All posts by r k Morris

TPP: BETTER WITHOUT AMERICA

A CANADIAN ON TPP

“What was a blessing for Western Canada–Asian markets finally opening–could be even better without the presence of U.S. competitors.”

Carlo Dade
July 26, 2017  (publication date) 

CONTEXT

On January 23, 2017 — just three days after taking the oath of office — President Trump issued a memorandum that announced America’s withdrawal from the Trans-Pacific Partnership Agreement. While that action provoked a great deal of consternation around the world, it has not killed the TPP agreement. And not everyone is unhappy. Carlo Dade is among those who, to the contrary, see a world of advantages for Canada, especially Vancouver and environs, to a TPP that does not include the United States.

Mr. Dade is the Director of the Trade and Investment Centre at the Canada West Foundation. Today’s featured quote is from an article of his that was published in the Vancouver Sun on July 26. Yes, Canada’s ranchers and other agricultural producers should be able to gain market share in Asia at the expense of the U.S. if Canada and the other other ten TPP countries can conclude a revised TPP agreement. But that is only part of the potential Canadian advantage of a TPP without the U.S.

For Mr. Dade, there is more to the story. “It is not just beef and other commodity exporters that stand to gain,” he writes. “There are bigger opportunities on trade in services.” And, he adds, “For Vancouver, a TPP 11 is a chance to accelerate the movement of production, especially in services like high-tech, from the U.S.”

That is assuming, of course, that the remaining eleven can come to a final agreement on a new TPP, that is, one without the United States. Mr. Dade seems comfortable with that assumption. “All indications from media in TPP countries are that TPP 11 will indeed go ahead,” he writes.

COMMENT

Our guess — and it is only a guess — is that there is indeed a strong likelihood that TPP or some not too different successor to it will in fact come into being before too long. Whether the eleven will be able to wrap things up by November is another issue. It is their widely reported goal to have the deal essentially done by the time of the APEC Leaders’ meeting, which will be held in Da Nang, Vietnam, in early November.

Whether TPP is a done deal then or not, it should be an awfully interesting set of discussions. President Trump is planning to attend the Leaders’ meeting, though, obviously, not the side meetings of the TPP countries.

And, of course, one can only guess at how much intervening events will complicate things. Just as a taste, there was the July 28 announcement by Japan of a new “emergency tariff” on frozen imported beef. America is Japan’s largest supplier of that product and will be the hardest hit by that action. Even so, it has left countries that do not have a free-trade agreement with Japan — including Canada — envying countries like Australia that do have such an agreement. It has also given an added impetus to the TPP negotiations for those for whom they are still relevant.

***

Portland, Oregon, was not directly in the path of the full eclipse. But we were awfully close, which is to say that we did manage a brief twilight in the midst of an otherwise bright morning. That experience is over, but the metaphor lingers. With the signing of President Trump’s TPP withdrawal memorandum on January 23, we entered of a period of eclipse for America and TPP. U.S. policy makers and trade negotiators are now focused elsewhere, namely on the effort to revise and upgrade NAFTA.

But — thought for the day — maybe this fading of TPP is only a temporary eclipse. Certainly, if the other eleven manage to pull together enough to pull off a final deal, TPP will be an agreement that America will need to confront anew. If that happens, we will, with some enthusiasm, be dusting off an old adage: if you can’t beat ’em, join ’em.

SOURCES & LINKS

TPP – The Vancouver Advantage is a link to an op-ed in the Vancouver Sun by Carlo Dade of the Canada West Foundation. This was the source for today’s quote.

Beef Tariffs Up is a report from the Omaha Herald on Japan’s decision at the end of July to impose “emergency” tariffs of 50 percent on frozen beef, mainly from the United States.

Focused on Getting it Done is a Nikkei report of August 9 highlighting the commitment of Australia and other remaining TPP countries to get the deal done this year.

TPP Issues for Congress is a 2013 paper on TPP by the Congressional Research Service, which is quite useful. .

Withdrawal Announced takes you to the President Memorandum of January 23, 2017, which announces and explains America’s withdrawal from the Trans-Pacific Partnership Agreement.

