International Policy Update
White House, Congress Engage on USMCA
President Trump met on March 26 with approximately two dozen House Republicans to strategize on efforts to secure congressional approval of the United States-Mexico-Canada Agreement. Declaring passage of the agreement his top legislative priority for the year, the president, House Republican Whip Steve Scalise, Ways and Means Committee Republicans, and several other senior House Republicans discussed the timeline for the deal’s consideration.
Reports indicated the group focused on three “must-do” items preceding legislative action on the deal: Mexico must pass the labor reforms required in the text of the USMCA, the U.S.-China trade talks must be concluded, and the Administration must draft implementing legislation that addresses Democrats’ concerns.
One upcoming milestone will be release of the U.S. International Trade Commission’s analysis of the deal’s economic impact—due by April 19— after which the administration can submit the deal to Congress. Administration officials have signaled that they intend to work with House Speaker Nancy Pelosi to find a path forward and hope to send the bill to Congress once she agrees the time to do so is right, but all concerned are looking at legislative action before the August congressional recess.
In related news, Senate Finance Chairman Chuck Grassley on March 27 told a gathering of reporters that President Trump is not prepared to lift tariffs on steel and aluminum imports from Canada and Mexico. Grassley described a recent White House meeting in which a group of Republican senators all urged Trump to lift the duties before Congress takes up debate on the USMCA. Politico reported:
“The whole message from everyone in the Senate delegation that went there was ‘we’ve got to get rid of the tariffs or nothing is gonna happen,’” Grassley told reporters in a briefing.
Grassley said he asked Trump directly: “Don’t you think the tariffs ought to come off?” And the answer he received was “No.”
Grassley’s urging was also not well-received by White House trade adviser Peter Navarro, who pushed back on tying the tariffs and USMCA together.
When the senators asked why the administration wasn’t lifting the tariffs, “Peter Navarro interrupts and says, ‘Well you can’t conflate the tariffs with the agreement’ ... And I say, ‘What do you mean you can’t conflate this? They were conflated when you started this whole process,’” the Iowa Republican said.
Both Democratic and Republican members of Congress have urged that the tariffs be lifted and not replaced with quotas, explaining that the barriers are effectively blocking efforts to whip the USMCA. Canadian Foreign Minister Chrystia Freeland also told U.S. Trade Representative Robert Lighthizer earlier this week that the tariffs could complicate ratification of USMCA in Canada.
The USMCA Coalition, for which the U.S. Chamber of Commerce serves as Secretariat, continues its extensive outreach on Capitol Hill, in the media, and at the grassroots level to make the case for approval of the agreement. More than 360 companies and associations have joined the Coalition. The Chamber alone has met with more than 200 members of Congress to make the case for approval of the agreement, including 70 meetings with members and their staff outside the beltway.
“Constructive” Talks Amid Signs of New Chinese Proposals
U.S.-China trade negotiations held last week were “constructive,” according to a March 29 tweet by Treasury Secretary Steven Mnuchin, who accompanied U.S. Trade Representative Robert Lighthizer and a broader delegation to Beijing. In an apparent sign of progress two days earlier, several senior U.S. officials told Reuters that Chinese negotiators have made proposals on a number of issues, including forced technology transfer, that went beyond the scope of previous offers.
One proposal could ease certain cloud computing restrictions for foreign companies in China. The Wall Street Journal reports that China is considering a “liberalization pilot” in a free trade zone to open cloud computing to foreign companies. Although public details of the proposal are sparse, the Journal reported that foreign companies would be able to own data centers in the free trade zone—potentially in Guiyang.
Despite some encouraging reports, National Economic Council Director Larry Kudlow told the annual conference of the U.S. Export-Import Bank that the negotiations are “not time-dependent. We’ll get there when we get there and it will be an historic moment…If [a potential deal] takes a few more weeks, or a few more months, so be it.”
Administration Refuses to Drop Auto Tariff Threats
On March 28, National Economic Council Director Larry Kudlow hinted that President Trump could take more than 90 days to announce a decision on whether to raise tariffs on imports of autos and auto parts. “The president is exercising his legal right to take the 90, and, by the way, he could take longer under a 232,” Kudlow stated, though no further explanation was offered on how the Administration could extend the statutory 90-day deadline.
The Commerce Department delivered its report on the Section 232 auto investigation to the White House on February 17, starting the 90-day clock for the administration to decide what action to take. The report has not leaked, though it reportedly does include the option mentioned on numerous occasions by the White House of a broad 25% tariff on imports of autos and auto parts.
On March 19, a bipartisan group of senators sent a letter to Commerce Secretary Wilbur Ross asking for the release of the Section 232 report. The letter also included a series of questions based on the senators’ briefings from the department, including whether the agency met with industry stakeholders who favored auto tariff action and whether the Defense Department agreed with the report’s conclusions. The answer to both queries is understood to be negative.
Senate Finance Committee Chairman Chuck Grassley has sent multiple requests for the report to the Commerce Department, but the agency has not complied. Grassley also announced last week that he is nearing completion of draft legislation to constrain the president’s ability to impose tariffs on national security grounds. His hope is that his bill will gain support from Senators Rob Portman and Pat Toomey, each of whom has proposed legislation addressing the same issues.
The U.S. Chamber has argued strenuously against the auto tariffs. As U.S. Chamber President and CEO Thomas J. Donohue stated:
“The U.S. Chamber strongly opposes the administration’s threat to impose tariffs on auto imports in the name of national security. If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”
New Report Shows Strength of the Transatlantic Economy
On March 20, AmCham Sweden released The Transatlantic Economy 2019, a study that outlines the state-by-state and country-by-country benefits of transatlantic trade and investment. The report finds the commercial relationship between the United States and Europe is unmatched. Trade and investment across the Atlantic generates more than $5.5 trillion in commercial sales each year. In terms of trade alone, more than $3.75 billion in goods and services flow between the U.S. and Europe every single day.
The study also looks at the impact Brexit and the threat of new U.S. Section 232 tariffs on imported autos and potential European countermeasures could have on the U.S.-European relationship.
Upon the report’s release, Peter Dahlen, Managing Director, stated:
“The strength of America’s economic relationship with Europe is unmatched. Transatlantic trade and investment supports 16 million jobs on both sides of the Atlantic. At a time of considerable global uncertainty and shared global economic challenges, the U.S. and Europe must choose to continue working closely together, or risk significant consequences if trade tensions escalate.”
The study’s findings will be presented at the U.S. Chamber’s upcoming Transatlantic Business Works Summit on April 8 in Washington, D.C.