Trade Update (November 2)
This week, the Global Forum on Steel Excess Capacity (GFSEC) members held a virtual meeting organized by co-chairs South Korea and the European Union. The leaders reaffirmed their commitment to confront the downturn in steel demand. Additionally, they urged G20 leaders to address global excess capacity in steel production.
The virtual meeting resulted in a 67-page report approved by the forum’s 29 countries. In the joint statement, the ministers recommended that G20 leaders “firmly maintain” the issue of steel excess capacity on the agenda for the upcoming G20 ministerial set for Nov. 21-22. The statement also said the leaders should support the forum as a “multilateral way forward.”
The report outlines recommendations that members say should “be urgently put into action by all G20 and interested economies,” referring to the Organization for Economic Cooperation and Development (OECD).
China’s excess steel capacity has been a focal point of the forum, and many members have expressed frustration about the country’s refusal to endorse transparency in its reporting requirements and have questioned Beijing’s commitment to changing its behavior. Other non-market oriented countries have also been subjects of forum discussion.
The forum officially expired last October. However, most of the countries agreed to continue its work on an informal basis. European Trade Commissioner Valdis Dombrovskis said the COVID-19 crisis has made the forum’s work “more important than ever.”
To view GFSEC’s joint statement, click here.
To view GFSEC’s report, click here.
The European Union (EU) has decided to work towards a negotiated outcome with the U.S. rather than retaliating immediately over subsidies for Boeing. The news comes after the EU won a case at the World Trade Organization (WTO) on the issue.
On Monday (Oct. 26), the WTO formally signed off on a request to give the EU the right to retaliate on $4 billion worth of U.S. goods. EU Trade Commissioner Valdis Dombrovskis said while Brussels was “preparing countermeasures,” a negotiated settlement is the preferred outcome.
Several EU diplomats have said the EU should wait for the outcome of the U.S. elections before moving to impose tariffs.
Strengthened Retaliation Tools
On Wednesday (Oct. 28), the European Parliament, Commission, and Council agreed to enhance the EU’s trade retaliation powers. The move would allow Brussels to retaliate when a dispute is blocked at the WTO.
US Appeals WTO Ruling
This week, the U.S. formally appealed a WTO ruling that found President Trump’s tariffs on Chinese goods to be in violation of global trade rules. This decision could make the final resolution in the dispute uncertain, because the U.S. has also blocked the WTO Appellate Body from appointing new judges.
During the meeting of the WTO’s Dispute Settlement Body, the U.S. said the ruling was flawed because the two countries (U.S. and China) had bilaterally agreed to resolve the intellectual property concerns that prompted the tariffs to begin with.
China’s practice of forcing foreign companies to transfer valuable technology to gain market access, along with other failures to protect intellectual property, are “inconsistent with U.S. and international norms for moral conduct,” the U.S. representative said.
China criticized the U.S. at the meeting for unilaterally imposing tariffs then taking advantage of the WTO crisis to avoid having to comply with the earlier ruling.
“China, once again, urges and calls upon the United States not to use this unfair advantage, accept the decision of the Panel and take meaningful actions to fully implement the recommendations of the Panel in this dispute,” the Chinese representative said.
There will not be a final decision in the dispute unless WTO members agree on a package of reforms that persuades the U.S. to stop blocking the appointment of new judges.
On Thursday (Oct. 29), leaders in China approved a new economic blueprint for the next five years that emphasizes “technology self-reliance,” in the face of increasing U.S. sanctions against Chinese firms.
The four-day meHouseeting was chaired by President Xi Jinping and around 360 top officials. It addressed a plan for the years through 2025. The plan stresses the need to prioritize domestic markets.
Vice Premier Liu He, who has been China’s chief trade negotiator in Washington, D.C., is leading the five-year plan draft. According to Chinese officials, Mr. Liu has sought to balance the domestically oriented policy shift against the need to avoid scaring investors.
Notably, China did not issue an overall economic growth target.
House GOP Unveils COVID-19 Relief Bill
On Friday (Oct. 30), House Minority Leader Kevin McCarthy (R-CA), House Ways and Means Ranking Member Kevin Brady (R-TX), Rep. Richard Hudson (R-NC), Energy and Commerce Ranking Member Greg Walden (R-OR), and Appropriations Ranking Member Kay Granger (R-TX) released H.R. 14, the “Commitment to Defeat the Virus and Keep America Healthy Act.”
The legislation provides a series of targeted proposals on pandemic preparedness, domestic manufacturing and supply chains, the Strategic National Stockpile (SNS), public health infrastructure, COVID-19 health disparities, and COVID-19 health impacts on mental health and substance use. The bill also includes a number of healthcare related tax incentives.
To view a section-by-section summary, click here.
To view the legislative text, click here.
