▶ 0:18:24Chair Crapo: This morning we had a hearing on a very important issue with regard to our critical supply chains, and I appreciate our witnesses being here with us to share your wisdom. We will introduce you after opening remarks. Trade has the ability to increase productivity, incomes, and the availability of goods.
▶ 0:18:48Chair Crapo: While we talk often about how increasing the supply of choice of goods that come from international trade benefit our consumers we forget that it also benefits our producers. Majority of what we import each year is reinvested into more manufacturing, processing, and farming activity. Efficient and reliable supply chains help american businesses, farmers and workers expand production and focus resources on the high-value aspects of industry.
▶ 0:19:19Chair Crapo: This is the issue we must be wary about, when supply chains turn unreliable particularly because they are controlled by countries that refuse to follow free-market rules such as china. China continues its march towards expanding control over key resources and goods and thus over the world's supply chains.
▶ 0:19:42Chair Crapo: For example, semiconductors increasingly rely on a rare earth mineral. 99% of which comes from china. This is not an isolated case where china has dominance over a strategic resource. China controls over 90% of global processing for rare earths and 70% for cobalt, used in batteries for electric cars, smartphones, and other components.
▶ 0:20:10Chair Crapo: The way that china uses trade and invest and to expand the control over resources outside its own borders is particularly concerning. Indonesia has 40% of the reserves for a nickel. The largest of any single country. And yet chinese firms control 75% of indonesia's nickel refining capacity.
▶ 0:20:33Chair Crapo: We need to take a hard look at the reality of our situation and develop a strategy to counter china. Our domestic policies are at fault in some instances. There are things that we can produce efficiency but they are burdensome -- but burdensome and unnecessary regulations stalls the development of those projects.
▶ 0:20:54Chair Crapo: We should not have to learn from another economic shock like the oil embargo of the 1970's to realize where we have the resources and potential for investment that must be unleashed. Both sides of the aisle agree that we need a strong semiconductor industry. In asia, new semiconductor fabs are being built and deployed in under three years.
▶ 0:21:19Chair Crapo: In the united states a semiconductor chemistry, one of the safest manufacturing sectors for workers must contend with a myriad of measures that provide only marginal if any benefit. And these permits guarantee increased delays and costs, often adding years to projects.
▶ 0:21:37Chair Crapo: As a part of its economic policy, the trump administration has prioritized the regulation as a way to drive economic growth and I look forward to working with them to rationalize our regulatory system. In many other cases, geography or geology does not provide the united states with the natural resources we require. Here the fault rests with the failure to develop an affirmative trade policy.
▶ 0:22:06Chair Crapo: An affirmative trade policy ensures that consumers and manufacturers has access to the resources that we need to be secure and independent. The trump administration was correct to exempt canadian potash, a key nutrient for corn and soy farmers from recent tariffs. Another key to the economic approach is to renegotiate global trade deals. Including deals that reclaim america's lead over china.
▶ 0:22:37Chair Crapo: Critically these deals will be particularly useful in strengthening supply chains. If they improve market access opportunities. Our trading partners must respect american investment and afford it the same treatment given their own companies. Our partners must realize it bolsters their security when they do not inhibit access to cutting-edge american technology like our state-of-the-art medical devices.
▶ 0:23:07Chair Crapo: Unfortunately, a number of trading partners use price controls, technology theft, or unreasonable government procurement policies to keep these devices out of market. Such actions only mine -- undermine the health of their own citizens while leaving a strategic opening for china. Today we have an opportunity to consider these issues carefully. Our four witnesses are experts on industries critical to economic security.
▶ 0:23:36Chair Crapo: We should encourage thoughtful debate on how to advance a trade policy that strengthens the security of our supply chains and creates opportunities for all americans. I would like to turn to senator wyden for his remarks.
▶ 0:23:50Sen. Wyden: Thank you very much. Our committee is back again to ss donald trump's trade policy and I'd like to say it is not exactly a command performance. Our country is stuck in an endless trade cycle that donald trump has no idea how to escape. What happens is donald trump makes big threats, and then he imposes massive tariffs.
▶ 0:24:21Sen. Wyden: And then after there is a huge outcry from american farmers, investors, and families, he caves in. And that starts the chaos all over again, having accomplished virtually nothing, except damaging american's sacred credibility. All of this thrashing around, we are still worse off today than we were before donald trump took office.
▶ 0:24:50Sen. Wyden: This was documented this morning in several articles. Prices are higher. Supply chains are in desolate -- disarray. And nobody can feel very confident about the rules in three months, or what markets will still be slammed to our exporters. So, just for a moment I will reflect on the much ballyhooed trade deal that donald trump announced with china.
▶ 0:25:21Sen. Wyden: After lots of bluster, the end result that donald trump has put an additional 30% tax on everything americans buy from china. That is still one of the biggest tax increases on working families ever enacted. In return, donald trump got a promise to have more talks, sometime in the future. In other words, america got nothing.
▶ 0:25:49Sen. Wyden: Meanwhile, real people have been harmed by the game of chicken. Tariffs are threatening supply chains for all kinds of essential industries including health care. When the supply chain for medicine fails, people are going to die. Our farmers and ranchers, who absolutely have to sell the egg products overseas have been having trouble finding ships to take their crops.
▶ 0:26:18Sen. Wyden: The port of portland in my home state saw a 51% decrease in experts -- in exports according to statistics just release. And I know that senator cantwell, one of our trade experts, is very concerned about this. The port of tacoma is a major hub for sending soybeans to asia. They have seen 28% decrease according to recent statistics.
▶ 0:26:45Sen. Wyden: It is ironic that some of the companies that invested the most heavily in their north america supply chains have been hit the hardest by the trump trade chaos. U.S. automakers say the fumbling will cost them billions of dollars this year alone and raise car prices for consumers. Ford predicts $1.5 billion in losses. Gm predicts $5 billion in losses.
▶ 0:27:12Sen. Wyden: Toyota, which employs more than 60,000 people in america forecasts 20% of its revenue is going to evaporate. It is only a matter of time before companies start to cut jobs. The latest estimate is that china is not going to do a thing to reverse the damage that donald trump caused to the auto industry. In fact the deal with the united kingdom might make things worse.
▶ 0:27:41Sen. Wyden: Donald trump gave a massive gift to british car companies by setting their tariff to 10% compared to 25% for canadian autos and parts. He justified it because rolled -- rolls-royce and bentley's are super luxury. So donald trump means less taxes on cars for the ultra-wealthy and higher taxes on cars that working families drive here in america.
▶ 0:28:11Sen. Wyden: I voted for the bipartisan U.S.-mexico-canada trade agreement because in this room, colleagues, democrats and republicans worked together for months to put together a bipartisan proposal. We were able and I think senator crapo remembers this, we won the votes of senators who had never voted for a trade agreement because we put in all of that time to work together.
▶ 0:28:41Sen. Wyden: So it shows that you can make progress in a bipartisan way if you want to. The only option on offer is tariffs. They are causing price hikes for cars, electronics, and warnings of possible toilet paper shortages and medical device manufacturing right now. All over the world, those who have been reliable trading partners with our country are saying not anymore. He is making the supply chain more reliance on china.
▶ 0:29:11Sen. Wyden: So, to make progress on trade and manufacturing, this committee worked extensively on the chips legislation and clean energy. Donald trump is breaking that model and hitting people with more costs that make manufacturing in america harder. We passed to we passed tax credits for made in america for the factories that will make products right here in america.
▶ 0:29:39Sen. Wyden: As of this morning, the trump administration is in the process of tearing that down. Donald trump's cuts to research and science funding are huge and it hurts mastic manufacturing and threatens industries like semiconductors and the development of new medical treatments.
▶ 0:29:58Sen. Wyden: I look forward to our witnesses this morning and, what I want to know more than anything is your ideas for getting america off of this merry-go-round with respect to trade. It starts with threats and goes forward with the steps I outline. Let us get off that merry-go-round. Thank you.
▶ 0:30:17Chair Crapo: Thank you, I would just date that I just checked and the stocks are higher today again and the s&p climbed .2% already and has now advanced into the green for the entire year. And the fact is that we are starting to see renewed interest in taking down trade barriers and opening up more access for trade.
▶ 0:30:41Sen. Wyden: I will not belabor this, Mr. chairman. I will just say that there were several articles this morning that described how we are in many times worse shape today than we were on day one of the trump administration. And I would ask unanimous consent that I would put that set of articles in the record.
▶ 0:31:03Chair Crapo: Without objection. And maybe we will add some others as well. Thank you very much. We both look very much forward to the testimony that our witnesses will provide. These issues are critical to republican and democrat members on many levels. And I think our witness -- thank our witnesses for being here. Our witnesses will be scott whitaker, Dr.
▶ 0:31:32Chair Crapo: Gracelin baskaran , the director of critical minerals security program at the center for strategic and international studies. David issacs, vice president for government affairs at the semiconductor industry association. An caleb ragland, president of the american soybean association.
▶ 0:31:58Chair Crapo: Please follow your five-minute clock in front of you as you make your statement so we can have opportunities to interact. And we will begin with Mr. whitaker.
▶ 0:32:07Mr. Whitaker: Chairman, ranking member, thank you for the opportunity to testify before this committee on such an important topic. I am the president and ceo of advamed. We represent the industry that invents, and you factures and distributes technologies to every hospital, health clinic and doctors office in america.
▶ 0:32:32Mr. Whitaker: We are an american success story and the global superpower of medical innovation. Think about the industry this way, the diagnostic test, x-ray, cat scan and the ultrasound, heart valves and heart pumps, cardiac monitors. Stints, pacemakers, the artificial hip, knee, and shoulder. The insulin pump and the continuation -- continuous glucose monitor color -- monitor.
▶ 0:33:03Mr. Whitaker: Surgery can used for 77,000 procedures and now the imaging exam powered by ai, which according to a recent study proved rest cancer detection by more than 29%. These are the products and many more that the industry and you factures. And I suspect everyone in this room has had direct experience with one or more of these lifesaving technologies.
▶ 0:33:28Mr. Whitaker: As we think about trade policy and supply chains, it is essential that this industry is protected for humanitarian reasons as it historically has been. To be clear, we applaud efforts to bring more manufacturing back to the united states and fix the existing trade imbalances. The reality is that up to 70% of med tech used in america is already made in america. Supporting 3 million jobs across the country, and that is growing every day.
