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 Volume 25, Number 142                             Monday, July 18, 2016

Trade Reports International Group

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A Week’s Worth of TTIP Negotiating

 Negotiators spent a full week – with some going into this week – to make enough progress in a TransAtlantic Trade and Investment Partnership so both sides will be able to see materialization of a substantive agreement by the end of the year (WTD, 7/15/16).

 Talks will continue this week in Brussels on services, which are lagging, suggested Assistant US Trade Representative Dan Mullaney.  Services negotiators were busy in Geneva last week working on the Trade in Services Agreement.

 European Union Trade Commissioner Cecilia Malmström and US Trade Representative Michael Froman continue to touch bases at least every two weeks on the progress of the talks.  Mr. Mullaney told a concluding press conference on Friday that much needs to be done to reach agreement on a comprehensive and ambitious pact – both at the technical and political levels.

 But chief EU negotiator Ignacio García Bercero was optimistic.  Work last week and planned discussions up until the summer break – and beyond – should provide a clearer indication to the leaders of whether a pact is attainable.  There should be consolidated texts on the vast majority of issues, he commented.

   Mr. Froman and Ms. Malmström will meet in early September to take stock of the negotiations.  The EU trade commissioner is expected to update member states during a major trade conference in late September in Bratislava.

 Progress made in last week’s Brussels negotiations show that an agreement can be reached by the end of the year, Mr. Mullaney said.

 Proposals have been submitted in almost all anticipated chapters in the agreement.

How Things are Shaping Up

 Here’s how things are shaping up –

 ●        on financial services both sides tabled market access proposals last week, but the United States continues to hold back on greater cooperation in writing new regulations, saying it prefers the issues should be dealt separately between the Treasury Department and the EU’s Directorate General for Financial Stability.

 Nonetheless progress was made on that front on cooperation – albeit outside of TTIP.  But Brussels continues to insist that bilateral financial understandings eventually move into TTIP, commented Mr. Bercero.

 ●        a less than ambitious offer from the United States on opening up public procurement on all levels to each other’s bidders remain a serious concern for the EU, said Mr. Bercero.  But USTR’s Mr. Mullaney pointed to leadership by the United States in expanding procurement opportunities in the World Trade Organization’s Government Procurement Agreement.  He also said the US proposal exceeds in generosity any outcome in previous free trade agreements, including the TransPacific Partnership;

 ●        on Geographical Indications both sides are far apart.  GIs remains a priority for Brussels, but Mr. Mullaney responded that the US system of “GIs” affords significant protection for European food – including cheese – sold in the United States.

 Those negotiations are taking place in the context of shrinking US agricultural exports to Europe, Mr. Mullaney added;

 ●        on binding labor and environment principles, both negotiators said they have the same ambitious objectives.  What is proving troublesome, added Mr. Mullaney, is how alleged violations of those principles will be disciplined – through official dispute settlement or monetary penalties.

 The United States wants labor and environmental strictures to track existing US free trade agreements – opening complaints to investor-state dispute settlement;

 ●        on dispute settlement there are now two proposals on the table.  Negotiators will work this week to try to consolidate them.  The two proposals reflect very similar goals – assuring transparency in the process, discouraging frivolous suits and protecting against conflict of interests in any adjudicatory panel along with a procedure that allows suits to be dismissed by concurrence of the two parties;

 ●        on energy and raw materials very little has progressed.  The EU at the beginning of the week submitted a proposal on energy which did not go much beyond the discussion stage last week.  There still is no decision on which energy issues should be dealt with horizontally in the text or in its own chapter.

 Once TTIP is wrapped up – with or without an energy chapter – liberal treatment of US energy exports would apply as it does to all US FTA countries, noted USTR’s Mullaney;

 ●       a mutual recognition agreement on engineering qualifications was just submitted by the EU and

 ●        both sides continue to talk about how quickly the 97-percent of agreed-upon tariff lines would drop to zero.

 Significant progress also was made during the week on rules-of-origin, customs rules, how to achieve cooperation in developing future regulations, aligning procedures for sanitary and phytosanitary audits and import checks and transparency and due process in each other’s trade defense actions.

Brexit

 As for Britain’s leaving the European Union, the two chief negotiators said Brexit has no practical impact on the negotiations.  London’s action will not delay the negotiations, Mr. Bercero said in answer to a question.

 But Britain remains an important factor, offered USTR’s Mullaney.  He pointed out that fully one-quarter of US exports go to Britain and the country remains the largest market for US services providers.  US firms also have a big share of the procurement market there.

