The Office of the U.S. Trade Representative (USTR) has released President Donald Trump’s 2019 Trade Policy Agenda and 2018 Annual Report, detailing how the Trump administration’s trade policies “are benefitting American workers and contributing to the strongest economy in decades.” Claiming that the Trump administration “inherited a significantly flawed trading system,” the report states that the administration “took immediate and decisive action to implement a new trade agenda.” The USTR indicated that it “and other parts of the Administration have used both domestic laws and international fora to press U.S. trade priorities and enforce trade commitments made by America’s trading partners. In 2019, the Administration will continue this work and take further steps to rebalance America’s trade relationships and the global economy.”

In one of its more interesting statements in support of Trump’s trade agenda, the report states:

For too long, workers here and throughout the developed world have been frustrated by elected officials who talk about the problems resulting from globalization – but do nothing about them. For too long, policymakers here and throughout the developed world have been intimidated by the claim that any effort to shift trade policy in a more worker-friendly direction represents some type of Smoot-Hawley style “protectionism.” But this is nonsense – recent events demonstrate that by using its leverage as the world’s largest market, the United States can create better conditions for U.S. workers, and encourage more efficient global markets.

The lengthy report focuses on three broad areas: (1) President Trump “inherited a deeply flawed global trading system,” (2) the Trump administration is making U.S. trade policy “work better for American workers,” and (3) the administration in 2019 will continue to pursue new trade deals, enforce U.S. laws, monitor trade agreements and rebalance U.S. trade relationships. A fact sheet on the president’s Trade Agenda and Annual Report is also available.

The report provides summaries and comments on the United States-Mexico-Canada Agreement (USMCA), the revised U.S.-Korea Free Trade Agreement and discusses the new trade negotiations with Japan, the European Union and the United Kingdom. In the area of trade enforcement, the report addresses the ongoing Section 301 trade and tariff actions toward China and notes that the United States will continue to press China to address long-standing U.S. concerns about unfair trade practices. Concerning the World Trade Organization (WTO), the report notes ongoing reform efforts, particularly the challenges of non-market economies and concerns over the WTO dispute settlement system. These efforts are “part of an ongoing upgrade to adjust U.S. trade policy to the realities of the 21st century economy.”

On February 28, 2019, the U.S. Trade Representative (USTR) submitted to Congress and released to the public a summary of the Trump administration’s specific negotiating objectives for its United States-United Kingdom trade agreement negotiations. This follows the USTR’s notification to Congress on October 16, 2018, of the Trump administration’s intention to enter into negotiations (see Trump and Trade Updates dated October 17, 2018 and November 16, 2018), the submission of public comments – over 133 total – concerning negotiating objectives for any trade agreement with the UK, and a January 29, 2019 USTR hearing at which 24 witnesses testified on negotiating objectives.

The USTR has stated that its aim in the negotiations is to address both tariff and non-tariff barriers and to achieve fairer, more balanced trade. The introduction to the negotiating objectives notes that “the President intends to negotiate a trade agreement with the United Kingdom (UK) once it leaves the European Union (EU).” It notes, “As the first and fifth biggest global economies, the U.S. economic relationship with the UK is one of the largest and most complex in the world, with annual two-way trade totaling more than $230 billion. Despite this significant trade volume, multiple tariff and non-tariff barriers have challenged U.S. exporters in key sectors while the UK has been a Member State of the EU and therefore a part of the common trade policy of the EU. The UK’s decision to leave the EU creates a new opportunity to expand and deepen the U.S.-UK trade relationship.” The summary document consists of brief bullet point objectives for such issues as Trade in Goods; Customs and Trade Facilitation; Rules of Origin; Technical Barriers to Trade; Trade in Services; Intellectual Property; Labor; Environment; Trade Remedies; Dispute Settlement; and other trade-related areas of focus for the negotiations.

On November 30, 2018, the United States, Mexico and Canada officially signed the United States-Mexico-Canada Agreement (USMCA), a proposed free trade agreement that, if approved by Congress and ratified by the governments of Canada and Mexico, would revise and modernize the North American Free Trade Agreement (NAFTA). Known as “NAFTA 2.0” during the trilateral negotiations, the USMCA is expected to be debated by the 116th Congress in the coming months as it considers legislation to implement the agreement. The new free trade agreement, consisting of 34 chapters and 14 side letters, retains many of NAFTA’s chapters but also makes notable changes and additions to the original trade agreement among the three countries.

