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This Week In Trade

Canada takes first step toward USMCA's ratification

Posted: May 28, 2019

The Canadian government took the first procedural step toward the ratification of the U.S.-Mexico-Canada Agreement this week as it attempts to get the deal through Parliament before it breaks for the summer -- and for federal elections.

On Monday, Canadian Foreign Minister Chrystia Freeland put forward a ways and means motion on USMCA that the Parliament must approve before it can consider USMCA. The Canadian government is racing against the clock, as Parliament is scheduled to leave for its summer break after its June 21 session. If the trade deal is not ratified by then, it likely will not be taken up by the legislature until after Canada’s federal elections, which are expected to take place in October. Freeland also testified before Parliament’s International Trade Committee about the USMCA on Tuesday.

Parliament’s first steps toward ratification came days ahead of Vice President Mike Pence’s scheduled visit to Ottawa, where he will meet with Prime Minister Justin Trudeau on Thursday. Pence and Trudeau are expected to discuss their countries’ respective USMCA ratification efforts.

Congress does not yet have a timeline for its consideration of USMCA -- and rising political tensions between the White House and House Speaker Nancy Pelosi (D-CA) are complicating ratification efforts. Last week, President Trump said USMCA was “too complicated” for the House speaker, among other insults.

U.S. Trade Representative Robert Lighthizer has been working with House Democrats, including Pelosi, to address the caucus’ concerns about USMCA’s labor, environmental, enforcement and drug provisions. Democrats are expected to create small working groups to work out the issues with USTR.

Trump has suggested that the White House will not work with Congress on any issue unless the House agrees to halt its investigations of the administration.

Across the Atlantic, meanwhile, the provisional results of the European Union’s parliamentary elections are in: The body’s two main centrist parties took a major hit and will be unable to form a ruling coalition. The center-right European People’s Party lost 38 seats and the center-left Socialists and Democrats Party lost 35 seats, leaving Parliament’s two largest groups 45 votes shy of being able to form a coalition. The new EU Parliament is expected to be more trade-skeptical than the last, which could pose problems for any trans-Atlantic trade deal.

New Chinese tariffs on U.S. goods will go into effect on June 1. Beijing has announced it will ratchet up tariffs on $60 billion worth of U.S. goods in retaliation for the U.S.’ increase of tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent.

The U.S. business community has largely panned the escalation of the tariff fight between the U.S., and China. Economists for Federal Reserve Bank of New York have estimated that the new U.S. tariffs on Chinese goods could cost U.S. households $831 per year.

But the Coalition for a Prosperous America, a group supportive of Trump’s trade policies, released a study this week that estimated a 25 percent tariff on all Chinese imports would add $125 billion to the U.S. gross domestic product and 721,000 jobs by 2024.

Comments on the U.S.’ proposed tariffs on the roughly $300 billion of Chinese goods that have not yet been subject to Section 301 tariffs are due on June 17. Trump has threatened to impose 25 percent tariffs on those goods but has yet to commit to them.

The president will wrap up his trip to Japan early this week. While there, he predicted the U.S. could announce the completion of a trade deal with Tokyo as soon as August. Japanese Prime Minister Shinzo Abe was more cautious about the prospects of a quick U.S.-Japan deal, refusing to offer an estimate of when a deal might be achieved. Trump and Abe did agree to “accelerate the talks between the ministers,” Abe told reporters on Monday.

Following British Prime Minister Theresa May's resignation announcement last week, the jockeying to replace her is in full swing among Conservative Party politicians in the United Kingdom. Hardline Brexit supporter Boris Johnson is the presumed frontrunner; his ascension to the prime minister spot would put no-deal Brexit not only back in the race, but potentially at the front of the line. U.S. business groups have warned that a no-deal Brexit would be destabilizing to the global economy. Trump administration officials have expressed support for a harder Brexit to keep the UK further from the European Union, which they say would allow the U.S. to negotiate a more comprehensive trade deal with a post-Brexit UK.

Events this week:

  • The Washington International Trade Association will discuss the latest on the U.S.-China trade talks during a panel on Wednesday morning. Scott Paul, president of the Alliance for American Manufacturing; Erin Ennis, senior vice president of the U.S.-China Business Council; Steve Lamar, executive vice president of the American Apparel & Footwear Association; and John Neuffer, president and CEO of the Semiconductor Industry Association will participate.
  • The Heritage Foundation will host a panel on the state of China’s economy on Thursday with U.S.-China Business Council President Craig Allen, American Enterprise Institute scholar Derek Scissors, Congressional Research Service analyst Wayne Morrison, and Heritage Asia policy analyst Riley Walters.
  • On Thursday, the Asia Society Washington Center will discuss its new report on the role the Asia-Pacific region can play in global trade reforms. Australian Ambassador to the U.S. Joe Hockey will give opening remarks. Asia Society Vice President and former deputy USTR Wendy Cutler, Singaporean Ambassador to the U.S. Ashok Mirpuri, and New Zealand Ambassador to the U.S. Rosemary Banks will take part in a panel discussion. -- Brett Fortnam (bfortnam@iwpnews.com) with Hannah Monicken (hmonicken@iwpnews.com)