By Adam Behsudi and Adam Behsudi | 10/11/2017 10:00 AM EDT

With help from Doug Palmer, Megan Cassella and Sabrina Rodriguez

THE NAFTA ROUND TO END ALL NAFTA ROUNDS? It's the first day of what could be a defining round of NAFTA talks. Negotiators from the U.S., Canada and Mexico will converge on a Pentagon City, Va., hotel, but the real fireworks may be seen north of the Potomac as Canadian Prime Minister Justin Trudeau discusses the pact with President Donald Trump and House Ways and Means Committee members.

Even before Trudeau landed in Washington on Tuesday, Trump's latest views on NAFTA emerged in a Forbes Magazine interview: "I happen to think that NAFTA will have to be terminated if we're going to make it good," he said. "Otherwise, I believe you can't negotiate a good deal." Agriculture Secretary Sonny Perdue, seeking to soothe nerves on Tuesday, interpreted Trump's statement to mean the president wants "to redefine and renegotiate NAFTA in a free and fair trade deal. We support him in that."

But on a more substantive level, the talks could see some of the thorniest U.S. proposals thrown onto the negotiating table, including on automotive rules of origin, investor-state dispute settlement, a five-year "sunset" provision and a bid to rid the agreement of its trade remedy dispute provisions. Still unclear is whether those proposals are merely starting points for negotiations or red lines that will send the talks into free fall.

"This is absolutely headed for a disaster," one worried business lobbyist told Morning Trade. "This is an absolute crisis. I am pretty damn pessimistic about where NAFTA is headed."

The talks this week could also be the longest round yet, having been extended by two days. Canadian Foreign Minister Chrystia Freeland will return to Washington on Oct. 17 to meet with her U.S. and Mexican counterparts and close the talks, a spokesman for her office told Morning Trade. Freeland is in Washington this week with Trudeau and will accompany him to Mexico for the second leg of his trip.

IT'S WEDNESDAY, OCT. 11! Welcome to Morning Trade, where we wonder if the U.S. men's team loss last night and its subsequent failure to qualify for next a World Cup for the first time since 1986 will be a bad omen for NAFTA talks this week. Got any NAFTA news to share this week? Let me know: abehsudi@politico.com or @abehsudi.

** A Message from ACTION for Trade: FACT: IP-intensive manufacturing industries support nearly 58 million U.S. jobs, and workers in IP-intensive industries earn 45% more than workers in non-IP-intensive industries. Learn more: http://actionfortrade.org/issues-and-resources/ **

TRUDEAU WALKS THE HALLS OF LONGWORTH: Many are looking at Trudeau's decision to drop by the Ways and Means Committee as a significant move. The rare, if not unprecedented, visit to Congress by a head of state in the midst of ongoing negotiations could be a landmark moment for the embattled trade pact.

Ways and Means Chairman Kevin Brady told reporters on Tuesday that he was "honored" to host Trudeau. "I expect a very productive and constructive discussion on how we strengthen trade and I'm looking forward to that meeting," he said.

DELAURO: ISDS IN NAFTA MAKES IT EASIER TO OUTSOURCE JOBS: Connecticut Rep. Rosa DeLauro and four other House Democrats will urge NAFTA 2.0 negotiators today to drop the investor-state dispute settlement process from any renegotiation, arguing that ISDS makes it easier for companies to outsource jobs and forgo public health protections. Policies like ISDS "have no place in any version of a trade agreement. The American people deserve a new trade model that is not crafted by corporations. ... The people of our nation want a trade deal that works for them, not for the wealthy and corporations with the most lobbyists," DeLauro told Morning Trade in a statement.

The five members - DeLauro, Keith Ellison, Debbie Dingell, Marcy Kaptur and David Cicilline - will make the demand at a press conference on the Hill alongside leaders from more than 30 groups from the U.S., Mexico and Canada - including Public Citizen's Global Trade Watch, the AFL-CIO, International Labor Rights Forum, and Council of Canadians - this morning as negotiators start the fourth round of NAFTA renegotiation talks.

Trump administration officials are expected to include their final ISDS proposal in this week's talks. The proposal comes with both an "opt-in" provision that essentially makes the whole process voluntary and rolls back two key investor protections that private companies have previously been able to use under ISDS in past U.S. agreements. More on the ISDS proposal here.

