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This Week In Trade

As tariff exclusion talks continue, Republicans mull bill to nullify them

Posted: March 12, 2018

President Trump’s Section 232 steel and aluminum tariffs will continue to dominate the minds of foreign leaders seeking exemptions to them this week as the date of implementation ticks closer, while Republicans on Capitol Hill are mulling legislative options to narrow or nullify the tariffs – and the political world will be closely watching a heated House race in Pennsylvania that Trump has tied closely to his trade agenda.

The list of countries actively seeking exemptions to the 25 percent steel tariff and 10 percent aluminum tariff grew over the past few days, with Japan, the European Union, South Korea, France and Argentina all known to have raised the issue either with U.S. Trade Representative Robert Lighthizer or with Trump himself. Canada and Mexico have received exemptions, albeit for a non-specific period and, according to the U.S, conditioned on the NAFTA negotiations.

Additional clarity on how the exemption process will work is expected this week. EU Trade Commissioner Cecilia Malmstrom and Minister for Economy and Industry of Japan Hiroshige Seko requested exemptions from the tariffs during a meeting with Lighthizer this weekend but were left in the dark on the U.S. procedure for such exclusions, according to Malmstrom.

Australian Prime Minister Malcom Turnbull appeared to have made more headway by working directly with Trump on the issue. “Great discussion today on security and trade. Australia/U.S. trade is fair & reciprocal & each of our nations has no closer ally,” Turnbull tweeted on Friday evening after speaking with Trump. “Thank you for confirming new tariffs won’t have to be imposed on Australian steel & aluminum - good for jobs in Australia and in U.S.!”

The U.S. has said that if an ally can agree to “satisfactory alternative means” to address threats to national security caused by steel and aluminum imports, tariffs can be removed or modified. According to Trump, Australia and the U.S. are quickly” negotiating a security agreement that will lead to the tariffs being lifted – but Australia has pushed back against that account, saying only that routine paperwork must be signed. 

Trump has put Lighthizer in charge of negotiating with other countries.

Meanwhile, some Republican senators took to the major Sunday talk shows to push back against Trump’s tariffs. Sen. Jeff Flake (R-AZ), often a critic of Trump’s, said on NBC's Meet the Press that a bill to block the tariffs “ought to be introduced now.” Flake last week said he would “immediately draft and introduce legislation to nullify these tariffs” and urge his colleagues to pass it.

Sen. Cory Gardner (R-CO) said he and lawmakers have “legislative tools at our disposal” to narrow or eliminate the tariffs but pointed out that getting the president to sign such a bill would be a challenge.

“The question is, of course, how do we get that to the president for his signature? Our founders set up a system where the president has to agree with legislation that comes out of Congress,” Gardner said on CBS’ Face the Nation. “And there are ways that we can narrow the framework that the president is using to increase or levy those tariffs. There are things that we can do.”

“So let's work and spend the next few weeks trying to figure out exactly how narrowly tailored these tariffs can be, go after the bad actors,” he added.

Most Republicans and some Democrats, including Senate Minority Leader Chuck Schumer  (D-NY), have decried the tariffs as poor economic and diplomatic policy.

The Section 232 tariffs will be a large topic of discussion among industry representatives on Tuesday morning at an event hosted by the Washington International Trade Association, where trade enforcement in the Trump administration will be discussed. Heidi Brock, president and CEO of the Aluminum Association; Wendy Cutler, vice president and managing director of the Asia Society Policy Institute; Nova Daly, senior public policy adviser at Wiley Rein LLP; and Rufus Yerxa, president of the National Foreign Trade Council, will be among the participants.

The Business Roundtable will get another crack at blasting the tariffs Tuesday morning when it holds a conference call to discuss its first quarter 2018 CEO economic outlook survey results. Jamie Dimon, chairman and CEO of JPMorgan Chase & Co., and Joshua Bolten, president and CEO of the Business Roundtable, will be on the call.

Trump on Saturday used a campaign rally for Republican House candidate Rick Saccone in Pennsylvania’s 18th district to tout his announced tariffs. “They’re opening a lot of the steel mills up because of what I did,” Trump said in the district that’s home to thousands of steel jobs. “Steel is back and aluminum is back too.”

