to respond to the anticipated net job losses as outlined in the Trade Partnership’s study. Lighthizer simply dismissed the study as not being accurate and added that he is “not losing any sleep over its conclusions.”