▶ 0:33:59Mr. Whitaker: The U.S. is the largest med tech market in the world accounting for 40% of global sales. It is unquestionably the global leader in innovation. If there is a breakthrough, chances are it was developed right here. Tariff policy, if deployed in the wrong way could put all of that risk and here is why. Med tech products are mandatory and not optional. They can mean the difference between life and death, which is why they are highly regulated, as they should be.
▶ 0:34:31Mr. Whitaker: Shifting operations is a multi-year effort ringing regulatory requirements not seen in other industries. While the supply chains or other industries are important to the economy and the consumers, most do not have the same impact that we have on human lives. Secondly, ours is a mostly fixed reimbursement environment. Medical technologies are purchased through multi-year contest -- contracts making cost spikes difficult to adjust to.
▶ 0:35:01Mr. Whitaker: Customers are medicare, medicaid and the v.a., federal programs. Any revenues could be offset by higher prices, and increasing cost of federal programs seems to be counterproductive. Currently, med tech represents only 5% of health care spending in the united states. It has historically been deflationary. A pacemaker ingested for inflation costs 20% less today than it did 10 years ago. That is fairly typical.
▶ 0:35:34Mr. Whitaker: Finally, the medical supply chain for med tech is highly complex. Many products contain several hundred parts from multiple countries and multiple regions around the world. Let me give you an example. A U.S. company purchased a foreign company with the intent of moving its operations to the united states. Why?
▶ 0:35:57Mr. Whitaker: Because this company manufactures two critical neonatal products that respectively supply 50% and 70% of american nicu's with these product -- with this product. That move will take three to five years to implement. In the meantime, tariffs, if wrongly implemented, will threaten that plan. As a result they could put nicu's in a very difficult position. That is not a risk worth taking.
▶ 0:36:27Mr. Whitaker: Let me conclude by saying this, we appreciate the president's 90 day pause and we are encouraged by his most recent announcements on china as well. We believe that for the med tech industry, to continue delivering to patients requires maximum tariff flexibility. We are asking for products treated with a reciprocal 040 model and -- 0 for 0 model in each of the negotiations.
▶ 0:36:59Mr. Whitaker: Historically this has been the place that med tech has landed. We stand ready to work with you, with the president, and this administration to move forward to support this and continue to be the growing and vibrant american presence that it has always been. Thank you for the time and I look forward to your questions.
▶ 0:37:16Chair Crapo: Thank you. We will go with Dr. baskaraa we will go with Dr. baskaran.
▶ 0:37:23Dr. Baskaran: Chairman, ranking member and members of the committee I am honored to share my views with you today. I am the director of the critical minerals security program and I have spent the last 12 years working on critical minerals policy in the U.S. and abroad. It is no secret that the U.S. faces a severe labral of vulnerability and the access to minerals that underpin economic and energy security.
▶ 0:37:50Dr. Baskaran: China's stands as a lead producer of 30 of 50 critical minerals we have identified. China did not achieve this position alone. It drove this position and emerged as a key producer of the supply chains by leveraging trade.
▶ 0:38:08Dr. Baskaran: Despite producing 10% of the lithium, cobalt, nickel, and copper, china imports minerals and controls processing at the level of 65 to 90% of key supply chains. This level of control is a direct product of targeted foreign policy to secure minerals, trade policy and domestic industrial strategy to bring them home. The question is what should the U.S. do? We are operating on the back foot.
▶ 0:38:39Dr. Baskaran: While ramping up domestic production is of utmost importance the uncomfortable truth is that we will not do this alone and this is not just because of a political will problem but also geology. The united states holds less than 1% of nickel, graphite and cobalt. We have 1.3% of the world's rare earth. The U.S.
▶ 0:39:00Dr. Baskaran: Has to lead a coalition utilizing trade agreements, coordinating investment, sharing resources and driving partnerships and product session partners see -- and partnering. The U.S. possesses an arsenal of tools so here are six quick recommendations. First, the U.S. should take a pragmatic approach to determining which countries are allies.
▶ 0:39:25Dr. Baskaran: One challenge of the inflation reduction act provision was the friend shoring component in determining who is an ally. Under the provision minerals had to be sourced from the U.S. or a country we had a free-trade agreement with. While intended to boost production for doug -- the guideline sidelined key allies and resource rich countries like argentina brazil indonesia and vietnam and zambia.
▶ 0:39:52Dr. Baskaran: Despite china imposing rare earth restrictions for brazil and vietnam have more rare earth together than all of china's reserves and yet neither country was eligible for the proof -- for the provision and we need to source partnerships with countries that high mineral processing ambitions because we will not become a processing leader immediately. Countries like japan, australia, canada and saudi arabia will be critical.
▶ 0:40:21Dr. Baskaran: Ronald reagan once said if you want more of something, subsidize it. And if you want less, tax it. The united states needs more minerals urgently. There are two things we need to consider. Tariffs undermined a nascent processing sector. We will need to source beef stock from countries around the world to bring them back home but processing -- processing operates on razor thin margins. By increasing the cost we undermine the competitiveness of an early industry.
▶ 0:40:52Dr. Baskaran: The second thing is trade diversion even a process minerals for things like zinc, germanium and gallium, we rely on canada. By putting a tariff a tech ceo said they look to ship from the U.S. to asia. The next thing we need to look at is integrating U.S. offtake into U.S. financing.
▶ 0:41:14Dr. Baskaran: Where we are leveraging things in financing we could take a page out of the japanese playbook to ensure that a portion of offtake comes back to auto manufacturers and semiconductor manufacturers and other energy industries and defense. The next thing is prioritizing vertical integration. One of the big challenges financing early-stage mining projects is that ends back in chinese hands. The recent example is in brazil that is backed by the U.S.
▶ 0:41:43Dr. Baskaran: Led enteral security partnership that announced that offtake will go back to china. This is only strengthening china's dominance. Considering vertical integration from the beginning is critical. Finally, we need to ensure that we are investing in infrastructure and ecosystem. It is not just about building a mine but about road and rail and strategic partnerships that ensure that western companies retain access.
▶ 0:42:15Dr. Baskaran: Ultimately, it will be a whole government approach and require a full toolkit to build these partnerships. Thank you for giving me the opportunity and I look forward to questions.
▶ 0:42:23Chair Crapo: Thank you for those recommendations. Mr. isaacs.
▶ 0:42:28Mr. Issacs: Thank you chairman and senator and members of the committee. I am with the semiconductor industry association. As this committee well knows, semiconductors are a key enabler of the technologies of the future, driving our economy and national security from ai and advanced computing to medical technologies. Unfortunately, semiconductor -- fortunately, semiconductor companies are leaders.
▶ 0:42:58Mr. Issacs: This is timely because a strong supply chain is essential to our industry's ability to compete. The supply is highly complex consisting of thousands of specialized suppliers for research, design, manufacturing. Together, the supply chain allows us to bring advanced technology to the market that pushes the boundaries of physics and delivers every level of performance.
▶ 0:43:28Mr. Issacs: So, a resilient supply chain is critical to our competitiveness and innovation. And our ability to leverage the global supply chain is itself a competitive advantage for the U.S. industry. One way that we can make the supply chain more resilient is by revitalizing the chip ecosystem right here in the united states. Fortunately, we are making enormous strides through massive investments.
▶ 0:43:56Mr. Issacs: The industry has announced investments of over $540 billion in dozens of projects in 28 states around the country. And this is in the entire ecosystem, application, equipment and materials. These facilities are making the country stronger and growing our economy and making our supply chain more resilient. To sustain and continue these investments in the supply chain, it is critical that we have access to global markets.
▶ 0:44:28Mr. Issacs: Over 70 percent of sales are overseas, and we need that revenue to maintain market and technology leadership. Our industry is enormously research and capital-intensive. Approximately 20% of our revenue is put back into research and the costs are huge. A leading edge memory or logic fab can cost 20 to $30 billion.
▶ 0:44:57Mr. Issacs: So, having the ability to sell globally help sustain the high levels of investment. So, as we look on the horizon, wrongly implemented tariffs can create risks for our ability to have and conduct business overseas. We share the goal of the trump administration to rebalance trade relationships and build the supply chain in the U.S..
▶ 0:45:24Mr. Issacs: But, we fear that broad-based tariffs could increase the cost of critical inputs in american manufacturing and therefore weaken the competitiveness of the U.S. industry. To avoid this outcome we call for more targeted and strategic policy. And I am happy to discuss that further. We believe strongly that these targeted tariffs should be accompanied by a progrowth, pro-innovation policy agenda to ensure that the U.S.
▶ 0:45:53Mr. Issacs: Is the best destination for research, design and manufacturing. We believe there are five primary components to such a strategy. First as part of the tax bill, a highly successful advanced manufacturing investment credit should be extended in duration and strengthened and increased to 35% and expanded to include ship research and design.
▶ 0:46:21Mr. Issacs: Second, we need to continue to invest and increase investments in research, the foundation of our innovation and also trains the next generation of scientists and engineers. Third, workforce development is key and that means stem education and training workers in the united states while at the same time enabling us to attract high skilled foreign nationals.
▶ 0:46:49Mr. Issacs: Fourth, we need smart regulation to ensure that these facilities get up and running as soon as possible. Finally, we need a trade policy that increases access to growing markets. Among other things we believe a sectoral agreement can be used in semiconductors to grow markets, increase demand for chips designed and manufactured in the U.S..
▶ 0:47:15Mr. Issacs: We believe such a pro investment and pro-innovation strategy will secure the supply chain, maintain technology leadership and grow the economy and keep america on top. Thank you very much.
▶ 0:47:27Chair Crapo: Thank you. Mr. ragland.
▶ 0:47:32Mr. Ragland: Good morning distinguished members of the senate finance committee. It is an honor to join you to testify on but have of the american soybean association regarding trade and critical supply chains. My name is caleb ragland and I am a ninth generation soybean farmer from kentucky and I serve as president of asa which represents U.S. soybean farmers across 30 producing states.
▶ 0:48:02Mr. Ragland: Soybeans are the largest agriculture exports in the U.S. and robust international trade is a top priority. Opening new markets is not simple it requires time, attention, and long-term relationship maintenance to ensure that once open to exports, market access remains unhindered. China is the largest market for all, importing 60% of global soybean trade. Its importance to U.S.