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On February 27, 2019, Ambassador Robert Lighthizer, U.S. Trade Representative (USTR), testified before the House Ways & Means Committee on U.S.-China trade relations. In his brief opening statement, the ambassador stated that the United States “can compete with anyone in the world but we must have rules – enforced rules – that make sure market outcomes, not state-capitalism and technology theft, determine winners.” Due to the Section 301 tariffs implemented on certain imports from China, he said, the United States is “in a position to deal with this problem for the first time after decades of government inaction.” He closed his statement by emphasizing that ongoing negotiations with China are resulting in “real progress” that could help to “turn the corner in our economic relationship with China.”

Preceding Lighthizer in the hearing was House Ways & Means Committee Chairman Richard Neal, D-Mass., who acknowledged in this opening statement that “China has been good for some but also very bad for others.” He added that “[w]hile this Administration confronts the same challenges with China that previous administrations faced, it has chosen to use tactics and tools that previous administrations – of both parties – did not. The Trump Administration tariffs have been sweeping, disruptive, controversial, and painful. The Administration’s promise is that its high-risk approach will yield high rewards.” He closed his statement by claiming that “the future of America’s economic prosperity is at stake.” Ranking Minority Member Kevin Brady, R-Texas, stated in his opening statement that he was “hopeful that the substantive talks under way … will produce meaningful commitments from China that lower trade barriers, achieve structural reforms and establish a new era of fair trade.”

Under questioning by the committee members concerning ongoing U.S.-China trade negotiations, Lighthizer indicated that while progress was being made, much work still needed to be done before an agreement could be reached. He cautioned that even once a deal was reached, there would continue to be trade friction, stating “I’m not foolish enough to think there is going to be one negotiation with China that’s going to change all their practices.” Given concerns about China’s past lack of compliance with its WTO and other trade-related commitments, the ambassador acknowledged that any enforcement tools would have to be “very specific” and “have layers,” but that the United States would be able to “act proportionately but unilaterally to insist on enforcement” if a disagreement remains. Lighthizer insisted that any agreement reached with China will not be submitted to Congress for approval, despite President Trump’s claim that he wanted a “trade agreement” and not a series of memoranda of understanding (see Trump and Trade update of February 25, 2019). Instead, Lighthizer indicated that any agreement would be an “executive agreement” not requiring congressional approval.

Concerning current Section 301 tariffs on imports of Chinese products, Lighthizer testified that an exclusion request process would be instituted on the third tranche of Chinese products valued at $200 billion only if those existing tariffs of 10 percent were increased to 25 percent. Despite Congress’ instruction in the recent appropriations law funding the federal government through September that such an exclusion request process be implemented (see Trump and Trade update of February 19, 2019), he indicated the Office of the USTR would institute such a process if the tariffs are raised to 25 percent, but “[s]hort of that I sort of want to see where we are” and to see if U.S. companies seeking such exclusions are considering “ways to manufacture more in the U.S.”

At times, the questions by House members focused on topics other than trade with China, such as the proposed United States-Mexico-Canada Agreement (USMCA). In response to questions on this trade agreement, Lighthizer repeatedly called for its approval by Congress. Failure to do so, he argued, would leave the United States without a trade agenda “for the next several years” and indicate to other countries that “we don’t have a consensus.” “If the Congress doesn’t see fit to pass that, then everything else is kind of like a footnote,” he stated, adding that if the USMCA does not pass, “We can’t do trade deals.”

Several questions concerned the continuing Section 232 tariffs on imports of steel and aluminum. On this issue, the ambassador noted that the Trump administration wants “very much to work out a deal” and that they especially want a deal with Canada and Mexico. Numerous members of Congress from both parties have made clear their position that they will not approve the USMCA until the Trump administration removes these tariffs for Canada and Mexico.

In his second State of the Union address to Congress, President Donald Trump noted that he campaigned on several core promises, including “to defend American jobs and demand fair trade for American workers.” He argued that his administration has “moved with urgency and historic speed to confront problems neglected by leaders of both parties over many decades” and indicated that “one priority is paramount – reversing decades of calamitous trade policies.”

His prepared speech included comments on the ongoing trade dispute with China and the Section 301 tariffs imposed on $250 billion worth of imported Chinese products. He noted that his administration continues to work on a new trade deal with China, but that any final agreement “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.” On the other major trade issue of 2018, the president called NAFTA an “historic trade blunder” and “catastrophe” that has now been addressed by the new United States-Mexico-Canada Agreement (USMCA). Trump called on Congress to pass the agreement in order to “bring … back our manufacturing jobs, [expand] American agriculture, [protect] intellectual property, and ensur[e] that more cars are proudly stamped with four beautiful words: made in the USA.”

