Trade Update (October 28)
U.S., China Move Closer to ‘Phase One’ of Trade Deal
The beginning of a long-term trade deal between the U.S. and China could be one step closer to finalization. U.S. Trade Representative (USTR) Robert Lighthizer and Treasury Secretary Steve Mnuchin cited progress after their Friday (Oct. 25) phone call with Chinese Vice Premier Liu He, the nation’s top trade official. “They made headway on specific issues and the two sides are close to finalizing some sections of the agreement,” USTR said in a statement. “Discussions will go on continuously at the deputy level, and the principals will have another call in the near future.” Earlier this month, President Trump announced the two superpowers had reached an agreement on what the White House called “Phase One” of a preliminary trade deal. China agreed to purchase agricultural imports from the U.S. worth roughly $40-$50 billion and implement certain intellectual property and financial services protections. The administration agreed to scrap a new round of tariffs on imports of Chinese goods that were set to become effective on Oct. 15. It remains unclear whether the administration will abandon or postpone another round of tariffs set to take place on Dec. 15, which would impose duties of 15 percent on various consumer goods. The phase one deal is not expected to address the structural issues related to subsidies and other Chinese industrial policies that formed the basis of U.S. action against Beijing that has resulted in tariffs on more than $350 billion worth of goods. Trump said those issues would be addressed in phase two of negotiations. USTR also released a notice of product exclusions related to China’s “acts, policies, and practices related to technology” that will be published in the Federal Register on Oct. 28. The product exclusions announced in the notice will apply as of September 24, 2018, effective date of the $200 billion action, to August 7, 2020, according to the statement. The exclusions include 83 specially prepared product descriptions that cover 95 separate exclusion requests.
Senate Spending Bills: Slowly, but Surely?
It appears increasingly likely that another continuing resolution (CR) will be needed past Nov. 21 when the current stopgap spending legislation is set to expire. In a 92-2 vote, the Senate approved a procedural move Tuesday (Oct 22) to begin debate on a package, H.R. 3055, of four measures to fund the departments of Agriculture, Transportation, Commerce, Housing and Urban Development, Interior and Justice, plus the Food and Drug Administration (FDA), Environmental Protection Agency (EPA) and National Science Foundation. According to a statement from the Senate Appropriations Committee, Chairman Richard Shelby (R-AL) urged senators to work together to move the package of domestic appropriations bills and “immediately turn to another House-passed package that contains the defense appropriations bill.” Shelby has insisted he prefers not to do a CR, but given tensions related to border wall funding and the House impeachment inquiry, it could be inevitable. House Appropriations Chairwoman Nita Lowey (D-NY) was quoted as saying a CR that carries current funding-levels into 2020 could occur, although those conversations are not “official.” The minibus, if passed next week, where the House and Senate will then take up conference negotiations on the measures. Senate Majority Leader Mitch McConnell (R-KY) has committed to bringing up another package of spending measures for debate if his chamber can pass the first, four-part bundle. That second batch would include the Defense and Labor-HHS-Education funding measures — the two most expensive appropriations bills. However, Senate Minority Leader Chuck Schumer (D-NY) said this week that both bills, in addition to funding for the Department of Homeland Security and military construction, won’t make it through the upper chamber without satisfying more Democratic priorities. And while funding bills not containing defense are likely to pass, it’s unlikely the Senate will clear final conference reports with certainty for approving the DOD bill. Both parties have insisted they want to avoid a shutdown like the one that began in Dec. 2018 and concluded as the longest government shutdown in U.S. history. Speaking of slow-moving…
USMCA: Now, Eventually, Never?
Earlier this week, House Ways and Means Chairman Richard Neal (D-MA) said he felt “pretty good” about passing the United States-Mexico-Canada Agreement (USMCA) before year’s end. While Neal’s sentiment has likely not changed since week’s start, those in the administration are growing frustrated that Democrats are intentionally delaying, or altogether scrapping, a win for President Trump. On Friday (Oct. 25), Trump lashed out at Democrats for their lack of urgency on USMCA’s passage. “Republicans are just outraged, and the American public is outraged, that the do-nothing Democrats are doing nothing,” Trump told reporters at the White House. “We need USMCA passed. It’s a great deal for our country, for our farmers, manufacturers, unions.” Neal, who leads the House Democrats working group tasked with negotiating USMCA, has continued to work with Lighthizer over provisions that Democrats remain concerned with, which include environmental standards, labor enforcement, and drug-pricing. The administration is not the only one concerned that the deal will likely not be passed in 2019. Senate Finance Chairman Chuck Grassley (R-IA) said it’s “increasingly unlikely” the deal gets done this year, which he believes “threatens the passage of a trilateral trade deal this Congress.” Ways and Means Ranking Member Kevin Brady (R-TX) made an appearance Friday (Oct. 25) morning on CNBC’s Squawk Box where he alluded to the notion that Democrats do not want to pass USMCA to prevent a win for the administration.
On Tuesday (Oct. 22), Commerce announced the affirmative final determinations in the antidumping duty (AD) and countervailing duty (CVD) investigation of imports of aluminum wire and cable from China. According to the press release, Commerce found that “exporters from this country have sold aluminum wire and cable at less than fair value in the United States at rates of 58.51 percent to 63.47 percent. In addition, Commerce determined that exporters from China received countervailable subsidies at rates of 33.44 percent to 165.63 percent.” Imports of aluminum wire and cable from China were valued at an estimated $115 million in 2018. To read the statement in its entirety, click here.
1] Behsudi, Adam. “USTR: U.S., China close to finalizing some sections of phase one trade deal.” Politico Pro. 25 Oct. 2019. https://subscriber.politicopro.com/article/2019/10/ustr-us-china-close-to-finalizing-some-sections-of-phase-one-trade-deal-3973417
 Scholtes, Jennifer. Emma, Caitlin. “Spending bills crawl forward, but a second stopgap looms.” Politico Pro. 22 Oct. 2019. https://subscriber.politicopro.com/article/2019/10/spending-bills-crawl-forward-but-a-second-stopgap-looms-1810940