POLITICO’s Morning Trade, presented by the American Sugar Alliance: Tech giants to press digital trade agenda — Ways and Means divided over border adjustment — Budget bonanza: What’s in, what’s out

By Megan Cassella | 05/24/2017 10:02 AM EDT
With help from Doug Palmer, Adam Behsudi and Esther Whieldon TECH GIANTS TO PRESS DIGITAL TRADE AGENDA: Top executives from Apple, Microsoft, IBM and other big tech companies are in Washington today to meet with members of Congress and stress the importance of achieving strong outcomes on digital trade in new agreements negotiated by the Trump administration. “NAFTA is the place to start," said Victoria Espinel, president and CEO of the BSA | The Software Alliance, the group organizing today’s fly-in. “These improvements are critical for the modern economy. NAFTA is an opportunity to create a trade agenda for the future." President Donald Trump walked away from a digital trade pact with Mexico, Canada and nine other countries when he abandoned the Trans-Pacific Partnership pact. Now, his administration cites the lack of digital trade provisions in NAFTA as one reason the 23-year-old agreement badly needs an update. BSA released its digital trade agenda for NAFTA and other new agreements this week. Topping the list were a provision guaranteeing the free movement of data across borders and a related requirement that governments cannot use data localization requirements as market access barriers. The group will meet with Senate Foreign Relations Chairman Bob Corker; Senate Commerce Chairman John Thune; House Majority Leader Kevin McCarthy; Sens. Tim Kaine, Cory Booker and Mike Lee; members of the House Judiciary Committee; and the two co-chairs of the Digital Trade Caucus, Reps. Suzan DelBene and Erik Paulsen. IT’S WEDNESDAY, MAY 24! Welcome to Morning Trade, where your host wants to highlight but disagree with a bit of investigative journalism digging into whether our newsroom’s snacks are going downhill. Any trade tips out there to keep my mind off all the free food floating around? Let me know: mcassella@politico.com or @mmcassella. RETAILERS TO MAKE AN ANTI-BORDER ADJUSTMENT TAX PUSH: Elsewhere in the Capitol and across Washington today, the National Retail Federation has its own fly-in to bring 20 executives from large and small businesses to meet with key members of Congress and the administration to lobby against the controversial border adjustment tax provision. Executives of household names like Dillard’s, IKEA and Levi Strauss, as well as smaller companies such as Random Harvest and American Sale, will meet with more than two dozen Hill lawmakers as well as Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin and Labor Secretary Alexander Acosta. WAYS AND MEANS DIVIDED OVER BORDER ADJUSTMENT: The retailers’ fly-in comes just a day after the House Ways and Means Committee held its first hearing on the controversial proposal, which would tax imports but not exports. Though the provision – a key part of House Republicans’ tax overhaul plan – has been debated around Washington for more than six months, and many have already left it for dead, Tuesday’s hearing marked the first time that a congressional panel finally took up the issue. During the hearing, a growing divide among Republicans over the proposal was readily apparent, Pro Tax’s Brian Faler reports. From Brian: “Several GOP members of the Ways and Means Committee expressed qualms or outright opposition to the idea, including Rep. Erik Paulsen, a moderate from the suburbs of Minneapolis who had previously backed the proposal. ‘I cannot support the border adjustability provisions as introduced,’ he said. ‘I really want to urge this committee to listen, to be educated and to address [criticism of the plan] as we move forward with reform.'" The hearing also came as Treasury Secretary Steven Mnuchin, at a separate event, issued what might be the administration’s strongest opposition to the border adjustment to date. Speaking at a fiscal policy conference across town, Mnuchin complained the plan “doesn’t create a level playing field." “It has very different impacts on different companies," he said. “It has the potential to pass on significant costs to the consumer." U.S. STEEL INDUSTRY EASES SUPPLY, PRICE FEARS OVER 232 ACTION: U.S. steelmakers say they can fill any domestic demand even if steel imports are dramatically curtailed under a trade enforcement action that would restrict imports for national security reasons. “We produce to meet the demands that the marketplace asks of us and I can assure you we are ready, willing and able to do that," John Ferriola, president and CEO of Nucor Corp., said during a press briefing Tuesday at the annual American Iron and Steel Institute conference. “If imports were to stop completely today, our industry would be able to meet the needs and demands of our customers." Ferriola, who also serves as chairman of AISI, also dismissed concerns that such an action could lead to a spike in steel prices. “If dumped illegally trade imports