Rep. Sean Duffy: Let's Level the Playing Field on Trade
American workers and companies are the hardest-working, most innovative on Earth. If given a level playing field, they can compete with anyone. Unfortunately, they have been forced to compete in a trade environment that is neither free nor fair.
Under the World Trade Organization’s “most favored nation” rules, foreign countries can levy significantly higher tariffs on U.S. goods than America levies on the same or similar products — and laugh all the way to the bank at our expense.
Our MFN applied trade-weighted average tariff is a mere 2.4 percent. In contrast, the EU’s equivalent tariff is 3 percent, China’s is 4.4 percent, Mexico’s is 4.5 percent, and India’s is 7.6 percent.
These one-sided tariffs have been in place for years and are hurting our nation now. India, for example, has a 100 percent tariff on large motorcycles, many of which are produced in Wisconsin. America’s tariff on Indian large motorcycles? Zero percent. Butter, an important dairy export, faces a 68.2 percent tariff from the EU. Our tariff on butter from the EU? Only 2.8 percent. This puts American workers at an unnecessary and avoidable competitive disadvantage.
While higher tariffs put America at a disadvantage, many countries also use high nontariff barriers to protect their markets.
Onerous standards and technical barriers to trade are notorious for blocking the export of American beef and poultry. Country-specific standards add thousands of dollars to the cost of trying to export an American car into the EU and to countries like Japan and South Korea. Japan alone exports more than 100 cars to the U.S. for every one we export to Japan. In China, nontariff barriers in the form of burdensome testing requirements and licensing procedures are not only used to block U.S. exports from U.S. markets, they facilitate the forced transfer of American technology.
In assessing this tilted playing field of nonreciprocal trade, one abiding truth emerges: Neither Congress nor the president currently has the appropriate tools to force foreign countries to lower their tariffs and nontariff barriers. That is why it is time for a new United States Reciprocal Trade Act.
On Thursday, with strong White House encouragement, I am introducing the USRTA bill. Here’s how it works.
If the president determines that the rate of duty imposed by a foreign country with respect to a particular good is significantly higher than the rate of duty imposed by the United States or if a
foreign country imposes significantly higher nontariff barriers, then the president has the authority to “negotiate and seek to enter into an agreement” that “commits the country to reduce the rate of duty or reduce or eliminate the nontariff barriers.” If the country refuses to lower trade barriers through negotiations, the president then has the authority to levy reciprocal duties to offset their protectionist advantage.
The purpose of granting the president these authorities is not to raise tariffs. Rather, it is to provide the president, working in close consultation with Congress, with a sophisticated and targeted tool to force other countries to lower their tariffs and nontariff barriers. To provide America with appropriate leverage, “the president should have a wide array of tools to open the markets of United States trading partners and encourage participation in negotiations.”
Note also that the purpose of granting the president these authorities is not to circumscribe the taxing powers of Congress. Rather, the proposed USRTA features numerous provisions to ensure a close partnership between the White House, the United States trade representative, and Congress.
For example, before taking any action, the president must provide notice, consult with Congress, and allow for public comment. The bill also provides an immediate override feature and a three-year sunset provision that together will act as strong curbs against any possible executive branch abuses.
Our workers and farmers need Congress to step up to prevent foreign countries from taking advantage of us with high tariffs that enter unfettered into our markets. No rational Main Street American could possibly think otherwise.
If ignored, unfair trade will continue to stifle our economic growth, depress our wages, and allow foreigners to buy up America one factory, farm, and house at a time.
Rep. Sean Duffy, a Republican, represents Wisconsin's 7th Congressional District. You can follow him on Twitter: @RepSeanDuffy