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Trade Update (September 17)

Sep 17, 2019 | SHARE  

China Exempts Some Products after US Tariff Delay

Chinese officials announced on Friday (Sep. 13) they would exclude imports of US soybeans, pork, and other farm goods from additional trade war tariffs, a move that could allow for purchases of agricultural products by the US. Earlier in the week, Chinese officials released a list of 16 types of products that will be exempt from the first round of additional tariffs as talks between the two countries revamp. The exemption will take effect this Tuesday, September 17, and remain in place until September 16, 2020. The move stems from the US’ decision to postpone an increase in the tariff rate on $250 billion of Chinese goods from October 1 to October 15. Adding to the rare optimism during the trade war is President Trump’s proclamation of an “interim trade deal” that could arrive over the next several weeks. Chinese businesses will be permitted to purchase “certain amount of farm products such as soybeans and pork” from the US, according to the report. China has levied three rounds of additional tariffs on US frozen pork, including 25 percent in April 2018, 25 percent in June 2019 and another 10 percent in September 2019, bringing the final tariff to 72 percent. If all the trade war tariffs were removed, the rate would return to 12 percent, the “most favored nations” duty paid by China’s other trading partners. China has also imposed 30 percent tariffs on yellow soybeans — the sort the U.S. grows in abundance — including 25 percent in June and 5 percent on September 1, bringing the current tariff level to 33 per cent. If the additional tariffs are removed, tariffs on U.S. soybeans would return to 3 percent — the same rate paid by importers of Brazilian soybeans, which have largely filled the gap left by the US China’s Ministry of Commerce had not responded to a request for confirmation of exactly what the exemption would look like, with Friday being a public holiday in mainland China. [1]   Negotiators from both countries plan to meet in Washington, DC, in October to continue searching for a deal.

 

USMCA Latest

House Democrats said Thursday (Sep. 12) they’re making progress with the Trump administration to resolve issues with the United States-Mexico-Canada Agreement (USMCA). The deal, which would replace NAFTA, could still see a vote before year’s end. United States Trade Representative (USTR) Robert Lighthizer sent text to the House Democrats working group on Wednesday (Sep. 11). However, the text has not been made public nor has the working group reviewed the entirety of his response. Still, it’s enough to bolster morale that the deal can get done. “It’s good that they got that first response out of the way, because I think that usually helps get the ball rolling a little bit more and shows people that folks are serious,” said Rep. Jimmy Gomez (D-CA), one of the nine members of Democrats’ USMCA working group, which is leading the party’s negotiations with Lighthizer.[2]  The group continues to press the administration on certain provisions such as labor, environmental, enforcement, and prescription drug-related issues. The two sides will likely spend the next several weeks exchanging documents and texts.

“We have to finish our back-and-forth,” House Speaker Nancy Pelosi (D-CA) told reporters during her weekly press briefing. “We’ve made an offer, they’ve made an offer, now we sit down and see where we can find our common ground.” Once the administration sends the final bill to Congress, neither chamber is allowed to add amendments to the bill under fast-track rules. But Pelosi has the power to change those rules to remove the deal from fast-track, which she could do if the Trump administration decides to send it without waiting for her nod. Administration officials have so far said they will not do so.[3] 

House Agriculture Committee Chairman Collin Peterson (D-MN) said on Thursday (Sep. 12) that he expects Congress to vote on the deal in the next month or two. Peterson said he spoke earlier this week with House Ways and Means Committee Chairman Richard Neal, who has been leading negotiations with the Trump administration on a number of concerns that Democrats have raised about the pact. Peterson said Neal told him he was “pretty confident we’re going to get a vote in the next month or two.”[4]  Rep. Henry Cueller (D-TX) echoed Peterson’s optimism, stating he believes Pelosi will allow a vote on the USMCA. Late Friday afternoon, Politico reported that the administration has agreed to fix problems with how disputes between governments are resolved that plagued NAFTA and were not initially corrected in the new deal.  They also reported that USTR has also accepted the idea of binational inspection teams to ensure that Mexico lives up to tough new labor commitments. In a fourth area, the two sides are discussing a provision that could potentially reduce the 10-year period of intellectual property protection for biologic medicines in the agreement.[5]  However, a spokesperson for Ways and Means Democrats said he “can’t confirm the accuracy of this,” when asked by reporters.

 

References

[1] Xin, Zhou. “China to exempt US pork and soybeans from additional trade war duties, in response to Trump’s tariff delay.” South China Morning Post. Politico Pro. 13 Sep. 2019.  https://subscriber.politicopro.com/article/2019/09/china-to-exempt-us-pork-and-soybeans-from-additional-trade-war-duties-in-response-to-trumps-tariff-delay-1730395

[2] Cassella, Megan. “More Dems see path to resolving new NAFTA differences.” Politico. 12 Sep. 2019. https://www.politico.com/story/2019/09/12/democrats-nafta-usmca-talks-1729037

[3] Cassella, Megan. “More Dems see path to resolving new NAFTA differences.” Politico. 12 Sep. 2019. https://www.politico.com/story/2019/09/12/democrats-nafta-usmca-talks-1729037

[4] Palmer, Doug. “Peterson predicts USMCA vote in next month or two.” Politico Pro. 12 Sep. 2019. https://subscriber.politicopro.com/article/2019/09/peterson-predicts-usmca-vote-in-next-month-or-two-1728184

[5] Palmer, Doug. Cassella, Megan. Behsudi, Adam. “Trump courts Democratic support with USMCA counteroffer.” Politico Pro. 13 Sep. 2019. https://subscriber.politicopro.com/article/2019/09/trump-courts-democratic-support-with-usmca-counteroffer-1733491 

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