 Should Washington and Brussels miss their end-of-year deadline, Mr. Bercero was silent.  But Mr. Mullaney suggested it could be “quite a few years” before both sides could get back to the negotiating table given the current political situation on both sides of the Atlantic.

       

Ryan Downplays TPP Vote This Year

 House Speaker Paul Ryan (R-Wisc) downplayed the chance for a vote on the TransPacific Partnership later this year, saying that President Obama will need to renegotiate parts of the agreement first (WTD, 7/15/16).

 Some provisions in the agreement will have to be changed in order to schedule a vote in the post-election “lame duck” session, Mr. Ryan said in an interview with National Public Radio aired Friday.

 “I think the President has to go back and renegotiate some key provisions in it,” the Speaker said.  “He would have to go back and fix a number of things that are in this agreement before it would be ready to be considered,” he added.

 But a Japanese Embassy official told reporters Friday that “renegotiation is not acceptable.”  The TPP negotiations were complex and the final deal represents a “delicate balance,” Deputy Chief of Mission Atsuyuki Oike said.  Any attempt to reopen the agreement could cause the entire deal to unravel.  He spoke at a program sponsored by the National Foreign Trade Council.

 Mr. Oike also rejected the idea of using side agreements to address US concerns.  “The simple answer is ‘no’.”

 Nonetheless Tokyo is not ready to give up on the TPP and continues to believe it will be ratified by the United States, Mr. Oike said.  The possibility that TPP might not be ratified is “something I don’t want to think about.”

 Japan’s Diet is expected to take up ratification in the fall.

 Separately, a group of House Democrats said Friday they will fight against a “lame duck” vote on the TPP.  Given that both Presidential candidates are firmly opposed to the TPP, “sneaking the agreement through is not acceptable,” commented Rep. Rosa DeLauro (D-Conn).

 Organized labor will be using the summer recess to try to put lawmakers on record in opposition to a lame duck vote, AFL-CIO President Richard Trumka told reporters.

 Ms. DeLauro said she will be reaching out to members of her own party, but not to Republicans who might oppose the TPP.  But with presumptive Republican Presidential nominee Donald Trump staunchly opposed to the agreement, Ms. DeLauro said she expects some Republicans that voted to give the President Trade Promotion Authority will end up voting against the final TPP deal.

       

Rectangular Welded Pipe Tubes

 The Commerce Department on Friday announced its affirmative final determinations in antidumping duty investigations of imports of heavy walled rectangular welded carbon steel pipes and tubes from South Korea, Mexico and Turkey and the countervailing duty investigation from Turkey (WTD, 2/24/16).

 In the Korea investigation, Commerce found dumping ranged from 2.34 percent to 3.82 percent.  For Mexico dumping margins ranged from 3.83 percent to 5.21 percent.

 In the Turkey antidumping investigation, Commerce found dumping ranged from 17.83 percent to 35.66 percent.  In the Turkey countervailing duty investigation, duties ranged from 15.08 percent to 23.37 percent.

 In 2014, imports of the pipes and tubes from Korea, Mexico and Turkey were valued at an estimated $50.5 million, $53.7 million and $41.9 million, respectively.

 An International Trade Commission final injury decision is due by August 29.

       

Around the Globe

             ●          The United States warned China on Thursday that it had not done enough to qualify for market economy status, especially in steel and aluminum, sowing the seeds for a trade battle between Washington and Beijing at the end of 2016, Reuters news service reported (WTD, 7/15/16). Upon China’s admission to the WTO in 2001, it was told by other members that they would not use its published, state-controlled prices to judge whether or not it was “dumping” exports unfairly in their markets, but rather “surrogate” prices reflecting what it should be charging without state subsidies.

 That was written into its WTO membership agreement in a clause that would expire after 15 years, on Dec. 11, 2016.  If the United States, European Union, and other WTO members begin to take Chinese export prices at face value, it will be much harder for them to challenge China’s cheap exports.  U.S. trade diplomat Chris Wilson told the WTO meeting that the expiry of the clause did not require other WTO members to automatically grant China market economy status on Dec. 11.

 Instead, China must establish under each WTO member country’s domestic law that it is a market economy, he said, according to an outline of his remarks seen by Reuters.  “Second, there is little doubt that China’s market reforms have fallen short of the expectations that were held by many members when China joined the WTO,” he said.  “This is particularly evident in the steel and aluminum industries where China’s pervasive interventions have led to a significant overcapacity of global supply that is threatening the viability of competitive firms in these industries around the world.”

