On The Hill

Trade Update (July 6)

Jul 6, 2020 | SHARE  
Steel & Aluminum
 
The Trump administration has decided against moving forward with reimposing tariffs on Canadian Aluminum imports – for now.
 
The United Steelworkers (USW) union said re-imposing the tariffs would “make a mockery” of the new trade agreement. Senate Finance Committee Chairman Chuck Grassley (R-IA) said the Trump administration should pursue a negotiated solution to steel and aluminum surges from Canada, rather than reimpose tariffs.[1]
 
“It ought to be settled peacefully, not by our putting tariffs on, and (with) the good-faith effort of Canada,” Grassley said.
 
“I think I even had some discussion with Canadians a year or 18 months ago on what we would call surges in steel and aluminum and we were more or less satisfied – I was at the time, I don’t know (whether) Lighthizer’s satisfied or not – that we were going to get the cooperation of Canada on surges,” he added. However, he also said he did not know where they (the administration) were at on that.
 
On Monday (Jun. 29), Canadian Prime Minister Justin Trudeau said reimposing the tariffs would harm American businesses interests, and that U.S. manufacturers rely on Canadian aluminum.[2]
 
On Tuesday (Jun. 30), business leaders urged the three countries to resist implementing tariffs and “other barriers or measures that will undermine the objectives of the comprehensive trade agreement and weaken North American competitiveness.”
 
“Duty-free trade will underpin the success of the agreement,” leaders of the U.S.’ Business Roundtable, Business Council of Canada, and Consejo Mexicano de Negocios said in a statement.[3]
 
A report from CRU Group, an independent aluminum analysis firm, found imports of unwrought aluminum from Canada are on pace to increase 14 percent this year, however, this would still be 5 percent less than 2017 import volume, and 2 percent above the average import levels from 2015 – 2017.
 
 
USMCA
 
On Wednesday (Jul. 1), USMCA went into effect amid growing calls to ensure key tenants are enforced.
 
The U.S. Chamber of Commerce and its Mexican and Canadian counterparts cautioned that “the work does not stop now,” and noted the auto industry in particular will have to comply with hundreds of pages of new regulations.[4] 
 
“It’s fun to be able to celebrate the passage, the implementation … but also the cold realization that in a lot of respects the hard work is just beginning to make sure that Canada and Mexico now are living up to the terms of the agreement,” Rep. Ron Kind (D-WI) said.
 
On Tuesday (Jun. 30), United States Trade Representative (USTR) published a Federal Register notice that explains its proposed procedure for groups or individuals to file labor complaints under USMCA. The notice details the steps for an interested party to file a “rapid response petition” that would ask for an independent panel to investigate allegations of labor rights violations; a mechanism included at the insistence of House Democrats.
 
To view USTR’s notice, click here.
 
Additionally, the Labor Department published a Federal Register notice that specifies how it plans to calculate whether a vehicle is meeting USMCA’s “labor value content” provision. This provision requires 40 – 45 percent of the content of a vehicle to be made by workers earning at least $16 per hour. The interim rule will take effect right away.[5]
 
To view the Labor Department’s notice, click here.
 
 
US – China
 
Tariff Exclusion Requests
 
USTR has received hundreds of COVID-19 related China tariff exclusion requests for products that could be used to help treat the virus. USTR has already temporarily exempted some personal protective equipment (PPE) and medical supplies from the existing tariffs on more than $350 billion worth of Chinese goods, and in late March asked for suggestions for additional exemptions.
 
Premier Healthcare Alliance asked USTR to remove tariffs on “any remaining medical products essential to addressing the coronavirus,” including goggles, clothing, medical caps, thermometers, and about a dozen ingredients used to make critical drugs in the treatment of COVID-19.[6]
 
Phase One
 
U.S. goods exported to China for the first five months of 2020 totaled $40.2 billion, about 20 percent less than the same period in 2017, according to a Commerce Department report released Thursday (Jul. 2).
 
