Europe’s trade woes could spell trouble for TTIP

With help from Adam Behsudi and Doug Palmer

EUROPE’S TRADE WOES COULD SPELL TROUBLE FOR TTIP: A proposed free-trade deal between the European Union and Canada could be on its last legs after one of Belgium’s regional leaders vowed on Tuesday not to support it by Friday, which Brussels is touting as a make-or-break deadline. Belgium can’t sign the deal without consent from all five of its regional parliaments, and the EU can’t ratify it without unanimous support from its members, our POLITICO Europe colleagues Hans von der Burchard and Christian Oliver report.

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The European Commission is casting a Friday meeting of EU leaders as the time and place to come to a consensus on the Comprehensive Economic and Trade Agreement — thereby salvaging the credibility of the entire EU trade agenda. The CETA deal has become a litmus test of whether the European Commission is still able to wield its ultimate power to negotiate trade deals — and more broadly, it’s being closely watched by trade observers who say it could be a bellwether for how negotiations surrounding the TTIP between Brussels and Washington may fare in the future.

“There has to be an agreement [this week],” European Trade Commissioner Cecilia Malmström said Tuesday, stressing that time is running out before the EU hopes to sign the deal with Canada at a summit on Oct. 27. Otherwise, she insisted, “there will not be a summit.”

Bill Reinsch, a senior trade adviser for the firm Kelley Drye who formerly led the National Foreign Trade Council, spun the development in a slightly more positive light. “The Commission will regroup and come up with plan B,” he told Morning Trade in an email. “That may not work, but it’s not over yet.”

If Belgium’s defiance “sticks,” however, “it’s not good news for TTIP,” he wrote. CETA is “less controversial, and if they can’t do that it’s hard to see them doing TTIP.”

IT’S WEDNESDAY, OCT. 19! Welcome to Morning Trade, where your host wants to know what you think the odds are that trade will come up in tonight’s debate. Will Trump think these 90 minutes are his last chance to slam Hillary for her TPP flip-flop? Will Clinton try to bash Trump for his use of Chinese steel? Or will the moderators just think there are bigger fish to fry outside of the trade world? Let me know: or @mmcassella.

CANADA, EU TALKS SHOULD’VE BEEN IN THE BAG: Looking objectively at CETA, the deal should have gone over smoothly on both sides, said Scott Miller, a trade analyst at the Center for Strategic and International Studies. He pointed out to Morning Trade that some of the biggest roadblocks in U.S.-EU negotiations — namely, the divide over geographic indicators and government procurement — did not seem to be a problem in the EU’s talks with Ottawa.

“For me, there’s an open question whether Europe in its current political arrangement is able to ratify any agreement,” he said. “If they can’t sign with Canada, who can Europe sign with?”

SENATORS PUSH USTR ON GSP LUGGAGE DECISION: A bipartisan group of 14 senators criticized the Obama administration’s decision to exclude the majority of Generalized System of Preferences countries from being granted tariff cuts on exports of suitcases, handbags and other travel goods, although they welcomed the White House’s efforts to review the issue further.

“The administration’s decision was disappointing for several reasons,” the lawmakers wrote in a letter Tuesday to U.S. Trade Representative Michael Froman. “First, the decision did not comport with the expansion of duty-free treatment that Congress envisioned when it passed the Trade Preferences Extension Act of 2015 with overwhelming bipartisan support. Section 204 of the TPEA authorized the president to designate all 28 articles at issue as eligible for duty-free treatment for all GSP beneficiaries.”

In June, the administration eliminated tariffs on imports of those goods only from least-developed GSP countries and African Growth and Opportunity Act nations. The industry has argued that the decision is a missed opportunity to transfer production from China, a non-GSP country where 85 percent of U.S. travel good imports come from, to Thailand, Sri Lanka, the Philippines and other GSP countries that, compared to the poorest countries included in the initial decision, actually have capacity to produce.

The lawmakers also questioned how the administration came to the decision to exclude some countries under the required criteria for determining GSP eligibility, noting that move “unnecessarily perplexed and understandably frustrated U.S. businesses and consumers.”

The U.S. Trade Representative’s Office held a hearing Tuesday on the issue and said it plans to complete a review of luggage and travel goods by January.

USTR CLAIMS ENFORCEMENT VICTORY OVER CHINA: In brighter news for the administration, USTR announced on Tuesday that China has eliminated a tax scheme that benefited its domestic aircraft factories over manufacturers in the U.S. and other countries, bringing the Obama administration another enforcement victory at the World Trade Organization.

Beijing’s policy had exempted certain Chinese-produced aircraft, generally those weighing less than 25 metric tons, from a 17 percent value added tax that was applied to imported aircraft, USTR said in a statement. While China rescinding the scheme was a positive development for the U.S. and other aircraft manufacturers, U.S. Trade Representative Michael Froman noted that the administration remains “deeply concerned about China’s lack of transparency on taxes affecting American products.” Read the full story here.

CLINTON CAMP SLAMMED WHITE HOUSE FOR CALLING HILLARY A TRADE ALLY: Hillary Clinton’s team of advisers responded with alarm in April 2015 when principal deputy White House press secretary Eric Schultz told reporters that the administration considered Clinton an ally on trade, according to the latest batch of emails purportedly hacked from campaign chairman John Podesta’s email account and posted online by WikiLeaks.

On April 23 of last year, campaign spokesman Nick Merrill circulated among advisers a POLITICO story in which Schultz is quoted as saying: “I haven’t seen anything to suggest any distance” between Clinton’s position on the Trans-Pacific Partnership and Obama’s. Communications director Jennifer Palmieri replied that Schultz had warned her such comments might be coming.