In his only other significant remarks on trade, the president asked Congress to pass the United State Reciprocal Trade Act, arguing that the United States should be able to issue “the exact same tariff on the same product that they sell to us” if another country places an unfair tariff on a U.S. product. See also Trump and Trade Update of January 25 for more details on this act and other recently introduced trade- and tariff-related legislation.

Concerning economic sanctions and relations with certain “rogue” countries, the president announced that he will meet again with Kim Jong-un, Supreme Leader of North Korea, on February 26-27, 2019, in Vietnam, acknowledging that “much work remains to be done.” Trump highlighted his administration’s recent decision to officially recognized the legitimate government of Venezuela and its new interim president, Juan Guaidó. President Trump noted that he has “acted decisively to confront the world’s leading state sponsor of terror: the radical regime in Iran” and “put in place the toughest sanctions ever imposed on a country” after withdrawing from the “disastrous Iran nuclear deal.”

Shortly after the president’s address, the White House released a series of fact sheets on the various topics covered in his message, including “President Donald J. Trump Has Forged New Trade Agreements to Revitalize American Industry and Agriculture.”

The Congressional Research Service (CRS), a nonpartisan staff to congressional committees and Members of Congress, has released an overview report, International Trade and Finance: Overview and Issues for the 116th Congress, in which it offers a brief review of President Donald Trump’s first two years in office and policy issues that the new 116th Congress may address. The policy issues include: the impact of trade and trade agreements on the U.S. economy; the causes and consequences of the U.S. trade deficit; the implications of technological developments for U.S. trade policy; and the intersection of economics and national security.

The report acknowledges that the president has focused his trade policy on “reevaluating many U.S. international trade and economic policies and relationships.” The report also notes that members of Congress “exert significant influence over U.S. economic and trade policy and its implementation through their legislative, appropriations, and oversight roles” and that “[g]iven current debates, fundamental questions about the future direction of trade and international economic issues may be key areas of interest for the 116th Congress.” Some of the trade issues discussed in the report are:

  • Tariff Actions Undertaken by the Trump Administration – summarizing imposed and/or increased tariffs under: (1) Section 201 of the Trade Act of 1974 on U.S. imports of washing machines and solar products; (2) Section 232 of the Trade Expansion Act of 1962 on U.S. imports of steel and aluminum, and potentially autos, auto parts and uranium; and (3) Section 301 of the Trade Act of 1974 on U.S. imports from China; and retaliatory tariffs implemented by other countries.
  • U.S.-China Trade and Key Issues – summarizing China’s economic rise and increasing U.S. tensions over various economic and trade issues “stemming largely from China’s incomplete transition to an open-market economy,” including: (1) China’s industrial policies and Made in China 2025 initiative; (2) China’s policies on technology, innovation, and intellectual property and its economic espionage; and (3) China’s Belt and Road Initiative.
  • U.S. Bilateral and Regional Trade Agreements and Negotiations – summarizing a number of trade actions and negotiations the Trump administration has undertaken concerning free trade agreements, including: (1) the U.S.-Mexico-Canada Agreement (USMCA); (2) modifications to the U.S.-South Korea (KORUS) free trade agreement; (3) ongoing U.S.-European Union trade negotiations; (4) U.S.-Japan trade negotiations; and (5) the call for launching U.S.-United Kingdom free trade agreement negotiations.
  • The World Trade Organization – summarizing the state of affairs and growing challenges facing the World Trade Organization (WTO) and calls for reforms of its functions, including: (1) the lack of any modernization of its rules since 1995 despite numerous multilateral and plurilateral negotiations; (2) the entrenched differences in priorities among leading emerging market economies, developing countries and advanced economies; and (3) skepticism over the WTO’s dispute settlement system.

In addition to these high-profile trade matters, the CRS report also provides details on more general trade issues such as intellectual property rights, labor and environmental conditions in trade agreements, and select U.S. import policies. It concludes with an overview of foreign direct investment in the United States and a review of international financial institutions and markets relied upon to discuss and coordinate economic policies.

International trade matters, at times, dominated the 2018 political landscape. Those of us at Trump and Trade expect 2019 to be no different. While the CRS report offers a broad overview of the policy debates that remain, we recommend a quick review of it. The report itself concludes that these issues “provide the backdrop for a potential robust and complex debate in the 116th Congress over a range of trade and finance issues.”

