US Trade Rep Outlines Expectations for NAFTA, WTO, EU Ties
US Trade Representative Robert Lighthizer told a Washington audience this week that trade watchers should “expect change, expect new approaches, and expect action” in the current Trump Administration’s policy plans going forward.
Speaking at the Center for Strategic and International Studies on Monday 18 September, Lighthizer then answered questions on a host of topics, while repeatedly referring to the Trump Administration’s interest in negotiating bilateral trade deals, ensuring reciprocity in trading relationships, and addressing trade deficits.
“I believe – and I think the president believes – that we must be proactive, that years of talking about these problems have not worked, and that we must use all instruments we have to make it expensive to engage in non-economic behaviour and to convince our trading partners to treat our workers, farmers, and ranchers fairly,” said Lighthizer.
“We must demand reciprocity in home and in international markets,” he added, following this statement with the above-mentioned promise of change and action. Later on, when describing existing US trade agreements with other partners, he affirmed that one metric for judging their success would be the impact on trade deficits.
“Where the numbers and other factors indicate a disequilibrium, one should renegotiate,” he said.
He suggested that not only would it be more straightforward to clinch deals bilaterally, but that it would also be simpler to enforce their terms – while noting that the administration is still determining which countries to pursue such agreements which. “Usually in multilateral or plurilateral agreements it’s difficult to enforce the agreements because you’re disrupting too many things,” he said.
The US trade chief took office in May, five months after President Donald Trump was sworn in on a platform touting an “America First” approach to the economy. Trump has repeatedly criticised various existing trade deals and has pledged to refocus the US agenda away from plurilateral and multilateral deals towards one-on-one accords with chosen partners. (See Bridges Weekly, 18 May 2017 and 26 January 2017)
China in the spotlight
Lighthizer flagged the US’ trading relationship with China as one in need of repair, suggesting that the WTO system was “not designed to successfully manage mercantilism on this scale” and saying that the US would be pursuing new options for ensuring its partners compete on a level playing field.
Among the US’ concerns with China are “forced” technology transfers and intellectual property rights violations, he added, referring later to the “Section 301” investigation launched by his office in August. Section 301 refers to a section of the Trade Act of 1974 allowing for possible investigations and action in response to allegedly “unfair practices” by trading partners.
He added that while he could not “prejudge” an ongoing investigation, noting that a hearing in early October could serve to build a better understanding of the issue, there have been concerns already raised by industry in these areas.
“We’re not going to prejudge it. But there’s an awful lot to indicate that there’s a problem here,” he said. Lighthizer also responded to the question of why his office is using Section 301, given that this type of investigation has not been launched in several years.
“Why are we using 301? Because that’s the investigative tool we have. If there are – if we turn up WTO violations, we’ll bring them to the WTO. We’re not precluded from doing that, by any means, by using 301,” he said.
At a press conference the following day, Chinese Foreign Ministry Spokesperson Lu Kang responded to questions on Lighthizer’s remarks by referring to the WTO system, and argued that Beijing “has strictly observed the WTO rules and faithfully implemented is obligations.”
“The WTO has an objective assessment system to judge whether the policies of China and the US, as the two largest economies in the world, are appropriate or not,” the Chinese official said, according to a transcript released by his office. He also noted Beijing’s efforts at economic reform and incorporating more of a market-focused approach, while suggesting that Washington has benefitted from its trading relationship with the Asian economy.
The US official also fielded questions on the Trump administration’s plans for its UK and EU trading relationships, given both Washington’s own interest in deeper bilateral ties with key partners, as well as the ongoing Brexit negotiations.
Lighthizer said that negotiations for a UK-US free trade agreement were likely, though far off, while noting that he has held discussions with his British counterpart, Secretary of State for International Trade Liam Fox, on their economic relationship.
“At the appropriate time, I think the United States will enter into that process with the UK,” he said. “That’s probably a year or two off, I mean, it’s not even the deadline. Even when it’s going to happen is not quite clear yet until we know how their exit is going to go.”
The UK is currently expected to leave the European Union by end-March 2019. While the island nation cannot negotiate free trade accords as long as it remains an EU member state, it has been setting up working groups with interested partners to begin preparations for future trade initiatives, including possible negotiations for formal deals.
