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This Week In Trade

Biden’s cabinet taking shape; more Trump moves against China expected

Posted: November 23, 2020

President-elect Joe Biden this week is expected to announce his picks to lead key agencies, including Treasury and State, with former Obama administration Deputy Secretary of State Anthony Blinken reportedly getting the nod for Foggy Bottom.

As a part of the Obama administration, Blinken was an outspoken proponent of the Trans-Pacific Partnership. Blinken on Jan. 23, 2017, responded to President Trump’s decision to remove the U.S. from the Asia-Pacific pact an “economic [and] strategic mistake” and suggested China would be left to set standards on labor, the environment and intellectual property.

The Biden campaign foreign policy adviser has been more muted in his recent comments about TPP. Asked in July if a Biden administration would rejoin the deal, Blinken espoused the benefits of trade generally rather than commenting directly on TPP. “As a basic principle, trade is profoundly in the interests of the United States,” Blinked said at the Hudson Institute. “If we’re going to sustain our growth, if we’re going to advance our growth, if we’re going to sustain and advance our standard of living, we have to find ways to continue to open markets and to make sure that American products, American services, American ideas can be consumed around the world.”

Biden, once also a strong proponent of TPP, has said since that he would not join its successor, the Comprehensive and Progressive Agreement for TPP, without negotiating changes to it.

Blinken also has been outspoken in his criticism of the president’s policy toward China. The Trump administration has put the U.S. in a “strategic deficit,” Blinken told BloombergTV in July. “Right now, by every key metric, China’s position is stronger and ours is weaker as a result of the president’s leadership.”

Trump, Blinken said, has helped China advance its strategic goals -- weakening U.S. alliances, creating a leadership vacuum for China to fill, abandoning American values, and debasing the U.S. democracy and values and reducing its appeal in comparison to China.

The president-elect has said he wants to strengthen U.S. alliances in hopes of forming an international coalition to pressure China. He has not taken a stance on whether he would withdraw Section 301 tariffs on roughly $370 billion worth of Chinese goods.

Biden also is expected to announce his treasury secretary this week. One area to watch is how the pick for Treasury deals with currency manipulation. During the Trump administration, the Commerce Department and the Office of the U.S. Trade Representative have waded into currency manipulation cases. Commerce in February enacted a rule that makes undervalued currency a countervailable subsidy and USTR in August launched a Section 301 in Vietnamese currency practices.

The Trump administration’s Treasury Department also has failed to stay up to date on twice-yearly reports on the foreign exchange policies of U.S. trading partners. The reports are due to Congress every April and October, but the department last issued a report in January, three months past its October 2019 due date.

The Treasury Department also is the U.S. lead in negotiations at the Organization for Economic Cooperation and Development over how to address the trend toward digital services taxes. USTR has stepped into the fray on this issue as well, launching Section 301 investigations into the digital services imposed or proposed by France and 10 other jurisdictions. The probe into France’s tax concluded last December, but the U.S. agreed to postpone tariffs on $1.3 billion worth of French goods so long as France did not collect its tax on U.S. companies. U.S. companies began receiving invoices for the tax this month.

Biden and French Finance Minister Bruno LeMaire were expected to discuss the digital tax issue in a phone call on Monday, Bloomberg reported.

China actions coming

The Commerce Department has drafted a list of 89 Chinese companies it claims have ties with the Chinese military that could soon be subject to U.S. export controls, according to Reuters. If the list is published, U.S. exporters would not be able to sell to those companies without licenses from Commerce’s Bureau of Industry and Security. BIS in April expanded the definition of a “military end-user” in a way that would require U.S. exporters to seek licenses from BIS even if they are selling civil end-use products to Chinese entities that do business with the Chinese military.

The New York Times on Sunday cited a senior administration official as saying there would be more announcements made on China this week as the outgoing administration fears Biden’s team will seek to improve relations with Beijing.

The reported action by Commerce follows turnover among its leadership, with acting Under Secretary for Industry and Security Cordell Hull expected to leave his post in December. The Trump administration also this month hired Corey Stewart, a Trump supporter and failed Virginia senatorial and gubernatorial candidate who bills himself as an international trade lawyer, to serve as the “principal deputy assistant secretary for export administration,” a position created for him, according to Reuters. Stewart’s appointment is seen as another indication that Commerce will pursue more hardline actions against China before the Trump administration leaves in January, the report said.