▶ 0:48:31Mr. Ragland: Soybean farmers cannot be overstated. Last marketing year, 54% of soybean expert -- exports went to china, according for $13 billion in value for U.S. partners. By comparison, our next two largest markets, that you and met --the e.u. And mexico.
▶ 0:49:01Mr. Ragland: The effective retaliatory act -- tariffs are never out of mind. China applied regulatory duties against U.S. soybeans that reached up to 30.5%. These severely constrained our exports to china. According to estimates from the usda economic research service, soybean exports decreased in value by 76% from 2017 until 2018. Ers estimated that the trade war costs U.S.
▶ 0:49:31Mr. Ragland: Agriculture over $27 million. Soybeans accounted for 71% of those losses. I want to emphasize that the U.S. soybean industry is dealing with long-term negative impacts from the last trade war. Now the farmers are facing another trade war, one that could dwarf the pain of 2018. Since february, there been multiple rounds of tariffs imposed on our global trading partners. A 20% duty was levied on chinese goods into the U.S. in march.
▶ 0:50:02Mr. Ragland: China responded with 10% retaliatory duty on U.S. soybeans. This ochoa nation continue to escalate -- situation continue to test of -- the escalate until both countries decided to negotiate. Today the total duty is 34%. This includes a retaliatory duty of 10%, the new baseline 10% rate plus the most favored nation rate and china's value added tax.
▶ 0:50:31Mr. Ragland: While this is a step in the right direction, U.S. soybeans are still facing a duty, nearly equal to the height of the 2018 trade war. If the retaliatory tariffs return or escalate after the pause, we can expect to see futures prices to client significantly as early as this summer. At the same time, the two largest trading partners, th e.u.
▶ 0:50:58Mr. Ragland: In canada have threatened to retaliate. Farmers depend on exports but we are reliant on the imports for critical farm inputs. The current tariff situation is complicating this matter. For example, the U.S. relies on canada for 87% of our potash supply and siege and agriculture are subject to U.S. import duties. I must emphasize that the farm economy is in a dire situation.
▶ 0:51:30Mr. Ragland: Commodity prices are down 50% from three years ago and farmers are facing elevated prices for land, seeds, fertilizer, and pesticides. As the administration negotiates to reduce barriers and address reciprocal trade issues, we encourage this committee to press the white house on the importance of market asset for -- market access.
▶ 0:51:52Mr. Ragland: I include a specific ask of our industry including a strong plea to copper this -- to couple this strategy with swift negotiations to reduce tariffs and remove market barriers. Tit-for-tat trade wars are not beneficial and U.S. agriculture cannot afford them. Thank you again for this opportunity to testify on behalf of U.S. soybean farmers regarding the importance of global trade and the impact of tariffs on our industry. Asa appreciates the work ahead of the committee.
▶ 0:52:23Mr. Ragland: I am grateful for the opportunity to share the perspective of U.S. soybean farmers and I look forward to your questions.
▶ 0:52:33Chair Crapo: I think all of the witnesses for providing insights and you will get an opportunity to engage with members of the senate. We might want to communicate with you as we move forward in developing necessary policies that we should pursue. I would like to talk with you first, you mentioned in your statement a tax item that we should consider. And we are working on that right now.
▶ 0:53:00Chair Crapo: You were referring to the advanced manufacturing tax credit and you mentioned it should be extended but expanded to include chips. Could you elaborate?
▶ 0:53:08Mr. Issacs: Yes. While it is vitally important to continue to rebuild our manufacturing capability is in the united states and we are still seeing the results from the current tax credit in achieving those goals, it is important that we maintain our technology leadership. And the U.S.
▶ 0:53:29Mr. Issacs: Is the traditional leader in chip design and yet other countries are directing incentives to displace U.S. leadership. And right now the U.S. is the only leading nation that lacks a direct incentive for chip design.
▶ 0:53:52Mr. Issacs: So we believe the tax credit can help attract investment and spur employment to make sure that this high-value design activity is conducted in the U.S. and we maintain that first mover advantage.
▶ 0:54:04Chair Crapo: Are chips already included in the current provision or do they need to be added?
▶ 0:54:10Mr. Issacs: It would need to be added.
▶ 0:54:12Chair Crapo: Thank you. And you referenced in your testimony the ira and difficulties in the way that the ira is administered with certain products. You explain that better to me?
▶ 0:54:27Dr. Baskaran: Of course. The provision that gives us a tax credit for $7,500 is split by minerals that are processed in the united states or a country with a free-trade agreement with. Every year the threshold of minerals that has to be sourced to meet that requirement grows from 50% to 70%. Geology did not follow along a historical trade agreement.
▶ 0:54:54Dr. Baskaran: Many of the minerals we need are outside of countries that we have a free-trade agreement with. When we look at africa which has 50% of the world's cobalt, palladium, platinum, chromium and reserves of lithium, there is only one country that we have a free-trade agreement with and it is morocco. What happens is that every -- any incentive is a disincentive.
▶ 0:55:18Dr. Baskaran: That means that countries with a -- that do not have a free-trade agreement with they are less competitive and we are less likely to spur investment. The problem is that china has made progress in emerging markets in sourcing offtake agreements that are now feeding into chinese processing. If we want to create a competitive regime we need to extend that incentive or extend a new incentive into non-fda countries.
▶ 0:55:45Chair Crapo: Thank you. We might want to get back with you on how to accomplish that end how to revise that. I appreciate you highlighting that. Mr. whitaker, the american med tech industry is a major driver of economic growth and job creation. However, this is a highly regulated industry. It is not easy to move manufacturing. As you indicated in your testimony.
▶ 0:56:14Chair Crapo: Some of the manufacturing entails low value products that do not generate significant returns. How can we help identify what parts of the supply chain are essential to near shore and what part should benefit from tariff relief?
▶ 0:56:29Mr. Whitaker: We source things from all over the country and the world as well. From plastics to rubbers to tongue skin -- the tungsten, the list goes on. So having open markets without tariffs makes it easy import back into this and finish those products and settle down for hospitals to the united states.
▶ 0:56:54Mr. Whitaker: The tariff barrier, the current tariff barrier is the biggest challenge we have faced in a long time relative to accessing all of the component parts we need to finish the products and provide them to hospitals.
▶ 0:57:06Chair Crapo: Thank you. I would like to go back to you very quickly for the last 30 seconds that I have. You indicated that you had some ideas on how the tariff policy could be better targeted in your were. Could you give us 30 seconds on that?
▶ 0:57:27Mr. Issacs: Thank you. We believe any terror should be targeted to either specific product categories for countries of concern, and we certainly think there should be appropriate exemptions for critical input so they do not inadvertently raise our costs. There should be phased-in processes to allow the supply chain to adjust over time, and things like that.
▶ 0:57:51Chair Crapo: Thank you very much.
▶ 0:57:53Sen. Wyden: Thank you very much, Mr. chairman. It has been a good panel and I will start with you Mr. ragland and I appreciate your thoughtful work in the soybean area and you have been very helpful. This morning it was released by researchers that since the inauguration that the trump administration officials have announced new or revised tariff policies, more than 50 times.
▶ 0:58:22Sen. Wyden: And one research analysis said it was 50 times and one said it was 55. But the fact is that it is something that has been again and again happening. What does that mean for agriculture and soybeans. It seems to me that I met with farmers in eastern oregon and more than anything they said we want predictability and some certainty. Give us that, whatever else you guys do and who knows what goes on, give us predictability.
▶ 0:58:53Sen. Wyden: What happens when you change your mind 50 times?
▶ 0:58:56Mr. Ragland: It gives our customers uncertainty and gives them a reason to look for other sources that are more dependable. When we have established these long-term relationships and with china for example, we have been working there since 1982 to establish that relationship and with a stroke of a pen we can damage that severely. Before the first trade war, one of three rows of soybeans went to china and last year it was one out of four.
▶ 0:59:27Mr. Ragland: It can go down significantly quickly and hurt the economic opportunities for our farmers. We are struggling already in a trade -- and a trade war adds severe pain to the farmers, not just soybeans. Exports are over half of our total production. We do not need to give our customers an excuse to go to brazil. Brazil has overtaken us.
▶ 0:59:50Sen. Wyden: I hope my colleagues heard that, that these incredibly flawed trade policies are driving customers that would look at the united states to brazil. Please continue.
▶ 1:00:00Mr. Ragland: Approximately 90 million acres of soybeans are grown in the you are -- in the U.S.. Priscilla has the potential to add up to 200 -- brazil has the potential of 270 more million acres in pastor right now. There is nearly unlimited opportunity. If we give excuses for customers to look elsewhere they will and they have.
▶ 1:00:25Mr. Ragland: And, furthermore, china has invested significantly in infrastructure in brazil to help get the product to market. We have better infrastructure but they are gaining on us. This is very concerning for a soybean farmer.
▶ 1:00:41Sen. Wyden: Thank you and we appreciate your leadership. Let me go to you. Republicans in the house voted this morning to repeal the single best tool in the toolbox to incentivize growth in minerals and energy supply chains, the ira tax credits. We wrote them in this room. My thought from the beginning, the technological neutrality feature and the fact that there are no mandates would be a huge success.
▶ 1:01:10Sen. Wyden: I believe that it is still in the markets, but there is no question that the republicans in the house are acting to remove the ira tax credits and trump chaotic tariffs added to the tax credits looks to me like a double whammy against the ability to have these promising new industries and resources in america. What do you think about that and what is your counsel given the fact that you have changes 50 times when you need predictability?
▶ 1:01:39Dr. Baskaran: One of the most important things that we think about building mineral supply alone we will make more but the minerals have to go somewhere. We need a demand signal and the inflation reduction act was an important signal.
▶ 1:01:53Sen. Wyden: Do not give it in the past tense.
▶ 1:01:56Dr. Baskaran: It is important and I want to go to one step fasted because one of the dilemmas with the chips and sciences act is that there was no mineral sourcing provision for the chips in science act, which meant there was no money added -- allocated to sourcing minerals. We remain reliant on china and russia for germanium, poly silicone and these are really critical minerals because there is no incentive.
▶ 1:02:24Dr. Baskaran: The inflation reduction act is critical and stimulated mineral demand. The defense industry is a critical off taker of minerals that it is small. We might build 100 satellites but not 10,000. So for companies to invest in the large-scale, electric vehicles and automotive's will be critical. We should think about expanding and thinking about how we ensure that we have incentives to source for the defense industry and semiconductor industry.
