Former Trade Policy Officials Say Resolving EU Trade Problems Thorny.
While it seems clear that Joe Biden wants to “team up with our allies” to confrontChina, less clear is how that will work in reality, Mayer Brown international tradelawyer Tim Keeler said during a Nov. 17 Mayer Brown webinar about trade policy in theincoming administration. Keeler, who is a former chief of staff in the Office of the U.S.Trade Representative, said a majority of Congress believes the Section 301 tariffs havebeen a source of leverage, while the European Union thinks the tariffs violated WorldTrade Organization rules.
He said that during the Trump administration, the EU and the U.S. have been indisagreement on the WTO appellate body, Boeing and Airbus subsidies, who should bethe next WTO director-general and digital services taxes (DST). He asked: “Even if theU.S. were to accede to the EU view on all those positions, what does the EU do inreturn? I don’t think they do tariffs on China.” And if all the EU is willing to do is bringWTO cases or try to get China to agree to new disciplines at the WTO, he doesn’t thinkthat will satisfy U.S. politicians. “I think people have assumed not having mean tweetswill make it easier” to present a unified front on China, he said. “I don’t think that’s thecase.”
Former USTR and Commerce Secretary Mickey Kantor, who served during the Clintonadministration, believes that Biden will roll back Section 232 tariffs on European steeland aluminum, reach a compromise on Airbus-Boeing and work to resolve DST policyto move the relationship with Europe forward. None of the other panelists were asoptimistic.
Former USTR Susan Schwab, who served during the George W. Bush administration,agreed with Keeler. She said that while a Biden administration would not haveimposed tariffs on European steel, the worldwide effects of Chinese overcapacity insteel remain even if those tariffs are lifted. “I believe that if [USTR Robert] Lighthizercould have struck an approach between Japan and the EU on overcapacity, they wouldhave done so,” she said. She also said that the free trade talks between the U.S. andEurope failed because of the EU, not the U.S.
Mayer Brown senior adviser Warren Payne, a former policy director at the House Waysand Means Committee, said that although Biden would prefer to focus on the COVID-19pandemic, the recession and an infrastructure bill in the first six months in office, thecollision course between European countries and the U.S. on DST means that he can’tjust stick with domestic concerns in the early days of his administration. Payne saidthere may be a tax approach to finding a settlement at the Organization for EconomicCooperation and Development, rather than tariffs on French or other DST-imposingcountries’ imports.
But he said Ways and Means Chairman Richard Neal, D-Mass., Senate Minority Leader Chuck Schumer, D-N.Y., and the top Democrat on the Senate Finance Committee have all “been very clear that they will not sacrifice the U.S. tax base either to these DSTs or to these OECD negotiations.” He said Republicans in Congress also think countries trying to impose DSTs are trying to tax income that rightfully should be subject to the U.S. corporate income tax.
Payne, in response to a question from International Trade Today, said he believes the most likely tariff liberalization in 2021 is the restoration of India to the Generalized System of Preferences benefits program. “I think if the Trump administration does not reach any kind of mini deal” with India before Jan. 20, 2021, Biden will make improving relations with India a priority, he said. Biden wants to “rebuild relationships with allies that can help it triangulate against China,” he said. “Restoration of GSP benefits is going to be critical to that,” Kantor agreed.
None of the panelists believes Biden will roll back any Section 301 tariffs on China in the first year, though he may restore lapsed exclusions or approve more exclusions. “You may see more exclusions, you may see more negotiations,” Schwab said. “I see a quieter trade policy; perhaps a more boring trade policy. But I don’t see any tariffs being peeled back any time soon.”
Schwab said she’ll be looking for what last-minute actions Lighthizer takes over the next two months, including whether he pushes to renew GSP and the Miscellaneous Tariff Bill, whether he extends exclusions on Section 301 tariffs on COVID-related items, and whether he reaches a deal with the United Kingdom. Payne pointed to the Section 301 investigation on Vietnam as something the outgoing administration could try to finish before Jan. 20, and said the fact that Lighthizer is against a public hearing suggests “they are in a hurry to get to a conclusion.”
If the Trump administration doesn’t impose trade restrictions on Vietnam over alleged currency manipulation or illegal logging, the panelists said, they are unsure how Biden will deal with the investigation. Keeler said some Democratic constituencies like the investigations, and choosing not to punish Vietnam could have some political cost. Payne said he expects Biden would want to pursue action on Vietnamese logging practices, but he didn’t say whether tariffs were a likely outcome.
He thinks a deal with the U.K. before Jan. 20 is very unlikely, though possible, and Schwab said Biden might want to move a U.K. deal by March so that it can get in under trade promotion authority, or fast-track, which will expire July 1. “There is a very narrow window to do a deal,” she said.
Keeler agreed that if the U.K. deal will get a vote, it has to be no later than June 30. “I think it’s unlikely a Biden administration would want to spend the kind of political capital to avoid a lapse in TPA; even if they did, I very much doubt they would have the votes in Congress to get TPA approved,” he said.
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