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American Shipper

U.S. mulls more metal tariff exclusions, Lighthizer says

U.S. Trade Representative Robert Lighthizer named several countries that could potentially be excluded from steep U.S. tariffs on steel and aluminum, and discussed progress on the North American Free Trade Agreement.

   The Trump administration anticipates it will talk with Argentina, the European Union and Brazil about potential country exclusions from the generally global steel and aluminum tariffs the president ordered earlier this month, U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee Wednesday.
   During the hearing, Lighthizer reiterated that Canada and Mexico will be exempt from the 25 percent steel and 10 percent aluminum tariffs proclaimed pursuant to an investigation under Section 232 of the Trade Expansion Act of 1962, pending successful completion of the ongoing renegotiation of the North American Free Trade Agreement (NAFTA).
   The “Section 232” investigation affirmed that imports of steel and aluminum are harming U.S. national security, thus providing a statutory justification for Trump to impose trade remedies.
   “There have been other countries that have come up, and that I believe we are in the process of talking to now – Australia, Argentina and the EU, I would put in those categories,” Lighthizer said. “There have been a number who have asked, a great number, you could imagine.”
   The U.S. will likely soon start talking with Brazil, as well, he said.
   Australian Prime Minister Malcolm Turnbull on March 9 tweeted that the White House was exempting his country from the tariffs.
   “Our hope is that by the end of April, we have this part of the process resolved,” Lighthizer said. “Having said that, the President has the authority at any time during the course of the program to let people out, if he thinks it’s in the national economic interests of the United States.”
   During the hearing, committee Chairman Kevin Brady, R-Texas, said he will “strongly support” Trump’s request to renew Trade Promotion Authority, which the White House submitted to Congress on Tuesday.
   But, similar to a letter sent by Brady and over 100 other congressional Republicans to Lighthizer on Tuesday, Brady during the hearing strongly urged Lighthizer to preserve investor-state dispute settlement (ISDS) as it is in the current form of NAFTA.
   Brady added he was “alarmed” that Canada and Mexico have apparently started negotiating a bilateral ISDS framework after the U.S. proposed to require parties to opt in to participate in ISDS.
   Lighthizer countered that if a renegotiated NAFTA omits ISDS, U.S. companies will still have recourse for unfair practices against their investments in Canada or Mexico through NAFTA’s Chapter 20 state-to-state dispute settlement regime.
   Chapter 20 applies to all disputes over the interpretation or application of NAFTA. The process begins with government-to-government consultations.
   If that doesn’t resolve the underlying dispute, a party can request a meeting of the NAFTA Free-Trade Commission, comprising trade ministers from NAFTA parties.
   Then, if that commission can’t resolve the dispute, any of the parties can call for establishment of a five-member arbitral panel, which is formed by each dispute party selecting two citizens of the other dispute party to be panelists, as well as a citizen of any NAFTA party or other country to be dispute chair.
   Chapter 20 investigations are scheduled to take approximately five months, and panel reports contain determinations of whether the measure in question would be inconsistent with a party’s obligations under the agreement or nullifies or impairs benefits that the complaining government could have reasonably expected under the agreement, as well as any recommendations for resolution that panel might provide.
   Lighthizer said the administration is “skeptical of ISDS for a variety of reasons,” and questioned why foreign nationals should have greater rights in the U.S. court system than Americans. He also described ISDS as a form of political risk insurance sought by U.S. companies and paid by Washington.
   “Our view tends to be, if you want to move a plant from the United States to Mexico, and the economics suggest that, that you should go with economics,” Lighthizer said. “But if you’re going there because we are underwriting the investment, we’re putting our finger on the scale, we’re encouraging you to move your plant down there, that’s not the job, in my opinion at least, of the United States government.”
   He acknowledged several disagreements within intellectual circles against the administration’s NAFTA ISDS approach, but noted that several organizations share his view, including the libertarian Cato Institute, National Association of Attorneys General, and National Association of State Legislatures.
   Brady said ISDS doesn’t threaten U.S. sovereignty, and argued that the mechanism enables U.S. government support for U.S. companies making foreign investments to generate customers.
   Another issue ripe for solving through the NAFTA renegotiation is British Columbia (BC) regulations that mandate that wine sold in the province’s grocery stores originate in BC, Lighthizer said during the hearing.
   The U.S. challenged the regulations at the World Trade Organization (WTO) in the last days of the Obama administration, and the Trump administration is now “aggressively litigating” the issue in Geneva, Lighthizer said.
   “It’s just rank protectionism at the provincial level in Canada, and it’s something that, in fact, is spreading,” he said. “We’re far better off trying to resolve this issue in the context of the NAFTA negotiation. It’s more likely to have a near-term solution that’s satisfactory to the industry.”
   Lighthizer indicated it could take until the end of the NAFTA renegotiation to solve the issue, however, noting that, in general, parties typically don’t resolve agriculture and intellectual property issues – which are usually among the most contentious in free trade agreements – until the end of negotiations.
   After the last two rounds, it’s clear the NAFTA renegotiation is reaching a “culminating part,” Ways and Means Trade Subcommittee ranking member Bill Pascrell, D-N.J., said during the hearing. He said he is confident, “still,” that USTR is working to ensure NAFTA’s labor chapter is fully enforceable.
   Among other things, Pascrell called on Lighthizer to ensure that NAFTA absorb as a “floor and not a ceiling” a House Democratic initiative to put labor and environmental provisions on equal footing with other FTA provisions, through making them fully enforceable.
   Since the agreement was reached May 10, 2007, House Democrats have consistently championed that provisions of the document, known as the “May 10th Agreement,” be included in U.S. FTAs.
   The agreement, among other things, says that FTAs should include enforceable obligations for member parties to adopt five basic labor standards formally recognized by the International Labor Organization, including freedom of association, earnest recognition of collective bargaining rights, elimination of forced labor and child labor, and elimination of employment discrimination.
   “Some of your NAFTA proposals have really challenged the status quo of U.S. trade policy, and I think have been creative in trying to make the agreement work for the many, and not just the few,” Pascrell said. “All the votes have to rise.”
   On the issue of bilateral free trade agreements, which senior administration officials have said on several occasions they will pursue in lieu of multilaterals, Lighthizer noted that the administration intends to “aggressively pursue” new ones, now that the Office of the U.S. Trade Representative (USTR) has a full complement of deputies to serve under him.
   He referenced a trade working group with the United Kingdom, and said the administration is “prepared to explore the possible countries in Africa and Southeast Asia” with which it might be appropriate to enter into a free trade agreement (FTA).
   The agency is also exploring as potential FTA candidates Southeast Asian countries in the Trans-Pacific Partnership, as well as others, including the Philippines, which could be “a reasonable first step” in that regional direction, he said.
   USTR has also informed Japan the U.S. is interested in negotiating a FTA with them “at the appropriate time,” Lighthizer said. “Right now, I believe, is not that time. Japan is in the process of having the TPP become implemented, and it was signed on the eighth of this month… But they’re very much aware that we think that a closer economic relationship with them is in their interest, as it is in our interest.”