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This Week In Trade

Lighthizer meets with Malmström, Seko; U.S. delegation in China

Posted: January 07, 2019

U.S. Trade Representative Robert Lighthizer will meet with his European Union and Japanese counterparts this week as a U.S. delegation is engaged with Chinese officials in Beijing.

The U.S.-China talks have the highest profile, as President Trump’s threat to increase 10 percent tariffs on $200 billion worth of Chinese goods to 25 percent hangs over the discussions. The most significant negotiations, however, could happen during the trilateral discussions in Washington, analysts told Inside U.S. Trade.

Lighthizer, EU Trade Commissioner Cecilia Malmström and Japanese Trade Minister Hiroshige Seko will meet on Wednesday. The trio last met in September to discuss the non-market-oriented policies of third countries, industrial subsidies, state-owned enterprises, forced technology transfer policies, World Trade Organization reform, e-commerce and other issues. Previous statements from the three ministers have not mentioned China, despite the agenda consisting of topics where China’s policies are central to the conversation. Sources have said China is not mentioned because policies stemming from the trilateral talks would extend to more countries than just China.

Malmström will discuss the Wednesday meeting, as well as her trade priorities for 2019 and the prospects for the transatlantic trade relationship, at the Atlantic Council on Thursday in a conversation moderated by the Atlantic Council’s Bart Oosterveld.

Meanwhile, a delegation of U.S. officials led by Deputy USTR Jeffrey Gerrish is in China this week to discuss a slew of trade issues with Chinese officials. Gerrish was accompanied by Ted McKinney, the under secretary of agriculture for trade and foreign agricultural affair, Under Secretary of Commerce for International Trade Gilbert Kaplan, Treasury Under Secretary for International Affairs David Malpass, and Steven Winberg, the Energy Department's assistant secretary for fossil energy.

The importance of the talks has been downplayed by some observers because Lighthizer -- the Trump-appointed lead for the U.S.-China discussions -- stayed in Washington. One China analyst told Inside U.S. Trade that true negotiations would not take place with the Chinese unless Lighthizer was present. This week’s discussions instead are expected to be focused on detailing how China lives up to commitments President Xi Jinping made to Trump during a meeting on the sidelines of the G20 in Buenos Aires last month.

Myron Brilliant, the U.S. Chamber of Commerce's executive vice president and head of international affairs, said on Monday that he did not expect a major breakthrough this week.

“I don’t believe we will see breakthrough until either Vice Premier Liu He travels to Washington, which is perceived to be the next step, or some members of the Cabinet led by Ambassador Lighthizer and likely the secretary of Treasury end up heading to Beijing,” Brilliant said in a Jan. 7 interview with CNBC. “That is when the deal would get closer, that's when we'll ultimately know whether or not something can be resolved by the March 1 deadline.”

Liu He, Xi’s top economic adviser, did make an appearance at the meetings with U.S. officials, according to media reports.

Brian Dunch, who leads the supply chain risk management practice at PricewaterhouseCoopers, told Inside U.S. Trade the makeup of the delegation could be a good omen because it shows the U.S. is sending serious representatives to outline a deal in a variety of areas.

On Monday morning, Commerce Secretary Wilbur Ross outlined what a possible U.S.-China deal could look like. In an interview with CNBC, Ross said he thought “there’s a very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues.”

President Trump has also said the U.S.-China talks “are coming along very well.”

Ross reiterated that the U.S. is eyeing three categories of concern: immediate trade, structural reforms, and enforcement. According to Ross, immediate trade includes a transactional arrangement in which China would agree to buy more U.S. soybeans and liquefied natural gas; structural reforms would address intellectual property issues, market access and other areas; and an enforcement mechanism would ensure China follows through on its commitments, which he said it had failed to do when it struck deals with previous administrations.

Brilliant and Dunch suggested a deal could center on a transactional agreement that includes a commitment to negotiate structural reforms.

“There [are] clearly signals that if there is a package of purchases that China agrees to in a significant way -- and there have been all kinds of numbers that have been discussed -- and China agrees to some tangible, verifiable steps with regard to market access whether it's reducing further auto tariffs, or whether it's accelerating financial reforms and insurance banking securities or doing things like electronic payment -- that's a package that could get us through March 1 and lead us to additional negotiations around some of the deeper, more fundamental structural reforms that frankly are critical to the success of turning this around and strengthening the overall relationship, which today as we all know there is a lack of trust on both sides and we need confidence-bundling measures,” Brilliant said.

Dunch also said a transactional deal could include a quid pro quo agreement between the U.S. and China to lower certain tariff lines.

Another China analyst said a 90-day window for trade talks was too short to move Beijing to agree to structural reforms. Accordingly, any deal reached by March 2 -- the deadline the Trump administration set to reach an agreement before increasing tariffs on $200 billion of Chinese goods to 25 percent -- would have to be transactional.

Back in Washington, American Petroleum Institute President and CEO Mike Sommers on Tuesday will deliver API’s annual “state of American energy” address. Preserving market access provided by the North American Free Trade Agreement was one of API’s 2018 priorities.

On Wednesday, South Korean Ambassador to the U.S. Cho Yoon-je will participate in a discussion at the Hudson Institute about U.S.-Korea cooperation.

U.S. Chamber of Commerce President Thomas Donohue will give his annual “state of American business” address on Thursday. Donohue’s speech comes as the Chamber is preparing to help launch a business coalition focused on securing the congressional passage of the U.S.-Mexico-Canada Agreement.

On Thursday, U.S. Ambassador to Thailand Virachai Plasai, Singaporean Ambassador to the U.S Ashok Mirpuri, former Japanese Ambassador to the U.S. Kenichiro Sasae, and former acting Deputy USTR Wendy Cutler will discuss the coming-into-force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the negotiation of the Regional Comprehensive Economic Partnership and the future of Asian trade at an event hosted by the Asia Society Policy Institute. Cutler is the vice president of the Asia Society Policy Institute and Sasae is the president of the Japan Institute of International Affairs.

The World Trade Organization Dispute Settlement Body will hold a special meeting on Friday where the U.S. will advance a second request for the establishment of a panel over retaliatory tariffs -- imposed after Section 232 tariffs on steel and aluminum took effect -- from Turkey, which it cannot block. The U.S. has been escalating disputes with countries who have imposed retaliatory tariffs, arguing they violate WTO rules, while U.S. tariffs are justified under a national security exemption.

The recent Appellate Body report on a Mexican dispute over tuna practices with the U.S. will also be up for adoption, marking the end of the dispute proceedings for the case.

British Parliament this week will formally debate the Brexit deal tabled by Prime Minister Theresa May, whose government will try to convince the divided lawmakers her withdrawal agreement with the European Union is the only thing standing between the United Kingdom and no-deal chaos. Parliament will vote Jan. 15 and the outcome will set the stage for how -- and how hard -- the UK will exit the bloc on March 29. -- Brett Fortnam (bfortnam@iwpnews.com)