USTR won’t say if it supports GSP renewal Presented by Semiconductor Industry Association

With help from Doug Palmer

PROGRAMMING NOTE: Morning Trade will not publish from Dec. 25-Jan. 1. Our next Morning Trade newsletter will publish on Tuesday, Jan. 2.


USTR WON’T SAY IF IT SUPPORTS GSP RENEWAL: The Office of the U.S. Trade Representative is declining to say whether it supports renewal of the Generalized System of Preferences, which expires at the end of this year, or approval of a new Miscellaneous Tariff Bill. Both pieces of legislation unilaterally waive tariffs on imported goods, an action that’s at odds with the Trump administration’s preference for “reciprocal” trade relationships.

The three-year cost of both programs is estimated at $3.2 billion. That breaks down to $2.4 billion for GSP and $800 million for MTB. Supporters had hoped to attach the two bills to a larger piece of legislation in the waning days of the current congressional session. However, it’s unclear whether that’s going to happen.

A USTR fact sheet shows that India, Thailand and Brazil are the three largest beneficiaries of the GSP, accounting for more than half of the $18.95 billion in total imports under the program in 2016. The single largest product -- $1 billion worth of motor vehicle parts -- stands out at a time when the Trump administration is trying to revamp NAFTA to boost auto and auto parts production jobs in the United States. The only time USTR has mentioned the program over the last year was to announce in October a new enforcement initiative to ensure countries were meeting their eligibility criteria.

GSP was last renewed in 2015, as part of a larger bill that also extended trade benefits for Haiti and African countries. Before that GSP was expired for two years, and supporters are concerned it could face a similar fate again without action soon.

IT’S THURSDAY, DEC. 21! Welcome to Morning Trade, where your host thinks the “ selfiecchino” is going to really take off in 2018. Got any trade news to share? Let me know: [email protected] or @abehsudi.

BOMBARDIER FINAL DUTIES SET HIGH STAKES FOR ITC RULING: The Commerce Department’s decision to set combined anti-dumping and countervailing duties of 292 percent on imports of Bombardier’s C-Series aircraft creates a high-pressure situation for the U.S. International Trade Commission, which is due to make its final determination by Jan. 26.

All eyes are on whether the ITC comes to the conclusion that new C-Series aircraft is a so-called like product that would directly compete against petitioner Boeing’s 737 Max 7 aircraft. The case is targeting imports of 100- to 150-seat commercial aircraft imports from Canada. The U.S. aerospace giant argues that the C-Series would be a direct competitor with an advantage of unfair state support. Bombardier has said there’s little to no overlap with the C-Series, which is slightly smaller than the Boeing aircraft. The Canadian aircraft company has entered into a contract to sell at least 75 of the planes to Delta Air Lines.

“It is beyond all reason that Boeing could be threatened with injury in a market segment it exited over a decade ago,” Canadian Foreign Minister Chrystia Freeland said in a statement Wednesday.

‘Divorced from reality’: Boeing said the final duties validate its complaints against “pricing that has harmed our workforce and U.S. industry.” Bombardier, however, said the Commerce decision was “divorced from reality.”

“The fact is that the C-Series simply does not threaten Boeing,” Bombardier Vice President for Communications and Public Affairs Mike Nadolski said in a statement. “Boeing did not compete in the Delta campaign. It has not made a plane sized to Delta’s needs for many years, since it stopped producing the 717 and 737-600. Moreover, Boeing has acknowledged that it has oversold its 737 production capabilities and has a backlog of more than 4,300 aircraft orders that stretches years into the future.”

U.S. TARGETS INDIA FOR WTO RETALIATION: The United States will pursue retaliation against India after declaring this week that New Delhi has failed to comply with a World Trade Organization ruling faulting the government’s domestic content requirements in its solar industry.

“The United States and India agreed that the reasonable period of time for India to implement the DSB's [Dispute Settlement Body] recommendations and rulings would expire on 14 December 2017,” the U.S. said in a communication circulated Wednesday. “In the view of the United States, India failed to bring its measures into compliance with the recommendations and rulings of the DSB within that period.”

The case marks the first opportunity for the Trump administration to retaliate against a country through the WTO. Retaliation can include raising tariffs on a range of products imported from India. Any final action is subject to an arbitration process. The DSB has 30 days after the reasonable period of time to authorize retaliation unless the matter is sent to arbitration.

JAPAN GIVES GENERIC FOOD NAMES A CHANCE: U.S. food producers breathed a collective sigh of relief this week after Japan said food names like parmesan and bologna would remain generic terms, countering the European Union’s demands in a free trade agreement that Tokyo enforce the exclusive use of European geographical names for a long list of products.

