October 23, 2021

Bazar Lead

Just Law & Legal

U.S., EU eye steel tariff deal by Nov. 1

With help from Sarah Anne Aarup

Editor’s Note: Weekly Trade is a weekly version of POLITICO Pro’s daily Trade policy newsletter, Morning Trade. POLITICO Pro is a policy intelligence platform that combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

— The U.S and the EU hope to resolve a three-year-old dispute over former President Donald Trump’s steel and aluminum tariffs by Nov. 1, and plan to hold the first ministerial-level meeting of the new transatlantic Trade and Technology Council in late September.

— Countries should be doing a lot more to make world trade more environmentally friendly, but requiring more goods to be produced domestically would not be the best way to clean up the planet, a World Trade Organization official said.

Monthly trade figures that will be released on Thursday are expected to show a booming U.S. trade deficit that could set a record in the goods category this year.

It’s Monday, Aug 2. Welcome to Morning Trade. Greetings from the public library in Derby, Kan.! That’s where I wrote most of this report on Friday, when I was home visiting my parents. Never heard of Derby? Well, the high school football team has been state champion six out of the last eight years. Even a dedicated non-sports fan like myself has to notice that.

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EU, U.S. AIM TO RESOLVE SECTION 232 TARIFFS BY NOV. 1: Brussels and Washington want to resolve the Section 232 steel and aluminum tariff spat by Nov. 1, an EU official told our Morning Trade colleague Sarah Anne Aarup in Brussels.

“Both sides confirmed readiness to find a solution by 1 November,” the official said, reporting back on a conversation on Friday between EU trade chief Valdis Dombrovskis and U.S. Commerce Secretary Gina Raimondo. That’s earlier than the year-end deadline the two sides set in a joint statement released in May.

It’s also a full month before the EU is set to impose a second batch of retaliatory tariffs on American goods, ranging from cranberries to bourbon. That increase was originally set for June 1, but was delayed for six months to give both sides time to come to an agreement on steps they could take together to rein in global excess capacity, particularly in China.

Commerce Department and USTR officials did not respond to a request to confirm the Nov. 1 deadline.

What to expect: “Both sides agreed to move forward with some concrete solutions in line with key parameters, such as restoring historic trade flows and to have a WTO compliant system in order to avoid managed trade,” the EU official said.

“Restoring historic trade flows” sounds like a bid to limit the volume of EU steel and aluminum that enters the U.S. market. But requiring the solution to be WTO compliant seems to rule out the EU adopting voluntary export restraints to limit its shipments to the United States, since those prohibited are by the WTO. There is “no way will the EU buy peace” at the expense of multilateral rules, an EU diplomat said.

EU open to “other solutions”: Both sides are parsing out alternatives to the U.S. section 232 tariffs. Brussels still wants “complete withdrawal” of the tariffs, but is “ready to look [at] other solutions, understanding the fact that the US also is interested in protecting its steel industry,” Dombrovskis told the Financial Times.

“We’re trying to find a solution,” Raimondo said in an interview with Bloomberg. “The reality is that the Trump administration used national security-related tariffs against our allies in Europe, and so there’s certainly challenges with that.”

But here’s the problem: “We cannot simply say, we’re going to get rid of the tariffs because we need to protect our steel industry and those workers,” Raimondo said. “Simply to say ‘no tariffs’ is not the solution.”

U.S.-EU T&T MINISTERIAL SET FOR LATE SEPTEMBER: The first ministerial level meeting of the new U.S.-EU Trade and Technology Council will take place Sept. 29-30.

The aim is to have “some tangible results for the ministerial,” an EU official said, after the phone call between Dombrovskis and Raimondo. There will be a focus on “export controls and supply chains,” the official continued.

President Joe Biden and European Commission President Ursula Von Der Leyen launched the new forum at the U.S.-EU summit in Brussels last month. Secretary of State Anthony Blinken, Trade Representative Katherine Tai and Raimondo lead the U.S. team, while Competition Commissioner Margrethe Vestager and Dombrovskis head up the EU side.

SOLAR COMPANIES TO SEEK EXTENSION OF TRUMP DUTIES: Two U.S.-based solar companies plan to file a petition with the U.S. International Trade Commission later today asking President Joe Biden to extend Trump-era tariffs imposed on certain solar cells and modules for another four years, POLITICO has confirmed. The current tariffs are set to expire on Feb. 6.

Once the petition is filed, the ITC will have to examine whether the “safeguard” tariffs are still needed to prevent or remedy serious import injury. If the answer is yes, it will ultimately be up to Biden to decide what, if any, import relief is needed.