 China’s envoy at the WTO meeting said Beijing agreed that the expiry of the clause did not require automatic granting of market economy status, according to a WTO official who was present at the meeting.  However, the Chinese official said its expiration would eliminate the legal basis for countries to continue to use “discriminatory anti-dumping methodology” against China, the WTO official said.  The WTO official said it was believed to be the first time the United States had responded to China on the issue at the WTO. U.S. Treasury Secretary Jack Lew said last month that the stance on China’s market economy would be determined ultimately by the U.S. Commerce Department.

 In Beijing Friday a Foreign Ministry spokesperson said the United States was mistaken.  The accession article – Article 15 of China’s Protocol of Accession – which expires on December 11 stipulates that the use of surrogate country approach in antidumping investigations against China shall end on December 11, 2016.

 “The US can cut to the chase and just get to the point on whether it is ready to honor its promise and international obligations,” he said.  He added that the WTO rules have no such concept as “market economy status”.

            ●          A US Senator claims Australia wants to steal American medicine patents under provisions in a 12-nation trade deal, the Australian Associated Press reported (see related report in this issue).  Pro-trader Orrin Hatch, a US Senate Finance Committee chairman, wants changes to be made to the Trans-Pacific Partnership including a 12-year data exclusivity, instead of Australia’s demand for five years.

 “We cannot agree to something that would just destroy the biologics industry. In essence what the Australians are saying is ‘Let us steal your patents,’” he told the ABC.  Senator Hatch accused Australia of wanting biologics to come off patent as quickly as possible.  Senator Orrin Hatch says “we cannot agree to something that would just destroy the biologics industry.  But there still has to be enough patent term to be able to recoup the approximately $2 billion and 15 years of effort that you have in biologics, and there’s no way you can do that in five years,” he said.

 Australia’s Trade Minister Steve Ciobo met Senator Hatch in Washington, describing their discussions as “constructive.”  But Australia would not be budging on its five-year patent timeframe. “There’s a hard stop in terms of our commitment – that is the coalition’s commitment to Medicare and to the health system more generally,” he said.

 US Trade Representative Michael Froman Thursday participated in a round table discussion on the Trans-Pacific Partnership with NPPC and representatives of Iowa agricultural groups at the Iowa Pork Producers Association headquarters in Des Moines.

             ●          The Labor Department on Friday accepted a petition filed by US and Colombian labor groups alleging that Bogota is not living up to its obligations to protect workers rights under the bilateral free trade agreement (WTD, 5/17/16).  The petition charges that the Colombian government has failed to enforce its labor laws.

 House Ways and Means Committee ranking Democrat Sander Levin praised the move, saying that Colombia needs to take action to bring itself into compliance with the commitments it made under the FTA.

             ●         South Korea has agreed to lift the ban it placed on U.S. poultry in reaction to outbreaks of avian influenza last year and earlier this year, Agri-Pulse news service reported.  The decision means that U.S. exporters are now able to ship chicken and turkey to South Korea so long as the poultry was processed after June 1, Agriculture Secretary Tom Vilsack said today.

 Now that South Korea has lifted its ban, U.S. poultry industry representatives say they hope the USDA will be able to persuade the Asian country to stop its policy of issuing blanket bans on all U.S. poultry in the event of a localized detection of highly pathogenic avian influenza. Last year, after several outbreaks of the virus, many countries did enforce regional bans on U.S. poultry only from trouble spots, while allowing shipments from areas that were not affected.

 South Korea and China were two major importers that banned all poultry. South Korea stopped its poultry imports in early 2015 during the initial outbreaks. The country then lifted the ban in November only to put it back in place less than two months after avian influenza was detected in Indiana in January.

             ●          Australia has called for a free trade deal with Britain following its exit from the European Union, according to press reports (WTD, 7/13/16).  Theresa May described the move as “very encouraging” and insisted it showed Brexit could work for Britain.

 In a phone call to the new PM, her Australian counterpart Malcolm Turnbull said he urgently wanted to open up trading between the two countries.  Liam Fox, the new international trade secretary, said he was already “scoping about a dozen free trade deals.”  But the UK cannot sign any deals while it is still an EU member - and experts warned trade deals take a long time to negotiate.

 Britain is Australia’s seventh largest trading partner.

