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This Week In Trade

Ways & Means to take up USMCA on Tuesday; House vote expected Thursday

Posted: December 16, 2019

The U.S.-Mexico-Canada Agreement moves forward this week with a House Ways & Means Committee vote slated for Tuesday and full House consideration expected two days later -- though the implementing bill has raised some questions in Mexico.

The committee on Friday announced Tuesday’s “markup” of the USMCA bill minutes after the administration submitted the legislation. With the implementing bill now formally submitted, Congress cannot amend the text under the 2015 Trade Promotion Authority law. Lawmakers also have lost the ability to pursue a “mock markup” process that previous implementing bills have undergone. In mock markups, lawmakers will introduce amendments to draft implementing legislation as a means of offering their input in the drafting of the final implementing bill. Skipping that informal step has drawn the ire of some members of Congress.

USMCA could still face some roadblocks, however, as Mexico has taken issue with some of the provisions in the implementing bill. Mexican officials claim the bill includes enforcement language that differs from what was agreed to in the protocol of amendment, which the Mexican Senate ratified on Dec. 12. Mexican Under Secretary for North America Jesús Seade was slated to meet on Monday with U.S. Trade Representative Robert Lighthizer to discuss enforcement provisions -- specifically the potential appointment of labor attachés -- that have worried Mexico's government. Senate Majority Leader Ricardo Monreal, in a Dec. 15 tweet, said the Senate would reject “any possibility of establishing an additional mechanism” that “goes against the goodwill and spirit” of the protocol of amendment. “The only changes approved at #TMEC are those included in the Modifying Protocol....We will oppose any measure that breaks the limits,” he continued.

The U.S. Chamber of Commerce on Monday called on Congress to pass USMCA. “Even with some shortcomings, USMCA is a strong deal overall that represents a hard-fought bipartisan victory,” Chamber CEO Thomas Donohue said in a blog post. “It’s also a testament to the tenacity of the American business community and its ability to forge consensus on even the most difficult issues. With the finish line in view, we encourage lawmakers on both sides of the aisle to do what’s best for our economy by voting yes on USMCA.”

The submission of the implementing bill capped a hectic week in trade, with lawmakers and business groups still digesting the ramifications of a phase-one trade deal with China that was announced earlier on Friday. The deal includes commitments from the U.S. not to implement tariffs on about $160 billion worth of Chinese goods and to cut 15 percent tariffs on roughly $120 billion worth of U.S. goods to 7.5 percent. The U.S.’ 25 percent tariffs on $250 billion worth of Chinese goods will remain in place.

According to U.S. Trade Representative Robert Lighthizer, the U.S. and China hope to sign the 86-page deal in the first week of January, after it has undergone a legal scrub and translation. The deal is expected to be signed at the principal level.

Business groups and lawmakers called on the administration to continue negotiations with China, with some contending the phase-one deal constituted legitimate progress on key issues while others saying it fell well short of administration promises.

Senate Majority Leader Chuck Schumer (D-NY), in a tweet on Friday, said President Trump “has sold out for a temporary and unreliable promise from China to purchase some soybeans.”

Rep. Bill Pascrell (D-NJ) offered an even harsher criticism of the phase-one deal. “This trade agreement made between the United States and the China must be a dead letter,” he said in a statement Friday. “The chaos of Trump’s trade war has battered Americans so badly that the Trump administration resorted to full-blown socialist payoffs to farmers to curry electoral favor. Now Trump is rushing to consummate some deal, any deal, so he can run away from the catastrophic mess he alone created. By the terms we’ve seen, America is getting taken to the cleaners one more time. You need a microscope to find what U.S. goals this flimflam achieves. And it is farcical to imply China will make further concession in a second phase. Trump may be the most incompetent deal-maker since Napoleon gave us the Louisiana Purchase.”

