By Adam Behsudi | 12/05/2017 10:00 AM EDT
With help from Doug Palmer, Megan Cassella and Sabrina Rodriguez
USTR PRESSING AHEAD QUICKLY IN SECTION 301 PROBE AGAINST CHINA: It's only been 109 days since USTR launched a Section 301 investigation that could lead to unilateral trade action against China, but there are already signs the Trump administration could release its conclusions and move into the remedy phase of the probe much sooner than the one year it has to complete the investigation.
Two sources told Morning Trade that USTR has completed a draft report that is now being shared with the interagency committee overseeing the investigation. A USTR spokeswoman wouldn't comment on the report's status, but said it has not gone to the White House and declined to provide any update on when it would be released.
U.S. Trade Representative Robert Lighthizer had a chance to raise the issue with Chinese officials when he was in Beijing last month as part of President Donald Trump's five-nation trip through the region. USTR also requested consultations with China on the same day it launched the investigation, according to an Aug. 24 Federal Register notice, so it's likely the two sides have held talks by now.
Acting on a memorandum signed by Trump on Aug. 14, USTR is investigating whether any of China's laws, policies, practices, or actions force American companies to transfer valuable technology to compete in the market or otherwise fail to adequately protect intellectual property rights. Lighthizer has said the United States could threaten unilateral trade action to put pressure on China to reform any practices USTR determines have unfairly hurt American companies.
In that vein, he issued a statement last month in Vietnam emphasizing the United States' willingness "to use our economic leverage to pursue truly fair and balanced trade." But Lighthizer has also not ruled out taking the more conventional step of going through the World Trade Organization dispute settlement process, if the investigation uncovers some WTO violation.
IT'S TUESDAY, DEC. 5! Welcome to Morning Trade, where your host thinks it's pretty amazing that a human-built object is traversing interstellar space at 11 miles per second. Got any out of this world trade news to share? Let me know: firstname.lastname@example.org or @abehsudi.
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HOLA FROM ARGENTINA: Readers, stay tuned for special coverage from the World Trade Organization's 11th ministerial conference. POLITICO reporters Hans von der Burchard and Megan Cassella will be on the ground in Buenos Aires, Argentina, to bring you up-to-the-minute news and a special article every afternoon, Buenos Aires Briefing, with highlights of the day. It will publish each day of the conference, from Dec. 10-13. If you have specific questions about the events in South America, please reach out to email@example.com and firstname.lastname@example.org.
A NATIONAL SECURITY STRATEGY IN THE MAKING: Another possible sign of imminent Section 301 action is the fact that the administration's forthcoming National Security Strategy will likely make combating China's economic competition a key pillar when it comes to "reclaiming America's strategic confidence."
White House National Security Adviser H.R. McMaster on Saturday warned that "competition must be fair. Our economic relationships will respect our partners' sovereignty and their economic destinies, while ensuring American workers and American companies are not unfairly disadvantaged."
"For too long Washington turned a blind eye to cheating and exploited practices abroad," McMaster said at the Reagan National Defense Forum. "We, in large measure, vacated the competitive economic space and the American people pay the price."
MTB AND GSP HANGING IN THE BALANCE: Two outstanding pieces of trade legislation - a reauthorization of the Generalized System of Preferences and the Miscellaneous Tariff Bill - have gotten a lot of bipartisan love, but their path forward in Congress is far from certain as lawmakers start digging into more pressing political matters in the final few weeks of the year.
The official line from the committees is optimistic: "Chairman Hatch continues to work toward the goal of reauthorizing GSP and passing MTB legislation as soon as possible," a Senate Finance Committee spokeswoman told Morning Trade.
"The chairman remains committed to getting these bipartisan bills done," a spokeswoman for House Ways and Means Committee Chairman Kevin Brady said.
A Christmas wish? The downtown set remains hopeful there will be some action soon, with some sources telling Morning Trade there have been rumblings that MTB legislation - introduced last month on a bipartisan, bicameral basis by trade committee chairmen and ranking members - could soon move in the House under suspension of the rules. Another source close to the issue said congressional trade leaders are "continuing conversations" on moving GSP renewal but have not made any commitments on a specific vehicle for doing so.
Time is ticking: Attempts to pass a new MTB have been snared in a House Republican ban on earmarks, which the new bill gets around. The legislation provides tariff cuts on products not made in the U.S. that are imported by U.S. manufacturers, but it hasn't been renewed since 2012. The GSP program, which gives tariff breaks to imports from developing countries and helps out U.S. companies with overseas production, expires at the end of the year. But with a DACA-fueled fight over government funding, a tax bill conference and a host of other thorny issues , "I don't know where it all fits," lamented one industry lobbyist.
CHINA TO TRUMP: DON'T WIELD A PROTECTIONIST 'SLEDGEHAMMER': China's state-run news agency, Xinhua, reacted strongly on Monday to the Commerce Department's decision to self-initiate an anti-dumping and countervailing duty investigation into imports of aluminum sheet from China. The outlet accused Trump of picking up the "sledgehammer of protectionism" and warned that could hurt both countries. For more, click here.
WTO OFFICIAL: DEAL ON PUBLIC STOCKHOLDING POSSIBLE AT MC11: As World Trade Organization members prepare to pack up their delegations in Geneva and head to Buenos Aires, Argentina, for the ministerial conference, the agency's top agriculture leader is feeling bullish about the prospects of reaching a deal in a handful of ag-related areas: public stockholding, export prohibitions and restrictions, and cotton.
Public stockholding in particular "is one of the issues where an outcome at MC11 is possible," Stephen Karau, Kenya's ambassador to the WTO who chairs the agriculture panel, told members on Monday. "That being said, some serious work will need to be done in Buenos Aires."