▶ 1:02:52Dr. Baskaran: There is a lot that we can take from the ira being critical and expanding it to source mineral incentives across industries.
▶ 1:02:58Sen. Wyden: One quick question if I can get it in and I thank you Mr. chairman. Donald trump with respect to the chips act said "it is horrible, horrible thing." a lot of members on this committee were involved putting -- in putting this together and he wants to repeal it. Would you like to build on the chips act rather than tear it apart?
▶ 1:03:21Mr. Issacs: Thank you. Absolutely it should be built upon. You know, the chips act, it got initiated during the first trump administration and authorized in the defense bill during his first term. And I think it is wholly consistent with the trump administration policies about revitalizing american manufacturing and growing american technology leadership.
▶ 1:03:48Mr. Issacs: It has proven to be highly successful to date throughout the supply chain and in attracting investment. The numbers speak for themselves. And we need to maintain that momentum through the tax policy that I referenced earlier.
▶ 1:04:02Sen. Wyden: Thank you.
▶ 1:04:03Chair Crapo: Senator grassley.
▶ 1:04:06Sen. Grassley: You're the only one who I missed your testimony on. I apologize, but I was called out to be on omaha radio, and we were talking trade. And I said at least you were here to represent the soybean association of the midwest and the nation. So, I hope I am not repetitive when I ask you questions that the ranking member brought up.
▶ 1:04:37Sen. Grassley: In your testimony you talked about the chinese market for soybeans. You said that 50% of all soybeans exported went to china and the possibility of agreements between the united states and china that one of the key pieces of phase one was the purchasing agreement that china failed to comply with in previous years.
▶ 1:05:01Sen. Grassley: Are the old purchasing agreements under phase one sufficient for the soybean industry today?
▶ 1:05:09Mr. Ragland: Thank you for the question. We need increased trade is the bottom line. That is the lifeblood of american agriculture and american soybean industry. The largest ag import -- export in the U.S.. The phase I one deal with china had wonderful opportunities if compliance and enforcement had taken place, but it did not.
▶ 1:05:37Mr. Ragland: We would like to see a minimum of those volumes return. And we need those desperately. As I stated in my testimony, we have not returned to the pre-2018 trade war levels where over one third of U.S. soybeans were exported to china. The highest we got back to was about 25%. So, we have a lot of room to make up. The main thing is getting the volume back because it has been devastating.
▶ 1:06:09Mr. Ragland: Our prices are similar to what they were pretrade war, but our cost of production is so much higher as inflation has been very difficult on agriculture in general. And we need higher prices, and that is driven by higher demand and trade drives demand and that is what we need. And that is because china is such a large customer that they have all of the poultry and pork. There are more pigs in china than the rest of the world combined.
▶ 1:06:39Mr. Ragland: Their appetite for the soy protein is unlimited and that is why we cannot just replace them with another customer.
▶ 1:06:45Sen. Grassley: I stressed to ambassador greer earlier that while it is important to hold china accountable to their international commitments, the united states must find alternative markets for both imports and exports. Overdependence on any one market leads to less resilient supply chains.
▶ 1:07:07Sen. Grassley: We tend to stress the importance of china, japan, south korea, india, the united kingdom and a few others for a trade but there are 190 other countries that represent market opportunities. What countries besides china should the united states look to as an alternative market for soybeans and soy byproducts?
▶ 1:07:29Mr. Ragland: Senator, we are looking around the world. India is complicated. But the large population makes them a target that we want to look to. There are some other barriers outside of tariffs to do with their business model and production model within the country. We are working our map and sons are very helpful as we develop markets around the world.
▶ 1:07:57Mr. Ragland: We have asked for increased funding as part of our policy to double the funds because they are quickly used up and there is much more demand than supply and that helps us to diversify and grow markets. And we are working. We certainly will not expand and diversify -- we certainly will expand and diversify so we are not dependent on china. But they import more soybeans than the rest of the world combined.
▶ 1:08:25Mr. Ragland: We cannot completely replace them, they will be a major player.
▶ 1:08:30Sen. Grassley: I will yield because you just answered my last question because I was going to ask you the importance of market assets. Thank you very much.
▶ 1:08:39Chair Crapo: Thank you. Senator cantwell.
▶ 1:08:43Sen. Cantwell: I think that the witness is and this hearing has been sobering and also eliminating about what a better path forward is. Sobering because you are talking about the costs that we are still being impacted by I think the first thing to remember is that we are still at a 30% tariff right now on many products. And so that is costing us.
▶ 1:09:07Sen. Cantwell: With all of the happy talk about we decided to pull a gun from the business head related to the 120 5% plus tariffs, the fact remains we have a 30% tariff on products from china. In fact it is higher than that, 50 and 60% on steel and aluminum. The smoot-hawley tariffs which cause a recession were only 20%. Here we are in a world of uncertainty with a 30% tariff.
▶ 1:09:37Sen. Cantwell: Do you know where what -- cal lama washington is?
▶ 1:09:45Mr. Ragland: In the state of washington.
▶ 1:09:47Sen. Cantwell: It is the second largest port for the export of soybeans. So I pay attention to soybeans, I sure do. The fact that the last trump administration trade war, you are at 62% market share in china competing with brazil and he plummeted you down to 18% and somehow you are going to get the chinese to cooperate and they did not. Guess what, you never recovered.
▶ 1:10:16Sen. Cantwell: 52% and you never got back to the 62% high because the trade more as you said in your testimony created habit and uncertainty. -- havoc and uncertainty and all the hard work that you did get markets open you never recovered. Why will we continue the trade war when we know what the results were last time? So now what I am hearing and you are verifying in your testimony, Mr.
▶ 1:10:41Sen. Cantwell: Isaacs, semiconductor costs are up which is the influx of building and manufacturing semiconductors. We worked hard. Senator cornyn and I to get that bill done. We also gave them a nepa exemption. So we do not want those inputs to be more expensive. We do not want motor vehicle parts at 9.3% more expensive and computer and electronics.
▶ 1:11:09Sen. Cantwell: You talked about supply can't -- supply chain chaos and that is the point. I do not think somebody told the president that are supply chain even posed his last administration is so much more integrated today than it was before. And when you cause supply chain chaos as you were saying, it leaves us behind in the foot race when we should be opening up market share.
▶ 1:11:34Sen. Cantwell: How many trade agreements has a world done in the last -- since 2017 and how many of our partners around the globe done? 90. How many did we do, one, we updated the usmca. I represent a very trade dependent part of the united states of america and I support more trade and getting trade deals done. I do not support the disruption and chaos this is causing. So Mr.
▶ 1:12:02Sen. Cantwell: Isaacs, I have a question. First of all, Mr. ragland if we do not get these tariffs off, will we lose farmers and actual farms and farmers in america?
▶ 1:12:15Mr. Ragland: Yes. That is a very harsh reality. The farm economy is struggling. I am a younger farmer. I know farmers that have gone out of business. There are bankruptcies taking place. I know older farmers choosing to leave the industry because of the limited economic opportunity. They do not want to lose what they have worked their whole lives for.
▶ 1:12:39Sen. Wyden: Mr. isaacs, you are saying we should go in the opposite direction and we should build alliances around semiconductor supply chains and development and that that would enhance the united states. Because right now you are saying that serious harm is being cost of the semiconductor industry because of the tariffs?
▶ 1:13:00Mr. Issacs: I think the first option is to build it here and strengthen the U.S. supply chain, but the fact of the matter is that it is a global supply chain. And that is a part of our strength as an industry. Therefore, we should make sure we have secure access to key inputs from a diversity of trading partners around the world. And that is essential to our ability to innovate and compete globally.
▶ 1:13:27Sen. Cantwell: And you are saying we could do this better with a bigger sectorial approach?
▶ 1:13:33Dr. Baskaran: That is --
▶ 1:13:34Mr. Issacs: That is correct.
▶ 1:13:36Chair Crapo: Thank you. Senator cornyn.
▶ 1:13:39Sen. Cornyn: In fairness, I know that our democratic colleagues have been very critical of the trump administration, but I do not remember a single free-trade agreement negotiated during resident biden's term of office. As a matter of fact our democratic colleagues in the former administration were allergic to free-trade negotiations. It was president trump who negotiated the usmca.
▶ 1:14:09Sen. Cornyn: And at least he has been trying to level the playing field for american companies, goods, and services around the world. It is easy to criticize, but the truth is president trump is trying to do what the previous administration failed to do, which is leveled the playing field.
▶ 1:14:33Sen. Cornyn: So, c1 we have focused a lot in the last few years on the advanced semi conductor supply chain. One think over exposed was dependency on foreign supply chains.
▶ 1:15:01Sen. Cornyn: Thanks to the first trump administration, when I remember distinctly mike pompeo and wilbur ross bringing to us this vulnerability and saying we only make 12% of these in the united states and this is a terrible national security and economic risk so we have begun to remedy that. Dr.
▶ 1:15:21Sen. Cornyn: Baskaran, you have talked a little bit about the resources of these critical minerals, but would you distinguish between processing and mining? My understanding is that while you are exactly right, that we do need additional reserves of these critical minerals, china still controls 90% of the process.
▶ 1:15:50Sen. Cornyn: This is an incredible vulnerability for the united states. Do you agree?
▶ 1:15:59Dr. Baskaran: It is an incredible vulnerability.
▶ 1:16:03Sen. Cornyn: Not just economally, but with national security?
▶ 1:16:07Dr. Baskaran: Absolutely. We saw it with the heavy rare earths restriction. We are unable to do that because we don't have those processing capabilities finished. We need to build those capabilities here at home.
▶ 1:16:32Dr. Baskaran: One of the constraints we have is that it is energy intensive and we don't have the energy at scale to be able to cost competitively do that. So while we want to build our processing capabilities given the low off at margins on that segment, we need to work with -- make sure we are working on the other infrastructure barriers.
▶ 1:16:54Dr. Baskaran: To take a page out of china's playbook, we are going to source minerals from abroad to bring them back home for processing or to allied countries.
▶ 1:17:04Sen. Cornyn: I know president trump has not only negotiated a critical minerals deal with ukraine which I think will address a lot of the concerns we have about ask -- about access, but reports are he is negotiating with the drc.
