By Megan Cassella | 04/19/2017 10:02 AM EDT
With help from Doug Palmer and Adam Behsudi
CANADA THROWS DOWN IN DAIRY FIGHT: Canada's ambassador to the U.S. has an answer on a controversial dairy issue dogging cross-border trade relations, but it's probably not the solution President Donald Trump promised to deliver for dairy farmers during a speech in Wisconsin on Tuesday.
"Canada does not accept the contention that Canada's dairy policies are the cause of financial loss for dairy farmers in the United States. The facts do not bear this out," Canadian envoy David MacNaughton wrote in a letter sent Tuesday to New York Gov. Andrew Cuomo and Wisconsin Gov. Scott Walker.
The Canadian dairy industry is implementing a new pricing program and "national ingredients strategy" that allows Canadian cheese makers to buy certain ingredients from domestic producers at the lowest world market price. The U.S. industry argues that the policy is effectively pricing their exports of ultra-filtered milk, a key ingredient in cheese, out of the Canadian market. U.S. producers can export the targeted products duty-free and quota-free to Canada under the terms of NAFTA despite Ottawa's dairy import restrictions under its supply management program.
MacNaughton argues that the U.S., like many other dairy producing countries, has fallen victim to overproduction and backs up his assertion with the attachment of a USDA dairy outlook report. "As made clear in the report, Canada is not a contributor to the overproduction problem," he said, adding that the U.S. should "not lay blame where it does not belong, for economic changes that are the result of global market trends."
IT'S WEDNESDAY, APRIL 19! Welcome to Morning Trade, where we're thinking about Trump's comments Tuesday that he "has been reading about" dairy trade issues and wondering if it means he's started reading our newsletter. Mr. President, if you're reading this, maybe send us a tweet? Reach me at @mmcassella or firstname.lastname@example.org.
TRUMP'S APPEAL TO DAIRY: Canada's defensive letter came the same day Trump promised to stand up for Wisconsin dairy farmers and "immediately" address the dairy issue. "I've been reading about it and I've been talking about it for a long time, and that demands, immediately, fair trade with all of our trading partners, and that includes Canada," he said.
"What's happened to you is very, very unfair. It's another typical one-sided deal against the United States and it's not going to be happening for long," he said during a speech in Kenosha. "We're going to get together and we're going to call Canada and we're going to say what happened, and they might give us an answer - but we're going to get a solution, not just the answer."
The dairy industry welcomed the presidential attention. "We thank President Donald Trump for speaking out today in Wisconsin against the harmful pricing policy Canada implemented in an effort to stifle competition with the United States," the National Milk Producers Federation said in a statement. "We have repeatedly stressed that trade must be fair and that all countries should be held accountable when they break the rules. Canada's repeated disregard for its dairy trade commitments to the United States has left American dairy farmers enduring the severe and unfair consequences."
TRUMP'S DIVISIVE 'BUY AMERICAN' ORDER: With the signing of his "buy American and hire American" executive order on Tuesday, Trump began taking steps toward fulfilling his campaign promise to limit the use of foreign workers and promote the purchase of U.S.-sourced materials - but what it didn't do was win him any new allies in the business community or among Democrats on Capitol Hill.
From the business side, expanding "buy American" rules under the executive order would make it harder to spur growth and create jobs, and closing the door on high-skilled foreign workers would be a "mistake," the Chamber of Commerce said shortly after Trump signed the order in Kenosha, Wis. "If the goal is to grow the economy and create jobs, which the administration has indicated, it's important to open more procurement markets for American companies and attract the best and brightest talent," U.S. Chamber of Commerce Senior Vice President and Chief Policy Officer Neil Bradley said in a statement.
In the same vein, the IT Alliance for Public Sector, a coalition of tech companies, said it was concerned the order would freeze technological innovation, increase costs by requiring domestic sourcing and stifle innovation and IP services exports. "Buy American sounds good and is well-intentioned, but it will only help America if it is applied in a manner that reflects today's reality, rather than cut off our nose to spite our face," Senior Vice President for Public Sector Trey Hodgkins said in a statement.
On Capitol Hill, many Democrats - including several who have championed "buy America" efforts - criticized the order as providing lip service to an issue that deserves concrete action. "Unfortunately, I think we're headed to a rerun in the same movie we've seen before," Senate Minority Leader Chuck Schumer told reporters. "The president makes a promise, signs an empty executive order that won't help the life of a single American worker, smiles at the cameras, and goes right back to helping out the special interests and leaving America's workers out to dry." Read more on Democrats' reaction here.
