USMCA: The Biden Administration announced a 13th USMCA Rapid Response Labor Mechanism (RRM) review on labor rights denial—the first in the services sector. The request centers on whether pilots at Aerotransportes Mas de Carga (Mas Air), a Mexico City-based airline that provides cargo transportation services, are being denied the right to freedom of association and collective bargaining.
U.S. – China: Commerce Secretary Gina Raimondo concluded four days of meetings in Beijing and Shanghai where she met with senior Chinese officials and American business leaders to discuss “issues relating to the U.S.-China commercial relationship, challenges faced by U.S. businesses and areas for potential cooperation,” the Commerce Department said in a press release. A prominent outcome from the meetings involves the formation of multiple bilateral working groups to discuss trade and investment issues, as well as U.S export controls.
U.S. – EU: EU and U.S. officials affirmed intensified discussion on concluding the Global Arrangement on Sustainable Steel and Aluminum (GSA) as the Oct. 31 deadline rapidly approaches. If a final deal is not reached by Oct. 31, the moratorium on Trump-era tariffs, Section 232 tariffs, and EU retaliatory measures would automatically return on more than $10 billion worth of exports.
WTO: WTO Director-General Dr. Ngozi Okonjo-Iweala called on WTO members to stay the course in pursuit of an open trading system. The WTO leader touted the benefits of an open trading system, contributing to improved global access to goods and services, economic opportunity, and lowering trade costs. “I ask all of you to speak up for open trade, multilateral cooperation, and the WTO,” she said in recent remarks.
Trade Policy: Former President Donald Trump said if elected he would impose a 10% tariff “automatically” for all countries. The nonpartisan Tax Foundation released an analysis of the universal 10% import tariffs floated recently by former President Trump, estimating it would cost American consumers $300 billion a year, result in the loss of 550,000 U.S. jobs, and cut growth by 0.7%. The group noted that retaliatory tariffs on U.S. exports by trade partners would compound economic damages, further reducing U.S. economic growth by 0.4% and eliminating another 322,000 jobs.
Food Security: India recently implemented additional export restrictions on parboiled and basmati rice, adding to other rice variety export limitations, elevating concerns of global food insecurity. Days after the announcement, India announced it will permit some rice export to Mauritius, Bhutan, and Singapore for food security purposes, but did not specify timelines.
Note: This Trade Update was published early due to the Labor Day holiday. Have a safe and restful Labor Day!
“A world that turns its back on open and predictable trade will be one marked by diminished competitive pressures and greater price volatility. It would be a world of weaker growth and development prospects, a slower low-carbon transition, and increased supply vulnerability in the face of unexpected shocks.”
—WTO Director-General, Ngozi Okonjo-Iweala
U.S. Requests 13th Labor Rights Review, first ever for the Service Sector
The Biden Administration announced the pursuit of the first ever USMCA Rapid Response Labor Mechanism (RRM) review of labor rights denial in the services sector this week. At issue is whether pilots at Aerotransportes Mas de Carga (Mas Air), a Mexico City-based airline that provides cargo transportation services, are being denied the right to freedom of association and collective bargaining. The USTR action marks the thirteenth time the U.S. has formally invoked USMCA’s RRM.
USTR Ambassador Katherine Tai commented on the action stating, “Workers’ ability to affiliate with the union of their choice is a key tenet of the freedom of association and collective bargaining rights the RRM is designed to protect. Today’s action highlights the United States is committed to safeguarding the labor rights enshrined in the USMCA across industries and sectors, including in services. We look forward to working closely with the Government of Mexico to address the issues present in this matter.”
U.S. Labor Department Deputy Undersecretary for International Labor Affairs Thea Lee added, “This request for review is another example that compliance with the labor commitments under the United States-Mexico-Canada Agreement is a priority for the United States in all sectors the Rapid Response Labor Mechanism covers. We expect to continue our good collaboration with the government of Mexico in addressing the fundamental issues raised in this request.”
Under USMCA guidelines, Mexico has ten days to agree to conduct a review and, if it agrees, 45 days from today to complete the review.