Canada West is the website of the Canada West Foundation. The Foundation is based in Calgary, Alberta, the province’s largest city.

Originally published on August 21 as TTALK Quote No. 52 of 2017.

©2017 The Global Business Dialogue, Inc.

U.S. NAFTA GOALS

A CONJECTURE

“We want to claim or reclaim some manufacturing employment that has settled itself in Mexico.”

John Magnus
June 23, 2017

CONTEXT

Like our last entry,  today’s is from the preliminary comments made by TradeWins president, John Magnus, acting as a panel moderator at GBD’s June 23 event. Earlier we shared with you his thumbnail estimation of the U.S. trade posture towards the European Union. He offered similar comments on America’s apparent goals for a revised NAFTA. The first round of NAFTA renegotiation got under way in Washington yesterday [June 16], beginning with a fairly challenging opening statement from the U.S. Trade Representative, Ambassador Robert Lighthizer. We shall turn to that in a moment.

First, though, this is as good a time as any to review the assessment that John Magnus offered back in June. “Okay, what about NAFT?,” he asked. These points were his answer:

Content, Rules of Origin. “We apparently would like to wring out non-North American content as fully as possible from the goods that have NAFTA eligibility.”

Jobs. “We want to claim or reclaim some manufacturing employment that has settled itself in Mexico.”

Trade Deficits. “And we would like to have a smaller, bilateral merchandize trade deficit with Mexico.”

Dairy. “We want to extract concession from Canada on some offensive issues, most notably dairy trade. I’ll let you decide what the word offensive modifies in all of that. It could be our behavior in relation to dairy trade.”

Investment and Trade Remedies. “We want to overhaul some of the NAFTA’s institutional provisions and dispute resolution provisions and most notably the ones that sit in chapters 19 and 11”.

Government Procurement. “We want to really have a new or continue our new mania for Buy American, meaning that we want to, apparently, refrain from deepening the NAFTA in regard to government procurement. And that matters because our NAFTA partners have some interesting requests and proposals in that category.”

The Cases. “And we seem to want to continue to treat even the highest profile trade remedy proceedings – examples: softwood lumber for Canada, sugar for Mexico – as basically matters of pure law enforcement as opposed to some part of our trade policy that we would be prepared to bargain over.”

COMMENT

Doubtless you have already read or read about Ambassador Lighthizer’s opening statement yesterday. Certainly, it was important, but its importance is bound to fade somewhat as the negotiations — and all that is said and written about them — move on to specific issues. But while it is still fresh, here are a few thoughts on the statement and on the negotiations now in their second day.

First, of course it was a tough statement. It had to be. It was the United States that called for these negotiations, and in a sense that was a fallback from President Trump’s threat to withdraw from NAFTA, to tear it up. And the essential toughness of the statement was in this paragraph:

“The views of the President about NAFTA, which I completely share, are well known. I want to be clear that he is not interested in a mere tweaking of a few provisions and an a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

That was near the end of his statement. The beginning was somewhat different. There he talked about the many Americans who have benefited from NAFTA. “For many of our farmers and ranchers,” he said, “Canada and Mexico are their largest export markets.” And, he added, “Many are particularly vulnerable today because of low commodity prices.”

***

In short, at least as we read it, it was a tough speech with a major concession: America too needs NAFTA. Yes, there is some leverage in the belief if not the fact that the other two, Canada and Mexico, need NAFTA more. But America needs it. Think of NAFTA as a leaky lifeboat in an unforgiving sea. It’s three occupants — Canada, Mexico, and the United States — may have, will have, trouble agreeing on the best way to patch it. But agree they must. Scuttling it is unthinkable (or should be).

Much as we would like to end on that rhetorical flourish, it doesn’t quite capture the larger point. NAFTA may have been a mistake. A better set of policies set in motion in the 1990s might have preserved more U.S. manufacturing jobs and led to a stronger U.S. industrial base. The challenge for today’s NAFTA negotiators, however, isn’t to rewrite the 1990s. That can’t be done. Their challenge it is to improve a system that is now deeply embedded in the economies of all three countries and to do so without disrupting the lives and livelihoods of those who have successfully adapted to it.

