Lawmakers pushing financial regs in TTIP

With help from Doug Palmer

LAWMAKERS TICKED OFF FINSERV REGS AREN’T IN TTIP: Fifteen House members on Thursday emphasized to President Barack Obama that they want to see TTIP cover financial services regulations — something the U.S. has thus far flat out refused to do, despite the European Union’s best efforts.

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“The administration has indicated that it will not discuss setting out a framework for cooperation on financial services regulatory issues within TTIP,” the lawmakers, which include 12 members of the House Financial Services Committee, wrote in a letter. “We believe this would represent a misused opportunity and is contrary to the objectives set forth by Trade Promotion Authority with respect to financial services.”

They call for an “accountable, results-driven dialogue” rather than information exchanges, noting that none of the existing dialogues “have fully succeeded in addressing ongoing regulatory challenges and are, at times, conducted on an ad hoc basis without tangible results.”

A senior U.S. official told POLITICO that the administration has been making an effort to facilitate more productive conversations in existing forums to help the Europeans become more comfortable with leaving financial services regulations out of TTIP, and to unstick talks on financial services market access, which the Europeans have so far refused to discuss because of the regulatory issue.

IT’S FRIDAY, APRIL 15! Welcome to Morning Trade, and hello to Canadian Trade Minister Chrystia Freeland, who we understand is an avid reader of this newsletter. Any other celebrity readers we should know about? Let me know at vguida@politico.com or @vtg2.

TPP CAUCUS UNSURE ON DEAL’S CHANCES: Reps. Charles Boustany and Ron Kind, two of the four co-chairs of the Friends of TPP Caucus, on Thursday didn’t have any predictions on how things might ultimately shake out for the deal, indicating they’re just taking things one day at a time.

“We have lost a lot of time, and I do believe American credibility is at risk in all of this,” Boustany told reporters after a Ways and Means hearing on miscellaneous tariff bill reform. “I hope we can get through this. I just don’t know the answer as to whether this can get done in the lame duck or not at this stage.”

The Louisiana Republican said it wouldn’t be useful to hold any sort of hearings yet. “The productive way to go forward right now is to continue these meetings, short of a public hearing, to see how far we can prod the administration to get to a resolution of these outstanding problems,” he said. “It’s certainly way too premature do any kind of markup.”

In the meantime, the TPP Caucus is working hard to “share information and feedback with [National Economic Council Director] Jeff Zients and Ambassador [Michael] Froman to try and find resolution to all this.”

Kind and Boustany both said much more progress would have to be made on complaints, such as on biologics and financial services data, before a markup. But Kind noted that there was a “window” between the release of the U.S. International Trade Commission’s report, due May 18, and the July recess where a hearing could theoretically take place. He also indicated that he and fellow pro-TPA Democrats don’t necessarily have the same complaints as Republicans.

“I wouldn’t say we’re that aligned as far as the objections are concerned, but when you’re looking at the path to 218, you have to be concerned about those who are expressing concerns,” he told reporters.

USTR OFFICIAL: WE HAD CHINA ‘DEAD TO RIGHTS’: Beijing doesn’t usually give up without a fight at the World Trade Organization, but it signed an agreement Thursday to terminate a massive export subsidy program challenged by the United States just a little more than one year ago. As WTO disputes go, that’s a blazingly fast resolution.

Why was this time different? It’s hard to say for sure, but after the United States laid out all the documents it had uncovered in its lengthy investigation, “China could see that we had them dead to rights,” a U.S. trade official opined, using an expression for being caught in the act of committing a crime. “What I do know is we have an important result and faster than we could have gotten through litigation, which always takes longer.”

Many of the lawyers and researchers involved in the investigation are fluent in Mandarin and now they can turn to other enforcement issues, he said. To read Doug Palmer’s story on the settlement, click here.

** A message from Allied Progress and American Family Voices: Protect America’s Consumers is a shady front group set up by industry insiders to undermine Senator Elizabeth Warren and the Consumer Financial Protection Bureau (CFPB) she fought to create. Learn how you can spot shady groups like Protect America’s Consumers: http://bit.ly/23fDtSV **

CUSTOMS GETTING THE LIMELIGHT: Senate Finance Committee Chairman Orrin Hatch is holding hearings on trade, just none of them about TPP. The Utah Republican has scheduled another trade hearing, this time with an administration witness, but it will be Customs and Border Protection Commissioner Gil Kerlikowske instead of Froman.

Kerlikowske will testify Thursday on his agency’s efforts to improve trade facilitation and enforcement, including the implementation of the new customs law.

EVERYBODY LOVES MTB: Things are looking good for the MTB reform bill after a hearing on Thursday, where everyone in attendance agreed that the tariff waivers are important for manufacturers and should’ve been passed a long time ago. The markup is scheduled for next week. The bill is even supported by anti-earmark groups.

PREDICTION: EU-CANADA DEAL IN FORCE BY EARLY 2017: Canadian Trade Minister Chrystia Freeland believes a free-trade pact between Canada and the European Union could become a reality in early 2017, more than three years after a preliminary deal was announced.

“We are aiming for a signing this year and for the treaty to come into force no later than the beginning of next year,” Freeland told reporters in a phone call from Berlin, referring to an understanding she has with EU Trade Commissioner Cecilia Malmström.