Though the previous Obama Administration had suggested prior to the Brexit referendum that the UK would be “at the back of the queue” for trade deals should it leave the EU, the current leadership in Washington has indicated interest in discussing the issue further with their UK counterparts. (See Bridges Weekly, 2 February 2017)
Lighthizer did not confirm whether the Trump Administration would be continuing talks launched under his predecessor, Barack Obama, for a Transatlantic Trade and Investment Partnership (TTIP) with the European Union. However, he did say that the relationship with the EU is “important” to the US and reaffirmed that Washington is studying TTIP, while waiting for European electoral processes to unfold.
While most elections in major EU member states have now passed, there is one key poll remaining this year: the federal elections in Germany, the bloc’s economic powerhouse. Those elections are set for this weekend, with Chancellor Angela Merkel widely expected to win a fourth term in office.
In the meantime, Lighthizer repeatedly stressed that the US has a strong interest in deeper EU ties, and that the relationship is a valuable one for Washington.
“There is just an enormous amount of trade between the United States and Europe. So improving the rules there is something we should do. And working with Europe on a whole variety of other things, including the challenge with China but also negotiations within the WTO, is also important,” he said.
WTO: Ministerial prospects, Appellate Body impasse
The US’ approach to the World Trade Organization was also raised on Monday, with Lighthizer playing down the possibility of tangible negotiated deliverables at the organisation’s upcoming ministerial conference in Buenos Aires, Argentina, while also raising a series of concerns with the Geneva-based institution’s dispute settlement arm.
“Our view is that it’s unlikely that the ministerial in Buenos Aires is going to lead to negotiated outcomes. There are a number of areas where we would be willing to engage, but there seems to be something blocking it in every case,” said Lighthizer, suggesting instead that Washington is aiming for a meeting that will set the organisation’s future agenda.
Over the past fortnight, US officials have raised in different WTO negotiating prospects their scepticism that talks in agriculture or fisheries are advanced enough to lead to concrete results, according to Geneva trade officials.
In the area of fisheries, the US did say during informal meetings last week that it was a “supporter” of the talks and would continue its involvement towards a possible outcome. A dedicated cluster of fisheries meetings is set for next week, from 27-29 September. (For more on the agriculture talks, see related story, this edition)
Lighthizer also dedicated a large portion of his remarks to concerns that both he and fellow US trade officials have raised over the past several months regarding the WTO’s dispute settlement mechanism.
For example, he said that some decisions released in various trade remedy cases were “indefensible” for purportedly having “diminished what we bargained for or imposed obligations that we do not believe we agreed to.”
“So what we’ve tended to see is that Americans look at the WTO or any of these trade agreements and we say, OK, this is a contract and these are my rights. Others – Europeans, but others also – tend to think they’re sort of evolving kinds of governance. And there’s a very different idea between these two things,” said Lighthizer.
He also said that this is why the US recently blocked the start of selection processes to fill empty slots that have arisen on the seven-member Appellate Body – the WTO’s highest court. (See Bridges Weekly, 14 September 2017)
“Well, I mean, to the extent that we’re objecting to the process, it’s because we don’t agree with the way the – in many cases the Appellate Body has approached this. We think the Appellate Body has not limited itself… to precisely what’s in the agreement,” he said.
NAFTA: conclusion unclear
Lighthizer also gave a mixed assessment on the recently launched efforts to modernise the North American Free Trade Agreement (NAFTA) with Canada and Mexico, with those talks due to enter their third negotiating round this weekend. (See Bridges Weekly, 14 September 2017)
“We’re moving at warp speed, but we don’t know whether we’re going to get to a conclusion, that’s the problem. We’re running very quickly somewhere,” he said.
Lighthizer did not elaborate on why he thought the talks may not bear fruit, while noting that upcoming elections in Mexico and the importance of addressing economic concerns by many sectors at home were reasons behind the tight timeframe. He did confirm that four more negotiating rounds are planned this year after the upcoming round in Ottawa from 23-27 September.
Meanwhile, Mexican Economy Secretary Ildefonso Guajardo Villareal suggested this week that issues such as rules of origin and trade deficits will be pivotal in the NAFTA modernisation’s success – or failure – while noting that various other areas are likely to be thorny as well.
US and Mexican officials have previously said that this next round in Ottawa will likely focus on making progress in more straightforward areas, hoping that this energy can then give a boost to the tougher negotiating topics. (See Bridges Weekly, 14 September 2017)
ICTSD reporting; “Mexico sees ‘elephants in the room’ in NAFTA talks: minister,” REUTERS, 18 September 2017.