SOURCES & LINKS

An Educated Guess is a link to the YouTube video of the Diplomatic Panel at the GBD EU Outreach event on June. This was the source of today’s featured quote.

Opening Statement takes you to Ambassador Lighthizer opening statement at the start of the first round of negotiations toward and an updated and revised NAFTA.

Objectives is a link the U.S. negotiating objectives for the new NAFTA negotiations, which USTR published on July 17, 2017.

About Dairy is the TTALK Quote for June 14, 2017, which focuses on the issue dairy in U.S.-Canada trade, beginning with comments from Shawna Morris of the U.S. Dairy Export Council.

Originally published on Augusut 17 as TTALK Quote No. 51 of 2017.

© 2017 The Global Business Dialogue, Inc.

 

THE EU, WHAT AMERICA WANTS

AN OBSERVATION 
“We would like the EU to be a little bit less successful in propagating its views on geographic indications and which food and beverage products are geographically distinctive.”

John Magnus
President of TradeWins and Panel Moderator

A RESPONSE
“I take note of your remark on our successful GI policy.”

Damien Levie
EU Delegation 
Together on the Same Panel
June 23, 2017

CONTEXT

The Global Business Dialogue’s event on EU Outreach was held on in Washington on June 23. That was almost two months ago, and admittedly a lot has happened (and not happened) since. Still much of what was said then remains fresh and relevant, and we are far from finished in our process of mulling over those comments in these pages. There were three elements to the event: a keynote address from the EU’s Ambassador to the United States, Ambassador David O’Sullivan, a business panel, and a diplomatic panel.

John Magnus, the president of TradeWins LLC, served as the moderator of the diplomatic panel, which included officials from the Embassies of Canada and Mexico and from the Delegation of the European Union. He was asked not only to introduce the other panelists but to offer some thoughts on America’s trade policy goals. He did so engagingly, talking first about America’s trade policy posture toward the European Union, and then with respect to NAFTA and the pending negotiations to revise and upgrade the North American Free Trade Agreement. We’ll save his NAFTA comments until next week.

Below you will find most of what Mr. Magnus said about America’s trade posture toward the EU. When it came his time to speak, Damien Levie, the Head of the Trade and Agriculture Section at the Delegation of the European Union, responded to many of Mr. Magnus’s points on U.S.-EU trade, and we’ll take note of some of those as well.

Here then is what Mr. Magnus said about America’s apparent posture toward the EU where trade is concerned.

MR. MAGNUS
“You’ll notice right off the get-go that there are three but not four diplomatic presences on this panel. Missing in action is somebody who can speak for Uncle Sam, which I certainly can’t do. But what I thought I would do instead, in order to get us rolling, is to just very briefly click through what it seems we may be aiming for, or think that we’re doing, or think that we would like to do, in regard to the EU and in regard to NAFTA. Just as a consumer of the news and observer of events like you all are. Because, you know, if you go on the basis … of rhetoric and visible behavior, there is a little that you can see. … So what do we think we’re doing, want to do, with regard to the EU?

Brexit. “Well, we’re interested in Brexit and in our future trade relationship with the United Kingdom.”

Mr. Levie of the EU said quite a bit about Brexit. We’ll share that in a separate entry.

China.  “It appears that we’re very interested in how the EU handles the evolution of its own policy with regard to China and market economy status and anti-dumping. That issue has been elevated.”

Mr. Levie dealt with China saying: “Just one word on antidumping. We are moving to upgrading or modifying our antidumping regulations or our laws in a way to bringing them closer to the U.S. system in order to keep using the analogue country methodology when we have to.”

Taxation. “We seem to be displaying some combination of resentment and envy in regard to the European approach to taxation, business taxation. And there I refer not only to the attractiveness of jurisdictions like Ireland but [to] the sort of heavy use of border adjustment across most of Europe.”

Mr. Levie: “I will not respond to your comments on tax.”

Trade Actions: “We seem perfectly willing to contemplate zapping EU exports in the context of global trade actions, like the ones under 232, like the ones that are now going forward under Section 201.”

