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This Week In Trade

Lighthizer to face the Finance Committee; EU's Parliament to vote on U.S. trade talks

Posted: March 11, 2019

U.S. Trade Representative Robert Lighthizer on Tuesday will testify about World Trade Organization reform before the Senate Finance Committee, while the European Parliament this week will hold a highly anticipated vote on recommendations for talks with the U.S.

Lighthizer, fresh off testimony to the House Ways & Means Committee at the end of last month, will face queries about U.S. efforts to reform the WTO, which President Trump has called one of the worst trade “deals” ever made. The U.S. has been pushing for reforms in the WTO’s practice of self-designation and transparency and is also working together with Japan and the European Union on proposals for new rules on industrial subsidies and state-owned enterprises. The most visible and controversial action the Trump administration has taken at the WTO is its blocking of appointments to the Appellate Body, leaving the panel with three of its seven seats filled. At least three panelists are needed to hear an appeal and the terms of two more panelists expire in December.

Many members believe the Appellate Body crisis is an existential threat to the WTO, arguing that there is little point in negotiating new rules if the old ones can’t be enforced. The U.S. maintains the WTO’s dispute settlement arm is not the organization’s “crown jewel,” arguing instead that members should be focused on negotiations.

But perhaps the biggest roadblock to negotiating new rules is a fundamental disagreement between the U.S. and China about how “developing” countries should be treated at the WTO. The U.S. last month proposed that if a member met any one of four criteria it would not qualify to receive special and differential treatment. China, India and others then introduced a paper touting what they see as the importance of special and differential treatment.

USTR General Counsel Stephen Vaughn will discuss WTO reform this week as well. He is slated to deliver a keynote address at the Hudson Institute on Wednesday. The address will be followed by a panel discussion on whether the U.S. can find common ground with its allies on WTO reform. The panel is set to feature Takeshi Komoto, a trade minister from the Japanese embassy; Peter Rashish, the director of the geoeconomics program at the American Institute for Contemporary German Studies; and Thomas Duesterberg and Peter Rough, fellows at the Hudson Institute.

On Thursday the European Parliament will vote on its non-binding recommendations for trans-Atlantic trade negotiations. International Trade Committee Chairman Bernd Lange’s initial draft of the recommendations asked EU member states to reject the European Commission’s proposed negotiating mandates on an industrial goods agreement and conformity assessments. But the recommendations were significantly amended during a Committee vote last month, and the full Parliament will vote on recommendations that endorse the talks.

The Commission has said it expects member states to make a decision on whether to accept the negotiating mandates soon after Parliament’s vote. The outcome of Parliament’s vote would not require member states to accept or reject the Commission’s proposed mandates, but Parliament does have to approve any final trade deal. EU Trade Commissioner Cecilia Malmström said last week that she believed the U.S. and EU could complete a trade deal on industrial goods by October.

On Tuesday, the British Parliament is once again slated to vote on Prime Minister Theresa May's negotiated Brexit deal with the European Union. The United Kingdom is set to leave the bloc in less than three weeks. As of Monday, there were no indications the EU and UK have been able to reach an agreement on changes to the much-loathed “backstop” protocol for the Irish border that could allow the deal to squeak through Parliament. The proposal was defeated by historic margins in mid-January.

If the May deal is defeated, Parliament would vote on Wednesday whether to proceed with a no-deal Brexit -- a scenario most of Parliament does agree it wants to avoid -- or delay the Brexit deadline. The EU would also have to agree to any delay, which is considered likely, if not guaranteed.

Other happenings of note this week:

  • The Washington International Trade Association on Wednesday will host a discussion on what Brexit means for trade policy. Slated to participate are Marjorie Chorlins of the U.S. Chamber of Commerce’s U.S.-UK Business Council; the Center for Strategic and International Studies’ Heather Conley; John Dickerman, the head of the Washington, DC, office of the Coalition of British Industries; and Pat Ivory from the Irish Business and Employers Coalition.
  • Irish Taoiseach Leo Varadkar will visit Washington, DC, this week and discuss U.S.-Irish economic ties, Brexit and trans-Atlantic relations at the Chamber of Commerce on Wednesday.
  • China’s National People’s Congress is slated to vote on Friday on a new investment law that would ban forced technology transfers. Some analysts have downplayed the importance of the law, saying the legislation would basically outlaw something China does not acknowledge.
  • U.S.-China Economic and Security Review Commissioner James Talen will testify before the Senate Foreign Relations Committee on Wednesday. Oriana Mastro, an assistant professor at Georgetown University, will also testify.
  • On Thursday, the Johns Hopkins University School of Advanced International Studies will hold a discussion on U.S.-China relations featuring former U.S. Ambassador to China J. Stapleton Roy, George Washington University professor Robert Sutter, and Yukon Huang and Douglas Paal from the Carnegie Endowment for International Peace.

Friday also marks the deadline for USTR to create a product-exclusion process for tariffs on $200 billion worth of Chinese goods, but Lighthizer has suggested his agency will not do so. A House Appropriations Committee explanatory statement on the government funding package passed last month instructed USTR to create the exclusion process, but Lighthizer did not commit to following that instruction when asked about it at last month’s Ways & Means hearing.

Lighthizer has maintained that an exclusion process for the third tranche of Section 301 tariffs would be instituted if they were ratcheted up to 25 percent. Citing progress in talks with China, the administration has indefinitely delayed that scheduled tariff increase, which had been scheduled for the beginning of March. -- Brett Fortnam (bfortnam@iwpnews.com) with Hannah Monicken (hmonicken@iwpnews.com)