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This Week In Trade

Lighthizer responds to critics; Congress focuses on U.S.-China relations

Posted: July 20, 2020

U.S. Trade Representative Robert Lighthizer responded to critics of the Trump administration’s trade policy and criticism of his June op-ed in Foreign Affairs with another op-ed for the magazine in which he argues against U.S. participation in the Trans-Pacific Partnership and defends the administration’s strategy with China.

Congress will also be busy on the trade front this week. The Senate Finance Committee will hold a confirmation hearing for the nominee tapped to replace the deputy USTR with the China portfolio as two other committees hold hearings on U.S.-China competition.

Lighthizer spent the bulk of his July 20 Foreign Affairs piece pushing back against the contention that the U.S. should rejoin TPP and focus more on working with other countries to counter illicit Chinese practices. The argument for U.S. participation in TPP, as Lighthizer describes it, is that the U.S. would eventually welcome China into the Asia-Pacific pact with the expectation that Beijing would undertake structural economic reforms -- the very same justification proponents of China’s accession to the World Trade Organization used. Lighthizer said the justification is as faulty now as it was then and would only lead to the loss of U.S. jobs.

The other case for the U.S. joining TPP as a means to counter China is that the 12-nation deal would serve as “a NATO-like counterweight” in the Indo-Pacific, according to the USTR. But Lighthizer argues the “incremental” benefits of U.S. participation in TPP are undermined by the various trade agreements and defense treaties the U.S. already has in place with many TPP members and the tradeoff in the loss of American jobs would not be worth the minimal geopolitical gains.

The U.S. has been able to achieve the same benefits TPP offered through bilateral engagement, Lighthizer contended. The most significant economic argument for TPP was U.S. access to the Japanese agricultural market, which the U.S. secured through a phase-one deal with Japan that did not require nearly the same level of concession that TPP would have, he said.

Furthermore, TPP was not a good trade deal, Lighthizer said. The rules of origin chapter “would have allowed China to set up new auto assembly platforms in Malaysia and Vietnam, divert high-value parts to those plants (up to 55 percent of total content), and flood the U.S. market,” he wrote. The deal also had “weak or unenforceable” rules on labor, intellectual property and currency manipulation and the state-owned enterprises and digital trade chapters “were riddled with loopholes,” the USTR said.

Lighthizer criticized the “armchair internationalists” who claim the Trump administration has not worked enough with its allies on China. The USTR cited U.S. work with the European Union and Japan that has produced proposed changes to WTO rules on subsidies. The U.S. is also engaging with allies on 5G and investment screening, although Lighthizer did not mention any partners on those issues by name.

“Getting U.S. allies to take bold, concerted action is easier said than done, however,” Lighthizer said, noting constant pushback from U.S. allies even at the height of the Cold War “when the U.S. military was the only thing standing between Paris and Soviet tanks.”

On the Hill

The Senate Finance Committee will meet on Tuesday to hold a confirmation hearing for Michael Nemelka, who has been tapped to replace C.J. Mahoney as the deputy USTR for investment, services, labor, environment, Africa, China and the Western Hemisphere. Mahoney has been nominated to be the State Department legal adviser. The Senate Foreign Relations Committee will hold a hearing on Mahoney’s nomination on Tuesday.

Democrats on the Senate Foreign Relations Committee will release a report on Tuesday on “The New Big Brother: China and Digital Authoritarianism.” The report will highlight “China's efforts to develop, export, and institutionalize a new, authoritarian governance model for the digital domain,” according to an announcement by the committee’s minority senators. Senate Foreign Relations ranking member Robert Menendez (D-NJ) will hold a virtual briefing on the report on Tuesday.

The full Senate Foreign Relations Committee will then hold a hearing on Wednesday on “Advancing Effective U.S. Competition with China: Objectives, Priorities, and Next Steps” with Deputy Secretary of State Stephen Biegun.

The Senate Banking, Housing and Urban Affairs subcommittee on economic policy will also convene on Wednesday to discuss “winning” the U.S.-China economic competition. Testifying before the panel are: Walter Russell Mead, a professor of foreign affairs and the humanities at Bard College; Chris Giancarlo, senior counsel at Willkie Farr & Gallagher and former chairman of the U.S. Commodity Futures Trading Commission; Tim Morrison, a senior fellow at the Hudson Institute; Lisa Cook, professor of economics and international relations at Michigan State University; and Martijn Rasser, a senior fellow in the Center for a New American Security's technology and national security program.

The DG search continues

Candidates to be the next WTO director-general will continue their campaigns this week after making their first official appearances before WTO members last week. The eight candidates made their pitches to members over three days at a General Council meeting last week. Inside U.S. Trade is closely following the race.

The Washington International Trade Association will host Nigeria’s director-candidate, former Finance Minister Ngozi Okonjo-Iweala, for a discussion Thursday on her vision for the WTO. Okonjo-Iweala previously spoke with Inside U.S. Trade about her candidacy to replace outgoing WTO Director-General Roberto Azevêdo.

The WTO will hold a General Council meeting on Wednesday and Thursday. Members are likely to discuss appointing an acting director-general while the nomination process plays out after Azevêdo steps down at the end of August. Azevêdo is scheduled to have a press conference after the General Council meeting on Thursday.

Events

  • Sen. Mitt Romney (R-UT) will discuss the U.S.-China competition Center for Strategic & International Studies Trustee Bob Schieffer on Tuesday.
  • The House Ways & Means trade subcommittee will hold a hearing on Thursday on “trade, manufacturing and critical supply chains: lessons from COVID-19.” Witnesses for the hearing have not yet been announced.
  • WITA will hold a webinar on Thursday on WTO reform and the Appellate Body impasse. Panelists include EU DG Trade Director Ignacio García Bercero, National Foreign Trade Council President Rufus Yerxa, K&L Gates Partner Stacy Ettinger, and Tailwind Global Strategies founder Bruce Hirsh.
  • The United States Studies Centre will host a webinar on Thursday on the 15 years of the Australia-U.S. Free Trade Agreement. Participants include Australian Ambassador to the U.S. Arthur Sinodinos; former USTR Robert Zoellick; former Australian Prime Minister John Howard; former Australian Ambassador to the U.S. Joe Hockey; former deputy USTR Wendy Cutler; and former Australian Ambassador to the U.S. Michael Thawley. -- Brett Fortnam (bfortnam@iwpnews.com)

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