Trump administration sketches out ’model’ trade agreement

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Politico | 20 March 2017

Trump administration sketches out ’model’ trade agreement

President Donald Trump promised last year to negotiate "great" new trade deals to replace NAFTA and TPP without offering many specifics about what he might do differently.

Now, some details are beginning to trickle out, including a list [see below] of more than 20 foreign trade practices the administration told a senior member of Congress it would seek to prioritize when it renegotiates NAFTA with Canada and Mexico and pursues bilateral trade deals.

Those include relatively new areas like currency manipulation, where achieving agreement could be difficult, as well as goals like stronger intellectual property protection which have long been the mainstay of U.S. trade agreements.

The list, which is entitled “Key Elements of a Model Trade Agreement,” was prepared at the request of Sen. Pat Roberts (R-Kan.) ahead of last week’s Finance Committee hearing on the nomination of Robert Lighthizer to be U.S. trade representative. A USTR official said Lighthizer played no role in preparing the list since he has not yet been confirmed.

During the hearing, Roberts said the list encompasses 24 trade objectives. However, since two issues — forced technology transfers and evasion of anti-dumping and countervailing duties — are listed twice with slightly different wording, there are actually only 22 distinct items.

“These are market problems that the administration has identified either through vigorous consultations with Congress, or their own internal research,” Payne Griffin, deputy chief of staff at the Office of U.S. Trade Representative, told POLITICO. “It is a non-exhaustive list of things that may be addressed in these bilateral trade agreements.”

Commerce Secretary Wilbur Ross, during his confirmation hearing in January, told the Commerce Committee that he wanted to help develop a model trade agreement containing “certain principles that would have to be in any agreement.”

“I think it’s a huge mistake to start out each time with kind of a blank page from ground zero. Makes it take longer, makes it harder to negotiate,” Ross said. “The best negotiating tool is to be able to tell someone: ‘I can’t change this. This is official policy. You know it is. We’ve got it in 10 other deals.’"

In reality, U.S. trade negotiators have not started with a completely blank slate in pursuing trade deals like TPP, which Trump abandoned on his first day in office.

Negotiators followed objectives laid out by Congress and as a result, key details of the TPP pact reached by the administration of President Barack Obama resembled trade deals negotiated by the administration of President George W. Bush.

Additionally, the trade promotion authority bill passed by Congress in 2015 contains close to 150 negotiating objectives for the White House to follow in any trade deal that it wants to submit to Congress for expedited approval using “fast track” procedures.

The Trump administration’s list has grown from an initial 13 objectives that White House trade adviser Peter Navarro and Special Representative for International Negotiations Jason Greenblatt gave lawmakers last month. That reflects input from lawmakers in the weeks since then, Griffin said.

Roberts, who chairs the Agriculture Committee, told Lighthizer he was not pleased to see one item on the list that had been the subject of a meat trade dispute with Canada and Mexico: country-of-origin labeling.

“We fixed the issue of COOL in 2015,” Roberts said. “We don’t need to go down that road again. We narrowly escaped about $4 billion — somewhere between $2.5 billion and $4 billion — in retaliatory tariffs against the United States.”

The administration’s overriding focus on reducing the trade deficit — No. 2 on the White House list — is also "worrisome," especially if that means curbing imports, as Navarro has indicated it could, Sen. Pat Toomey (R-Pa.) said.

“I think that would be a big mistake for several reasons,” Toomey said. “One, it would invite retaliation” that would hurt U.S. exports and two, it would raise costs for consumers, while also reducing their choice of goods, he said.

The No. 1 item — tighter "rules of origin" — reflects the administration’s hope of bringing back manufacturing jobs in industries that make parts and other components that are assembled into final goods, like autos. However, there’s still no detail on how exactly they want to change the provisions.

Many other items also provide little clue about what the administration has in mind. One listed simply as “Chapter 19” appears to reflect a desire to revisit anti-dumping and countervailing dispute settlement provisions of NAFTA.

Two other items — “quotas” and “stumpage” — seem to be related to a softwood lumber dispute with Canada since U.S. producers argue that low stumpage fees charged by Canadian provinces to cut wood are an unfair government subsidy. As a result, they would like the two countries to agree to strict limits on how much Canadian softwood enters the United States.

That dispute could be potentially be solved through an anti-dumping and countervailing duty case that U.S. producers have filed at the Commerce Department against their Canadian competitors, or as part of the NAFTA renegotiations.

In either case, Lighthizer delighted Sen. Ron Wyden by assuring the Oregon Democrat that solving the problem was a “top priority” for the new administration.

“I like that answer,” replied Wyden, who has been pressing the White House to pay more attention to the softwood lumber spat.

Yet another item, "tax rebates on exports" reflects the view held by the administration and many congressional Republicans that foreign tax systems give many U.S. competitors an unfair advantage in trade.

Meanwhile, despite Trump’s decision to abandon the TPP, Lighthizer also told the committee his predecessor, Michael Froman, did a “remarkable” job negotiating many details of the 12-nation trade deal.

Rather than throw all that away, “we should take advantage of that work” as the United States renegotiates NAFTA and pursues new trade deals, Lighthizer said.

That might be the final bitter pill for the Obama administration, which tried to sell TPP to Congress as an update of the 23-year-old NAFTA accord even as Trump was blasting both deals as terrible agreements.

Key Elements of a Model Trade Agreement

1. Rules of Origin Percentages & Loopholes
2. Trade Deficit Reduction
3. Dumping, Diversionary Dumping, and Evasion of AD/CVD Duties 4. Currency Manipulation
5. Strict Environmental and Labor Standards
6. Intellectual Property Protection
7. Restrictions on State­owned and State­financed Enterprises. 8. Investor State Dispute Resolution
9. Chapter 19
10. Non­Tariff Barriers
11. Government Procurement
12. Joint Cooperation on Issues Related to the WTO
13. Enforcement, Monitoring, and Compliance
14. Corruption
15. Country of Origin Labeling
16. Evasion of Antidumping and Countervailing Duties
17. Forced technology transfer
18. Geographical indications to restrict trade
19. Quotas
20. Phytosanitary standards
21. Processed foods
22. Stumpage
23. Tax rebates on exports
24. Technology transfers

source: Politico