Trump initially set his solar tariffs at 30 percent and scheduled them to be reduced gradually to 18 percent. WTO rules allow for a four-year extension of safeguard duties if market conditions warrant that action. But they also require any additional relief to continue to be phased down.

South Korea formally challenged Trump’s solar tariffs at the WTO in 2018, but a panel was never formed to hear the dispute, leaving the case in legal limbo.

WTO AIDE DOWNPLAYS POTENTIAL FOR RESHORING TO FIGHT CLIMATE CHANGE: About $17.6 trillion worth of goods crossed international borders last year, carried on ships, trucks, trains and planes that create greenhouse gas emissions that drive global climate change.

That begs the question: Would it be better for people and the environment if more goods were produced domestically and didn’t have to travel so far to end users? Not necessarily, said Aik Hoe Lim, director of the World Trade Organization’s Trade and Environment Division.

For many small countries, it’s simply “not feasible” for them to produce everything that they need within their own borders and condemning them to that fate would deny them many basic goods. And even within large countries, there could be negative environmental consequences of increasing domestic production that outweigh the benefits of reduced greenhouse gas emissions from shorter transportation distances.

Large-scale operations allow companies to produce goods more efficiently than if the production were spread out around the world, regardless of whether it made economic sense, Lim argued at an Washington International Trade Association event on how trade can support efforts to create a more sustainable “circular economy” that reduces product waste.

“That being said, there’s also a big challenge, and I’m not trying to dismiss this. International trade itself has to, let’s say, ‘be better,’” Lim said. “Emissions do need to come down. And there are pathways to do that. And that is an important thing to take on board, be it through shipping, through aviation, through road transport.”

Five circular economy topics to ponder: Lim laid out five areas to think about as countries consider policies to encourage more recycling and environmentally friendlier ways of producing goods.

For starters, there’s a lot of work to be done on definitions and classifications, since whether an item is classified as a recyclable good or waste has huge ramifications for its future use, he said.

At the next level, there is the potential for divergent standards and regulation to impede trade in goods made from recycled products. There’s a variety of options for countries to address that, ranging from a minimal effort to ensure companies know what’s expected of them in different markets to a push for “full harmonization,” Lim said.

A third area to consider is what goods are needed to facilitate “reverse supply chains” — the act of a manufacturer retrieving a product from a customer and either reusing it or disposing of it — and to identify what barriers to trade those items may face.

Similarly, it would be good to identify what services are needed to facilitate the circular economy in order to make it as easy as possible for them to operate across borders, Lim said.

Lastly, many developing countries will need technical assistance to participate fully in the circular economy, Lim said. Once again, that could take many forms, from working with them on good regulatory practices and combating environmental crimes to helping them manage their waste streams in an environmentally sustainable way, he said.

THURSDAY REPORT TO SHOW BOOMING TRADE DEFICIT: Trade figures due out on Thursday are expected to show the U.S. goods and services trade deficit with the rest of the world surpassed $400 billion in the first half of 2021, a jump of more than 25 percent from the first six months of 2020. The dramatic increase reflects strong U.S. economic growth at a time when many other countries around the world are struggling to get their populations vaccinated.

Early figures released last week by the Commerce Department showed the U.S. goods trade deficit totaled just over $91.2 billion in June, compared with $71.2 billion in the same month last year. At its current pace, the U.S. goods deficit will exceed $1 trillion in 2021 for the first time in history, surpassing the record of $922 billion in 2020.

Shrinking services surplus: The U.S. has long run a surplus in services trade, reducing its overall trade deficit with the rest of the world. But because of restrictions on travel and related activities, U.S. services exports have fallen during the pandemic. Last year, the services surplus totaled $245 billion, a nearly 18 percent drop from the record set in 2018.

The U.S. Export-Import Bank says its has approved an $832.5 million financing package to support Boeing aircraft sales to Turkey.

— Governors want Biden to explain why the U.S. border remains shut to Canadians, POLITICO reports.

— Biden keeps pressure on Cuba, meets with Cuban-American leaders, POLITICO reports.

— China’s WTO ambassador said there is scope for Beijing to work with the U.S., the EU and other nations on an agreement to curb practices at the heart of the US-China trade conflict, The South China Morning Post reports.

— Thousands of people protested in Paris and other French cities on Saturday against a mandatory coronavirus health pass for entry to a wide array of public venues, Reuters reports.

— The Morrison government will spend about $19,000 to send former Prime Minister Tony Abbott on a five-day trade mission to India this month, The Guardian reports.

— The U.K. is “closing in“ on a trade deal with New Zealand, Reuters reports.

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