Japan’s TPP moves put pressure on U.S.

With help from Adam Behsudi and Doug Palmer

JAPAN’S TPP MOVES PUT PRESSURE ON U.S.: The United States’ inability to move forward on the TPP isn’t stopping other members of the pact from going ahead and trying to ratify it themselves. A Japanese embassy aide said Tuesday that government leaders in Tokyo hope to pass the agreement by the end of the year, and a report in Japanese media said the first vote in the lower house of the Japanese Diet could come as soon as Friday.

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Despite uncertainty over whether the U.S. Congress will move on the deal, “I think the ruling party in government is trying to push the process forward and trying to pass the bill by the end of this year,” Kazuhiro Suzuki, minister for economic affairs at the Japanese Embassy, said during a trade discussion at George Washington University. The vote in Japan’s lower house will be only the first step in Japan’s ratification process, however, as the upper house must also approve the deal for it to become law. Japan’s current parliamentary session is expected to end on Nov. 30, providing just a few more weeks to finish the legislative process this year.

The step forward sends a message that Tokyo is serious about getting the deal done, and it could squash any remaining hope among opponents in the U.S. that parts of the deal could still potentially be renegotiated. The administration has maintained for months that the deal cannot be reopened, citing risks of the entire thing unraveling if any changes are made.

Congressional leaders including House Speaker Paul Ryan have continued to downplay chances that the agreement will come up for a vote before the end of the year, which has also prompted speculation that the other 11 TPP countries might try to put the agreement into effect without the United States. But Suzuki told reporters he couldn’t comment on that possibility. “We are now really focused on passing our TPP bill in our Diet,” he said. “I cannot answer such hypothetical questions.”

IT’S WEDNESDAY, NOV. 2! Welcome to Morning Trade, where your host is thrilled to be watching a World Series Game 7 tonight — because unlike another head-to-head race we’ve been watching, this is a national competition that actually gets better the longer it lasts. Send me your trade tips, your TPP predictions and your bets on Cubs v. Indians: mcassella@politico.com or @mmcassella.

U.S. NEGOTIATOR SEES STRONG DAIRY SECTOR SUPPORT FOR TPP: Republican leaders can expect strong support from the dairy sector if they reverse course and agree to hold a TPP vote after the election, the chief U.S. agricultural negotiator said Tuesday.

That could be critical since Ryan’s home state of Wisconsin is the second-largest U.S. dairy-producing state behind California.

“I think dairy, frankly, is out there in full force,” Ambassador Darci Vetter told Morning Trade after a discussion on TPP and related issues at George Washington University late Tuesday afternoon. “It kind of took them a while to get there, but they’ve become one of the more enthusiastic groups out there supporting TPP.”

The TPP was hard for the dairy sector to accept at first because it opens the U.S. market to more imports from New Zealand, a major competitor. But it also opens Canada, Japan and other TPP markets to more U.S. dairy exports. “If TPP works like the magnet we think it will, every country in the Asia-Pacific that joins after, that’s just gravy [for the U.S.] because none of them really have active dairy sectors and dairy demand is growing exponentially,” Vetter said. “So getting that first agreement was really hard, but the potential they see after is really big.”

DRIFTING TOWARD BEIJING: With the TPP looking in doubt, leaders of Asia-Pacific nations appear to playing out the Obama administration’s worst-case scenario of drifting toward closer ties with Beijing, Bill Reinsch, a distinguished fellow at the Stimson Center and former president of the National Foreign Trade Council, told Morning Trade.

“Everybody is starting to suck up to the Chinese,” Reinsch said, referring to Malaysian Prime Minister Najib Abdul Razak’s current six-day trip to China that comes hot on the heels of Philippine President Rodrigo Duterte’s recent visit. “If they think [TPP] is going to go down, they’ll go with plan B.”

Malaysia is expected to sign a contract to buy navy vessels from China, in blow to U.S. influence in the region, Reuters reported. Najib is traveling with a big government delegation and is expected meet with Chinese President Xi Jinping on Thursday. He will witness the signing of more than 10 agreements between Malaysian and Chinese companies in areas including “port construction, gas-pipe laying and water desalination plants, ecommerce, solar panel manufacturing, construction, investment, development and finance,” Bernama reported.

CLOCK TICKING AS TISA ROUND KICKS OFF: The 21st round of negotiations for the Trade in Services Agreement kicks off this morning in Geneva, and stakes are high for significant progress to be made this round in order for the deal to wrap up by its early December deadline. Significant issues remain, including data flows — where the European Union is still working to come up with a consolidated position — and new services, on which the EU and others are continuing to push for the right to apply different regulations to domestic and foreign constituents rather than afford the same treatment to all TISA partners. The round is scheduled to last through Nov. 10.

ADMINISTRATION SHIFTS SEMICONDUCTORS INTO THE SPOTLIGHT: Commerce Secretary Penny Pritzker is set to deliver what’s being branded as a “major policy speech” later today on the future of the tech economy and, more specifically, the semiconductor industry, which is home to about 250,000 workers and the third-largest source of U.S. manufactured exports.

“It is imperative that semiconductor technology remains a central feature of American ingenuity and a driver of our economic growth. We cannot afford to cede our leadership,” Pritzker will say, according to a preview of her remarks provided to Morning Trade. “Let me be clear: We will not allow any nation to dominate this industry and impede innovation through unfair trade practices and massive, non-market-based state intervention.”

