U.S. Trade Policy Agenda in 2019 – USMCA and China

By Herb Cochran

The USTR Annual Report says a successful 2019 will involve getting USMCA aepproved by Congress and reaching a deal with China that satisfies U.S. complaints. The EU, Japan, and UK are next in line.

“President Trump’s trade agenda rests on principles as old as the Republic itself. President Washington, in his Farewell Address, warned his fellow citizens that when it comes to trade negotiations,’There can be no greater error than to expect, or calculate upon, real favors from nation to nation.’ He also advised that trade agreements should be ‘temporary,’ and ‘abandoned or varied, as experience and circumstances shall dictate.’ These statements laid the groundwork for an American trade policy that is pragmatic, flexible, and steadfastly focused on our national interest.”

“For most of our history, Americans generally followed President Washington’s advice. Even afterjoining the General Agreement on Tariffs and Trade, not only did the United States retain its sovereign power to act in defense of its national interest – it repeatedly undertook such actions. The result was a trade policy capable of maintaining popular support at home, while promoting more efficient markets around the world.

“More recently, however, the United States has backed away from these successful principles. Instead of asserting its sovereign authority to act in response to changing circumstances, the United States continued to passively adhere to outdated and under performing trade deals and allowed international bureaucracies to undermine U.S. interests. This has left U.S. workers and businesses at a disadvantage in global markets, as unfair trading practices flourish in the absence of a strong U.S. response. Countries benefiting from market-distorting practices had no incentive to seriously engage with the United States. Wages for many Americans came under pressure from threats of outsourcing.”

USTR’s report portrays the U.S. as the victim of an increasingly unfair international trading system. USTR acknowledged that the U.S. had benefited for decades but contends that by the time Trump took office, “significant flaws in that system were hurting American workers and businesses.”

USMCA (Mexico and Canada). “USTR has set as its primary objective for these renegotiations to: ‘Improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries.’ To accomplish this, we are focusing our efforts on tightening rules of origin for products imported into the United States from Canada and Mexico for which we have significant trade imbalances, like automobiles and automotive parts. Our proposals seek to strengthen the rules of origin for such products, and make them more enforceable through stricter tracing requirements, to ensure that they contain considerable regional, and U.S specific, content.

“We are also determined to avoid provisions that will encourage outsourcing. If a company decides to build a factory in Mexico – and it has legitimate, market based reasons for doing so – then it should act as the market dictates. But we reject the notion that the U.S. Government should use NAFTA – or any other trade deal – to encourage outsourcing. The point of a trade deal is to create increased opportunities for market efficiency, not to encourage foreign investments that are otherwise not viable.

“It should also be noted that we have made serious proposals in the labor and environment chapters that will help level the playing field for American workers and businesses and raise standards in these areas. For both chapters, we are insisting that all of the provisions be subject to the same dispute settlement mechanism that applies to other obligations in the agreement.

“If we succeed in achieving these core objectives, a renegotiated NAFTA would certainly prove a fairer deal for all Americans. This includes those manufacturing workers across the country whose hold on their jobs has been tenuous due to a flawed trade agreement.”

China USTR described the U.S. as being frustrated by the World Trade Organization’s inability to rein in Beijing’s unfair trading practices. It also pointedly showed the administration has been exasperated by its inability to find allies who are eager to help confront the Asian economic power.

Korea. “President Trump directed USTR to address problems with the Korea-U.S. Trade Agreement, as well as to seek fairer, more reciprocal trade with Korea. Accordingly, in July 2017. Ambassador Lighthizer called for a Special Session of the KORUS Joint Committee to initiate the process of seeking modifications and amendments to the agreement. In October 2017, Korea agreed to pursue discussions on modifications and amendments, and completed necessary domestic procedures in December in order to initiate such discussions.

“USTR remains engaged in ongoing negotiations with Korea to improve KORUS in order to deliver more reciprocal outcomes for U.S. workers, exporters, and businesses. The Administration will continue to vigorously pursue U.S. objectives with the Korean government on an expedited timetable.”

EU, Japan, UK. Next in line for attention are U.S. Trade Agreements with the EU, Japan, and the UK, which have been notified to the U.S. Congress under the requirements of the “Trade Promotion Authority.”

Vietnam and ASEAN. “The United States continued to work with the Association of Southeast Asian Nations (ASEAN) under the auspices of the ASEAN-United States Trade and Investment Framework Arrangement to further enhance trade and investment ties between the United States and ASEAN, which collectively represents our fourth largest trading partner, to create fairer and more reciprocal trade. In 2018, the United States launched cooperation with ASEAN on agriculture biotechnology; proposed new areas of cooperation on electronic payment services and automotive standards; and continued work on establishing common approaches to digital trade, including encouraging of free flow of data and discouraging localization requirements. Working with Singapore under the Third Country Training Program, the United States also provided training on digital trade and implementation of the WTO Trade Facilitation Agreement in 2018.”

Since ASEAN collectively represents the fourth largest trading partner of the U.S., and Vietnam represents a substantial part of U.S. trade with ASEAN, it might be useful to review the USMCA, and the U.S.-China Trade Agreement, when and if announced, to prepare for trade agreement negotiations with the U.S. in 2020 or 2021.

Source:

https://ustr.gov/sites/default/files/files/Press/Reports/2018/AR/2018%20Annual%20Report%20I.pdf

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