Business groups applauded the lowering of tariffs, but some said the administration must continue negotiations to ensure more structural reforms in China. In a statement on Friday, the Business Roundtable said it welcomed the “de-escalation in trade tensions” but urged “both governments to continue progress toward additional structural reforms in China and tariff relief.” Chamber Executive Vice President and Head of International Affairs Myron Brilliant urged the administration to “keep its eye on the prize” and “reach a comprehensive agreement in six months.”

Lighthizer, on CBS’ “Face the Nation,” said the next stage in negotiations will very much depend on how China implements phase-one. He also pushed back on criticism that the U.S. did not get enough in the first stage of talks.

“It was always going to be in phases. The question was, how big was the first phase?” Lighthizer said. “Anyone who thinks you're going to take their system and our system that have -- that have worked in a very unbalanced way for the United States and in- in one stroke of the pen change all of that is foolish. The president is not foolish. He's very smart. The question was, how big- how big was the first phase going to be? This is going to take years. We're not going to resolve these differences very quickly.”

When the Ways & Means Committee convenes on Tuesday it will also consider a resolution that reaffirms U.S. support for the World Trade Organization, but lists a myriad of concerns with the body and emphasizes its need for reform. The resolution, introduced by Rep. Ron Kind (D-WI), expresses support for many of the criticisms the Trump administration has hurled at the WTO.

The U.S. crippled the WTO’s Appellate Body last week with its continued block of new nominations to the panel. The terms of two members expired last week, leaving the Appellate Body with only one member; it needs at least three to hear or rule on an appeal.

The resolution makes no mention of the U.S. block of nominations but reiterates longstanding complaints about how the Appellate Body functions. “[T]he WTO is the preferred forum in which member economies resolve disputes that arise among them,” and “the United States has consistently supported having a functional, efficient dispute settlement mechanism at the WTO that strictly follows the Dispute Settlement Understanding as agreed by all WTO members and remains accountable to WTO members,” the resolution says.

The resolution also takes a not-so-subtle shot at other WTO members for not addressing U.S. complaints, saying that “for over a decade, most WTO members have refused to engage in serious efforts to address longstanding United States calls for reform of dispute settlement and other important aspects of the WTO system.”

Some WTO members have offered proposals aimed at addressing U.S. concerns. But the U.S. has said members have failed to address the issue of why the Appellate Body has driven off course to begin with -- a prerequisite, in the U.S.’ view, for reform moves.

The resolution also backs several other U.S. criticisms of the WTO, including the charge that members fail to abide by notification requirements, the use of special and differential treatment, and the confidentiality of hearings and submissions in the dispute settlement process.

Events

  • The Global Business Dialogue on Tuesday will hold an off-record event on trade policy developments in 2019 -- and there have been a few. Panelists will include Carrie Goodge O'Brien, trade policy counselor at the Embassy of Canada; Tomas Baert, trade head at the Delegation of the European Union to the U.S.; Angela Ellard, chief trade counsel for the House Ways & Means Committee; Terence Stewart, former managing partner at Stewart and Stewart; Claire Reade, senior counsel at Arnold and Porter; and Sergio Gomez Lora, CEO of the Business Coordinating Council of Mexico.
  • The Hudson Institute on Tuesday will hold a panel discussion on the role of global standards in the “battle for 5G leadership.” Participants will include Deputy Assistant Secretary of State for Cyber and International Communications and Information Policy Robert Strayer; Susan Armstrong, senior vice president of engineering at Qualcomm; John Neuffer, CEO of the Semiconductor Industry Association; Jeremie Waterman, president of the U.S. Chamber of Commerce's China Center; and Hudson senior fellows Thomas Duesterberg and Harold Furchtgott-Roth.
  • The WTO’s Dispute Settlement Body will meet on Wednesday. The U.S. is expected to again block the appointment of new members to the Appellate Body.
  • The American Enterprise Institute on Thursday will host Sen. Pat Toomey (R-PA) for a discussion with AEI President Robert Doar and resident scholar Derek Scissors centered on the question: “Does USMCA fall short on free trade?” Toomey has been an outspoken critic of USMCA. -- Brett Fortnam (bfortnam@iwpnews.com)

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