Speeches & Floor Statements

Hearing Statement: Trump Administration’s Zero Tariff Goal

Posted on September 5, 2018

The Committee on health education, labor and pensions will please come to order. Senator Murray and I will have an opening statement, then we'll hear from our witnesses. And then we look forward to questions and conversations between senators and witnesses. There's a lot going on in the Senate today, so there are people becoming in and out, but this is an interesting topic and we look forward to it.

President Trump has set as a goal, zero tariffs. He said at the G-7 meeting, "no tariffs, no barriers." That's the way it should be. And at a meeting a few weeks later with the president of the European Commission, they said, “We agreed to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies."

Today is an opportunity to make the case why zero tariffs are good for the US auto worker. And I'll be using the impact of an essentially zero tariff agreement, the North American Free Trade Agreement, on the Tennessee auto worker to make my part of that case.

Let me begin with the story of the Rogue. Rogue is a Nissan vehicle. It's very popular in the United States. It's an SUV, a small SUV. A few years ago, Nissan internally had a competition to see where to build it, whether in South Korea or Japan or the United States, and the Nissan Plant in Smyrna, Tennessee, which employs 8,400 people, won that competition. As a result, all of the Rogues sold in the United States today are built in Tennessee. A major reason why Nissan was able to put the plant in Tennessee and win that competition with South Korea and Japan was because of the North American Free Trade Agreement and it's essentially zero tariff policies.

Nissan is able to move parts and even cars back and forth across the North American borders in order to make a car competitively, one that is low enough cost, high enough quality to compete in the marketplace.

It has not always been true that U.S. automakers have been able to build a car competitively. If one reads David Halberstam's book in 1979, The Reckoning, he talks about how the Midwestern auto plants, which was most of our auto plants then, were growing not competitive with European and Japanese cars and were losing the market. What has happened since then is pretty remarkable, and it's especially remarkable in our state. We use this story as an example. Forty years ago, I walked across Tennessee to campaign for governor, spending the night with people along the way.

One family I stayed with was the Knight family outside Murfreesboro, Tennessee, south of Nashville. Lillian Knight told me she was sad because she had twin sons, high school students. She said they're very smart, but they'll never get a job around here and I'll never see my grandchildren. Well, two years ago, one of those twins, Randy, a step down as the CEO of Smyrna's Nissan Plant, which employs 8,400 people.

Since that time, we've added the General Motors plant, the Volkswagen plant, and 1000 suppliers. Auto suppliers are now in 88 of our 95 counties, and are one third of our manufacturing workers. One out of 15 vehicles made in the United States is now made in Tennessee, and none were 40 years ago. So it's important to us what happens in the auto industry. And much of all the good that I just described has happened since 1994 when NAFTA and its gradual move towards zero tariffs in North America went into effect. Tennessee auto jobs have nearly doubled since 1994. National auto jobs have doubled since 2010. It's true that many auto jobs were lost in the Midwest, about 3.6 million since 1994. But on the other hand, about 3.6 million jobs were gained in the Southeastern United States. So the United States is producing about the same number of cars today than it did when NAFTA was signed.

Half the cars, nearly, according to the Global Automakers Alliance, are built by so called foreign owned cars who make in the United States what they sell in the United States, like the Rogue. And the practical effect is that in our state it meant family incomes have gone up as jobs which paid less are being replaced by auto jobs, which pay more.

Here's what President Trump said at the G-7 summit in June: "no tariffs, no barriers, that's the way it ought to be." And then later in July, with the European Commission president, they said, "We agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. One of our witnesses, Steven Moore, wrote in a piece for the Washington Times in July, "Zero tariffs would be the ultimate victory for totally free and fair trade. It would advantage the United States most because we already imposed the lowest trade barriers. Zero tariffs, in my view, are the right goal. Piling tariffs on top of tariffs, in my view, are the wrong goal."

You don't have to be a math professor to figure that out. Nissan says it's 70 percent of the weight of the vehicles that it makes in Tennessee and Mississippi are steal. The cost of steel is up since January by 40 percent, according to Steel Benchmark. That means a several thousand dollar increase in the cost of a rogue made in Smyrna. Or you can look at President Bush's experience with steel tariffs. He found out pretty quickly that while they are about 139,000 people, that's today's number, producing steel in the United States. There are 17 million Americans working in industries that use steel. And he abandoned his steel tariffs because after about a year they had destroyed more jobs in the steel-using industry than exists existed then in the steel-producing industry.

We see the same thing in Tennessee.  Electrolux, an appliance manufacturer, has canceled a $250 million dollar expansion because of the new high cost of steel, even though they buy all their steel in the U.S. You import steel, put a tax on it, and everybody else raises their prices too. Same with Bush Brothers, who can beans, about third of all the beans in the United States. They estimate their revenues to go down eight percent because of the higher cost of steel. Same with Bridgestone. They buy steel cord for tires. None of that is made in the United States, so they have to pay higher price for important steel.  There are 38,000 waivers at the Department of Commerce from people who would like not to pay the higher tax on steel that's imported.

The zero tariff goal also keeps us from talking about what I consider to be the wrong goal when we talk about trade. And that is to focus on the trade deficit, which really is irrelevant to this discussion.

For example, look at the North American Free Trade Agreement. One of the sticking points still is dairy between Canada and the United States. The problem is not a trade deficit. The United States has a trade surplus with Canada on dairy, a pretty big one. The problem is Canada does not do for us what we do for them. Reciprocity, or a lack of it, is the problem.

Also, the trade deficit is not a good focus because Mexico, for example, spends about a quarter of its entire wealth buying stuff from the United States. The United States spends one fifth of one percent of what our GDP is buying stuff from Mexico. So the focus, and a zero tariff places this focused properly, should be on reciprocity -- is the other country doing for us what we do for them? So we hope to learn today from distinguished witnesses, what the impact of a zero tariff policy will be on U.S. auto workers. What can we learn about the goal the president has talked about and what will the impact be?