▶ 1:17:26Sen. Cornyn: I was in the drc last august and as you pointed out about the libido corridor, the only opportunity we have to eliminate china's monopoly on these critical minerals. It seems good work is being done in ukraine and africa in providing greater access to the reserves and I take your point that we need to broaden our access.
▶ 1:18:06Sen. Cornyn: If we don't do more on processing, we will still see china with a stranglehold. I had a chance to visit a rare earth processing facility in fort worth recently, where they are the sole manufacturer and processor to make magnets.
▶ 1:18:29Sen. Cornyn: For those who are uninitiated like I was, magnets are needed for everything with an electric motor. We need a lot more processing in addition to more reserves.
▶ 1:18:54Sen. Cornyn: If you set aside semi conductors for second, to me this is the biggest vulnerability to the united states economy and our national security. Thank.
▶ 1:19:06Chair Crapo: Thank you. Senator hassan.
▶ 1:19:09Senator Hassan: Thank you, Mr. chair and senator wyden for having this hearing. Thank you to our witnesses today. I want to start with a question for you, Dr. baskaran. Critical minerals like gallium and germanium are used in a wide range of products from medical devices to defense technology. Your organization issued a report detailing canada's abundance of critical minerals and the ways in which -- enhanced U.S. cooperation with canada could solve supply chain problems.
▶ 1:19:41Senator Hassan: However instead of working with canada on critical minerals trade, the president has targeted canadian imports with truly reckless tariffs while making concessions to the chinese government to try to access their mineral reserves. Considering are long and close relationship with canada, do you think the administration prioritized the relationship with canada to strengthen the supply chain's?
▶ 1:20:05Dr. Baskaran: Canada is going to be one of our strongest allies to reduce reliance on china. It is such a vertically integrated, we want to be a global energy leader. It is a bipartisan goal.
▶ 1:20:35Dr. Baskaran: Canada's uranium reserves are 10 times bigger than ours. They don't enrich it or process it. We want to bring it back home. What we see is that given the mining, refining, and manufacturing, they are so vertically integrated we will not be able to do it without strengthening our relationship with canada.
▶ 1:20:50Sen. Hassan: I appreciate that very much and as someone who lives close to the canadian border, I'm going to encourage us to continue to do that. Mr. isaacs, the united states leads the world in advanced ai capable semi conductor development. One way the U.S. leverages this leadership is through export controls that stop chips from being sold to china by american companies or our allies.
▶ 1:21:17Sen. Hassan: These export controls require cooperation with allies like japan and the netherlands and help american companies stay on the leading edge. Can you speak more about the importance of coordination with our allies on the semi conductor trade and how trade policies that attack our allies could give china the advantage in developing advanced ai?
▶ 1:21:37Mr. Isaacs: Yes, thank you senator. Obviously, coordination with our allies on export controls is essential. It serves at least two purposes, one to ensure that the technology we are seeking to restrict is not falling in the hands of adversaries, it ensures that U.S.
▶ 1:21:57Mr. Isaacs: Companies are getting ahead while their competitors are not. We need to coordinate with our allies on export controls that address national security can earn while making sure the U.S. remains the leader in ai technology and our technology is deployed around the world to maintain our market and technology leadership.
▶ 1:22:29Sen. Hassan: Building up our domestic technology is crucial to our national security. One of the ways we can do this is to strengthen our relationship however the president has imposed reckless tariffs on our allies who are
▶ 1:23:01Sen. Hassan: Customers for american defense technologies. Does it improve our national security or weekend it?
▶ 1:23:15Mr. Isaacs: Senator, I think the challenges facing the chip companies that focus on defense technologies are similar to the challenges facing commercial companies as well. They utilize many of the same processes. As I mentioned in my testimony, global sales are the lifeblood of our industry.
▶ 1:23:46Mr. Isaacs: 70% of our sales are overseas. That capacity drives us with scale and allows us to invest and innovate and retain market leadership. That is a cycle that continues. We need to maintain market access as a means of propelling our leadership.
▶ 1:24:03Sen. Hassan: Thank you very much.
▶ 1:24:05Chair Crapo: Senator tillis.
▶ 1:24:08Senator Tillis: Thank you all for being here today. Mr. whitaker you mentioned in your opening statement about medicaid devices being the backbone. We saw an exposure during covid in terms of ppe and a disproportionately high reliance on china.
▶ 1:24:32Senator Tillis: Can you give me some thoughts, this is maddening, it reminds me of storms. After we have a storm, we talk about resiliency and building back stronger and as time goes on we forget about it. I feel like we are at risk of forgetting the lesson we learned during the covid crisis. Could you give me an idea of what we could do to eliminate the vulnerabilities and exposures going forward and what congress should do?
▶ 1:25:02Mr. Whitaker: I would say I think we have made a lot of progress since covid in our industry to relocate a lot of facilities and products closer to the U.S. not everything in the U.S., but closer.
▶ 1:25:21Sen. Hassan: I agree with you about the complete lift and set back in the U.S. probably doesn't make sense for a variety of reasons. Talked very briefly about why bringing it all back doesn't necessarily make sense for the long-term.
▶ 1:25:39Mr. Whitaker: It is complicated, but there is a reason why we have the usmca agreement. We want to locate as much as we can within north america to get those supplies into the U.S.. Rather than build a new facility in the U.S. which will cost a lot of money to get fda approval for.
▶ 1:26:15Sen. Tillis: I agree. Mr. isaacs, can you talk about how tariffs could affect supply chains in the semi conductor space and what advice would you give us as the administration proceeds with that initiative that I fundamentally agree with but I also want to make sure we are not exposing some of the critical supply chains like semi conductors. Give me a little, give me some of your advice on how we should proceed.
▶ 1:26:44Mr. Isaacs: Thank you, senator. We believe a sectoral trade agreement would advance our interests in many ways to accelerate and increase demand for U.S. designed and manufactured chips. It would allow us to align standards on technology and things like ip protection with our trading partners.
▶ 1:27:16Mr. Isaacs: It would allow us to sell more into global markets in areas like government procurement and critical infrastructure. We believe that positive trade agenda would be advantageous for our industry and our economic and national security.
▶ 1:27:36Sen. Tillis: Mr. ragland, I have 40 farmers in my office, I'm about to meet with the north carolina farm bureau. We broke soybeans, we grow 80 different commodities at scale, we punch pretty well above our weight if you look at our geographic footprint.
▶ 1:27:58Sen. Tillis: Tell me a little bit about how trade right now, I had some farmers in my office a couple of weeks ago and they are supportive of what president trump is doing. They say we need to be patient. I asked what they mean? Three years, they said no. Two years, no. One year, no. They said they need some certainty going into this season or there were -- will be farmers on the margins who will be in trouble.
▶ 1:28:28Sen. Tillis: We have a weather outbreak, a lot of things that are being locked on these farmers that have the toughest job out there. You have all the complexity of running a business plus all of the unknowns of mother nature. I did what your opening statement from my office.
▶ 1:28:49Sen. Tillis: What would you like to say in terms of the phi could only fix one or two things, the trade uncertainty is going to have to work itself out but I see labor is a major impediment to making your day a good day. Very quickly I'm running out of time, what should be -- we be focusing on while we try to sort out these trade agreements? >> thanks for the question. A lot to unpack here.
▶ 1:29:20Sen. Tillis: More than anything, we need a level playing field. Obviously overregulation with the pesticide seeds, there is so much going on. We have the best technology.
▶ 1:29:37Sen. Tillis: Adverse wage rates. >> yes, the issue with getting labor in through the h2a program. There are a litany of opportunities.
▶ 1:29:48Sen. Tillis: It is fine to say we should definitely get this tightened up fairly quickly and I hope the administration does. Let's not forget about the things independent of that that will make your job easier.
▶ 1:30:04Chair Crapo: Senator cortez masto.
▶ 1:30:08Senator Cortez Masto: I appreciate the panelists and the conversation. Dr. baskaran? Let me ask you this. I'm sure you talked a little bit about this and I understand senator cornyn addressed you the -- this a little bit with you with rare earth minerals.
▶ 1:30:29Senator Cortez Masto: We know china controls 90% of rare earth mineral manufacturing into magnets, which we know are critical to U.S. national defense and the economy. I have a bipartisan bill that will help build the U.S. supply chain for these minerals by creating a tax credit for companies domestically manufacturing the magnets necessary to power american technology.
▶ 1:30:54Senator Cortez Masto: My question to you is do you think there is a role for tax credits like these two incentivize greater production of mind and processed critical minerals in the united states?
▶ 1:31:04Dr. Baskaran: Production tax credits will be very important. The reason is china flooded the market with rare earths between 2010 and 2018 and it actually forced prices for rare earths down to a point that made it very difficult for non-chinese entities to compete in this space.
▶ 1:31:33Dr. Baskaran: We need companies to make these long-term investments. But we are being outcompeted by the chinese. Anyway we can reduce the cost of doing business will get us closer to leveling the playing field. We have the same dilemma in mining.
▶ 1:31:49Sen. Cortez Masto: You think there are trade policies that complement domestic tax cuts?
▶ 1:31:56Dr. Baskaran: I think using some set of trade incentives. At the end of the day, we still have 1.3% of the world's reserve. If we tap brazil and vietnam, it is greater than china in terms of reserves.
▶ 1:32:24Dr. Baskaran: We are not leveraging these two separate and manufacture. How do we create the tax and investment incentive in those markets? To bring it home is key.
▶ 1:32:38Sen. Cortez Masto: I agree. Let me also ask you -- in nevada, I'm proud that nevada has the most mineral wealth of any country.
▶ 1:33:06Sen. Cortez Masto: China is undercutting our companies. Do you believe that targeted and strategic tariffs unlike the chaotic, blanket tariffs that we see here imposed by this administration can play an important role? As we think about the targeted tariffs, please talk about has that worked in the past and what we should be thinking about in the future if we look at targeted tariffs?
▶ 1:33:31Dr. Baskaran: Targeted tariffs are going to be really important. We shouldn't be terrifying raw ore -- tariffing raw ore. I will use copper as an example. 95% of the value is when I take it out of the grounds. If I make that ore 20 5% more expensive, it is not viable.
▶ 1:33:59Dr. Baskaran: So thinking more strategically to ensure that we are not putting tariffs on raw ore would be super important. Are we using the tariff policy in a way that is not punitive to countries that we want to source from that may be new markets for minerals where we want our western countries to go into? Whether w use tariffs on finished products from china is a totally different question. It goes back to ronald reagan, if we want more of something subsidize it, if we want less of it, tariff.