U.S. – Mexico
Lopez Obrador, Biden meeting at APEC forum in November
Mexico’s President Andres Manuel Lopez Obrador confirmed he plans to meet with President Biden in conjunction with the Asia Pacific Economic Cooperation (APEC) forum on Nov. 15-17 in San Francisco, California. Bilateral meetings with U.S. and Mexican officials are also expected. Lopez Obrador indicated he plans to discuss an America’s development plan to President Biden to strengthen the region. Regional investment and immigration topics are also likely on the agenda. The two presidents last met in January at the North American Leaders Summit (NALS), also attended by Canadian Prime Minister Justin Trudeau.
U.S. – China
U.S., China establishes working groups to improve communications and transparency
Department Commerce Secretary Gina Raimondo held a series of meetings over four days in Beijing and Shanghai meeting with senior Chinese officials and American business leaders in to discuss to “issues relating to the US-China commercial relationship, challenges faced by US businesses and areas for potential cooperation,” the Commerce Department said in a press release. A prominent outcome from the meeting with her counterpart Wang Wentao, China’s Minister of Commerce, was the two nations announced the formation of multiple working groups to discuss trade and investment issues, as well as U.S. export controls. According to the Commerce Department, Raimondo and Wang agreed to:
Establish a new commercial issues working group, a consultation mechanism involving U.S. and PRC government officials and private sector representatives to seek solutions on trade and investment issues and to advance U.S. commercial interests in China. They agreed that the working group will meet twice annually at the Vice Minister level, with the U.S. hosting the first meeting in early 2024.
Launch the export control enforcement information exchange, which will serve as a platform to reduce misunderstanding of U.S. national security policies. The first in-person meeting will occur at the Assistant Secretary level at the Ministry of Commerce in Beijing on Tuesday, Aug. 29.
Convene subject matter experts from both sides to hold technical discussions regarding strengthening the protection of trade secrets and confidential business information during administrative licensing proceedings.
Communicate regularly at the Secretary and Minister level about commercial and economic issues and to meet in-person at least once annually.
Raimondo indicated the new commercial issues working group will address concerns raised by American industry, including operating and investing in China. The group will comprise of official and private sector representatives from both China and the US, with the U.S. hosting the first meeting in early 2024, according to the Commerce Department.
Regarding export controls, the U.S. and China agreed to an “information exchange” to “reduce misunderstanding of US national security policies.” The Commerce Department indicated Raimondo plans on regular communication and will meet at least once a year with Wang. On several occasions, Raimondo emphasized that the U.S.’s policy goal is to ensure transparency surrounding its trade and security policies. “The United States is committed to being transparent about our export enforcement control strategy,” she said. “I want to be clear. We are not compromising or negotiating in matters of national security — period.”
Regarding speculation of U.S. decoupling and tensions in the economic bilateral relationship, Raimondo told Chinese Premier Li Qiang, “We seek to maintain our $700 billion commercial relationship with China, and we hope that that relationship can provide stability for the overall relationship,” according to press reports of the closed-door meeting.
Raimondo’s four days of meetings with senior Chinese officials follows prior visits to Beijing by other Biden Administration officials, namely Secretary of State Antony Blinken and Treasury Secretary Janet Yellen, attempting to deescalate bilateral tensions amidst U.S laws curtailing U.S. exports and investments in advanced technology industries and curtailing imports from China associated with forced labor.
UN announces “trade day” at COP
Trade policy will be spotlighted at the upcoming COP28 United Nations (UN) climate summit, scheduled for Nov.30 to Dec. 12 in Dubai, UAE. “UNCTAD is pleased to contribute to shaping the first-ever Trade Day at COP28,” UNCTAD Secretary-General Rebeca Grynspan said. “We look forward to working together with the host country and our partners to show how trade can be a powerful tool for climate action and accelerate the just and clean energy transition around the globe… Trade Day at COP28 will highlight trade’s potential as a catalyst for climate-smart development, focusing on issues like value-chain decarbonization and resilience” and will “spotlight the role of trade in goods and services and trade policy can play in bolstering and accelerating the clean energy transition,” according to the UN.
