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This Week In Trade

Dombrovskis lays out trans-Atlantic agenda: Subsidies, digital taxes

Posted: September 14, 2020

Valdis Dombrovskis, picked to be the next European trade commissioner, wants the United States and European Union to focus on tackling some familiar issues -- aircraft and industrial subsidies, regulatory cooperation -- while injecting new issues, like the trade-related aspects of a European Green Deal, into the mix, he said on Monday.

Dombrovskis gave his first public address after being named to succeed Phil Hogan as trade commissioner. Dombrovskis, one of three EU executive vice presidents, will officially take over the trade portfolio once confirmed by the European Parliament.

Like his predecessor, Dombrovskis wants the U.S. and EU to resolve the longstanding dispute over aerospace subsidies. The U.S. is hitting the EU with tariffs in retaliation for subsidies provided to Airbus and the EU is soon expected to receive authorization from the World Trade Organization to hit the U.S. with retaliatory tariffs for subsidies provided to Boeing. With the aerospace industry reeling from the coronavirus pandemic, the U.S. and EU should not be imposing tariffs on each other, Dombrovskis said.

“The COVID-19 pandemic has had a hugely negative impact on global air travel, affecting both airlines and manufacturers, so the urgency to find a solution to this issue has only increased,” Dombrovsksis said in prepared remarks delivered during a BusinessEurope webinar on Monday. “On the European Union side, our priority is to negotiate a settlement that resolves the existing subsidy issues while at the same time shaping future subsidy disciplines for the sector as a whole.”

Announcements by France and Spain that they have complied with the WTO’s ruling faulting subsidies provided to Airbus provide an opportunity for the U.S. and EU to get past the long-running trade dispute, he said. “This should open the door for the U.S. to drop its countermeasures on EU exports and it gives us a real opportunity to settle this long-running dispute quickly,” Dombrovskis said. “The alternative is not attractive. The award on the Boeing case is imminent, which would allow the EU to impose duties on our side. Instead of imposing tariffs, I want to find solutions.”

The WTO authorization on how much the EU can retaliate against the U.S. could come as soon as this month. The WTO last October allowed the U.S. to impose tariffs on up to $7.5 billion worth of European goods.

Dombrovskis also sought to strike a collegial tone on working with the U.S. on WTO reform -- an issue that has often been a divisive trans-Atlantic topic. “When it comes to WTO reform, the EU and U.S. broadly have the same diagnosis, although we sometimes have different views about the best cure,” he said. “A solution will only come about if we work together. We both agree, for example, that China must do its fair share to renew the multilateral system, and show a willingness to go further in opening up and maintaining a level playing field.”

The EU, U.S. and Japan have already worked together to outline changes the WTO can make on industrial subsidies, he noted, and more work on WTO reform can continue in that vein.

The U.S. and EU also should seek to resolve a burgeoning dispute on digital services taxes via negotiations at the Organization for Economic Cooperation and Development, the new trade commissioner said. OECD talks on how to best handle digital services taxes have largely stalled. The Office of the U.S. Trade Representative has launched a Section 301 investigation into the EU’s consideration of a digital services tax that also covers individual member states’ moves to impose such measures. USTR has concluded an investigation into France’s digital services levy, although the two sides struck a détente set to last until the end of the year.

But if OECD negotiations fail this year, Dombrovskis said the EU will move ahead with a proposal for an EU-wide tax. “We hope for progress at global level, however if not, we will move ahead with a proposal for digital taxes in the first half of next year,” he said. EU member states have tried before to reach a consensus on a digital tax for the entire economic bloc, but those negotiations fell apart in November 2018.

Dombrovskis also said he wanted to work with the U.S. to address trade issues related to climate change. “I also believe it is vitally important to engage with the U.S. on the trade-related aspects of the European Green Deal, including climate change,” he said.

Lastly, he mentioned the U.S. and EU should find ways to advance regulatory cooperation and “uphold our common values and set standards in appropriate areas.”

Canadian retaliation to take effect

Canada is primed to hit $2.7 billion worth of U.S. aluminum and aluminum-containing products with retaliatory tariffs on Wednesday. Ottawa announced the tariffs last month after the Trump administration decided to reimpose Section 232 tariffs on Canada, citing a surge in imports of Canadian aluminum.

The 30-day consultation period for the retaliatory tariffs will close on Wednesday, at which point the tariffs will be enacted. Canadian Ambassador to the U.S. Kirsten Hillman told CBC News on Friday there would be no delay in the imposition of the duties. “Absent any change in [the U.S.] policy, they will take effect next week," she said. “And they will remain in effect until the U.S. eliminates its tariffs against Canada.”