▶ 1:34:29Dr. Baskaran: If we want less finished products from china, we should finish -- shift our tariff policy that way. Tariffs across-the-board dis-incentivize is the development of the domestic refining industry.
▶ 1:34:43Sen. Cortez Masto: I have been a proponent of the african growth and opportunity act. It is a key part of our relationship was sub-saharan africa and it creates valuable opportunities for businesses and consumers and it is set to expire in september. Renewal provides a key strategic opportunity to diversify global supply chains and reduce our reliance on china.
▶ 1:35:11Sen. Cortez Masto: Do you believe that renewable provides an opportunity to advance U.S. critical mineral interests? If you do, --
▶ 1:35:24Dr. Baskaran: Agoa has been our absolute linchpin of commercial diplomacy with the african continent. Not renewing it would be a very negative signal to a continent that benefits enormously from it. Is it in and of itself going to solve are critical minerals in its current form? Probably not an part of that is because tariffs on minerals are generally very low. When I look at tariff rates with african countries on minerals, they are like 2%.
▶ 1:35:53Dr. Baskaran: They will not be significantly more competitive because of agoa . What would make it more beneficial is linking an investment incentive in it. It is a strong minerals diplomacy signal. How do we make sure it is bilaterally beneficial?
▶ 1:36:20Sen. Cortez Masto: Thank, Mr. chairman.
▶ 1:36:22Chair Crapo: Senator whitehouse is next.
▶ 1:36:25Senator Whitehouse: Thank you very much, senator wyden. A couple of observations. One is an observation by a quite renowned economist that the chaos and confusion about tariffs is it self a form of tariff.
▶ 1:36:52Senator Whitehouse: It is just a particularly stupid one because it provides no revenue. But I'm absolutely seeing in rhode island businesses hesitancy as to whether to invest. Because they don't know. We have a lot of business with canada, it is our number one trading partner.
▶ 1:37:21Senator Whitehouse: If you don't know what the tariff will be six months now, you don't know how to make a business decision. 90 days of clarity with china doesn't really help in planning years ahead. I think it is really important that we settle down, stop thrashing about chaotically, decide what our tariff policy is going to be and broke -- proceed in a scalpel, smart way.
▶ 1:38:04Senator Whitehouse: I want to commend senator cassidy and senator graham for their attention to this problem of pollution. If you simplify and say that there is a cement factory on the mexican border in the U.S. and a cement factory on the U.S.
▶ 1:38:22Senator Whitehouse: Border in mexico and they are each 10 minutes away from the border and one of them has to abide by significant pollution regulations that get built into the cost of the product and the other does not, then a tariff is an extremely appropriate way of remedying that discrepancy.
▶ 1:38:43Senator Whitehouse: Another area I would love to see a sharper focus for tariffs is that we have known for a long time that china using a whole variety of sources including the chinese military has had a very aggressive cyber campaign to hack into american businesses and raid them for intellectual
▶ 1:39:14Senator Whitehouse: Property. Whether it is designs, processes, formulae. We were on the losing end of what the former cyber commander described as the largest theft in human history. And we frankly didn't do much about it.
▶ 1:39:35Senator Whitehouse: After a law -- lot of pressure and kicking and convincing, the obama administration I believe finally indicted a number of chinese military officers for participating in this but that was sent as a signal.
▶ 1:39:57Senator Whitehouse: It would be interesting to me to track where we can show chinese products are manufactured using stolen american intellectual property. And tariff those companies and products and may even return the revenues to the countries whose intellectual property they stole.
▶ 1:40:24Senator Whitehouse: My point is that tariffs have an important and vital function at policing fair international trade. But the thrashing about largely it seems to me just to get attention and have people jumping through hoops for you is not a way to go about it.
▶ 1:40:50Senator Whitehouse: My worry is we are going to spend months and months with economic drag on our economy because of this opening bid of rash, thoughtless tariff threats and it is going to take a while for all of that tunnel -- tummult to subside and I just want to be clear that at least this democrat believes there are
▶ 1:41:23Senator Whitehouse: Really useful ways in which tariffs can be brought to bear to assure a world economy which america is not the patsy, but the rhode island businesses at least are dealing with very high anxiety right now because of the uncertainty that has been created. The dumbest form of tariff there is because it creates no revenue. Thank you.
▶ 1:41:48Sen. Wyden: Well said from both of my colleagues. Senator lujan.
▶ 1:41:54Senator Lujan: Mr. isaacs, as you may know new mexico is home to two national laboratories and they have been at the forefront of some of our nation's most consequential scientific breakthroughs. Both labs are leaning into emerging technologies like ai, quantum computing while helping the united states maintain a strategic advantage.
▶ 1:42:18Senator Lujan: The pace of ai is accelerating rapidly and we cannot afford to wait for a new chip slab -- chips lab be fully operational and some of these areas. Continued access to high-performance software is essential for research and mission-critical national security eight applications. Will president trump's impacts the importation of hardware needed to continue ai development and deployment?
▶ 1:42:46Mr. Isaacs: I think it is too early to say, but it has the potential to increase costs for key inputs that are used in the process of making the chips that go into the ai stack. We estimate, first of all, the vast majority of the cost is the very sophisticated equipment and approximately 80% of that is imported.
▶ 1:43:15Sen. Lujan: I will ask the question again, will these tariffs make it harder to get the hardware needed? I think I heard you just say that.
▶ 1:43:25Mr. Isaacs: You know, the landscape is not yet settled.
▶ 1:43:29Sen. Lujan: I'm sorry to interrupt. Can you repeat about what you said of the 80% of the hardware cutting harder to import or can you talk about that?
▶ 1:43:37Mr. Isaacs: Yes, approximately 80% of the costs of the fabrication is the sophisticated equipment that runs the fabrication.
▶ 1:43:46Sen. Lujan: And that is imported?
▶ 1:43:47Mr. Isaacs: About two thirds of that I believe is imported. And so doing the math depending on of the tariff rate there could be substantial cost increases associated with that.
▶ 1:44:02Sen. Lujan: Do you think the president should exempt this hardware for national security missions?
▶ 1:44:11Mr. Isaacs: Yes, we think there should be strategic targeted exemptions. We provided a key list to the department of commerce recently, a nonexhaustive list of key inputs and we think though should be considered for exemption.
▶ 1:44:31Sen. Lujan: I agree. Americans are terrified that tariffs on medical highs will increased health care costs including skyhigh drug prices. One wrote me I need thyroid medication every day to stop damage to my heart and can. My kidneys are failing and please fight for me.
▶ 1:45:00Sen. Lujan: Despite an investigation still underway, the secretary of commerce has stated tariffs on pharmaceuticals are coming in the next month or two. President trump recently said that american children don't need to have more dolls due to his tariffs or pencils. My question to you is our pharmaceuticals and medical devices different than dolls and pencils? >> obviously different. I don't represent the pharmaceutical industry but I can speak to the medical technology industry.
▶ 1:45:32Sen. Lujan: The disruption that has been caused is a challenge and we don't have the same flexibility that many people do in the economy to adjust and change our prices without impacting in a negative way. Clarity here and an exemption for medical technology projects -- products is critical to making sure there is patient access and making sure costs remain stable.
▶ 1:45:53Sen. Lujan: Appreciate it. From the perspective of having the medical equipment, do we have what we need to keep them safe? >> we do a nice job of providing american hospitals with american made products. In the short-term, we can continue to manage it. In the long term, it create a crisis.
▶ 1:46:23Sen. Lujan: I'm all about on shoring and near-shoring. I hope the united states helps in that way. Targeted tariffs might help. Across the board tariffs didn't work this time, they haven't worked the last few times, we just go back and look at their impact. Let's look at the last one. The great depression and what that had on the economy.
▶ 1:46:51Sen. Lujan: Farmers and ranchers have been reaching out to me quite a bit looking at some of these inputs. This is a foundation not just across america. Can you speak to this?
▶ 1:47:12Mr. Ragland: Before the trade were agriculture in general was in a difficult spot due to the inflated cost of production. The last three years, our revenue we are receiving for our crops is down about 50%. It is already tough. You had a trade war and it takes it a whole other level. One that could equal the farm economy of the 1980's.
▶ 1:47:44Mr. Ragland: They say a dollar in agriculture is turned over 6-8 times in local communities. That is hardware stores, small businesses, churches, schools, community organizations and a whole lot of people that do end up living and dying and working and playing across this country. Rural america is the backbone of the U.S. ended impacts the whole economy of the country in a dynamic way. When agriculture is struggling, it is hard for the economy of the U.S. to do well.
▶ 1:48:14Mr. Ragland: We are in a bad spot and we are in a position where this could get much worse depending on the decisions made now. We need a level playing field, we need exports, we need certainty and we need demand for our products to do well. Our rural communities are dependent upon that.
▶ 1:48:33Sen. Wyden: I think my colleague and thank you for making those points. That is a hugely important question. Senator warnock.
▶ 1:48:43Senator Warnock: Thank you very much, Mr. chairman. I agree with my republican colleagues. Did you hear that? It is on the record. [laughter] I agree with my republican colleagues and even president trump that bringing manufacturing jobs back to the united states should be a bipartisan priority and that is why I supported the inflation reduction act, which has been a game changer in this country, certainly in my state of georgia
▶ 1:49:14Senator Warnock: Where it has helped create 42,000 clean manufacturing jobs across the state, advanced manufacturing jobs of tomorrow that often don't require a college degree. But last week I released this report that shows that these georgia jobs are at risk under the tax bill currently being rammed through congress by republicans. Without objection I would like to enter my report.
▶ 1:49:41Sen. Wyden: Without objection so ordered.
▶ 1:49:44Sen. Warnock: President trump claims his tariffs will bring back manufacturing jobs to the united states. Is he right? Will the president's on raw goods and component parts boost domestic manufacturing?
▶ 1:49:58Mr. Isaacs: Targeted tariffs can play a role in incentivizing the re-shoring of certain jobs or industries, but we think that they should be targeted and used strategically and supplemented by the positive agenda I have outlined in my testimony regarding tax and workforce development.
▶ 1:50:21Sen. Warnock: So targeted and strategic is not words I would use to describe this approach. Do you think these tariffs threaten the manufacturing boom we have seen in georgia?
