US-China olive twigs exchanged

by Trade Correspondent L.C.

The US-China trade war seemed to slightly ease this week amid speculation that both sides wish to spare their economies further tariff escalation. Beijing is now proposing two negotiating tracks: one for strictly trade matters – which Vice Premier Liu He would lead – and one for national security matters. The US response isn’t clear.

Both sides exchanged olive twigs last week. President Xi made the first gesture. The Commerce Ministry’s State Council Tariff Commission on September 11th named sixteen exports that it will exempt from retaliatory tariffs. The US responded the same day: President Trump said he will delay for two weeks a scheduled tariff increase on List 1-3 goods (meat and fish).

Beijing then made a second gesture that President Trump on September 12^th relayed to the US public. “It is expected that China will be buying large amounts of our agricultural products!” Trump tweeted. Beijing will now be allowing the purchase of some US agricultural products — including soybeans and pork — by suspending the 25%-35% tariffs on them. Private sector pork purchases have already resumed. Pork is China’s favorite meat, but its hog herd has been devastated by African swine fever. The re-opened pork trade will be greatly appreciated both by Chinese consumers and hard-pressed US hog farmers.

The Hong Kong crisis could throw the US-China negotiations off track, however. Hong Kong protesters have been calling on Congress to pass the Hong Kong Human Rights & Democracy Act, which would sanction Chinese officials who abuse rights in Hong Kong. The Act has bipartisan support and is gaining co-sponsors. The Senate Foreign Relations Committee is moving it toward a vote. The bill would require the government to review Hong Kong’s level of political autonomy as guaranteed by the 1992 US-Hong Kong Policy Act to determine if it should continue to have the special trade status granted by the act.

Progress toward USMCA passage

There also seems to have been progress last week toward getting the USMCA over the congressional finish line. US Trade Representative Robert Lighthizer on September 11th submitted his official counterproposals for dealing with the main Democratic issues – labor, environment, enforcement, and drug prices. His document is believed to have directly addressed Democrats’ concerns. It was submitted to the nine-member House USMCA Democratic Working Group that House Majority Leader Nancy Pelosi appointed to work with Lighthizer.

Just before delivering the document, Lighthizer met with the Republican USMCA whip team tasked with harvesting votes for the pact. Republican Whip Steve Scalise (R-LA) reportedly believes that the needed Republican votes can be delivered. USMCA passage is seen as vital for moving ahead on trade talks with China, Japan, and other countries and is the President’s top legislative priority. Lighthizer himself probably agrees with some of the Democrats’ demands. His earlier career was as a lawyer representing labor unions and heavy industry, once the Democratic Party base, and he is as committed to tough trade enforcement, especially for labor standards, as are most Democrats.

New EU commissioners appointed

On September 13^th, European Commission President-Elect Ursula von der Leyen unveiled her picks for the new European Commission. She chose Phil Hogan of Ireland as trade commissioner and Margrethe Vestager of Denmark as “Executive Vice President for Europe Fit for the Digital Age.” Vestager is a holdover from the previous Commission and is hostile to US tech giants.

Hogan is an experienced trade negotiator and is expected to continue Cecilia Malmstrom’s successful push for new trade agreements. Regarding Brexit, Hogan has been highly critical of the UK’s decision to leave and is expected to take a tough line when he leads the negotiations for a post-Brexit UK-EU trade arrangement. He is a strong supporter of the Irish backstop – that Brexit must not lead to a hard Ireland-Northern Ireland border. But despite Ireland’s dislike for Brexit, it is eager to have a workable trade relationship with the UK and minimal disruption.

Hogan will have many other matters on his plate beyond the UK relationship. He will be responsible for negotiating any US-EU trade deal. He strongly supports Brussels’ position against including agriculture in the talks. The US is so far insisting that farm products be included. He will also have to navigate all the other flashpoints in US-EU trade: disputes over aircraft subsidies, threatened US Section 232 tariffs on European cars and parts, and ending the Section 232 tariffs on European steel and aluminum.

Ex-Im Bank likely to be renewed

The battle over reauthorization of the US Export-Import Bank is heating up as the September 30th expiration of its current charter approaches. The National Association of Manufacturers (NAM) is leading the forces demanding that Congress act quickly to reauthorize the charter. The Competitive Enterprise Institute (CEI) and other free-market groups are leading the opposition. The CEI charges that

• the Bank’s loans go mostly to large corporations which can easily access private financing at market rates; and
• the loans amount to a taxpayer subsidy, corporate welfare, and crony-capitalism.

President Trump, despite campaigning against “the Swamp,” has not opposed corporate subsidies and cronyism when they can be rationalized as protecting US jobs. He wants the Export-Import Bank reauthorized, and the legislation to do so is expected to pass. A reauthorization bill was introduced in July by Sens. Kevin Cramer (R-ND) and Kyrsten Sinema (D-AZ). It would reauthorize the bank for ten years and set a $175 billion cap on its financial exposure over seven years. Bank opponents concede the legislation is likely to pass, but they object to its expansive nature – its ten-year life and large exposure cap.

Founders Broadsheet also has a minor presence on Facebook and Twitter.