Witnesses Queue Up for NAFTA Marathon; Modi, Moon Visit D.C.

The International Trade Practice Center on Bloomberg Law® provides in one comprehensive, time-saving resource.

By Rossella Brevetti and Brian Flood

It’s take-a-number time in Washington this week, with witnesses lining up to give the government their 2 cents on how the North American Free Trade Agreement should be reworked to address 21st century realities.

About 130 witnesses—representing sectors such as agriculture, automobiles, and apparel—are queued up to participate in the marathon three days of hearings scheduled to start June 27 in Washington. The hearings will help Team Trump develop negotiating objectives for NAFTA. Those objectives will guide the U.S. negotiating team as it prepares for formal talks that are expected to start as early as mid-August.

While industry representatives will be looking for greater market access, labor and environmental groups will be pushing for stronger language to protect workers’ rights and the environment.

But that’s not all. Also on tap are visits from two heads of state—Indian Prime Minister Narendra Modi and South Korean President Moon Jai-in—who are traveling to the nation’s capital to meet with President Donald Trump.

It will be the first face-to-face meetings with Trump for both leaders, with Modi up first on June 26. Moon will be in Washington June 29-30.

The visits coincide with the deadline for release of a report on bilateral trade relationships where the U.S. runs a significant deficit in the trade of manufactured goods. Trump ordered the Commerce Department and the Office of the U.S. Trade Representative in March to prepare the report, which is due June 29. The president has called the U.S. bilateral trade agreement with Seoul a “disaster” because of the rising trade deficit on the U.S. side. According to the Census Bureau, the U.S. chalked up a $27.57 billion deficit in goods trade with South Korea in 2016. The trade in goods deficit with India weighed in at $24.38 billion in 2016.

In addition, a second wave of duties on Canadian softwood lumber imports is likely to hit this week, and the International Trade Commission is expected to release a report June 27 on competitive conditions affecting the U.S. aluminum industry.

NAFTA: ‘Do No Harm.’

Representatives from various industry sectors from farm interests to the auto sector will be at the June 27-29 NAFTA hearings in force, providing the interagency Trade Policy Staff Committee with perspectives on how the agreement should be revamped. Also jockeying for position at the hearings will be labor and environmental groups, as well as a host of nongovernmental organizations and trade associations.

Among a plethora of other groups, The U.S. Grains Council—representing an industry that has benefited greatly from NAFTA—will argue that all efforts should be expended to maintain existing commitments and “do no harm” to current market access. The American Insurance Association will tell the administration that a modernized NAFTA must continue to include the core financial commitments of free trade agreements, including market access.

Some auto industry officials will also testify in support of maintaining NAFTA’s current automobile rule of origin, which has come under attack by senior members of the Trump trade team. Rules of origin determine which products benefit from a trade deal’s preferences. Stakes are high for the automobile sector in the NAFTA talks as the North American auto industry has integrated automotive and supply networks in the NAFTA region.

The Interagency Trade Policy Staff Committee, chaired by the Office of the U.S. Trade Representative, will take it all in and make policy recommendations that could shape NAFTA 2.0.

New Softwood Lumber Duties

As the U.S. prepares to launch NAFTA talks, a second wave of duties on Canadian softwood lumber imports is likely to hit next week. Commerce Secretary Wilbur Ross has said he would like the fractious softwood lumber issue to be dealt with before NAFTA renegotiations start later in the summer.

Canadian softwood lumber is already subject to anti-subsidy duties and adding dumping duties on top of that would exacerbate negative effects for Canadian companies since the U.S. market represents almost 75 percent of Canadian softwood lumber exports.

The Montreal Economic Institute, a non-profit research organization, estimates that dumping duties could be as high as 10 percent. “The tariffs are already having negative effects, but it is still too soon to evaluate these effects over the long term since there is much uncertainty in the market, with each player pursuing its own strategy,” Alexandre Moreau, public policy analyst at the MEI, said in a statement.