The issue has long been among the more contentious topics at the WTO, as developing nations like India, for example, argue that it needs an exemption to legalize its public distribution program of grains at a reduced price. The 2013 ministerial conference in Bali was largely dominated by public stockholding negotiations, and members ultimately agreed to an interim solution, saying they would not legally challenge developing countries' programs for four years - until MC11, at which point a permanent solution would be agreed to.
"I will be working together with a facilitator and all of you to find the way which has thus far eluded us," Karau said in Geneva on Monday. "The will to embark on this journey would, however, have to come from you."
- Committing to future talks: On other agricultural issues, where members' views remain so divergent that an outcome is not possible in Buenos Aires, Karau recommended that members pursue a so-called limited outcome by agreeing to a post-MC11 work program. That would likely encompass issues including domestic support, market access and export competition.
Many members expressed disappointment over what little progress had been made on domestic support talks in particular, Geneva sources told Morning Trade, and they stressed their interest in discussing the issue with trade ministers in Argentina.
HOUSE FINANCIAL SERVICES EYES HEARING ON CFIUS REFORM: Former Deputy Treasury Secretary Robert Kimmitt is scheduled to testify next week at a House Financial Services Committee hearing on a bill that would reform the Committee on Foreign Investment in the United States, Morning Trade has learned. The legislation would make it harder for China and other potentially hostile powers to gain access to valuable U.S. technology.
House Financial Services has not yet announced the hearing, but that is expected in coming days. Kimmitt, who is now senior international counsel at WilmerHale, is expected to make the case for an open U.S. investment environment and warn against overzealous restrictions that could impede growth.
At a U.S. Chamber of Commerce event earlier this year, Kimmitt said the United States was in the midst of the "fifth wave of decennial investment protectionism" since the 1970s, when many Americans were worried about Saudi petrodollars buying up the United States. "Today, driven by China, we're seeing some of same investment protectionism concerns," Kimmitt said.
TRUMP PICKS THREE FOR TRADE COMMITTEE: Trump announced on Monday his intention to appoint three new members of the Advisory Committee for Trade Policy and Negotiations, a high-level group of business, labor and agriculture industry representatives that advise the U.S. Trade Representative on trade matters. Chief among those picked for a four-year term is Dan DiMicco, former CEO of steel company Nucor and trade adviser to Trump during his campaign and transition.
American Farm Bureau Federation president Zippy Duvall was also tapped to serve on the committee. The third pick was Leslie B. Daniels, an operating partner of AE Industrial Partners, a private equity firm that specializes in aerospace, power generation and specialty industrial businesses.
CANADA-CHINA AGREE TO KEEP TALKING TRADE: Canadian Prime Minister Justin Trudeau and Chinese President Xi Jinping announced they were "continuing exploratory discussions towards a comprehensive trade agreement between Canada and China."
"With China, as with all of our trading partners, we are committed to pursuing trade that benefits everyone, that puts people first and reflects Canadian values, especially when it comes to the environment, labour, and gender," Trudeau's office said in a statement issued after the two leaders met in Beijing on Monday.
China and Canada also agreed to collaborate more on agricultural trade, "which will include expanding market access to give Canadian producers new opportunities to enhance their competitiveness," the statement said. An accompanying fact sheet said the two countries committed to fully implementing a 2016 agreement to expand access for Canadian exports of frozen, bone-in beef and start a pilot program to allow Canada to export chilled beef and pork to China.
ICYMI - ARGENTINA RESPONDS ON REVOKED NGO MC11 CREDENTIALS: The Argentine government on Saturday defended its decision to deny credentials to more than 60 NGO representatives for WTO's 11th ministerial conference in Buenos Aires, calling it a decision against representatives associated with "disruptive and/or violent proposals." The Argentine government explained in a release that the multiple representatives who had their ministerial accreditation were identified for making "explicit calls for violent manifestations through social media," expressing support for generating "intimidation and chaos." However, 213 other NGOs with a total of 593 representatives have been given credentials, double the number of accredited representatives in the past four ministerials, the release said.
But in a letter sent to WTO Director-General Roberto Azevedo on Sunday on behalf of the NGO representatives, Deborah James of the Our World Is Not For Sale Network called the Argentine government's defense "outrageous libel."
"It is impossible to justify that" the rejected organizations "are 'disruptive' or 'violent,'" wrote James, who is also the director of international programs for the Center for Economic and Policy Research. "None of the organizations we know have expressed calls to violence on social media. If the Argentine government is using this claim as its justification, it should be required by the WTO to offer proof (which of course does not exist)."
- Aeromexico is eyeing a deal to take some Bombardier jet orders from Delta Air Lines to avoid potential U.S. trade duties on the planes, Reuters reports.
- WTO members issued fewer trade-restrictive measures in the period between October 2016 and October 2017 compared to the previous year, according to a new WTO report.
- Canada is in talks with the U.S. to meet fresh demands for stopping trade in counterfeit goods, CBC reports.
- The Nebraska Farm Bureau releases a new report that shows how NAFTA withdrawal would damage the state's agriculture industry, the Lincoln Journal-Star reports.
- Canada's chief NAFTA negotiator lays out five U.S. proposals the government won't accept, the National Post reports.
- The South Korean government will submit a plan for renegotiating KORUS to its National Assembly on Dec. 18, Yonhap reports.
THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: email@example.com and @abehsudi; firstname.lastname@example.org and @mmcassella; email@example.com and @tradereporter; firstname.lastname@example.org and @jmlauinger; and email@example.com and @pjoshiny. Also follow us @POLITICOPro and @Morning_Trade.
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