UNCTAD is partnering with the UAE, the World Trade Organization (WTO) and other global organizations like the World Economic Forum and the International Chamber of Commerce to shape the day’s discussions.
U.S. – EU
U.S., EU intensify steel agreement talks
On the sidelines of the G20 meetings, EU and U.S. officials affirmed intensified discussion on concluding the Global Arrangement on Sustainable Steel and Aluminum (GSA) as the Oct. 31 deadlines rapidly approaches. “Currently we are focusing on not missing the deadline,” the EU’s trade chief, Valdis Dombrovskis, said in an interview on the sidelines of a G20 trade meeting in Jaipur, India. “We aluminum production — and I can say there is still work to be done.” Dombrovskis added, “We are very intensively engaging both at the political and technical level and we see this as one of the deliverables for the EU-US summit.”
If a final deal is absent by Oct. 31, the moratorium on Trump-era tariffs and EU retaliatory measures would automatically return on more than $10 billion of exports. The GSA aims to resolve the transatlantic trade tensions emanating from Section 232 Steel and Aluminum tariffs imposed in 2018 under then President Trump, citing national security concerns. Two years ago, the Biden Administration brokered an agreement with the EU to pause tariffs and retaliatory measures as an effort to find a permanent solution.
Both countries aim to complete an agreement ahead of the U.S.-EU summit between President Joe Biden and European Commission President Ursula von der Leyen, scheduled for the fall. While U.S. and EU officials insist that Oct. 31 is a hard deadline, observers note that progress to date on rectifying global overcapacity in steel and aluminum production may be significant enough to justify extending the task and tariff moratorium to finalize a quality agreement.
DOC seeks input on potential 232 exclusion process changes
The Department of Commerce (DOC) issued a notice of proposed rulemaking, soliciting public comments on revisions to the section 232 exclusion process. In the notice, issued by the Bureau of Information Security (BIS), a sub-agency of DOC, indicated the proposed exclusion process revision “will further improve the Section 232 exclusions process, following the receipt of comments from the February 2022 notice.” The proposed rule to amend the Section 232 exclusions process comprises four areas of modifications as follows:
General Approved Exclusions (GAE) Process Revision: BIS suggests redefining criteria for GAEs to focus on Harmonized Tariff Schedule of the United States (HTSUS) codes with low rates of substantiated objections rather than those with zero objections.
Introduction of General Denied Exclusions (GDE): GDEs act as a counterbalance to GAEs and intend to facilitate the process for products with historically low likelihood of exclusion approval. The criteria for GDEs would mirror those of GAEs but focus on high rates of substantiated objections. This addition will alleviate the burden on both requesters and objectors.
Volume Certification: BIS proposes an amendment to volume certifications on exclusion request forms. Businesses would be required to certify that reasonable attempts have been made to source the required product domestically, or from a partner country, prior to filing an exclusion request.
Objector Certification: Objectors will be required to certify their capability to supply the requested product, backed by evidence such as past sales or ongoing discussions. This change intends to reduce cases of unsuccessful objection follow-throughs.
Public comments are sought on various aspects, including the type of evidence to support certifications and sourcing attempts. The public comment window closes on Oct. 12, 2023.
WTO leader calls for staying course on open trade, avoiding trade risks
WTO Director-General (DG), Ngozi Okonjo-Iweala touted the benefits of an open trading system, contributing to improved global access to goods and services, economic opportunity, and lowering trade costs. Speaking at the annual Jackson Hole Economic Policy Symposium, Okionjo-Iweala noted that the despite the economic shocks, including the global pandemic, recent proclivity to protectionist policies, and geopolitical conflicts, global trade remains fairly resilient but the threat of fragmentation into rival trading blocs “would be very costly.” Other highlights from Okonjo-Iweal’s remarks include:
The boom in trade was a pivotal factor in the sharp reduction in extreme poverty, from nearly 38% of the global population in 1990 to just over 8% in 2019, according to World Bank data.
