Introduction

On 11 January 2019 and 18 January 2019, the United States Trade Representative (“USTR”) and the European Commission (“Commission”) released their respective negotiating objectives for a U.S.-EU trade agreement, potentially marking a new phase in the transatlantic trade relationship.  The release follows from the joint agenda agreed to in July 2018 by European Commission President Jean-Claude Juncker and U.S. President Donald Trump to work together toward “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods,” increased cooperation on regulatory issues and standards, and protecting European and U.S. companies from unfair global trade practices.  The release could also signify an important expansion of market opportunities for EU and U.S. companies.

The road ahead is fraught with obstacles, however, as the EU and U.S. negotiating positions differentiate substantially.  The USTR’s summary of specific negotiating objectives seeks a broad free trade agreement with the EU, including on sticky issues such as agriculture, while the Commission aims to limit trade negotiations to reciprocal commitments on conformity assessment and industrial goods. This makes any future transatlantic trade negotiations challenging at best and raises the question of whether the two sides will be able to arrive at an agreement at all. The situation is further complicated by the Trump administration’s ongoing 232 investigations on imports of certain automobiles and parts, as the EU stands ready to suspend any trade talks and retaliate with duties on U.S. exports should the investigation lead to the imposition of tariffs on certain EU automotive products.

EU Perspective

EU Commissioner for Trade, Cecilia Malmström, has clearly stated that the EU is “not proposing to restart a broad free trade agreement negotiation with the US,” referring to the breakdown of negotiations, five years ago, of the Transatlantic Trade and Investment Partnership (TTIP).  On 30 January 2019, the Commission published a progress report concerning the joint agenda agreed to in July 2018.  The report indicates that talks between the parties have so far focused on potential regulatory cooperation initiatives.  The EU has also taken some measures to avoid the escalation of trade tensions with the United States.  
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On Friday, January 4, 2019, the Office of the U.S. Trade Representative (USTR) announced that the United States has requested consultations with Peru under the auspices of the U.S.-Peru Trade Promotion Agreement (PTPA) to address an alleged violation by Peru of the environmental chapter of the agreement.  According to USTR, Peru’s recent decision to move

This morning, on the sidelines of the G-20 summit in Argentina, the United States, Canada, and Mexico signed the U.S.-Mexico-Canada Agreement (USMCA).  The new trade deal is slated to replace the 24-year old North American Free Trade Agreement (NAFTA).  Today’s signature date was a critical deadline for the parties because it is Mexican President Enrique Peña Nieto’s last day in office before his successor, Andrés Manuel López Obrador, takes office tomorrow.

The three parties have spent the last 15 months negotiating the final text of the USMCA, with a deal reached first between the U.S. and Mexico at the end of August, and Canada signing onto the agreement with additional tweaks a month later.  We have covered the USMCA in previous blog posts (here, here, here, here, and here).

Each country’s legislature must now approve the agreement for it to take effect.  In the United States, the USMCA was negotiated under Trade Promotion Authority, or “fast track” legislation, meaning that the agreement is subject to an up-or-down vote and Congress cannot modify or amend the agreement itself.  Instead, the hurdles involve the implementing legislation that will be required to give effect to the deal under U.S. law.  The Administration has 60 days to submit to Congress a list of changes to U.S. law that will be required to implement the USMCA, and then must prepare a draft implementing bill and “statement of administrative action” at least 30 days before the bill is actually introduced in the House and Senate.  The House must vote first before the bill moves to the Senate for consideration and a vote.      
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On October 1, 2018, the United States, Canada, and Mexico announced that they had reached an agreement to “modernize” the 24-year old North American Free Trade Agreement (NAFTA). When NAFTA came into effect, it created the largest free trade region in the world. Since then, developments in virtually every sector and the advent of cross-border

The Office of the U.S. Trade Representative (USTR) has opened a public comment period in connection with the proposed U.S.-Japan Trade Agreement negotiations.  On October 16, 2018, USTR notified Congress of its intent to enter into trade talks with Japan.  Those discussions cannot begin until mid-January 2019 at the earliest under the requirements of the Trade Promotion Authority law.