With the 35-day partial federal government shutdown ending on January 26, 2019, the U.S. government’s trade-oriented agencies have reopened and are beginning to work through massive backlogs of work as personnel resume full-time operations. What follows is a listing of the current operational status of many of these agencies:

U.S. Customs and Border Protection (CBP)

While CBP staffed ports “as normal” during the shutdown to ensure that the “flow of trade {is} as close to normal as possible,” other functions were curtailed. Due to the lapse in federal funding, however, the CBP website and certain databases were not actively managed. While no formal announcement has been made by CBP, these resources are once again fully operational, including the Customs Rulings Online Search System (CROSS) and the AD/CVD search database.

U.S. Department of Commerce – Bureau of Industry and Security (BIS)

No official statement has been issued by BIS officials, but the Department of Commerce is once again fully operational. While export enforcement continued during the shutdown, other functions of BIS were severely curtailed, including the filing of export license applications. SNAP-R (BIS’s electronic filing system) is back up and accepting licensing applications; however, it is expected that the review-and-approval process for applications will be delayed due to the expected high volume of filings BIS expects to receive.

U.S. Department of Commerce – International Trade Administration (ITA)

ITA is once again fully operational and has issued a memorandum stating that “any delay and confusion caused by the closure of the Federal Government will best be minimized by uniformly tolling all Enforcement and Compliance deadlines for the effective duration of the recent closure (i.e., 40 days), with the exception of requests for administrative reviews of suspension agreements and antidumping duty (AD) and countervailing duty (CVD) orders.” ITA has indicated that this determination applies to every proceeding, with the exception of court-ordered redeterminations. For AD and CVD orders and suspension agreements with December and January anniversary months, all requests for administrative reviews are now due by February 28, 2019.

U.S. Department of State – Directorate of Defense Trade Controls (DDTC)

DDTC has posted a notice on its website stating that it “has returned to full operational status with all electronic application systems placed in normal operational mode and the 3pm daily pick-up and drop-off service restored.” In resuming full operations, the agency notes that “Priority will be placed on issuance of licenses in the system at the time of implementation of lapse of funding operations on December 22, 2018. New licenses will be accepted; however, industry is advised of the likelihood of longer than normal processing times due to the high volume of licenses DDTC expects to receive.”

U.S. Department of the Treasury – Office of Foreign Assets Control (OFAC)

As previously reported, Treasury continued to have critical staff reporting to work to maintain core operations, even though OFAC’s operations were significantly curtailed. OFAC is again fully functional, and its sanctions web pages and licensing portal are operating.

U.S. International Trade Commission (ITC)

The ITC has publicly stated that all investigations that were active and ongoing when the shutdown began will be tolled by 35 days; a formal notice soon to be published in the Federal Register will provide more detailed information. The ITC website notes that “specific schedules for each investigative proceeding, including those pending before an Administrative Law Judge, will be revised and new schedules posted. We hope in a week or more for revised schedules to be finalized.” The ITC website is once again fully operational, and EDIS (the ITC’s electronic filing system) was live and accepting filings as of January 30. The HTS Search Tool and Dataweb are once again fully operating.

Office of the U.S. Trade Representative (USTR)

USTR has announced that it has returned to “full operating status.” Bilateral trade negotiations continued during the shutdown, particularly those between the United States and China, which face a March 1 deadline before U.S. retaliatory tariffs increase on certain imports of certain Chinese products on March 2 from 10 percent to 25 percent; however, no notice has been provided regarding how the lengthy shutdown will affect the processing of Section 301 product exclusion requests.

The White House has released a fact sheet listing the “historic results” of President Donald Trump’s first two years in office. For international trade, these results are listed:

”NEGOTIATING BETTER DEALS FOR THE AMERICAN PEOPLE: President Trump is negotiating fair and balanced trade deals that protect American industries and workers.

