POLITICO's Morning Trade, sponsored by HSBC: Trump to sign executive order on ‘Buy American, Hire American’ — Pence, in Seoul, criticizes South Korean trade deal — Ross leans into self-initiating trade cases

By Megan Cassella | 04/18/2017 10:00 AM EDT

With help from Doug Palmer and Adam Behsudi

TRUMP TO SIGN EXECUTIVE ORDER ON 'BUY AMERICAN, HIRE AMERICAN': President Donald Trump will act on one of his signature campaign promises today when he signs an executive order aimed at promoting "Buy American, Hire American" practices. The order, which Trump will sign in Wisconsin this afternoon, will direct Commerce Secretary Wilbur Ross to lead an investigation into government procurement practices at federal agencies, with a focus on rooting out weak monitoring, enforcement and compliance efforts. It will also task four agencies with re-examining all programs under which workers enter the United States from abroad.

The executive order also directs the Commerce Department and the Office of the U.S. Trade Representative to "comprehensively assess" the procurement provisions of all free-trade agreements as well as the World Trade Organization's Government Procurement Agreement. The goal, a senior administration official said, is to "determine which deals may actually be working for America and which may not."

"If it turns out America is a net loser because of those free trade agreement waivers," the official said, "these waivers may be promptly renegotiated or revoked."

"It is simply unfair for government contracts to be awarded to low bidders that use dumped or injuriously subsidized, foreign-source content to push out domestic producers," the official continued. "This portion of the executive order is an innovative step to stop the foreign cheaters from using taxpayer funds to steal our jobs, to shutter our steel mills and offshore our factories."

The "Hire American" side of things will focus primarily on guest worker visa programs - and, namely, the H-1B program, which allows companies to bring specialized foreign workers to the U.S. on a temporary basis. The order proposes amending the H-1B program to favor higher-skilled and higher-paid workers and directs the departments of Labor, Justice, Homeland Security and State to examine their various programs and explore various ways to crack down on "fraud and abuse." Read more about the executive order from yours truly here.

IT'S TUESDAY, APRIL 18! Welcome to Morning Trade, where your host is wondering who donned the bunny costume at the White House's Easter Egg Roll on Monday and whether he or she may be following Sean Spicer down a similarly illustrious career path. Any trade news, thoughts or tips out there? Let me know: mcassella@politico.com or @mmcassella.

MANUFACTURERS 'ENCOURAGED' BY TRUMP'S EO: Domestic manufacturing groups were quick to praise the executive order after news broke Monday night. The Alliance for American Manufacturing, a coalition comprised of leading manufacturing groups and the United Steelworkers, called the move "a step in the right direction" but noted that it was "just the first step."

"The true test will come as agencies review their existing procedures and recommend action to improve and apply Buy American laws," Scott Paul, AAM's president, said in a statement. "It should be the policy of our government to maximize the amount of American-made steel, iron, and manufactured goods bought with our hard-earned tax dollars. We're pleased the president agrees."

Broader reaction remains to be seen. But we know that the procurement review alone will earn Trump some unlikely allies on Capitol Hill: progressive Democrats who have been pushing Trump to suspend and renegotiate the procurement provisions of trade deals, as well as labor groups like the AFL-CIO, which recommended in December that any NAFTA rewrite should include the wholesale deletion of the procurement chapter that treats Canadian and Mexican goods as "American" for government purchasing decisions.

Likely less pleased by the move will be international trading partners, who say dictating procurement decisions for private companies violates international obligations under NAFTA and the WTO. Anticipating such a reaction, a senior administration official on Monday tamped down the idea that there would be retaliation.

"This is simply a red herring, given that virtually all of our trading partners embrace similar kinds of domestic preference procurement programs, and such programs are fully compliant with international trade law," the official said. "This argument also rings hollow given that the available evidence ... already indicates the U.S. is a big net loser in the global government procurement market."

** A message from HSBC: We've always served as a commercial bridge between nations, businesses and people. Our network covers around 70 countries and territories accounting for more than 90% of global GDP, trade and capital flows. This gives us a truly global perspective on global trade and investment. Read our insight at www.hsbc.com/made-for-trade **

PENCE, IN SEOUL, CRITICIZES SOUTH KOREAN TRADE DEAL: In some of his first direct comments on trade during his 10-day Asia trip, which began on Sunday, Vice President Mike Pence praised the U.S.-South Korea economic partnership but noted that the two countries "have to be honest about where our trade relationship is falling short."

