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This Week In Trade

China talks continue in DC this week; UK Parliament continues search for Brexit fix

Posted: April 01, 2019

Chinese Vice Premier Liu He will be in Washington, DC, for talks with U.S. trade officials later this week as the two sides continue to hammer out the contours of a deal expected to lead to the lifting of at least some U.S. tariffs on Chinese goods.

Liu will also “undoubtedly” meet with President Trump this week, according to National Economic Director Larry Kudlow. Last week, Kudlow said the U.S. would maintain some of its tariffs on $250 billion worth of Chinese goods as a means of ensuring Chinese compliance. Trump, meanwhile, said the U.S. wanted to maintain its 25 percent tariffs on $50 billion worth of Chinese goods. Ten percent tariffs are imposed on the other $200 billion in goods.

Administration officials believe a deal between the U.S. and China is close, according to House Republican lawmakers who met with Trump last week. In the talks, the U.S. is pushing for currency language similar to what is in the U.S.-Mexico-Canada Agreement, as well as concessions from China on forced technology transfers and intellectual property. China has passed a foreign investment law that bans forced tech transfers, but China analysts have described the law as little more than a fig leaf because China does not acknowledges the endorsement of such practices.

Chinese officials have linked the passage of the foreign investment law to U.S. demands for the need for structural reforms to the Chinese economy, according to Rep. Rick Larsen (D-WA), who led a congressional delegation to China last month.

The China negotiations will likely be a key topics at a Christian Science Monitor breakfast Kudlow will address on Wednesday.

This week the British Parliament will hold another series of votes as the United Kingdom searches for a way to leave the European Union after Prime Minister Theresa May's negotiated withdrawal deal failed for a third time last week. The UK has until April 12 to agree on a deal to leave the EU.

After Parliament rejected May’s deal last week, the U.S. Chamber of Commerce called on British lawmakers to reach a consensus on how to leave the EU because it said a no-deal Brexit would “be significantly disruptive to global trade.”

A majority of British lawmakers, in a nonbinding vote, are expected to endorse the UK remaining in a customs union with the EU after the proposition missed a majority by eight votes last week. Switching tactics in backing a customs union would violate May's campaign pledges and split her Conservative Party, but her other options are equally bleak: May could call a general election she would be unlikely to win, accept a no-deal Brexit with all the economic consequences that come with it, or call another referendum on any host of Brexit options.

Any extension to the Brexit deadline, which would likely be necessary for pursuing a customs union or calling a general election, will require unanimous consent of EU leaders. Without a clear way forward, they will be loath to give their backing to any extension if it will just prolong the uncertainty.

British Ambassador to the U.S. Kim Darroch will discuss the future of Brexit at the Council on Foreign Relations on Tuesday. He will be joined by Amanda Sloat, senior fellow at the Brookings Institution's Center on the United States and Europe; Heidi Crebo-Rediker, adjunct senior fellow at CFR; and James Goldgeier, visiting senior fellow at CFR.

Commerce Secretary Wilbur Ross on Wednesday will testify before a House Appropriations subcommittee on his department’s fiscal year 2020 budget request, one day after Under Secretary for International Trade Gil Kaplan is slated to appear before a Senate Appropriations subcommittee to discuss the budget. The Commerce budget request would lower funding for the International Trade Administration by nearly $24 million and increase funding for the Bureau of Industry and Security by $9.6 million from FY2019. ITA’s budget request would allocate $2.9 million to implement the Foreign Investment Risk Review Modernization Act and another $3.3 million “to increase the core competencies and sectoral expertise within the Industry and Analysis business unit, with the expectation that these resources will support FIRRMA implementation as necessary,” according a summary released by Commerce. BIS’ budget request would allocate $3 million “for ongoing support of the current, and any future, efforts to process requests for exclusion from tariffs imposed under Section 232,” according to the summary. It would also allocate $2.5 million for the implementation of the Export Control Reform Act and $1.5 million for FIRRMA implementation.

The World Trade Organization on Tuesday will release its 2018 trade statistics and its trade growth projections for 2019-20. A WTO report released in February projected a global economic slowdown in the first quarter of 2019 if trade tensions continued.

Amid reports that the U.S. and Japan will hold trade negotiations as soon as mid-April, the Washington International Trade Association on Wednesday will host a discussion on the future of U.S.-Japan trade. The panel is set to include former U.S. Deputy Trade Representative Robert Holleyman, president and CEO of Crowell and Moring International; former U.S. Ambassador to Malaysia Christopher LaFleur, chairman of the board at the American Chamber of Commerce in Japan; former chief U.S. trade negotiator with Japan and Canada Ira Shapiro, senior East Asia and Pacific adviser at the Albright Stonebridge Group; Daniel Bob, visiting scholar at the Johns Hopkins School of Advanced International Studies' Reischauer Center for East Asian Studies; Wendy Cutler, vice president and managing director of the Asia Society Policy Institute's Washington, DC, Office; Elissa Alben, senior director and global trade policy lead at Pfizer Inc.; and Maria Zieba, international affairs director at the National Pork Producers Council.

The Center for Strategic and International Studies will discuss the new auto rules of origin in USMCA on Thursday with Michelle O'Neill, senior vice president for global government affairs and sustainability at Alcoa; Leila Afas, director of international public policy at Toyota; Charles Uthus, vice president for international policy at the American Auto Council; Jack Caporal, associate fellow at CSIS; and William Alan Reinsch, senior adviser at CSIS. -- Brett Fortnam (bfortnam@iwpnews.com)