On August 31, 2018, President Donald Trump officially notified Congress of his administration’s intent “to enter into a trade agreement with Mexico — and with Canada if it is willing, in a timely manner, to meet the high standards for free, fair, and reciprocal trade contained therein.” Notification was necessary under the provisions of the Trade Promotion Authority (TPA) legislation, which allows “fast track” consideration of trade agreements (i.e., Congress can vote to approve or reject a trade deal but cannot amend the text of the agreement). In the wake of the president’s notification, U.S. Trade Representative Robert Lighthizer indicated that a resulting free trade agreement could either be bilateral (with Mexico) or trilateral (with Canada also), depending upon the final negotiated text of any agreement. It has been questioned, however, whether a bilateral agreement fulfills TPA requirements since Congress had been earlier notified of the Trump administration’s intent to renegotiate a trilateral North American Free Trade Agreement (NAFTA). If Congress believes that a free trade agreement with only Mexico does not qualify for TPA consideration, amendments could be offered by Congress, potentially complicating any final agreement. With Congressional notification under the TPA, the actual text of any agreement must be submitted to Congress within the next 30 days for its consideration. Continue Reading Trump Administration Moves Forward with Proposed Trade Agreement with Mexico, Continues Negotiations with Canada

On August 27, 2018, the United States and Mexico reached a preliminary agreement “in principle, subject to finalization and implementation,” to update the North American Free Trade Agreement (NAFTA). The Office of the U.S. Trade Representative (USTR) stated that the updated agreement will “support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.” In reaching the agreement with Mexico, President Trump stated that, “America has … finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth.” Continue Reading United States and Mexico Agree in Principle to New Trade Agreement

Key Notes:

  • On May 23, 2018, the Department of Commerce self initiated a Section 232 national security investigation concerning the imports of automobiles and automotive parts.
  • A formal docket has been opened for the submission of public comments and requests to appear at a public hearing July 19-20, 2018.
  • The Department of Commerce has 270 days to issue its findings and submit a report to the president.

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Top trade officials from the United States, Canada and Mexico will resume negotiations over revisions to NAFTA this week in an effort to finalize an agreement. Reports indicate that while progress has been made, a number of issues remain, including rules of origin pertaining to automobiles, dispute settlement, government procurement and labor.

All parties agree that May will be a critical month in these renegotiations given upcoming events and important time lines. Mexico’s presidential election will occur in July 2018, and U.S. mid-term congressional elections will occur in November 2018. U.S. Trade Representative Robert Lighthizer has indicated a strong desire to conclude negotiations in May in order to seek approval from the current Congress under Trade Promotion Authority.

Trump and Trade has prepared a slide presentation, Summary of NAFTA’s History, Development and Current Status, for our readers as negotiations enter their final phase.

The Office of the U.S. Trade Representative (USTR) has released its annual report on significant foreign trade barriers, providing an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. persons and protection of intellectual property rights. The term “trade barriers” does not have a fixed definition but is broadly defined by the USTR as government laws, regulations, policies or practices that either protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights. The report classifies foreign trade barriers into 10 different categories, including import policies, government procurement, export subsidies, lack of intellectual property protections and service/investment barriers. Continue Reading USTR Releases 2018 National Trade Estimate Report on Foreign Trade Barriers

The Office of the U.S. Trade Representative has released the Trump administration’s Trade Policy Agenda and Annual Report detailing how the administration “is promoting free, fair, and reciprocal trade and strongly enforcing U.S. trade laws.” USTR Robert Lighthizer, in releasing the report, stated that, “President Trump has launched a new era in American trade policy. His agenda is driven by a pragmatic determination to use the leverage available to the world’s largest economy to obtain fairer treatment for American workers.”

The policy rests on these five major pillars:

  • Adopting Trade Policies that Support Our National Security
  • Strengthening the U.S. Economy
  • Negotiating Better Trade Deals
  • Aggressively Enforcing U.S. Trade Laws and U.S. Rights under Existing Agreements
  • Reforming the Multilateral Trading System

The report adheres closely to past statements and well-known positions of President Trump’s trade team. According to Lighthizer, “President Trump is keeping his promises to the American people on trade, from withdrawing the United States from the flawed Trans-Pacific Partnership, to renegotiating NAFTA, to strongly enforcing U.S. trade laws. We are already seeing the results of President Trump’s agenda pay off for American workers, farmers, ranchers, and businesses.”

Of note in this voluminous report are these planned policy actions and activities:

  • Trade Agreements – The United States will continue to renegotiate the North American Free Trade Agreement and amend the Korea-U.S. Free Trade Agreement. The Trump administration will prepare for a potential bilateral agreement with the United Kingdom once the UK leaves the European Union. It will also pursue other bilateral agreements in the Indo-Pacific and African regions. The administration’s primary goals in NAFTA negotiations are to modernize provisions and to rebalance NAFTA for fair, reciprocal trade. The goals for KORUS are also to establish a more balanced trade relationship and to eliminate non-tariff barriers to exports of U.S.-made motor vehicles and motor vehicle parts.
  • Enforcing/Defending U.S. Trade Laws – The report states that the Trump administration will continue to “use all tools available” to combat unfair trade, and that there are “no successful trade agreements without enforcement.” The report highlights, but provides little new information or insight into, many of the trade actions undertaken in 2017 (i.e., trade actions under Sections 201, 232 and 301 of the Trade Act of 1974) and ongoing antidumping and countervailing duty investigations.
  • China – Several sections of the report discuss China and state that the scope of its economy means that “its economic practices increasingly affect the United States and the overall global economic and trade system.” It notes, however, that despite China’s WTO membership, the country is “moving further away from market principles” and as a result the United States “will resist efforts by China – or any other country – to hide behind international bureaucracies in an effort to hinder the ability of the United States to take robust actions, when necessary, in response to unfair trade practices abroad.”
  • World Trade Organization – The administration will work with all WTO members “who share the U.S. goal of using the organization to create rules that will lead to more efficient markets, more trade and greater wealth for our citizens.” However, the report notes that the United States is “concerned that the WTO is not operating as the contracting parties envisioned and, as a result, is undermining America’s ability to act in its national interest.”

