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.

 

 

CANADA ON CETA AND NAFTA

FIRST CETA, THEN NAFTA

“I think the response from Canada [to the U.S. proposal for renegotiating NAFTA] was a very open response to the possibility of modernizing and updating. And I think you have to look no further than CETA to see what Canada means by that.”

Colin Bird
June 23, 2017

CONTEXT

Colin Bird is the Minister for Trade and Economic Policy at the Canadian Embassy in Washington. As a panelist at the GBD event on June 23, he made several major points in a calm and quiet voice. For us, the biggest of these is that Canada has just notched a big win in trade policy. CETA, Canada’s Comprehensive Economic Trade Agreement with the European Union, is largely a done deal. And it is a big deal. In the words of the EU Trade Commissioner, Cecilia Malmström, “It is the most modern and advanced trade agreement ever made.”

As for when it will be implemented, Mr. Bird said, “We are, I think, very, very close to application of the CETA.” But that was in late June. In early July, Canada’s prime minister, Justin Trudeau, and EU Commission president, Jean-Claude Juncker, met on the margins of the G-20 Summit in Germany, and they set a date. Provisional application of CETA will begin on September 21, 2017.

So, how provisional is “provisional” application? Mr. Bird put it this way:

“When you’re talking provisional application, that sounds very tentative. In reality, it means essentially full application of the CETA, with the exception of certain investor issues that are in member state competence.

“So, what does that mean? You’re looking at 98 percent of tariff lines going duty-free as of day one, as soon as we bring it into force. We’ve got fairly concise phase-outs for those very sensitive products in the sort of 3, 5, 7 year range. So that will be at about 99 percent of tariff lines duty-free by the time the phase-ins are complete.”

But tariffs are just a part of it. Mr. Bird praised CETA for an array of elements including its provisions on labor, on environment, on transparency, on services, and most notably (for us) on government procurement. “You look at the level of ambition on government procurement and it’s really quite dramatic; so that we are down to the provincial, the Member State, [and] city level in terms of openness to procurement.”

And Mr. Bird was quite clear in making the connection between CETA and NAFTA. “We’ve had an agreement [CETA],” he said, that has essentially leap-frogged NAFTA.” That in itself, he suggested, makes the case for the effort to try to modernize and update NAFTA.

As to how difficult the NAFTA project is going to be, Mr. Bird took note of the mixed character of the climate for the negotiations. He spoke positively of the high-level engagement in all three NAFTA countries. On the other hand, he also took note of the “challenges in terms of managing an agreement going forward, particularly when you have rhetoric that can sometimes look win-lose.”

But overall his assessments of the looming NAFTA talks was more positive than negative, more upbeat than otherwise. That, at any rate, is how we understood this passage in his comments:

“The rhetoric around America first and economic nationalism that we’re hearing in the United States does not necessarily have to translate into a win-lose model. And Canada is very focused on keeping a win-win model going forward into these negotiations, or a win-win-win model going forward into these negotiations.”

COMMENT

An honored boss of many years ago would often brush aside our over-reliance on precedence, footnotes, and documentation. “Just assert it,” he would say. So we shall simply assert our belief that any negotiation — and certainly the negotiation of a major trade agreement — is more likely to end successfully if the partner or partners on the other side of the table are strong, confident, and clear in their purpose. In that sense, Mr. Bird’s comments at GBD were full of good omens for the upcoming NAFTA negotiations. For starters, Canada is feeling confident about trade. “We are probably at one of the most unified places I’ve ever seen Canada on trade,” he said.

Even if, from an American perspective, such confidence is a good thing, it’s probably not an unqualified blessing. By itself, it may make it harder for the U.S. to get Canada to budge from the protectionist barriers it still enjoys. When you add in the well-founded concerns in the U.S. that the NAFTA talks could end up doing more harm than good, the situation becomes even more complicated.

That said, count us among the optimists. It is our strong impression that USTR Robert Lighthizer, Canada’s Minister for International Trade, François-Philippe Champagne, and Mexico’s Secretary of the Economy, Ildefonso Guajardo Villarreal, all have a clear idea of what’s at stake  and that each of them is responding to the same unwavering imperative: Don’t screw it up!

SOURCES & LINKS

The Diplomatic Panel takes you to the YouTube video of the Diplomatic Panel on the EU and North America from the GBD conference on June 23, 2017. This was the source for today’s featured quote.

On the EU Website. Among other things, this page on the EU website includes a video clip with the above quote from Cecilia Malmstrom.

Date Set takes you to the BBC story about the July meeting between Justin Trudeau and Jean-Claude Juncker, in which they set September 21 as the date for provisional implementation of CETA.

Originally published as TTALK Quote No. 46 of 2017.

© 2017 The Global Business Dialogue, Inc.

 

COMMISSIONER BROADBENT HONORED

ON WINNING THE LIGHTHOUSE AWARD

“We’ll this is an interesting experience to have. Suddenly, you’re thinking, ‘I might know this person. I don’t know. …’

“I love you guys… . Thank you very much.”