are stopped from coming into the country, then prices will be at the fair market price for the steel period," he said. The Commerce Department will hold a public hearing today on the enforcement action invoked under Section 232 of the Trade Expansion Act of 1962. A witness list released Tuesday included Yu Gu, first secretary in China’s Ministry of Commerce; Alexander Zhmykhov, deputy head of economic section at Russia’s trade office in Washington; and Vitalii Tarasiuk, minister-counselor at the Embassy of Ukraine. ** A message from the American Sugar Alliance: Mexico broke America’s trade laws, costing U.S. sugar producers $4 billion. It’s time to hold Mexico accountable and defend America’s 142,000 sugar jobs. www.sugaralliance.org. ** ITC INITIATES SOLAR SAFEGUARD PROBE SOUGHT BY SUNIVA: The U.S. International Trade Commission on Tuesday launched an investigation requested by U.S.-based solar cell manufacturer Suniva that could lead President Donald Trump to impose emergency tariffs on solar modules and cells from around the world. Suniva filed a petition in April asking the ITC to recommend that Trump grant temporary relief under Section 201 of the Trade Act of 1974 by imposing trade restrictions for four years on imported solar cells and modules. Suniva is going through a bankruptcy proceeding and agreed to file the Section 201 petition in exchange for an additional line of credit. It has blamed an influx of cheaper solar panel modules and cells largely from China for putting it out of business. The ITC said it will accept comments on the case through Aug. 8 and hold a hearing Aug. 15. It plans to make an injury determination by Sept. 22, after which it would make its recommendation to Trump. PILOTS PRESS TRUMP FOR ACTION ON GULF CARRIERS: The Air Line Pilots Association and other pilot and flight attendant groups will hold a press conference this morning with Reps. Tom Emmer and Brenda Lawrence to urge the Trump administration to take action against what they say are unfair subsidies for Emirates, Etihad and Qatar Airways. They charge that the United Arab Emirates and Qatar have provided over $50 billion in subsidies to the three Gulf carriers, in violation of their Open Skies agreement with the United States. BUDGET BONANZA: WHAT’S IN, WHAT’S OUT: Trump’s proposed budget for fiscal year 2018, which was released Tuesday, reflected the administration’s almost singular focus on reducing the trade deficit, emphasizing a heavy focus on enforcement while eliminating funding for activities and agencies related to trade promotion and international development. Here’s a breakdown of some of the most notable requests affecting the trade world: – The Commerce Department’s International Trade Administration would see about an 8 percent cut, from $482 million to $443 million for fiscal 2018, a change that would lead to the elimination of 136 jobs in the Global Markets division, which promotes exports around the world. Global Markets would altogether lose more than 230 positions under the plan, as ITA closes an estimated 35 international posts and 10 U.S. Export Assistance Centers while also reducing headquarters staff, budget documents said. At least 18 jobs on ITA’s Industry and Analysis team would also be cut. At the same time, however, the proposal includes funding for an additional 29 jobs in the Enforcement and Compliance division, which would "establish a dedicated team to develop factual information and legal justification to self-initiate U.S. anti-dumping and countervailing duty investigations," as well as to investigate any cases brought by the private sector, according to the administration’s documents. That reflects Commerce Secretary Wilbur Ross’ pledge that his department would begin self-initiating cases, which would spare domestic producers the costs of hiring lawyers to gather evidence and develop a formal complaint. – Commerce’s Bureau of Industry and Security gets slightly plussed-up in the proposal, by around $1 million overall. Trump is requesting an additional $3.8 million and 14 new law enforcement agents to join the export enforcement division, which serves as the in-house law enforcement arm of BIS, but that additional funding and staffing would be offset by decreases and reallocations in the bureau’s other divisions, including export administration activities. – The Office of the U.S. Trade Representative would be funded at $59 million in fiscal 2018 under the Trump budget, down slightly from the $62 million that Congress recently approved for the current year. However, at the time budget was prepared, USTR was operating on the assumption of a $54.5 million budget this year. Viewed that way, Trump’s proposal reflects a desire to put more resources into USTR, although not as much as Congress just did. USTR spokeswoman Emily Davis said the agency plans to increase staffing to 238 people, which is eight more than it has now, with an emphasis on monitoring and enforcement. “By prioritizing our national economic interests, the president’s budget lays