Trade Update (September 14)
Biden “Buy America” Announcement
On Wednesday (Sep. 9), Democratic nominee for president Joe Biden told a small group of blue-collar workers that he would be the most “union-friendly president in American history.” He also blamed President Donald Trump’s “failed response” to COVID-19 for the recent economic downturn.
Biden also outlined his plans to boost manufacturing by toughening “Buy American” provisions for federal contracts. He proposed tax penalties on companies that manufacture U.S.-bound products outside the country, incentives to keep jobs in the U.S., and close what he called “Trump loopholes” that allow companies engaged in offshoring to avoid paying U.S. taxes.
“I’m not looking to punish American businesses, but there’s a better way,” Biden said in his speech. “Make it in Michigan. Make it in America. Invest in our communities and the workers in places like Warren,” he added.
More specifically, as part of the Biden/Harris “Build Back Better” plan, the campaign announced two new steps to ensure the future is “Made in America” by America’s workers. In the tax code, they aim to establish a “Biden Offshoring Tax Penalty” and a “Made in America” tax credit.
Biden also plans to sign a series of executive actions, if elected, to “ensure the federal government is delivering on its obligation to use taxpayer dollars to “Buy American” products and support American supply chains.” Notably, Biden said he would:
- Use authorities under the Defense Production Act and the Federal Property Administrative Services Act of 1949 to enforce Buy American rules;
- Make American products more competitive in public procurement;
- Expand the scope of critical materials that must be made with U.S. origin components—beyond critical medicines;
- Crack down on companies that label products as “Made in America;” and
- Create a new “Made in America” Office within the White House Office of Management and Budget.
The Biden Offshoring Tax Penalty would be aimed at those who offshore manufacturing and service jobs to foreign nations in order to sell goods or provide services back to the American market. Biden plans to establish a 28 percent corporate tax rate, plus a 10 percent Offshore Penalty on profits of any production by a U.S. company overseas for sales back to the U.S.
The “Made In America” tax credit would be a 10 percent advanceable tax credit for companies making investments to create jobs and accelerate economic recovery. It will be available for the following purposes: revitalizing existing closed or closing facilities, retooling facilities that advance manufacturing competitiveness and employment, reshoring job-creating production to the U.S., expanding U.S. facilities to grow employment, and increasing manufacturing payroll.
To close the “Trump offshoring loopholes,” Biden said he would: end U.S. companies’ ability to pay zero taxes on the first 10 percent of their profits when they locate manufacturing and service jobs overseas, require minimum tax on all foreign earnings of U.S. companies located overseas, and end the use of “tax haven strategies” to allow companies to offshore jobs and avoid U.S. taxes.
To view the Biden/Harris Buy America fact sheet, click here.
European Commission President Ursula von der Leyen tapped Executive Vice President Valdis Dombrovskis as the EU’s new trade commissioner this week. Last month, Phil Hogan resigned from the position.
On Tuesday (Sep. 8), the European Commission published a proposal for a Council and European Parliament regulation to scrap duties on certain imports to the European Union (EU). In return, the U.S. agreed to reduce its duties on certain EU exports to the U.S. market.
This will enact the agreement that was announced by the EU and the U.S. on Aug. 21, 2020. Under the agreement, the EU will eliminate tariffs on imports of U.S. live and frozen lobster products. EU tariffs will be eliminated for a period of five years, and the U.S. will reduce tariff rates by 50 percent on certain products, including prepared meals, certain crystal glassware, cigarette lighters, and propellant powers, exported by the EU worth an average annual trade value of $160 million.
The tariffs will be eliminated on a Most Favored Nation basis, retroactive to Aug. 1, 2020.
“The EU and the U.S. share the most important economic partnership in the world, with trade in goods and services worth over €1.3 trillion annually. This deal provides both sides with a true win-win outcome, helping us to strengthen our partnership even further. Lowering tariffs on both sides improves access for our exporters and reduces the cost of imported goods. Those are both critically important factors in this time of coronavirus-related economic crisis,” Dombrovskis said.