  • President Trump negotiated a new trade agreement between the United States, Canada and Mexico to replace the disastrous and outdated North American Free Trade Agreement.
    • Once enacted by Congress, the United States-Mexico-Canada Agreement (USMCA) will better serve the interests of American workers and businesses.
    • USMCA will incentivize billions of dollars in auto and auto parts production in the United States and create a freer and fairer market for American agriculture.
    • USMCA also includes the strongest-ever provisions on labor, environmental, digital, and intellectual property protections to reflect the realities of the 21st century economy.
  • The President renegotiated the United States-Korea Free Trade Agreement to preserve and grow jobs in the American auto industry and increase American exports.
  • The United States and Japan are set to begin negotiations on a United States-Japan Trade Agreement.
  • President Trump is establishing a new trade relationship with the European Union (EU), working toward the elimination of tariff and non-tariff barriers to transatlantic trade.
  • President Trump has established a Trade and Investment Working Group to lay the groundwork for post-Brexit trade with the United Kingdom (UK) and has notified Congress of his intent to negotiate a free trade agreement with the UK.
  • Under President Trump, the United States will no longer accept bad trade deals and unfair trade practices that harm American workers and industries.
    • One of the President’s first actions after taking office was withdrawing the United States from the terrible Trans-Pacific Partnership, which incentivized outsourcing.
    • In 2017, the Administration oversaw 82 antidumping and countervailing duty investigations.
  • President Trump is holding China accountable for its unfair trade practices, such as the theft of intellectual property, by imposing tariffs on $250 billion in Chinese goods.
    • Following President Trump’s successful meeting with President Xi in Buenos Aires, both agreed to conduct negotiations over 90 days to address the United States concerns.
  • American steel and aluminum jobs are coming back following President Trump’s tariffs to protect domestic industries that are vital to national security.
  • President Trump imposed tariffs to protect American-made washing machines and solar products that were hurt by import surges.
  • President Trump has expanded market access for American agricultural producers.
    • Argentina has opened to American pork and beef, Brazil to American beef, Japan to lamb and Idaho chipping potatoes, South Korea to American poultry, and more.
    • The Administration authorized $12 billion to aid farmers affected by unfair retaliatory tariffs.”

International trade and international trade disputes were a predominant focus of President Trump and his trade officials throughout 2018. Thompson Hine’s Trump and Trade team has prepared a slide presentation to provide our readers with a broad overview of the most significant trade actions taken by the Trump administration last year. From the renegotiation of the North America Free Trade Agreement (NAFTA), which is now the U.S.-Mexico-Canada Agreement (USMCA), to the many ongoing trade actions involving imports of steel, aluminum and products from China, it was a busy year. This overview concisely presents details and the current status of the president’s primary trade activities.

The presentation includes information on the current status of President Trump’s major trade actions, including NAFTA/USMCA negotiations, the U.S.-Korea Free Trade Agreement, and other bilateral trade negotiations with Japan, the European Union and the United Kingdom. It also provides details on major trade and tariff actions occurring in 2018, such as the Section 232 steel/aluminum tariffs, the Section 232 automobile and automobile parts investigation, and the Section 301 China-related tariffs.

We invite you to stay abreast of continuing developments in 2019 via our blog, TrumpandTrade.com. To receive an email notification whenever a new post is published, please subscribe to the blog.

Happy new year!

On December 21, 2018, the U.S. Trade Representative (USTR) submitted to Congress and released to the public a summary of the Trump administration’s specific negotiating objectives for its U.S.-Japan Free Trade Agreement negotiations. This follows the USTR’s notification to Congress on October 16, 2018, of the Trump administration’s intention to enter into negotiations (see Trump and Trade Update dated October 17, 2018 and Update dated October 26, 2018), the submission of public comments – over 150 total – concerning negotiating objectives for any trade agreement with Japan, and a December 10, 2018 USTR hearing at which more than 40 witnesses testified on negotiating objectives.

The USTR has stated that its aim in the negotiations is to address both tariff and non-tariff barriers and to achieve fairer, more balanced trade. The summary notes that the United States and Japan are “the world’s first and third largest economies, respectively, representing about 30 percent of global Gross Domestic Product.” While Japan is an important market for U.S. exporters, the USTR notes, the market is “still too often underperforming” and “exporters in key sectors such as automobiles, agriculture, and services have been challenged by multiple tariff and non-tariff barriers for decades, leading to chronic U.S. trade imbalances with Japan.” The summary document consists of brief bullet point objectives for such issues as Trade in Goods; Customs, Trade Facilitation, and Rules of Origin; Technical Barriers to Trade; Trade in Services; Intellectual Property; Labor; Environment; Trade Remedies; Dispute Settlement; and other trade-related areas of focus for the negotiations.

In releasing the negotiating objectives, the USTR stated that it may “seek to pursue negotiations with Japan in stages, as appropriate, but we will only do so based on consultations with Congress.” It also noted that these negotiating objectives will be updated in the future and that the Trump administration is committed to working closely and transparently with Congress. Formal negotiations with Japan may commence in late January 2019.