Voters go to the polls on Tuesday to decide between Saccone and Democrat Conor Lamb in a race seen as an early bellwether for the fall midterms.      

Congress will have its hands full with other trade issues as well this week. A pair of House committees will address trade and national security in separate hearings on export controls and the Committee on Foreign Investment in the U.S.

The House Foreign Affairs committee on Wednesday will hold a hearing on hearing titled “Modernizing Export Controls: Protecting Cutting-Edge Technology and U.S. National Security.”

The Trump administration last month injected some momentum into the export control reform project the Obama administration began by issuing notices – from the Commerce and State departments – seeking comments on revisions to the U.S. Munitions List and Commerce Control List covering exports of explosives, protective equipment and military and intelligence electronics.

The Obama administration set out to review all 21 USML categories with the aim of moving less sensitive items from the USML – where export licenses are required – to the CCL, where a larger range of export exceptions are allowed.

The Obama administration was able to reform all but three USML categories: firearms, explosives and artillery. Those reviews were seen by Obama administration officials as too political, both domestically and internationally, to be completed.     

Testifying in front of the House Foreign Affairs Committee on Wednesday will be Mario Mancuso, a partner at Kirkland and Ellis, LLP, and a former under secretary of Commerce for industry and security; and Kevin Wolf, a partner with Akin Gump Strauss Hauer and Feld, LLP, and a former assistant secretary for export administration in Commerce's Bureau of Industry and Security.

On Thursday, the House Financial Services Monetary Policy and Trade Subcommittee is set to hold a hearing to evaluate CFIUS “administration Perspectives.”  The committee likely will continue to assess Sen. John Cornyn’s (R-TX) bill to expand CFIUS’ jurisdiction, the Foreign Investment Risk Review Modernization Act of 2017 or FIRRMA. Administration officials have backed the bill but concerns remain among some in the business community, as well as House and Senate lawmakers, who fear the bill would chill foreign investment in the U.S. and seriously undermine the U.S. export control regime.

Also on the hill this week: A likely confirmation vote for Trump's nominee to lead Customs and Border Patrol Commissioner, Kevin McAleenan, who is already acting in the role.

Wednesday morning, Commerce Secretary Wilbur Ross and Transportation Secretary Elaine Chao will appear before the Senate Commerce, Science and Transportation Committee for a hearing on rebuilding infrastructure. Democrats have slammed the Trump administration’s infrastructure plan for not including strong Buy America rules, although Trump has signaled a willingness to including such rules.

Earlier on Thursday, the Washington International Trade Association will bring together industry and academic voices to discuss Brexit one year after Article 50 was triggered. Participating will be Karl Brophy, CEO of Red Flag Consulting; Marjorie Chorlins, executive director of the U.S.-UK Business Council; former Irish Minister for European Affairs Lucinda Creighton, CEO of Vulcan Consulting Ltd.; Nile Gardiner, director of the Heritage Foundation's Thatcher Center for Freedom; and Thomas Wright, director of the Brookings Institution's Center on the United States and Europe.

NAFTA is on the agenda as well this week. On Thursday, the Johns Hopkins University Paul H. Nitze School of Advanced International Studies will hold a discussion on “NAFTA 2.0 – The Role of the Canadian Private Sector,” with Brian Kingston, vice president for international and fiscal issues at the Business Council of Canada.

And on Friday, the Heritage Foundation will hold a discussion on the national security implications of withdrawal from the deal, which Trump continues to threaten. Former U.S. Ambassador to Mexico John Negroponte, vice chairman of McLarty Associates; former U.S. Ambassador to Mexico Earl Wayne, public policy scholar at the Woodrow Wilson Center; Eric Farnsworth, vice president of the Americas Society and the Council of the Americas; Juan Zarate, chairman of the Financial Integrity Network; and David Shedd, visiting fellow at the Heritage Institute for National Security and Foreign Policy, will participate. – Jack Caporal (jcaporal@iwpnews.com)