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This Week In Trade

Congress jumps into fray on U.S. deals with Japan, China; Mexico moves budget forward

Posted: November 18, 2019

House lawmakers this week will insert themselves into the conversation on two priority trade pacts the administration has tackled without including the legislative branch in the decision-making process, setting a hearing on the U.S.-Japan deal and a briefing on U.S. negotiations with China.

Meanwhile, the lower chamber of Mexico’s Congress is expected to approve the country's federal budget, which is being closely watched by U.S. labor groups that are concerned about funding for labor implementation reforms required under the U.S.-Mexico-Canada Agreement.

The House Ways & Means subcommittee on trade on Wednesday will hold a hearing on the first-stage agreement the Trump administration struck with Japan and the prospects for a second stage in negotiations.

Trade subcommittee member Stephanie Murphy (D-FL), meanwhile, on Tuesday will hold a briefing with analysts on the trade relationship between the U.S. and China as the administration hopes to complete a phase-one agreement with Beijing.

Ways & Means Democrats have been critical of the administration’s handling of the negotiations with Japan and have gone as far questioning its legal authority to strike a stage-one deal. Reps. Bill Pascrell (D-NJ) and Dan Kildee (D-MI), both committee members, are circulating a letter that questions whether the Office of the U.S. Trade Representative has fulfilled its obligations outlined in the 2015 Trade Promotion Authority law. Pascrell and Kildee plan to send the letter to USTR Robert Lighthizer this month.

The members are seeking answers on USTR’s claims that is has appropriately consulted with Congress and are demanding that USTR furnish advisory reports on the deal, as required by TPA and the 1974 Trade Act. According to the letter circulating among House members, those reports should have been provided to Congress by Oct. 16 -- 30 days after the administration signed the deal with Japan. A spokesman for the Senate Finance Committee said USTR delivered the required reports on Nov. 15.

The lawmakers also want USTR to explain how the deal, which covers some agricultural and industrial goods, meets the World Trade Organization requirement that regional trade pacts must cover substantially all trade.

The Ways & Means Committee has not yet announced the witnesses for Wednesday’s hearing. USTR did not respond to an inquiry last week on whether they would have a representative at the hearing.

Murphy’s briefing on the U.S.-China negotiations will explore the Trump administration’s goals and tactics in the talks as well as the impact tariffs have had on U.S. companies, farmers and consumers -- and “whether there are realistic alternative policy approaches that are more likely to achieve legitimate U.S. objectives,” according to a statement.

Discussing these issues will be Peterson Institute for International Economics fellow Chad Bown, Retail Industry Leaders Association Chief Operating Officer Brian Dodge, Center for Strategic & International Studies fellow Matthew Goodman, Information Technology Industry Council Executive Vice President of Policy Josh Kallmer and former USTR Chief Agricultural Negotiator Darci Vetter.

The U.S. and China are at odds over the extent to which each side will roll back tariffs as part of a phase-one deal, as well as the amount of U.S. farm goods China will be required to purchase. The two sides had initially targeted the Asia-Pacific Economic Cooperation leaders summit in Chile for a meeting between President Trump and his Chinese counterpart, Xi Jinping, but have not scheduled a bilateral meeting since the summit was canceled.

Lighthizer and Treasury Secretary Steven Mnuchin spoke with their Chinese counterparts on Saturday, according to Chinese state-run media. The call came amid reports that Trump had said he would not roll back tariffs. USTR did not respond to a comment asking for a readout of the call.

Mexican budget watch

Mexico’s Chamber of Deputies is expected to approve a federal funding package on Wednesday, the leaders of the country’s lower house said during a press conference last week.

Laura Angélica Rojas Hernández, president the of the board of directors at the Chamber of Deputies, along with Alfonso Ramírez Cuéllar, president of the Chamber’s Budget Committee, said the chamber would continue working “in the next hours” to approve the 2020 budget. “Have no doubt that the Chamber will give Mexico a budget for next year,” Ramírez Cuéllar said. Monday is “Revolution Day” in Mexico, a national holiday.

