Lumber battle to test new market realities

With help from Adam Behsudi and Doug Palmer

LUMBER BATTLE TO TEST NEW MARKET REALITIES: U.S. lumber producers can expect a much different battlefield for a fifth round of acrimonious — and certainly expensive — litigation over lumber trade with Canada compared to the last skirmish in the early 2000s.

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New market circumstances could shield some of the biggest Canadian companies from the full brunt of retaliatory duties. But the U.S. industry enters the fight armed with several legal rulings from recent years that could bolster its argument that Canada is providing unfair subsidies through government pricing programs for timber.

“I pretty much guarantee the U.S. coalition is very creative,” said Peter Clark, an Ottawa-based trade consultant. “They’re going to come up with other forms of arguments and other ways to impose high enough duties on the Canadians that you’re going to force some Canadian mills to curtail and slow the flow across the border.”

More than 10 years after the last softwood lumber agreement was struck, U.S. producers will be filing litigation against a Canadian industry that has ramped up its investments in the U.S., is selling more lumber to China, and in some provinces is subject to more market-based pricing policies. But U.S. companies still aren’t buying it. Adam Behsudi has the full story here.

IT’S TUESDAY, OCT. 18! Welcome to Morning Trade, where your host’s eyes are on Luxembourg this morning and the proposed free trade deal between the European Union and Canada, which is up for a vote among EU trade ministers. What’s your take on the Comprehensive Economic and Trade Agreement? Or have any other trade tips to share? Let me know: or @mmcassella.

EU SEEKS RENEWED EFFORT TO REEL IN FISHERIES SUBSIDIES AT WTO: The European Union will tackle fisheries subsidies as an area of focus for the WTO as members look for achievable outcomes from next year’s ministerial conference in Buenos Aires. European Trade Commissioner Cecilia Malmström and Environment Commissioner Karmenu Vella said they would present a proposal to WTO members later this week.

“A broad, multilateral agreement covering all 164 countries of the WTO will be key to achieve meaningful progress, in order to help safeguard the world’s fisheries,” the commissioners wrote in a Monday blog post. “As we are talking about a truly global problem, just like for climate change, only a global solution will be enough to tackle it.”

The EU proposal will attempt to place disciplines on “capacity enhancing” subsidies that increase the size of fleets, which leads to overfishing. The other targeted subsidies would be those granted to fishermen engaging in illegal, unregulated or unreported fishing. The proposal wouldn’t be one-size-fits-all, allowing flexibility for developing countries and protection for subsistence fishing, the commissioners said.

It remains unclear whether the EU proposal would run counter to a U.S. led effort to launch “plurilateral” negotiations on fisheries subsidies with 12 other WTO members. That effort looks to build on enforceable provisions combating fisheries subsidies in the TPP.

ENVOYS: U.S. WILL BE LEFT OUT OF ‘PLAN B’ IF TPP FAILS: Ambassadors from TPP countries say they’re remaining fully engaged with the United States to push for the deal’s ratification this year, but that doesn’t mean they haven’t also been working on alternative plans in case it doesn’t work out — plans that don’t involve the United States, a pair of high-ranking foreign officials warned on Monday.

“We’ve all got our plan B’s,” New Zealand Ambassador to the U.S. Tim Groser said at a Global Innovation Forum event. “The tragedy would be that the plan B’s that we have would not involve the United States.”

Groser said he and his staff have been meeting continuously with members of Congress, their staffs and “leading Democrats and leading Republicans at all levels,” though he declined to name any lawmakers. The New Zealand delegation remains “fully engaged” and will be accelerating its efforts throughout the rest of the year, he said, adding that the U.S. has been not only an ally, but an architect of the global trading system.

“But if the United States gets stuck in a hole, do not for one minute think that the [11 other TPP countries] are going to sit in the hole with them,” Groser said.

Singaporean Ambassador Ashok Kumar Mirpuri echoed Groser’s comments at the event, saying there is no alternative for his country that involves the United States. But the consistent engagement with U.S. lawmakers from his and other delegations indicates how fundamentally important U.S. involvement is in the region. If the U.S. were not important, or if an effective deal could be worked out without it, then “we would not be making this effort,” Mirpuri said.

BUT IS IT TOO EARLY TO FIND ‘PLAN B’? Given how much the ambassadors and negotiators have devoted to TPP at this point, it would be wrong to expect them to fully explore alternatives while there is still a chance the deal could pass, added Rufus Yerxa, president of the National Foreign Trade Council and a former deputy U.S. trade representative.

“If we simply begin to say, ‘Oh, well it looks like it’s not going to pass so we ought to start to rethink’ — I think that would be obviously the wrong thing to be doing now,” he said.

CLINTON CAMP CONSIDERED HIGHLIGHTING PRIOR TPP SUPPORT: In April of last year, under pressure to stake out a clear position on trade, Hillary Clinton’s speechwriter drafted a statement saying she would be “watching closely” to see whether the TPP met her standards, alleged campaign emails hacked from John Podesta’s email account and released by WikiLeaks show.

When Dan Schwerin circulated the draft statement among advisers to ask for feedback, senior policy adviser Jake Sullivan responded with: “One thought: do we need a sentence acknowledging her prior support for TPP?” He drafted a possible addition to the statement, which would read: “Hillary has been on record in favor of an outcome that meets both these tests. But we should be willing to walk away from an outcome that falls short.”