FDA Releases List of Essential Medicines
On Friday (Oct. 30), the FDA finalized its list of essential medicines, medical countermeasures, and critical inputs. The list, which was required by President Trump’s August ‘Buy American’ Executive Order (EO), includes 223 drug and biological products and 96 medical devices deemed crucial to reduce U.S. medical dependence on foreign nations.
To view the complete list of essential medicines, click here.
U.S. lawmakers are accusing Mexico of giving its state-owned petroleum company Petróleos Mexicanos (PEMEX) preferential treatment; and said this violates “the spirit, if not the letter,” of the U.S.-Mexico-Canada Agreement (USMCA).
The letter, dated Thursday (Oct. 29), was signed by over 30 members from both chambers. It calls on President Trump to work with Mexico to restore market conditions put in place during the country’s 2014 energy reform.
The lawmakers argued a leaked memo from Mexican President Andrés Manuel López Obrador shows he directed authorities to use resources within the regulatory framework to protect PEMEX.
In recent years, U.S. energy exports to Mexico have grown. Mexico imported $30 billion of U.S. petroleum products in 2018.
To view the letter, click here.
Phase One Deal
The U.S. Trade Representative’s (USTR) office and the U.S. Department of Agriculture (USDA) said China has increased purchases of U.S. farm goods and implemented 50 of 57 commitments aimed at lowering structural barriers to U.S. imports.
In a joint statement, USTR and USDA said China had purchased over $23 billion in agriculture goods to date, or about 71 percent of the target set under the Phase One deal.
“Since the Agreement entered into force eight months ago, we have seen remarkable improvements in our agricultural trade relationship with China, which will benefit our farmers and ranchers for years to come,” USTR Robert Lighthizer said.
Agriculture is one of four areas where China pledged to increase its purchases of U.S. goods and services.
Supply Chain Webinar
On Tuesday (Oct. 27), The Hill held a webinar on COVID-19 and a Responsive RX Supply Chain. Various lawmakers, former government officials, and industry officials participated in the event.
Representative Elissa Slotkin (D-MI), lead sponsor of the “Strengthening America’s Strategic Stockpile Act,” said her legislation is bipartisan and helps improve public-private partnerships to address surge capacity issues related to medical supplies and pharmaceuticals. She also stressed the importance of moving medical supply chains back to the U.S., and discussed the national security implications of an overreliance on foreign manufacturing.
Representative Buddy Carter (R-GA) highlighted his legislation, the “Made in America Act of 2020,” and said the U.S. has been dependent on other countries for pharmaceuticals for a long period of time. He noted his bill would attract companies to come back to the U.S. through Opportunity Zones, tax incentives, and patriotism. Carter added it was critical to “make it worth it” for companies to return back to America. Additionally, he said Congress needs to ensure PPE and pharmaceuticals are manufactured in the U.S. to avoid the issues that occurred early on in the pandemic.
To view the Q&A from the event, click here.
To view the webinar in full, click here.
 Moens, Barbara. “EU holds off on Boeing trade retaliation.” Politico Pro, 26 Oct. 2020. https://link.edgepilot.com/s/534d1b73/iiYKiy6wjkiKack-KYppJw?u=https://subscriber.politicopro.com/article/2020/10/eu-holds-off-on-boeing-trade-retaliation-3984836
 Palmer, Doug. “U.S. appeals WTO ruling against Trump’s China tariffs.” Politico Pro, 26 Oct. 2020. https://link.edgepilot.com/s/737e1f36/ewDX9D-4Z0uq3v7FpCRGjQ?u=https://subscriber.politicopro.com/article/2020/10/us-appeals-wto-ruling-against-trumps-china-tariffs-2013380
 Wei, Lingling. “China Stresses Reliance on Its Own Technologies in Five-Year Plan.” The Wall Street Journal, 29 Oct. 2020. https://link.edgepilot.com/s/a2175558/bIh0fb22FkW7NQP1TD_pQg?u=https://www.wsj.com/articles/china-leadership-says-economy-will-reachmid-level-within-15-years-11603969958
 Bustillo, Ximena. “U.S. lawmakers accuse Mexico of violating USMCA on energy.” Politico Pro, 23 Oct. 2020. https://link.edgepilot.com/s/d689a454/fC02nZ0J6kuhUspPKBkntw?u=https://subscriber.politicopro.com/article/2020/10/us-lawmakers-accuse-mexico-of-violating-usmca-on-energy-3984809
 Reuters Staff. “China’s purchases of U.S. farm goods at 71% of target under trade deal: U.S.” Reuters, 23 Oct. 2020. https://link.edgepilot.com/s/653cdc1b/iPlQjVDN-E_VqSsxu8vQ_w?u=https://www.reuters.com/article/us-usa-trade-china/chinas-purchases-of-u-s-farm-goods-at-71-of-target-under-trade-deal-u-s-idUSKBN2782UL