International Policy Update
Lighthizer Describes Course on U.S.-China Trade Talks
U.S. Trade Representative Robert Lighthizer appeared before the House Committee on Ways and Means on February 27 just days after President Trump said he would defer a planned hike in tariffs on $200 billion of imports from China. The president’s decision was ascribed to progress in negotiations with China, which reportedly picked up when Lighthizer made an appearance and “read them the riot act,” according to White House National Economic Council Director Larry Kudlow.
In his prepared testimony, Lighthizer stated:
“As you know, we have had near-constant negotiations with China in recent months. Both sides are seriously engaged at the highest level—and significant progress has been made. While it is too early to predict the outcome, I want to emphasize two key points: First, this Administration is pressing for significant structural changes that would allow for a more level playing field – especially when it comes to issues of intellectual property rights and technology transfers. The issues on the table are too serious to be resolved with promises of additional purchases. We need new rules.
“Second, any agreement must be enforceable. We at USTR are very aware of the history of our trading relationship with China, and the disappointments that have resulted from promises that were not kept. Thus, the Administration is focused on making sure that we have the ability to enforce any new agreement.”
Ambassador Lighthizer noted that submissions from business groups played a key role in defining his vision of a “successful” agreement as he addressed the following areas:
Intellectual Property Protection: “We are negotiating provisions that will make commitments against cyber theft, physical theft, and state-directed investment,” said Lighthizer, adding that the IP section of the agreement could be 28 pages long.
Forced Technology Transfer: Lighthizer emphasized the need to address forced technology transfer issues at all levels of the Chinese government, including the central, sub-central, and local levels.
Market Access for Services: Lighthizer said services are very much part of the negotiations, noting that much discussion has been devoted to the banking, e-payment, cloud computing, credit rating, express delivery, and insurance sectors.
NTBs/Industrial Subsidies: He noted the significant distortions in the global economy created by China’s industrial policies that are supported by subsidies and other non-tariff barriers that harm U.S. companies.
Agricultural Purchases: Purchases of agricultural commodities are clearly an important component of the ongoing negotiations, and Lighthizer noted significant work is focused on the regulatory approval process for agricultural biotechnology.
Currency Manipulation Restraints: Lighthizer noted that China has made commitments not to engage in competitive devaluation, but cautioned that there is no deal on currency “until there’s an agreement on everything.”
With regard to enforcement, Lighthizer said there would be monthly meetings at the office director level and quarterly meetings at the vice-ministerial level, and then semi-annual meetings at the ministerial level. Throughout this process, individual companies could bring complaints to USTR on an anonymous basis. Moreover, USTR will also monitor for any “systemic problems or patterns” that need to be addressed. The U.S. government would engage in unilateral enforcement if issues cannot be resolved via this process, Lighthizer added.
Lighthizer said there is no plan to submit a final “executive agreement” to Congress for a vote, and he described the agreement as the settlement of a 301 action but not a “trade agreement” in the traditional sense. He declined to comment on concerns that the Huawei case would become a “bargaining chip” in the current negotiations. He maintained that he has no role in the case and that issues of law enforcement are not in his purview.
Ahead of the hearing, Ranking Member Kevin Brady (R-TX) and Trade Subcommittee Ranking Member Vern Buchanan (R-FL) sent a letter to Chairman Richard Neal (D-MA) emphasizing the need to focus on China’s distortive policies and the need for a durable and enforceable agreement.
Separately, USTR published a Federal Register Notice on February 28 suspending the scheduled increase in tariffs from 10% to 25% on the so-called “list 3” representing $200 billion of imports from China until further notice.
USMCA Coalition Launched
On February 26, the U.S. Chamber of Commerce joined with more than 250 companies and associations to launch the USMCA Coalition. The Coalition, which includes representatives of farmers and ranchers, manufacturers, service providers, and technology companies, will advocate for congressional approval of the United States-Mexico-Canada Agreement.
The website (www.USMCAcoalition.org) went live in conjunction with the launch of the coalition and quickly attracted a wide readership. The website lists all the coalition members and provides a variety of resources.
Several DC-based news outlets covered the launch, with Politico describing the coalition as “the largest business-sector lobbying effort to promote passage of the U.S.-Mexico-Canada Agreement.” Additionally, Secretary of Commerce Wilbur Ross tweeted his support of the USMCA Coalition.
Over the coming weeks and months, the USMCA Coalition will make the case for expeditious passage of the agreement to members of Congress, and it will work to educate the American public about the benefits of the new deal. A fact sheet on the USMCA is available here. The effort will harness the advocacy strength of a broad membership of companies, trade associations, and chambers of commerce, including many that operate outside of Washington, D.C.
In addition to companies and association members, corporate co-chairs from Cargill, Citi, Cummins, Fiat Chrysler Automobiles, Owens-Illinois, UPS, and VF Corporation will provide advocacy heft.
In the February 26 hearing described above, Ways and Means Committee members touched on the USMCA. U.S. Trade Representative Robert Lighthizer said failure to approve the USMCA would be a “catastrophe,” insisting “there is no trade program in the United States if we don’t pass USMCA. There just isn’t one… It just has to pass. If it doesn’t, you have no credibility at all with China, and you will have no credibility on any deals with your other trading partners.”
U.S. Chamber Issues Principles for International Taxation in a Digitalizing Economy
On February 28, the U.S. Chamber released its “Principles for International Taxation in a Digitalizing Economy.” The principles were crafted based on extensive consultation with U.S. Chamber members and will be used as the basis of the U.S. Chamber’s submissions in response to various consultations, including at the OECD. They will also be shared broadly with policymakers in Washington, as well as with other jurisdictions that are considering similar measures. The full document is available here.
Senate Finance Leaders Weigh in on “De Minimis”
On February 27, Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) sent a letter to U.S. Trade Representative Robert Lighthizer urging the administration to avoid making changes to existing law to lower the U.S. de minimis threshold through the implementing legislation for the United States-Mexico-Canada Agreement (USMCA).
The United States raised its de minimis level, the value below which goods may be imported free of customs duties, from $200 to $800 under the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). However, USTR’s recently issued description of changes in U.S. law needed to implement the USMCA appeared to signal an intent to lower the U.S. de minimis level despite the total lack of any identifiable stakeholder support for the move—and considerable opposition. The senators wrote:
“We strongly oppose any change to existing law that would authorize the administration to lower the current U.S. de minimis threshold to make it reciprocal with its trading partners. While we are deeply disappointed that both Canada and Mexico were unwilling to raise their de minimis thresholds for express shipments to match the U.S. $800 de minimis level, lowering the U.S. threshold in response is contrary to well-demonstrated Congressional intent.”
“Our higher threshold has helped to make the United States a leader in global e-commerce — a position that we should not cede to countries, like China, that are vying for that role.”
Trade: Above the Fold
Not Just a Fender Bender: Tariffs Could Wreck the U.S. Auto Sector by John Murphy
Tariffs on autos and auto parts would risk the country’s economic attractiveness and harm American companies, workers, and consumers. Such tariffs would deal a staggering blow to the very industry they purport to protect and could ignite a global trade war.
How the Steel and Aluminum Tariffs Miss Their Mark by John Murphy
The Section 232 tariffs have missed their intended target of Chinese overcapacity and instead hit innocent bystanders in Canada and Mexico as well as U.S. workers, farmers, and ranchers.
5 Reasons We Support the U.S.-Mexico-Canada Agreement by U.S. Chamber Staff
The case for approval of USMCA is strong – it will preserve and strengthen our trade ties to our two most important export markets. We urge Congress to move quickly and approve USMCA as soon as possible.