Biden says he would renegotiate TPP Presented by Semiconductor Industry Association

With help from Sabrina Rodriguez and Alex Panetta

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Quick Fix


— Joe Biden said he would renegotiate the TPP but still sees it as a necessary counterweight to China. The former vice president vigorously supported the deal when it was negotiated by the Obama administration.

— Top trade officials from the U.S. and Japan meet today in Washington as the administration looks at ways to get a mini trade deal without requiring congressional approval.

— Senate Finance Chairman Chuck Grassley wants President Donald Trump to be patient with House Democrats on USMCA passage.

IT’S THURSDAY, AUG. 1! Welcome to Morning Trade, where your host is open to the idea of a quiet month ahead but knows there’s always something brewing on the trade beat. Got any tips to share? Let me know: [email protected] or @abehsudi.

Driving the Day

BIDEN SAYS HE WOULD RENEGOTIATE TPP: Biden said Thursday night that if elected president, he would renegotiate the Trans-Pacific Partnership rather than give China free rein to write the rules of trade for the 21st century.

“I would not rejoin the TPP as it was initially put forward. I would insist that we renegotiate,” Biden said during the Democratic debate in Detroit. “Either China’s going to write the rules of the road for the 21st century on trade or we are. We have to join with the 40 percent of the world that we had with us and this time make sure that there’s no one sitting at that table doing the deal unless environmentalists are there and labor is there.”

As vice president, Biden was a vocal supporter of the TPP, which the Obama administration insisted had the strongest labor and environmental provisions of any trade agreement to date. However, most labor and environmental groups opposed the pact, which they feared would move U.S. jobs to lower-income countries like Vietnam.

Tariff criticism: During the debate, Rep. Tulsi Gabbard (D-Hawaii) defended her opposition to the TPP and said she would end Trump’s tariffs on China because they were imposed “without any clear strategic plan” and have had a “devastating effect” on manufacturing and farmers. Sen. Kamala Harris (D-Calif.) also criticized the tariffs for raising costs on consumers.

USMCA under attack: New York Mayor Bill de Blasio attacked Trump’s new U.S.-Mexico-Canada Agreement as a “dangerous” job-killing update of NAFTA and asked Biden whether he opposed it. Biden answered “yes.” A Biden spokesperson clarified that the former vice president believes the pact as written is a gift to pharmaceutical companies, and it should be renegotiated to strengthen its labor and environmental provisions so that they’re fully enforceable, the aide added.

U.S.-JAPAN TALKS UNDERWAY: Japanese Economic Revitalization Minister Toshimitsu Motegi is in Washington today for talks with U.S. Trade Representative Robert Lighthizer on a limited agreement covering agriculture, autos and potentially digital trade. The Trump administration is eager for a deal to make up for lost farm sales as result of pulling out of the TPP.

Industry officials following the talks say the administration also wants an agreement that does not have to be approved by Congress. The 2015 trade promotion authority bill allows Trump to eliminate tariffs of 5 percent or less without congressional approval. However, he can only reduce any tariff above 5 percent by half without going through Congress.

That suggests the agreement could not completely phase out the 25 percent U.S. tariff on trucks, as was done over 30 years in the TPP agreement. However, Japan may be willing to accept such an arrangement if the deal spares it from new Trump tariffs on its auto exports.

Part of the rush to get an agreement is because any deal would have to be approved by the Japanese Diet. Unless that happens this year, action could be delayed well into 2020, meaning farmers might not see much benefit before next year’s presidential election.

GRASSLEY TO TRUMP: KEEP YOUR COOL ON USMCA: Grassley is optimistic that USMCA will be passed this fall — as long as Trump doesn’t blow it up. The Iowa Republican on Wednesday urged the president to be patient and not push USMCA until House Speaker Nancy Pelosi is ready for it.

“It’s very necessary the president hold his patience because nothing is going to happen if Pelosi doesn’t want it to happen,” Grassley said in a briefing with reporters.

“So far, we’ve had patience and we better keep our patience, and so somebody in the White House that doesn’t have common sense better not push the president to do something erratic,” he said.

Solving the issues: Negotiations between the nine House Democrats tapped to secure changes to USMCA and Lighthizer are expected to continue this month. Hill and USTR staff will be shuttling proposals back and forth during the recess, with the goal of moving the process closer to a deal by the time lawmakers return on Sept. 9.

Pelosi has regarded enforcement as the “overarching issue” with the pact — and one possible solution that has repeatedly come up is a proposal from Sens. Ron Wyden and Sherrod Brown that would require Mexico to conduct inspections of factories accused of poor working conditions. Inside U.S. Trade reported Wednesday that USTR is crafting a “rapid response” enforcement approach that pulls from the proposal. Grassley called the Wyden-Brown proposal “a legitimate approach.”

