Trump slams Canada after talks falter Presented by Semiconductor Industry Association

With help from Hans von der Burchard

TRUMP SLAMS CANADA AFTER TALKS FALTER: President Donald Trump blasted Canada on Saturday, one day after his administration failed to conclude talks with the United States’ northern neighbor on the terms of a NAFTA agreement. He also warned Congress not to “interfere” with the negotiations and repeated his threat to terminate the current NAFTA pact unless a new deal is made.


“There is no political necessity to keep Canada in the new NAFTA deal,” Trump said in a series of two tweets. “If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off… Remember, NAFTA was one of the WORST Trade Deals ever made. The U.S. lost thousands of businesses and millions of jobs. We were far better off before NAFTA — should never have been signed. Even the Vat Tax was not accounted for. We make new deal or go back to pre-NAFTA!”

Try, try again: Canadian Foreign Minister Chrystia Freeland will be back in Washington on Wednesday to renew efforts to resolve politically difficult issues, like dairy market access and the fate of NAFTA’s Chapter 19, which created a forum for NAFTA countries to attempt to overturn anti-dumping and countervailing duties that they believe were unfairly applied. Canada wants to preserve the provision, which it has used aggressively in the past against U.S. decisions on softwood lumber, while the Trump administration wants to eliminate it.

After negotiations ended abruptly on Friday, House Ways and Means Chairman Kevin Brady reserved judgment on the evolving NAFTA 2.0 framework, but also appeared to put the onus on Canada to close the deal with Trump. “I look forward to carefully analyzing the details of what has been agreed to and consulting with my colleagues and constituents to determine whether the new proposal meets the high-standard trade priorities set out by Congress under Trade Promotion Authority,” the Texas Republican said. “I also strongly urge Canada to step up and demonstrate that it can take on the ambitious obligations of the agreement with the aim of concluding a modern, seamless three-way agreement.”

Keep Huey, Dewey and Louie together: Business groups strongly disagreed with Trump’s insistence that there is “no political necessity” to keep Canada in the deal. “If you break off one member of this agreement, you break it all, and that would be bad news for U.S. businesses, for American jobs, and for economic growth,” U.S. Chamber of Commerce President and CEO Thomas Donohue said. “Anything other than a trilateral agreement won’t win congressional approval and would lose business support.”

A big ‘but’: The Business Roundtable said it was encouraged by some details of the U.S.-Mexico agreement, including in areas like intellectual property and digital trade. But the group said it remains “concerned about reported provisions that would weaken investment protections, limit access to dispute settlement procedures, and require a sunset clause. Business Roundtable also believes that forfeiting this three-nation partnership would destabilize North American supply chains, jeopardize U.S. jobs and undermine economic growth.”

IT’S TUESDAY, SEPT. 4! Welcome to Morning Trade, where both your hosts were a little bit sad that Morning Trade was on hiatus last week in the midst of all the NAFTA action, but not sad enough to actually suggest canceling the break! Now that we're back, got any news tips? Let us know: [email protected] or [email protected]

LABOR’S LABORIOUS PATH TO YES ON NAFTA: It would be a historic achievement if Trump could reach a final NAFTA deal that earns support from labor unions, and in some ways he’s already moving in that direction. NAFTA has been patient zero in a string of trade deals that unions have accused of destroying U.S. jobs and wages, but the administration has a long way to go before it scores a win with organized labor.

Key to labor support is making sure any final deal includes Canada, where many unions have members. Also, labor is looking to be able to hold Mexico’s feet to the fire if it violates any of the agreement’s rules on worker rights.

Enforcement questions: Trump’s notification letter to Congress on Friday said labor rules will be “strictly enforced.” But sources close to the talks said the administration is still grappling with how it can press Mexico on enforcing tougher labor standards. One idea under consideration would involve including a provision — possibly in a legislative package required to enact the deal — that would allow unions to directly petition for trade sanctions. Those penalties would be imposed under the same legal authority Trump used to hit China with tariffs, sources said.

U.S. Trade Representative Robert Lighthizer is also being urged to include in the legal text of any final deal a provision that would require goods imported from Mexico to be certified as having been manufactured under conditions that meet the deal’s labor rules, sources said. Adam has more here.

Labor not loving Trump: Despite their shared hatred of NAFTA, labor leaders haven’t had many good things to say about the president overall. On Sunday, AFL-CIO President Richard Trumka said Trump has not done enough to help American workers. Trump shot back on Twitter, saying Trumka “represented his union poorly on television.”