▶ 1:50:32Mr. Isaacs: Well, I can't speak to the ira, but with regard to the investments that have been accelerated under the chips act, I believe that they have the potential to increase costs of critical inputs that are required to maintain our competitiveness in fabrication and packaging and equipment and the like throughout the ecosystem.
▶ 1:50:59Sen. Warnock: It sounds like it could be a real drag and we see evidence of that, a real drag on manufacturing by taxing these raw parts and components. We have seen, because of global supply chains, we obviously need to import raw goods and component parts to complete that manufacturing here at home. We have seen this in georgia with hyundai.
▶ 1:51:28Sen. Warnock: These tariffs make importing those raw materials and incredibly expensive, making it even harder to boost american manufacturing and to create jobs. Dr. baskaran, I don't want to butcher your name, the clean energy sector relies on many critical minerals which are not in the united states.
▶ 1:51:52Sen. Warnock: What will happen to industries that cannot access the critical minerals they need because of retaliatory measures or because the cost of importing them skyrockets due to tariffs?
▶ 1:52:04Dr. Baskaran: Thank you senator, when we started this hearing, senator crapo pointed out a mineral that is in the stereo system in every single car. These mineral systems are absolutely critical for the automotive manufacturing industry. In detroit where I'm from, we saw a round of layoffs after the tariffs.
▶ 1:52:31Dr. Baskaran: Every time we see a supply chain disruption regardless of what kind of automotive, when things get significantly more expensive, we see that people buy less cars when the economy is weak and economic uncertainty is high. They undermine the competitiveness. Of these really critical industries. We need to be really strategic about tariffs to ensure we are not ultimately crippling the manufactured good because we have to think about it from a manufactured good perspective.
▶ 1:53:00Dr. Baskaran: If there is a disruption, it hurts the end good.
▶ 1:53:02Sen. Warnock: Would send prices up based on your background and experience on cars?
▶ 1:53:07Dr. Baskaran: What about cars?
▶ 1:53:10Sen. Warnock: With these tariffs set prices up for consumers?
▶ 1:53:14Dr. Baskaran: One hundred percent. An internal combustion engine uses 33 milligrams -- kilograms of rare earth minerals. The ev industry, and ev car uses threefold. China has used 230 point $9 billion of subsidies between 2009 and 2023.
▶ 1:53:41Dr. Baskaran: But now if you go to mexico city and get in an uber, it is probably one of their cars. We have seen it is a competitively global industry. Ensuring we have competitive mineral inputs is critical to maintaining the competitiveness of gm and ford in this country and ensuring we can sell internationally.
▶ 1:53:59Sen. Warnock: Thank you so much. Congressional republicans are currently trying to repeal clean energy investments and threatened the more than 42,000 georgians employed because of the ira. President trump's chaotic and punitive tariffs are punishing companies who did the right thing and brought the manufacturing back to the united states because of the ira by making parts and materials so expensive.
▶ 1:54:24Sen. Warnock: This in my view is a one-two punch george's clean manufacturing economy and these tariffs are making us weaker and weakening our position in relationship to china and making us poorer and it is long past time for congress to reclaim our power in the area of tariffs. Thank you.
▶ 1:54:47Sen. Wyden: Thank you. Senator welch.
▶ 1:54:51Senator Welch: Thank you very much. Mr. ragland, I appreciated your comments about the importance of the aggie economy to rural america and all of america, mind you. We are getting hammered. Gary is our big product. We have a lot vegetable growers. Our farmers get a lot of the fertilizer from canada.
▶ 1:55:15Senator Welch: I don't care what the politics are of the farmer, whether they voted for trump or they voted for harris, that is a real hit. 25% more?
▶ 1:55:28Mr. Ragland: It is a massive hit considering where the farm economy is already. 87% of our potash comes from canada.
▶ 1:55:38Sen. Welch: This is all across especially the northern tier.
▶ 1:55:42Mr. Ragland: Yes but it's even in kentucky where I farm. Potash is one of the top five costs on my production list each year. We use a huge amount of production for our soybeans on our farm.
▶ 1:55:57Sen. Welch: You know, some of the issues of the justification for tariffs is to get the supply chain back here and I have some appreciation for that. But it is not like our crops, the more we grow here, the better, right? And we are already doing that. We get higher costs to make the market more vulnerable, right? More farms will go out of business.
▶ 1:56:23Sen. Welch: On these tariffs, in the midwest, where it is different crops, not a lot of dairy, but it is soy and wheat, those farms in round one of trump tariffs as I understand it, they lost international markets. Those are really important to the bottom line of those farms.
▶ 1:56:44Sen. Welch: Do you see that as an additional threat to the well-being of some of those commodity crop farms, that they will lose markets because the void will be filled by other countries like argentina and brazil?
▶ 1:56:56Mr. Ragland: Absolutely and we have the precedent from the first trade war. Before the 2018 trade war, one out of three rows of U.S. soybeans went to china. We got down to nearly one out of 10 rows at the peak of the trade war. We have only got back to about 25% or one out of four. We have a gap we have never gained back. It is picked up by brazil.
▶ 1:57:24Mr. Ragland: Priscilla went to being the number one soy producer worldwide and they are ready to take advantage of this trade war now and grab more of that. We must have a level playing field.
▶ 1:57:35Sen. Welch: Thank you very much. Dr. baskaran, you know the tariff authorities exist under section 232 and 301 and those are prescribed approaches so that there is a hearing process in the upsize and downsize to be discussed and debated. People will be impact like these midwest farmers would be able to come in and say, this is going to hammer us.
▶ 1:58:05Sen. Welch: The president is using the so-called emergency authority which I find a little bizarre because it is a national security threat that justifies imposing tariffs on that enormous threat to the well-being of vermont and that is an invasion from canada. A little bit of a stretch, I would say.
▶ 1:58:24Sen. Welch: Talk about how tariffs really make a difference in terms of whether they are thought out, where there is consideration of what the upsides and downsides are versus the unilateral and arbitrary exercise of authority that the president seems to be justifying under what he is doing.
▶ 1:58:47Dr. Baskaran: 232 investigations are an interesting opportunity. One of the problems with critical mineral policy is we think of them as a homogenous group of 55 minerals and the vulnerabilities, where they are located, where processing is located is different. Disaggregating is important.
▶ 1:59:09Dr. Baskaran: The second point I would say is that strategic tariffs and not blanket are beneficial because we don't want to undermine the development of our own processing capabilities. If we are applying tariffs to raw or it simply becomes too expensive and commercial and only in viable. The difference between the united states and the west and china is we have fiduciary responsibilities to our shareholders. Companies have an obligation to operate profitably.
▶ 1:59:37Dr. Baskaran: Assuring tariff policies are congruent with ensuring they can operate profitably is critical, otherwise we are continuing allowing china to dominate. Looking at it supply chain by supply chain and looking at the various stages from raw or all the way through finished goods will be critical to ensuring we don't pull our long-term read industrialization goals.
▶ 1:59:59Sen. Welch: Thank you very much. I yield back.
▶ 2:00:02Sen. Wyden: Senator young.
▶ 2:00:04Senator Young: Dr. baskaran, the chinese communist party just exporting minerals, it is exporting leverage. By controlling the midstream chokepoints of global mineral processing and using that power to restrict exports of rare earth elements, beijing is effectively turning raw materials into raw geopolitical pressure.
▶ 2:00:31Senator Young: America can't afford in my estimation to respond with vague policies or blanket tariffs. That is why I have introduced a strategic three-part legislative approach. The finding ore act, the critical mineral security act and the strategic minerals act to map global resources with a right of first refusal, to monitor supply chain risks, and to forge sector specific
▶ 2:01:02Senator Young: Free-trade agreements with trusted partners. Even if we streamlined permitting tomorrow, which is a much needed priority, we would still need international partnerships because the U.S. simply doesn't have every mineral under our feet. Dr. baskaran, given these realities, do you believe the sector specific approach in my strategic minerals act is the right path to secure long-term supply?
▶ 2:01:25Dr. Baskaran: Thank you, senator. I think sector specific trade agreements are critical. I want to commend you on a lot of the work you are doing. When we identify new deposits, that is absolutely to call and ensuring those stay in allied hands is really important. One of the reasons china has excelled as they have taken the whole supply chain from exploration mapping, production, and processing. For the U.S. to xl it needs to start at that early stage.
▶ 2:01:57Dr. Baskaran: Sector specific trade agreements are important as what is important. It is not the flavor of the decade to go to a free-trade agreement, but we need to ensure we are being targeted with trade policies to our long-term vulnerabilities because we see china continues to weaponize them. The list keeps getting longer. It is absolutely going to need to be many of the tools you highlighted.
▶ 2:02:17Sen. Young: Thank you too often it seems that the conversation around critical minerals ends at the mine. Many of our conversations here in congress and understandably so, many of our constituents are excited about accessing domestic minerals on account of the jobs.
▶ 2:02:42Sen. Young: -- the jobs it creates end it seems intuitively to make a lot of sense, but without refining, there is no supply chain, there is no value chain and there is no utility for these rocks and other minerals we get out of the ground. The U.S. has made meaningful progress and growing domestic midstream capacity, but china still dominates globally. Manufacturing over 90% of rare-earths and graphite processing.
▶ 2:03:11Sen. Young: That kind of concentration isn't just risky, it gives beijing outsized influence over the global industrial base. Our allies like japan have taken a more strategic approach, pairing public financing with enforceable offtake agreements to secure mineral access and build processing capacity abroad. Locking in supply while supporting its industrial base. In your written testimony, you referenced japan as a successful model.
▶ 2:03:41Sen. Young: Could you expand on how a similar approach might work for the united states and what you see as the most important steps congress can take to develop midstream processing capacity without simply shifting the bottleneck?
▶ 2:03:53Dr. Baskaran: Thank you so much, senator. One of the things that made japan so successful is where they used state funding, there was an offtake requirement that must go to japanese companies. What we don't want to do in the united states is use dfc which is up for reauthorization to fund projects that ultimately get signed over to chinese processing.
▶ 2:04:18Dr. Baskaran: We have already seen it with sarah verity which has been shortlisted by a rare earth project, that in the new york times that recently came out that they signed their long-term offtake agreement over to china. That is quite self-defeating for our use of taxpayer resources. We want to ensure that where we are using government financing, a percentage of it is coming back either through guaranteed offtake or discounted offtake to U.S. companies.
