The World Trade Organization may have its first answer to what happens when a party appeals and there's no appellate body to resolve the dispute. The U.S., which killed the appellate body by not agreeing to appoint any replacements, is appealing a compliance report for a case in which India won the argument that the U.S. antidumping and countervailing case against Indian steel didn't fully follow trade law (see 14081205 and 1706090021).
The enactment of the U.S.-Mexico-Canada Agreement would increase revenues by $230 million a year in 2023 and $360 million a year in 2024, the Congressional Budget Office estimates. CBO projects that “certain imports of motor vehicles and parts” that currently enter the U.S. duty free under NAFTA would not be eligible under the stricter rules of origin in USMCA. It expects that some of those parts or vehicles would be replaced by domestic production, but some would be replaced by imports subject to tariffs, and thus, total customs revenue would rise. While there would be hundreds of millions spent in the first three years, primarily for monitoring environmental and labor compliance in Mexico, by 2024, that spending would be just $21 million, and would be partially offset by lower subsidies to dairy farmers, since CBO assumes they would have higher sales as a result of the deal.
Seven freshmen in the House -- all from traditionally Republican districts -- say that it's wrong for Senate Majority Leader Mitch McConnell to put off a vote on the U.S.-Mexico-Canada Agreement when he's complained for months that House Democrats are delaying a vote. “We are deeply concerned by your statements that the Senate will not take up the USMCA this year and that you refuse to pass any legislative items during January -- including the USMCA,” they wrote. They said the USMCA cannot end up in the Senate's “legislative graveyard,” as hundreds of other House-passed bills have. The letter, sent Dec. 17, was led by Rep. Cindy Axne, D-Iowa, and joined by Reps. Abby Finkenauer, D-Iowa; Joe Cunningham, D-S.C.; Angie Craig, D-Minn.; Anthony Brindisi, D-N.Y.; Kendra Horn, D-Okla.; and Susan Wild, D-Pa.
A bipartisan resolution supporting the administration's desire to get reforms to the World Trade Organization, but also urging that the Geneva delegation work with other countries, passed the House Ways and Means Committee on Dec. 17. Rep. Ron Kind, D-Wis., a leader on free trade in the Democratic caucus, co-authored the bill. He told fellow committee members that he is talking to the Senate to see if they will raise a similar resolution.
The House Ways and Means Committee, with near-unanimity, recommended the U.S.-Mexico-Canada Agreement go to the floor. A vote on the replacement for NAFTA is expected on Dec. 19. For about three hours, Democrats and Republicans praised the rewrite of North America's free trade pact, though many Republicans complained that it took a year to get the opportunity to vote for it.
The Craft Beverage Modernization Act, which covers beer, wine and spirits, will remain in effect through 2020, instead of expiring at the end of this year. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said that the CBMA made it into a tax extenders package that was negotiated after midnight on Dec. 17. The provision allows importers and exporters a refund on alcohol excise taxes.
With the announcement of a phase one deal, Flexport chief economist Phil Levy said the promise is for stability in tariff levels -- even if the large majority of goods facing Section 301 tariffs will retain the 25 percent hike. But, he noted in a Dec. 16 webinar, many times over the last eight months, “a deal was announced, and it didn't last. That should sort of serve as a precautionary tale.” Levy, like many observers, doesn't believe that a phase two deal, that could lead to rolling back more tariffs, is likely in the next year.
As the auto industry grapples with how much the rules of origin for cars and trucks will change from NAFTA to USMCA, the implementing bill that will be voted this week suggests there may be an opportunity to re-evaluate the system when USMCA undergoes review in six years. In two years -- and again in four, and six years -- the International Trade Commission must prepare a report on the economic impact of the auto ROO, including on exports and imports; aggregate employment, employment and wages of automotive workers, “production, investment ... and profit levels in the automotive industries and other pertinent industries in the United States affected by the automotive rules of origin and the interests of consumers in the United States.”
Sen. Ron Wyden of Oregon, the senior Democrat on the Finance Committee, and Sen. Sherrod Brown, an Ohio Democrat who voted against NAFTA, have endorsed the NAFTA rewrite, known as the U.S.-Mexico-Canada Agreement. The two had said they would oppose the USMCA unless it included a labor enforcement mechanism that carried consequences for Mexican imports from factories that weren't honoring workers' rights.
With the last round of consumer goods imported from China spared, and a reduction in Section 301 tariffs on about $120 billion in goods that were first subject to additional tariffs Sept. 1, some business interests welcomed the de-escalation, but warned that the U.S. should stay focused on more significant economic reforms in China. The tariffs on List 4a, which are at 15 percent and apply to about 3,800 8-digit tariff lines, will go to 7.5 percent.