FED WATCHES AND WAITS ON TRADE: Federal Reserve Chairman Jerome Powell said trade policy uncertainty was one factor that led the central bank to announce an interest rate cut of one-quarter of a percentage point — its first since the 2008 financial crisis. But Powell said the “mechanical effects” of the tariffs on the economy have been quite small.

“They’re not large as it relates to the U.S. economy,” he said in a press conference. “The real question is what are the effects on the economy through the confidence channel.”

Confidence wanes: Ongoing uncertainty about the direction of Trump’s trade policy is making some companies cautious about capital spending, Powell said. Still, he couldn’t say if continuing trade tensions would lead to another rate cut.

CANADA LENDS A HAND TO MEXICO ON LABOR: Canadian Labor Minister Patty Hajdu will visit Mexico today to speak with her counterpart, Luisa María Alcalde, about ways Canada can help Mexico implement its landmark new labor law. Hajdu is also meeting with union and employer representatives before returning home Friday.

This is likely welcome news for House Democrats, who have expressed the need for all hands on deck to help Mexico with capacity building and implementation of the labor reforms. Democrats have praised Mexico for the large undertaking but remain concerned about the feasibility of making the changes.

Under the new law, hundreds of thousands of protection contracts must be revisited within four years. Another area of concern is whether Mexican President Andrés Manuel López Obrador's government will have the funds necessary to implement the labor reform law. López Obrador has repeatedly called for more austerity in the 2020 budget, which will be released in September and passed in November.

Here to help: Foreign Affairs Minister Chrystia Freeland committed Canada’s help months ago. One Canadian official told Pro Canada’s Alex Panetta on Wednesday that what Mexico needs is technical expertise on collective bargaining and worker rights — for example, on how to certify a union and how to investigate labor practice complaints. The official said the U.S. administration is aware of Canadian efforts and the countries are cooperating by sharing information.

Rep. Earl Blumenauer, chairman of the House Ways and Means Trade Subcommittee, said Friday he’d spoken with Canada’s ambassador about how both countries could help Mexico. Canada “ought to be in the mix and they can be part of solutions in terms of capacity building,” he said.

U.S. TEXTILE INDUSTRY NOT A FAN OF MONGOLIA LEGISLATION: A group representing U.S. textile producers say they have “serious concerns” about proposed legislation that would give Mongolia duty-free access for cashmere wool products. The National Council of Textile Organizations said in a statement that the Mongolia Third Neighbor Trade Act would harm U.S. producers of cashmere fiber, yarn, fabric and apparel and open a backdoor for China to benefit from tariff-free access.

“Various versions of the legislation allow for 50 percent of the value of the finished textile or apparel item to be produced outside of Mongolia,” NCTO said. “Due to proximity and well-established relationships with Chinese manufacturers, China will certainly partner with Mongolia in the production of garments that receive duty-free treatment under this proposal.”

The industry group also raises alarm over the fact that the bill, if enacted, would be the first time the U.S. would give a single country tariff elimination on unlimited quantities of apparel. NCTO said that would require a waiver at the World Trade Organization and lead other countries to demand the same treatment.

International Overnight

— Sens. Tammy Baldwin (D-Wis.) and Josh Hawley (R-Mo.) introduced a bill to realign the value of the U.S. dollar, POLITICO Pro reports.

— Sen. Sheldon Whitehouse (D-R.I.) introduced a bill to revamp the tariff exclusion process, POLITICO Pro reports.

— Sens. Rob Portman (R-Ohio), Tim Scott (R-S.C.) and Johnny Isakson (R-Ga.) want Lighthizer to exclude 96 tariff lines from the proposed fourth list of Chinese goods targeted with tariffs.

— The White House says China confirmed its commitment to increase ag purchases, POLITICO reports.

— Mexico threatens to ramp up border inspections of U.S. farm goods in tomato fight, POLITICO Pro reports.

— Two former top staffers to Senate Majority Leader Mitch McConnell lobbied Congress and the Treasury Department on a Russia-backed aluminum mill in Kentucky, POLITICO reports.

— A Chinese billionaire was indicted in U.S. court for evading tariffs on aluminum, The Wall Street Journal reports.

— The Trump administration butts heads with U.S. drugmakers over a plan that would allow importation of cheap medicines from Canada, POLITICO reports.

— Two private surveys show a contraction of manufacturing in the Midwest, Reuters reports.

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