Meredith Broadbent
July 12, 2017

CONTEXT

These brief comments from Commissioner Meredith Broadbent of the U.S. International Trade Commission followed almost immediately this sentence from her friend and colleague, the Chief Trade Counsel for the House Committee on Ways and Means, Angela Ellard:

“So, without further ado, we’re presenting the Lighthouse Award tonight to Meredith Broadbent.

***
But let’s back up a little bit. If there is a single event that brings the Washington trade community together each year, it is the Annual Awards Dinner of the Washington International Trade Association (WITA) and the Washington International Trade Foundation (WITF). It’s a tradition that has been going on for a while now. The Trade Prom that was held a little over a week ago, on July 12, was the 23rd. As for the men and women who are given awards, some of them are published in advance. Indeed, the fact that well known Congressional leaders are being given awards is part of the appeal, part of the advertising for the event. This year, for example, Congressional Leadership Awards were presented to Senator Jeff Flake of Arizona, a Republican, and to Congressman Rick Larsen from Washington, a Democrat.

There is one award, however,  that is a secret. Even the recipient has no clue. It is the Lighthouse Award.  In years past the presentation was a joint effort between Walmart’s Sarah Thorn and Caterpillar’s Bill Lane. Together, they turned those ten minutes of the Trade Prom into a routine that would have made George Burns and Gracie Allen envious. Bill Lane has retired, however, and so this year Sarah Thorn was on her own. In the end, she decided to call in assistance from one of the trade world’s big guns, Angela Ellard. Before she did, however, Ms. Thorn offered a few thoughts worth noting. Among other things, Sarah said:

“The Lighthouse Award is my favorite part of the Prom. It’s wonderful because we get to honor one of our own.”

“That’s who we should be honoring — people who are doing the hard work, who believe in trade, and are there consistently.”

After quoting from the Declaration of Independence,
“This country actually went to war partly for the ability to trade. That’s why we need trade warriors. That’s why we need people in the trenches thinking about trade, doing the right thing, and thinking about how trade benefits consumers and workers around the world.”

And then, a few sentences later, Ms. Thorn asked Angela Ellard to come to the microphone, to say a few words, and to present the award. Both Ms. Thorn and Ms. Ellard noted some of the basic career facts of the person they were about to honor:

Now a Commissioner at the U.S. International Trade Commission, Meredith Broadbent is a former Chairwoman of the ITC.

She has held the William M. Scholl Chair in International Business at the Center for Strategic and International Studies.

She served as the Assistant U.S. Trade Representative for Industry, Market Access and Telecommunications at a time when the world was still hopeful about the Doha Round.

She was on the staff of the House Committee on Ways and Means when Congress was writing the implementing legislation for NAFTA and the Uruguay Round.

And, from 2009-2010, she served as a volunteer Trade Adviser to the Global Business Dialogue.

Those are the bare bones of Ms. Broadbent’s biography. More important, in a sense, are the elements added by Sarah Thorn and Angela Ellard. Here is some of what Angela said:

“What is so impressive about [Meredith] is that, not only is she a very substantive person, very policy oriented, she thinks about all the people behind the particular problem she’s working on.”

“And she’s always worked on a very bipartisan basis, bringing excellence to the table and a lot of creativity.”

COMMENT

Your editor was not able to attend the Trade Prom this year. But we have been often enough to know what a fine event it is. WITA does a great job and provides a wonderful service to the Washington trade community. (And because we can’t always be there, we are awfully glad that portions of it are available on YouTube.)

So, we are not inclined to criticize the organizers — and certainly not for the choice of this year’s Lighthouse Award winner. On that score, they could not have done better. We do sometimes wonder, though, if there might be merit in giving the winners a day or two of advance notice and a little more time at the microphone. Yes, we would lose some of the fun of the surprise. But Lighthouse winners are people it would be good to hear from, especially in the setting of the Trade Prom.

In the circumstances, what Meredith Broadbent said was perfect: short, funny, affectionate, and sincere. Of course, we don’t know what she would have said if the setting had been a bit different. But we have heard her talk, and we suspect two themes would have emerged even more strongly, namely, the importance of trade and the importance of law — both the law of the GATT and other agreements and U.S. trade law.

But we are not quibbling. It was a wonderful ceremony, a wonderful award. Our sincere and heartfelt congratulations to WITA and to

                            Commissioner Meredith Broadbent!

SOURCES & LINKS

The Presentation is a link to the YouTube clip from the July 12 Trade Prom that includes the presentation of the Lighthouse Award. This was the source for today’s featured quote.

Highlights is the page from the WITA website with highlights from the Annual Awards Dinner, and

A Biography is a link to Commissioner Broadbent’s biography as it appears on the website of the U.S. International Trade Commission.

***

Originally published on July 21 as TTALK Quote No. 45 for 2017.

© 2017 The Global Business Dialogue, Inc.

 

 

 

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