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This Week In Trade

U.S., China on the clock to reach a deal in the next 90 days

Posted: December 03, 2018

President Trump and Chinese President Xi Jinping agreed to a 90-day window to reach a deal on a bevy of trade issues, putting U.S. Trade Representative Robert Lighthizer on the clock to wrap up talks or the U.S. will raise tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent early next year.

White House trade adviser Peter Navarro told National Public Radio on Monday that Lighthizer would lead the talks for the U.S. side. A bit later Treasury Secretary Steven Mnuchin told CNBC that Lighthizer would be a principal negotiator, along with Commerce Secretary Wilbur Ross and Agriculture and Energy department leaders. CNBC also cited sources telling Dow Jones that Lighthizer would lead the talks. Trump on Friday said National Economic Council Director Larry Kudlow is working with Chinese officials on a “constant basis.”

Business groups were quick to applaud the Trump’s decision not to increase tariffs on $200 billion from 10 percent to 25 percent, which was scheduled to occur on Jan. 1, 2019. According to a White House statement released on Saturday, China has agreed to immediately begin buying U.S. agricultural products. The U.S. and China also have 90 days to reach a deal on forced technology transfers, intellectual property, non-tariff barriers, cyber theft, services, and agriculture or the heightened tariffs will be imposed.

“This is the first positive news we’ve seen after months of downturned prices and halted shipments,” American Soybean President John Heisdorffer said in a statement on Sunday. “If this suspension of tariff increases leads to a longer-term agreement, it will be extremely positive for the soy industry. We want to begin repairing damage done to our trade relations with China, which has been essential to successful soybean exports for years.”

The Information Technology Industry Council was also optimistic, saying it hoped Trump and Xi “seize this opportunity to broaden the scope of these benefits, and make a deal that rolls back U.S. tariffs and leads to genuine structural and systemic change in China. This includes China taking concrete, measurable actions to end requirements that companies transfer technology, permit the movement of data into and out of China, and increase market access for non-Chinese companies. The tech industry will continue to monitor these critical negotiations closely.”

The U.S. Chamber of Commerce and the Business Roundtable also released statements applauding Trump’s decision to not yet raise tariffs on China.

The president patted himself on the back over his deal with Xi in a series of tweets on Monday morning. “Farmers will be a a very BIG and FAST beneficiary of our deal with China,” he tweeted. “They intend to start purchasing agricultural product immediately. We make the finest and cleanest product in the World, and that is what China wants. Farmers, I LOVE YOU!”

In another tweet, Trump said “My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!”

Trump also promised -- again -- to terminate the North American Free Trade Agreement as a means of forcing Congress to choose between no NAFTA and the renegotiated U.S.-Mexico-Canada Agreement. Congressional Democrats criticized Trump’s threat.

“Neither Trump’s bellow Saturday night about terminating NAFTA to pressure Congress nor the President’s negotiating skills on China impress me,” Rep. Bill Pascrell (D-NJ) said in a statement on Sunday. Pascrell is the ranking member of the House Ways & Means trade subcommittee and is vying to chair the subcommittee next year. “I'll be watching whether this truce actually delivers or if Mr. Trump will just blow things up again,” he said.

Sen. Sherrod Brown (D-OH) said he would not vote for the renegotiated USMCA because the work is “not done,” adding that Trump’s withdrawal threat was “not particularly helpful.”

“No, the president's threats to pull out of NAFTA don't take away from the importance of getting this job done,” he said on CNN’s State of the Union on Sunday. “We have got to do this right. The president's threats are not particularly helpful, not surprisingly. But we need stronger labor enforcement standards there. These -- these rules so far, the USMCA, don't get us where we need to get to stop the outsourcing of jobs, to respect the dignity of work, to protect American workers, whether it's the Lordstown plant in Ohio or the Hamtramck GM plant, or other companies that find it's profitable for them to outsource jobs.”

