Lighthizer clarifies Section 232 ‘program’ to probing Senators

July 27, 2018

U.S. Trade Representative Robert Lighthizer on Thursday said the national security-based Section 232 tool is only effective if it is applied globally, despite relationships the U.S. has with countries considered to be key allies.

[Isabelle Hoagland | July 26, 2018 | Inside US Trade]

Asked by Sen. Jack Reed (D-RI) if Canada posed a national security threat to the United States, Lighthizer answered affirmatively.

“In the case of steel, yes, absolutely, because of the nature of the [Section 232] program, for sure. Otherwise you don’t have a program,” he said during a July 26 Senate hearing to defend USTR’s funding priorities. Thursday’s hearing was held by the Senate Appropriations’ Commerce, Justice, Science and related agencies subcommittee.

If the U.S. is of the opinion that the Section 232 tariffs on steel and aluminum imports are justified because of the need to preserve certain industries, “then you have to put in place a provision -- a program that actually works.”

“And that means every country has to have -- you can’t let -- you can’t let all of the steel come in through any other country otherwise the program doesn’t make any sense,” Lighthizer asserted.

Canada is a “great ally” and “nobody is declaring war on them,” he continued, “But if you decide that you need to protect an industry, you can’t be [in] a position where the protection is of no value. Everything comes into -- comes down to Canada."

If the U.S. has made the decision to pay higher steel prices to “save that industry,” that benefit should not go to countries like Canada, he said. Accordingly, if the U.S. is “paying the price,” the benefit of the protection afforded by the Section 232 tariffs should go to the U.S. steel producers, he added.

“Hopefully you come to the point where you’re -- the price increase is worth the pain, and people have different ideas of where that point is, but this is logically how you would do it,’ Lighthizer contended.

“If you have one hole in the net, all the fish will swim through it if you give them enough time. You have to be in a position where you don’t have a hole in the net. That’s not to suggest that we think army tanks are going to come in from Canada, the point is that if you’ve made a decision that it's in the national interest to save the steel industry, then you have to put in place a program that actually works, and that requires not having holes in the net,” he asserted.

Reed said Canada is a country that has “given their lives in a joint effort with the United States” and hitting them with national security-based tariffs is unjustifiable.

“And I don’t know what kind of data or information you have that would show that Canadian influence of steel or any other products would impair the functioning of our steel industry,” Reed continued. “I don’t think you’ve got a good legal basis for what you’re doing.”

Lighthizer responded by asking what he called “the fundamental question."

“Do you think -- it’s not really about, in my judgment, with all due -- it’s not really about Canada, or Mexico, or Europe, it’s about do you think having a steel industry is -- is a national security issue?”

Reed said “No” and inquired what else the U.S. could “evoke Section 232 for,” pointing to the entertainment industry which he said is flooded with imports from countries like France and China.

“So, China is a -- China is a threat to us, France is a threat to us,” Reed asserted. “Those new wave films are just cutting the heck out of us. You’re using national security as, kind of, a generalized premise, and I don’t [think it’s] a valid premise, to -- to go after countries -- individual countries that are, frankly, ironically, are contributing more to our national security than -- than -- they’re contributing a lot.”

Sen. Brian Schatz (D-HI) also questioned Lighthizer on the U.S. decision to impose steep national security-based tariffs on “some of our greatest allies.”

“So, it seems to me that anything that is large enough, even if there’s no direct nexus to national security issues and even if we’re undermining our national security by offending some of our greatest allies, that you are now in a position where you’re arguing we’re going to use 232 with near impunity,” Schatz contended.

Lighthzier demurred, saying he is “not arguing at all.”

“I’m certainly not arguing that we use 232 on everything in the economy,” Lighthizer said. “So, if I gave you that impression I want to change that impression right now; that’s not my position at all. With respect to the action that the president took on steel, it’s in my judgment, it’s clearly -- ” the official said before being cut off by Schatz.

Lighthizer added that the “232 has nothing to do with USTR."

“I was involved in policy discussions about what the solutions should be as were the national security adviser, all the appropriate national security departments under that statute. Once again, it’s not my statute. I’m not responsible for it,” he said.

Earlier this year, President Trump announced USTR would be in charge of granting country exemptions to Section 232 duties and directed Commerce Secretary Wilbur Ross to head the product exclusion process.

 Sen. Jeanne Shaheen (D-NH) questioned whether the Trump administration was imposing tariffs as part of a broader global strategy.

“It seems to me that one challenge that we’ve got right now is that we haven’t recognized that what’s good for national security is often good for the economy and what’s good for the economy is often good for national security and that we haven’t looked at the tools of diplomacy and of international activity in the context of a coordinated strategy,” Shaheen said. “And I guess that’s a concern I have about these tariffs -- that I appreciate the arguments that you are raising but it doesn’t seem to me that it’s part of a coherent, coordinated strategy that is looking at the role of the United States in the world. And it seems to me that that presents real challenges for us going forward.”

Lighthizer replied that other diplomatic tools had returned little results for the U.S. and that the administration’s national security strategy was well-founded.

“What we’ve tried to do is the opposite of that -- we have tried to coordinate it,” he said, prompting Shaheen to say “Maybe I am faulting the implementation, rather than the strategy then."

Sen. Lamar Alexander (R-TN) asked whether the conclusion of a modernized NAFTA would result in the repeal of Section 232 tariffs for those countries.

“Resolving the NAFTA issue -- we would expect, or hope, that we would resolve the steel and the aluminum issues with both Mexico and Canada,” Lighthizer added.

Earlier that day, Lighthizer said he hoped to have a NAFTA deal in principle completed next month. -- Isabelle Hoagland (ihoagland@iwpnews.com)

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