“Some of the things he said were so against the working men and women of our country, and the success of the U.S. itself, that it is easy to see why unions are doing so poorly. A Dem!” Trump wrote.

ACCOMMODATING MEXICO’S TIMELINE: The Trump administration’s push to notify Congress on Friday of its intent to sign a trade deal with Mexico in late November appeared to have been motivated largely by Mexico’s political calendar, because it would allow the U.S., Mexico and potentially Canada to sign an agreement before Mexican President Enrique Peña Nieto’s last full day in office on Nov. 30. USTR did not respond Monday when asked by email why it was important, from a U.S. perspective, that the signing take place before incoming Mexican President Andrés Manuel López Obrador takes office on Dec. 1.

But one former U.S. trade official speculated that accommodating Mexico’s political calendar — and AMLO’s wish to have a new agreement signed before he takes office — may have helped the administration win concessions that it might not have been able to achieve otherwise.

A fast-track problem? Still, it currently leaves USTR with a half-complete NAFTA pact after the administration told Congress last year that it planned to renegotiate the deal with all three countries — and that potentially opens the door for lawmakers to push to deny the administration “fast-track” privileges for congressional consideration of any deal that does not include Canada.

From the administration’s perspective, a senior administration official told reporters during a call on Friday, there would be “risks in interpreting the [trade promotion authority] statute to require that, if USTR were to begin, say, with two or three countries, then USTR is required to sign an agreement with all of those countries, no matter what any of the countries were asking for,” the official said.

“That strikes me as kind of an odd reading of the statute. But, at the end of the day, obviously it’s going to be up to the Congress. All I can say is that, up to this point, we feel that we are in full compliance with the statute and that we’ve been very transparent with the Congress on our intentions. And that would be our expectation going forward as to what we would do,” the senior administration official added.

Meanwhile, the administration has alerted the private sector trade advisory committees to begin preparing their reports on the U.S.-Mexico agreement, since those are due in 30 days, and has also alerted the U.S. International Trade Commission, “which has to prepare its own report regarding the likely impact of the agreement,” the official said.

KORUS AMENDMENTS RELEASED: USTR and South Korea’s Ministry of Trade, Industry, and Energy on Monday published the outcomes of negotiations to amend and modify the U.S.-Korea Free Trade Agreement, nearly six months after the two countries announced they had reached a deal. The publication follows a letter that Sen. Ron Wyden, top Democrat on the Finance Committee, and Sen. Robert Menendez, ranking member on the Foreign Relations Committee, sent in late July complaining that details of the revised KORUS pact and several steel and aluminum agreements the administration negotiated had not been transmitted to Congress, as required by law.

USTR said publication followed completion of U.S. domestic consultation procedures in August and noted that a number of steps still must be taken before the changes take force.

“Korea will now initiate the next step in its own domestic procedures, which is to open for public comment the provisional Korean translations of the outcomes to amend the KORUS Agreement,” USTR said. “Once complete and translations are certified by both governments, the documents may then be finalized for signature, to be followed by further procedures in both countries as needed to bring the outcomes into force.”

Where are the currency provisions? One item missing from the documents released Monday was a new currency agreement the two countries had announced. Neither USTR nor the Treasury Department responded Monday to a request for information about the status of the currency pact, which USTR said in March was still being finalized with South Korea’s Ministry of Strategy and Finance.

The currency agreement, in the form of a memorandum of understanding, contains “robust provisions to prohibit competitive devaluation and exchange rate manipulation in order to promote a level playing field for trade and investment. Strong commitments on transparency and accountability are included in the provisions,” USTR said at the time.

HAS CHINA RULED OUT A CURRENCY REALIGNMENT PACT? An off-the-record discussion of U.S.-China trade relations at the Center for Strategic and International Studies last week was so hush-hush that reporters were warned not to bring recorders — and were even jokingly threatened with being frisked upon entering the room.

So, imagine our surprise on Friday morning, when the Chinese embassy released a copy of remarks Ambassador Cui Tiankai made at the event. He declared China “is always ready to engage in serious, substantive and pragmatic negotiations” to resolve bilateral concerns, but will not give in to U.S. pressure tactics to change its trade practices or allow the Trump administration to force it to revalue its currency.

“I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China,” Cui said, referring to a 1985 agreement between France, West Germany, Japan, the U.S. and the United Kingdom to depreciate the U.S. dollar in relation to the Japanese yen and the German Deutsche Mark by intervening in currency markets. “They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation.”

