Trump moving forward on NAFTA renegotiation

United States Trade Representative (USTR) Robert Lighthizer on Thursday sent to the leadership of the House and the Senate a statutorily-mandated notification letter to Congress (PDF), signaling President Donald Trump’s intention to initiate negotiations with Canada and Mexico regarding modernization of the North America Free Trade Agreement (NAFTA).

First negotiated 25 years ago, Trump says the agreement has grown outdated and unresponsive to the needs of American workers and businesses. While the USTR intends to initiate negotiations with Canada and Mexico “as soon as practicable”, the notification indicates that such negotiations will commence no earlier than 90 days from today.

USTR Lighthizer pledged that the Trump Administration will continue to consult closely with Congress in developing the President’s negotiating positions to ensure that they are consistent with Congressional priorities and objectives outlined in section 102 of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (“Trade Priorities and Accountability Act”).  To that end, the notification states that the White House’s specific objectives for this negotiation will comply with the specific objectives set forth by Congress in section 102 of the Trade Priorities and Accountability Act.

Making the case that NAFTA does not reflect modern standards, the letter notes that digital trade was in its infancy when NAFTA was negotiated.  The Notification indicates that the Administration’s aim is to modernize NAFTA by including “… new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.”  Asserting that “effective implementation” and “aggressive enforcement” of trading partners’ commitments under trade agreements is vital to the success of those agreements, in the forthcoming NAFTA negotiations, the USTR also seeks to improve both the implementation and enforcement of its trading partners’ commitments.

While both Canada and Mexico assert that NAFTA has been beneficial to all parties to the agreement, including the United States, both countries sought to downplay the significance of today’s notification to Congress, characterizing it simply as a procedural step that has long been anticipated.  In statements in response to the Congressional notification of President Trump’s intention to enter into negotiations for a new agreement, each country acknowledged that, with the passage of time, technological developments have produced “new realities” that make updating the agreement necessary and appropriate.

In a statement, Canadian Foreign Minister Chrystia Freeland said:

“We are at an important juncture that offers us an opportunity to determine how we can best align NAFTA to new realities — and integrate progressive, free and fair approaches to trade and investment.”

Similarly, in a statement emphasizing the importance of “regional competitiveness”, the government of Mexico commented:

“We reaffirm our willingness to update the agreement in order to successfully address the challenges of the 21st century. Our countries deserve a modern instrument to regulate our trading and economic relationship.”

Trump makes good on campaign’s tough trade talk

Reflecting his deep-seated skepticism about free trade and declaring that the policy of his Administration is “… to represent the American people and their financial well-being in all negotiations, particularly the American worker, and to create fair and economically beneficial trade deals that serve their interests”, President Donald Trump on Monday signed a Memorandum directing the US Trade Representative to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP)  and to permanently withdraw the US from TPP negotiations.  He also directed the Trade Representative to provide written notification to the Parties and to the Depository of the TPP, as appropriate, and to publish the memorandum in the Federal Register.  Taking these steps effectively kills the TPP deal because it is not economically viable without the participation of the United States.  The withdrawal is a repudiation of what had been a key priority of the Obama Administration.

President Trump said that the intention of his Administration is ” … to deal directly with individual countries on a one-on-one (or bilateral) basis in negotiating future trade deals and he directed the Trade Representative “… to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.” To that end, President Trump will meet at the White House this Friday with British Prime Minister Theresa May, Trump’s first meeting with a foreign leader since becoming President. Trump and May are expected to discuss beginning talks on a bilateral trade agreement between the United States and the United Kingdom, an agreement that many believe will be difficult to achieve until the United Kingdom completes the Brexit process and leaves the European Union, something that may not occur until as late as March 2019.

Because he believed that this 12-nation Asian-Pacific trade deal would hurt U.S. jobs and was what he once called “a rape of our country”, President Trump had promised throughout the presidential campaign to have the US withdraw from the TPP if he was elected. (He also had pledged in a video released after his election to withdraw from the TPP deal on day one of his presidency.)  Trump’s decision, which is more popular with Congressional Democrats and labor groups than with many Congressional Republicans and business and agriculture groups, prompted praise from several Democrats and criticism from Senator John McCain (R-AZ) who called President Trump’s decision “… a serious mistake that will have lasting consequences for America’s economy and our strategic position in the Asia-Pacific region.”  Senator McCain also argued: “It will create an opening for China to rewrite the economic rules of the road at the expense of American workers. And it will send a troubling signal of American disengagement in the Asia-Pacific region at a time we can least afford it.”   

Some observers had expected the president also to issue an executive order today notifying Canada and Mexico of the United States’ intention to withdraw from the North American Free Trade Agreement (NAFTA).  However, at today’s White House press briefing, Trump Press Secretary Sean Spicer said that the United States might be able to renegotiate NAFTA with Canada and Mexico, if these two countries agreed to do so, without the US issuing a notice of intention to withdraw from the agreement.  Thus, while Spicer promised further trade updates later in the week, he said that no further executive orders were expected to be issued today.   