             ●          The Canadian government is focused on ratifying a trade agreement with the European Union despite Brexit, International Trade Minister Chrystia Freeland said, downplaying a report the government has begun talks for a bilateral trade deal with the U.K, Bloomberg news service reported (WTD, 7/13/16).  Freeland met with Britain’s new Secretary of State for International Trade Liam Fox on Friday in London.

 Though Fox said the two commenced “very fruitful” trade negotiations, according to a report in London’s Sunday Times, Canada’s priority is to enact and ratify the Canada-EU Comprehensive Economic and Trade Agreement in 2017 while the U.K. is still part of the EU. “We had a very positive conversation with the secretary,” Freeland spokesman Alex Lawrence said Sunday in a statement, responding questions about Fox’s comments. Freeland “shared details about the trade negotiating team in her department, and the two committed to work together to ratify CETA as quickly as possible.”

 The EU has put its landmark free-trade accord with Canada on a slow track for approval, increasing the risk of a veto amid an anti-globalization backlash across Europe. The pact will now need the approval of each EU member state’s individual parliament, as well as both the European Council and European Parliament. The sides had initially hoped to avoid sending the deal to each national parliament for approval.

             ●         Brazil may launch a trade challenge against Canada over state funding to struggling planemaker Bombardier Inc that could hurt Brazilian rival Embraer, Foreign Minister Jose Serra told Reuters on Thursday.  Serra, a former presidential candidate who took over the ministry two months ago, said a $1 billion investment in Bombardier from the province of Quebec was a “subsidy” and gave the company an unfair advantage against Embraer.

 “We are studying opening (a challenge) again as in the past,” Serra said in an interview. “Why the need for that subsidy from Quebec?”  It was the first time a senior Brazilian official has publicly acknowledged the possibility of a challenge to the Canadian state funding at the World Trade Organization (WTO).  A new dispute at the WTO would again pit two of the world’s biggest planemakers and stoke tensions between major economies fighting for a piece of the global trade market at a time of sluggish growth.

 Any dispute over Canadian aid to Bombardier this time could also drag Boeing and Airbus, whose planes would compete with the CSeries passenger jet.

             ●          The performance of the Chinese economy in the first half of this year was steady and in line with expectations, and China is confident of achieving its main full-year development targets, Chinese Premier Li Keqiang said here Friday according to a Xinhua news agency report.  “New economy is vibrant, new business forms are booming, and new growth momentum is accumulating,” Li said in a keynote speech at the 11th Asia-Europe Meeting (ASEM) Summit in Ulan Bator.

 The comments came shortly after the release of China’s key macroeconomic data earlier in the day. Official statistics showed China’s gross domestic product (GDP) expanded 6.7 percent year on year in the first half of 2016 to reach 34.06 trillion yuan (5.08 trillion U.S. dollars).  The premier said the world’s largest developing economy, while facing continued downward pressure, still has huge potential, sufficient advantages and big maneuvering space.

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On the Web......

 

Asia-Pacific

TPP.  National Association of Manufacturers statement on Republican President Candidate Trump and the TransPacific Partnership.  (available at: http://www.shopfloor.org/2016/07/manufacturers-congratulate-gov-pence/ ) issued: 7/15/16.

Campaign 2016

TPP.  National Association of Manufacturers statement on Republican President Candidate Trump and the TransPacific Partnership.  (available at: http://www.shopfloor.org/2016/07/manufacturers-congratulate-gov-pence/ ) issued: 7/15/16.

China

MES.  Manufacturers for Trade Enforcement statement on market economy status for China.  (available at: http://tradeenforcement.org ) issued: 7/16/16.

Customs

TFA.  World Trade Organization statement on the Trade Facilitation Agreement.  (available at:   https://www.wto.org/english/news_e/news16_e/fac_15jul16_e.htm  ) issued: 7/15/16.

European Union

Trade Balance.  European Union report on the trade balance for May.  (available at:  http://europa.eu/rapid/press-release_STAT-16-2537_en.htm ) issued: 7/15/16.

TTIP.  Remarks by Assistant US Trade Representative Mulvaney at the closing press conference of the latest round of negotiations for the TransAtlantic Trade and Investment Partnership.  (available at:  https://ustr.gov/about-us/policy-offices/press-office/speechestranscripts/2016/july/statement-assistant-ustr-dan ) issued: 7/15/16.

TTIP.  Opening remarks by European Union chief negotiator for the TransAtlantic Trade and Investment Partnership at the concluding press conference.  (available at:  http://trade.ec.europa.eu/doclib/docs/2016/july/tradoc_154811.pdf ) issued: 7/15/16.

