With help from Gavin Bade and Emilio Casalicchio
— Former U.S. Trade Representative Robert Lighthizer is putting pressure on congressional Republicans not to mandate exemptions to Trump-era tariffs on China. And key Democratic lawmakers are supporting his efforts.
— Russia’s war in Ukraine has created an opportunity for the Biden administration to pursue a trade policy that’s not rooted in nationalism or unfettered globalization. But can trade officials get their act together to reshape the global economy?
— Meanwhile, G-7 leaders huddled this weekend and emerged with new sanctions against the Kremlin. The U.S. will impose new restrictions on industrial exports and financial services, per the White House.
It’s Monday, May 9! Welcome to Weekly Trade. We hope all those who celebrate Mother’s Day enjoyed much-deserved rest this weekend.
LIGHTHIZER BACK IN THE RING: The first meeting of the China bill conference committee is this Thursday and supporters of the dueling House and Senate trade titles are lobbying in earnest to get their preferred language written into the final bill.
The latest: Trump’s former trade chief Robert Lighthizer has been making calls to Republican senators, trying to convince them to oppose a provision in the Senate’s bill that would direct USTR to reopen the tariff exemption process and renew exemptions that have expired. That would amount to rolling back Trump’s legacy on trade, he and MAGA-aligned groups are arguing.
The current team at USTR is on the case, too. They sent a statement around last week saying the tariff rollback language would “undermine” U.S. trade law and “support China’s goal of obtaining a reduction in the tariffs.”
The outreach appears to be working. Though 91 senators voted for the trade title that was included in the Senate version of the legislation last year, only 53 voted for a motion last week supporting the tariff language itself as part of a motion to instruct conference committee members on what to include in the final bill.
Republican supporters of the tariff language are pushing back, arguing that reopening exemptions would only return the economy to where it was under Trump, before his exemptions expired at the end of 2020.
“The exclusions process would not roll back Section 301 tariffs,” a GOP aide said. “It would simply do what the Trump administration did for 30 out of the 31 months they were in office: allow American manufacturers with no alternative sourcing options to apply for temporary tariff relief.”
Lighthizer’s campaign signals a new phase in the alliance between the confrontational former U.S. trade representative and the progressive members of the House Ways and Means Committee, who have crafted their own trade language that would raise tariffs on China, which Lighthizer supports. After the Senate’s passage of its trade proposals last year, Lighthizer penned an op-ed in The New York Times asking the House to “save” America from the tariff rollback.
One congressional staffer said Lighthizer’s recent Senate lobbying was encouraged by House Ways and Means Chair Richard Neal (D-Mass.). Neal’s office did not respond to requests for comment, but another Ways and Means heavyweight, trade panel chair Earl Blumenauer, confirmed through a spokesperson that he had also pushed Lighthizer to engage the upper chamber.
“This is a Neal play, and it’s very smart,” said the staffer.
BIDEN’S CAMPAIGN TO REMAKE GLOBAL TRADE POLICY: The China bill negotiations are just the latest front in the Biden administration’s campaign to reshape the global paradigm on trade — an effort the trade team’s Gavin Bade detailed in a special report over the weekend.
After Trump and the pandemic challenged the global consensus on free trade and globalization, Russia’s invasion of Ukraine shattered it, giving the president’s economic team a chance to shape the future of world trade policy. So can they do it?
They say they have a plan: the so-called “worker-centered” trade policy that supports labor and environmental standards at home and abroad. But even if the administration is united in purpose, the team has often disagreed on how to enact those plans, leading to internal disagreements that have delayed their central objectives.
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G-7 SLAPS NEW SANCTIONS ON THE KREMLIN: The Group of Seven leaders imposed a new raft of sanctions against Russia and its political elite over the weekend as President Vladimir Putin’s brutal war in Ukraine continues to claim civilian lives.
New export bans: The U.S. will impose export controls that restrict Russia’s access to wood, industrial engines, boilers, motors and bulldozers, among other products. The Commerce Department will also slap penalties on Promtekhnologiya, a weapons maker, as well as seven shipping companies and one marine towing company.
