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This Week In Trade

Tai earning praise from all sides; GSP, MTB likely to lapse

Posted: December 21, 2020

President-elect Joe Biden’s selection for U.S. Trade Representative, Katherine Tai, has been meeting with senators ahead of her confirmation process next year and is receiving warm praises from both sides, with even a former Trump trade official applauding her selection.

Meanwhile, Inside U.S. Trade is reporting the massive spending and coronavirus relief package Congress expected to pass this week will not include extensions of two key trade programs, but will include technical corrections to the U.S.-Mexico-Canada Agreement.

Tai, the House Ways & Means Democrats’ chief trade counsel, has already earned compliments from Finance Committee senators on both sides of the aisle. “I know that Katherine Tai’s experience and expertise will be incredible assets for the Biden Administration as they work to ensure that there are clear and fair rules of the road on trade that help American workers compete and win in the global economy, while also holding bad actors accountable,” Sen. Tom Carper (D-DE) said in a statement after meeting with Tai last week. “Katherine Tai has many years of experience working across the aisle in Congress. I am confident that she will have the broad support necessary to be a highly skilled and effective USTR, and I hope the Finance Committee moves quickly to take up her nomination.”

That across-the-aisle work has had an impact, as former USTR and Finance Committee member Rob Portman said last week that Biden’s pick will help “the new administration to hit the ground running” on trade policy.

One of the most immediate concerns for the Biden administration will be crafting a policy on China, something for which she is well-suited, according to former presidential adviser for international trade policy and economic policy Clete Willems. “Katherine Tai is an excellent choice for USTR and the right person for the moment,” Willems told CNBC in an email on Friday. “Folks like me who worked in the Trump Administration have a ton of respect for her and think she will help carry on a tough line on China.”

Exactly what faces Tai and Biden remains murky as the outgoing Trump administration, in its waning days, continues to take action against Beijing. The Commerce Department last week announced it would blacklist China’s marquee semiconductor manufacturer, the Semiconductor Manufacturing International Corporation, in hopes of cutting off Beijing’s ability to develop the technology to make cutting-edge chips.

President Trump last week also signed the Holding Foreign Companies Accountable Act, which will allow U.S. regulators to kick Chinese companies off U.S. financial exchanges if they do not submit to the same audits as American companies. “With President Trump’s signature, Chinese firms that flout the rules that American and other companies follow do so at their own peril,” Sen. John Kennedy (R-LA), the sponsor of the legislation, said in a statement. “Any foreign company that doesn’t submit to our audits has to grow up or get off U.S. exchanges -- they can’t keep using our markets to exploit workers and families.”

And Congress and Trump may not be done. The Senate on Sunday unanimously passed the “Protecting American Intellectual Property Act.” The bill, according to co-sponsors Ben Sasse (R-NE) and Chris Van Hollen (D-MD), would direct the government to sanction individuals or companies involved in IP theft. According to a statement from the senators, the bill requires that the president either impose property-blocking sanctions or ban U.S. companies from exporting to any company that has “engaged in, benefitted from, or materially assisted the significant theft of U.S. trade secrets, if that theft constitutes a major threat to the national security, foreign policy, economic health or financial stability of the United States.”

As the 116th Congress meets for final sessions this week, the fate of two trade programs is grim. Congress has yet to extend the Generalized System of Preferences or pass a new Miscellaneous Tariffs Bill. Both GSP and the current MTB expire at the end of the year. The massive spending and coronavirus relief package is not expected to include extensions for either program, Inside U.S. Trade’s Isabelle Icso reports.

Republicans and Democrats are at odds over whether a GSP renewal should include sweeping reforms. Democrats are pushing for new criteria for countries benefitting from the preferential-tariff program, including on human rights and environmental protections; Republicans are pushing for a clean renewal, with some allowing for the prospect of reform after it is renewed.

Similarly, the two sides cannot agree on the list of products that should benefit from the tariff cuts provided in an MTB. Democrats have sought to exclude some inputs and finished products that Republicans want to include.

The spending package, however, is expected to fix drafting errors in the USMCA implementing legislation. The biggest “fix” is a clarification that USMCA will treat foreign trade zones the same way as NAFTA, much to the chagrin of the National Association of Foreign-Trade Zones. USMCA did not carry over a NAFTA provision that prevented U.S. manufacturers in FTZs from receiving the preferential treatment. NAFTZ has been urging Congress to keep the NAFTA language out of the technical corrections bill.

In Geneva, the World Trade Organization will shut its doors for the holiday season without a new director-general, without a deal on fisheries subsidies, without a functional Appellate Body (again) and with no clear direction for reform. The body’s last General Council of the year concluded on Friday as members were unable agree on much of anything, including proposals to waive certain IP obligations in the wake of the pandemic, to ban export restrictions on foodstuffs purchased by the World Food Program for humanitarian purposes, and on launching an initiative aimed at facilitating trade in medical goods.

The U.S. also continues to block appointments to the now-defunct Appellate Body and refuses to back the “consensus candidate” for director-general, Nigeria’s Ngozi Okonjo-Iweala. USTR Robert Lighthizer last week said the WTO needed “someone with real experience in trade” and is supporting South Korean Trade Minister Yoo Myung-hee for that reason. -- Brett Fortnam (bfortnam@iwpnews.com)