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This Week In Trade

USTR holds hearings in Vietnam probes; EU eyes year-end deals

Posted: December 28, 2020

The Office of the U.S. Trade Representative this week will hold hearings to inform its Section 301 investigations into Vietnamese timber and currency practices, while European negotiators are pushing to finalize deals with the UK and China that could have impacts on trans-Atlantic relations.

USTR’s timber hearing is slated for Monday and the currency hearing is scheduled for Tuesday. Vietnam’s currency practices have been the subject of heightened scrutiny in recent months: In November, the Commerce Department issued preliminary countervailing duties on Vietnamese tires, citing Hanoi’s undervalued currency, and earlier this month the Treasury Department named Vietnam a currency manipulator.

Monday’s timber hearing features testimony from 19 witnesses from Vietnamese and U.S. wood and furniture associations and business groups. Tuesday’s hearing on currency will include a more varied cast, with 22 witnesses expected to testify -- including Luc Can, from the Bank for Development and Investment of Vietnam. The bank has denied the U.S. charges of currency manipulation. The United Steelworks, HanesBrands, General Electric, Semiconductor Industry Association, National Pork Producers Council and the U.S. Chamber of Commerce are among the groups that will be represented at the hearing.

Many of the groups testifying on Tuesday have urged USTR to delay the hearing in light of Treasury’s decision to name Vietnam a currency manipulator. In a Dec. 18 letter, several industry associations said Treasury’s finding, which was issued after the public comment period for the hearing closed, “could have substantial impact on the ongoing investigation.”

How far the Trump administration will go in its waning days to take actions against Vietnam remains unclear. Some sources and analysts believe the Trump administration will move to impose tariffs before leaving office in just over three weeks. Trump last week spoke with Vietnam’s prime minister, Nguyen Xuan Phuc, raising “concerns regarding the trade deficit” and urging Vietnam to “take bold steps to ensure fair and reciprocal trade between the United States and Vietnam,” the White House said in a statement.

Congress, meanwhile, is back in Washington, DC, this week, as the House has scheduled a Monday evening vote to override President Trump’s veto of the fiscal year 2021 National Defense Authorization Act. The NDAA includes several provisions aimed at China, including one calling for the creation of a Multilateral Semiconductors Security Fund. The fund would be open to participants willing to impose export controls on China similar to restrictions the Commerce Department has in place.

The House and Senate overwhelmingly passed the bill earlier this month, but it was vetoed by Trump because it requires military bases named after Confederate officers to be renamed and does not repeal Section 230 of the Communications Decency Act, which provides protections for internet service providers for content posted on their sites by third parties.

Budget bill

The president on Sunday signed an omnibus spending and coronavirus relief package passed by Congress last week, averting a government shutdown. He had threatened to veto it.

The bill provides $55 million for the Office of the U.S. Trade Representative in fiscal year 2021, plus $15 million for the Trade Enforcement Trust Fund. The White House had requested $60 million and $13 million.

The U.S. International Trade Commission, meanwhile, is in line for $103 million, an increase of $3.6 million over fiscal year 2020 “to execute a record enforcement caseload,” as the Senate Appropriations Committee put it in a statement. ITC Chairman Jason Kearns earlier this year warned that the agency was facing a funding crunch due to its “record-high workload across all mission areas.”

The bill also includes a slew of requirements for agencies to compile reports on China, assessing whether the country exploited the pandemic to advance its economic and political goals and if partner countries have sufficient export control regimes. It also calls for an evaluation of recommendations made by a cyberspace commission that said the U.S. has “a China problem.”

Eyes on Europe

European negotiators remain busy in the last days of 2020, as the United Kingdom and European Union reached a Christmas Eve Brexit deal that will keep the two from imposing tariffs on each other once the calendar flips to 2021 and the UK leaves the EU’s single market. The deal, however, does create non-tariff barriers, as the UK has not agreed to abide by all EU regulations.

With its newfound autonomy, the UK is intent on striking trade agreements with major partners, including the U.S. Time for a deal between the two sides may be running out, however. A formal negotiating round has not taken place since October and no talks are scheduled before the Trump team leaves office. Though President-elect Biden will be inaugurated in January, his trade team likely will not be installed for several months. Biden has named his pick for USTR, Katherine Tai, but has not announced who her deputies will be. He also has said he does not plan to ink new trade deals until domestic priorities are addressed.

Complicating matters is the pending expiration of Trade Promotion Authority. For a deal to be considered under TPA, the administration must submit it to Congress before April 1.

The timelines don’t seem to daunt U.S. Ambassador to the UK Woody Johnson. “We’ve already signed 3 post-Brexit deals that will help both of our countries!” he tweeted on Monday. “More deals on the way!”

Johnson was similarly optimistic on Sunday (often a day of marked disappointment for the New York Jets owner). “Free trade between our countries will lift us all to prosperity,” he said in a tweet accompanied by an August 2019 photo of U.S. and UK negotiating teams. “Our trade negotiations are making great progress. We will get this done,” he added.

USTR Robert Lighthizer earlier this month called a trade agreement with the UK “extremely likely,” but noted “serious issues” remained, including agricultural provisions and standards. He also nodded to the incoming administration as a factor.

European negotiators are close to striking an investment treaty with China. Both sides are aiming to complete a deal by the end of the year, with the South Morning China Post reporting that no EU member states on Monday objected to finalizing an agreement, paving the way for negotiators to complete talks.

The deal could have impacts on U.S.-EU relations. Biden has said the U.S. will seek to galvanize allies to pressure China to curb illicit trade and investment policies, and an EU-China agreement right before Biden takes office could make the new president’s path more challenging.

Jake Sullivan, Biden’s pick for national security adviser, last week responded to reports of a looming EU-China deal by tweeting -- in a statement that raised eyebrows on both sides of the Atlantic -- that “The Biden-Harris administration would welcome early consultations with our European partners on our common concerns about China's economic practices.” -- Brett Fortnam (bfortnam@iwpnews.com) with Dan Dupont (ddupont@iwpnews.com)