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This Week In Trade

Lighthizer to meet with counterparts in Paris; Japanese officials due in DC

Posted: May 20, 2019

Trade ministers including U.S. Trade Representative Robert Lighthizer will head to Paris this week for a series of meetings, including an annual Organization for Economic Co-operation and Development ministerial, with World Trade Organization reform, industrial subsidies and bilateral trade deals expected to be discussed.

Lighthizer is expected to meet with EU Trade Commissioner Cecilia Malmström as well as Japanese Trade Minister Hiroshige Seko to discuss the progress of bilateral negotiations. Those talks will likely touch on President Trump’s announcement last week that he would delay a decision to impose auto tariffs on the EU and Japan for six months to give the U.S. time to negotiate deals to address the what the Commerce Department has called a threat to national security posed by auto and auto-parts imports.

Whether the U.S. goal of negotiating deals on autos and auto parts will be pursued in the context of broader trade deals or as separate pacts remains to be seen. Autos were already a point of contention in trans-Atlantic talks as the EU has pushed to include them in negotiations, but the U.S. has resisted. Malmström last week criticized the Commerce Department’s finding that auto and auto imports were a threat to U.S. national security.

The start of trans-Atlantic trade talks has been, hindered by disagreement about whether agriculture will be part of the discussions. Negotiators met in Washington, DC, over the past two weeks to focus on technical work.

A U.S.-Japan deal could materialize more quickly because the two sides could pull from commitments the U.S. agreed to in the Trans-Pacific Partnership, from which the Trump administration withdrew in January 2017. Agriculture is a key issue in the U.S.-Japan talks as well; the U.S. absence from the deal has disadvantaged American agriculture producers because TPP members now have more favorable market access provisions.

 Senate Finance Chairman Chuck Grassley (R-IA) is less sanguine that a deal could be reached quickly due to upcoming elections in the Japanese House of Concillors slated for July. Earlier this month, Japanese Economy Minister Toshimitsu Motegi said the U.S. and Japan would not reach an agreement in any one area before others, countering the Trump administration’s hopes for a quick deal on agriculture.

Japan's ambassador for international economic affairs, Kazuyoshi Umemoto, and Kazuhisa Shibuya, chief of staff of the Trans-Pacific Partnership headquarters, will lead a trade delegation to Washington, DC, this week, a Japanese official told Inside U.S. Trade. Trade talks will begin at USTR on Tuesday. Lighthizer will then visit Japan to meet with Japanese Economy Minister Toshimitsu Motegi on May 24, according to Reuters. USTR did not respond to a request for comment. Last week, USTR told Inside U.S. Trade that no meetings in Washington, DC, with Japanese officials were scheduled for this week.

President Trump will be in Japan from May 25-28 to celebrate the enthronement of Japan’s new emperor.

Lighthizer, Malmström and Seko are also expected to discuss a trilateral initiative on WTO reform while they are in Paris this week. The three WTO members have been working on a proposal to address industrial subsidies, which they said would be introduced this spring. The proposal is expected to address the WTO’s definition of “public bodies.” The U.S. has been critical of how the WTO’s Appellate Body has interpreted the definition of public bodies, claiming its reading is too narrow and does not capture all state-owned enterprises that act contrary to market forces. China is expected to oppose any proposal that would treat SOEs as public bodies, as doing so would make it easier for members to hit SOEs with countervailing duties.

China last week offered a WTO reform proposal that called SOEs “equal players in the market as other types of enterprises” and said they should operate “in an environment of fair competition.”

The Ottawa group, a cadre of middle-ground WTO members that first met in Canada last year to discuss WTO reform issues, will meet on the sidelines of the OECD meeting on Thursday morning. Those talks will precede the annual WTO mini-ministerial later Thursday.

The WTO’s imminent Appellate Body crisis will almost certainly be a main topic of debate for ministers. The U.S. blockage of appointments to the Appellate Body has been a topic of heated discussion at recent General Council meetings. If the U.S. does not change course, the Appellate Body will be unable to hear cases come December, when the terms of two of the three remaining panelists expire. The U.S., however, does not appear to be in a hurry to resolve the issue.

Malmström and Australian Trade Minister Simon Birmingham will host an event on domestic regulation on Thursday, according to the EU commissioner’s public schedule. WTO members had hoped to strike a deal on domestic regulation in services at the 11th WTO ministerial in Buenos Aires, Argentina in December 2017, but those hopes were dashed in November. Geneva sources said formal negotiations on rules on domestic regulation in services could begin anew in 2019.

The Trump administration has cleared a major hurdle in its push to ensure the ratification of the U.S.-Mexico-Canada Agreement, which Democrats are labeling the “new NAFTA.” The U.S. announced it would lift its Section 232 tariffs on steel and aluminum on Mexico and Canada as of Monday; in turn, Mexico City and Ottawa said they would lift their retaliatory tariffs on U.S. products. Canada, Mexico and Senate Finance Committee Chairman Chuck Grassley (R-IA) have said the lifting of the Section 232 was a precondition for USMCA's ratification.

The House Ways & Means Committee will hold a hearing on “enforcement in the new NAFTA” on Wednesday that will explore some of the Democrats’ biggest concerns with the deal. Ways & Means Committee Democrats, led by committee chairman Richard Neal (D-MA), have chronicled their concerns in a series of letters to Lighthizer over the past month. The letters have outlined concerns on USCMA’s labor, environmental, enforcement and biologics provisions.

The committee will hear testimony from Beth Baltzan, a former USTR negotiator now with American Phoenix Trade Advisory Services; Owen Herrnstadt, from the International Association of Machinists and Aerospace Workers; Sandra Polaski, the former deputy director-general for policy at the International Labor Organization; Alexander von Bismarck, the executive director of the Environmental Investigation Agency; and Devry Boughner Vorwerk, the corporate vice president of global corporate affairs at Cargill.

The U.S. Chamber of Commerce will continue its push for USMCA ratification on Thursday by hosting a panel on how USMCA “is good for the innovative economies of North America.” Former Rep. Joe Crowley (D-NY), now the honorary co-chair of the Pass USMCA Coalition, will be joined by Patrick Kilbride, the senior vice president of the Chamber’s Global Innovation Policy Center; Maryscott Greenwood, the CEO of the Canadian American Business Council; and Brian Lee Crowley and Richard Owens from the Macdonald-Laurier Institute. -- Brett Fortnam (bfortnam@iwpnews.com) with Isabelle Hoagland (ihoagland@iwpnews.com)

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