European officials have not yet decided whether any of the 28 member states also have to approve the pact, Freeland said. But it’s already clear more than 90 percent of the agreement would go into force after approval by the Canadian and European Union parliaments, she said.

Meanwhile, German Vice Chancellor Sigmar Gabriel expressed confidence that his party, the Social Democrats, would back the pact. He praised Canada’s decision to accept EU reforms to investor-state dispute settlement and called the overall pact an “excellent bar” for TTIP.

ANOTHER WAY TO LOOK AT CURRENCY: April 15 isn’t Tax Day this year, and the Treasury Department’s semiannual report on foreign currency practices also won’t drop today, although it’s coming soon. But in honor of April 15, we’ve got a currency discussion to tide you over.

Lawmakers and presidential candidates continue to flag deliberate government intervention in exchange rates as a huge disadvantage for U.S. exporters. But what if everyone is focusing on the wrong thing? That’s the argument made by John Hansen, a retired economist with the World Bank.

Basically, he says, the problem is not so much currency manipulation by governments like China, but rather the overvaluation of the dollar by as much as 20 percent to 30 percent through private capital inflows, thanks particularly to the dollar’s role as the global reserve currency. This is made evident by the fact that the U.S. has been running a trade deficit for decades, he says.

“America’s trade deficits reflect the lack of domestic competitiveness caused by the overvalued dollar,” Hansen told POLITICO. “The overvaluation causes imports to rise and exports to fall, and the deficits send a signal to foreign investors, who might otherwise be interested in investing in physical projects that would increase America’s competitiveness, to bring in capital largely for speculative, non-productive investments.”

So how to prevent the dollar from being overvalued? Morning Trade would like your thoughts on this one: Hansen, who now heads up an organization called Americans Backing a Competitive Dollar – Now!, proposes a fee, starting at 0.5 percent, on dollars coming into the United States. Hansen testified before the U.S. International Trade Commission in February to make this argument in the context of TPP.

DELAURO WANTS CONGRESSIONAL SAY ON CHINA STATUS: Rep. Rosa DeLauro introduced legislation Thursday that would require Congress to approve or reject the Commerce Department’s potential recognition of China as a market economy, within 45 days of such a decision.

At issue is a provision in China’s WTO accession agreement that expires on Dec. 11, meaning Beijing will not automatically be considered a non-market economy in trade remedy cases. The Chinese government argues that this means it should be considered a market economy from that point forward.

“Across our economy, American businesses are in crisis under the weight of billions of government-subsidized Chinese exports,” DeLauro said in a statement. “Meanwhile, American companies attempting to do business in China have faced severely unfair treatment by the Chinese government.”

MORE HILL ACTIVITY ON NME: With all the steel hearings this week, the NME issue is getting an uptick in attention as well, as trade remedy cases are the steel industry’s biggest defense against Chinese imports. A group of lawmakers on Thursday teamed up on two letters on the issue, one to Froman and Commerce Secretary Penny Pritzker and the other to EU Ambassador David O’Sullivan. They urge the EU to reject market economy status for Beijing. “While China has made significant strides in opening its economy, prematurely granting MES will remove incentives for the Chinese government to continue to move away from its market-distorting policies,” they write. They urge the U.S., meanwhile, to consider whether China has implemented all of the reforms it promised when it joined the WTO.

HOW THE CHINA NME QUESTION COULD SHAKE OUT: There are three main scenarios for how the question of Beijing’s economic status could play out, according to a new report from global communications firm Weber Shandwick. First, the U.S. and EU could keep viewing China as a non-market economy and face a potential dispute at the WTO. The report notes that “[r]eaching a verdict would be a lengthy process, buying the EU and U.S. time to refine their trade defence instruments.” Second, they could recognize Beijing as a market economy, but it would be a tough political sell to change the trade remedy approach to China legislatively. Third, they could adopt an entirely new approach, which “could allow the EU/U.S. to avoid a WTO dispute settlement, protect vulnerable industries, and maintain good relations with China all at once.” Click here to read the report.

INTERNATIONAL OVERNIGHT

The decision on China’s market economy status cannot be a purely economic decision, European Parliament member Alessia Maria Mosca writes in EurActiv.

Beijing won’t limit foreign central bank’s investments in Chinese inter-bank foreign exchange and bond markets, according to Chinese state-run agency Xinhua.

The Global Services Coalition is calling for “ambitious” market access offers in the Trade in Services Agreement by the end of May.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: abehsudi@politico.com and @ABehsudi; vguida@politico.com and @vtg2; dpalmer@politico.com and @tradereporter; mkorade@politico.com and @mjkorade; and jhuffman@politico.com and @JsonHuffman. You can also follow @POLITICOPro and @Morning_Trade.

** A message from Allied Progress and American Family Voices: Protect America’s Consumers is a shady front group set up by industry insiders to undermine Sen. Warren and the Consumer Financial Protection Bureau (CFPB). The CFPB was established to do exactly what Protect America’s Consumers is pretending to do: protect American consumers from dangerous lending and banking practices and make sure we never have another financial crisis. We put together a short primer on groups like Protect America’s Consumers in order to expose their shady tactics and hold them accountable for their actions and so that their true motives are understood. http://bit.ly/23fDtSV **

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