Mexican President Andrés Manuel López Obrador last month committed to increasing spending on labor reform implementation by 23 percent, according to a letter delivered to House Ways & Means Committee Chairman Richard Neal (D-MA). The promised boost is seen as key for many Democratic lawmakers and labor groups as they weigh whether to support the U.S.-Mexico-Canada Agreement.

“[I]f more funds are needed to implement the proposed changed, you can be assured that I will take the necessary steps with Congress to guarantee the additional funds,” López Obrador said in the Oct. 14 letter.

But one source said that even with the “modest increases” outlined in the letter, “less than 8 percent of the total spending laid out in the letter is projected to occur in FY 2020, the critical first year of the reform plan.”

“Given the widespread resistance to the labor reforms from opposition parties, corporations and protection unions, there are serious doubts that a gradual, voluntary phasing in of the labor reforms will be sufficient to root out the corruption in the existing system,” the source continued.

The source also pointed to political questions about whether sufficient funds would be provided because significant portions of the labor reform implementation are up to the states.

“Moreover, the government’s plan relies on the states to provide nearly half -- 46 percent -- of the proposed reform budget, but of the 10 states that are scheduled to implement the reform by October 2020, eight have governments fully or partly controlled by opposition parties that are hostile to AMLO and his reform program, only two currently have MORENA governors while six have legislative majorities for MORENA and coalition partners,” the source added.

And while the MORENA coalition “may improve its position in 2020 elections, there is no guarantee that the funds for Local Courts and Local Conciliation Centers will be provided, or that they will qualify as ‘sufficient,’” the source said. “This calls into question whether the money that is supposed to fund the local labor courts and conciliation centers will ever be appropriated.”

U.S. questions Appellate Body funding

The U.S. this week will raise questions about the compensation of WTO Appellate Body members, according the agenda for a Friday Dispute Settlement Body meeting. The WTO budget proposal would fund the Appellate Body secretariat staff at 4.6 million Swiss francs per year. The U.S. also raised this issue at a WTO Budget Committee meeting last week.

Also on the agenda is a statement by the DSB chairman on “pending appeals.” The future of the WTO’s appellate function is very much in doubt, as the terms of two of the remaining three Appellate Body members will expire in a matter of weeks, leaving the body unable to hear appeals. WTO Appellate Body members have continued to work on cases they’ve been assigned even after their terms have expired, but it is unclear whether the U.S.' appointed member, Thomas Graham, will decide to do so.

Events this week

  • George Washington University’s Elliott School of International Affairs will welcome French Ambassador to the U.S. Philippe Etienne on Wednesday to discuss France’s perspective on the state of Europe.
  • CSIS on Wednesday will host a roundtable discussing a roadmap for digital trade between the U.S. and United Kingdom after the latter exits the European Union. Participating will be Alexandra Renison, the Institute of Director’s head of Europe and trade policy; ITIC’s Josh Kallmer; CSIS senior adviser Meredith Broadbent; and CSIS senior adviser and Scholl Chair in International Business William Reinsch.
  • Steptoe & Johnson LLP and the Global Business Dialogue on Wednesday will discuss the changing trade dynamic between India and the U.S. Former deputy USTR Susan Esserman, now a partner at Steptoe’s international trade policy practice, will be joined by Shuchita Sonalika, director and North America head at the Confederation of Indian Industry; Abby Pratt, vice president of AdvaMed; Richard Rossow, senior adviser and U.S.-India policy chair at the Center for Strategic and International Studies; Sahra English, MasterCard.
  • The Washington International Trade Association will examine the latest crisis at the WTO on Thursday with Marvin Hildebrand, economic minister at the Embassy of Canada; Stacy Ettinger, partner at K&L Gates LLP; Jennifer Hillman, senior fellow for trade and international political economy at the Council on Foreign Relations; Bruce Hirsh, principal at Tailwind Global Strategies LLC and of counsel at Capitol Counsel LLC; Terry Stewart, former managing partner at the Law Offices of Stewart and Stewart. -- Brett Fortnam (bfortnam@iwpnews.com) with Isabelle Icso (iicso@iwpnews.com)

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