With regard to prices, there is considerable evidence that trade liberalization and the rise of modern supply chains were disinflationary.
Trade openness increases specialization, reduces exposure to domestic shocks, and lowers macro-volatility. WTO research shows that trade diversification in 2008 contributed to lower GDP growth volatility during 2008-2018.
Okonjo-Iweala referenced WTO research revealing that between 1996 and 2018, trade costs fell by more than a quarter in countries like Vietnam, Poland, and India. There is still room to improve. Trade costs in developing economies remain almost 30% higher than in high-income economies and are 50% higher in Africa.
Okonjo-Iweala acknowledged the needs for countries and businesses to re-examine their supply chains in the wake of the global pandemic, geographic conflicts, and other economic upheavals. Yet, she called on members to consider re-globalization rather than outright decoupling or onshoring. She noted re-globalization is occurring already in certain countries including Vietnam, Cambodia, Romania, and Turkey who are experiencing increased participation in global value chains (GVC). “There is a strong case for diverting some of the energy behind reshoring to re-globalizing production instead. Re-globalization is a far better alternative,” the WTO leader said. “I ask all of you to speak up for open trade, multilateral cooperation, and the WTO. Doing so might even end up making your jobs a bit easier,” she concluded.
Presidential candidate Trump floats 10% tariff
Former President Donald Trump said if elected he would impose a 10% tariff “automatically” for all countries. Speaking on the Fox Business show last week Trump said, “I think we should have a ring around the collar.” Dubbed the “universal baseline tariff,” several trade experts and industry stakeholders describe the proposal as harmful to the economy and inflationary. The nonpartisan Tax Foundation released an analysis estimating a 10% tariff on almost all imports would cost American consumers $300 billion a year, result in the loss of 550,000 US jobs, and cut growth by 0.7%. The group emphasized that should U.S. trade partners pursue retaliatory tariffs on U.S. exports, such measures would compound the economic damage. The Tax Foundation reported that a tit-for-tat tariff war would further reduce U.S. economic growth by 0.4% and eliminate another 322,000 jobs.
India imposes new rice export restrictions
Last week the Modi government implemented additional export restrictions on parboiled and basmati rice, elevating concerns of global food insecurity. India imposed a minimum price ($1,200 per ton) on shipments of basmati rice and levied a 20 percent export tax on the parboiled variety in an effort to arrest rising domestic food prices. India, the world’s largest rice exporter, has now implemented restrictions on every rice variety it exports, arguably contributing to rising prices for the grain, a staple in the Asian diet. Rice contributes as much as 60 percent of total calorie intake for people in parts of Southeast Asia and Africa, and some countries like Bangladesh, 70 percent.
Within the week of the new export restrictions, India announced it will permit some rice export to Mauritius, Bhutan, and Singapore for food security purposes, but did not specify timelines. India will sell 79,000 of non-basmati white rice to Bhutan, 50,000 tons to Singapore and 14,000 tons to Mauritius, according to the India’s Commerce Ministry. The move highlights the policy implications of the world’s largest rice exporter on Asian and African nations dependent on supplies from India. Leading export destinations for Indian rice include Benin, China, Senegal, Cote d’Ivoire and Togo.
Recall in July, India banned shipments of non-basmati white rice to maintain rising domestic prices in advance of the nation’s general election due in early 2024. The rice export restrictions applied to roughly 25% of India’s total rice exports, according to a government statement. Indian officials noted shipments will only be permitted on the basis of permission granted by India to other countries to meet their food security needs and based on requests from their governments. Last year India had export bans on broken rice varieties, which accounted for 20 percent of India’s rice exports.
July goods trade deficit widens on increased imports
The U.S. trade deficit in goods increased $2.3 billion, propelled by increasing imports. The international goods trade deficit registered at $91.2 billion in July compared with $88.8 billion in June, a 2.6% increase, after two consecutive months of contraction. Exports of goods for July were $164.8 billion, $2.4 billion more than June exports. Imports of goods for July were $256.0 billion, $4.7 billion more than June imports.