POLITICO's Morning Trade, presented by Electronic Frontier Foundation: Democrats to Trump on NAFTA: Hit me with your best shot — Videgaray: NAFTA will remain a trilateral deal — Mnuchin’s Ex-Im pledge

By Adam Behsudi | 05/19/2017 10:00 AM EDT

With help from Doug Palmer, Megan Cassella, Aaron Lorenzo and Catherine Boudreau

DEMOCRATS TO TRUMP ON NAFTA: HIT ME WITH YOUR BEST SHOT: The news that the U.S. will formally reopen NAFTA for negotiation drew little fanfare from congressional Democrats who see the trade deal redo as a chance for President Donald Trump to prove himself as a great negotiator.

"Donald Trump ran for president as the best negotiator on the face of the Earth," Rep. Dan Kildee, a Michigan Democrat whose district includes the hard-hit city of Flint, said at a press conference Thursday with other critics of U.S. trade agreements. "Here's his chance to prove it - to have his first moment of success as president of the United States."

The lawmakers said they feared Trump would make only modest changes to NAFTA - as his bare-bones notification letter to Congress seems to indicate - after blasting the agreement as an economic disaster throughout last year's presidential campaign.

But if Trump wants to use a NAFTA 2.0 to achieve one of his main goals - reducing the trade deficit - it would require actions like strengthening labor and environment rules, eliminating the controversial investor protections, eliminating a ban on "Buy America" procurement requirements, introducing currency rules and strengthening rules of origin, said Lori Wallach, director of Public Citizen's Global Trade Watch.

"This is an agenda that is as appealing to the Republicans in Congress as eating ground glass," Wallach said. "The administration is going to have to figure out the politics of whether they actually want an agreement that satisfies what they pledged to American voters and that can get through Congress. If so, they're going to be stuck ... having to do a lot of things that Democrats in Congress have been calling for for decades." Doug Palmer has the full story here.

IT'S FRIDAY, MAY 18! Welcome to Morning Trade, where your host is glad it's finally Friday. Got anything to help us close out the week? Let me know: abehsudi@politico.com or @abehsudi.

DELAURO PRESSES TRUMP TO DIVEST MEXICO, CANADA ASSETS: Rep. Rosa DeLauro pressed Trump to sell off company assets in Canada and Mexico as the United States prepares to renegotiate NAFTA. "I am deeply concerned about President Trump's conflicts of interest," the Connecticut Democrat said. "The Trump Organization has 14 Canadian and 2 Mexico investments. If the president will not divest of his business holdings or release his tax returns, we cannot know in whose interest these talks are being conducted." The White House did not respond to a request for comment.

VIDEGARAY: NAFTA WILL REMAIN A TRILATERAL DEAL: Mexican Foreign Minister Luis Videgaray said NAFTA is a trilateral agreement "and the conversations need to be trilateral in nature."

"This is our position," he said in a joint press conference Thursday with Secretary of State Rex Tillerson. "And what we have heard from the United States government, especially from Wilbur Ross, the secretary of trade, is that the United States does not have a preference in one sense or another. We do have a preference. The agreement is trilateral and should continue to be a trilateral platform."

Videgaray acknowledged there will be bilateral issues in the course of renegotiating the deal, but the overall framework is trilateral and "is the most suitable and the most convenient for the peoples of Mexico, Canada and the United States."

Mexico ready to go: Videgaray was upbeat about the news of the notification and said Mexico had been informed of its progress "at each and every step of the process."

"It's good news for Mexico and we are willing and we are prepared to start the constructive negotiation once the 90 days ... go by," he said. "This will be mid-August, and we're ready to go. So this is - what happened [Thursday], what the USTR sent to Congress, is something that is a significant net positive for the Mexico-U.S. relationship, and we will build upon that."

** A message from Electronic Frontier Foundation: Trade experts agree that without five simple fixes, Americans will continue to reject new trade deals. Find out how to stop the next trade deal going the way of ACTA and TPP, at https://eff.org/trade. **

FARMERS TO TRUMP: DON'T BURN DOWN THE BARN ON NAFTA: The U.S. agriculture industry's message to the Trump administration, after it formally notified Congress on Thursday of its intent to start trade talks with Canada and Mexico, was a resounding "do no harm" to the benefits farmers and ranchers have reaped as a result of the Clinton-era free trade agreement. Organizations representing grain, produce, dairy and livestock farmers said NAFTA is largely working for their industries, especially the integrated supply chains that allow goods to move freely across borders. Since NAFTA's implementation in 1994, U.S. agricultural exports to Canada and Mexico have more than quadrupled, growing from $8.9 billion in 1993 to $38.6 billion in 2015, USDA data shows.