A fact sheet on the report can be viewed here. Congress requires the USTR to submit the President’s Trade Policy Agenda and Annual Report by March 1 each year.

President Trump and several Cabinet members hosted a meeting with congressional Republicans and Democrats on February 13, 2018 at the White House to discuss possible trade remedies in the Section 232 steel and aluminum investigations. The purpose of a Section 232 investigation is to determine the effect of imports on the national security of the United States, and the president stated that his administration is reviewing the final Department of Commerce reports submitted last month and considering all options. He told those attending that quotas and tariffs are options on the table.

In opening the discussions, President Trump stated that while he wants to keep prices down, he also wishes to “make sure that we have a steel industry and aluminum industry, and we do need that for national defense. If we ever have a conflict, we don’t want to be buying the steel from a country that we’re fighting because somehow that doesn’t work very well.” Several senators urged caution, however, including Senator Roy Blunt, who said, “we do need to be careful here that we don’t start a reciprocal battle on tariffs” because the United States not only makes aluminum and steel but also must buy and import these products to satisfy domestic demand. Others cautioned President Trump on the issue of jobs, noting that with so many items manufactured in the United States using steel and aluminum, import tariffs could actually result in a net job loss. In response, the president stated, “In one case, you’re going to create jobs. You may have a higher price or maybe a little bit higher, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs; it’s going to be made in China and other places.”

Senator Pat Toomey cautioned the president to proceed cautiously under Section 232 for national security reasons, arguing that U.S. defense needs account for only about 3 percent of domestic steel consumption. “So I think it’s implausible to believe that we’re not able to meet the needs of our defense industry,” he said, indicating that invoking national security concerns could be difficult to support and invite retaliation. Others urged caution in the scope of any enforcement action resulting from the investigations. Commerce Secretary Ross noted that Section 232 remedies do not require “the same tariff on every single country. It doesn’t have to mean the same tariff on every single product. It can be applied in a much more surgical way. And we presented the President with a range of alternatives that goes from a big tariff on everything from everywhere, to very selective tariffs from a very selective group of countries.”

The meeting also included brief comments by multiple participants on other trade matters, including South Korea (the KORUS FTA is a “very bad trade deal”), China (is “violating the international rules, stealing our intellectual property, overproducing steel products”), Canada (has “treated us very, very unfairly when it comes to lumber and timber”), and NAFTA (the renegotiations are “making real headway” but still working through a number of issues).

A full transcript of the meeting is available on the White House website: Remarks by President Trump, Members of Congress, and Members of the Cabinet in Meeting on Trade.

On the eve of the State of the Union, 35 Republican Senators sent a letter to President Trump reaffirming their belief in the benefits of the North American Free Trade Agreement (NAFTA). They urged the president to keep NAFTA in place but supported efforts to modernize the trade agreement. Overall, the letter extols the value of the existing agreement and is seen by many as a reminder that many Republicans and business leaders remain concerned over threats to withdraw from NAFTA.

While the sixth round of negotiations among trade officials from Canada, Mexico and the United States proceeded in Montreal last week on the North American Free Trade Agreement (NAFTA), the nonpartisan Business Roundtable released an economic analysis concluding that termination of NAFTA would have a significant net negative impact on the U.S. economy and employment. The analysis, prepared by Trade Partnership Worldwide, LLC, quantifies the harmful impacts of NAFTA withdrawal by examining how the re-imposition of “most-favored-nation” tariffs on U.S. trade with Mexico and Canada would affect the U.S. economy. The analysis also shows that withdrawing from NAFTA would:

  • Result in the net loss of 1.8 million U.S. jobs within the first year.
  • Reduce U.S. exports to Canada and Mexico by 17.4 percent each and lower U.S. companies’ global exports by 2.5 percent.
  • Diminish U.S. households’ purchasing power by almost $654 per household due to higher prices and lower wages caused by increased tariffs.
  • Shift economic activity away from North America and toward U.S. competitors, including China, which would experience a GDP increase of 0.2 percent and a net employment increase of 2 million jobs.

Overall, the analysis concludes that termination would re-impose high tariff costs on U.S. exports and imports, which would reduce the competitiveness of U.S. businesses both domestically and abroad. U.S. exports would drop, both to Canada and Mexico and globally, as U.S. output becomes more expensive, making U.S. businesses less competitive in these markets.

Upon the conclusion of the fifth round of renegotiations of the North American Free Trade Agreement (NAFTA), U.S. Trade Representative Robert Lighthizer issued the following statement:

“While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result. A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

The parties have agreed to hold the sixth round of negotiations January 23-28, 2018 in Montréal, Canada. In the meantime, negotiators will continue to work in intersessional meetings in Washington, D.C. throughout mid-December and will report back to the chief negotiators on the progress achieved.