DESPITE EVERYTHING: Commerce Department data to be released Tuesday is expected to show goods trade between the world’s two biggest economic superpowers surpassed the previous record of $658 billion set in 2018. The tally for the first 11 months of 2022 was $640 billion, putting the record well within reach when the December numbers are added in tomorrow. U.S. exports to China could exceed the 2021 record of $151 billion, while U.S. imports from China could match or exceed the 2018 record of $538 billion. Still, there are signs that the political turbulence of the last few years is having an impact on two-way commerce. Based on data for January through November, China accounted for just 13.1 percent of overall U.S. trade in 2022, the lowest level in at least a decade and down from a peak of 16.4 percent in 2017. The full-year data will show the U.S. trade deficit with China increased from $353 billion in 2021 but did not set a new record high in 2022. Spy balloon fallout: The discovery of a Chinese spy balloon over the United States makes a tougher political environment for the two sides to discuss lifting tariffs on each other's goods and increases U.S. concern about Chinese ambitions that has already led the Biden administration to tighten controls on the export of high-technology products to China. It also prompted Secretary of State Antony Blinken to postpone a trip to Beijing scheduled to begin yesterday. China expressed regret that its balloon violated U.S. sovereign airspace, but said it was a civilian airship used primarily for meteorological purposes that had blown off course. The U.S. shot down the balloon Saturday (if by some chance you hadn’t heard) and the Chinese Foreign Ministry issued a statement expressing its “strong” disapproval. Tariff review grinds on: Close to 1,500 interested parties weighed in during a public comment period that ended on Jan. 17 as part of USTR’s four-year statutory review of the tariffs that Trump imposed on more than $300 billion worth of Chinese goods. Two weeks later, there is still no word on whether USTR will hold a public hearing before it concludes the review, which has been underway in various stages for roughly nine months. The Court of International Trade will hear oral arguments Tuesday in a case challenging whether the Trump administration met the requirements of the Administrative Procedure Act when it imposed the third and fourth tranches of the tariffs. Looking ahead: The past year could turn out to be the high-water mark for U.S.-China trade, especially in the near term if the United States falls into a recession that reduces overall import demand from China and other suppliers. A recent report from Boston Consulting Group forecasts U.S.-China trade to decline by $63 billion annually between 2023 and 2031, a drop of about 10 percent, as a result of geopolitical tensions and rising Chinese labor costs. But that’s a relatively minor change compared to an expected $262 billion drop in annual EU-Russian trade and an expected $338 billion increase in annual EU-U.S. trade over the same period, said Nikolaus Lang, who leads BCG’s Global Advantage practice. Both of those big shifts are driven primarily by the EU halting energy imports from Russia and replacing them with U.S. liquefied natural gas, Lang said. Everyone loves ASEAN: The 10 countries that make up the Association of Southeast Asian Nations are forecast to be the biggest beneficiaries of changing global trade flows by 2031. That’s because they have lower labor costs and are geographically well positioned for companies looking to relocate out of China, Lang said. The BCG report forecasts annual U.S.-ASEAN trade to increase by $236 billion over the nine-year period. EU-ASEAN trade is forecast to grow by $172 billion, Japan-ASEAN trade by $272 billion and China-ASEAN trade by $438 billion by 2031. PARIS, BERLIN TO CALL FOR SUBSIDY TRANSPARENCY IN U.S. TRIP: France and Germany will urge the U.S. government not to encourage companies to leave Europe to benefit from subsidies under the Inflation Reduction Act, and to share more information on aid disbursed under the controversial legislation. That will be the main message of a joint trip of Le Maire and Habeck to Washington, French officials said. They have meetings Tuesday morning with Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai. “The most important thing is that we cooperate with allies to have transparency about the amount of subsidies and tax credits that will be granted,” Le Maire told AFP in an interview published Saturday. “If you know at what price green hydrogen will be released in the United States and at what price it will be released in Europe, this allows you to guarantee fair competition conditions.” Cooperation needed: European officials have been concerned that the huge subsidies provided by the IRA will siphon investment away from the EU. In that vein, the two ministers will ask “most of all that there is no more offensive solicitation from the Americans on large strategic European projects, on companies that would already be established in the European Union and that would be attracted in a more offensive and non-cooperative way to the United States," a French economy ministry official told reporters ahead of the trip. Show us the money: They will also ask the Biden administration to share the amount and the beneficiaries of aid under a "reciprocal transparency mechanism," the official said. "The idea is to ensure a more global consistency between the incentives put in place in the EU and in the U.S., making sure also so that we do not enter a subsidy race, making sure also that we bar market participants from subsidy shopping between Europe and U.S., which entails the risk of a subsidies war," a second French official said. The particular details of a transparency mechanism remain to be worked out, but could involve an initial overall estimate of subsidies the United States expects to provide under various initiatives as well as the reporting of disbursements, that official said. No TTIP resurrection: Europe wants Washington to treat it as having a free trade agreement with the United States (even though it doesn’t) since that would make it easier for European companies to benefit from some of the electric vehicle tax credits provided by the IRA. But reviving talks on an actual EU-U.S. trade deal (as Germany has suggested) “is not a French priority nor an American priority," another French economy ministry official said. The U.S. and the EU tried to negotiate a free trade pact known as the Transatlantic Trade and Investment Partnership during the Obama administration, but failed to finish it. TAKE TWO: U.S., KENYA TO HOLD ‘CONCEPTUAL’ TRADE ROUND: Trump’s plan to negotiate an FTA with Kenya was put on hold after President Joe Biden took office in January 2021, although Tai met frequently with then-Kenyan Cabinet Secretary Betty Maina to discuss other ways to deepen commercial relations. That culminated in a decision this past July to launch the U.S.-Kenya Strategic Trade and Investment Partnership, which is aimed at achieving “high-standard commitments” in a number of areas, including agriculture; anti-corruption; digital trade; environment and climate action; good regulatory practices; micro, small and medium-size enterprises; worker’s rights and protections; supporting women, youth and others in trade; standards collaboration; trade facilitation and customs procedures; and services domestic regulation. Kenyan election: However, there was little activity on the initiative during the following months as Kenya held a presidential election to replace outgoing leader Uhuru Kenyatta, who had launched the FTA talks with Trump. Tai led the U.S. delegation to new Kenyan President William Ruto's inauguration and then met virtually and in person with new Cabinet Secretary Moses Kuria to confirm the current government’s interest in continuing to pursue the STIP initiative. Weeklong meeting: USTR described the first formal round of talks this week as “conceptual discussions.” Constance Hamilton, the assistant U.S. trade representative for Africa, will lead the U.S. delegation with several other agencies also participating. What’s missing: In keeping with the Biden administration’s overall approach to trade negotiations, the STIP initiative avoids any discussion of tariff cuts on either side. According to World Trade Organization data, Kenya’s average applied tariff rate is 20.4 percent for agricultural products and 12.1 percent for non-ag goods. The United States, in comparison, has average applied tariff rates of 5.2 percent on ag products and 3.1 percent on non-ag. SCHAGRIN “ACTING” NO MORE: Kenneth Schagrin is now officially assistant U.S. trade representative for services and investment after serving in that role in an acting capacity since 2021, when Daniel Bahar retired from the agency. Schagrin joined USTR in 2000 as director of telecommunication and e-commerce. He worked in the Geneva office as a services negotiator from 2008 to 2015 and also did a stint as deputy assistant USTR for APEC affairs. He was DAUSTR for services from 2018 to 2023.
| 
Comments
Post a Comment