October 16, 2018

New Trade Agreements on the Horizon?

Casie Daugherty

Trade Negotiations

As anticipated, USTR notified the Committees with jurisdiction over trade that they would be pursuing new trade negotiations under TPA authority.

The Administration has long expressed a desire for USTR to negotiate with Japan, the United Kingdom, and the European Union, though the timing of these negotiations had been in question. Unlike early reports indicated, the Philippines was not included in the list of countries that USTR would be pursuing.

It is generally understand that that formal negotiations with the UK will not begin until after they formally split with the EU on March 29, 2019 (and which is clearly stated in the USTR letter), and even then may be delayed depending on whether such a split comes after an agreement between the two is nailed down. Additionally, any discussions with the EU are likely to be impacted by those ongoing negotiations. A formal trade negotiation with the EU has been expected for some time, buoyed in part by President Trump’s meeting with EU Commission President Jean-Claude Juncker in July. It is unclear how much the Administration will seek to use some of the frameworks laid out in the Transatlantic Trade and Investment Partnership (TTIP), on which negotiations were halted in 2016.

Like with the EU, negotiations with Japan will likely have to address the Administration’s stated desire to levy tariffs on automobiles and automotive parts. Additionally, currency manipulation and agriculture will likely be  significant sticking points.

Because the Administration has chosen to negotiate under TPA, they must provide detailed negotiating objectives 30 days before beginning any negotiation. Additionally, negotiations cannot begin for at least 90 days, meaning that January 14, 2019 would be the earliest possible day for such discussions to begin.

USMCA Timeline

Senate Majority Leader Mitch McConnell seemed to throw cold water on the notion that Congress would take up NAFTA 2.0 during the Lame Duck session this year. While always seen as a likely priority for next spring, there were some that had hoped Congressional approval could be completed this year. McConnell said during an interview with Bloomberg this morning that USMCA would be a “next year issue” and pointed to the timing requirements of TPA as the primary reason.

McConnell’s announcement comes days after the U.S. International Trade Commission announced that it had begun its investigation into the impacts of the USMCA, as required by TPA. When ITC announced it was beginning its process, it also laid out a schedule on how stakeholders could inform the process:

301 Exclusion Process

Unlike with the first two lists of products imported from China, USTR chose not to lay out a process by which companies could seek exclusions on the third (and largest) list – which targeted some $200 billion in imports. USTR pointed to the fact that the tariff sits at only 10% currently and won’t be raised to 25% until January as the driving reason. However, as many companies effected have noted, supply chains cannot be easily adjusted in such a short time period.

Therefore, a bipartisan group of 167 members of the House, including Ways and Means Trade Subcommittee Chairman Dave Reichert and a number of his fellow committee members, sent a letter to USTR urging them to reconsider. Whether it will ultimately lead to changes remains unclear, but it is a good first step.

Casie Daugherty

Casie helps to lead the firm’s trade practice, where she covers client needs in relation to NAFTA, tariff action, CFIUS, and other trade-related actions.