Trump, Xi talk as Chinese media threatens trade war

Chinese President Xi Jinping spoke by telephone Sunday with Donald Trump, according to a statement issued by the president-elect's transition team.

Aides to the president-elect said he “believes the two leaders will have one of the strongest relationships for both countries moving forward,” while Mr. Xi was quoted in Chinese media as saying there was “huge potential” in cooperation between the two nations.

But the conversation, in which the two “established a clear sense of mutual respect for one another,” according to the statement, came as a state-run newspaper in China warned President-elect Trump against punitive trade measures.

Despite the outwardly friendly tone from Trump and Xi, the media organ of the Community Party of China condemned the president-elect as “naïve” for his pledge to levy a 45% tariff on Chinese imports to the United States, warning it would result in a retaliatory squeeze on American exports of automobiles, agriculture, and smartphones.

“China will take a tit-for-tat approach,” an unsigned editorial in the Global Times reads. “A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the U.S.”

The two nations traded some $650 billion in goods last year, registering the Chinese trading relationship as America's second-most profitable.

Trump described the trade deficit between China and the United States as “the greatest theft in the history of the world” and has pledged to officially label the country a currency manipulator on this first day in office. In the days since his historic victory last week, though, the president-elect has adopted a more conciliatory tone with China.

Soapbox will continue to monitor transition developments, including key staffing and agency appointments, foreign relations, and policy objectives.

Trump's first 100 days: Obamacare, taxes, crime, and trade

President-elect Donald Trump released last week his “Contract with the American Voter,” a set of 18 specific policy objectives aimed at “restoring honesty and accountability, and bringing change to Washington.”

The manifesto includes some ten legislative measures spanning taxes, the repeal and replacement of the Affordable Care Act, immigration and crime. The plan, a revival of Republicans' 1994 “Contract with America,” brings new clarity to the broad legislative and regulatory pledges the incoming president made in the course of the last 16 months, including:

  • Proposals to modify federal lobbying and campaign finance law, including term-limiting members of Congress, an extended five-year “cooling off” period for White House and Congressional officials transitioning to work as lobbyists, a lifetime ban on White House officials lobbying on behalf of the foreign government and a ban on foreign lobbyists fundraising for American elections;
  • Regulatory reform proposals, including a requirement that two existing regulations be eliminated for every new federal regulation, lifting restrictions on oil and natural gas production on public lands, jump-starting stalled energy infrastructure projects such as the Keystone XL Pipeline, and cancelling US payments to the UN Green Climate Fund and redirecting the funds to domestic water and environmental infrastructure;
  • Renegotiating or withdrawing from existing trade deals, such as NAFTA and the proposed Trans-Pacific Partnership, as well as directing the Secretary of the Treasury to label China a currency manipulator; and
  • New immigration and public safety-related measures, such as cancelling federal funding to sanctuary cities, suspending immigration from terror-prone regions without adequate vetting procedures and deporting criminal illegal immigrants.

Mr. Trump's 100-day plan includes the following legislative measures that he expects to pursue in Congress to accomplish these objectives, including:

  • Middle Class Tax Relief and Simplification Act: Features broad tax reduction and tax code simplification, condensing the number of tax brackets and lowering the top business tax rate to 15%.
  • End the Offshoring Act: Establishes tariffs to discourage companies from relocating overseas.
  • American Energy and Infrastructure Act: Leverages public-private partnerships and private investments through tax incentives to spur infrastructure investment.
    School Choice and Education Opportunity Act: Redirects education dollars to increase school choice, ends Common Core, expands vocational and technical education, and brings greater local control to education.
  • Repeal and Replace Obamacare Act: Fully repeals the Affordable Care Act and replaces it with health savings accounts (HSAs), removes restrictions on purchasing health insurance across state lines, lets states manage Medicaid funds, and speeds up drug-approval times at the FDA.
  • Affordable Childcare and Eldercare Act: Allows tax deductions for childcare and eldercare, incentivizes employers to provide on-site childcare services, and creates tax-sheltered dependent care savings accounts for young and elderly dependents, with matching contributions for low-income families.
  • End Illegal Immigration Act: Funds the construction of a wall on the Mexican border “with the full understanding that the country of Mexico will be reimbursing the United States for the full cost of such wall,” as well as increases sentences for illegal immigrants with criminal convictions or previous deportations.
  • Restoring Community Safety Act: Creates a task force on violent crime and increases funding for programs to train and assist local police, and increases resources for federal law enforcement agencies and federal prosecutors.
  • Restoring National Security Act: Eliminates the defense sequester and expands military investment, increases options for veterans seeking privately-offered healthcare outside of the VA, establishes new screening procedures for immigration and new programs for protecting infrastructure from cyber-attacks.
  • Clean Up Corruption In Washington Act: Enacts new ethics and campaign finance reforms to reduce the influence of special interests.

The plan can be read in its entirety here.