[CTC] Topping the new year’s trade-policy agenda: Five threshold issues

Wed Dec 27 12:56:52 PST 2017

Topping the new year’s trade-policy agenda: Five threshold issues
December 27, 2017

As 2017 yields to 2018 ...

NAFTA negotiations resume. The next major NAFTA negotiating session is scheduled for Jan. 23-28 in Montreal, the sixth in the series. It may not be make or break, but considering that President Trump’s withdrawal threat lurks in the background, the resumption of top-levels talks after a two-month hiatus has been flagged as a major moment<https://insidetrade.com/node/161439>, particularly if a targeted March agreement on goals and objectives can be met.

“There are still big gaps,” said Canada’s ambassador to the U.S., David MacNaughton, in an interview. “We need to try to bridge those differences,” he added, saying “we’re going to try to get something done in a comprehensive nature by the end of March. “ And Canadian Prime Minister Justin Trudeau recently fretted<https://insidetrade.com/node/161422> about Trump’s withdrawal threat, saying he has “successfully communicated to the administration that triggering a termination isn’t going to have them be able to negotiate a better deal with Canada.”

Pressures abound – none more so than on the issue of stiffer automotive rules of origin, which the U.S. is demanding despite the opposition of the U.S. industry and both Mexico and Canada. The U.S. has sought, unsuccessfully so far, to gain industry support<https://insidetrade.com/node/161413> for ratcheted-up rules. But a report by Canada’s Scotiabank labeled the U.S. rule-of-origin proposal a “poison pill<https://insidetrade.com/node/161423>” and said there is “little evidence” to support the U.S. position that NAFTA content is declining in Canadian- and Mexican-assembled autos, providing a “back door for Asian content.”

U.S. negotiators are also coming under increasing pressure from farm-country interests<https://insidetrade.com/node/161408>, including Sen. Charles Grassley (R-IA), who said there was “talk” the Trump administration will put together “a pot of money<https://insidetrade.com/node/161426>” to support agriculture in case of a NAFTA withdrawal. Grassley said “farmers don’t want money from the federal treasury, they want it from the marketplace,” concluding that the talk of federal support “suggests a pessimistic view of how things are going.”

KORUS talks will begin for real. Negotiations to revamp the U.S.-Korea Free Trade Agreement, which as recently as November Trump called “quite unsuccessful and not very good<https://insidetrade.com/node/160941>” for the U.S., soon will get serious, South Korea announcing on Dec. 18 the completion of its statutory requirements for renegotiating trade deals. Korea’s Ministry of Trade, Industry and Energy said in a statement that it would propose “demands equivalent to the U.S. calls<https://insidetrade.com/node/161416>.” The ministry has come under pressure from agricultural groups to take a harder line in upcoming talks, pressuring negotiators to oppose any additional opening of South Korean markets.

For its part, the U.S. needs a “permanent solution<https://insidetrade.com/node/161355>” to shrink the trade deficit with South Korea, Commence Secretary Wilbur Ross said recently. He added that the U.S. goal is to “increase overall trade while reducing the deficit, adding that liquefied natural gas and petroleum products “are clear examples and food products are another good candidate.”

Uncertain next steps for steel overcapacity issues. There are at least three ongoing pathways for dealing with steel overcapacity issues, previously flagged for special attention by the Trump administration. The newest of them involves an agreement<https://insidetrade.com/node/161356> among the U.S., European Union and Japan to “strengthen our commitment to ensure a global level playing field” in dealing with overcapacity issues, steel being one prime example. The three countries said they had a “shared” view that overcapacity has been “exacerbated” by, among other things, “government-financed and supported capacity expansion, [and] unfair competitive conditions caused by large market-distorting subsidies and state-owned enterprises....” Next steps have not yet been announced.

Two other initiatives face uncertain futures. One is the Global forum on Steel Excess Capacity, which issued a report<https://insidetrade.com/node/161447>at the end of November that outlined six broad principles for dealing with steel overcapacity but took no specific actions. Three forum meetings are scheduled for 2018, but uncertainties involve whether China, often mentioned as the biggest overcapacity offender, will seriously commit to forum efforts.

The other issue involves fate of Commerce’s report on its Section 232 investigation into steel imports, long awaited but not yet issued. The draft report is said to have drawn objections from the Defense Department, among others, although early in December Commerce Secretary Wilbur Ross told lawmakers the investigation would be completed “very soon”

Whither the WTO? The World Trade Organization December ministerial that delivered few tangible results<https://insidetrade.com/node/61330> but opened what in 2018 seems certain to be an intensified debate over the group’s future. The U.S. has been highly critical of the WTO's functioning, U.S. Trade Representative Robert Lighthizer saying the group was “losing its essential focus,” stressing litigation over negotiation, and calling for a shift in direction<https://insidetrade.com/node/161306>, emphasizing a sectoral approach involving “like-minded countries” rather than continuing to press for multilateral agreements.

Lighthizer came away from the Buenos Aires ministerial claiming it “will be remembered as the moment when the impasse at the WTO was broken<https://insidetrade.com/node/161346>,” the group pursuing “a fresh start in key areas.” WTO Director-General Roberto Azevêdo, though, noted noted some “very wide<https://insidetrade.com/node/161308>” differences among members, but he also defended the group’s results, saying “by any objective measure, the multilateral trading system has delivered.” Next year could provide the WTO’s next defining moment.

For the Ex-Im Bank, wait ‘til next year. The philosophical and political wrangling continues to keep the Export-Import Bank, whose operations limp along in the absence of a board quorum, in limbo – lacking a director and other members. The Senate Banking Committee rejected Trump’s nominee<https://insidetrade.com/node/161391> for chairman, former Rep. Scott Garrett (R-NJ), who has been an outspoken Ex-Im critic and whom bank supporters fear might undermine the bank’s mission. Supporters argued Garrett would bring needed reforms to bank operations, but four other nominees are stalled<https://insidetrade.com/node/161418>, even though the committee cleared their nominations.

And while it waits for the next shoe to drop, the Trump trade teams moves into 2018 with significant unfilled positions<https://insidetrade.com/node/161442>, including two deputy USTR nominees still awaiting a vote in the Senate.

Michael F. Dolan, J.D.
Legislative Representative
International Brotherhood of Teamsters
Desk  202.624.6891
Fax    202.624.8973
Cell    202.437.2254

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