Photo by Gage Skidmore on Flickr and licensed under CC BY-SA 2.0

Senator Pat Toomey (R-Pa.) is introducing a Motion to Instruct Senate conferees to include provisions that would offer American businesses and consumers relief from Section 301 tariffs. Senator Toomey is offering this MTI as part of the conference committee to resolve differences between the House-passed America COMPETES Act and the Senate passed US Innovation and Competition Act (USICA.)  

Americans for Tax Reform supports the MTI and urges all Senators to support it as a common sense measure that reduces the tax burden on American trade.

Currently, the Biden administration imposes an extra 16 percent, on average, tariff increase on $506 billion in imports from China. These tariffs stem from the 2018 use of Section 301 of the Trade Act of 1974 that authorized President Trump to use the tariffs to counter China’s use of forced technology transfer and intellectual property theft. In recognition of the damage these tariffs could cause to American businesses, the Trump administration rightly enacted a targeted exclusion process to alleviate the economic damage.

Businesses could receive an exclusion based on a number of simple factors:

  • If failure to grant the exclusion would result in severe economic harm to a U.S. business
  • If there is no reasonable substitute commercially or domestically available
  • If the imposition of the duty would have an unreasonable impact on manufacturing output in the U.S

Unfortunately, the Biden administration has allowed this exclusion process to lapse, causing market uncertainty and economic harm across the economy which in turn has contributed to inflation. In fact, the Peterson Institute for International Economics estimates modest trade liberalization that includes reducing tariffs and reinstating the exclusion process would curb inflationary expectations and save Americans $797 per household.

The purpose of the Section 301 tariffs, to combat China’s unfair trade practices, should remain a paramount objective of American trade policy. By implementing a transparent and predictable tariff exclusion process Congress acknowledges limitations to a heavy-handed intervention.

This is recognized by the U.S. Trade Representative. In its annual report to Congress covering China’s WTO compliance it admits that after four years of Section 301 tariffs and a corresponding Phase 1 deal “fundamental problems persist” including China’s “state-led, non-market policies” and “use of illicit means to secure foreign intellectual property.” To make progress on curbing China’s unfair trade practices the Biden administration must explore other strategies rather than continue tariffs on imports that can’t be substituted and hasn’t demonstrated an intended effect on China.

There is strong support for reinstating a Sec.301 exclusion process from both Democrats and Republicans in the House and the Senate.

In January, 140 members of the House of representatives wrote to the U.S. Trade Representative Katherine Tai stating that restarting the exclusion process is “a critical component of a worker-centric trade agenda, given that many Americans work in industries that are struggling to adjust their supply chains while remaining competitive with global competitors and adapting to the pandemic that continues to threaten their lives and livelihoods.”

In February, 41 members of the Senate wrote to the U.S. Trade Representative urging a comprehensive exclusion process would “allow the United States to continue to maintain pressure on China, while providing relief to the economic pain facing businesses and workers across the country.”

Finally, the Senate passed Competes Act included an amendment led by the Ranking Member of the Senate Finance Committee Senator Mike Crapo (R-Idaho) and Senate Finance Committee Chair Senator Ron Wyden (D-Oregon) to reinstate the 301-exclusion process. The amendment passed 91-4 to be added into the Senate USICA bill.

Passing Senator Toomey’s MTI signals to conferees that a final version of the bill should include reinstating an exclusions process. Americans for Tax Reform applauds Senator Toomey’s leadership on this issue and urges Senators to support this MTI.