Any member of the public – including individual companies, industry coalitions, and trade associations – may submit written comments to USTR by November 26, 2018.  That is also the deadline to submit written notice of intent to testify, along with a summary of intended testimony, at a public hearing to be held on December 10, 2018 at 9:30 am.  The hearing will be held by the Trade Policy Staff Committee, an interagency committee chaired by USTR and comprised of 20 executive branch agencies that provide input into the Administration’s trade-related decision-making through review of policy papers and negotiating documents, and eliciting public feedback.  Procedures are available for commenters to submit business confidential information. 
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On October 15, 2018, chief Mexican trade negotiator Jesus Seade indicated that the United States is seeking to replace Section 232 tariffs on Mexican steel with an export quota program.  Seade stated that a deal regarding any potential export quotas on Mexican steel must be reached in the coming weeks, prior to the December, 1, 2018 inauguration of new Mexican President Andres Manuel Lopez Obrador.

This announcement was issued just days after the trilateral trade agreement, the U.S.-Mexico-Canada Agreement (“USMCA”) was reached among the United States, Canada, and Mexico.  Notably, the Section 232 tariffs, imposed in June on the basis of national security pursuant to the Trade Expansion Act of 1962, remain in place for both Mexico and Canada despite the USMCA agreement being finalized.

As of June 1, 2018, imports of Mexican steel became subject to a 25 percent duty, while aluminum shipments are subject to a 10 percent duty.  Certain countries, including Argentina, Brazil and South Korea, have already negotiated export quotas to nullify the Section 232 duties.  For example, South Korean officials agreed in March to cut steel exports by 30 percent of the 2015-2017 average.
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Last Friday, the U.S. International Trade Commission (“ITC”) formally launched an investigation into the economic benefits of the new U.S.-Mexico-Canada Agreement (“USMCA”) that is to replace NAFTA.

Under the Trade Promotion Authority (“TPA”) law, known as the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the ITC must prepare a report that assesses the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors, as well as the interests of U.S. consumers.  This report, which will be made public, is due to the President and Congress no more than 105 days after the President signs the agreement. The TPA requires the President to wait 90 days from the date of the notification before signing the USMCA.  President Trump notified Congress of his intent to enter into the new trade agreement on August 31, 2018.  Therefore, the earliest the President may sign the agreement is November 30, 2018.

Congress is expected to wait until the ITC report is issued before voting on the new agreement.  In fact, Senate majority leader Mitch McConnell recently told Bloomberg in an interview that the vote on USMCA will be a “next-year issue.”

If Congress does not pass the TPA, the President has threatened to withdraw from NAFTA. 
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Yesterday, the Office of the U.S. Trade Representative (“USTR”) officially notified Congress that it would be launching separate trade discussions with the European Union, Japan, and the United Kingdom.  The letters sent to Congress provide notice of the Administration’s intent to negotiate trade agreements with each partner as required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, often referred to as Trade Promotion Authority (“TPA”).  USTR must wait at least 90 calendar days from yesterday’s notification to initiate negotiations, and must also publish specific negotiating objectives in the Federal Register at least 30 days before talks begin.

In addition to general negotiating objectives across numerous areas – including trade in goods, services, and agriculture; intellectual property; digital trade and cross-border data flows; labor and the environment; trade remedies; anti-corruption; and dispute settlement – TPA also establishes procedures for consultation with Congress and other stakeholders throughout trade agreement negotiations.  These procedures include required reports on certain aspects of the agreement prior to signing the agreement; Congressional notification 90 days before signature; release of the final agreement text 60 days before signature; and Congressional notification of expected changes to U.S. law 60-180 days before signature.  USTR also engages with public and private sector stakeholders through consultation with various policy- and sector-oriented trade advisory committees and through comment periods and hearings announced in the Federal Register.
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As we previously reported, the United States, Canada, and Mexico have reached agreement on the United States-Mexico-Canada Agreement (“USMCA”) to replace the North American Free Trade Agreement (“NAFTA”), which has governed trade between the three countries since 1994.  Article 32.10 of the agreement requires each country to notify the others of any intention to negotiate a free trade agreement with a “non-market country.”  The provision defines a “non-market country,” as any country that: (1) one or more USMCA member countries has determined to be a non-market economy for purposes of the USMCA member country’s trade remedy laws; and (2) none of the USMCA member countries has a free trade agreement with.

Last year, as a result of the expiration of certain language in China’s World Trade Organization (“WTO”) Protocol, the U.S. Department of Commerce conducted a review of its designation of China as a non-market economy country for purposes of the U.S. antidumping laws.  The Department announced the results of its review of China’s status on October 26, 2017, concluding that China continued to be a non-market economy country.  Further, none of the USMCA member countries have a free trade agreement with China.  As a result, China would be considered a “non-market country” for purposes of the USMCA.

Article 32.10 requires a USMCA member country seeking to negotiate a free trade agreement with China, or any other “non-market country” to:
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