Bringing back self-initiated antidumping and countervailing duty cases and addressing trade barriers will be among the major focuses of Commerce Secretary nominee Wilbur Ross if confirmed, he told senators Jan. 18. Commerce initiating AD/CV duty cases on its own would help small companies that often lack resources to collect data and fund such proceedings, he said. Such cases can also impose a sense of restraint upon nations that subsidize or dump exports destined for the U.S., Ross said during his confirmation hearing before the Senate Commerce, Science, and Transportation Committee. Sen. Gary Peters, D-Mich., noted that Commerce Department AD/CV duty case self-initiations have been “virtually nonexistent” in recent administrations. Ross is expected to play a larger role in executive trade policy than recent predecessors.
President-elect Donald Trump renewed threats to slap heavy tariffs on U.S. auto manufacturers who move jobs overseas, in a Jan. 3 tweet (here) directed at General Motors and its production of the Chevrolet Cruze in Mexico. “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border,” the tweet said. “Make in U.S.A. or pay big border tax!” A GM statement responding to Trump acknowledged that the company makes the Cruze hatchback in Mexico for global markets, “with a small number sold in the U.S.,” but noted that the company manufactures all Cruze sedans sold in the U.S. at GM’s assembly plant in Lordstown, Ohio. Trump had previously expressed intentions to raise tariffs to 35 percent on car companies that move jobs to Mexico upon export of cars to the U.S. (see 1611150035).
Amid grievances raised by importing industries and Senate Democrats, House Ways and Means Chairman Kevin Brady, R-Texas, on Dec. 18 vowed to keep border adjustability tax provisions for imports and exports in the House GOP’s plan for tax reform. Speaking during C-SPAN’s Newsmakers (here), Brady said foreign competitors don’t tax exports to the U.S., but the U.S. taxes its exports. “Today, we lose both here in America, and we lose around the world,” Brady said. “That can’t stand. This is a key part of our ‘Built for Growth’ tax [initiative]. It’s going to stay.” The border adjustability aspects of the House GOP’s tax reform proposal would exempt exports from taxes while taxing imports. Importers raised concerns about the plan in meetings with lawmakers and in a letter to Brady’s committee (see 1612140046).
While the president doesn’t have express constitutional authority to modify tariffs, several congressionally approved statutes give the White House authority to change tariffs based on a findings that other countries’ exports to the U.S. pose a threat, according to a recently released Congressional Research Service (CRS) report (here). But such delegations of power usually accompany clearly defined conditions and often include time restrictions, the report said.
China on Dec. 12 filed a World Trade Organization complaint requesting dispute consultations over what it says are “special calculation methodologies” employed by the U.S. in antidumping duty cases, the WTO said (here). Though the complaint was not immediately available, China is challenging the U.S.' continued application of non-market economy status, said Stimson Center distinguished fellow Bill Reinsch. China argues a provision in its WTO membership agreement requires countries to treat it as a market economy, and use actual prices and costs instead of artificial prices and costs based on third-country data, beginning on Dec. 11, 2016. The U.S. will not consider China a “market economy” for AD duty purposes, and will continue to apply alternative AD methodologies, as appropriate, to ensure “accurate calculations” in proceedings involving China, an Obama administration official told International Trade Today.
House Ways and Means Chairman Kevin Brady, R-Texas, holds China responsible for being the main obstacle to successful World Trade Organization Environmental Goods Agreement negotiations last weekend (see 1612050010), but expressed his hope that a strong agreement can be concluded under the incoming Trump administration, according to a statement (here). “This agreement is all about growing our economy and expanding access to affordable clean air and water technologies -- many of which are manufactured right here in the U.S.,” Brady said. “We are one of the world’s largest exporters of environmental goods in this dynamic and rapidly growing market. While U.S. tariffs on these manufactured products already are low, other countries charge taxes on American exports of these goods that can increase their prices by as much as one third, making them uncompetitive.”
As the Trans-Pacific Partnership awaits an expected rejection from the U.S., the incoming Trump administration should consider bilateral negotiations with Japan and Taiwan, a top GOP lawmaker and a trade analyst said during a Dec. 6 House hearing. House Foreign Affairs Subcommittee on Asia and the Pacific Chairman Matt Salmon, R-Ariz., said bilateral negotiations with Japan might bring a “core group” of modern economies to the table in a more feasible framework than the TPP. “Without a concerted economic engagement with all parts of Asia, China will fill the void with its willingness to fund much-needed infrastructure without regard to intellectual property, labor and environmental standards,” Salmon said. Negotiating a free trade agreement with Japan is a noble goal, but it would be more complicated and politically difficult than an FTA with Taiwan, American Enterprise Institute resident scholar Derek Scissors said during the hearing.
There isn't as much of a gap between President-elect Donald Trump’s and Vice President-elect Mike Pence’s trade stances as many expected, said Marty Obst, Pence’s inaugural director, during a Barnes & Thornburg event Nov. 30. People in the Indiana governor’s circle thought the two would be “miles apart” on trade because of Pence’s free trade views, he said. But during a campaign call between the leaders' allies exploring whether Pence would be a suitable running mate, Trump told Pence’s colleagues that he’s not against free trade, but he’s more in favor of bilateral, as opposed to multilateral, deals, which Pence jumped on board with. According to Obst, Trump said, “I just want bilateral deals that make sense for us, because we’ve made some bad deals. So I just want to re-examine all of them.” Trump provided “interesting insights” into how to fix the U.S. trade imbalance, and he and Pence will work to do that in an “earnest way,” while benefiting U.S. businesses, Obst added.
Work continues by House Ways and Means Republicans to draft tax legislation that could have a far-reaching impact on importers and exporters. Among the many changes detailed in the "A Better Way" blueprint (here) released by House Speaker Paul Ryan, R-Wis., is a shift to a "border-adjustable" model that would exempt exports from taxes through rebates while making imports taxable, possibly by removing tax deductions, said National Foreign Trade Council Vice President for Tax Policy Catherine Schultz. Though the plan says it will be "consumption-based" and has been compared to value-added taxes (VAT) used by many major U.S. trading partners, it still appears to follow the current income tax structure, calling into question whether the border adjustments violate WTO rules, Schultz said.
Steven Mnuchin and Wilbur Ross confirmed that President-elect Donald Trump selected them to serve as treasury secretary and commerce secretary, respectively, during a CNBC interview (here). After Trump’s campaign threats to raise tariffs on Chinese goods raised some uncertainty in the trade community, Ross indicated that tariffs would be a last resort in Trump administration trade negotiations. “The real trick is going to be [to] increase American exports,” Ross said. “Get rid of some of the tariff and nontariff barriers to American exports.” Mnuchin and Ross called the Trans-Pacific Partnership a bad deal, and Mnuchin emphasized the focus on bilateral, as opposed to multilateral, deals that the soon-to-be Trump administration will take. “The problem with regional trade agreements is you get picked apart by the first country,” Ross said. “Then you negotiate [with] . . . the second country. You get picked apart. And you go with the third one. You get picked apart again. What has to be put into perspective, we are the big market. We are the world's biggest importer. We need to treat the other countries as good suppliers, not as determining the whole show.”