"Our businesses continue to face too many barriers to entry, which tilts the playing field against American workers," Pence said at an event with about 100 U.S. and Korean business representatives early Tuesday morning - or late Monday evening, Washington time - according to a pool report. He added the countries need to "level that playing field," saying "we will work with you" as we "reform KORUS in the days ahead." In a tweet, Pence added: "Most concerning is the fact that the [U.S.'s] trade deficit with South Korea has more than doubled since KORUS came into effect."

Pence also praised South Korea's level of foreign direct investment in the United States as well as the scale of U.S. services exports to the country, the pool report said.

TURKEY'S DEPUTY PRIME MINISTER IN TOWN AFTER VOTE: Voters in Turkey on Sunday narrowly approved giving Turkish President Recep Tayyip Erdogan sweeping new powers in a referendum that European election monitors said was unfairly tilted in the government's direction. Fresh off that vote, Turkish Deputy Prime Minister for Economic and Financial Affairs Mehmet Simsek will discuss the outlook for his country's economy in an event on Thursday at the U.S. Chamber of Commerce.

Erdogan's increasingly authoritarian style has limited bilateral trade cooperation in recent years. Though then-President Barack Obama did visit Turkey to meet with then-Prime Minister Erdogan in 2009, and the two leaders established the U.S.-Turkey Framework for Strategic Economic and Commercial Cooperation aimed at substantially increasing trade and investment flows between the two countries. That was followed by then-Commerce Secretary Penny Pritzker's visit in 2014 to explore possible U.S. export opportunities.

The Chamber will also host Secretary of State Rex Tillerson and Saudi Minister of Commerce and Investment Majid Al-Qasabi on Wednesday as part of its U.S.-Saudi Arabia CEO Summit. Saudi Arabia was the 19th largest export market for the United States in 2016, while Turkey was the 29th.

ROSS LEANS INTO SELF-INITIATING TRADE CASES: Ross has spoken openly of his interest in self-initiating anti-dumping and countervailing duty cases at the Commerce Department to accelerate the process for industries that have been injured by unfairly traded imports. So far, no cases have been announced, but Ross has been talking like some are in the works.

In a blog posted Friday on the White House website, Ross said the department had "already begun the process of self-initiating trade cases, which speeds up the process of taking corrective action while allowing the Department of Commerce to shield American businesses from retaliation." A quick check with the department yielded no additional information. However, Morning Trade will keep tabs on this, given Ross' eagerness to self-initiate.

SPICER: CHINA CURRENCY DECISION NOT A QUID PRO QUO: White House spokesman Sean Spicer rejected the idea that the president's decision not to label China a currency manipulator is tied to seeking Beijing's help with North Korea.

"It's not a quid pro quo," he said during Monday's press briefing. "It's just saying that in the middle of them taking very positive signs to help us address the issue - the situation in North Korea - that to label them a currency manipulator I don't think we would be very productive in achieving a very, very important national strategic objective."

Trump on Sunday tweeted: "Why would I call China a currency manipulator when they are working with us on the North Korea problem? We will see what happens!"

Spicer went on to say China has not been devaluing the yuan to gain an export advantage since the president took office, despite Trump's past assertion that China is a "grand champion" at currency manipulation and campaign promises to immediately call out Beijing for doing so.

"The Treasury did issue a report on Friday that put them on a watch list with a number of other countries," he said. "I know that it's easy to just take an issue and make it seem very black and white, but on these particular issues you can see that there's movement towards his position. I would argue that he's achieving a lot of results on the issues that he's talked about."

For more on currency policy, read our colleague Danny Vinik's story on Trump's "shockingly conventional" decision over at POLITICO's The Agenda here.

TRADE REMEDY CORNER: RULING DUE IN BILLION-DOLLAR PLYWOOD CASE: The Commerce Department is expected to announce its preliminary ruling today in its countervailing duty investigation into imports of hardwood plywood products from China, imports of which totaled more than $1 billion last year. The case - filed in November by the Coalition for Fair Trade in Hardwood Plywood and its individual members, who are based primarily in North Carolina and Oregon - was the first trade remedy case launched against China after Trump's election.

Barring a major surprise, the Commerce Department is also expected to announce today that it is launching an anti-dumping investigation into over $200 million worth of imports of carbon and alloy steel wire rod from Belarus, Italy, South Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates and the United Kingdom.