GIs. ”We would like the EU to be a little bit less successful in propagating its views on geographic indications and which food and beverage products are geographically distinctive.

“And by the way, given who we have represented here, maybe we can sort this out, but I read just in this morning’s beverage alcohol press about an interesting one involving Heineken’s placing in the market of a tequila infused beer, which has offended the sensibilities of the folks in Mexico responsible for that geographically distinctive product. So, maybe we can get that sorted out before we wrap up.”

Mr. Levie: “I take note of your remark on our successful GI policy.”

Cooperation in the WTO Etc. “We are not showing much inclination, as far as I can tell, to work with the EU in some of the traditional ways. For example, on a package, a good package of deliverables for the next WTO ministerial, which is not far off.”

TTIP, The Transatlantic Trade and Investment Partnership. ”And, oh yes, for the moment, at least, we’re content to leave the TTIP in an undead state and continue skirmishing over aerospace subsidies.”

COMMENT

We have not much to add on this Friday afternoon, only our sincere gratitude to everyone who participated in GBD’s June 23 event. They brought to the table a wealth of expertise and information. They also brought a certain sense of fun and community, which you will see if you watch the video.

As mentioned, we shall deal with other topics of that day next week, including NAFTA and Brexit.

SOURCES & LINKS

The Diplomatic Panel takes you to the YouTube video of this portion of the June 23 event on EU Outreach, with a particular emphasis on the EU’s relationships with the countries of North America.

Tequila Infused Beer is an NPR story of late June about the dispute between Mexican authorities and Heineken over this product.

-gbd-

Originally published on August 11 as TTALK Quote No. 50 of 2017.

© 2017 The Global Business Dialogue, Inc.

 

WYDEN AT THE KAPLAN HEARING

THE TOUGH-TALK CONUNDRUM

So far in this administration, there’s been a lot of tough talk on trade enforcement, but there hasn’t been much in the way of action. And there is a real cost to all of the overhyped rhetoric when the follow-through isn’t there.”

Sen. Ron Wyden
August 3, 2016

Senator Ron Wyden of Oregon is the most senior Democrat, the Ranking Member, on the Senate Finance Committee.  On Thursday, August 3, the Committee held hearings on three nominees for positions in two quite different departments, namely, the Department of Commerce and the Department of Health and Human Services. Today’s featured quote is from Senator Wyden’s opening statement at that hearing.

Here is a longer excerpt from the same statement:

“So far in this administration, there’s been a lot of tough talk on trade enforcement, but there hasn’t been much in the way of action. And there is a real cost to all of the overhyped rhetoric when the follow-through isn’t there. For example, in response to all of the tough talk on steel, countries have shipped even more steel to the U.S. in a rush to get in ahead of any hike in tariffs.

“My friend Leo Gerard, President of the United Steelworkers, recently informed me that imports have surged 18% since the president launched his Section 232 investigation. Meanwhile, the administration appears to be backing off. This episode demonstrates how tough talk without a real strategy hurts American workers.

Mr. Kaplan’s background suggests he will be a tough trade enforcer, and that’s exactly what’s needed right now at ITA [the International Trade Administration].”

COMMENT

We have highlighted the statement about Mr. Kaplan’s background, not because it was the most important thing Senator Wyden said last Thursday, but because it underscores our impression that the hearing was not about whether Gilbert Kaplan should be confirmed as Under Secretary of Commerce for International Trade.  He seems to enjoy broad support on the Committee, and there is little doubt but that he will be the Under Secretary.  We will deal with the question of when below.

Rather than a yes-or-no on the nominees, the Committee’s August 3 hearing was about the other things. One was observing the necessary formalities for positions requiring Senate approval, i.e., “Advice and Consent.” The other was providing opportunities for Members of the Committee to obtain certain commitments from the nominees and to send messages to the Administration and their constituents on the issues they care about.

For the record, those other nominees are Matthew Bassett, who has been nominated to serve as Assistant Secretary for Legislation at the Department of Health and Human Services and Robert Charrow, who is in line to become the next General Counsel at HHS. Disparate as their respective areas of expertise and responsibility might seem, some of the discussion surrounding the HHS issues — starting with the implementation of the Affordable Care Act — more than held our interest. Beyond that, Mr. Charrow’s opening statement was a profound and profoundly useful discussion of the role of a general counsel in a U.S. Government agency and the interplay between law and regulation in the American system. We expect to come back to it sooner rather than later.

