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This Week In Trade

U.S.-China talks to continue this week; aircraft tariffs go into effect

Posted: October 15, 2019

Trade negotiations between the United States and China will continue this week, with deputy-level officials scheduled to discuss outstanding issues for the phase-one deal that President Trump announced last week. Meanwhile, the U.S. on Monday received final authorization from the World Trade Organization to impose retaliatory tariffs on European aircraft, agricultural and industrial products for subsidies four EU member states provided to Airbus.

Trump announced “one of the biggest deals ever made” on Friday, but admitted the agreement had not yet been written down. Treasury Secretary Steven Mnuchin on Monday said the two sides had reached “a fundamental agreement in principle,” but acknowledged that outstanding areas still had to be agreed to before the U.S. could agree not to impose tariffs on $160 billion worth of Chinese goods on Dec. 15.

“There’s a fundamental agreement in principle,” he told CNBC. “We’ve gone through these chapters many times. There’s still some issues that need to be worked out in wording, but I would say we have every expectation that phase one will close.”

U.S. and Chinese negotiators will continue to work to get the deal in writing, with the hope that Trump and Chinese President Xi Jinping could sign a phase-one agreement when they meet at the APEC leaders summit in Chile, which is set for Nov. 16-17. After deputy-level officials talk this week, Mnuchin, U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He will hold a conference call next week. Deputies likely will then schedule talks before the APEC summit and a principal-level meeting in Chile likely will precede a Trump-Xi sit-down, Mnuchin said.

According to Mnuchin, China has agreed to lift tariffs on U.S. agricultural products as part of its agreement to buy $40 billion to $50 billion worth of agricultural goods. China agreed to step up its ag buys in June after Trump met with Chinese President Xi Jinping on the sidelines of the G20 summit in Osaka, Japan, but Chinese purchases did not live up to the U.S. hopes, as Chinese buyers complained about the cost of the U.S. goods because of the Chinese retaliatory tariffs.

Trump on Friday said the agricultural purchases would be made over “two years, but it'll go a long time into the future,” though he did not elaborate. Mnuchin told CNBC there would be “some scaling up to get” to the level of promised purchases, but said that ramping-up would happen over a short period of time.

Treasury’s biannual report on the macroeconomic and foreign exchange policies of major trading partners is due to Congress on Tuesday. Treasury published its last report on May 28, six weeks after a statutory deadline. Since the last report, the U.S. has named China a “currency manipulator.” Mnuchin and Trump said the phase-one deal between the U.S. and China would include currency provisions.

The Commerce Department is also expected this week to publish regulations implementing Trump’s May executive order on the information communications technology supply chain that could restrict U.S. companies from buying certain Chinese products.

Airbus tariffs

The WTO’s Dispute Settlement Body met on Monday and authorized the U.S. to impose retaliatory tariffs on $7.5 billion worth of EU goods. The U.S. tariffs are scheduled to go into effect on Friday. A WTO arbitrator authorized the U.S. retaliation earlier this month.

The EU blasted the arbitrator’s decision on Monday, claiming it was based on faulty assumptions, was “awarding recurring annual countermeasures for an indefinite period in response to non-recurring measures,” and had overvalued the effects of the Airbus subsidies, according to a copy of its statement.

The EU suggested the pending paralysis of the WTO’s Appellate Body could also prohibit a “multilateral determination of compliance,” a lack of which was repeatedly cited in the arbitrator’s decision. “We recall in this respect that the possibility of a ‘multilateral determination of compliance’ will be at serious risk in the very near future in the absence of a functioning multilateral dispute settlement system, and the United States bears the responsibility if that situation were to materialize,” the EU said.

The Appellate Body has only three members because the U.S. has been blocking appointments to the panel since mid-2017. The terms of two members expire in December; the Appellate Body cannot hear new cases with fewer than three members.

The Appellate Body will be a priority issue at the WTO’s General Council meeting on Tuesday and Wednesday, as the U.S. is expected to again voice its concerns about the functioning of the WTO’s appeals system.

Turkey faces higher steel tariffs, again

The Trump administration on Monday announced sanctions on Turkey for its incursion into Syria, which will include a boost of steel tariffs from 25 percent to 50 percent. The U.S. imposed 25 percent steel tariffs on most of its trading partners, including Turkey, last March, but Trump announced last August that Turkey would face a 50 percent tariff on its steel products. That was reduced back to 25 percent in May at the same time the U.S. rescinded Turkey’s benefits under the Generalized System of Preferences.

Events

  • Agriculture Department Deputy Secretary Stephen Censky will address the U.S. Grains Council’s 2019 Global Ethanol Summit on Tuesday to discuss the U.S. potential “through collaboration and trade.”
  • The International Monetary Fund and World Bank Group hold their fall meetings this week and will release their World Economic Outlook.
  • The German Marshall Fund on Tuesday will host EU diplomats to discuss the incoming European Commission’s digital policies and how they could affect the U.S.-EU relationship. GMF fellow Susan Ness will lead a discussion with Peter Fatelnig, the minister-counselor for digital economy policies at the EU delegation to the U.S. and Rainer Wessely, first secretary for trade and agriculture at the delegation.
  • The Carnegie Endowment for International Peace will hold a discussion on Wednesday on whether Asia can benefit from U.S.-China trade war featuring CEIP scholar Trinh Nguyen and Evan Feigenbasum, CEIP’s vice president for studies.
  • On Thursday, the Woodrow Wilson Center and the Nixon Foundation will hold a forum on U.S.-China relations with Deputy National Security Adviser Matthew Pottinger, WWC President and CEO and former Rep. Jane Harman (D-CA), and Nixon Foundation President, CEO and General Counsel Hugh Hewitt.
  • WTO Director General Roberto Azevêdo will give remarks at the Bretton Woods@75 Gala Dinner in Washington, DC, on Thursday.
  • The East-West Center will discuss America’s trade success with southeast Asia on Friday with Satu Limaye, the East-West Center director, and Malcolm Cook, a senior fellow at the ISEAS-Yusof Ishak Institute.
  • The Council on Foreign Relation on Friday will look at the U.S.-China relationship and the next steps for the global trading system. Participants include former USTR Charlene Barshefsky, Center for International Governance Innovation Paul Blustein, Paulson Institute Executive Director and Vice Chairman Deborah Lehr, and CFR senior fellow Jennifer Hillman. -- Brett Fortnam (bfortnam@iwpnews.com)

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