Trump Administration Eyes Next Steps on Trade, Prepares for Xi Meeting

6 April 2017

US President Donald Trump signed two trade-focused executive orders last week, with the former relating to trade deficit data and the latter on enforcing the collection of duties at the border. The US leader is also preparing to meet with Chinese President Xi Jinping this week, in a high-profile meeting that is expected to focus heavily on trade. 

Trump, who took office in January, made trade one of his major issues on the US campaign trail, pledging to take action against countries who are treating the United States “unfairly” in either their trading practices or in the negotiation of trade deals.

Since taking office, he has ordered the US’ withdrawal from the Trans-Pacific Partnership (TPP), and his administration is said to be preparing for the re-negotiation of the North American Free Trade Agreement (NAFTA) while examining the option of negotiating bilateral trade deals with other countries. (See Bridges Weekly, 2 February 2017 and 9 February 2017)

Trade executive orders

The first of Trump’s trade-related executive orders signed on 31 March focused on determining the extent and causes of the American economy’s trade deficit with its trading partners, including allegedly unfair trading practices, in order to provide trade policymakers with the relevant data for future work, such as in negotiating deals.

“For many years, the United States has not obtained the full scope of benefits anticipated under a number of international trade agreements or from participating in the World Trade Organization,” the order says.

After outlining a series of concerns on the subject, the order then directs the heads of various US government agencies to put together an “Omnibus Report on Significant Trade Deficits” featuring a list of trading partners “with which the United States had a significant trade deficit in goods in 2016.”

It then goes on to list a series of questions to consider in this review, including the factors behind the deficit, as well as the impacts on US growth and jobs. The report is due within 90 days.

Those tasked with this report are the US Trade Representative (USTR) as well as the Commerce Secretary, with those officials ordered to seek input from the heads of the State, Treasury, Defense, Agriculture, and Homeland Security departments. Those two lead trade officials can also request information from other agencies if needed, as well as from other stakeholders.

Trump’s nominee for USTR, Robert Lighthizer, is still awaiting Senate confirmation. He had a confirmation hearing in the Senate Finance Committee last month. (See Bridges Weekly, 16 March 2017)

US Commerce Secretary Wilbur Ross, writing in the Financial Times on 4 April, pushed to make the case in favour of undertaking such analysis, suggesting that the result will allow the American leader to “take measured and rational action to correct any anomalies.”

Among the areas of concern raised by Ross include the role of non-tariff barriers; intellectual property violations; non-market economies; overcapacity in sectors including steel and aluminium; ineffective trade deals and poor enforcement; currency policy; capital flows; and “asymmetrical” WTO provisions and legal “interpretations.”

“These actions will implement the president’s recent summary to me of his trade policy: ‘Any new NAFTA will be spelt N-A-F-F-T-A – North American Free and Fair Trade Agreement’,” said Ross in the op-ed regarding the executive order. The article was prepared with contributions from Peter Navarro, the director of the new National Trade Council.

Another executive order signed by Trump on 31 March targets the collection of anti-dumping and countervailing duties. While anti-dumping duties are meant to tackle instances of foreign producers selling goods at prices cheaper than their “normal value” back home, countervailing duties are meant to address instances of unfair state aid to foreign producers.

The order directs the US Department of Homeland Security, with inputs from Commerce, USTR, and Treasury, to come up with a plan over the next three months that would require those importers who “pose a risk to the revenue of the United States” to buy bonds or other alternatives as a type of guarantee against their anti-dumping and countervailing “liability.” These importers would be identified by a risk assessment prepared by US customs officials.

Also within the same timeframe, the heads of Homeland Security and Customs and Border Protection have been tasked to come up with a system that would tackle “violations” of American trade and customs laws.

Xi comes to America

Trump is also preparing to hold a summit this week with Chinese President Xi Jinping, in a two-day event at the US president’s Mar-a-Lago estate in Florida that is expected to tackle various trade issues, along with security topics in relation to North Korea.

Speaking to the Financial Times this past weekend, the US leader said that he has “great respect” for the Asian economic giant, adding that “I would not be at all surprised if we did something that would be very dramatic and good for both countries and I hope so.”

In response to a question on how to reduce China’s trade surplus, Trump said that he would convey to Beijing that “we cannot continue to trade if we are going to have an unfair deal like we have right now. This is an unfair deal.” He also added that he is not looking to discuss issues regarding tariffs with the Chinese leader at this stage.

Among the various trade irritants that Trump has raised, either on the campaign trail or in office, are concerns over allegedly unfair Chinese trading practices, along with claims that the Asian economy has also been manipulating its currency to gain an export advantage.

In the Financial Times interview, Trump argued that China “are world champions” in the area of currency manipulation, and suggested that past US administrations “haven’t had a clue. I do.”

“This is really an opportunity for the two leaders to exchange views on each other’s respective priorities and to chart a way forward for the US-China bilateral relationship,” said a senior White House official in a background briefing to reporters regarding the meeting at Mar-a-Lago.

The official said they could not pre-judge which trade topics come up in the Trump-Xi meeting, including whether the issue of possibly raising tariffs on Chinese products might indeed arise. They stressed that the idea in Florida remains to set up a “framework” for future discussion, and that other subjects may come up as the leaders see fit.

They did note, however, that a key trade issue for the White House right now is China’s status as a non-market economy.

China has tabled WTO complaints against both the EU and the US regarding their treatment of the Asian giant as a “non-market economy” in their anti-dumping probes, given the expiry of certain provisions of Beijing’s WTO accession protocol. While a panel was established this week to hear the case involving the EU, China has not yet requested a panel for the US complaint. (See Bridges Weekly, 30 March 2017)

“For us, it’s very important that they continue to be designated as a nonmarket economy,” said the senior White House official, who noted the China-EU case at the WTO but did not mention the case also underway involving the US.

ICTSD reporting; “U.S. business seeks action, not trade war, in Xi-Trump summit,” REUTERS, 4 April 2017; “Donald Trump will make trade fair again,” FINANCIAL TIMES, 4 April 2017; “Trump to seek tariff ‘snap-back’, tax equality in NAFTA revamp: letter,” REUTERS, 30 March 2017; “Donald Trump in his own words,” FINANCIAL TIMES, 2 April 2017.

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