Trade Remedy/Enforcement

President Donald Trump and Chairman Kim Jong Un issued a joint statement at the conclusion of their summit in Singapore in which both countries committed to further negotiations and future cooperation for the development of new relations between the United States and the Democratic People’s Republic of Korea. In the statement, Trump committed “to provide security guarantees” to North Korea, and Kim reaffirmed “his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.”

In a post-summit press conference, Trump stated that his meeting with Kim “was honest, direct, and productive … Today is the beginning of an arduous process. Our eyes are wide open, but peace is always worth the effort, especially in this case.” He added that all U.S. sanctions toward North Korea will remain in effect until “the nukes are no longer a factor.”

On June 7, 2018, the U.S. Department of Commerce announced that Zhongxing Telecommunications Equipment Corporation of Shenzhen, China (ZTE Corporation) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (ZTE Kangxun) (collectively, ZTE) had agreed to additional penalties and compliance measures to replace Commerce’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement. On April 15, 2018, BIS activated the suspended denial order against ZTE after learning that ZTE had not disciplined numerous employees responsible for the violations that led to the settlement agreement. Instead, ZTE rewarded those employees with bonuses. With the imposition of the denial order by BIS, ZTE announced in early May 2018 that all major operating activities of the company had ceased as a result of the denial order. On May 13, 2018, President Trump, against the advice of U.S. law enforcement and intelligence officials, announced that “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!” Continue Reading Department of Commerce Announces Sanctions Deal with China’s ZTE, but Will Congress Block It?

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.

In wide-ranging remarks during a business session with U.S. governors, President Trump yesterday repeatedly broached the topic of international trade. The president reiterated his commitment to working on fair and reciprocal trade deals and highlighted specific trade issues:

  • Mexico – “You know, with Mexico … we probably lose $130 billion a year…. And, at some point, we have to get stronger and smarter, because we cannot continue to lose that kind of money with one country.”
  • Canada – “We lose a lot with Canada. People don’t know it. Canada is very smooth. They have you believe that it’s wonderful. And it is — for them…. So we have to start showing that we know what we’re doing.”
  • WTO – “World Trade Organization – a catastrophe…. makes it almost impossible for us to do good business. We lose the cases, we don’t have the judges. We have a minority of judges.”
  • China – “[W]e probably lost $504 billion, last year, on trade…. Other Presidents should have solved this problem long before I got here. And they’ve been talking for 25 years. And you know what happened? Nothing.”
  • Steel – “I want to bring the steel industry back into our country. If that takes tariffs, let them take tariffs, okay? Maybe it will cost a little bit more, but we’ll have jobs. Let it take tariffs.”
  • Aluminum – “I want to bring aluminum back into our country. These plants are all closing or closed.”
  • Section 232 Trade Actions – “Recently, we put a tariff on washing machines because we were getting killed ….. That was two months ago. You have to see the activity on new plants being built for washing machines and for solar panels. We had 32 solar-panel plants. Of the 32, 30 were closed, and 2 were on life-to-life resuscitation. They were dead. Now they’re talking about opening up many of them — reopening plants that have been closed for a long time.”

In closing comments on trade, President Trump stated that “we’re going to straighten it out. We’ve already started. I mean, the first year is just — we laid the seeds.”

The Department of Commerce’s Bureau of Industry and Security (BIS) has sanctioned 21 entities determined by the U.S. government to be acting contrary to the national security or foreign policy interests of the United States. BIS has taken this action to ensure the efficacy of existing sanctions on the Russian Federation (Russia) for violating international law and fueling the conflict in eastern Ukraine. These entities have been placed on the BIS Entity List, which identifies entities and other persons that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items. Engaging in transactions with any of these entities now entails additional export licensing requirements and approval from BIS. The license review policy for each listed entity is identified in the License Review Policy column on the Entity List.

As discussed during our recent “Trump and Trade: One Year Later” webinar, 2018 will not only be a year of monitoring continued trade enforcement activities by the Trump administration, but also a year to monitor how affected countries and industries will react to such trade actions. Yesterday’s update noted WTO action by various countries regarding the recent Section 201 global safeguard decisions, and now three Canadian companies that manufacture crystalline silicon photovoltaic cells (i.e., solar cells) have filed a complaint with the U.S. Court of International Trade against the United States and the safeguard measures in the recent Section 201 solar cell cases. The Canadian plaintiffs have claimed that the import tariffs will “inflict severe and irreversible injury” on them when the U.S. International Trade Commission’s injury finding determined that imports from Canada “do not meet the prerequisites for including a NAFTA country in a global safeguard action,” and that imports from Canada do not constitute a “substantial share” of total imports or “contribute importantly to the serious injury, or threat thereof” caused by U.S. solar cell imports. The complaint specifically claims that provisions of the NAFTA Implementation Act bar the president from taking safeguard actions against a NAFTA country. The plaintiffs seek to enjoin the United States from implementing or enforcing the safeguard measures. The case is Silfab Solar Inc., et al. v. United States, et al., case number, 1:18-cv-00023, in the U.S. Court of International Trade.