Steel and National Security. For this brief entry, however, we will confine ourselves to two of the trade issues raised by Senator Wyden. One is the challenge of steel imports, especially imports from China, and the fact that in April the Commerce Department opened an investigation into the question of whether such imports are a threat to America’s national security. This was under Section 232 of the Trade Expansion Act of 1962.  Senator Wyden is quite correct that the Administration had earlier led the world to believe that a decision — and potential action — was imminent, only to then, in effect, slow the process down. To date no report has been issued and no action taken.

Against that background, it did not surprise us to learn that some steel shipments to the United States had been accelerated, almost certainly to avoid new restrictions.

Those who care about this trade will judge from their own perspectives whether these are positive or negative developments. We would simply point out that there are other considerations. Yes, the increased likelihood of U.S. trade restrictions on a product will often accelerate the pace of foreign shipments. Exporters will want to get in under the wire if they can. But there are other effects. For example, the increased likelihood of a trade action will, more often than not, make buyers of imported commodities reluctant to commit to long term contracts. They don’t want to be left holding the bag of unaffordable or unattainable products. For that reason, the 232 threat may, by itself already have worked to the advantage of some American producers.

Then, there is the wider question of determining what in fact is good public policy. Surely, the fact that investigations like the current 232 investigation on steel raise the hopes of some and the fears of others does not mean such investigations should never be undertaken. Those uncertainties are a necessary cost of asking difficult questions. And the question of whether the United States should use Section 232 in the current instance is a difficult one, especially since whatever is done in steel will have repercussions for other sectors. We do not have a view as to how the Administration should come out on this, but if they have decided that they need a little more time on this one, they should take it.

Softwood Lumber. All that pine, it’s been an irritant in the U.S.-Canada trade relationship for a very long time, but a manageable one. The problem is that the most recent iteration of the U.S.-Canada Softwood Lumber Agreement (SLA), the principal management tool, expired in October 2015. And so America cranked up the trade defenses against softwood lumber imports from Canada, both antidumping and countervailing duty (anti-subsidy cases). Those cases are now coming to a head. Preliminary dumping and subsidy margins have been announced, and the plan is to consolidate them in a final ruling. This was explained in a Federal Register notice issued by the Commerce Department on April 28, which stated that:

“[T]he final CVD [countervailing duty] determination will issue on the same date as the final AD [anti-dumping] determination, which is currently scheduled to be issued no later than September 6, 2017, unless postponed.”

So those fairly stiff measures are rolling along. So too are the negotiations toward a new agreement. And, from the Canadian press one gets the impression that they may be quite close to a deal. Chrystia Freeland, Canada’s foreign minister, says she can “see the outlines of that agreement already.” Ah but when? That’s the question.

There are lots of reasons to get it done sooner rather than later. The NAFTA negotiations are set to begin next week. It would be nice to have softwood lumber settled before it wormed its way into the NAFTA talks. Then there are the looming final decisions on antidumping and countervailing duties. Those can only complicate the situation further.

But Senator Wyden and his colleagues on the Finance Committee don’t want things to go too fast. Specifically, they don’t want things to move so quickly that they leave the Finance Committee out of the picture. On July 24, Senator Wyden, Senator Mike Crapo, a Republican from Idaho, and five others Committee Members wrote to USTR Robert Lighthizer and Commerce Secretary Wilbur Ross forcefully, making just that point. They wrote:

“You must consult closely with Congress throughout any negotiation. The Senate Finance Committee must be briefed fully and regularly on the details of proposals before they are made to Canada.”

Senator Wyden made those same points even more forcefully in his exchange with Mr. Kaplan last week. And Mr. Kaplan made clear that it was his intention to be as cooperative as possible, but, of course, he has not yet been confirmed. As he put it

MR. KAPLAN
“Senator, I hear you loud and clear on that [consult closely and before sharing proposals with Canada] and I absolutely agree to do that. …

“I should mention that the date of the lumber final is September 6. So if I am privileged to be confirmed and confirmed before then, I’ll be more effective in that regard…”

SENATOR WYDEN
“That is a really clever argument for the United States Finance Committee to move quickly.”

