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This Week In Trade

All eyes turn toward Japan as U.S., China prepare for Trump-Xi meeting

Posted: June 24, 2019

After six weeks of stalled negotiations, the U.S. and China have resumed trade talks in preparation for a meeting between President Trump and Chinese President Xi Jinping on the sidelines of the G20 summit this week in Osaka, Japan.

The meeting between the two leaders will mark the first major step in negotiations since the talks broke down in mid-May, after U.S. officials claimed China had reneged on a series of key commitments. The breakdown led Trump to raise 10 percent tariffs on $200 billion worth of Chinese goods to 25 percent; it also spurred the Office of the U.S. Trade Representative to prepare to impose additional tariffs on about $300 billion worth of U.S. goods. USTR’s hearing on the additional tariffs will wrap up on Tuesday after seven days of testimony from more than 300 stakeholders.

Ahead of the summit, companies have been staking out their positions on the potential for new tariffs on China. Hundreds of small businesses and major U.S. companies and trade associations sent out dueling letters this month. Major U.S. companies and trade associations have maintained their opposition to new tariffs and urged the president to de-escalate the current trade tensions. A letter signed by hundreds of small businesses, however, calls on Trump to stay the course with China, arguing that higher tariffs have not had any effect on consumer prices.

Trade analysts liken the Osaka meeting between Trump and Xi to their December 2018 rendezvous on the sidelines of the G20 meeting in Buenos Aires. Matthew Goodman and Michael Green, fellows at the Center for Strategic and International Studies, said last week that the two leaders could strike a deal in Osaka similar to the arrangement they brokered in Argentina, agreeing to suspend tariff increases as negotiations continue.

Green also suggested that Trump and Xi could discuss the decision by the Commerce Department to add Chinese telecom giant Huawei to its entities list -- and Trump could make a concession to China on Huawei, despite opposition from many in Congress.

“It is possible that in the summit the president might, you know -- make some concession on Huawei,” he said. “I think the mood in the Congress right now is pretty resolute. The entities list is a bit more controversial, but the ban on Huawei entering U.S. 5G markets has very strong bipartisan support in the Congress -- almost complete support as far as I can tell in the administration. So I think if the president did an audible, if he sort of gave that to President Xi, I don’t think it would last.”

China has continued to blast Commerce’s decision, arguing that the U.S. is abusing the concept of national security to hurt Chinese companies. “I would like to point out that the abuse of the concept of national security by the United States and the use of state power to suppress a Chinese enterprise on unwarranted charges are the root of the problem and the initiator of the chaos, Foreign Affairs Ministry spokesman Yan Shuang said at a press conference on Monday. “The U.S.' bullying practices not only hurt Chinese companies, but also harm American companies, which not only affects the daily operations of enterprises, but also interferes with normal cooperation between enterprises. We urge the U.S. to immediately stop and correct wrong practices and create conditions for the operation and normal cooperation of enterprises in various countries.”

The G20 meeting itself is expected to focus heavily on trade. Japan is keen to discuss cross-border data flows at the meeting and the European Union will want to raise the issue of World Trade Organization reform, Goodman said.

The U.S. and Japan will also hold high-level meetings on the sidelines of this weekend's summit to discuss a potential free trade agreement, U.S. Trade Representative Robert Lighthizer told lawmakers last week. The meetings, which will take place ahead of a bilateral meeting between Trump and Japanese Prime Minister Shinzo Abe, are in addition to working-level discussions that took place in Washington, DC last week.

Democratic hopefuls could be pressed on trade

Democrats running for president will get the chance to lay out their trade policy platforms during two debates this week. The top 20 candidates will take part in debates on Wednesday and Thursday. The candidates are in a tough spot, according to Scott McCandless, the trade policy leader at PricewaterhouseCoopers. McCandless said Democrats have to find a way to separate themselves from Trump’s policy toward China while embracing a hardline approach.

