The New Democrat Coalition, a caucus of generally pro-free-trade Democrats in the House of Representatives, has not coalesced around the NAFTA replacement, according to J.D. Grom, executive director of the group, speaking Jan. 29 on a panel at the Washington International Trade Association annual conference. "Members are still working through where we're at on the agreement," he said, but they are clear that they will be unhappy if President Donald Trump tries to withdraw the U.S. from NAFTA to force a yes vote on its replacement. "We don't want to be in a hostage situation," he said.
Bipartisan bills were introduced in the House and Senate to give Congress a veto over potential Section 232 tariffs on autos and auto parts and the ability to rescind the tariffs and quotas on steel and aluminum. The push in the Senate is led by Sen. Pat Toomey, R-Pa., who also tried to move a similar bill last year, as well as Sen. Mark Warner, D-Va.
In order for importers to be able to create certificates of origin under the U.S.-Mexico-Canada Agreement, U.S. law will have to change. That's one of dozens of changes to statutes that will need to happen to accommodate the changes between NAFTA and USMCA. The U.S. trade representative shared the six-page outline of the needed changes with Congress late on Jan. 29, fulfilling one of the steps under fast-track consideration of the trade pact. The document suggests that USTR is still seeking a lowering of U.S. de minimis levels specifically for Canada and Mexico (see 1810190043), since those countries did not raise their de minimis levels as much as the U.S. negotiators wished.
Panelists at the annual Washington International Trade Association think there will be a U.S. deal with China that will avoid more tariff hikes, but they disagree on when and what it will mean for the relationship going forward. David Dollar, an expert on U.S.-China economic relations at the Brookings Institution, said that "realistically China is not going to change its system overnight." He scoffed at a deal that includes purchases of U.S. commodities in an effort to shrink the trade deficit. "I see that mostly as a shell game and mostly PR."
The perspectives from Congress, Canada and Mexico -- and a former acting U.S. trade representative -- diverge wildly on how much can be changed in the new NAFTA to garner votes for approval and how difficult it will be to get it passed in 2019. Miriam Sapiro, who was acting USTR and is now with SVC Public Affairs, used the term “lovely miracle” to describe how she’d feel if it passed this year. Rep. Kevin Brady, R-Texas, the ranking member on the House Ways and Means Committee, said it's clear that the metals tariffs on Canada and Mexico -- without quotas -- have to have a date certain to come off before Congress members are really about to start “to count the noses.”
Dispute panels are forming at the World Trade Organization on the Section 301 tariffs the U.S. levied on China and on the retaliatory tariffs Turkey levied on the U.S. in response to U.S. tariffs on Turkish steel and aluminum. China said the tariffs, on about $250 billion worth of its exports, are damaging China's economic interests and the rules-based trading system. The panel on Turkish retaliation is the sixth panel formed on retaliation for the metals tariffs, which are applied around the world.
The Congressional Budget Office says that the fact that the administration imposed additional tariffs on 12 percent of all imports will reduce GDP -- after adjusting for inflation -- by about 0.1 percent each year through 2029, assuming all the tariffs stay on. The projection also assumes that the 10 percent tariffs on about $200 billion in Chinese imports do not rise to 25 percent. "Tariffs reduce domestic GDP mostly by raising the prices paid by U.S. consumers and businesses, which reduces the purchasing power of domestic consumers and increases the cost of business investment," the CBO wrote in a report released Jan. 28. They said reduced exports, due to retaliatory tariffs, also contribute to the economic drag, though both are partly offset by increases in domestic production.
Sen. Ron Johnson, R-Wis., and a half-dozen Republican colleagues told President Donald Trump that the decline in the stock market since October is due partly to higher tariffs, and they used his own words against him to argue that steel and aluminum tariffs should be lifted on Canada and Mexico. Their letter, sent Jan. 28, starts by quoting a Trump tweet from March 2018 that said steel and aluminum tariffs in North America "will only come off if a new & fair NAFTA agreement is signed." They noted that he signed the new NAFTA at the end of November, but that the tariffs haven't been lifted.
Trade ministers from 49 countries and the European Union said they will start World Trade Organization negotiations on electronic commerce, and U.S. Trade Representative Robert Lighthizer lauded the news on Jan. 25. "The United States is pleased that the initial exploratory work on digital trade issues at the WTO in 2018 was productive. The digital economy is a powerful force for global economic growth. The United States is committed to seeking a high-standard agreement that creates strong, market-based rules in this area and reduces the barriers around the world that threaten to undermine the growth of the digital economy, including restrictions on cross-border data flows and data localization requirements," he said.
A House bill that would limit the ability of the president to unilaterally raise tariffs or block imports without congressional approval was reintroduced by Rep. Warren Davidson, R-Ohio, and 10 co-sponsors, including prominent members of the Freedom Caucus. Davidson calls the bill the Global Trade Accountability Act, and he first introduced it in March 2018. Its likelihood of becoming law is slim, because Senate Majority Leader Mitch McConnell, R-Ky., has repeatedly said he will not bring forward bills he expects the president would veto.