Internet

Electronic Commerce.  Canada proposal on a World Trade Organization digital trade program.  (available at:  https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=229993,229980,230029,229982,229991,229996,229981,229972,229992,229945&CurrentCatalogueIdIndex=0&FullTextHash=371857150 ) issued: 7/14/16.

Trade Policy

Brady Remarks.  Remarks by House Ways and Means Committee Chairman Brady to the Washington International Trade Association on US trade policy.  (available at:  http://waysandmeans.house.gov ) issued: 6/14/16.

Pritzker Remarks.  Remarks by Commerce Secretary Pritzker at the Washington International Trade Association.  (available at:  https://www.commerce.gov/news/secretary-speeches/2016/07/us-secretary-commerce-penny-pritzker-delivers-remarks-washington ) issued: 7/14/16.

 

Tunisia

Trade Policy.  US statement on World Trade Organization trade policy review of Tunisia.  (available at:  https://geneva.usmission.gov/2016/07/13/u-s-statement-at-the-trade-policy-review-of-tunisia/ ) issued: 7/14/16.

Turkey

Economy.  OECD report on Turkey’s economy.  (available at:  http://www.oecd.org/newsroom/turkey-challenging-times-call-for-pushing-ahead-with-economic-reform.htm ) issued: 7/15/16.

Economy.  World Bank report on Turkey’s economy.  (available at:  http://www.worldbank.org/en/news/press-release/2016/07/15/first-half-of-2016-in-turkey-sees-slower-gdp-growth-than-2015-says-world-bank ) issued: 7/15/16.

World Trade Organization

Electronic Commerce.  Canada proposal on a World Trade Organization digital trade program.  (available at:  https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=229993,229980,230029,229982,229991,229996,229981,229972,229992,229945&CurrentCatalogueIdIndex=0&FullTextHash=371857150 ) issued: 7/14/16.

World Trade Organization

TFA.  World Trade Organization statement on the Trade Facilitation Agreement.  (available at:   https://www.wto.org/english/news_e/news16_e/fac_15jul16_e.htm  ) issued: 7/15/16.

Calendar/Prime Source

WTD’S

FRIDAY

AFTERNOON

PODCAST

Straight Talk.

Click the underlined text to hear snippets from WTD’s straight talk. (mp3 files)

 •  Watch President Obama slow jam on the TransPacific Partnership.

 •  Here’s what veteran Congressman Darrel Issa (R-Calif) says about the free-trade conundrum evident in the Presidential election campaign.

 •  Here’s what Senate Majority Leader Mitch McConnell told NPR about working with the White House on Trade Promotion Authority.

  •  Campaign 2016  –  Here’s how Republican Presidential contender Donald Trump is at a loss to explain China’s positive reaction to his sharp criticisms.

 •  Here’s what New Democrat free-trader Rep. Henry Cuellar (Texas) tells WTD in an interview about trade and the upcoming elections.  

•  Here’s an introduction by Woodrow Wilson Center Director Jane Harmon -- a rare species known as “pro-trade Democrats” -- of US Trade Representative Michael Froman on the TransPacific Partnership.

•  Campaign 2016 -- Republican Presidential contender Donald Trump explains his China trade policy to a crowd on Iowa.

•  Campaign 2016 -- Here’s what Republican Presidential contender Donald Trump says about “Made in USA”.

•  Campaign 2016 -- Republican Pr-esidential contender New Jersey Governor Chris Christie says why he’s against the Obama TPP agreement.

•  Here’s why Democratic Presidential contender Hillary Clinton opposes the TransPacific Partnership.

•  A question to and answer from Republican Presidential contender Jeb Bush on the US Export-Import Bank -- and OPIC.

•  Here’s how Nucor steel company CEO John Ferriola describes the Chinese economic monolith.

•  Negotiating in Geneva -- or Can You Hear Me?  --  From chief WTO services negotiator Abdel-Hamid Mamdouh.

•  Here’s how the United States views the future of the Doha Development Round according to Deputy US Trade Representative Michael Punke.

•  Here’s a comment from Senate Foreign Relations Committee Chairman Bob Corker about why he doesn’t want to get into reauthorizing the Overseas Private Investment Corporation -- ala the Ex-Im mess.

•  Here’s a response from World Trade Organization Director General Roberto Azevedo at the Peterson Institute for International Economics on whether the Doha Development Agenda is a vampire.