▶ 2:04:47Dr. Baskaran: This is how we start to take the mind to market supply chain. Aligning our financing with our offtake agreements.
▶ 2:04:57Sen. Young: Thank you so much. Mr. chairman, I yield back. I also have a medical device question I would love to post to Mr. whitaker. >> senator wyden has one more question and then we will wrap up.
▶ 2:05:20Sen. Young: >> on this question of supply chains and health care, one of the things we learned during the pandemic and the aftermath of how to deal with this in the future is that it is pretty hard for you all to act like that with a snap of the fingers. You do an amazing job moving very quickly but I think it would be very helpful if you could give us some kind of inkling of the challenges when you can't snap your fingers and why it is so important.
▶ 2:06:00Sen. Young: >> it is a great question. The reason we can't act quickly is because our supply chains are very complicated. Resources are distributed all over the world. As a result of that, it is impossible to build a technology that might have 300 different component parts in one location at the snap of a finger.
▶ 2:06:26Sen. Young: Even if we wanted to do that and even if we did that, the regulatory process takes a long time to go through. For good reason, you want to make sure you have good manufacturing practices and the product is safe and effective.
▶ 2:06:46Sen. Young: It is virtually impossible for us to relocate through a meaningful regulatory process as well which means we need a diverse supply chain and we need to pull products from a lot of different parts of the world to execute the agreements we have.
▶ 2:07:02Senator Wyden: I put this in the continued -- to be continued department. You can get really sick and also died. >> thank you, senator wyden. I'm going to yield my final opportunity for question. >> thank you and I will make it highly abbreviated. The good senator wyden basically laid a predicate for my question to Mr.
▶ 2:07:30Senator Wyden: Whitaker and this might be a harmonious moment of bipartisan interest in the medical device industry so we can so we can optimize our trade enforcement tools to the health and well-being of so many americans, but also highly regulated and also life critical. Mr.
▶ 2:07:58Senator Wyden: Whitaker, are there particular things we should be thinking about as policymakers to take into account the life critical and highly regulated nature of your industry when designing or considering trade enforcement tools?
▶ 2:08:15Mr. Whitaker: First of all to answer this way, broad tariff policy is not constructive relative to that. Targeted tariff policy could be constructive relative to certain component parts. Tax policy matters a lot relative to manufacturing in the united states.
▶ 2:08:42Mr. Whitaker: Incentives and d incentives to the tax code matter a lot to allow us to continue to build here. Regulatory policy matters. Regulations are important but if it is a slow process, it is difficult for us. Third, reimbursement policy matters as well. Other countries are careful about reimbursing products for their country at a rate that is better than ours and we don't do that and we need to and I will give you one more thing.
▶ 2:09:10Mr. Whitaker: The breakthrough legislation you have introduced for medical technologies will make a huge difference in U.S.-made manufacturing projects coming to market more weakly incentivizing growth, incentivizing jobs and it is good for the health care system.
▶ 2:09:23Sen. Young: Thanks. >> thank you, senator john. Senator blackburn, senator blackburn, you will go next and if no other senator shows up, we will do a wrap up and then we will finish.
▶ 2:09:37Senator Blackburn: Thank you and I want to thank each of you for being here. When we talk about supply chains and the work that is being done and the importance, I appreciate that each of you would be here to talk with us.
▶ 2:09:53Senator Blackburn: Last week, senators bennett, tillis, thune and I filed the investment act dealing with the semi conductor industry and makes certain you are going to be able to use the advanced manufacturing tax credit for this issue. Supply chains are vitally important. In tennessee, we have a lot of auto manufacturing.
▶ 2:10:20Senator Blackburn: We have a good bit of appliance manufacturing and many people don't think about entertainers and road crews and concerts and the amount of manufacturing that is done there with amplifiers and microphones. And the staging equipment that goes into those events.
▶ 2:10:45Senator Blackburn: Supply chains for us in tennessee, whether the logistics side and memphis has the port of memphis. It has all five class a railroads. It has fedex. We are a hub there.
▶ 2:11:05Senator Blackburn: When you look at the manufacturing in the entertainment and also as we look at health care and nashville being a true center for health care I.t. This is something that is important to us.
▶ 2:11:32Senator Blackburn: I classify that as russia, china, iran, and north korea. As we look at the strategic investments that somebody like china is putting up across the entire semi conductor value chain, can you speak to how the semi act would be important for domestic manufacturing?
▶ 2:11:58Mr. Isaacs: Thank you, senator. We appreciate your leadership in introducing that legislation. The goal of this effort was always to build out the entire ecosystem and that starts with material inputs and equipment as well as fabrication. We need to be doing that whole stack.
▶ 2:12:24Mr. Isaacs: Your legislation would incentivize and extend the existing advanced manufacturing investment to cover materials and we think that can be an important part of building our ecosystem. I would also take a moment to clarify a comment I made to the chairman in response to his question.
▶ 2:12:45Mr. Isaacs: The current advanced manufacturing investment credit currently covers semi conductor manufacturing and equipment manufacturing and what we are suggesting it be extended to include research and design. Senator blackburn's bill would cover materials as well.
▶ 2:13:01Sen. Blackburn: And we think that would be important. Mr. whitaker, we do a lot of medical device manufacturing in tennessee down in shelby county one in every four jobs is linked to medical devices and a lot of these businesses that are in that supply chain with different components, things of that nature, they are small to
▶ 2:13:35Sen. Blackburn: Midsize businesses. These companies rely on a very complex global supply chain. As I have listened to your hearing, you all have talked a good bit about this. One of the things we want to do is make certain that we are guarding against disruptions because it is important that we continue to build some diversity into these supply chains.
▶ 2:14:06Sen. Blackburn: It is important we have access to all of those inputs. You all have talked about rare earth minerals. We have one tennessee company has worked tirelessly to reposition their entire global footprint because of what we went through during covid.
▶ 2:14:41Sen. Blackburn: This is kind of a strategic shift to more resilience in our supply chains and it is an effort we need to put some energy and some focus on two. What more can we do when we talk about building and that resiliency for these inputs and the supply chain for something like medical devices? >> it is a great question and you do have great companies in tennessee.
▶ 2:15:12Sen. Blackburn: I would say 80% of all U.S. medical technology companies or small companies, small businesses who aren't profitable today, but they are the engine that drives innovation for many of the large companies as they bring new, innovative products to market. I think there are tax policies beneficial to small companies especially.
▶ 2:15:34Sen. Blackburn: I think the tariffs, to come back to this point, for any small company that may have made strides in moving products back to the united states but still have to access products from other parts of the country where the world I should say, a 10 percent increase, a 15% or 20% increase it's their bottom line quickly and hits it very hard.
▶ 2:15:55Sen. Blackburn: My concern is that if the small businesses get hit hardest first in medical technology, so exempting medical technology products from the tariffs in the short term would be a huge benefit for small companies, midsize companies, and large companies as well. We have never really experienced tariffs before in the medical technology industry. Across the board, they have been zero to 1% to 2%, so any increase domestically or overseas is an increased cost to our companies.
▶ 2:16:27Sen. Blackburn: Countries have recognized for years the value of what we do, the humanitarian nature of the work we do, the impact on costs to the health care system and as a result we haven't experienced that. We would hope going forward we wouldn't dixie -- we wouldn't see that experience in the future.
▶ 2:16:42Sen. Blackburn: Thank, Mr. chairman.
▶ 2:16:44Chair Crapo: We do believe one senator still may show up. But senator wyden and I are going to give some brief closing remarks and then if that senator is not here yet we will wrap up. If he is, he will be getting the?'s.
▶ 2:17:01Sen. Wyden: I'm going to be brief. We have been sitting here for several hours and my take is that the trump tariff policies are delivering a double way me that is hammering the american people. Let me just give you my sense of how I reach that judgment. The trump tariffs are not just unhelpful.
▶ 2:17:25Sen. Wyden: They are actually threatening critical supply chains and they are doing it by driving up costs, closing out export markets, and making it impossible to essentially invest and plan for the future. That harms the creation of jobs and innovation. Meanwhile, donald trump is essentially tearing down the policies that do bring about investment and manufacturing in our country.
▶ 2:17:54Sen. Wyden: In effect, policies that are working today, as you all have told us are being pulled out by the roots and apparently there is going to be little or nothing and for example in the area of the clean energy tax credits that I worked on for almost a decade, we are going to miss the chance if it goes through in this form and we are going to push to keep it from perceiving that way.
▶ 2:18:21Sen. Wyden: If it does, we are going to jack up energy prices, make it harder to reassure, our country is going to needlessly suffer. Your work in terms of chips, clean energy, looking at federal funding for science and research, I think you are on the right side of history and I think all of you and it is ironic that you all offered us an assessment that was pretty similar.
▶ 2:18:46Sen. Wyden: I'm going to use it with my colleagues, both democrats and republicans, because I think it is the right thing to do, the best politics is good policy. Thank you, we will be calling on you often in the days ahead and we appreciate your input very much.
▶ 2:18:59Chair Crapo: Thank you, senator wyden. I want to thank our witnesses. I think all of you have presented very solid and helpful information to us about our supply chains and the needs for us to get it right. There is really not a lot of disagreement on the notion that we need to get a targeted tariff regime and we need to and nontariff trade barriers.
▶ 2:19:29Chair Crapo: The playing field is not balanced, the united states is discriminated against in many different ways by many different countries, and the effort president trump is undertaking right now is aimed at balancing that field. But like I say, we all understand that the objective is to eliminate nontariff trade barriers, to balance the trade field, and let us have actual, fair trade globally.
▶ 2:19:58Chair Crapo: If there is some pain in getting there, we all hope we get there and you have all described how you think that in to look and I personally agree with the descriptions you have given of how it all to look when we get there. With that being said, I expect and hope that this committee will work together as we move forward on a bipartisan basis to find some solutions along the lines those who have suggested here and focus on making america as strong as we possibly can with regard to critical supply chains.
▶ 2:20:29Chair Crapo: Your input has been very helpful in that regard. Seeing no other senator here, I would like to thank our witnesses for appearing before us today. Your insights into the complexity of supply chains will be top of mind as we continue our conversations on trade and tax. I remind my colleagues that the deadline for amid any questions for the record is 5:00 p.m. Next wednesday, may 20 one. With that, the finance committee stands adjourned. Thank you again for being here. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]