Credit: Original article can be found here
With help from Doug Palmer and Anna Kambhampaty
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— Trade ministers from the G-7 nations convene this week with an agenda that ranges from health and climate to WTO reform and digital trade.
— The U.S. has no immediate plans to lift tariffs on China, U.S. Trade Representative Katherine Tai said in her first media interview. Negotiators don’t just give up leverage, she said.
— The massive vessel in the Suez Canal is now free, but has created a global trade headache that will result in delayed shipments and congested ports.
It’s Monday, March 29. Welcome to Weekly Trade. We’re following along in real time as crews try to spring the Ever Given from the Suez Canal. The live updates haven’t quite captivated the internet with the same zeal as April the pregnant giraffe, but meme-makers have nevertheless been cranking out some gems.
EYES ON THIS WEEK’S G-7 MEETING: Trade ministers representing the G-7 countries are slated to gather virtually on Wednesday with a complex agenda that includes WTO reform, digital trade, health and climate. The meeting will mark the first time the newly installed USTR engages the body of U.S. allies collectively, though she already spoke with her counterparts from most member countries during her first week in office.
The agenda could put Tai in a defensive position, even as the U.S. looks to rebuild its economic relationships abroad. Several G-7 members will arrive at Wednesday’s meeting looking for the U.S. to pull back tariffs on steel and aluminum, and to strike an agreement that raises international taxes on U.S. technology companies. Just on Friday, the U.S. revived its tariff threat against countries that impose digital taxes — several of which will be at the G-7 table.
The U.S. has also been the key figure obstructing the WTO, blocking the appointment of appellate judges and thus crippling its primary dispute resolution forum. That effort began during the Trump administration, but Biden is expected to take a hard line of his own on reforming the WTO. That will likely be a point of contention among G-7 nations.
“I wouldn’t expect her to make any commitments on anything beyond agreeing to consult and cooperate. Her response to most inquiries will be, ‘It is under review,’” predicts Bill Reinsch, a trade expert at the Center for Strategic and International Studies. “Since she will only have been in the job for two weeks, she’ll probably get a pass from the others, but they’ll make clear that the next time won’t be so easy.”
Advancing the U.S. agenda: While Tai will undoubtedly be pressed by her counterparts, she’s also expected to push a U.S. agenda that relies heavily on trading partners to form an alliance against China’s most repudiated market practices. Many G-7 nations have signaled a desire to enforce trade rules that China has flouted in the past, but trading partners like Europe, for instance, have relationships with Beijing to nurture, too.
TAI TALKS TARIFFS IN FIRST INTERVIEW: Tai told The Wall Street Journal that she has no immediate plans to ease tariffs on China, despite complaints from the business community that the Trump-era measures are harmful to the U.S. economy. Her remarks come as a wide swath of industries are mounting an effort to convince the current administration that tariffs have not delivered as former President Donald Trump promised and should be scrapped.
But chief among the reasons why Tai is in no rush, the Journal reports, is that Trump’s decision to impose tariffs now presents the Biden administration with a bargaining chip in talks with Beijing. “Every good negotiator retains his or her leverage to use it,” Tai said in the interview. “Every good negotiator is going to keep all of their options open.”
About meeting with China: U.S. trade officials are expected to meet with Chinese counterparts every six months under the phase one deal Trump inked. That meeting is overdue, but Tai said she would engage with Chinese Vice Premier Liu He “when the time is right.”
TAI DISCUSSES U.S. LEADERSHIP IN ASIA WITH SINGAPORE: Tai spoke on Friday with Singapore Trade Minister Chan Chun Sing, rounding out a week of virtual meetings with key counterparts in Asia, Europe and North America.
“In addition to strengthening bilateral cooperation between the United States and Singapore, they discussed the importance of U.S. regional leadership in the Asia-Pacific and globally on trade, economic and strategic issues,” USTR said in a statement.
Tai and Chan also agreed to future engagement on shared areas of interest, including WTO reform, digital trade and climate, USTR said. Singapore has been particularly active in the digital trade space, having concluded pacts with Australia, New Zealand and Chile.
UPDATE FROM THE SUEZ CANAL: The boat is now afloat! The Ever Given was finally freed on Monday after blocking maritime traffic through Egypt’s Suez Canal for nearly a week. The incident has caused major delays and disruptions to global trade at a time when shipping companies were already stretched thin. Crews worked throughout the weekend to dredge the canal and move the vessel, hoping to take advantage of an elevated tide.
The snafu nevertheless caused a logistical headache. The world’s largest shipping companies were forced to reroute vessels away from the Suez Canal, a critical passageway that facilitates roughly 12 percent of the world’s trade, according to the International Chamber of Shipping. That will mean longer delivery times and unexpected crowding at ports, many of which were already handling a surge of shipments due to the pandemic.
