On The Hill

Trade Update (November 2)

Nov 5, 2018 | SHARE  


US-Mexico-Canada Agreement (USMCA) 


The US International Trade Commission (ITC) will hold a hearing entitled “United States-Mexico-Canada Agreement: Likely Impact on the US Economy and on Specific Industry Sectors” on November 15. The deadline for requests to appear at the hearing were due on Monday (Oct 29), but written submissions for the record can be submitted until December 20. The hearing is required in order to ratify the agreement under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. President Trump notified Congress of his intent to enter the agreement on August 31. US ITC has until December 14 (105 days from the announcement) to send its public report to the President and Congress.[1]


This week, the Farm Foundation published “How U.S. Agriculture Will Fare Under the USMCA and Retaliatory Tariffs.” The report applauds the USMCA for maintaining “relatively free market access across the three countries, particularly in agriculture” and improving market access for US dairy and poultry exports. It estimates the agreement will lead to an increase in agricultural imports of $450 million, especially in the dairy and poultry sectors. However, the report states that Canada and Mexico’s retaliatory actions against the US Section 232 steel and aluminum tariffs “will cause US agricultural exports to decline by $1.8 billion” to North American trading partners, which would overwhelm the modest gains under USMCA.[2]


Canada-China Trade Relations & USMCA


Canadian Ambassador to China John McCallum has been working in Beijing to “bridge policy gaps on agricultural market access, wages, and gender equity,” and to address issues with China’s human rights record. Chinese and Canadian officials will meet in November in what McCallum calls “building block” sessions, as Canada needs to see improvements in China’s human rights record before coming to an agreement. That being said, China could be a beneficial trading partner for Canada and there is chatter about adding China to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).


However, the USMCA could pose a problem to negotiations between the Canada and China due to Article 32.10, which requires a signatory country to notify the other countries three months prior to beginning trade talks with a “non-market” economy.[3] When asked directly about the clause, Canadian Ambassador to the US David McNaughton said, “The reality is, setting aside the USMCA, if we were to get close to having a comprehensive free trade agreement with China, the Americans would have something to say about it, particularly given the tensions between China and the United States right now. It doesn’t prevent us from continuing to export to China or having agreements that deal with certain sectors.”[4]




On Wednesday (Oct 31), Australia became the sixth signatory to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This means the agreement will enter into force on December 30. The first group of signatories includes Canada, Japan, Mexico, New Zealand, and Singapore.[5] New Zealand is the depository of the agreement; New Zealand Trade Minister David Parker said, “I expect other signatories will come on board after the CPTPP enters into force, as many are working hard to progress their applicable domestic procedures. As a result, we could well see other signatories in a position to ratify over the coming weeks and months.” The agreement includes 11 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), which represent 16% of global economic output and 500 million people.[6]


Section 301 Exclusion Process


The US has imposed tariffs on $250 billion worth of Chinese goods that benefit from the “Made in China 2025” program and contribute to China’s unfair trade practices. The $50 billion worth of Chinese goods were divided between two lists: the first list contains$34 billion worth of goods and the second list contains $16 billion worth of goods. Companies were permitted to file product exclusion requests for products from the first list until October 9. They can submit exclusion requests for the second list until December 18.


As of today, the Administration has not granted any exclusion requests from either list.[7] More than 7,800 requests have been filed for the first list and thus far, more than 800 have been denied. However, 240 could be approved if “US Customs and Border Protection (CBP) says the exclusions are administrable.” The second list currently contains 435 requests, but that number will likely continue to rise as companies have until December 18 to file an exclusion request.[8]


No announcement has been made regarding the product exclusion process for the third list of tariffed goods totaling $200 billion and USTR indicated that there are no immediate plans to implement such a process.[9]


US-Japan Trade Negotiations


The US Trade Representative (USTR) published a request for comments titled, “On Negotiating Objectives for a US-Japan Trade Agreement” in the federal register. This is the next step in the Trade Promotion Authority (TPA) process President Trump began in April. On October 16, USTR announced the president “intends to commence negotiations with Japan for a US-Japan Trade Agreement.” USTR is seeking comments on general and product-specific negotiating objectives; relevant barriers to trade that should be addressed; economic costs and benefits to US produces and consumers if tariffs and non-tariff barriers are reduced or removed; ways to address export priorities and import sensitivities; customs and trade facilitation issues; sanitary and phytosanitary measures and technical barriers; and other measures or practices that undermine fair market opportunities for US businesses, workers, farmers, and ranchers. All comments are due by Monday, November 26. A hearing is scheduled for Monday, December 10 at US ITC.[10]



[1] “USITC Institutes Investigation to Assess a Trade Agreement with Mexico and Canada.” US International Trade Commission, 12 Oct 2018. https://www.usitc.gov/press_room/news_release/2018/er1012ll1019.htm


[2] “Maksym Chepeliev et al. “How US Agriculture Will Fare Under the USMCA and Retaliatory Tariffs.” FarmFoundation.org, Oct 2018. https://www.farmfoundation.org/wp-content/uploads/2018/10/Trade-Analysis-10-31-18-Final.pdf


[3] Elise von Scheel. “Canada prepared to stall trade deal with China until its behaviour is ‘more reasonable.’” CBC News, 26 Oct 2018. https://www.cbc.ca/news/politics/mcccallum-china-trade-human-rights-1.4878455


[4] Matt Robinson. “It’s our expectation those tariffs will be dropped: Canada’s ambassador to the US.” Vancouver Sun, 1 Nov 2018. https://vancouversun.com/business/local-business/its-our-expectation-those-tariffs-will-be-dropped-canadas-ambassador-to-the-u-s


[5] “Australia ratifies the TPP-11.” Minister for Trade, Tourism and Investment, Senator the Hon Simon Birmingham, 31 Oct 2018. https://trademinister.gov.au/releases/Pages/2018/sb_mr_181031.aspx?w=97hIoZC4PHe7VC%2F%2F1w31%2FA%3D%3D


[6] Ankit Panda. “The CPTPP Trade Agreement Will Enter Into Force on December 30.” The Diplomat, 1 Nov 2018. https://thediplomat.com/2018/11/the-cptpp-trade-agreement-will-enter-into-force-on-december-30/


[7] Hughes Hubbard & Reed. “Trump Administration Trade Battles Continue.” Global Trade Magazine, 31 Oct 2018. http://www.globaltrademag.com/global-trade-daily/trump-administration-trade-battles-continue


[8] Adam Behsudi. “Trump Expands his China attack strategy.” Politico, Morning Trade, 2 Nov 2018. https://www.politico.com/newsletters/morning-trade/2018/11/02/trump-expands-his-china-attack-strategy-398900


[9] Hughes Hubbard & Reed. “Trump Administration Trade Battles Continue.” Global Trade Magazine, 31 Oct 2018. http://www.globaltrademag.com/global-trade-daily/trump-administration-trade-battles-continue


[10] “Request for comments on Negotiating Objectives for a US-Japan Trade Agreement.” FederalRegister.gov, 26 Oct 2018.  https://www.federalregister.gov/documents/2018/10/26/2018-23569/request-for-comments-on-negotiating-objectives-for-a-us-japan-trade-agreement




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