#1 – SPEAKER RYAN: NAFTA TPA CLOCK NEEDS TO START THIS THURSDAY
• The biggest story in trade last week came when Speaker Ryan laid down a Thursday, May 17th deadline for USTR to send Congress a notification of intent to sign a new NAFTA deal in order for Congress to consider the deal this calendar year. The comments came in response to a question at a Rippon Society event (see video above). While there was initially some ambiguity about whether the Speaker was indicating a completed deal or just a notification to sign was required by Thursday, his spokeswoman later clarified that it was the latter.
• Here’s the math via Inside U.S. Trade reporting:
“Under the timeline set out under the 2015 Trade Promotion Authority, USTR must notify Congress 90 days before signing NAFTA and release the full text of the agreement 60 days before signing the deal. The U.S. International Trade Commission has 105 days after the deal is signed to complete a report on the economic impacts of the pact. Sources said the ITC could complete its assessment early, giving Congress more time to consider the deal. If USTR notifies Congress on May 17th that it will sign NAFTA and the ITC takes the full 105 days for its assessment, the first day Congress will be in session for a NAFTA bill to be submitted is Nov. 27.”
• Most insiders say the chances are slim that the Administration comes up with a deal that can get the TPA clock rolling in the next four days. One indication that they're right was that at the end of last week the ministers from Canada and Mexico who will ultimately approve the deal went home to their capitals rather than remaining in D.C. Another sign that nothing is imminent came in a statement that U.S. Trade Representative Robert Lighthizer released at the end of last week that did not specifically reference any progress toward a deal.
• Auto rules of origin remains the biggest sticking point in discussions, even after Mexico came to the table with a counter offer last week. Even if that issue were to get resolved by Thursday, other unresolved issues that could prevent an "agreement in principle" include a proposed sunset provision, dispute resolution provisions, and ag issues, like dairy access, which Speaker Ryan referenced specifically in his remarks.
#2 - TOOMEY FIGHTS BACK AGAINST NAFTA “BLACKMAIL” STRATEGY
• On Thursday, in an op-ed in the Wall Street Journal, Senator Pat Toomey of Pennsylvania took a preemptive swipe at the Administration’s rumored strategy of pulling out of NAFTA in order to increase pressure on Congress to support NAFTA 2.0. Here’s the meat of his argument:
“To pressure us into voting for an agreement that diminishes free trade, some in the administration suggest offering a grim choice: either approve a diminished Nafta, or the president will unilaterally withdraw the U.S. from the existing Nafta, leaving no Nafta at all.
“If presented with this ultimatum, I will vote “no,” urge my colleagues to do likewise, and oppose any effort by the administration to withdraw unilaterally. Pulling out of Nafta by executive fiat would be economically harmful and unconstitutional.
“Should the administration seek to withdraw from Nafta without congressional consent, I hope my colleagues will join me in employing all legislative means necessary to block the withdrawal. While opposing the president on these matters would be politically difficult for Republicans, acquiescing would result in economic harm and complicity in executive overreach.”
• The takeaway: It’s not just Toomey. There’s been a significant backlash to the withdrawal “blackmail” scenario among Republicans and very little indication that it would move any votes.
#3 - A CONSEQUENTIAL WEEK AHEAD
The upcoming week could prove to be one of the most pivotal on trade given action around both NAFTA and tariffs. In addition to NAFTA talks pressing up against the Speaker’s deadline, here are some other news-making events to watch for in the week ahead:
• Tuesday – Thursday: USTR hearing on 301 tariffs – There have been nearly 100 requests to testify at the Administration’s hearing on proposed 301 tariffs this week which will be held at the Ronal Reagan Building and International Trade Center starting on Tuesday. Look for panels of 8 or more witnesses who will each have roughly 5 minutes to plead their case. Judging by the more than 2,200 written submissions to the federal record, the majority of witnesses will be making a case as to why 301 will hurt exports and how China’s proposed retaliatory tariffs will inflict economic pain.
• Tuesday: New Dems gather trade experts to explore trade in the Trump era – The New Dem Coalition will gather an array of trade experts at the Newseum on Tuesday to try to make sense of the Administration’s seismic shifts on trade. The trade panel will kick off at 3:15 on Tuesday. The New Dems have been frustrated recently by engagement on trade from the Administration.
• Friday: Treasury deadline to propose China investment restrictions – As part of 301 action, the Treasury Department must unveil its restrictions on investment in the U.S. by Friday.
#4 – THE “SHADOW TRADE WAR”: CBS DOES ROUNDUP OF IMPACTS THUS FAR
From declining pork and soy orders from China, to a pecan farmer deciding against expansion, to higher newsprint prices, the impacts of an escalating trade war are far from theoretical. Last week, CBS News put together a compilation of stories on the impacts already being felt in various sectors. Look for these stories and new ones to be featured in the testimony of witnesses at the USTR 301 hearing this week.
#5 - A MULTI-FRONT TRADE WAR: U.S.- E.U. CONFLICT LOOKING LIKELY
A deal between the U.S. and the E.U. on an exemption from steel and aluminum tariffs (which must be reached by June 1st) is looking increasingly unlikely. Negotiations are at a stand-still, with the E.U. continuing to say that they expect an unconditional exemption and Commerce Secretary Wilbur Ross calling for a quota system similar to what other countries have accepted.
The big problem according to recent reporting from Inside U.S. Trade:
“The EU is limited in what it can offer to the U.S. in the context of the Section 232 dialogue, according to EU sources, because Malmström cannot negotiate any tariff cuts or other market access issues without a mandate from the EU's 28 member states.”
Get ready: The list of products the E.U. will retaliate against is already public, and it’s is designed to inflict maximum political pain. It includes everything from whiskey, to orange juice, to motorcycles and is aimed at red states. It’s now possible that after June 1, these tariffs could be in place while (1) NAFTA has been stuck in a drawer for the remainder of the year, (2) an additional $50 billion in 301 tariffs and commensurate retaliatory tariffs are in place, (3) new restrictions on Chinese investment in the U.S. are in place and (4) steel and aluminum tariffs between the U.S. and China continue to impact exporters and importers. Could make for an interesting summer.