Negotiators hunt for compromise in environmental talks

With help from Megan Cassella, Doug Palmer and Alberto Mucci

NEGOTIATORS HUNT FOR COMPROMISE IN ENVIRONMENTAL TALKS: Officials from 17 World Trade Organization countries involved in the Environmental Goods Agreement will employ a new strategy in Geneva this week as they meet for the 17th round of talks: Divide and conquer. With just six weeks remaining until the concluding ministerial meeting set for early December, negotiators are planning to spend a large portion of this week in small-group discussions focused on a few of the most politically sensitive items covered under the agreement — bicycles, for example, and wood products ranging from pellets to lumber.

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The strategy is meant to push critical issues into the spotlight and force negotiators off their talking points — and, hopefully, get them closer to a compromise. Officials involved in the talks said that while they don’t expect to reach solutions this week on the thorniest remaining issues, they do feel they need to see increased engagement and significant progress over the next four days in order for the goal of finishing before the end of the year to stay within reach.

“I would call them painful issues,” one Geneva-based official involved in the talks said. “There’s a danger that there are too many left for this moment, and that could lead to collapse of the whole agreement. So what we are pushing for is early engagement on all issues from all parties.”

Other issues beyond the product list still remain — including how long the tariff phase-out period will be and how to maintain a critical mass of countries in the agreement — but those aren’t expected to be a large topic of discussion this week, officials said. Read the full story from Pro Trade’s Megan Cassella here.

IT’S MONDAY, OCT. 17! Welcome to Morning Trade, where we might be paying a little closer attention to RCEP talks this week in Tianjin, China, given the ominous outlook for TPP. Anything else we should be keeping an eye on? Let me know: abehsudi@politico.com or @abehsudi.

TISA TALKS MOVE AHEAD: Lead negotiators for the Trade in Services Agreement are set to meet today and tomorrow in Washington in an attempt to bring talks closer to conclusion, but don’t expect the European Union to propose a revised market access offer quite yet. The EU’s revised offer, which the U.S. is hoping will be dramatically improved, probably won’t come until Friday — the deadline for the 23 participating governments to propose revised market access offers, according to a European Commission source. The next full round of talks is scheduled for Nov. 2-10, and ministers are aiming for a Dec. 5-6 meeting as the finish line for the talks.

All eyes are on Brussels to deliver on critical gaps in the negotiations. EU member states are still reviewing the revised market-access offer, but it remains too soon to say whether it will come close to the stated goal of the EU’s offer to Canada in a separate trade deal. The EU could use the November talks to put forward its proposal on how to address U.S. demands on the free flow of data and prohibitions on local data storage requirements, after reportedly reaching an interagency compromise on the issue.

FOR EU, TISA IS ABOUT TRANSPARENCY: A backdrop for today’s talks was provided by another release of negotiating documents from Wikileaks, one of which details the market access demands the EU has posed to other countries involved in the negotiations. With respect to the U.S., Brussels was hot for better transparency of state-level measures restricting access for foreign service suppliers. European companies have long complained that the U.S. does a rotten job of listing areas where state-level governments restrict foreign access. The document, dating to June, demands that the U.S. provide “full transparency” on all sub-federal level measures or that it at least describe restrictions in sectors where it has taken commitment, with a view to providing transparency in all other sectors after the deal enters into force.

The EU also makes a number of demands in the area of financial services. Brussels wants the U.S. to remove a restriction on allowing EU firms to offer housing finance products, which it says the U.S. did under the U.S.-South Korea trade deal and the General Agreement on Trade in Services. It also wants the U.S. to remove U.S. citizenship requirements for incorporating or serving on boards of insurance companies, even though states have jurisdiction over those policies. Read that document and other leaked documents on financial services rules and localization provisions here.