A Canadian Embassy spokeswoman told Bloomberg BNA that the sides were still working on getting a deal on a new softwood lumber agreement.

Trump Hosts Indian, South Korean Leaders

President Trump will host his first meeting with Indian Prime Minister Modi at the White House June 26.

The two leaders are unlikely to make any major announcements on trade between the two countries, such as the long-running negotiations over a bilateral investment treaty, said Michael Kugelman, senior associate for South Asia at the Wilson Center. They could, however, announce a new deal in the defense sector, or at least tout a recent deal between Tata and Lockheed Martin to produce F-16 fighter jets in India as a sign of increasing defense industry ties, Kugelman said.

Still, Indian officials said Modi will be seeking to convince Trump to continue a key visa program that has allowed information technology companies to send skilled workers to the U.S. and wants to make sure the U.S.-India Strategic and Commercial Dialogue continues.

While in the U.S., Modi will also meet with the leaders of major U.S. corporations including Apple, Walmart, Caterpillar, Google, and Microsoft.

Trump will also welcome newly elected South Korean President Moon Jai-in June 29-30.

Moon reportedly will be joined for his trip by a delegation of 52 South Korean business leaders, including representatives of Hyundai Motor Co. and Samsung Electronics.

The American Chamber of Commerce in Korea recently urged Moon to announce during the visit a $10 billion “Buy American Fund” to boost imports of U.S. goods, a move the group said would please Trump and ease the pressure on the Korea-U.S. Free Trade Agreement. Trump has called that deal “horrible” and threatened to renegotiate or terminate it.

Aluminum Can

There are also a number of key reports due out this week, starting with the International Trade Commission’s report on competitive conditions affecting the U.S. aluminum industry.

The commission is preparing the report at the request of the House Ways and Means Committee. It is looking into trends and developments in the global market for aluminum, competitive strengths and weaknesses of the industry in the U.S. and other exporting countries, and the impact of government policies in foreign countries, among other factors.

The aluminum industry has long complained that global overproduction, driven primarily by Chinese companies, have driven down prices and hurt the industry. The ITC’s report is separate from the “Section 232” investigation that the Commerce Department is pursuing, which is looking at whether aluminum imports are such a threat to domestic producers that they threaten U.S. national security. The results of that investigation, which could lead to new tariffs or quotas, is also expected by the end of the month.

Trade Deficits, Enforcement Reports

Also on deck this week is a large-scale study of U.S. bilateral trade deficits by country, which is due June 29. The president mandated the report in a March 31 executive order ( Exec. Order No. 13,786 )

The White House said the study will examine “every form of trade abuse and nonreciprocal practice” that are currently contributing to the “large and persistent” U.S. trade deficit, which weighed in at a hefty $500 billion in 2016. “We’re going to investigate all trade abuses, and based on those findings, we will take necessary and lawful action to end those many abuses,” Trump said.

Topping the list of countries with which the U.S. deficits are China, Japan, Germany and Mexico, followed by Ireland, Vietnam, Italy and South Korea, according to the administration.

Also due June 29 is a plan for improving collection of punitive duties, announced in another executive order ( Exec. Order No. 13,785) signed by the president March 31.

At issue are duties imposed in trade remedy cases when products are sold into the U.S. market at less than fair market value, known as antidumping duties, or when products are unfairly subsidized, known as countervailing duties.

Peter Navarro, director of the National Trade Council, has said there were approximately $2.9 billion in uncollected antidumping and countervailing duties on the books from fiscal year 2001 through FY 2016.

The executive order calls for the Department of Homeland Security, which administers U.S. Customs and Border Protection, along with the departments of Commerce and Treasury, to heighten bonding requirements for importers to tighten up the collection system, he said. The action also would improve monitoring and interdiction of imported counterfeit goods.

To contact the reporter on this story: Rossella Brevetti in Washington at rbrevetti@bna.com; Brian Flood in Washington at bflood@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Trade Practice Center on Bloomberg Law