SOURCES & LINKS

From Senator Wyden takes to the opening statement made by Senator Ron Wyden of Oregon on the Finance Committee hearing on August 3, which is discussed above. This was the source for today’s featured quote.

The Hearing is a link to the page of the Senate Finance Committee’s website on the August 3 confirmation hearing for Gilbert B. Kaplan and others. This includes a full video of the hearing as well as the opening statements of the Chairman, the Ranking Member, and each of the nominees.

The August Break is an article from Heavy.com with details of the House and Senate schedules from now until September 5, when both houses are expected to be back in full session.

The Letter is the text of the July 24 letter to Secretary Ross and Ambassador Lighthizer from seven member of the Senate Finance Committee. The authors of the letter were Sen. Ron Wyden (D OR), Sen. Mike Crapo (R ID), Sen. Michael Enzi (R WY), Sen. Debbie Stabenow (D MI), Sen. Johnny Isakson (R GA), Sen. Mark Warner (D VA), and Sen. Michael Bennet (D CO).

Outline in View is a recent article from The Star with Chrystia Freeland’s assessment of the softwood lumber negotiations.

-gbd-

Originally published on August 10 as TTALK Quote No. 49 of 2017.

© 2017 The Global Business Dialogue, Inc.

 

AN UNQUIET AUGUST

DOG DAYS?
by Joanne Thornton

As we approach what traditionally has been a month of recess in Washington, the policy agenda remains as hot as the weather. Unleashed by the Trump administration like a pack of greyhounds in the months following the president’s inauguration, several trade initiatives are now approaching decision points.

Section 232. An especially prominent one — the Section 232 investigation into whether steel imports are harming US national security — appears to have slowed its pace. Perhaps it will be subsumed within the exercise resulting from the president’s most recent executive order, directing the Defense Department to lead a nine-month study of the US defense industrial base. The same may be true of the Section 232 aluminum investigation.  And,

Trade Deficit. Even so, there are plenty of other impending reports and/or decisions that will keep trade mavens busy this summer. Two are overdue, and could pop up any day: an “Omnibus Report on Significant Trade Deficits,” now a month late.

Pipeline Steel. The other overdue report is a Commerce Department plan — technically due last Sunday — for use of American steel in pipelines.

Other upcoming items include:

Enforcement Priorities. This is a report to Congress by USTR on trade enforcement priorities, due by July 31 under Section 601 of the Trade Facilitation and Trade Enforcement Act of 2015 (PL 114-125). Essentially the latest iteration of the 1974 Trade Act’s “Super 301” instrument, the provision requires USTR to focus on “those acts, policies, and practices the elimination of which is likely to have the most significant potential to increase United States economic growth.”

China – The NME Issue. The Department of Commerce is reviewing its policies to determine whether China should continue to be treated as a “non-market economy” (NME) under US antidumping and countervailing duty laws. A finding is expected prior to mid-August, and it is widely anticipated that the Department will reaffirm current practice. Even if not surprising, such a decision would accentuate a deep rift with China. Beijing has challenged the use of NME methodology by the European Union and the United States in what USTR Robert Lighthizer has termed “the most serious litigation matter we have at the WTO right now.” Ambassador Lighthizer made that comment at a Senate Finance Committee hearing on June 21, and he asserted further that “a bad decision with respect to NME status for China . . . would be cataclysmic for the WTO. “

NAFTA Modernization. Mid-August also will see the formal initiation of NAFTA modernization negotiations, a process that the Trump administration hopes will produce more balanced trade among the three partners and a new and improved template for future free trade agreements.

Congress is watching and asserting its authority under Article 1 of the US Constitution. Stakeholders are having their say. While some further adjustments in direction and/or speed are possible, by summer’s end, America’s trade policy is likely to have been set on a transformative path.

First published as TTALK Quote No. 47 of 2017.

© 2017 The Global Business Dialogue, Inc.