U.S. Trade Representative Robert Lighthizer said NAFTA can be modernized to include provisions that address intellectual property rights, labor and environmental standards and sanitary and phytosanitary measures - which countries around the world employ to protect people, animals and plants from diseases, pests and contaminants but which are also often used as trade barriers. The dairy and produce industry said tackling SPS issues is a top priority.

The U.S. agriculture sector may have the most to lose should NAFTA negotiations go south, and farmers and ranchers seem to be cautiously optimistic that the Trump administration understands that. Secretary Perdue, in a statement, said he is confident the effort will result in a better deal for farmers, ranchers and foresters: "When the rules are fair and the playing field is level, U.S. agriculture will succeed and lead the world."

MNUCHIN'S EX-IM PLEDGE: Treasury Secretary Steven Mnuchin left little doubt on Thursday about the administration's support for the Export-Import Bank, responding to a line of questioning from Sen. Heidi Heitkamp (D-N.D.) that he believes the export credit agency is a critical tool.

"I've actually spent a lot of time looking at this, and I am concerned that without more members on it, they can only make loans up to $10 million," Mnuchin said at a Senate Banking Committee hearing. "I think that the board should obviously look at credit risk and everything else, but the Ex-Im Bank is an important tool, and the president has proposed adding new members."

Mnuchin's support for the bank should give at least some comfort to the agency's supporters, who have been concerned by Trump's varied stances toward it and are alarmed by his decision to nominate former Rep. Scott Garrett to Ex-Im's top slot. Heitkamp - who has asked the administration to reconsider giving the chairmanship to Garrett, an outspoken opponent of the agency - said during the hearing that she and others are "deeply concerned" his confirmation would mean some of the larger, lucrative deals stuck in Ex-Im's pipeline "will not even see the light of day."

"The head of the bank has the ability to set the agenda," Heitkamp said. "I quite honestly don't care if Garrett is on the board, but I do care if he's setting the agenda."

Mnuchin responded that he could not comment on Garrett, but he reassured Heitkamp that the agency would continue to function as normal once the nominees are confirmed. "I can assure you that the president is interested in making sure that the Ex-Im Bank can lend," he said. "We've had lots of businesspeople come in and talk about this, and it is something that [National Economic Council Director Gary] Cohn and I are deeply involved in."

MNUCHIN TO TALK TAX AT SENATE FINANCE NEXT WEEK: Mnuchin heads to the Senate Finance Committee on May 25 to talk tax policy and budget proposals. Mnuchin and Cohn recently released an outline of tax reform ideas from Trump, a list that included a 15 percent tax rate for all businesses, but didn't include many specifics.

"As Congress and the administration continue to work to unite behind policies that will remake the tax code to better meet the challenges of today's economy and get our nation on a better growth path, it's imperative we have a clear understanding of how Washington intends to achieve this goal," Senate Finance Chairman Orrin Hatch (R-Utah) said in a statement announcing the hearing.

Mnuchin and Cohn met with Hatch and other lawmakers throughout the day Wednesday, continuing a series of meetings as lawmakers and the White House work to find common ground on tax reform.

The most publicly fleshed-out tax reform proposal has come from House Ways and Means Committee Republicans. One of them, Rep. Peter Roskam (R-Ill.), chairman of the House Ways and Means Tax Policy Subcommittee, said House and Senate Republicans and White House officials want to roll out a single tax reform bill instead of multiple versions.

TALKS ON FISHERIES HEAT UP AT THE WTO: The World Trade Organization is deepening its negotiations surrounding fisheries subsidies with the goal of reaching a concrete agreement by the ministerial conference at year's end, but members are still at odds on a number of fundamental questions. The latest: how lenient the rules should be for poorer and developing countries.

The subject dominated a series of meetings this week, which wrapped up Thursday, with a Geneva source saying the predominant view is that developing and least-developed countries should be granted special and differential treatment that enables them to work their way up to meeting implementing commitments aimed at reducing fisheries subsidies.

"No member has come out to say that we do not want any disciplines on fisheries subsidies," Wayne McCook, Jamaica's ambassador to the WTO and chairman of the Negotiating Group on Rules, said at the meeting. "This discussion had a lot of focus on special and differential treatment as an enabler and not as an attempt to avoid responsibility."

The United States, for its part, took a relatively strong stance, noting that it was still under consultations with its new leadership but that it did not think any major developing nation that was a large fisher should have exemptions or lesser obligations.