"Japan took the right steps in preserving the vast majority of terms that were of concern to CCFN members worldwide, and in doing so helped maintain the choices and fair competition that will benefit Japanese consumers," said Jaime Castaneda, who heads the Consortium for Common Food Names, a group of U.S. food producers that is fighting against the EU’s system of geographical indications.

Japan has said it would continue generic name recognition for brie, camembert, cheddar, edam, emmental, gouda, grana, mozzarella, parmesan, pecorino, provolone and romano. Meat names like bologna, bratwurst and mortadella would also be recognized as generic, as well as varietal terms such as "kalamata" for olives and "valencia" for oranges. Other terms, including asiago, feta, fontina and gorgonzola, will get a transition period of seven years before EU producers have sole rights to those names.

NEW MINERAL STRATEGY WOULD EXPLORE TRADE OPPORTUNITIES: President Donald Trump signed an executive order Wednesday that will task the administration with finding a new strategy to ensure “secure and reliable supplies of critical minerals.”

“The United States is heavily reliant on imports of certain mineral commodities that are vital to the nation's security and economic prosperity,” the EO states. “This dependency of the United States on foreign sources creates a strategic vulnerability for both its economy and military to adverse foreign government action, natural disaster, and other events that can disrupt supply of these key minerals.”

The EO directs the Interior secretary to develop a list of critical minerals within 60 days. Within 180 days of the list’s publication, the Commerce Department, in coordination with Defense, Interior, Agriculture, Energy and USTR, is required to submit a report outlining a strategy for reducing reliance on critical minerals, developing recycling and reprocessing capabilities and easing regulation for mining and refining. The report will also present options for increasing access to critical minerals “through investment and trade with our allies and partners.”

TRADE NOMINEES STILL IN LIMBO: As 2017 winds down, the Trump administration is still waiting for Senate action on at least seven nominees for key trade positions at the Commerce Department and USTR. U.S. Trade Representative Robert Lighthizer raised the issue with Finance Committee Republicans on Tuesday and Chairman Orrin Hatch said he shared the administration’s desire to see progress, Morning Trade has learned.

However, Senate Minority Leader Chuck Schumer has a hold on two nominees, Gilbert Kaplan and Nazak Nikakhtar, for Commerce Department positions, while Sen. Jeff Flake is blocking a Senate vote on the nomination of Gregory Doud to be chief U.S. agricultural negotiator. That leaves Jeffrey Gerrish, who has been nominated for a deputy USTR slot, as potentially ready for floor action. But there’s still no word from Senate Majority McConnell’s office on which nominations might move before Congress adjourns for the year.

The Finance Committee still has not held hearings on three other nominees: Dennis Shea to be ambassador to the WTO, C.J. Mahoney to be deputy USTR and Jeffrey Kessler to be assistant secretary of Commerce for enforcement and compliance. That means it will be 2018 before those nominations are ready for floor votes.

EU LAUNCHES NEW TRADE REMEDY LAW WITH CHINA REPORT: The EU’s new anti-dumping and countervailing duty law went into force Wednesday, laying out a new process for handling trade cases involving countries with “significant state induced market distortions.” The new law was a response to China’s challenge that the EU was not meeting Beijing’s expectations that its agreement for WTO membership requires other countries treat it as a market-driven economy for the purpose of anti-dumping cases.

The new methodology sets up a process in which the European Commission will now need to show that distortions exist in a market before it can calculate anti-dumping duties using prices from another market. To that end, the Commission published on Wednesday a 466-page report concluding that such market-distorting conditions are given in the case of China: “The [Communist] party and the state retain … a leading role in the economic governance” and their “involvement … go[es] clearly beyond broad macroeconomic control,” the document says. Features such as “dominant state-ownership,” an “extensive and sophisticated economic planning system” as well as “an interventionist government policy” are “lead[ing] to non-market based resource allocations and to the creation of overcapacities in many sectors,” the report reads.

INTERNATIONAL OVERNIGHT

— Canadian auto sector representatives criticize Canadian business groups for pushing the government to join TPP-11, The Canadian Press reports.

— South Korea warned that it will respond to unfair trade actions by the U.S. at the WTO, Yonhap reports.

— British Environment Minister Michael Gove said the United Kingdom won’t compromise with the United States on food standards, The Guardian reports.

THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected] and @abehsudi; [email protected] and @mmcassella; [email protected] and @tradereporter; [email protected] and @jmlauinger; and [email protected] and @pjoshiny. Also follow us @POLITICOPro and @Morning_Trade.

Follow us on Twitter Pradnya Joshi @pjoshidc



John Yearwood @john_yearwood



Megan Cassella @mmcassella



Doug Palmer @tradereporter



Sabrina Rodriguez @sabrod123