But the economic toll could have been even more significant if the Ever Given was not freed. The blockage was disrupting between $6 billion and $10 billion in trade every day, according to German insurance company Allianz. Every week the port remained blocked could reduce annual trade growth by 0.2 to 0.4 percentage points, Allianz also predicted.
BIPARTISAN PUSH ON DIGITAL TRADE: The leaders of the Congressional Digital Trade Caucus are urging Tai to resolve the most pressing trade disputes facing tech companies and other industries that rely on data. In a letter Monday, Reps. Suzan DelBene (D-Wash.) and Darin LaHood (R-Ill.) wrote that divisions over digital taxes and data privacy, as well as tariffs and other market access barriers are stifling a fast-growing segment of U.S. exports.
“Digital trade is more critical than ever, lifting up every American industry from manufacturing to agriculture to services,” the lawmakers wrote in the letter. “To succeed in the 21st century economy, we must recognize that our economic resilience is firmly based in an economy that delivers American-made digital goods and services globally.”
Among their requests are for the U.S. to push back against digital protectionism, particularly out of Europe, India and China, in order to ensure a level playing field for U.S. businesses. (Other countries, meanwhile, fear that U.S. tech firms are too dominant and that foreign countries do not sufficiently tax their international revenues.) The pair also asked Tai to enforce digital commitments under the U.S.-Mexico-Canada Agreement and to “conclude a high-standard digital trade agreement” at the WTO.
U.S. APPLE EXPORTS TO INDIA RESUME: The U.S. had to halt its export of apples to India after the country implemented a law requiring shipments to carry non-genetically modified certificates. The USDA did not issue such certificates, leaving apple growers in the lurch. But last week, the Washington State Department of Agriculture stepped in to create the certification process, allowing for exports to continue.
“WSDA created the non-GMO certification for apples strictly to maintain market access to India,” said Hector Castro, WSDA communications director. “Our agency worked with the tree fruit industry to develop inspection protocols and a certificate demonstrating the non-GMO status of our apple shipments, and that process was accepted by officials in India.”
Tariff troubles: In 2018, India was the No. 2 importer of U.S. apples, but that changed quickly after Trump’s Section 232 steel and aluminum tariffs. India retaliated by raising duties on U.S. apple imports by 20 percent on top of a 50 percent tariff already in place for U.S. apples. Between 2018 and 2019, U.S. apple exports to India decreased by more than 75 percent.
CBP RETIREE: NO END IN SIGHT TO E-COMMERCE PACKAGE BOOM: The rapid growth of e-commerce shipments over the past several years has been a big adjustment for U.S. Customs and Border Protection, which for decades had focused its efforts on large container shipments brought in by sea, Brenda Smith, CBP’s executive assistant commissioner for trade, told Morning Trade before retiring on Friday
“When the supply chain started to move to essentially a small-package mode — whether that came in by air or trucks across our land borders, or even as we started to see container loads for small packages — CBP really needed to change how it did business,” Smith said. “And we had to change our thinking about how to evaluate risks.”
The pandemic gave a further boost to e-commerce volumes, as many consumers shopped from home rather than venture into stores. Incoming package shipments of goods worth less than $800 increased by 28 percent in fiscal 2020, fueled by a dramatic 219 percent increase in air cargo and a 123 percent increase in truck shipments.
Given that experience, “I think we want to be prepared for continued exponential growth” in e-commerce shipments, Smith said. That means more investment in training and technology to help CBP personnel identify packages that contain counterfeit goods or potentially even a bomb packed by a terrorist.
“You’ve got to have sufficient analysts and attorneys and auditors and commodity specialists who know what they’re looking at, know what the requirements are, and are able to take effective enforcement action, so that those that are thinking about not complying with the law know that’s a really bad idea,” Smith said.
FROM THE E.U. DELEGATION TO THE U.S. CHAMBER: Kasper Zeuthen, a longtime spokesperson for the EU’s Delegation in Washington, has joined the U.S. Chamber of Commerce as vice president of communications with a focus on international affairs, trade policy and media relations. During his 15-year stint for the EU, Zeuthen fielded questions on a variety of trade topics, including Trump’s tariffs on steel and aluminum and the endless Boeing-Airbus dispute.
— China and Iran have inked a 25-year agreement to cooperate on economic activity ranging from agriculture to transportation and oil, per the AP.
— U.K. Prime Minister Boris Johnson aims to give developing countries an alternative to China after Beijing imposed sanctions on critics, POLITICO’s Stuart Lau reports.
— The war over technology between the U.S. and China has put a spotlight on the Commerce Department’s Bureau of Industry and Security, The New York Times writes.
— Bill Brock, a longtime Republican lawmaker who also served as President Ronald Reagan’s U.S. trade representative, died on Thursday. Read his obituary in The Washington Post.
— The prospect of a trade agreement between the U.S. and U.K. could be years away as the Biden administration focuses elsewhere, according to Bloomberg.
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