TECH INDUSTRY PROVIDES FRIENDLY REMINDER ON TISA: Services negotiators starting talks today will receive a clear reminder of what the U.S. tech industry wants in the final TISA, according to a letter that leading industry associations sent to U.S. Trade Representative Michael Froman today. Those asks include binding and enforceable rules on the free flow of data and prohibitions on data localization requirements. The groups also demand the agreement’s rules apply to any “new services” that may emerge in the future — a step the EU has been hesitant to take.

“As our industry considers the nature and extent of its support for a final TiSA agreement, it will be vital to see concrete results in these critical areas,” according to the letter, which was signed by several prominent tech groups, including the Internet Association, ACT | The App Association, the Computer and Communications Industry Association, and Information Technology Industry Council. Read the full letter here.

GOOD WEEK FOR FROMAN’S FREQUENT FLIER MILES: The week ahead is poised to be a busy one for top U.S. trade officials, with U.S. Trade Representative Michael Froman starting off in Geneva, where today he is scheduled to deliver a speech at the Graduate Institute of Geneva. And U.S. Ambassador to the WTO Michael Punke today is expected to kick off EGA talks in the Swiss city.

Also today, but on the other side of the world, Deputy USTR Robert Holleyman and Deputy Commerce Secretary Bruce Andrews will be in Beijing for a vice-ministerial-level meeting in preparation of the U.S.-China Joint Commission on Commerce and Trade, slated for November.

On Tuesday, USTR will hold a hearing to consider possible tariff cuts on imports of handbags, suitcases, and other types of bags and travel goods under the Generalized System of Preferences. USTR added travel goods to the program earlier this year, but limited it to imports from least-developed and African countries.

On Wednesday and Thursday, Froman moves on to India for the U.S.-India Trade Policy Forum, where he will be joined by Holleyman. His globetrotting continues on Friday, when he is scheduled to land in Oslo to meet with fellow trade ministers to discuss potential outcomes for next year’s WTO ministerial conference and the status of TISA and EGA negotiations.

CUBA REGS NOT JUST ALL RUM AND CIGARS: Most headlines generated by the White House’s big Cuba announcement on Friday focused on eased restrictions on Cuban rum and cigars, but here’s how the new rules, effective today, will benefit broader trade with the Communist nation.

The rules give Cuba more of an opportunity to be a part of supply chains, now that certain authorized goods exported to Cuba can be imported back into the U.S. This will allow items initially sent to Cuba to come back to the U.S. for repair or service. Also, consumer goods for personal use that are sold online, ranging from air conditioners to toothbrushes, can be sent to Cuban citizens. The amendments also make it possible for exporters to directly finance shipments of tractors, pesticides and other goods used in agriculture, avoiding onerous cash in advance requirements that apply to transactions for agricultural commodities.

Foreign ships will also be free from a restriction that prohibited them from being able to load or unload freight at a U.S. port 180 days after first calling on a Cuban port, as long as items that were bound for Cuba are not restricted under U.S. export control rules. And air cargo with origins in the U.S. will be able to transit through Cuba on aircraft bound for other destinations. Read the full Treasury regulations here, and the Commerce regulations here.

PORTMAN, TRUMP CAMPAIGN SLAM CHINA CURRENCY DECISION: Sen. Rob Portman (R-Ohio) and Trump campaign advisers Peter Navarro and Dan DiMicco blasted the U.S. Treasury Department’s decision on Friday not to declare China a currency manipulator — an action no administration, Republican or Democrat, has taken since 1994.

“By refusing to take on China over how it manipulates its currency, the Obama administration is giving Chinese workers an unfair advantage over Ohio workers,” Portman said in a statement. “That’s both indefensible and wrong. … The administration should be working to level the playing field for American workers, farmers and businesses, and that includes taking stronger actions against China when it cheats.”

The Treasury Department’s semi-annual report once again found no major trading partner was artificially depressing the value of its currency against the dollar in order to boost exports to the U.S. However, China was kept on a new monitoring list, meaning the country’s monetary policies will be closely watched during the next six months.