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WHITE HOUSE OUTLINES DETAILED 'BUY AMERICA' TIMELINE: More than 24 hours after offering reporters a background briefing on the executive order, the White House released the full text on Tuesday evening. The text largely mirrors what senior administration officials described on Monday, and outlines a number of deadlines various federal agencies will follow when launching internal investigations of procurement practices and examinations of worker visa programs.
Within 150 days, for example - or by Sept. 15 - Commerce Secretary Wilbur Ross and the U.S. trade representative will have assessed the impacts of all free-trade agreements and the WTO's Government Procurement Agreement on the "operation of Buy American laws," the order says. Read the full text here.
TRUMP'S CONGRESS PROBLEM: Trump seems to be finally confronting the reality that working with Congress on trade deals is not always the quickest process. In Wisconsin on Tuesday, he made it clear what he thought of the congressional consultation process.
"We have all sorts of rules and regulations that are horrendous. Like we wanted to start negotiating with Mexico immediately and we have these provisions where you have to wait long periods of time," he said in a speech at a tool factory in Kenosha. "You have to notify Congress, and after you notify Congress you have to get certified, and then you can't speak to them for a 100 days. The whole thing is ridiculous."
Despite Trump's frustrations, Ross has said the administration would seek congressional approval of whatever emerges from NAFTA renegotiation and has committed to follow a consultation process detailed in trade promotion authority legislation. The administration has begun meeting with congressional committees mandated under TPA but the process has stalled in the Senate over complications connected to the pending confirmation of Robert Lighthizer as U.S. trade representative.
Standing in the way of starting negotiations is the 90 days that must pass following the administration's formal notification of its intent to enter into trade talks. Lawmakers received a copy of a draft letter that would start that process late last month, but formal delivery will likely only happen after Lighthizer is confirmed.
TRUMP THREATENS TO PUT NAFTA BACK ON THE CHOPPING BLOCK: Trump also revisited some of his fiercest anti-NAFTA campaign rhetoric in the Kenosha speech, once again blasting the deal as a "total disaster" for the U.S. and promised to make some "very big changes" - or to withdraw entirely.
"NAFTA's been very, very bad for our country," he said. "It's been very, very bad for our companies and for our workers, and we're going to make some very big changes or we are going to get rid of NAFTA once and for all."
The comment drew a quick response from pro-NAFTA Democratic Rep. Henry Cuellar, who criticized the threat as a "bad business decision." Trump "should stop threatening US business [with] disastrous anti-trade move, focus on getting our economy a great NAFTA 2.0 deal," Cuellar posted on Twitter.
U.K. PRIME MINISTER CALLS SNAP ELECTION: British Prime Minister Theresa May, in a bid to strengthen her hand in Brexit talks with the European Union, has called a snap election for June 8. Analysts expect the move to boost the Conservative Party's majority in Parliament, diminishing the chance of the Labor Party standing in the way of a completed exit deal. It also pushes the next election to 2022, instead of 2020, buying May more time to wean the U.K. from the EU before facing voters again.
BRITAIN URGED TO PURSUE ROMNEY'S FREE-TRADE ZONE DREAM: The United Kingdom should quickly lock down a free-trade agreement with the United States as a major stepping stone toward a plurilateral "Prosperity Zone" that also includes Switzerland, Canada, Hong Kong, Singapore, New Zealand, Australia and potentially other partners, according to a draft report from The Legatum Institute, a British think tank.
"As soon as possible, the U.K. should agree to a memorandum of understanding with the U.S. regarding intent to sign a high-standards free trade agreement after the U.K. has formally exited the European Union," the report says. "Discussions in relation to this FTA could begin immediately; there is no reason to wait for the Article 50 process [governing the U.K.'s exit from the EU] to be concluded before commencing negotiations."
The draft report is being shopped around town by Shanker Singham, director of economic policy and prosperity studies at the institute. Singham, a British citizen, advised Mitt Romney during his 2008 and 2012 presidential campaigns. In both those elections, Romney advocated the idea of like-minded nations joining together to lift to open markets and raise standards, which he dubbed the "Reagan Economic Zone." Singham hopes to meet Lighthizer and Commerce undersecretary nominee Gil Kaplan this week to discuss the report.