VISA URGES ACTION ON VIETNAM ELECTRONIC PAYMENT MOVE: Former Deputy U.S. Trade Representative Demetrios Marantis returns to Capitol Hill today as a senior vice president for credit card giant Visa to tell the House Ways and Means Subcommittee on Trade that U.S. electronic payment suppliers "are on the brink of being forced out" of Vietnam's market.

The problem stems from a State Bank of Vietnam regulation, known as Circular 19, that Marantis says grants a de facto monopoly on domestic payment processing to the state-owned National Payment Corporation, known as NAPAS.

Although both the Trump and Obama administrations have strongly objected to the provision, "NAPAS is charging ahead and is pressuring banks to prepare to process all domestic transactions, including Visa and MasterCard-branded payment cards, over its network," Marantis says in his prepared remarks. "This fundamentally threatens the ability of U.S. payments companies to continue to operate in Vietnam."

Still, Trump's upcoming visit to Vietnam offers a ray of hope, if not an action-forcing event, to resolve the issue. "Given the consistent message from Congress and the administration on this issue, we remain hopeful that the Vietnamese government will suspend and revise Circular 19 before President Trump's visit to Vietnam for the APEC leaders meeting next month," Marantis will tell the panel.

Rounding out the hearing: Kelley Sullivan, owner and operator of the Santa Rosa Ranch in Texas, will testify on behalf of the National Cattlemen's Beef Association at the hearing, which is focused on opportunities to expand U.S. trade relationships in the Asia-Pacific region. The NCBA was one of the biggest supporters of the Trans-Pacific Partnership, but Trump withdrew from that pact on his third day in office.

Scott Paul, president of the Alliance for American Manufacturing, whose members include labor groups and steel companies, will offer support for the Trump administration's focus on reducing bilateral trade deficits, as well as criticism for not following through on a number of proposed trade actions, such as restricting steel imports in the name of national security under Section 232.

"Domestic production of steel and aluminum are vital in the manufacture of America's military and critical infrastructure, including everything from ships and tanks to bridges and energy infrastructure," Paul says in his prepared remarks. "If domestic manufacturing capabilities deteriorate further, we may be forced to rely on countries like China and Russia to supply steel for our military and critical infrastructure needs. We cannot let that happen."

TRUMP VISIT TO CHINA COULD BRING U.S. SALES: Chinese business groups on Tuesday warned about the possibility of a "trade war" if the Trump administration takes unilateral action against Chinese imports as a result of the Section 301 trade investigation launched in August. But they also dangled the prospect of increased U.S. exports to China resulting from Trump's visit in November.

"China is a huge market" and offers great potential for the United States in a number of areas, Xu Chen, chairman of the China General Chamber of Commerce, said during a Trump administration hearing on the 301 probe. "After the visit of President Trump to China in November, I believe maybe China's government, maybe, will decide to import more American beef, American energy from the U.S. market."

An interagency panel led by USTR heard from 14 witnesses over the course of about four hours. Those included Juergen Stein, CEO of SolarWorld Americas, based in Hillsboro, Ore., who said his company was a victim of Chinese "state-sponsored hacking and theft" while it was pursuing an anti-dumping and countervailing duty complaint against China. That "greatly weakened SolarWorld's first-mover status, and again left SolarWorld vulnerable to China's relentless effort to take over the U.S. solar industry through the sale of solar cells and panels below the cost of production," Stein said.

Just one other company, American Superconductor Corp., testified on Tuesday that it had been badly hurt by Chinese theft of its intellectual property, while a third, ABRO Industries, said it had learned to work within the Chinese intellectual property protection system to address problems when they arise. William Mansfield, director of intellectual property at ABRO, also urged the Trump administration to refrain from rash action. "The time for gunboat diplomacy is long since past," he said.

Acting Assistant USTR for China Terry McCartin, commenting on the dearth of business witnesses, said some companies had expressed concern "about retaliation or other harm to their businesses in China if they were to speak out in this proceeding." For more on the hearing, read Doug Palmer's story here.

CHAMBER OF COMMERCE NAMES U.S.-INDIA BUSINESS COUNCIL PRESIDENT: The U.S. Chamber of Commerce named Nisha Desai Biswal the president of the U.S.-India Business Council on Tuesday. Biswal served as assistant secretary for South and Central Asian Affairs at the State Department from 2013-2017 and most recently served as a senior adviser at Albright Stonebridge Group, helping the firm expand its India and South Asia practice.

