Business interests who depend on NAFTA are trying to piece together a strategy for how to handle changes under a new deal, but there are differing opinions on what will happen to car rules of origin. Trade lawyer Daniel Ujczo, who chairs the Canadian-U.S. trade practice at Dickinson Wright, said in an interview that the U.S. trade representative is looking for a 75 percent North American content on high value parts, such as the engine and transmission, but may allow lower percentages for other tiers of parts. But Ujczo said his understanding is that the lower hurdle for parts doesn't eliminate the top-line requirement that 85 percent of cars' value must come from NAFTA partner countries in order to qualify for duty-free status.
The Commerce Department has not been able to keep up with the flood of product exclusion submissions -- the steel exclusion requests numbered 3,979 as of April 19, but just 120 have been posted for comments. For aluminum, there have been 396 exclusion requests, and 26 posted. No new filing has been posted since April 13 for aluminum, but the agency posted 44 steel product exclusion requests just on April 20th.
China on April 17 announced it will impose antidumping duty cash deposit requirements on U.S. sorghum, setting preliminary AD rates at 178.6%, according to a report from Bloomberg. U.S. Secretary of Agriculture Sonny Perdue criticized the move as retaliation for recent U.S. tariffs on Chinese products. “This is clearly a political decision by the Chinese and we reject their premise,” he said in an April 18 statement. “Our sorghum producers are the most competitive in the world and we do not believe there is any basis in fact for these actions. As we explore options, we are in communication with the American sorghum industry and stand united with them. The fact remains that China has engaged in unfair trade practices over decades and President Trump is correct in holding them accountable. We remain committed to protecting American agricultural producers in the face of retaliatory measures by the Chinese.”
The Mexican presidential front-runner is prepared to pick up NAFTA negotiations where the current government leaves off, according to Graciela Marquez Colin, a top economic advisor to Andres Manuel Lopez Obrador. Colin, who was speaking April 17 to a Washington audience, said Lopez Obrador appreciates the U.S. trade representative's goal of raising wages in the Mexican auto sector. "We support the idea of wage increases in NAFTA in autos because there would be spillover to other high skill industries," she said. But she cautioned, "Regional content changes should preserve the region's competitiveness." The Lopez Obrador administration does want to return to the growth rates of the '50s and '60s, but not to the tariff walls in place in Mexico at that time, she said. "It's not a return to protectionism." Colin said investor protections in NAFTA have worked well, and eliminating them would be NAFTA 0.5 rather than NAFTA 2.0. And, she said, a five-year sunset clause would be like renegotiating NAFTA all the time. If Lopez Obrador wins on July 1, Colin said, she and her colleagues are prepared to implement an agreement, if one exists, or to continue working. But, she said, Mexico would want a deadline to reach an agreement. "You have to be clear you're not negotiating NAFTA all the time." President Donald Trump recently said as far as he's concerned, NAFTA negotiations can go on forever, because the uncertainty is dissuading American companies from opening Mexican plants.
International Trade Today is providing readers with some of the top stories for April 9-13 in case they were missed.
The Trump administration’s imposition of 25 percent tariffs on TVs sourced from China (see 1804040019) would cause shipments of those sets to decline 2.1 percent and raise consumer pricing 23 percent, according to a new report released by industry groups. The survey report, released April 17, was prepared by Trade Partnership Worldwide for the Consumer Technology Association and the National Retail Federation, both of which vehemently oppose the tariffs. The Section 301 tariffs, which aren't yet in effect, would likely have a major impact on TVs from China (see 1804090008).
The World Trade Organization's nearly unanimous rejection of antidumping duties and safeguard duties has hurt the ability of countries to use AD/CV duties and safeguard tariffs, according to Jennifer Hillman, a former member of the WTO appellate body and now Georgetown University law professor. "Well over 50 percent of all WTO disputes have been in trade remedies," Hillman said during a Washington International Trade Association panel on April 13 about the WTO.
Sen. Chuck Grassley, R-Iowa, represents a state that exports lots of soybeans to China but remains critical of the U.S.'s largest trading partner in goods. He said he recently visited five cities in China with Agriculture Secretary Sonny Perdue and other senators. What he saw there convinced him that Chinese officials "will do anything legal or illegal, moral or immoral, ethical or unethical ... to get ahead and stay ahead." He added, "They are very strategic and we're very short-sighted." Grassley, speaking at a Senate Finance trade subcommittee hearing April 11 on access to China's market, said he's one of the only Congress members still in office who voted to allow China full membership in the World Trade Organization. "It hasn't turned out the way I anticipated," he said. "I kind of feel like I should feel sorry for my vote."
The House Ways and Means Committee grappled with the fact that tariffs might be painful enough for China to change course on its unfair trade practices but that protecting mills and smelters will hurt factories. China's retaliatory tariffs, in turn, will hurt agriculture and chemical exporters. Committee Chairman Kevin Brady, R-Texas, said during a hearing on the effects of new tariffs that he wants enforceable trade policies to target bad actors, but said, "at the same time, we must avoid unintended consequences that hurt Americans."
Misclassification and valuation are among areas of enforcement focus for CBP's administration of the Section 232 tariffs on steel and aluminum, CBP officials said during an April 10 interview. "Classification is a way to play with it, valuation as well, but these are things we will have to look at," said John Leonard, executive director of trade policy and programs at CBP. There are some different considerations involved for looking at possible transshipments because most antidumping or countervailing duty evasions involve countries around China, such as Malaysia or Thailand, but those countries are affected by the 232 tariffs too, he said. "It's hard to put it in that same context," he said.