Donald Trump has promised that, if elected, he would direct his Treasury secretary to label China a currency manipulator — and both DiMicco and Navarro onloaded on the Treasury Department’s latest finding in separate emails to POLITICO. “This is the same propaganda we have seen for the last two administrations,” DiMicco said. “I have been in meetings where certain unnamed cabinet-level individuals will readily admit that China definitely manipulates their currency, but they would not do anything about it! The reasons for this are just smokescreens — we owe China too much; they will attack our American companies in China and make doing business there very difficult if not impossible, etc.”

“Finding China to be a currency manipulator would be important for U.S. manufacturing,” DiMicco, a former steel company executive, continued. “First, it sends a very strong message that we have had enough damage to our manufacturing industries, our workers, our economy, and we are putting you on notice that we are done talking and will be taking action. Second, it would make it more likely that U.S. manufacturers could use the trade laws to obtain duties on undervalued Chinese products. Many experts believe that under current U.S. law, the Department of Commerce could use the countervailing duty laws to address currency manipulation. Declaring China to be a currency manipulator would encourage such an action.”

The Chinese yuan has fallen about 3.2 percent over the past year against the dollar and is now at its lowest level since 2010. But many economists say that mainly reflects market concerns about the country’s slowing economy and capital flight. The Treasury Department said the yuan would likely be lower than it is now if not for China’s central bank intervening in the currency market to stem the rate of decline. Doug Palmer has the full story, including Navarro’s take on the report, here.

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HOW HILLARY GOT TO ‘NO’ ON TPP: Hacked emails purportedly reveal how Hillary Clinton’s campaign machine worked to shape the Democratic candidate’s view on the TPP in line with that of her labor base shortly after the deal was concluded last October — and before she was to take the stage in a debate with longtime TPP opponent Sen. Bernie Sanders.

“We can’t survive hemming and hawing for 3 weeks,” Clinton campaign manager John Podesta — whose gmail was hacked — wrote in an Oct. 6 exchange. Indeed, Clinton didn’t waste any time, and effectively opposed the deal on Oct. 8, a few days after the talks concluded, on Oct. 5. Her labor outreach director, Nikki Budzinski, had advocated that Clinton not take a formal position until the final text of the agreement was released — which ended up happening on Nov. 5 — to avoid making her position look too political.

“We don’t have the language yet or much documentation to fall back that she will be able to credibly say she reviewed and then therefore weighed in on,” Budzinski wrote. “If she weighs in now, without viewing the document, some in labor might wonder why she didn’t just say she opposed earlier?”

But just a day later, on Oct. 7, Clinton speechwriter Dan Schwerin circulated a draft of her opposition statement, with at least one adviser advocating for broader language that would basically foreclose any support for the deal in the future. “The way it is written here, it sounds like she could flip her position next week or month if she hears new details of the deal,” campaign media adviser Mandy Grunwald wrote. “I think we have to close that door.”

BRICS: DON’T FORGET ABOUT THE WTO: The BRICS group of countries — Brazil, Russia, India, China and South Africa — concluded its annual leaders summit in Goa, India, on Sunday with a call for countries to focus on the multilateral trading system under the WTO.

“We note the increasing number of bilateral, regional, and plurilateral trade agreements, and reiterate that these should be complementary to the multilateral trading system and encourage the parties thereon to align their work in consolidating the multilateral trading system under the WTO in accordance with the principles of transparency, inclusiveness, and compatibility with the WTO rules,” the leaders said in a statement.

The joint declaration also called for implementation of decisions made at WTO ministerial conferences in Bali and Nairobi. Read the full statement here.

INTERNATIONAL OVERNIGHT

— TPP could be a boon to Japan’s massive instant noodle industry, the Asahi Shimbun reports.

— More than 80 percent of Canadian executives fear that rising protectionism will damage global trade efforts, the Globe and Mail 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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