On The Hill

U.S., China Reach Partial Trade Agreement

The United States and China reached a partial agreement on Friday (Oct. 11) that could potentially lead to a truce in the ongoing trade war between the two superpowers. Chinese Vice Premier Liu He, the nation’s top trade official, met with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin in Washington, DC, this week. Top aides from the respective sides had met throughout the week, with the aforementioned trio meeting for discussions on Friday. The deal could lay the groundwork for President Trump and Chinese President Xi Jinping to potentially sign a deal by year’s end. While reports are still incoming, it appears China will agree to some agricultural concessions and the U.S. will provide tariff relief and exemptions. Liu is scheduled to meet with Trump today (Oct. 11), and it appears little of the details for the short-term agreement will be released, according to Politico. Senate Minority Leader Chuck Schumer (D-NY) said in a tweet that any partial deal with China must not include concessions to Huawei, the Chinese telecom giant. Keeping pressure on Huawei remains one of the few bipartisan agreements throughout the US-China trade war.

Update: Reuters reported late Friday afternoon that President Trump and China have reached a substantial phase-1 trade deal, reaching an agreement on intellectual property, financial services, and agricultural purchases. Mnuchin also said the administration has scrapped a new round of tariffs on imports of Chinese goods that were set to take effect on Oct. 15. CHCG will recap the deal in full in next week’s Trade Update. 

British PM Asks Trump to Dismiss Tariffs

 Earlier this week, British Prime Minister Boris Johnson urged President Trump to not go through with planned tariffs in retaliation over illegal subsidies in the EU Large Civil Aircraft case. Last week, the World Trade Organization (WTO) awarded the U.S. the ability to impose tariffs on $7.5 billion worth of aircraft and consumer products. Duties of 10 percent apply to aircraft, largely made by European aerospace giant Airbus, while duties of 25 percent will be slapped on consumer goods.  Johnson specifically asked Trump not levy the tariffs because it would harm the Scottish whiskey industry, but illustrated that they will harm “a number of industries.” The tariffs will go into effect on Oct. 18 and include a number of products, including French wines, sweaters, cheeses, and olives. 

 USMCA Latest

 Last week, CHCG’s Trade Update noted that House Ways and Means Chairman Richard Neal (D-MA) would lead a congressional delegation (CODEL) to Mexico to discuss the latest issues surrounding the United States-Mexico-Canada Agreement (USMCA). Neal, and other House Democrats of the working group tasked with negotiating USMCA, appear to have come back empty-handed. The group remains unsatisfied with Mexico’s progress on the trade deal, particularly regarding provisions on labor reform. “Our meeting with President López Obrador shed further light on the Mexican government’s desire and intentions to carry out its labor justice reform, but the United States needs to see those assurances put into action,” Neal said in a statement after the meetings. The Trump administration continues to press House Speaker Nancy Pelosi (D-CA) to call a vote on USMCA. However, Democrats remain adamant about addressing issues in the trade deal including drug pricing provisions, environmental and labor standards, and enforcement. Lawmakers also sought an explanation from Mexican officials about the 2020 budget and whether there is enough funding for the labor overhaul. House Democrats and labor groups have expressed concerns about the initial budget Mexico released last month, which showed the government allotting significantly less money for enforcement than labor groups have said is necessary.^[1]  Representative Bill Pascrell (D-NJ) joined Neal on the CODEL and added, “We must know that Mexico is serious about beginning a new chapter before we rush to judgment on a new agreement. We’ll have a suitable agreement only when the hard terms match that aspiration.” This past week, the United Auto Workers (UAW) said the union is not ready to back the USMCA, stating that is not convinced the deal can restore automotive jobs in the U.S. “The whole idea that USMCA, these auto provisions will somehow lead to massive relocation of plants from Mexico to U.S. is extremely unlikely,” said Josh Nassar, legislative director with the UAW, at a George Washington University event on Thursday (Oct. 10). “We don’t think it’s as transformative as is being advertised.” Nassar noted that while some aspects of the USMCA are better than NAFTA, “we’re not there yet as far as getting the changes to make this the transformative deal it needs to be.”^[2] 

Commerce News

On Monday (Oct. 7), the Department of Commerce announced it will add 28 Chinese government and commercial organizations to the Entity List “for engaging in or enabling activities contrary to the foreign policy interests of the United States.” According to the press release, Commerce says “this action constricts the export of items subject to the Export Administration Regulations (EAR) to entities that have been implicated in human rights violations and abuses in China’s campaign targeting Uighurs and other predominantly Muslim ethnic minorities in the Xinjiang Uighur Autonomous Region (XUAR).” Commerce Secretary Wilbur Ross echoed the press release’s forceful tone. “The U.S. Government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China,” Ross said. “This action will ensure that our technologies, fostered in an environment of individual liberty and free enterprise, are not used to repress defenseless minority populations.”

References

^[1] Cassella, Megan. “House Democrats still looking for Mexico to carry out labor reform, Neal says.” Politico Pro. 8 Oct. 2019. https://subscriber.politicopro.com/article/2019/10/house-democrats-still-looking-for-mexico-to-carry-out-labor-reform-neal-says-1800410

^[2] Cassella, Megan. “UAW: ‘Not there yet’ on USMCA.” Politico Pro. 10 Oct. 2019. https://subscriber.politicopro.com/article/2019/10/uaw-not-there-yet-on-usmca-1804566