The Legatum Institute has created a special trade commission stocked with U.S., European and other trade experts to prepare a roadmap for the many trade negotiations the U.K. has to pursue over the next several years. First and foremost are talks with the EU on leaving the economic community, as well as parallel negotiations to define the new U.K.-EU trade relation.
At a not-for-attribution discussion on Tuesday, it was argued that the United States should move quickly to forge a free-trade deal with the U.K. to minimize the chances of being harmed by the outcome of U.K.-EU trade talks. It was also suggested that the U.K. explore the possibility of joining the Trans-Pacific Partnership, which the Trump administration abandoned.
PENCE, ROSS CONTINUE PUSH FOR BILATERAL TRADE DEAL IN TOKYO: Japanese officials may be continuing to tamp down the idea of launching bilateral trade negotiations with the U.S., but senior members of the Trump administration aren't being shy about their interest in pursuing a deal. In Tokyo, Vice President Mike Pence laid out specifics of a U.S.-Japan economic dialogue that he said "may result in bilateral trade negotiations in the future," adding: "We're beginning that conversation today, beginning to identify areas that we can enhance and strengthen the economic interaction between our two nations."
Pence said the dialogue will consist of three pillars - a focus on developing a common strategy for trade and investment rules, which will include looking at ways to break down market access barriers; a focus on fiscal and monetary issues; and an effort to improve cooperation between specific industry sectors in each country. The U.S. will assign the Office of the U.S. Trade Representative and the Treasury and Commerce departments to lead discussions for each pillar, though Pence didn't specify the individual agency assignments.
Ross, meanwhile, in his own meeting in Tokyo told the Japanese news outlet Nikkei Asian Review that the United States is "certainly eager to increase our trade relationships with Japan and to do so in the form of an agreement."
But Japanese officials are still hesitating. Trade Minister Hiroshige Seko, after a meeting with Ross, told the outlet that he wanted to wait for the results of the economic dialogue before committing to any sort of formal trade negotiations. And Japanese Deputy Prime Minister Taro Aso, who met separately with Pence, avoided any specific reference to a bilateral deal after the meeting. Instead, he said Japan is committed to strengthening the two countries' economic relationship and "will build high-level trade and investment standards and spread that to the Asian-Pacific region, that is free and fair trade rules."
TRADE REMEDY CORNER - COMMERCE SLAPS 111 PERCENT DUTIES ON HARDWOOD PLYWOOD: The Commerce Department on Tuesday announced preliminary countervailing duties on imports of hardwood plywood from China ranging from around 10 percent to more than 111 percent, handing an early win to the Coalition for Fair Trade of Hardwood Plywood in the first trade remedy case launched against China after Trump's November election. Imports of the product totaled more than $1 billion last year.
"The Department of Commerce will act swiftly to halt any possible unfair trade practices against U.S. companies while also assuring a full and fair assessment of the facts," Ross said in a statement following the ruling.
Tim Brightbill, trade counsel to the coalition, which petitioned the case, praised the decision as "an important step in remedying the harm caused by unfairly traded imports of Chinese hardwood plywood." "U.S. hardwood plywood producers look forward to further relief when preliminary antidumping duties are announced in about two months," he said in a statement.
Commerce has opened 24 trade enforcement investigations covering more than $2.3 billion in imports since Trump's inauguration, the agency noted in a press release. That tally also includes anti-dumping cases opened on Tuesday aimed at imports of carbon and alloy steel wire rod from Belarus, South Korea, Russia, South Africa, Spain, Ukraine, the United Arab Emirates, and the United Kingdom, as well as anti-dumping and countervailing duty cases opened against imports of the product from Italy and Turkey.
- Trump's policy reversal and decision not to label China a currency manipulator illustrates the heavy influence of billionaire investor Steve Schwarzman, which blurs ethics lines, POLITICO reports.
- Currency traders cast doubt on the idea that the dollar would appreciate enough to offset the cost of a border-adjustment tax, Bloomberg reports.
- Mexico, which has been trying to diversify its trade portfolio since Trump was elected president, expects to wrap up negotiations with Argentina on a free trade deal by the end of the year, Reuters reports.
- The IMF latest world economic outlook says global growth is gradually picking up but remains vulnerable amid rising protectionism and the growing risk of a trade war, the Washington Post reports.
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