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This Week In Trade

G7 Summit, Cotton Compliance Panel, Green Goods, Approps In Congress

Posted: June 02, 2014

Posted: June 2, 2014

Topping the trade agenda this week will be President Obama's trip to Europe for the G7 summit and a potential decision by Brazil on whether to move to the next stage of litigation in a longstanding World Trade Organization dispute with the U.S. over subsidies for cotton and other agricultural products.

In addition, Commerce is also slated tomorrow (June 3) to announce its preliminary determination in the countervailing duty (CVD) investigation of Chinese solar panels containing third-country cells made with Chinese components. SolarWorld, the petitioner in the case, hopes that this will close what it sees as a loophole in the earlier antidumping (AD) duty and CVD orders from 2012, which imposed duties only on Chinese cells on the basis that the cell confers the origin of a solar panel. Separately, it is also pursuing AD duties on Taiwanese solar cells.

This week will also feature a hearing by the Office of the U.S. Trade Representative on the new green goods initiative announced in January by the U.S. and 13 other WTO members, as well as a Senate subcommittee markup of an appropriations bill for Commerce, Justice, Science and related agencies (CJS).

Obama will travel to Warsaw, Brussels, Paris and Normandy in his June 2-6 trip, which will include discussions on the Transatlantic Trade and Investment Partnership (TTIP), according to Deputy National Security Adviser Ben Rhodes. Rhodes, speaking in a May 30 conference call with reporters, said Obama would raise the trade deal in his discussions with European allies, as well as issues related to the North Atlantic Treaty Organization, ongoing events in Ukraine, and diversification of European energy sources.

The president will meet with Polish President Bronislaw Komorowski, Polish Prime Minister Donald Tusk and Ukrainian President-elect Petro Poroshenko during his visit to Poland. On Wednesday (June 4), Obama will travel to Belgium, where he will meet with King Philippe of Belgium before attending the G7 summit, which is slated for June 4-5.

The summit will include discussions on the global economy, energy and climate issues, as well as a working lunch on development. Also in Belgium, Obama will participate in a bilateral meeting with United Kingdom Prime Minister David Cameron. He will then travel on Thursday (June 5) to Paris, where he will meet with French President Francois Hollande.

On the cotton dispute, Brazil has made clear it will request a WTO compliance panel by the end of this month if the two sides cannot reach a mutually agreeable solution. If Brazil wants to make that request at a June 18 meeting of the WTO Dispute Settlement Body (DSB), it would have to propose the item be added to the DSB agenda by the deadline of June 7. Alternatively, Brazil could later this month request a special session of the DSB to consider a compliance panel request.

U.S. and Brazilian officials met May 23 in Washington to try to resolve the dispute. “We talk with our Brazilian counterparts on a regular basis in our work to reach a negotiated solution to this dispute,” a USDA official said at the time.

In Washington, USTR will hold a hearing on Thursday (June 5) on a proposed initiative aimed at eliminating tariffs on environmental goods, as part of its consultations ahead of the official launch of those talks. The hearing is slated to be chaired by Assistant USTR for Environment and Natural Resources Jennifer Prescott and Assistant USTR for Trade Policy & Economics Doug Bell.

Under the expired 2002 Trade Promotion Authority law, USTR was required to notify Congress 90 days before launching any new trade negotiations and then engage in consultations with Congress, and the administration still follows this consultation requirement. The consultation period for this initiative will end mid-June.

In Congress this week, the appropriations process continues, with a Senate subcommittee slated to markup a CJS funding bill. The House late last week passed a CJS funding bill that included language aimed at preventing USTR from negotiating trade agreements that would further open up the U.S. government procurement market to other countries.

Also under that bill, USTR would receive $53.5 million for FY2015, which is a 1.7 percent increase compared to the funding the agency received under the FY2014 appropriations passed in January, but is 4.7 percent less than the amount the administration had requested.

House Ways and Means trade subcommittee Chairman Devin Nunes (R-CA) said in a May 30 statement that he had intended to introduce an amendment to the House CJS bill prohibiting USTR from negotiating or entering into a trade agreement that “excludes any products from full tariff elimination.”

He said he was “deeply concerned” that, in the Trans-Pacific Partnership (TPP) negotiations, countries such as Canada and Japan are seeking to “exclude critical agriculture products from full tariff elimination.” President Obama delivered the message to Japanese Prime Minister Shinzo Abe in April that the U.S. would not insist Japan eliminate all tariffs on beef and pork in a TPP deal.

But Nunes said he ultimately opted not to offer the amendment after receiving assurances from U.S. Trade Representative Michael Froman that he would work closely with Nunes and Ways and Means Committee Chairman Dave Camp (R-MI) to conclude a “strong and ambitious” TPP and keep the two lawmakers informed about the details of the negotiations. “I take that commitment very seriously, and it is only with this specific understanding that I am not offering this amendment tonight,” he said.

Froman this week will hold a series of meetings with government and private-sector officials, including a June 2 speech at the annual conference of the American-Turkish Council, a business association that promotes bilateral commercial, defense, technology and cultural relations.

Froman will meet Tuesday (June 3) with former Sen. Ben Nelson, who now serves as CEO of the National Association of Insurance Commissioners. This meeting could cover negotiations for a Trade in Services Agreement, as well as the EU's Solvency II directive, which is relevant in the context of the TTIP negotiations.

Under that directive, an EU insurance company is deterred from operating in a market not deemed to be equivalent from a regulatory standpoint because it would face heavy regulatory penalties for doing so. The directive also prevents foreign companies from operating in the EU market if their regulatory systems are not determined to be equivalent – a major potential problem for U.S. insurers.

Froman will also meet Friday (June 6) with Juan Gabriel Valdes, the new Chilean ambassador to the U.S. This meeting will follow on the heels of a trip by a U.S. delegation, led by Assistant USTR for the Western Hemisphere John Melle, to Santiago and Lima for committee meetings related to the U.S.-Chile and U.S.-Peru free trade agreements.

Also this week, the WTO Agriculture Committee will meet June 5-6, where members are expected to press the U.S. on provisions in the new farm bill. Argentina, India and Indonesia submitted questions ahead of the meeting covering topics such as reference prices under the new Price Loss Coverage (PLC) program, the number of farms eligible to receive support and whether the U.S. will notify PLC payments under its amber box subsidies.

The committee will also include a dedicated discussion of the export competition policies of WTO members, in line with the decision on the export competition agreed at the WTO's December ministerial meeting in Bali. This discussion will be based on members' notifications as well as a background document circulated by the WTO secretariat that is based members' responses to a questionnaire on this topic.