To view Dombrovskis’s full statement, click here.
Earlier this week, Dombrovskis said the EU would hit U.S. goods with tariffs as punishment for illegal aid to Boeing unless the U.S. removes duties imposed as retaliation over unlawful subsidies to Airbus.
“We will if we will have to, but our preference would be to have an agreement with the U.S. in between where they also withdraw their tariffs,” he said.
Additionally, Dombrovskis said on Tuesday (Sep. 8) that an EU investment agreement with China should be ambitious enough to address “imbalances” in the economic relationship between both parties.
Currently, the EU is negotiating an agreement to protect investments in China. Germany has made it a priority for the deal to conclude by the end of the year, but Dombrovskis said the deadline should not be met at any cost.
“Of course, it would be great if we could conclude it this year. But there, I would say substance before deadlines,” he said.
U.K. Trade Deal
U.S. – U.K. trade negotiators began their fourth round of virtual talks on a free trade agreement on Tuesday (Sep. 8). The talks are slated to last through Sep. 18.
However, in a move that could damage reactions with the U.S., U.K. Prime Minister Boris Johnson’s government released a controversial Internal Market Bill that proposes transferring regulatory powers over some sectors from the EU back to the U.K. government. The proposal would go back on a prior agreement with the EU on the terms for Brexit.
Additionally, changing how border checks are conducted would break a protocol protecting the Good Friday Agreement.
In response, House Speaker Nancy Pelosi (D-CA) said there would be “absolutely no chance” of a U.K. trade deal if London breaks the Brexit pact with the EU. House Ways and Means Chairman Richard Neal (D-MA) said he hopes the, “British government upholds the rule of law and delivers on the commitments it made during Brexit negotiations, particularly in regard to the Irish border protocols.”
Senior foreign policy advisor for the Biden campaign Antony Blinken tweeted, “Joe Biden is committed to preserving the hard-earned peace and stability in Northern Ireland.”
Three New England governors wrote a letter to President Trump and said his decision to reimpose aluminum tariffs on Canada would hurt the U.S. aluminum industry.
Governors Janet Mills (D-ME), Chris Sununu (R-NH), and Phil Scott (R-VT) said, “these tariffs are unnecessary and inappropriate to which there will be negative consequences, one of which is the artificial inflation of costs to aluminum goods to consumers and suppliers.”
The group called on Trump to repeal the tariff, and said New England depends on bi-lateral trade with Canada.
To view the letter, click here.
 “The Biden-Harris Plan to Fight for Workers by Delivering on Buy America and Make It in America.” 9 Sep. 2020. https://link.edgepilot.com/s/988c8ed6/rAB0DVEBvE_UiyqOBG_MmQ?u=https://joebiden.com/wp-content/uploads/2020/09/Buy-America-fact-sheet.pdf
 Stearns, Jonathan. “EU’s Dombrovskis Presses U.S. to Scrap Tariffs Over Airbus Aid.” Bloomberg Quint, 8 Sep. 2020. https://link.edgepilot.com/s/a09554b1/AJQgrHdWREq87QOrNupA_Q?u=https://www.bloombergquint.com/global-economics/eu-s-dombrovskis-presses-u-s-to-scrap-tariffs-over-airbus-aid
 Vela, Jakob Hanke & Smith-Meyer, Bjarke. “New EU trade chief designate wants ‘ambitious’ China deal.” Politico Pro, 8 Sep. 2020. https://link.edgepilot.com/s/d18ca948/G4LxLtrx4USG6KnfbuTN9A?u=https://subscriber.politicopro.com/article/2020/09/new-eu-trade-chief-designate-wants-ambitious-china-deal-3983747
 Heath, Ryan. “Boris Johnson’s Brexit maneuver risks blowback from Biden, Democrats.” Politico Pro, 10 Sep. 2020. https://link.edgepilot.com/s/c293afe2/2qotXS0i5kOdtgmBYFy03Q?u=https://subscriber.politicopro.com/article/2020/09/boris-johnsons-brexit-maneuver-risks-blowback-from-biden-democrats-1990975