The speech, which will be given at the Center for Strategic and international Studies and followed by a panel discussion, comes on the heels of a White House announcement earlier this week establishing a working group focused on “strengthening the U.S. semiconductor industry in ways that benefit the nation’s economic and security interests.” The group — which includes academics like John Hennessy, president emeritus at Stanford University, as well as private-sector executives like Paul Otellini, former president and CEO of Intel — is designed to promote U.S. leadership in the sector and boost the pace of technological innovation, the White House said in its announcement.

Semiconductor Industry Association President John Neuffer added in a blog post that the establishment of the group, which his organization previously called for, would help the industry combat “unprecedented government investment programs from some countries and the increasing technological complexity involved in achieving new innovation breakthroughs.”

FROMAN’S LATEST TPP PITCH TARGETS DEFENSE INDUSTRY: U.S. Trade Representative Michael Froman made a forceful pitch for TPP on Tuesday, urging a crowd of defense industry representatives and exporters of high-tech U.S. products to make their voices heard on the importance of the trade deal.

“I cannot overemphasize what’s at stake,” Froman said in a speech at the Commerce Department’s annual export control update conference. “If Congress fails to act, the United States will be effectively frozen out of the Asia-Pacific region, economically and strategically.”

The administration has spent the past seven years rewriting the government’s export control regulations to ease red tape on shipments of less sensitive dual-use goods, mainly parts and components, that have both military and civilian applications. The initiative has been billed as an effort to improve interoperability with allied countries that rely heavily on U.S.-made military equipment and a benefit for exporters hindered by onerous regulations.

“That is what is at stake here,” Froman said. “If we don’t move and others move ahead without us, as they are already indicating they are going to do, we’re going to find ourselves, not only missing the opportunity for growth in these markets, but we’re going to find our current market share in these markets going down. That hurts our jobs, and firms back here at home.”

TRUMP CAMP PILES ON MORE AG ADVISERS: Donald Trump’s campaign has added more than two dozen names to its massive agriculture advisory committee, according to a list obtained by our Pro Agriculture colleagues Ian Kullgren and Jenny Hopkinson.

The additions include some high-profile names, such as Nebraska Gov. Pete Ricketts; Michigan Attorney General Bill Schuette, a likely candidate for governor of the state; and Charles Bronson, the former secretary of Florida’s Department of Agriculture and Consumer Services.

The list was packaged with a statement from Charles Herbster, the committee chairman, on why he’s voting for Trump. The updated list of the committee members is here.

EXPANDED ITA ON PATH TOWARD IMPLEMENTATION: Most of the members of the expanded Information Technology Agreement have started to eliminate tariffs on the 201 products they added to the deal, from medical imaging equipment to video game consoles, Geneva sources say, after China last week joined the United States and 17 other members in submitting the required changes to its tariff schedules to the World Trade Organization.

Canada, reporting on behalf of the WTO’s ITA committee, said at a Tuesday meeting that other countries were on track to do so as well. Out of the deal’s 24 members, the EU, Australia, Albania, Switzerland, Taiwan and Thailand have yet to submit their revised tariff schedules. All 162 WTO economies will see the benefits of the deal.

WTO members, including the EU, Japan, South Korea and U.S., also used the committee meeting to again raise concerns over India’s decision to reimpose 10 percent duties on four categories of telecommunications products.

India argued that the products in question are not covered by the original ITA. The South Asian country was not part of the expanded agreement and said it would not make any tariff concessions on goods that were not conceived at the time the original deal was completed in 1996, sources said.

CHINA CHALLENGES U.S. ON SEAFOOD ORIGIN RULES: The Chinese delegation to the WTO has taken issue with a U.S. proposal to trace the origins of imported seafood, saying the rule would be incredibly costly while bringing little benefit, a Geneva source tells Morning Trade.

The proposed rules, which Beijing brought up at a meeting of the WTO’s Committee on Sanitary and Phytosanitary Measures late last week, would require seafood imports to the United States to be labeled with detailed information on their origins, the source said. China argued that the “monitoring program” would go against some key WTO principles, including the procedural obligation to give the WTO formal notification of the proposal and allow members to comment. The U.S., in response, argued that the proposal, as part of a broader effort to combat illegal fishing, falls outside of the scope of the committee.

The Chinese also argued there was no scientific reason for the rule and said abiding by it would add “excessive costs and complexity” for seafood exporters while doing little to cut down on illegal fishing. Chile joined the Chinese delegation in expressing concerns and urged the United States to formally notify the WTO of the measure.

SAVE THE DATE: The U.S.-China Economic and Security Review Commission will release its annual report to Congress on Nov. 16, according to a notice to be published in today’s Federal Register. The Commission, a watchdog panel Congress created in 2000, is designed to investigate the national security implications of U.S. economic ties to China, and the report will focus in part on bilateral economic and trade relations between the two countries, the notice shows. Overcapacity, China’s market economy status and the U.S. rebalance to Asia will also be highlighted in the report.


— With the EU-Canada free trade agreement signed, Canada’s free-trade opponents are already shifting their focus to the TPP, the AFP reports.

— The Obama administration continues its campaign for a lame-duck vote on the TPP, The Wall Street Journal reports.

— Trump’s claims that Caterpillar has been performing poorly against foreign competition, particularly Japan’s Komatsu, is at odds with the company’s place atop the list of the Dow’s highest performing stocks this year, CNNMoney reports.

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

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