Trump recently accused both China and the EU of “manipulating their currencies … while the dollar gets stronger and stronger with each passing day.” A stronger dollar makes its harder for Trump to achieve his goal of significantly reducing the trade deficit because it has the effect of making U.S. goods more expensive in foreign markets, while making imported goods cheaper in the United States.

U.S. BEEF BACK ON THE EU’S MENU: The European Commission on Monday proposed launching talks with the U.S. on a new quota for American beef exports into Europe, which is supposed to settle a longstanding dispute at the World Trade Organization.

The proposed mandate will have to be approved by EU countries. It comes as an olive branch to Trump after he and European Commission President Jean-Claude Juncker in July reached a fragile truce in the transatlantic trade war.

Brussels is looking to renegotiate an annual beef quota of 45,000 tons, which was granted to the U.S. in 2009 after the EU had lost a WTO dispute over its ban of hormone-injected beef. The quota, under which only hormone-free beef can be traded tariff-free, was seen as a mutually acceptable solution back then. American farmers, however, have argued that the deal hasn’t worked out for them because other countries, mainly Australia and Uruguay, were also given access to the quota under WTO rules and quickly took over large shares of it.

If no solution is found, the U.S. could impose a 100 percent tariff on about 90 European products, affecting millions of dollars of trade. The Commission reiterated on Monday that beef quota negotiations won’t mean that agriculture will become part of planned broader transatlantic trade talks: “Agriculture is outside of the scope of tariff discussions which President Trump and President Juncker agreed to; we are not talking here about negotiating additional quotas or anything like that,” said a spokesperson.

Lighthizer expected in Brussels: The top U.S. trade negotiator will probably be in Brussels next week for preparatory trade talks with EU trade chief Cecilia Malmström, ahead of the meeting of G20 trade ministers in Argentina from September 14-15, Morning Trade hears. Neither the Commission nor USTR has confirmed dates for the visit, which Malmström announced last week.

ICYMI: MEXICO LAUNCHES ANTI-DUMPING CASE ON ALUMINUM FOIL: The main U.S. aluminum industry group sent up a cheer last week after Mexico initiated an antidumping investigation on imports of certain Chinese aluminum foil.

“The North American aluminum market is highly integrated, and it is vital the region work together to combat unfair trade practices and enforce rules-based trade,” Aluminum Association President and CEO Heidi Brock said in a statement. “The U.S. aluminum industry has already seen real results from targeted and durable trade enforcement actions, and we are glad to see trading partners like Mexico demonstrate their commitment to rigorous and timely enforcement of global trade rules.”

In other aluminum news: The Beer Institute made a last-ditch effort on Friday to persuade the Trump administration to drop tariffs on aluminum imports from Canada and Mexico as part of a revised NAFTA deal. “Over 60 percent of the beer consumed in the United States is packaged in aluminum cans or bottles. There is simply not enough aluminum for cansheet produced domestically to fill our need of this commodity. As a result, the beer industry must import aluminum, and most of those imports come from Canada,” the group’s president and CEO, James McGreevey, said in a letter to Lighthizer.

INTERNATIONAL OVERNIGHT

— New data shows that small Chinese manufacturers are taking a beating as the U.S.-China trade war escalates, the South China Morning Post reports.

— U.S. companies are rethinking their Chinese supply chains as the trade war rages, the Financial Times reports.

— Trump canceled his Labor Day plans to make calls on trade and other international matters, Bloomberg reports.

— Chinese auto parts makers brace for a fresh round of tariffs, Bloomberg reports.

— Singapore has urged the U.S. to stay engaged in the region after Trump announced he would send Vice President Mike Pence to the ASEAN summit, Kyodo reports.

— Asian countries negotiating the Regional Comprehensive Economic Partnership hope to reach a “substantial conclusion” to the deal when ASEAN leaders meet in November, The Straits Times reports.

— Ivory Homes, Utah’s largest homebuilder, said higher lumber, steel and aluminum costs from the trade war have already increased its average home prices by $5,000 to $9,000, the Salt Lake Tribune reports.

On the housing front, lapsed rules on U.S.-Canadian lumber trade have boosted costs by nearly 60 percent since the start of last year, according to a top official with Ivory Homes, Utah’s largest homebuilder. In an interview, Michael Parker, vice president of public affairs and senior economist for Ivory Homes, said the rises in

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