"She is a driven, visionary leader who has a strong record of advancing United States business across the growth markets of Asia and throughout India. Under her strong leadership, we're confident the U.S.-India Business Council will play a critical role growing commercial partnership, investment, and innovation across the world's oldest and largest democracies," Myron Brilliant, the Chamber's executive vice president and head of international affairs, said in a statement.

PERDUE HEADING TO EUROPE: Agriculture Secretary Sonny Perdue will head to London, Rome and Madrid this week to discuss trade and food security - even joining Pope Francis for an event, the USDA announced Tuesday. He is set to discuss U.S. agricultural trade priorities with his counterparts in other countries. "We value our close relationship with our European partners, but there is work to be done to address the numerous trade barriers U.S. exporters face in that market," Perdue said in a statement.

USTR CONCERNED RUSSIA IS MOVING AWAY FROM WTO COMMITMENTS: USTR officials expressed concern Tuesday that Russia is abandoning some of the market-opening commitments it made when it joined the World Trade Organization five years ago.

"The core of the WTO is trade liberalization. It works to bring transparency, predictability and the rule of law to global trade," Betsy Hafner, the deputy assistant U.S. trade representative for Russia and Eurasia, said at the start of a hearing focusing on Russia's compliance with WTO rules. "Unfortunately, we have recently seen Russia diverge from those principles."

Instead of implementing "significant market-liberalizing reforms," Russia appears to be moving toward "more inward-looking, protectionist policies that threaten to undo many of the advances Russia made to modernize and diversify its economy," she added.

The comments came at the start of an hourlong hearing aimed at gathering information for a report due out in December, which marks the fifth anniversary of Russia joining the WTO. Both the hearing and the report "are part of the administration's commitment to use the tools of the WTO to ensure that Russia fulfills those obligations," Hafner said.

FARMERS FOR FREE TRADE GETS FARM BUREAU BACKING: A new grass-roots campaign will attempt to connect free trade with economic success for farmers and rural communities as NAFTA remains under threat and uncertainty clouds U.S. trade policy in Asia.

The Farmers for Free Trade group, which is headed by former Sens. Max Baucus and Dick Lugar and received the support Tuesday of the American Farm Bureau Federation, will seek to mobilize farmers nationwide as a force for supporting existing and future trade deals.

"We're going to drive home the threats to export markets like Mexico, Canada, South Korea are threats to states like Kansas, Kentucky and Washington," said Sara Lilygren, president of the group's board of directors, during a press call on Tuesday afternoon.

The bipartisan effort will seize on the agriculture industry's general frustration with the Trump administration's trade policy, which many in the export-oriented sector argue started off with a misstep when the newly elected president abandoned the Trans-Pacific Partnership and then put at risk major benefits to agriculture by initiating a renegotiation of NAFTA. The group also intends to speak out on the hits ag has taken as a result of enforcement actions and the need to pursue new trade deals, she said. Read more here.

INTERNATIONAL OVERNIGHT

- Mexican Foreign Minister Luis Videgaray said the termination of NAFTA could bring U.S.-Mexican relations to a breaking point, The Guardian reports.

- More than 310 local and state chambers of commerce increase pressure on Trump to stay in NAFTA, McClatchy reports.

- The United Kingdom considers its trade options after Brexit including joining NAFTA, The Telegraph reports.

- Auto dealers warn that Trump's NAFTA proposals could raise car prices, Bloomberg reports.

- South Korea and China let a currency swap deal expire as ties cool over Seoul's support of a U.S. missile defense system, Dow Jones Newswires 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; jlauinger@politico.com and @jmlauinger; and pjoshi@politico.com and @pjoshiny. Also follow us @POLITICOPro and @Morning_Trade.

** A message from ACTION for Trade: America's dominant position in innovative and creative industries provides an opportunity for U.S. negotiators to ensure that the global economy rewards innovation and protects creative assets. The new American Creative, Technology, and Innovative Organizations Network for Trade is dedicated to shaping U.S. trade policy and trade agreements, making sure they foster innovation and creativity and protect the intellectual property that drives U.S. trade competitiveness. Learn more: http://actionfortrade.org/ **

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