the foundation for building free and fair trade that puts hardworking Americans and their tax dollars first," she said. – The Export-Import Bank’s inclusion in the budget proposal is a negative number, reflecting the amount of money the agency is expected to generate and give back to the U.S. Treasury after it covers its own administrative and operating costs with money generated from transactions. The bank has been down on its luck and operating at less than full capacity now for nearly two years, but the budget for fiscal 2017 shows it will pay $173 million to the government – indicating an assumption on the administration’s part that the bank will be able to do some business between now and the end of the fiscal year. In fiscal 2018 – and through fiscal 2027 – the budget assumes the bank will be fully functional, doing $20 billion in export credit and generating around $487 million for the government to use to pay down the federal deficit. For 2018, however, the budget also includes a one-time cancellation of $165 million in tied-aid funds, or grants or soft loans provided to developing countries to be used for some types of capital goods procurement, an Ex-Im spokesman noted. – Off the books: As the administration’s so-called skinny budget blueprint earlier this year forewarned, the White House is looking to zero out both the Trade and Development Agency and the Overseas Private Investment Corporation over the next few years. The TDA focuses on boosting exports of U.S. goods and services to emerging markets, while OPIC provides risk management tools to support private investment in development projects. HATCH PRODS ADMINISTRATION TO FOCUS ON JAPAN: In the aftermath of the Trump administration’s withdrawal from the Trans-Pacific Partnership, and in its quest to launch bilateral trade deals with a number of U.S. trading partners, Senate Finance Committee Chairman Orrin Hatch has one word for the White House: Japan. Asked on Tuesday whether the White House and the newly staffed Office of the U.S. Trade Representative should begin to move on its bilateral trade agenda immediately, or whether it should first focus primarily on the renegotiation of NAFTA, Hatch indicated the administration should be working on both at once. “I think we need to get as many of those trade deals together as we can," he told Morning Trade. “Especially with Japan, in this particular case, because they could be pushed into China’s lap – and frankly I don’t begrudge China having its right to compete, but we should not give up our right to compete either." Hatch emphasized his personal support for the TPP and lamented the administration’s quick withdrawal from it, but he said the White House’s bilateral focus is “fine with me." “I’m the last to want to rock the boat," he said. “I’ll just support the president." A TTIP revival? Hatch also mentioned his hope that the administration will before too long refocus its attention on the Transatlantic Trade and Investment Partnership between the United States and the European Union, a pact that was put in a deep freeze last year and about which the Trump administration has said fairly little. While some say the agreement functions as a large, multilateral deal like the TPP, others note TTIP could satisfy Trump’s preference for bilateral deals given the way the EU functions as a single trading bloc. Asked whether the administration had given any indications that it was going to revive TTIP, Hatch responded: "He’s agreed to start with Great Britain, with England, so let’s see what happens there. … If he puts a deal together with England, with Great Britain, that could cause a lot of other countries to say, ‘Hey, I want that, too.’" INTERNATIONAL OVERNIGHT – Canada’s and Mexico’s foreign ministers emphasized at an event in Mexico City Tuesday that NAFTA should remain a trilateral agreement, FOX Business reports. – Canada is collecting a deep mine of data to illustrate what exactly the economic benefits of NAFTA are for the United States, broken down by individual congressional districts, the CBC reports. – Harley-Davidson, which Trump lauded as a symbol of American manufacturing, is building a new factory in Thailand, the New York Times reports. – Australia and Peru are set to begin negotiating a free trade deal in which Canberra hopes to open Latin American markets to beef, wheat and wine exports, ABC News reports. – Mexico’s economic outlook is improving after factory exports rebounded in the first quarter and trade talks with the United States are looking more optimistic, 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; and jlauinger@politico.com and @jmlauinger. You can also follow @POLITICOPro and @Morning_Trade. ** A message from the American Sugar Alliance: Aloha meant goodbye after Mexico broke U.S. trade laws and ran Hawaii’s century-old sugar industry into the ground. It’s time to hold Mexico accountable and defend America’s remaining sugar jobs. www.sugaralliance.org. ** To view online:
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