Time spent negotiating TPP wasn’t wasted

With help from Doug Palmer and Li Zhou

TIME SPENT NEGOTIATING TPP WASN’T WASTED: The immediate future of the TPP may look dim, at least in the United States, but U.S. Trade Representative Michael Froman and House Ways and Means Chairman Kevin Brady both maintain that aspects of it — if not the deal itself — can and should be preserved and revived later on down the road.

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Speaking at a POLITICO event Monday evening at the Newseum, Froman said that one of the clearest takeaways from last week’s election results is that of utmost concern to many Americans is the worry that they are on an unfair playing field. Addressing that worry — as well as raising other standards regarding things like labor, environment and intellectual property rights — was one of the main motivations for officials as they negotiated the pact, he said.

“I’m hopeful that over time, as people look into it and see what’s at stake as the rest of the world moves on and pursues their own trade agendas and that we see what the implications of that are for us, economically and strategically, that we’re able to see that work move into effect,” he said. Asked whether the TPP could be referred to as “dead,” Froman responded: “I think I’d prefer the word purgatory.”

Brady, long a supporter of free trade deals, added that withdrawing from the TPP and the Asia-Pacific region completely would let China win “in a big way.” “With the election, clearly the agreement is on hold,” said Brady, whose committee has jurisdiction over trade in the House — but that doesn’t mean the entire trade agenda has to be. He added that he would encourage President-elect Donald Trump to focus on whatever aspects of both the TPP and the North American Free Trade Agreement that he finds most problematic, and work on strengthening those areas to further reduce tariffs and bring more economic freedom to the United States.

“To grow our economy, it’s just not enough to buy American,” Brady said. “We have to sell American throughout the world. These trade agreements done right, strictly enforced, level that playing field, turn one-way trade into two-way trade, allow a number of jobs here.”

IT’S TUESDAY, NOV. 15! Welcome to Morning Trade, where your host wants to send a warm thank you to everyone who joined us at the Newseum last night for our “New Politics of Trade” event. If you missed it, we’re recapping the highlights for you in this newsletter, or read the tweets at #TradePolitics. Have any thoughts on last night’s event or on the week ahead? Let me know: mcassella@politico.com or @mmcassella.

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FROMAN: NO FINAL DECISION YET ON CHINA ANTI-DUMPING CHANGE: The Obama administration has not made a final decision on whether to change the non-market economy methodology currently used to calculate anti-dumping duties on Chinese-made goods, Froman said at the POLITICO event.

The issue is important to U.S. steel producers, who are the heaviest users of the U.S. anti-dumping law. They argue that China has not made enough reforms to be considered a market economy. However, Beijing argues the United States and other countries are required to stop treating it as a non-market economy beginning next month, the 15th anniversary of its accession to the World Trade Organization.

“I think what they’re focused on is what happens at the end of the year when part of their accession protocol to the WTO expires and how that will affect our application of the anti-dumping laws in the future and that’s what we’re continuing to work through,” Froman said. “We haven’t made any decisions on that.”

FROMAN: JURY STILL OUT ON TWO DEALS: Froman stopped short of predicting the Obama administration would be able to wrap up negotiations on two other initiatives before leaving office: a bilateral investment treaty with China and the Environmental Goods Agreement between the United States, Australia, Canada, China, Costa Rica, the European Union, Hong Kong, Japan, South Korea, New Zealand, Norway, Singapore, Switzerland and Taiwan.

On the BIT, Froman said the United States and China has “made progress, but we’re not there.” For an agreement to be successful, it must make meaningful reforms to China’s investment regime and contain disciplines to deal with some of the problems that American investors have faced in the market, he added.

The United States also considers China key to the outcome of the EGA talks. “It’s going to be important that they put on the table the type of access that the rest of the countries are willing to offer if we’re going to be able to reach that agreement, and we’re looking forward to engaging with them in the near future,” Froman said, in an apparent reference to high-level U.S.-Chinese talks next week in Washington.

DOES CONGRESS GET A SAY IN GREEN GOODS TALKS? Well, that depends. Assuming the administration and the 17 other WTO members involved in the deal wrap up talks in December, as they are hoping to do, the question becomes whether Obama can implement the deal as an executive agreement — in much the same way the similarly structured Information Technology Agreement was handled — or whether Congress will need to vote to approve it.

The answer will depend on what the finalized EGA looks like and whether it will change U.S. law, Brady said at the POLITICO event. Frank Samolis, co-chair of the International Trade Practice at Squire Patton Boggs, echoed the same idea in an email to Morning Trade, saying that while Obama would have the authority to enact certain reciprocal tariff reductions on his own, it’s possible the other aspects of the legislation could prove trickier and require congressional approval. “Like other trade agreements at the moment, the election could throw a wrench into the negotiations and require a different tact if they have any chance of passage before January,” Samolis said.

The other obstacle standing before the green goods talks is that both China and the European Union need to “step forward in a major way” in order for negotiations to wrap up by the Dec. 3-4 deadline, Brady said. “Europe has to … make sure we’re actually addressing the environmental goods of today and not of 20 years ago,” the Texas Republican added. “So I’m hopeful that that makes progress.”