Under the “Phase One” deal signed in January, China is supposed to increase purchases of U.S. goods and services by $200 billion above 2017 levels over two years. That includes $76.7 billion in increased purchases in 2020, and $123.3 billion in 2021.[7]
 
The Commerce Department report also showed May exports of all U.S. goods and services totaled just $144.5 billion, the lowest since November 2009. This is a 30 percent drop from May 2019 levels. [8]
 
To view the Commerce Department’s report, click here.
 
Hong Kong
 
On Wednesday (Jul. 1), the House unanimously passed a sanctions bill to penalize China for imposing a strict new security law in Hong Kong.
 
H.R. 7440 will now go back to the Senate, which has passed a nearly identical measure. The bills would penalize individuals, banks, and other entities that enable China’s national security law.
 
The Trump administration has taken some actions, including halting shipments of defense products and related technologies to Hong Kong, and is considering other moves to end preferential trade treatment for the region. The administration has avoided more severe measures that could hurt financial markets.[9] 
 
 
Upcoming Congressional Schedule
 
The House and Senate are in recess for the next two weeks.
 
The Senate will return the week of July 20, where they will continue their work on NDAA. The hope is that they complete the must-pass legislation by the end of the month. Senate Majority Leader McConnell (R-KY) said they will begin working on the next COVID-19 package after the July Fourth recess, ideally getting it off the Senate floor by Aug. 6, when they begin their August recess.
 
The House will return the week of July 20 for votes, however Committees are expected to hold hearings over the next two weeks while it stands in recess. The House is currently scheduled to adjourn on July 31 for the August break. The House has extended rules allowing for proxy voting and remote House hearings until August 14. This gives the House flexibility to finalize any additional COVID-19 package before the August recess.
 
The Democratic National Convention will be held August 17 – 20.
 
The Republican National Convention will be held August 24 – 27
 
 
References
 
[1] “Grassley: U.S. should not impose tariffs on Canadian aluminum.” World Trade Online, 1 Jul. 2020. https://link.edgepilot.com/s/7927621d/gsj9Fvt_EEergE-BXX-iXA?u=https://insidetrade.com/trade/grassley-us-should-not-impose-tariffs-canadian-aluminum
 
[2] Gardner, Lauren. “Trudeau pushes back on U.S. ‘musings’ about tariffs.” Politico Pro, 29 Jun. 2020. https://link.edgepilot.com/s/b01cdbeb/_mPJCZ7H8EKPGzOh9pZAyw?u=https://subscriber.politicopro.com/article/2020/06/trudeau-pushes-back-on-us-musings-about-tariffs-3982028 
 
[3] Rodriguez, Sabrina. “Trump’s North American trade deal starts now. Here’s what to expect.” Politico Pro, 30 Jun. 2020. https://link.edgepilot.com/s/6e72dc6c/4YPLESg2r0uaMZymepT3dg?u=https://subscriber.politicopro.com/article/2020/06/trumps-north-american-trade-deal-starts-now-heres-what-to-expect-1960217
 
[4] “As USMCA kicks in, Democrats and others wearily gear up for enforcement challenges.” World Trade Online, 1 Jul. 2020. https://link.edgepilot.com/s/7c9835b6/fc_DQ0CttUykvbd-IOjFow?u=https://insidetrade.com/daily-news/usmca-kicks-democrats-and-others-warily-gear-enforcement-challenges 
 
 
 
 
[8] “U.S. trade deficit widens as exports fall to lowest level since 2009” Reuters 2 Jul. 2020.
 
[9] Bade, Gavin. “House passes China sanctions as Pelosi declares ‘one country, two systems’ dead.” Politico Pro, 1 Jul. 2020. https://link.edgepilot.com/s/043649d4/yjTLTNejtUuHorZb5ziKJQ?u=https://subscriber.politicopro.com/article/2020/07/pelosi-decries-hong-kong-security-law-declaring-one-country-two-systems-dead-1960862
 
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