International Policy Update
U.S.-China Talks Continue; Summit Deferred
Treasury Secretary Steven Mnuchin confirmed on March 14 that President Trump and President Xi Jinping of China will not meet in late March to clinch a trade deal. The comments followed a report by Bloomberg making similar points. Secretary Mnuchin cited the extent of remaining work as the reason for the delay, but he continued to voice optimism about a presidential summit.
The two governments now appear to be looking to late April as the next available window to sign an agreement, although some are suggesting the leaders could meet before or after President Xi’s travel to Europe on April 9.
Meanwhile, CNBC reported that the two sides are considering a State Visit at the end of April rather than a mere signing ceremony, as the U.S. Chamber’s China Center had reported earlier as a possibility. The Chinese are said to be pressing for such a visit and have also recommended a trip to Houston to commemorate Deng Xiaoping’s visit to Texas in 1979 and celebrate the 40th anniversary of U.S.-China diplomatic relations.
Brexit Votes Continue, Article 50 Extension Likely
In a series of events over the last week, it is all but certain that the United Kingdom will remain in the European Union beyond the previously announced exit date of March 29. Here is where things stand:
March 12: The British Parliament voted against the withdrawal agreement negotiated by Prime Minister Theresa May; May won the support of an additional 41 Members of Parliament for her agreement relative to a vote a month ago, but her government nonetheless fell 75 votes short of winning approval.
March 13: Parliament voted to reject leaving the European Union without a deal under any circumstances, again affirming MPs strong aversion to a no-deal Brexit (which nonetheless remains the default path forward absent further action by Parliament).
On March 14: Parliament voted in support of an Article 50 extension, which would allow the country to remain an EU member past the March 29 exit date.
This week: Prime Minister May will bring her deal back to Parliament for a third vote; if she wins, a short extension will be sought; if she loses, a longer one will be sought.
Following the March 12 vote, Marjorie Chorlins, Executive Director of the U.S. Chamber’s U.S.-UK Business Council, released a statement:
“There are now less than 3 weeks to go before the UK is scheduled to leave the EU with or without a deal. Throughout this process, American investors and exporters have repeatedly called for clarity and certainty as the UK looks to reset its relationship with the EU. Unfortunately, today’s vote hasn’t advanced the ball. U.S. firms’ stakes in the outcome are substantial – as of today, U.S. firms have invested nearly $750 billion on the UK, supporting 1.5 million jobs. We call on Parliament to reject a no deal outcome and to support an extension of Article 50, albeit with a clear idea of what they aim to accomplish during such an extension.”
China Dominates Senate Finance Hearing
On March 12, the Senate Finance Committee held its first trade-related hearing of the 116th Congress entitled “Approaching 25: The Road Ahead for the World Trade Organization,” featuring U.S. Trade Representative Robert Lighthizer as the sole witness. Though the hearing’s focus was on the future of the WTO, much of the questioning about the administration’s trade policies focused on China.
In his prepared testimony, Lighthizer stated:
“The United States remains very active at all levels of the WTO, from the committees where much of the practical work is accomplished, to efforts to negotiate the new trade rules of the future… Nevertheless, we have concerns about the organization. In many ways, the WTO is not working as expected. We joined the WTO in the hope that it would help us promote stronger and more efficient markets. Unfortunately, those hopes have too often been disappointed.
“In sum, the WTO is an important organization that has developed some serious problems. We have to work with our trading partners to find solutions. I look forward to continuing to consult with members of this Committee in this effort.”
In their opening remarks, both Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) stressed support for the goal of reforming the WTO and seeking strong and enforceable trade deals, particularly in regard to China and its unfair trade practices. However, Senator Grassley did not miss the chance to reiterate his view that “erecting new market barriers with tariffs and quotas cannot be a long-term solution.”
When discussing WTO reform, many senators asked Lighthizer about the U.S.’s decision to block appointments to the Appellate Body-the WTO’s dispute settlement. He replied, “If you’re not willing to be bold and use the only leverage you have with the WTO, which is to say that we won’t approve the appointment of Appellate Body members without reform, I don’t know any other way to do it.” The Trump administration has been blocking Appellate Body nominations since 2017, and on the present course it will be reduced to a single member and unable to function after December.
Other senators questioned the WTO’s consensus-based decision-making approach due to the difficulty in getting all the member countries to agree. Lighthizer, a long-time critic of the WTO, defended this aspect of the institution, suggesting that the decision-making approach benefits the United States because any WTO decision must have the country’s approval.
On China, Lighthizer reiterated his statements from a House Ways & Means hearing the previous week, saying “nothing’s ever done until everything’s done… We’re either going to have a good result or we’re going to have a bad result before too long.” He noted that under the current negotiations, there is a provision on currency manipulation that has significant commitments and will be enforceable. He also added that discussions on the removal of Section 301 tariffs on imports of $250 billion worth of Chinese goods are ongoing, but no commitments have been made on that front. The ambassador was adamant, however, that the United States must have the right to raise tariffs on Chinese goods if China violates the terms of a potential deal.
Last Week in Trade: Above the Fold
Of Babies, Bathwater, and the WTO by John Murphy
Despite a number of challenges, the U.S. business community has long regarded the World Trade Organization (WTO) as one of the most successful multilateral organizations. The global rules-based trading system it embodies has benefited the entire world — but no one more than the United States… It isn’t just the tariff elimination brought about under the GATT and the WTO that benefits American companies and the workers they employ. American firms rely on its rules — from national treatment to prohibitions on arbitrary regulation and requirements that sanitary standards have a firm basis in scientific evidence — every day of the year.
More News from Mundus
The Riksdag voted in favour of a government proposal that companies registered in the UK, which are currently permitted to conduct securities operations in Sweden without authorisation from the Swedish Financial Supervisory Authority (FI) shall be permitted to continue with this for a certain period after the UK has left the EU. The amendment will come into force on 29 March (2018/19:FiU35)
The RIksdag said yes to more money to the European Investment Bank (EIB). As the UK intends to leave the EU and thus the EIB, there will be a capital increase for the Bank’s members. For Sweden, the increase is SEK 14 billion, making a total of SEK 89 billion (2018/19:FiU33)