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This Week In Trade

U.S., UK to launch trade talks this week; Trump again threatens China deal’s termination

Posted: May 04, 2020

The United States and United Kingdom will formally launch negotiations for a free trade agreement this week, the UK announced on Sunday.

The UK framed the launch of the talks as a tool to help the country combat the coronavirus pandemic. “UK-US #trade negotiations start next week,” the UK’s International Trade Department tweeted. “More trade is essential if the UK is to overcome the unprecedented economic challenge posed by Covid-19. We want an agreement benefitting every region and nation of the UK.”

The talks, initially expected to begin in March, had been delayed as both governments focused on grappling with the coronavirus pandemic. The UK can hold trade talks but cannot formally enter into a trade agreement until it leaves the European Union’s single market; the UK and EU have an end-of-the-year deadline to reach a post-Brexit deal.

U.S. officials have said the UK talks will be their top negotiating priority this year -- above phase-two talks with Japan and China or initial negotiations with Kenya.

But despite a chummy relationship between President Trump and British Prime Minister Boris Johnson, the negotiations are not expected to be a breeze, as the UK has several politically sensitive trade irritants that have been flagged repeatedly by the U.S. For instance, the British government has said it intends to impose a digital services tax similar to a French levy that drew the ire of the Office of the U.S. Trade Representative and led to the launch of a Section 301 investigation. The U.S. Agriculture Department has also said it does not expect the UK to deviate from the EU’s agricultural biotechnology regime, a longstanding irritant for U.S. farmers.

The UK, meanwhile, wants the U.S. to lift retaliatory tariffs it imposed over illegal subsidies EU member states -- including the UK -- provided to Airbus.

Even with the potential speed bumps, officials and business representatives on both sides of the Atlantic remain upbeat the two sides can reach a deal. Last week, a trans-Atlantic business group urged both governments to restart the negotiations.

But while the Trump administration pursues another deal, one of its hallmark agreements appears to be in jeopardy. Tensions between the U.S. and China have reached a fever pitch as some administration officials and lawmakers seek to pin the blame for the coronavirus pandemic on China. Political pressure is mounting on the president to take action -- which could include tariffs -- against Beijing, putting the future of the phase-one agreement the U.S. and China signed in January in doubt.

On Sunday, Trump called tariffs “the ultimate punishment” he could bestow on China and threatened to terminate the phase-one deal if China did not meet its purchase requirements. “Now they have to buy. And if they don't buy, we'll terminate the deal, very simple,” he said during a Fox News town hall.

As part of the phase-one deal, China agreed to buy $250 billion more in U.S. goods and services than it did in 2017 over a two-year period. China is not on pace to meet that commitment. Treasury Secretary Steven Mnuchin, nonetheless, on Monday told Fox News he expected China to “meet their obligations.”

Eyeing the ITC

The U.S. International Trade Commission could soon release a report outlining what products the U.S. may need to fight the coronavirus pandemic. The ITC sent the report, requested by Senate Finance Committee Chairman Chuck Grassley (R-IA) and House Ways & Means Chairman Richard Neal (D-MA), to the committees of jurisdiction last Monday, according to an ITC spokeswoman.

The report will be publicly released once the Finance and Ways & Means committees review it, the spokeswoman said. A Finance Committee spokesman said it expected the report’s release would “happen soon.”

Events

  • Chatham House on will host a discussion with former World Trade Organization Appellate Body member James Bacchus on how trade rules can address climate change.
  • On , SupChina will host a day-long conference on U.S.-China relationsthat will include panels on the future of bilateral investment, the U.S.-China trade spat’s potential to devolve into a technological “cold war,” reviving globalization, the future of the supply chains, and the challenges that Chinese companies face in the U.S. Panelists include the Center for Strategic & International Studies’ Scott Kennedy and Jude Blanchette, Asia Society Policy Institute Vice President Wendy Cutler, the U.S.-China Business Council’s Anna Ashton and many others.
  • The Washington International Trade Association on Thursday will host a webinar on the Defense Production Act and buy American provisions as they relate to the government’s response to the coronavirus pandemic. Participants are slated to include former White House trade adviser Clete Willems, a partner at Akin Gump; Jean Heilman Grier, a trade consultant at Djaghe LLC; Scott Paul, the president of the Alliance for American Manufacturing; Jeff Bozman, special counsel at Covington & Burling; and Wendy Cutler. -- Brett Fortnam (bfortnam@iwpnews.com)

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