The case was filed late last month by Gerdau Ameristeel US Inc., Nucor Corporation, Keystone Consolidated Industries, and Charter Steel. The group is also seeking countervailing duties on imports of the same product from Italy and Turkey.

IS THE WTO ALUMINUM CASE ON OR OFF? It's been nearly three months since the Trump administration took office, but there's still no clear indication whether the new team is pursuing a WTO case against Chinese aluminum subsidies filed in the waning days of the Obama administration.

"The Trump administration needs to push the WTO case forward, as this is the only vehicle that will force the Chinese to curtail its excess aluminum capacity and finally put thousands of American aluminum workers first," Mark Duffy, executive director of the China Trade Task Force, said in a statement. The group includes the United Steelworkers Union and the Aluminum Extruders Council.

The WTO case is not listed on the proposed agenda for Wednesday's meeting of the WTO Dispute Settlement Body, even though it's been more than three months since the 60-day request for consultations was filed. The relevant page on the WTO website also gives no indication that consultations have been held.

The Aluminum Association, which is not a member of the China Trade Task Force, recently filed an anti-dumping and countervailing duty case against Chinese aluminum foil imports. The U.S. International Trade Commission will decide Friday whether there is enough evidence of harm to domestic producers to allow that case to proceed.

MNUCHIN: WHITE HOUSE STILL KEEPING BAT ON THE TABLE: Treasury Secretary Steven Mnuchin said Monday that the administration is looking at alternatives to a border adjustment tax to fund tax cuts but said the controversial BAT proposal is not off the table.

House Republicans have made the BAT an integral part of their tax reform plan. The proposal to place a 20 percent tax on all imports while exempting U.S. exports would provide $1 trillion in revenue to cover cuts to the corporate tax rate. The White House, Senate Republicans and House Republicans all appear to have differing views on the border tax and its potential economic consequences.

Mnuchin, in an interview with the Financial Times on Monday, also acknowledged that expectations of getting tax reform legislation passed by August is "highly aggressive to not realistic at this point."

"It is fair to say it is probably delayed a bit because of the health care" maneuvering, Mnuchin said, although he added that he still expects tax reform to get done in 2017.

A TECH POLICY WISH LIST ON TRADE: Congress should create an "Office of Competitiveness" within USTR to focus on combating "innovation mercantilism" that would pinpoint foreign government practices that "do not necessarily violate WTO rules but clearly hurt U.S. commerce," a technology think tank recommended on Monday.

As part of its "Tech Policy To-Do List," the Information Technology and Innovation Foundation is also recommending that Congress direct USTR to create an annual index to comprehensively document and rank trade barriers and is calling for an update to the charter of the Committee on Foreign Investment in the United States. Read the full report here.

METLIFE TAPS FORMER CHILEAN ENVOY AS LOBBYIST: Roberto Matus, an alumnus of the Chilean-American Chamber of Commerce and a former deputy chief of mission at the Chilean Embassy in Washington, will join the insurance giant MetLife as vice president of government relations, focusing on Latin America, the company announced on Monday. Matus, who pushed for free trade and greater business ties between Chile and the United States while at the chamber, also worked on negotiations surrounding the Chile-U.S. free-trade agreement from 1999 to 2003.

INTERNATIONAL OVERNIGHT

- Japan is seeking to keep Commerce Secretary Wilbur Ross out of an economic dialogue between the two nations because he is seen as more of a hardliner on trade, Bloomberg reports.

- The Japanese trade minister says Ross has not requested any specific topics to be discussed in Tokyo, Reuters reports.

- Escalating trade tensions with Canada over the price of ultrafiltered milk, an ingredient in cheese, is one example illustrating how complex the NAFTA renegotiation might be for the administration, The Washington Post reports.

- Steven Mnuchin admits that getting tax reform done by August is highly unlikely, POLITICO reports.

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 HSBC: Our first offices opened in 1865 in Hong Kong, Shanghai, London and San Francisco to support trade between Asia and the world. In the 150 years since, HSBC has become a global network of thousands of offices in both established and fast-growing markets. We've remained steadfast in our purpose: to help our customers make the most of global opportunities. We work with millions of businesses of all sizes to invest, expand and raise capital at home and abroad. We are Made for Trade because our customers are Made for Trade. www.hsbc.com/made-for-trade **

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