Which top issues should global public affairs professionals be paying attention to?
Earlier this month, Robert Lighthizer was (finally) confirmed by the Senate as the United States Trade Representative (USTR). Although the new USTR will play a key role in determining the direction of U.S. trade policy, many questions remain about where the Trump administration’s trade strategy is headed.
- NAFTA: The Trump administration has made its commitment to renegotiating the North American Trade Agreement clear. In April, the administration publicly considered and then backed away from triggering the provision allowing the United States to withdraw in six months. Nevertheless, Wilbur Ross, U.S. Secretary of Commerce, indicated that the administration is looking to conclude talks with Mexico and Canada “as soon as possible,” even though key negotiating positions in the USTR’s office remain unfilled. While the U.S. has withdrawn from Trans-Pacific Partnership (TPP), many of those familiar with the terms of the 12-nation agreement speculate that it will serve as a basis for updating NAFTA, including provisions related to services, non-tariff barriers and e-commerce. Other areas of dispute, such as Mexican sugar imports, Canadian softwood lumber imports and access to the Canadian dairy market will likely be reexamined during the renegotiation process. New digital trade obligations will also have to be incorporated in NAFTA 2.0, and could serve as the standard baseline for any future U.S.-led trade agreement moving forward.
- Bilaterals: Could bilaterals be the new normal for trade agreements? The Trump administration has stated its intention “to focus on bilateral negotiations,” even though the President has also criticized such U.S. trade deals, including the agreement with South Korea (KORUS). The administration has stated its interest in pursuing bilateral negotiations with countries it views as potentially constructive commercial partners such as Japan and the United Kingdom. According to Secretary Ross, the administration wants to keep some parts of TPP when negotiating new deals, especially those which pertain to market access. On the other side of the Atlantic, the EU is also working to negotiate bilateral trade deals. The bloc recently concluded a new free trade agreement with Canada, and is working to modernize its trade agreement with Mexico, as well as a political consensus with Japan for an FTA.
- Enforcement: In addition to its commitment to “hold our trading partners to higher standards of fairness,” the Trump administration promises “to use all possible legal measures in response to trading partners that continue to engage in unfair activities.” The more aggressive stance could mean more unilateral action by the U.S. government, including increased duties through the use of anti-dumping, countervailing duties and safeguard proceedings, and even infrequently used provisions in U.S. law allowing for restrictions on imported goods for national security reasons. The administration has also ordered several studies of existing trade relationships. Preliminary countervailing duties have already been announced on softwood lumber imports from Canada, and USTR and Commerce have been tasked with identifying the causes of major trade deficits the U.S. has with certain trade partners.
- Buy American, Hire American: “America First” is the Trump administration’s motto. On April 18, President Trump signed a “Buy American, Hire American” executive order, which seeks to increase the use of and preference to American-made goods and labor in government-funded projects. The order also seeks to reduce the waivers and exceptions available for using foreign inputs when U.S. products are not readily available or are very costly. The order is aimed at giving the U.S. manufacturing sector a greater share of inputs in government-funded infrastructure projects, and also seeks to reduce regulatory burdens for domestic manufacturing. For the private sector, the order could alter existing supply chains, heighten the risk of non-compliance and create new opportunities for working with U.S.-based manufacturers. The recent creation of the Office of Trade and Manufacturing Policy under Peter Navarro further emphasizes the administration’s intention to give preference to the “made in the U.S.A.” label.
- TPP & TTIP: They’re not dead yet. The United States’ withdrawal from TPP was a largely symbolic gesture, as the agreement lacked support in Congress on either side of the political aisle. However, discussions among the other TPP countries have begun moving forward as an 11-nation pact without the United States. Japan and New Zealand have completed the ratification process of the agreement, and trade ministers continued exploratory negotiations when they met at the recent APEC summit in Vietnam. From the U.S. side, Speaker of the House Paul Ryan has hinted that the Transatlantic Trade and Investment Partnership (TTIP) agreement with the EU may not be dead after all, and that the U.S. could “chart a path forward on TTIP negotiations”.
- China: The Trump administration has toned down its aggressive rhetoric on China. The meeting between President Trump and China’s President Xi Jinping was largely successful, with the two sides agreeing to engage in a 100-day economic dialogue that aims to ease trade-related tensions between the two countries, in part by reducing the U.S. trade deficit with China. President Trump has not designated China as a currency manipulator, possibly signaling the administration’s desire to strike a more cooperative tone on issues like North Korea, cybersecurity and trade. However, given Lighthizer’s historically tough stance on China’s role in global commerce, the current rhetoric may be reversed under the new chief trade negotiator.
As USTR Lighthizer assumes his new role and the structure of the administration’s trade advisors is finalized, more details will continue to emerge on how these key issues will be approached. Even more likely is that there will first be a lot more questions. How are you adjusting your international public affairs strategy in light of the Trump Administration? Let me know at email@example.com.