Putting in their two cents: Five different fisheries proposals are now on the table - the European Union and New Zealand have each put out a plan, as have the African, Caribbean and Pacific group of states, the Least Developed Countries group and a Latin American group. Indonesia also said it plans to release a proposal "in the near future." Each of those members said they would refine their proposals following this week's meetings in preparation for the next round, slated for June 14-16.

TRADE REMEDY CORNER - COMMERCE LAUNCHES AIRCRAFT INVESTIGATION: The Commerce Department initiated new anti-dumping and countervailing duty investigations into future imports of 100- to 150-seat civil aircraft from Canada, setting in motion what could be one of the largest trade remedy cases in recent years.

Boeing is petitioning for the duties with the argument that imports of the new C Series aircraft manufactured by Canada's Bombardier threatens to injure Boeing's 737 production. The U.S. aerospace giant accuses Bombardier of marketing its new jets to Delta far below the price of production and says the Montreal-based company benefits from unfair government subsidies.

Bombardier argued at an initial U.S. International Trade Commission conference Thursday that Boeing's petition is "unprecedented in its overreach." The company argues that its new aircraft is smaller than Boeing's comparable product, the 737 Max 7, and is not a direct competitor. Moreover, Bombardier says Boeing has not suffered any lost sales or revenues and argues that the petition is an attempt to protect its smaller-sized 737 aircraft.

Boeing is alleging that Bombardier's dumping margins should be 79.8 percent and has calculated its subsidy rates at 79.4 percent. The ITC is expected to make its preliminary injury determination on June 12. If the ITC makes an injury finding, Commerce is expected to issue preliminary countervailing duty rates by July 21 and preliminary anti-dumping duty rates on Oct. 4, according to a Commerce fact sheet.

TURKISH STEEL GROUP OUTRAGED AT 'SCANDALOUS' DUTIES: The Turkish Steel Exporters Association called a decision by Commerce this week to hit imports of Turkish and Japanese steel rebar with anti-dumping and countervailing duties "scandalous and unlawful."

"It is clear that the purpose of this investigation was not to determine dumping or subsidization, but to block imports at all costs," the group's chairman, Namik Ekinci, said in a statement. Commerce "did everything possible to prevent Turkish exporters from responding to requests, including sending extremely detailed questionnaires with impossibly short or truncated deadlines."

Commerce on Tuesday announced final anti-dumping duties on Turkish imports ranging from 5.39 percent to 8.17 percent and Japanese imports ranging from 206.43 percent to 209.46 percent. Turkish imports were also hit with CVDs of 16.21 percent. The ITC is scheduled to make a final injury determination by June 29.

TRUMP PICKS FOREIGN COMMERCIAL CHIEF: Trump has nominated Elizabeth Erin Walsh, a former State Department official and Goldman Sachs executive, to lead the Commerce Department's U.S. and Foreign Commercial Service, the White House announced Thursday night. The agency oversees a diplomatic corps stationed in U.S. and foreign cities that work to promote U.S. exports abroad.

Walsh served as Trump's associate director for personnel management where she managed appointments for State and USAID. She also served as the head of the State Department landing team during the transition. At State, Walsh was senior adviser in the Bureau of Near Eastern Affairs and also had stints in the U.S. mission to the United Nations and the Department of Energy. She also worked for Goldman Sachs and Cisco.

INTERNATIONAL OVERNIGHT

- In the wake of Boeing's trade case against Bombardier, Canadian Foreign Minister Chrystia Freeland said Canada is reviewing military procurement that relates to Boeing, the government said.

- APEC secretariat executive director Alan Bollard sees an upside for countries still in the TPP, Bloomberg reports.

- China's ambassador to the U.K. describes in the Financial Times how the country's belt and road initiative will lead to inclusive development.

THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: abehsudi@politico.com and @abehsudi; mcassella@politico.com and @mmcassella; dpalmer@politico.com and @tradereporter; and jlauinger@politico.com and @jmlauinger. You can also follow @POLITICOPro and @Morning_Trade.

** A message from Electronic Frontier Foundation: Public opposition to trade deals sunk ACTA and TPP. What can restore confidence? The Electronic Frontier Foundation asked trade experts what could fix future trade agreements. They came up with: Publish the proposals. Publish the texts. Have a dedicated transparency officer. Open up proposals to notice and comments and a public hearing process. And open up Trade Advisory Committees to be more inclusive. Read more about how to fix our trade agreements at https://eff.org/trade, or contact EFF's team at trade@eff.org to discuss these plans in more depth. **

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