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This Week In Trade

UK lawmakers vote on Brexit deal; U.S. Chamber opposes WH tariff bill

Posted: January 14, 2019

British Prime Minister Theresa May’s Brexit deal is slated to be taken up on Tuesday by Parliament, while the U.S. Chamber of Commerce is urging lawmakers against supporting potential legislation that would give President Trump broader authority to raise tariffs.

U.S. officials have said May’s proposed terms of the UK’s departure from the European Union would make a deal between the U.S. and UK “unlikely.” The proposed deal would keep the UK in the EU’s customs union until December 2020, with the possibility of remaining past that date if the two sides are unable to reach a trade agreement.

The intent of that deal is to ensure that a hard border does not become necessary between Ireland and Northern Ireland. But hardline Brexiters in the UK see the deal as insufficiently fulfilling the mandate to fully leave the EU -- and the U.S. fears it will keep the UK tethered to an onerous regulatory system that is not science-based.

Last October the Office of the U.S. Trade Representative notified Congress of its intent to negotiate a trade deal with the UK, but formal negotiations cannot begin until the UK breaks from the economic bloc. The deadline for that break is March 29. But if the UK remains in the EU’s customs union, it would not be able to implement any free trade agreement it negotiates, according to EU rules.

Parliament is not expected to approve May’s deal on Tuesday because of concerns over the so-called “backstop” that would leave the UK in the EU’s custom union until a trade deal is reached. European Council President Donald Tusk and EU Commission President Jean-Claude Juncker sought to assuage the fears of many in Parliament ahead of the vote.

“The European Council also said that, if the backstop were nevertheless to be triggered, it would only apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided, and that the European Union, in such a case, would use its best endeavours to negotiate and conclude expeditiously a subsequent agreement that would replace the backstop, and would expect the same of the United Kingdom, so that the backstop would only be in place for as long as strictly necessary,” the two leaders wrote in a Jan. 14 letter to May.

Tusk and Juncker said they would be able to sign a withdrawal agreement as soon as the UK Parliament approved it. The deal would also be subject to approval by the European Parliament.

In related news, the European Parliament on Wednesday is scheduled to vote on the reapportionment of the EU’s tariff-rate quotas following the UK’s exit from the union.

Rep. Sean Duffy (R-WI) could soon introduce the “United States Reciprocal Trade Act,” according to the U.S. Chamber of Commerce. On Friday, Neil Bradley, the Chamber’s executive vice president and chief policy officer, wrote a letter to members of the House opposing the legislation because it would give the president broader authority to raise tariffs.

“The bill would effectively give the President unilateral authority to increase U.S. tariffs on imports from any foreign country,” Bradley said. “The harm to Americans would be immediate: Tariffs are taxes, and they are paid by American families and American businesses.”

According to Bradley, the bill ignores U.S. World Trade Organization obligations, would invite increased retaliation against U.S. goods, and raises constitutional questions.

“Surely, the Congress could not delegate to the executive the authority to raise incomes tax rates at whim whenever the President decides that current tax levels are not ‘fair,’ and this proposal relating to a different form of taxation is not substantially different,” Bradley continued. “Recent tariff actions by the executive and the economic damage they have inflicted on American families and businesses argue that Congress should reclaim -- not further divest -- its tariff authority.”

Senate Finance Committee Chairman Chuck Grassley (R-IA) has said he has no interest in granting the president more authority to raise tariffs.

USTR released its objectives for negotiating a trade deal with the EU late Friday, and despite Brussels’ insistence that agriculture remain outside the scope of negotiations, USTR included it. On Monday, at the American Farm Bureau Federation’s annual conference in New Orleans, Jesus Zorilla, an agriculture counselor at the EU delegation to the U.S., said agriculture was being discussed in the context of rules and regulations.

The U.S. objectives, however, envision market access negotiations, stating that the U.S. will seek to “Secure comprehensive market access for U.S. agricultural goods in the EU by reducing or eliminating tariffs.”

The U.S. will also seek to “Eliminate practices that unfairly decrease U.S. market access opportunities or distort agricultural markets to the detriment of the United States,” the objectives state.

President Trump will address the Farm Bureau conference on Monday afternoon. Lawmakers at the conference have said passage of the U.S.-Mexico-Canada Agreement will be a top priority for 2019, along with lifting U.S. tariffs that have sparked retaliatory moves against U.S. agricultural goods.

The U.S.-EU divide on agriculture likely will be a topic of discussion at the relaunch of the Congressional EU caucus on Tuesday. Reps. Gregory Meeks (D-NY) and Joe Wilson (R-SC) will be joined by EU Ambassador to the U.S. David O’Sullivan, along with Stephen Claeys, partner at Wiley Rein; Karen Donfried, president of the German Marshall Fund of the United States; former Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland, now the CEO of the Center for a New American Security; Kenneth Weinstein, president of the Hudson Institute; and Thomas Wright, director of the Center on the United States and Europe at the Brookings Institution.

On Monday, USTR updated its operating status as the agency had to furlough most of its employees due to the ongoing government shutdown. The USTR website says USTR “has implemented its lapse in appropriations contingency plan. Excepted personnel will ensure USTR continues to conduct operations, including trade negotiations and enforcement.”

Before Monday, the website said that “Using existing funds, USTR personnel continue to conduct all operations, including trade negotiations and enforcement.”

According to a White House memo, 186 of USTR’s 265 employee will be furloughed.

On Thursday, the Center for Strategic and International Studies will host a panel discussion on the 2019 prospects for the Indian economy. Panelists include Joydeep Mukherji, managing director of Standard and Poors Global Ratings; William Foster, vice president-senior credit officer at Moody's Sovereign Ratings; Richard Rossow, U.S.-India policy studies chair at CSIS; and Stephanie Segal, deputy director, senior fellow and political economy chair at CSIS.

The National Economists Club on Thursday will host Cornell professor Nandlal Tolani for a discussion on China’s economy and the state of the U.S.-China economic relationship.

In Geneva, heads of WTO delegations will hold an informal General Council meeting on Thursday. -- Brett Fortnam (bfortnam@iwpnews.com)