On The Hill

USMCA Clears Path for House Vote

After all of 2019 was spent with “will they, won’t they,” House Democrats and the Trump administration have struck a deal on the United States-Canada-Mexico Agreement (USMCA). The deal, which both sides are claiming victory, was announced Tuesday (Dec. 10) morning by House Speaker Nancy Pelosi (D-CA), Ways and Means Chairman Richard Neal (D-MA), and other House Democrats part of the “working group.” As of Friday (Dec. 13), the deal is poised for a floor vote sometime between Tuesday and Thursday but is largely dependent upon other issues such as the vote on spending bills for FY 2020 and the House vote on articles of impeachment against President Trump. Nevertheless, the decision to bring USMCA up for vote brings a sigh of relief for both Democrats and the administration, who traded blows all year to achieve their respective revisions. Democrats’ provision for Mexican factories to comply with higher labor standards was included in the deal, which gained the blessing of AFL-CIO President Richard Trumka. The deal also gives moderate Democrats a legislative win to bring back to constituents during the holiday recess. Democrats were also successful in removing a provision that established a 10-year protection period for biologic drugs, which they believe would further keep drug costs high. U.S. Trade Representative (USTR) Robert Lighthizer, the chief negotiator for the administration on USMCA, called the deal “nothing short of a miracle” and acknowledged the difficulties the three countries faced throughout the process. During the House Democrats press conference, Neal said, “I think we set a world record for hanging up on each other, myself and [Lighthizer].” Senate Majority Leader Mitch McConnell (R-KY) said the upper chamber will likely not take up the bill until after the impeachment trial. “A lot of our members are going to want to review it,” said Senate Majority Whip John Thune (R-SD). “I would not be surprised, even if the House does advance it, we just don’t have the available time to process it before the holidays.” Mexico’s and Canada’s legislatures must also approve the changes. Mexico is expected to do so in the coming days given that its Senate leaders have already offered support for the revised pact. A bill to pass USMCA is unlikely to be introduced in Canada’s Parliament until late January because its House of Commons will break for the holidays on Friday, according to a Canadian government official. The body is scheduled to return on Jan. 27.^[1] Canadian Prime Minister Justin Trudeau said he’s promised Trump and Obrador he’ll seek to ratify the deal as quickly as possible. Finance Chairman Chuck Grassley (R-IA) had hoped to hold a mock mark-up in his committee but said Friday that they will not follow the usual “trade promotion authority” procedures for USMCA. This allows the committee to skip the mock mark-up in an effort to speed the process up but contradicts McConnell’s timeline. Senators Pat Toomey (R-PA) and John Cornyn (R-TX) expressed their disdain for skipping the mock mark-up, with Toomey going as far to call it “a problem.” “I don’t think we’ve ever had such a clear violation of TPA procedures in a trade agreement that attempts to invoke TPA [protections], so we don’t have a precedent to look at. But it’s hard for me to imagine that you could retain the privileges that TPA bestows on legislation if you’re not following TPA rules,” Toomey said, according to Politico.

U.S., China Reach ‘Phase One’ Trade Deal

On Friday (Dec. 13), the U.S. and China agreed to a preliminary trade deal, which largely involves China’s commitment to purchase agricultural products in exchange for tariff relief. For months, the alleged commitment from China to purchase agricultural products was around $50 billion, but Lighthizer said China would instead increase purchases by $32 billion over the course of two years, with the objective to eventually get to the $50 billion mark. The deal is expected to be formally signed the first week of January after both sides can review the document. Lighthizer will sign along with his Chinese counterpart, Vice Premier Liu He. In exchange, the U.S. has a 25 percent tariff on roughly $250 billion worth of Chinese goods, and a 15 percent tariff on another $120 billion. The Trump administration said the 25 percent duties would remain the same, but the 15 percent tariff would be cut to 7.5 percent. Trump also said negotiations on a “phase two agreement” would begin immediately, instead of waiting until after the 2020 election.^[2]  While the progress has been positively receptive, Senate Minority Leader Chuck Schumer (D-NY) criticized the deal for not addressing China’s “huge structural inequalities, unfair imbalances.” The deal also does not address issues related to intellectual property and government subsidies, and pro-democracy issues rising in Hong Kong, that many members of Congress have sought. Those agreements will likely be much harder to secure.

USTR May Raise Duties on EU to 100 Percent

 When one trade issue appears to be gaining ground, another seems to be taking a step in the wrong direction. That’s the case the European Union (EU) has found itself in this week, as USTR could raise retaliatory tariffs on $7.5 billion of EU imports up to 100 percent. The duties, which currently reside at 10 percent for aircraft and 25 percent consumer goods, would be a response to what the U.S. view that the EU’s failure to comply with World Trade Organization (WTO) rulings in the Large Civil Aircraft dispute. USTR issued a request for comments, essentially, on whether or not to remove tariffs on any products, remove or add any items to the retaliation list, or increase tariffs on products up to 100 percent. The deadline for comment is Jan. 13, 2020. The notice can be read here. The move coincides with the EU’s possible decision to impose tariffs on goods from countries like the U.S. that have failed to match its climate change policies. Currently, the EU imposes a price of roughly $28 per metric ton of CO2 emitted by industries like oil, steel, and paper. Since other major economies including the U.S. have rejected similar measures for their own companies, the EU runs the risk it will make many European companies uncompetitive, and it has sparked calls for a “border adjustment” to put a tariff on imports based on their carbon footprint in their home country. “If you take the same, or comparable, measures there will be no need to correct anything at the border. If you don’t, then of course, at some point, we will have to protect our industries,” said European Commission Executive Vice President Frans Timmermans this week at the U.N. climate conference in Madrid.^[3] 

References

^[1]Rodriguez, Sabrina. Cassella, Megan. “Trump, House Democrats strike deal on updated NAFTA, setting stage for a vote.” Politico Pro. 10 Dec. 2019. https://subscriber.politicopro.com/article/2019/12/trump-house-democrats-strike-deal-on-updated-nafta-setting-stage-for-a-vote-3973566

^[2] Palmer, Doug. Behsudi, Adam. “U.S., China confirm preliminary deal.” Politico Pro. 13 Dec. 2019. https://subscriber.politicopro.com/article/2019/12/china-confirms-preliminary-trade-deal-with-us-1847402