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This Week In Trade

Lighthizer's busy week: Shanghai for talks with China, then back to DC to meet Japan's Motegi

Posted: July 29, 2019

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are headed to Shanghai to restart talks with China this week, after which the USTR will head home to meet with his Japanese counterpart to discuss a possible trade deal.

Chinese President Xi Jinping is scheduled to be in Shanghai while the negotiations are taking place, leaving open the possibility that he could hold an impromptu meeting with the U.S. officials. The negotiating round is the first since Xi and President Trump agreed to re-engage in trade talks last month. The two sides are not expected to reach a deal this week, but instead could set the tone for future engagement. Chinese Vice Premier Liu He will lead the talks for Beijing but he will be joined this time by Commerce Minister Zhong Shan, a noted hardliner.

There are some signs that tensions between the U.S. and China are de-escalating. China has stepped up its purchases of U.S. agricultural products, while the U.S. last week granted requests to exclude certain Chinese products from 25 percent tariffs imposed under Section 301.

“China resumed the purchase of U.S. farm produce while the U.S. administration announced the exemption of additional tariffs imposed on some Chinese industrial products,” a Monday editorial from the state-run Xinhua news service said. “The two sides have shown sincerity in implementing the consensus reached by leaders of the two countries in Osaka and bringing the negotiations back on track.”

Japan talks resume

Japanese Economy Minister Toshimitsu Motegi will be in Washington, DC, on Thursday and Friday to meet with Lighthizer. This will be the first face-to-face meeting between the two principals since Japanese federal elections concluded earlier this month. Negotiations for a limited trade agreement on agriculture and autos are expected to accelerate now that the election is over. Lighthizer has said that an agriculture-centric deal could be completed quickly, with “across-the-board” issues being addressed at a later date.

U.S. and Japanese officials held working-level meetings in Washington last week, according to Japanese media reports. U.S. and Japanese officials hope to conclude an initial deal as soon as late September when Japanese Prime Minister Shinzo Abe will be in New York City for the United Nations General Assembly.

USMCA clock is ticking

The House began its August recess last week, but a group of House Democrats plans to send USTR detailed proposals for how it wants USMCA changed before an implementing bill is submitted to Congress. A working group of House Democrats has now met with Lighthizer four times, with each meeting covering a specific issue of concern for the caucus -- biologic drug exclusivity terms, labor, environment and enforcement.

Sen. Joni Ernst (R-IA) warned late last week that USMCA must be considered by Congress in September or it could fall victim to political posturing ahead of the 2020 election cycle. “Everybody’s going to be positioning, doing political positioning, and it makes it that much tougher,” she told constituents in Jefferson, IA, on Friday. “[Democrats] will not want to give Donald Trump a win on this.”

She also claimed that a vocal minority of Democrats was holding up congressional consideration of the trade pact. “There are a number of people within the Democratic caucus that do not want this to move,” she said, adding that House Speaker Nancy Pelosi (D-CA) was “getting pushback from this minority group within her caucus that’s stalling the bill.”

The Trump administration and USMCA backers in Congress have long claimed that the deal would pass with Democratic support if it were brought to the House and Senate, but how many Democrats will support the deal remains to be seen. House Deputy Whip Henry Cuellar (D-TX), a USMCA supporter, recently suggested the House might not follow the informal Hastert rule on USMCA, meaning the deal could come to the floor even if Pelosi did not have the support of a majority of Democrats in advance.

The Senate Finance Committee will hold a hearing on Tuesday to hear from a spectrum of stakeholders on USMCA. Testifying will be former Agriculture Secretary Tom Vilsack, now the president of the U.S. Dairy Export Council President; former Missouri Gov. Matt Blunt (R), who heads the American Automotive Policy Council; Michael Wessel, the staff chair of the Labor Advisory Committee for Trade Negotiations and Trade Policy and president of the Wessel group; and business owners from Oregon, Delaware, and Nebraska.

Events

While the House of Representatives is out, there are a few trade-related events on the schedule:

  • Former White House trade adviser Clete Willems on Tuesday will discuss U.S. trade relations with the European Union, China and Japan at the Meridian International Center.
  • The Export-Import Bank will hold a meeting on Wednesday.
  • The U.S.-China Economic and Security Review Commission will meet on Wednesday to review its annual report to Congress. Commissioners will hear testimony on the U.S. reliance on China’s biotech and pharmaceutical products. -- Brett Fortnam (bfortnam@iwpnews.com)

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