By David Lawder
WASHINGTON, July 7 (Reuters) – Several Latin American countries said on Tuesday they are working to prevent the import of goods produced with forced labor, urging the Trump administration to exempt them from proposed new U.S. tariffs of 10% to 12.5% seeking to punish lax enforcement.
During a public hearing on the U.S. Trade Representative’s proposed tariffs on 59 countries and the European Union, ministers and representatives from Mexico, Peru, Guatemala and Ecuador rejected allegations they are failing to enforce laws against forced labor in their supply chains and said that they had laws and processes to combat the problem.
“Mexico has made the fight against forced labor a serious priority,” Ernesto Acevedo Fernandez, an undersecretary in Mexico’s Economy Ministry, told the hearing, adding an additional 10% tariff would unjustly punish thousands of law-abiding Mexican companies.
USTR’s proposal would exempt goods from Mexico that are compliant with the U.S.-Mexico-Canada Agreement on trade.
“The tariffs proposed by the USTR against Mexico are unjustified, since there is no evidence of imports made with forced labor entering the United States through Mexico,” Acevedo said.
Three days of hearings this week are part of the Trump administration’s legal process to impose “Section 301” unfair trade practices duties over alleged failure to enforce import bans on products made with forced labor. USTR says forced labor in foreign supply chains leads to unfair competition for U.S. workers.
But the new duties are widely seen as an effort to replace a 10% temporary tariff imposed in February after the Supreme Court struck down President Donald Trump’s broad global tariffs imposed under an emergency law. Those duties are due to expire on July 24.
A group of 22 attorneys general from Democratic states lodged their objections to the forced labor tariffs on Monday, calling them “an attempt to paper over predetermined sweeping tariffs” that are an abuse of the Section 301 authority. Their letter to U.S. Trade Representative Jamieson Greer previewed a potential future court challenge.
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Peru’s director of trade negotiations Jose Luis Castillo Mezarina requested that Peru be exempted from any tariffs, “since in the Peruvian case no concrete burden on U.S. commerce has been established, nor has the evidentiary standard required under Section 301 been met, and the bilateral trade relationship does not justify a measure of this nature.”
A simultaneous hearing on USTR’s proposed 25% tariff on goods from Brazil under a separate unfair trade practices investigation concluded on Tuesday, with testimony from Brazilian right-wing Senator Flavio Bolsonaro, the son of former President Jair Bolsonaro who is planning to run in the country’s October presidential election.
STEELMAKERS SEEK PIG IRON EXEMPTION
Some steelmakers and trade groups argued at the forced labor hearing for an exemption for imported pig iron, used in steel production from electric arc furnaces.
The raw material, not available for purchase from domestic integrated blast-furnace steel producers U.S. Steel and Cleveland-Cliffs, was exempted from Trump’s 50% “Section 232” national security steel tariffs but would be subject to the proposed forced labor tariff, adding costs for producers such as Nucor and Steel Dynamics.
Brandon Farris, executive vice president of the Steel Manufacturers Association, said that without exemptions, tariffs on imported pig iron from Brazil, a major supplier, could rise to 37.5% when combined with the proposed Brazil-specific tariffs, putting the majority of domestic steel production at a competitive disadvantage.
USTR is expected to consider the comments before issuing a final determination on the proposed tariffs and any exemptions.
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(Reporting by David Lawder; Editing by Cynthia Osterman)
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