Rep. Matt Cartwright (D-PA), who will hold a Democratic leadership post in the next Congress, said Trump’s USMCA fell short on labor and environmental standards. “What we were hoping with the U.S.-Mexico-Canada trade deal was that there would be more improvement to it, that maybe we would step back from the deal and get a better deal, because the protections for labor and the environment aren't -- are not there,” he said on the Fox News on Sunday. “I mean, they're limited, for example, to auto manufacturing and related industries. Well, that does -- raising labor standards in Mexico with the auto industry does make sense. But what we're looking for is a broadening of that.”

Sen. John Barrasso (R-WY), a member of the Republican leadership, said Congress should get a chance to vote on the USMCA before the president terminates NAFTA. “I think we need to see if we get it passed first,” he told Chuck Todd on NBC’s Meet the Press on Sunday. “And I don't see how many Democrat votes come on board for this. I support what the president has been doing.”

Trump’s NAFTA threat also rekindled a debate about whether the president has the authority to withdraw the U.S. from a ratified trade agreement, a point contested by some legal scholars.

While that debate rages this week, World Trade Organization Director General Roberto Azevêdo will be in Washington to meet with Lighthizer on Monday. The director general will also participate in the Wall Street Journal’s CEO conference on Tuesday and give the keynote address at the National Foreign Trade Council’s annual world trade dinner and awards ceremony on Wednesday.

Along with Azevêdo, several U.S. and foreign officials will speak on trade-related topics at the CEO conference, including National Economic Council Director Larry Kudlow, Treasury Secretary Mnuchin, White House Council of Economic Advisers Chairman Kevin Hassett, Chinese Ambassador to the U.S. Cui Tiankai, British Ambassador to the U.S. Kim Darroch, House Democratic Whip Steny Hoyer (D-MD) and National Security Adviser John Bolton.

U.S. Section 232 tariffs on steel and aluminum will again be the focus of a WTO Dispute Settlement Body meeting on Tuesday. The special meeting was called to consider two requests for establishing a panel over the 232 tariffs from India and Switzerland. The U.S. denied the first request but cannot block the second. The U.S. will also put forward its own panel request to Russia over its retaliatory tariffs.

China will remain at the center of the trade policy discussion this week as the U.S. Chamber of Commerce and the China Center for International Economic Exchanges on Tuesday will hold their annual CEO and “Former Senior Officials’ Dialogue.” Participants will include former Chinese Vice Premier Zeng Peiyan, chairman of the China Center for International Economic Exchanges; and Thomas Donohue, president and CEO of the Chamber of Commerce.

The Economic Club of Washington, DC, will host Chubb Chairman and CEO Evan Greenberg to discuss U.S.-China bilateral relations on Wednesday.

Trade negotiations with Japan will take center stage on Thursday when the International Trade Commission holds a hearing on the probable economic effect of allowing certain Japanese goods into the U.S. duty-free. The Center for Strategic and International Studies, meanwhile, will hold a forum on the U.S.-Japan economic alliance on Monday. Rep. Joacquin Castro (D-TX) will deliver a keynote address.

The European Parliament will vote on whether to move forward with a digital services tax on Monday. The prospect of a digital services tax has been criticized by U.S. businesses that see it as an unfair trade barrier that could violate WTO rules. EU finance ministers are set to vote on the tax on Tuesday.

The American Bar Association will host an event on Thursday on the link between critical minerals, trade policy and national security. A list of critical minerals recently published by the Interior Department in February could be used by Trump to guide future Section 232 investigations that could be focused on China.

The Cato Institute on Thursday will host a conference on the Jones Act, which restricts cabotage between U.S. ports to U.S.-flagged vessels and has been a target of criticism from U.S. trading partners. The conference will feature CATO scholars, academics, CEOs, and EU delegation to the U.S. senior trade adviser Jennifer Danner Riccardi. -- Brett Fortnam (bfortnam@iwpnews.com)