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This Week In Trade

Treasury’s recommendations on China due to Trump; NAFTA in limbo

Posted: May 21, 2018

Treasury Secretary Steven Mnuchin on Monday is set to provide the White House his recommendations on investment restrictions that could be placed on China, but whether President Trump will act on those recommendations remains uncertain after administration officials reached an understanding with a high-level Chinese delegation last week.

According to Trump, the meeting resulted in China agreeing “to buy massive amounts” of U.S. agricultural and farm products. A joint statement last week said the U.S. and China agreed on measures to reduce the U.S. trade deficit in goods with China and that China would increase purchases of U.S. agriculture and energy exports.

Treasury Secretary Steven Mnuchin said on Sunday that the U.S. would not slap new tariffs on Chinese goods. U.S. Trade Representative Robert Lighthizer had prepared a list of tariffs on $50 billion worth of Chinese goods as part of the U.S. response to its findings in its Section 301 investigation into Beijing’s intellectual property and technology transfer practices, and more tariffs were threatened. China had said it would retaliate.

The Treasury Department could not be reached for comment by press time on whether Mnuchin had yet submitted his recommendations to the president.

Senate Minority Leader Chuck Schumer (D-NY), after being called out by Trump in a tweet on Monday for allegedly not working hard enough on improving trade with China during the Obama administration, criticized the president for not addressing Chinese IP theft.

“[Trump and] his team have to be strong & not sell out for a temporary purchase of goods without fixing the real issue: stealing our IP, which costs us millions of jobs long-term,” Schumer wrote on Monday.

In the joint statement, China and the U.S. agreed to strengthen cooperation on IP protections and China said it would “advance relevant amendments to its laws and regulations in this area, including the Patent Law.”

Treasury is considering unilaterally implementing part of the proposed Foreign Investment Risk Review Act, which would reform the Committee on Foreign Investment in the U.S., as part of its response to China. The bill’s journey through Congress was slowed over a disagreement between the Treasury and Defense departments over whether CFIUS’ jurisdiction should be extended to review outbound investment. The Senate Banking Committee and House Financial Services Committee will both mark up a version of the bill on Tuesday that does not include language that would allow CFIUS to review outbound investment.

Meanwhile, the renegotiation of the North American Free Trade Agreement is at a critical point as the administration has missed an informal May 17 deadline to submit a notification to Congress of its intent to sign a deal. House Speaker Paul Ryan (R-WI) laid down that marker as the last day the notification could be submitted in time for the current session of Congress vote on the pact. Ryan has since backed off the deadline a bit, specifying suggesting some flexibility in the time lines laid out in the 2015 Trade Promotion Authority law. Lighthizer on May 1 said he hoped to wrap up negotiations within “a week or two” of May 7, a deadline that will also be missed.

The flexibilities in the TPA time lines are limited, however, and sources believe negotiators must wrap up the talks this month to ensure a realistic chance that this session of Congress considers a renegotiated NAFTA. But with all sides still far apart on a litany of issues, Lighthizer is beginning to consider what a NAFTA vote will look like in the next session of Congress, they say.

National Economic Director Larry Kudlow on CNBC on Monday said he believed the congressional deadlines were “not quite as strict” as Ryan mentioned. On Monday, Mnuchin told CNBC there was a mutual desire among all NAFTA parties to get a deal done.

Mexican chief negotiator Ken Smith Ramos wrote on Twitter on May 19 that the “last mile” of the negotiations “will require flexibility from all 3 Parties in order to find the balances that may allow us to close the negotiation.” In a second tweet, he said that last week, Mexico “made concrete proposals and will continue to work constructively to reach the best deal possible for Mexico.”

In a May 17 statement, Lighthizer said negotiating teams had “gaping differences on intellectual property, agricultural market access, de minimis levels, energy, labor, rules of origin, geographical indications, and much more.”

In other news, Deputy USTR Jeffrey Gerrish is headed to Papua New Guinea to represent the U.S. at the Asia-Pacific Economic Cooperation trade minister meeting on May 25-26. Gerrish will also hold “several bilateral meetings with key trading partners” on the margins of the meeting, according to a USTR statement.

On his way to the APEC meeting, Gerrish will stop in Hanoi, Vietnam, on May 21 and Manila, Philippines, on May 23 “for discussions with key ministers, other senior government officials, and stakeholders on ways to strengthen our bilateral trade relationships and resolve outstanding issues,” the press release says.

President Trump on May 18 declared May 20-26 “World Trade Week” in a proclamation highlighting the renegotiation of the U.S.-Korea Free Trade Agreement and NAFTA. He also noted systemic overcapacity and IP abuses, but did not single out China.

“My Administration is taking concrete actions to restore America’s capacity to compete in an increasingly international market,” the proclamation says. “We are dedicated to a renewed and equitable North American Free Trade Agreement that promotes the export of American products rather than American jobs. The recent agreement in principle on the United States-Korea Free Trade Agreement offers an opportunity to rebalance an unfair trade relationship.”

South Korean President Moon Jae-in is set to visit the White House on Tuesday.

“The United States will no longer tolerate any foreign nations gaining unfair advantages on American industries by stealing or forcing the transfer of our companies’ technology or intellectual property, subsidizing their exporters, illegally dumping products into our markets, and building excessive and unnecessary capacity,” the proclamation continues. “These unfair and distortionary trade practices flood global markets, depress prices, and harm our companies and workers.  We will not allow these practices to compromise our leadership in intellectual property, digital products, innovative technology, manufacturing, agriculture, and numerous industrial sectors.”

On Tuesday, EU trade ministers are expected to approve an agenda for potential trade talks with the U.S. EU heads of government approved the agenda last week, emphasizing that the EU would only enter into trade talks with the U.S. if it received a permanent exemption from the U.S.’ Section 232 tariffs on steel and aluminum. If the EU receives that exemption, it would be willing to negotiate with the U.S. on industrial tariffs, government procurement market access, voluntary regulatory cooperation, liquefied natural gas trade and reform of the World Trade Organization’s Appellate Body, according to EU Commission President Jean-Claude Juncker.

The U.S. Chamber of Commerce will host its sixth annual Global Supply Chain Summit on Tuesday. Customs and Border Protection Commissioner Kevin McAleenan, Chamber President Thomas Donohue and Assistant Secretary of Homeland Security for Border, Immigration and Trade Policy Michael Dougherty are among the listed speakers.

USTR's chief agriculture negotiator, Gregg Doud, will discuss the effect the Trump administration’s trade rhetoric is having on the agriculture sector in an event hosted by the Farm Foundation on Tuesday. Former USTR chief agriculture negotiator Darci Vetter will also participate.

On Wednesday, Commerce Secretary Wilbur Ross and Sens. Ben Sasse (R-NE) and Joe Manchin (D-WV) will take part in a breakfast discussion on trade policy hosted by The Washington Examiner.

On Thursday, the Woodrow Wilson Center’s Africa program will hold a discussion on the implementation of the African continental free trade area. Featured will be Permanent Representative of the African Union to the United States Arikana Chihombori Quao; former African Development Bank President Donald Kaberuka; Principal Deputy Assistant Secretary of State for African Affairs Stephanie Sanders Sullivan; and Cameroon Ambassador to the U.S. Etoundi Essomba.

The EU’s General Data Protection Regulation comes into force on Friday, meaning U.S. companies that handle the personal information of European Union citizens will have to comply with new data privacy and protection rules. -- Brett Fortnam (bfortnam@iwpnews.com)

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