Clinton’s prior support for the TPP as secretary of State — she called it the “gold standard” of trade deals — has dogged her throughout the campaign, with detractors using it as ammunition to try to show that she has flip-flopped in her support for trade deals to wherever she sees the most political benefit. But campaign manager Robby Mook turned down the idea of addressing her past position head-on.

“I wouldn’t mention prior support,” Mook replied. “I only see downside to that.”

WARREN’S WARNING ON TPP PUSHBACK: Two months before that statement, the Clinton campaign received warning from a top aide to Sen. Elizabeth Warren that the Massachusetts Democrat was going to “push back hard” against President Barack Obama on trade, another email exchange shows. Mook, referring to a conversation with Warren’s then-chief of staff Mindy Myers, told a group of Clinton advisers that Myers “understood that HRC was already on the record as (Obama’s secretary of State) so we don’t have a ton of room to maneuver.”

BREXIT: HARD, SOFT OR JUST COMPLICATED? The United Kingdom and the European Union face years of tough negotiations to redefine their economic relationship, but one thing is already clear: The U.K. cannot keep all of its access to the EU’s single market for goods and services unless it allows the free movement of workers across its borders, the EU’s ambassador to the United States said Monday.

“The single market is the ‘four freedoms,'” Ambassador David O’Sullivan said at an event hosted by the Georgetown University Law Center, referring to the freedom of goods, people, services and capital to move over borders, which is enshrined in EU law. “When I sometimes hear people talk about, ‘Well, we’d like access to the single market but without freedom of movement,’ it’s a contradiction in terms,” O’Sullivan said.

Currently, there is a debate in the U.K. over whether to push for a “hard Brexit,” meaning the country would regain complete control over its immigration policy but face steep tariffs on its exports to the EU, or a “soft Brexit,” meaning it would keep duty-free access for some exports and also allow some movement of workers across borders.

“This will be the most complicated divorce in history,” Germany’s ambassador the United States Peter Wittig said. Whatever the outcome, London cannot expect to negotiate a better position for itself than it would have if it stayed within the EU, he said.

NO BREXIT SILVER LINING: “I cannot see this Brexit decision as anything other than rather regrettable,” O’Sullivan also said, when asked if there was any silver lining to the U.K.’s vote. “We can try to ensure it does the least damage, but I genuinely think it is a decision that is going to leave us all slightly poorer and slightly less well off than if the U.K. had stayed.”

“It was a sad day,” agreed Gérard Araud, the French ambassador to United States. “Actually, to try to be a European Union without the U.K. frankly sounds weird. The British are an integral part, an essential part of Europe, in every sense of the word. Really, they were our best enemies in history and really, we want to keep them on board.”

“No silver lining, I think,” Wittig added. However, the shock of the decision could help refocus the EU going forward, as well as mobilize the youth of Europe to play more of a role in preserving the union and upholding its ideals, Wittig said.

NO DECISION YET ON NEXT TTIP ROUND: Meanwhile, O’Sullivan told reporters after the event that there has been no decision yet on whether to hold another round talks on the TTIP before the Obama administration ends in January. “I think we are doing very good work in these negotiations. The dilemma, as always, is that we are perhaps at risk of running out of time with this administration to complete everything. But we sincerely hope this process will continue,” O’Sullivan said. The former EU trade official traveled this summer to both the Democratic and Republican party conventions but said he has not had a chance to talk with either Donald Trump’s or Hillary Clinton’s campaign about TTIP. “I don’t think either campaign is really focused on these issues until one of them wins,” he said.

FROMAN: U.S. FIRMLY COMMITTED TO WTO: U.S. Trade Representative Michael Froman said Monday the United States remains firmly committed to the World Trade Organization, despite Donald Trump’s threat to withdraw from the rules-based body if it interferes with his disruptive trade plans. But the top U.S. trade official also challenged WTO members not to cling to long-held positions as the group prepares for its 11th ministerial meeting in Buenos Aires at the end of next year. Read Doug Palmer’s story here.

NEW CHAIRMAN OPENING AT BUSINESS ROUNDTABLE: Doug Oberhelman’s decision to step down in March as chairman and chief executive officer of Caterpillar means the Business Roundtable will need to find a new leader at least nine months ahead of schedule. The veteran executive began a two-year term as BRT chairman in January. The group’s CEO members will have to decide whether to appoint an interim chairman for the rest of Oberhelman’s term or potentially find someone willing to fill the job through 2019. Oberhelman is leaving Caterpillar after 41 years at the company. Both Caterpillar and BRT are leading proponents of trade agreements, and that’s expected to remain the case after Oberhelman departs.

Earlier this year, Oberhelman brushed aside the suggestion that the business community has been sitting on the sidelines in the TPP debate, allowing opponents to make loud and largely unanswered attacks on the pact. “We have put on an absolute full-court press in Washington, locally within our employees, within our own districts and so on, really since the beginning of summer,” he said. “We have weekly calls with the administration, we have almost daily calls on the Hill, we have lots of local events in our factories.”


— Sen. Pat Toomey tried in a Monday debate to accuse his Democratic challenger Katie McGinty of being the real “flip-flopper” on trade deals after supporting NAFTA when President Bill Clinton supported it, CBS Pittsburgh reports.

— The Spanish foreign minister says a post-Brexit trade deal between the United Kingdom and the EU will most closely resemble Canada’s free trade deal with the EU, the Independent reports.

— Big pharma drives Ireland’s trade surplus to a record high, the Irish Times reports.

— Indonesian exports and imports remain weak despite a spike in the country’s surplus, the Jakarta Post 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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