New services bans: Americans will be prohibited from offering accounting, trust and corporate formation and management consulting services to anyone in Russia. “These services are key to Russian companies and elites building wealth, thereby generating revenue for Putin’s war machine, and to trying to hide that wealth and evade sanctions,” the White House explained.
Doubling down on oil ban: The G-7 countries also committed to “phasing out or banning” the use of Russia oil. Nevertheless, the White House reiterated that the move “will hit hard at the main artery of Putin’s economy.”
REPUBLICANS CHASTISE TAI’S TRADE APPROACH: Senate Republicans are criticizing the Biden administration for the “lack of ambitious market-opening initiatives” on its trade agenda in a new letter sent Monday to U.S. Trade Representative Katherine Tai and Agriculture Secretary Tom Vilsack.
“Regrettably, U.S. trade leadership has thus far taken a backseat to other priorities under this administration,” the letter states. “But, as you know, global trade does not simply pause until the administration deems it worthy of pursuing.”
It’s authored by Senate Minority Whip John Thune (R-S.D.) and signed by nearly two dozen of his Republican colleagues, including Senate Finance ranking member Mike Crapo (R-Idaho) and Senate Agriculture ranking member John Boozman (R-Ark.).
Free trade agreements are “far from relics of the past, as Ambassador Tai recently implied at a hearing before the Senate Finance Committee,” the letter continues. Instead, the lawmakers argue such deals are critical to increasing exports and adding U.S. jobs.
Harsh words on IPEF: The letter takes aim at the Indo-Pacific Economic Framework, the administration’s signature economic initiative in Southeast Asia that will soon begin formal negotiations led by Tai and Commerce Secretary Gina Raimondo. In short, they contend it’s not enough to stand up to China.
Republicans “respectfully urge” Tai to add market access provisions and enforceable commitments to the framework despite the administration’s insistence that it will not resemble a traditional trade agreement. That echoes calls from both industry groups and key trading partners, as faithful readers will recall from our story last week.
“While some aspects of the IPEF may have potential, it is not a credible counterweight to the market-opening agreements that other countries, including China, are actively advancing,” the letter states.
JAPAN WANTS THE U.S. TO JOIN CPTPP: President Joe Biden will travel to Tokyo later this month, where his agenda is highly expected to include the U.S. trade strategy for the Indo-Pacific region. After all, the White House said in January that Japanese Prime Minister Kishida Fumio pledged to “build support” for the Indo-Pacific Economic Framework among countries in the region.
But during a U.K. visit last week, Kishida told our London-based colleagues that Japan hopes the U.K.’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will spur the U.S. on to do the same.
The CPTPP is “not just a trade agreement; it will have an extremely important role for the economic order in the Indo-Pacific region from now on,” Kishida said. The U.K.’s decision to join would be “highly meaningful in setting a high standard,” he added.
Quick reminder: Former President Barack Obama brokered that deal but it was abandoned once Trump took office amid a bipartisan backlash to free trade agreements from voters who felt the pacts favored foreign nations over American workers.
Biden has no plans to rejoin. But that did not stop Kishida from saying the decision to do so would be “desirable.” He added: “I will continue to patiently seek the return of the U.S. to [CPTPP] by collaborating with the U.K.”
— The World Trade Organization has begun negotiating a potential intellectual property waiver for Covid-19 vaccines and the response is “mixed and cautious,” writes POLITICO Europe’s Ashleigh Furlong.
— Countries desperate for new sources of critical metals are increasingly looking to Africa, Reuters reports.
— Beijing loyalist John Lee, the only candidate running to lead Hong Kong, was chosen for the job by a committee vetted by the Chinese government, per the Associated Press.
— A Chinese official said the country’s employment situation could become “complicated and grave” as Beijing and Shanghai impose ever-stricter Covid-19 lockdowns, Bloomberg writes.
— Hungary is blocking a European Union proposal to ban Russian oil imports and holding up the bloc’s sanctions package, according to Bloomberg.
— White House climate officials fear the Commerce Department’s investigation into solar panels accused of evading Chinese tariffs is harming the domestic solar industry, The Washington Post reports.