THE OTHER OUTLIER: TISA: As for the other big item left unfinished on the administration’s agenda, the Trade in Services Agreement, Brady said simply that it’s not as close to the finish line as EGA. Some of the decisions Europe is making — for example, requiring each of its member countries to approve it rather than acting as a bloc — are “creating roadblocks and making it very difficult to move the agreement forward that I think should be agreed to in a major way, that has so much upside globally in an economy worldwide that’s not so hot,” he said. “So I’m hopeful that progress can be made.”

CLINTON’S USTR: NAFTA NEEDS AN UPDATE: NAFTA and many other old trade agreements are badly in need of a major update, former U.S. Trade Representative Mickey Kantor said Monday during a discussion at the Cato Institute. He urged Trump to focus on ways to improve the deals rather than abandon them, as he has threatened to do with NAFTA if Mexico and Canada don’t renegotiate it to his liking.

“[NAFTA’s] been a success, but it’s not perfect,” said Kantor, who served in the Democratic administration of Bill Clinton, which won approval of NAFTA in late 1993. The world has changed dramatically in the years since the agreement was approved and many important issues, like state-owned enterprises and cross-border data flows, are not addressed in the pact, he said.

Trade advocates should approach the new administration with the argument that “look, you don’t have to throw the baby out with the bathwater,” Kantor said. “There’s some things in these agreements that need to be dealt with. Everyone understands that.” But abandoning NAFTA and other trade deals would damage U.S. standing in the world and its important relationship with many other countries, he said.

BROWN URGES TRUMP TO KEEP HIS NAFTA PROMISE: Sen. Sherrod Brown in his home state of Ohio on Monday called on Trump to follow through on his campaign pledge to renegotiate TPP. A longtime opponent of free trade deals who led opposition to NAFTA more than two decades ago, offered to work with Trump to “form a trade policy that protects American workers and creates Ohio jobs.”

Brown specified three areas of priority for renegotiation: the investor-state dispute settlement provision, which he said must be eliminated; the rules of origin, which he said must be adapted to protect U.S. auto workers and the domestic steel industry; and the regulations that all companies and countries face, which he said must be streamlined.

“I have spent my career fighting for a trade policy that puts American workers ahead of corporate profits,” Brown said in a statement released by his office. “I’ve stood up to presidents of both parties, and now I’m willing to work with President Trump to hold him accountable for keeping his promises and make sure we get this right.”

OBAMA OFFERS A NEW WAY TO SELL TRADE DEALS: With renegotiation becoming the name of the game among members of the transition team and the president-elect, Obama rejected the idea on Monday that pulling the U.S. out of trade deals — both those that are already in place as well as the still-pending TPP — would protect American jobs and workers. While acknowledging that his administration’s messaging in support of the Asia-Pacific pact has so far fallen on deaf ears, Obama offered instead that the way to approach the situation is to make sure workers understand their concerns are being addressed.

His administration’s attempt to sell the TPP by stressing its raising of labor and environmental standards was “a complex argument to make when people remember plants closing, jobs being offshored,” Obama said.

The key to comforting workers, he added, is not to shut off all trade but instead to say to workers: “Your concerns are real, your anxieties are real, here’s how we fix it.”

“And I think we can successfully do that,” he continued. “It continues to be my strong belief that the way we are going to make sure that everybody feels a part of this global economy is not by shutting ourselves off from each other even if we could, but rather by working together more effectively than we have in the past.” Read the full story here.

TRUMP’S TRADE POLICIES VS. IPHONE SALES: The Global Times, a Chinese state-run publication, ran an editorial on Sunday suggesting the country would go “tit-for-tat” if Trump were to enforce tariffs on Chinese exports, a move that the publication argued would adversely affect U.S. product sales, including those of iPhones. Michael Wessel, a commissioner on the U.S.-China Economic and Security Review Commission, spoke with our Pro Technology colleagues about the likelihood of this scenario and said the stakes are higher for China in a trade standoff.

“If President-elect Trump were to impose tariffs to respond to [China’s] unfair trade practices, China will probably respond. China, however, has a lot more to lose in [a] tit-for-tat approach,” Wessel said. “China’s leaders depend a lot more on keeping their people employed to stay in power than Americans need an iPhone.”

Following Trump’s phone call with Chinese President Xi Jinping, The Global Times published another editorial on Monday that took a different tack and emphasized goals of collaboration between the two nations.

DING! YOU ARE NOW FREE TO MOVE ABOUT THE COUNTRY — AND TO CUBA: Southwest Airlines officially kicked off commercial flights to Cuba this week, further deepening ties between the two nations before Trump — who took a harder stance toward Havana during his campaign than Obama has — enters the White House. The airline plans to increase daily direct flights to Havana to six daily roundtrips by the end of the year, Cuba Journal reports. Southwest’s Vice President of Ground Operations Steve Goldberg said the airline is also planning to launch one flight a day from Ft. Lauderdale, Fla., to Santa Clara on Dec. 15, pending government approval, according to the report.

INTERNATIONAL OVERNIGHT

— Malaysian Prime Minister Najib Razak says his country is committed to strengthening economic and trade ties with the U.S. even if the TPP is not completed, Channel News Asia reports.

— China names Australia a key partner in its push for a new trade bloc called the Free Trade Area of the Asia-Pacific, the Australia Financial Review reports.

— Buoyed by a rise in exports, Japan’s economy grew more than expected in the most recent quarter, the Japan News reports.

— Obama pledged to veto any legislation that would block financial transactions involving the export of passenger aircraft to Iran, Reuters 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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