“My guess … is that the Democrats will try to knit together a narrative that says, ‘President Trump is right to go after China, but the way in which he went about it will not achieve maximum results, and may, in fact, be counterproductive. Trust us, the Democrats, with the reins of power, because our approach will be different,’” he said during a Thursday press call. “And specifically, what I think they might say is, ‘We will try to build alliances

so that if we go after China; it won't be with an approach that is either actually, or at least in perception, a unilateral approach.’” Many Democrats in Congress have made similar arguments.

Most of the major Democratic candidates said USMCA must be changed before Congress should consider it, according to the Citizens Trade Campaign, which last week announced the results of a questionnaire it sent to all of the candidates.

ITC investigating if washers were hung out to dry

The U.S. International Trade Commission, meanwhile, will hold a hearing on Tuesday to assess the effectiveness of safeguard measures the Trump administration imposed on imports of large residential washers in February 2018. As outlined in Section 201 of the Trade Act of 1974, the ITC is required to conduct a midterm review of the restrictions and submit a report on its “Monitoring of Developments in the Domestic Industry” by Aug. 7.

U.S. companies Whirlpool Corporation and GE Appliances are arguing that while the remedies have not led to the growth they expected due to “headwinds,” they should not be modified. Sen. Sherrod Brown (D-OH) will testify in support of the domestic industry on Tuesday. Haekwan Chung, director general for trade legal affairs with the Korean Ministry of Trade, Industry and Energy, and Korean-based LG Electronics will also appear, according to the ITC.

AFL-CIO, DeLauro continue to demand USMCA changes

AFL-CIO President Richard Trumka and Rep. Rosa DeLauro (D-CT) on Tuesday will present petitions signed by “hundreds of thousands of Americans” that demand changes to the U.S.-Mexico Canada Agreement, according to a press release from Public Citizen. Last week, Trumka led a series of town halls in Pennsylvania, Ohio and Michigan to discuss Trump’s signature trade pact.

DeLauro, a longtime critic of free trade agreements, is part of the Democrats’ USMCA working group; she leads its task force on enforcement issues. USTR Robert Lighthizer last week promised to “plus-up” USMCA’s enforcement provisions.

The clock is ticking for any changes to be made to the deal in time for Congress to consider it before its August recess. The earliest the administration can submit an implementing bill to Congress is July 9.

Blumenauer holds hearing on Mexican labor reform and USMCA

House Ways & Means trade subcommittee Chairman Earl Blumenauer (D-OR) on Tuesday will hold a hearing on the opportunities and challenges USMCA presents for Mexican labor reform. The committee had not announced the witnesses as of press time. Blumenauer will also speak at an event hosted by the Washington International Trade Association on Wednesday.

Ex-Im president to testify on bank’s reauthorization

On Thursday, Export-Import Bank President Kimberly Reed will testify before the Senate Banking Committee on the pending reauthorization of the bank. The Senate hearing comes days after House Democrats and Republicans on the Financial Services Committee reportedly struck a deal that would reauthorize the bank for seven years, but impose a slew of reforms that are upsetting some ardent Ex-Im supporters.

Events

  • On Tuesday, the Information Technology and Innovation Foundation will host a discussion on the U.S. trade relationship with Korea, Mexico and Taiwan. Former Rep. Charles Boustany (R-LA), McLarty Associates Senior Director Tami Overby, Semiconductor Industry Association Vice President for Global Policy Jimmy Goodrich, and ITIF Vice President for Global Innovation Policy Stephen Ezell will take part.
  • The Charles Koch Institute on Tuesday will host Sen. Doug Jones (D-AL), Rep. Don Bacon (R-NE) and Flexport Chief Economist Phil Levy for a luncheon discussion of bipartisan cooperation on trade policies.
  • On Wednesday, the Peterson Institute of International Economics will hold a discussion on a new University of Maryland study on Americans' attitudes toward trade policy. UMD Professor I.M. Destler, UMD Public Consultation Director Steven Kull and PIIE Executive Vice President Marcus Nolad are slated to participate. -- Brett Fortnam (bfortnam@iwpnews.com)

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