Branstad leaving China

U.S. Ambassador to China Terry Branstad is planning to resign, according to Secretary of State Mike Pompeo. “I thank Ambassador Terry Branstad for his more than three years of service to the American people as U.S. Ambassador to the People’s Republic of China,” Pompeo said on Twitter early Monday morning. “Ambassador Branstad has contributed to rebalancing U.S.-China relations so that it is results-oriented, reciprocal, and fair. This will have lasting, positive effects on U.S. foreign policy in the Asia-Pacific for decades to come,” Pompeo said.

Chinese officials on Monday said they “have not yet received the notice that Ambassador Branstad will step down.” President Trump said Branstad wants to return to Iowa, where he served as governor for many years, to help with the president’s re-election bid.

Events

  • The Commerce Department’s Bureau of Industry and Security on Tuesday will hold a meeting of the Regulations and Procedures Technical Advisory Committee on the implementation of the Export Administration Regulations.
  • Secretary of State Mike Pompeo on Tuesday will deliver remarks during a webinar hosted by the Atlantic Council on “how European nations are awakening to the China challenge.”
  • Netherlands Minister of Foreign Affairs Stef Blok on Tuesday will participate in a Heritage Foundation webinar on “trans-Atlantic cooperation in the COVID-19 era and beyond.”
  • The National Association of Foreign-Trade Zones on Tuesday will host a virtual discussion on U.S. Customs and Border Protections’ new foreign trade zone online reporting program. Jim Swanson, director of the CBP Cargo and Security Controls Division for Cargo and Conveyance Security, is featured.
  • The Center for Global Development on Tuesday will host a webinar on “trade liberalization and Chinese students in U.S. higher education” with Gaurav Khanna, assistant professor of economics, global policy and strategy at the University of California at San Diego; Bilge Erten, assistant professor of economics at Northeastern University; and Justin Sandefur, CGD senior fellow.
  • Singapore Minister for Trade and Industry Chan Chun Sing on Wednesday will participate in a discussion hosted by the Peterson Institute for International Economics on digital trade agreements and whether they can “spur the next round of growth.” PIIE’s Anabel Gonzalez will moderate the discussion between Chan and Caroline Atkinson, the former head of global policy at Google.
  • The House Oversight and Reform subcommittee on economic and consumer policy has invited White House trade policy adviser Peter Navarro to testify on Wednesday about contracts he negotiated to procure ventilators.
  • The Heritage Foundation on Wednesday will host a webinar on China and challenges the next leader of Japan will face. Participants will include Tobias Harris, senior vice president of the Sasakawa Peace Foundation USA; Jeffrey Hornung, political scientist at the Rand Corporation; Mireya Solis, chair in Japan studies at the Brookings Institution; and Bruce Klingner, senior research fellow for Northeast Asia at Heritage.
  • The House Ways & Means trade subcommittee on Thursday will hold a hearing on enforcing the ban on imports produced by forced labor in Xinjiang.
  • The Center for Strategic and International Studies on Thursday will host a webcast on “U.S. Trade and Economic Leadership in the Next Decade.” The discussion will feature former USTR Charlene Barshefsky and CSIS Trade Commission on Affirming American Leadership co-chairs former Sen. William Brock (R-TN) and Frederick Smith.
  • The International Trade Commission on Thursday will hold a teleconference on the competition Washington state raspberry growers face from foreign suppliers.
  • BIS on Thursday will hold a meeting of the Material and Equipment Technical Advisory Council.
  • The Senate Foreign Relations Committee on Thursday will hold a hearing on U.S. engagement in the Indo-Pacific to counter China. Principal Deputy Assistant Secretary for Western Hemisphere Affairs Julie Chung; Philip Reeker, senior bureau official in the State Department's Bureau of European and Eurasian Affairs; and Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell will testify.
  • The Information Technology and Innovation Foundation on Thursday will host a webinar on semiconductor sector competitiveness with Sen. John Cornyn (R-TX), CSIS Technology Policy program director James Lewis, Semiconductor Industry Association President John Neuffer and ITIF’s Stephen Ezell.
  • Reps. Joaquin Castro (D-TX) and Will Hurd (R-TX) on Thursday will take part in a CSIS webcast on “information warfare” and U.S. competition with China.
  • The American Enterprise Institute on Friday will hold a webinar on securing the U.S. technology and communications supply chains. Rep. Mike Gallagher (R-WI) will take part in a discussion with Kathryn Condello, senior director for national security and emergency preparedness at CenturyLink; Robert Morgus, senior director of the U.S. Cyberspace Solarium Commission; Robert Strayer, executive vice president of policy at the Information Technology Industry Council; and Shane Tews, visiting fellow at AEI.
  • British Trade Commissioner for North America Anthony Phillipson on Friday will participate in a webinar hosted by the Atlantic Council on trade flows in the age of automation. -- Brett Fortnam (bfortnam@iwpnews.com)

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