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This Week In Trade

TTIP Round, TPP After Ottawa, G-20 Ministerial, Ways & Means WTO Hearing, AGOA

Posted: July 14, 2014

Posted: July 14, 2014

With the conclusion over the weekend of an informal Trans-Pacific Partnership (TPP) round in Ottawa, the major focus this week shifts to the Transatlantic Trade and Investment Partnership (TTIP) negotiations, with round six of the talks kicking off today (July 14) in Brussels amid clear signs the negotiations are lagging.

But discussions on TPP will continue in the background, with a new round of U.S.-Japan negotiations on agricultural market access and automobile trade taking place this week in Washington. In addition, U.S. chief negotiator Barbara Weisel and other U.S. trade officials are slated to participate in a well publicized “off the record” discussion of the state of play of the TPP talks tomorrow (July 15) on Capitol Hill.

Also on tap for this week is a July 16 hearing of the House Ways & Means trade subcommittee on advancing the U.S. trade agenda at the World Trade Organization, where Deputy U.S. Trade Representative Michael Punke is slated to testify.

Going into the TTIP round, two developments are already underscoring the extent to which the talks are lagging. Neither side is tabling a government procurement offer, which means they are failing to meet their target date of having all market access offers on the table by the end of the summer. In addition, the European Union has held off on tabling a text for the labor and environment chapter – labeled “sustainable development” in EU parlance – because the U.S. has declined to come forward with substantive ideas, according to Brussels sources.

The EU did table its services offer in advance of the sixth round, after the U.S. tabled its offer in May. EU negotiators are frustrated with a perceived lack of engagement from the U.S. side, which a U.S. business source said is the case throughout all parts of the negotiation. This has spurred doubt on the EU side about Washington's seriousness about getting the deal done with any kind of expediency.

Separately, the new head of the European Parliament’s trade committee last week pledged in an interview with Inside U.S. Trade that he will work to build support in Europe for the idea of a scaled-back TTIP. The parliament is slated to vote tomorrow on the appointment of Jean-Claude Junker as president of the European Commission.

Some observers say the U.S. appears less engaged on TTIP because U.S. officials know it cannot be done before President Obama’s term ends, and so they are instead focusing on concluding the TPP negotiations. But U.S. officials have rejected this idea.

The TTIP round will include a stakeholder presentation forum and a briefing for stakeholders on July 16, followed by a press conference with chief negotiators on July 18. Among the topics that will be discussed during the round are trade in goods and services, regulatory issues, government procurement, environmental protection and labor rights, energy and raw materials, and opportunities for small-and medium-sized enterprises, the commission said in a June 18 announcement.

The informal TPP round in Ottawa ended on July 12 with no specific announcement on when the next negotiating meeting would take place, though TPP countries have informally discussed the possibility of holding another chief negotiators' meeting in September and a ministerial in October. This schedule appears aimed at producing a substantial outcome by the time TPP leaders gather in Asia in November to participate in a series of other meetings – a target that has been publicly proposed by President Obama.

Several TPP countries in Ottawa privately indicated to stakeholders that they are working toward the November target, sources said. But one observer not directly involved in the negotiations pointed out that, by endorsing the November target, the U.S. may have given up some leverage in the talks. This is because the other TPP countries now know the U.S. wants a deal by November and may therefore wait to make concessions until the last minute, hoping that the U.S. will be so desperate to close a deal that it will accept less from them, this observer speculated.

This notion appears to be backed up by comments made privately by Japan's ambassador in Washington to U.S. agriculture representatives suggesting that the U.S. wants a TPP deal more than Japan. The failure of the U.S. and Japan to finish their market access talks or release details about them to other TPP parties remains the biggest obstacle to concluding the TPP negotiations, sources said.

Acting Deputy USTR Wendy Cutler will meet with Japanese official Hiroshi Oe in Washington July 14-15 to discuss market access, followed by a July 16-18 meeting with Japanese official Takeo Mori on auto issues.

In a related development, USTR Michael Froman will meet on July 15 with Koya Nishikawa, a member of the Diet from the ruling Liberal Democratic Party and chairman of the party's TPP committee. Nishikawa held meetings on TPP in Mexico City and Ottawa before visiting Washington this week.

TPP may also be a topic of discussion on the sidelines of the July 17 G-20 trade ministerial meeting in Australia, in which Froman will participate along with several TPP ministers.

One topic that will likely to come up both at the G-20 ministerial and the July 16 Ways and Means trade subcommittee hearing is the uncertain fate of the WTO's Trade Facilitation Agreement.

African countries have been among the developing and least-developed WTO members seeking to link the implementation of the TF agreement to the completion of the Doha round, and it is uncertain to what extent they have backed off that demand.

Africa experts have said this position may complicate renewal of African Growth and Opportunity Act (AGOA), which expires next year. Ways & Means is considering holding a separate hearing on AGOA prior to an August summit of African leaders at which the Obama administration is expected to unveil its proposal for reforming the program.

AGOA will also be on the agenda of Froman, who will discuss the trade preference programs at a July 14 roundtable hosted by the U.S. Global Leadership Coalition, according to USTR.

The same say, Froman will hold separate meetings with the presidents of the United Autoworkers Union and the United Food Workers Union, both of which supported the U.S.-Korea Free Trade Agreement. It is not hard to imagine that the Obama administration may be hoping to get the support of these unions for TPP.

Also taking place this week is the Farnborough Air Show, which could provide a forum for new friction in the longstanding dispute between the U.S. and EU over subsidies provided to their manufacturers of large civil aircraft, Boeing and Airbus, respectively.

Ministers from the four EU member states who support Airbus have publicly spoken out against tax breaks provided by Washington state to Boeing last year for the production of its newest civil aircraft, the 777X. At the Berlin Air Show in May, these ministers suggested that the tax breaks were illegal subsidies that should be reviewed by a World Trade Organization compliance panel that is examining whether the U.S. complied with an earlier ruling faulting federal and state subsidies to Boeing.

Boeing, however, has argued that the new tax breaks do not amount to a subsidy, and that they were specifically structured by Washington state to comply with the earlier WTO ruling.