“They did not want to buy into notion that HRC’s bar was higher than what the WH thinks they will get in TPP negotiations,” she wrote. At the time, Clinton had laid out a series of criteria she said any trade deal would have to meet in order to win her approval but had yet to comment on any specifics or take a formal stance.

“This probably pushes us to oppose,” Podesta replied. “Really stupid on their part.”

A LINK BETWEEN CLINTON’S TRADE STANCE AND TRUST NUMBERS? Two months later, liberal political commentator Brent Budowsky reached out to Podesta to warn him that Clinton’s wavering trade stance could be one factor dragging down her historically low favorability and trust ratings, another email exchange shows.

“I follow trade closely and I follow Hillary Clinton closely and I cannot tell you her position on the trade bill,” Budowsky wrote in late June 2015. “It is obvious she is trying to appease the Democratic base and trying to maintain the goodwill of her corporate and Wall Street donors but the result is…..that she talks repeatedly saying ‘I am a fighter, I am a fighter, I am fighting for working people and income equality’ but her actions on trade are an exercise in equivocation, hedging and maneuvering and the many voters who care about trade will not view her as more trustworthy because of this.”

In response, Podesta appeared relatively unmoved. “Her trade position has nothing to do with donors and Wall Street,” he wrote. “She’s stated her criteria for TPP, but hasn’t ruled out the possibility that that criteria can be met in a final deal. Her position in that regard is not that dissimilar to [House Minority Leader Nancy] Pelosi’s. That might not be that satisfying, but it’s what she thinks.”

PAKISTAN’S TRAVEL ADVISORY WOES: It’s a fair bet that Froman traveled under heavy security when he visited Islamabad on Tuesday for the eighth U.S.-Pakistan Trade and Investment Framework Agreement Council meeting, if an Oct. 7 State Department warning against “all nonessential travel” to the country is any guide.

“Throughout Pakistan, foreign and indigenous terrorist groups continue to pose a danger to U.S. citizens,” the State Department said. “Evidence suggests that some victims of terrorist activity have been targeted because they are Americans.”

Apparently, that stern advice is having a damaging impact on trade. According to a news report from the region, Pakistani officials intended to use the TIFA meeting to brief U.S. officials on “the improved economic and security situation in the country, and the pressing need for the U.S. government to revisit its travel advisories regime for U.S. businessmen, as the most critical step towards improving bilateral trade and investment.”

INDIA TO RAISE SOCIAL SECURITY ISSUES WITH FROMAN: Froman is expected to urge India to take steps to increase imports from the United States when he visits New Delhi on Thursday for the U.S.-India Trade Policy Forum. More than 15 percent of India’s exports go to the United States, but only 1.4 percent of U.S. exports go to India. That disparity is fueling U.S. interest in new market openings and economic reforms in the world’s second-most populous country in areas such as reduced tariffs, uniform notice and comment procedures for new rules and the adoption of high global standards for intellectual property and investment.

For its part, India is expected to raise concerns about U.S. sanitary and phytosanitary measures that impede imports of its basmati rice and mangoes. New Delhi would also like a “totalization agreement” with Washington that would exempt Indians working in the United States on short-term visas from having to pay Social Security, according to a news report from the region. “It is unfair to force Indian workers to pay social security when their visa tenure is shorter than the minimum working years required to benefit from social security,” an Indian government official told BusinessLine, an Indian publication.

NO PROBLEMS WITH TTIP IN ITALY, P.M. SAYS: Italian Prime Minister Matteo Renzi stood in solidarity with President Barack Obama on Tuesday as both leaders reaffirmed “strong support” for the TTIP that has recently faced backlash elsewhere in the European Union. At a joint press conference between the two leaders at the White House, Obama said the Italian leader had told him in a closed meeting earlier in the day that “in the wake of Brexit, the European Union can move forward and focus on delivering security and prosperity that Europeans deserve.” That would require an emphasis on demand and growth, Obama said, as well as TTIP, which he said “can support jobs and exports and innovation and growth on both sides of the Atlantic.”

WOOING TPA DEMS AT THE STATE DINNER: Obama and Renzi wrapped up their day of meetings with a formal state dinner, Obama’s last during his White House tenure — and potentially one he might be using as a tool to stay in the good graces of a few House Democrats who voted in favor of Trade Promotion Authority last year. Reps. Don Beyer and Gerry Connolly of Virginia, Suzan DelBene of Washington and Jim Himes of Connecticut were all slated to attend the glitzy Tuesday night event.

Meanwhile, White House National Economic Council member Jay Shambaugh said earlier Tuesday the administration remains optimistic it can win approval of the TPP in the lame duck session after the election. Why? Because the administration believes both House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell support TPP, despite their statements about shortcomings in the pact and the likelihood that Congress won’t vote on it, Shambaugh told reporters after speaking to the Washington International Trade Association.


— U.S. Ambassador to Germany John B. Emerson says the U.S. and EU are close to overcoming sticking points in their trade talks, Reuters reports.

— China will be looking to bolster trade ties with the Philippines during President Duterte’s four-day visit this week, Reuters reports.

— The U.S. Export-Import Bank is looking to tap India’s airport sector by providing loans for Indian companies to purchase American equipment and technology, LiveMint reports.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: and @ABehsudi; and @mmcassella; and @tradereporter; and @mjkorade; and and @JsonHuffman. You can also follow @POLITICOPro and @Morning_Trade.

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