As required by Section 241 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) (see our Trump and Trade Update dated 10/30/17), the Treasury Department has submitted to Congress a detailed and classified report identifying senior Russian political figures, Russian oligarchs and Russian parastatal entities (companies in which Russian state ownership is at least 25 percent and that had revenues of $2 billion or more). While the list of parastatal entities remains classified, Treasury has released an unclassified report on the list of senior Russian political figures and oligarchs. This unclassified list includes virtually every senior member of Vladimir Putin’s inner circle and nearly 100 Russian billionaires; the classified list reportedly details the relationships these individuals have with President Putin and any information on their involvement in corrupt activities. This report is not a sanctions list; the inclusion of individuals or entities in any portion of the report does not impose sanctions on those individuals or entities, nor does it create any other restrictions, prohibitions or limitations on dealings with such persons by either U.S. or foreign persons. However, many of those listed are already sanctioned for their alleged involvement in the illegal annexation of the Crimea region of Ukraine, malicious cyber incursions into the United States, and interference in the 2016 U.S. presidential election. The Treasury Department stated that it will rely on all available sources of information, including the classified version of this report, when making determinations about additional sanctions in the future. Putin responded to the release of the list by calling it “nonsense” that would “reduce our bilateral relationship to zero.”

In a related move, the State Department announced that the president would postpone any sanctions on persons or entities engaging in any significant transactions involving the Russian defense or intelligence sectors pursuant to Section 231 of CAATSA. Under CAATSA, President Trump is required to impose at least five sanctions on persons or entities that may be engaging in such transactions; however, he is allowed to postpone these sanctions. A spokesperson for the State Department indicated that no actions would be taken at this time as the law was already “serving as a deterrent.”

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 14 individuals and entities for sanctions arising from serious human rights abuses and censorship in Iran and support of designated Iranian weapons proliferators. According to Treasury Secretary Steven T. Mnuchin, “The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran’s judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government. We are also targeting Iran’s ballistic missile program and destabilizing activities, which it continues to prioritize over the economic well-being of the Iranian people.”

While the majority of these persons and entities are Iranian, several are located in Malaysia and China and have been sanctioned for their support of the Iranian regime. The full list is available on Treasury’s website. This decision is not formally related to an expected Trump administration announcement later today regarding an extension of the relaxation of sanctions on Iran under the Joint Comprehensive Plan of Action (i.e., JCPOA or Iran nuclear agreement) but indicates that the United States will continue to sanction Iran in non-nuclear areas outside the scope of the JCPOA.

The Trade Policy Review Body of the World Trade Organization (WTO) has released its annual report, Overview of Developments in the International Trading Environment, that covers the implementation of trade-related measures across the WTO membership in the last 12 months (from mid-October 2016 to mid-October 2017). WTO Director-General Roberto Azevêdo stated that “the Report aims to offer a horizontal, objective and fact-based view of developments across the trade landscape” and is not intended to be indicative of any WTO member state’s compliance with WTO trade measures.

The report shows that 108 new trade-restrictive measures were established during the past year, while WTO member states implemented 128 new measures that facilitate trade. Import-facilitating measures implemented during the annual review period in the context of the expanded Information Technology Agreement amounted to roughly $385 billion. There was also a slight deceleration both in the initiation of trade remedy investigations and in the termination of measures compared to the previous annual overview. Anti-dumping measures continue to make up the bulk (83 percent) of all trade remedy matters. The main sectors affected by trade remedy investigations during the review period were electrical machinery and related parts, iron and steel, articles of iron and steel, and wood and articles of wood.

The report further indicates that international trade flows rebounded strongly during the 2016-2017 review period after a sharp slowdown in the previous reporting period. World merchandise trade volume growth in the first half of 2017 was 4.2 percent, well above the 1.3 percent increase recorded for the whole of 2016. World real gross domestic product growth at market exchange rates is projected to pick up to 2.8 percent in 2017 from 2.3 percent in 2016. The WTO’s latest trade forecast has world merchandise trade volume increasing by 3.6 percent in 2017, with growth placed within an expected range from 3.2 percent to 3.9 percent, which reflects past forecast performance. The pace of expansion should moderate to 3.2 percent in 2018, set within a wider range from 1.4 percent to 4.4 percent, which reflects the greater uncertainty of longer-term forecasts.

As previously detailed in our September 26 Trump and Trade Update, the U.S. International Trade Commission (ITC) unanimously determined that crystalline silicon photovoltaic (CSPV) cells (or solar cells) were being imported into the United States in such quantities that they were causing substantial injury to the U.S. solar equipment industry. On October 31, 2017, the ITC issued its remedy recommendations to address the injury and to facilitate the efforts of the domestic industry to “make a positive adjustment to import competition.”

The recommendations varied among the four ITC commissioners but included quantitative import restrictions and tariff rate quotas (TRQs). Three commissioners recommended TRQs, while the fourth suggested quantitative restrictions only. The commissioners further recommended international negotiations “to address the underlying cause of the increase in imports of CSPV products and alleviate the serious injury thereof.” Commissioner Broadbent found that the main cause of the increase in imports was global oversupply of solar cells from China and specifically recommended negotiations with that country. Others acknowledged this global oversupply but also recommended that imports from certain countries (including Canada and other free trade agreement countries) be excluded because they were not the root cause of injury to the U.S. solar cell industry. Suniva, the primary petitioner in the case, which had requested a price floor, called the recommendations “disappointing” and urged the president to reject the ITC’s recommendations and follow the recommendations of the domestic industry.

The ITC will now forward its report, which will contain the injury determination, remedy recommendations, certain additional findings, and the basis for them, to President Trump by November 13, 2017. The president will make the final decision on whether to provide relief to the U.S. solar cell industry and on the type and amount of any relief. The Office of the U.S. Trade Representative has issued a formal notice requesting comments on the ITC’s injury determination and remedy recommendations. Any public comments are due by November 20, 2017; the USTR will also hold a public hearing on December 6, 2017. The president will have until January 12, 2018 to make a final decision on any remedy.