Walking back a report on Nippon-China ties

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May 06, 2024 View in browser   By Ari Hawkins With help from Daniel Lippman QUICK FIX — The authors of a report connecting Nippon Steel to China’s steel industry, which was circulated by critics of Nippon’s proposed purchase of U.S. Steel, have softened key elements of their findings. — The United States slammed Mexico over its “dubious” claim that trade restrictions on genetically engineered corn stem from valid scientific concerns, per a new submission to the USMCA dispute settlement panel. — Australia hosted a so-called “mini-ministerial” featuring trade ministers from major economies to advance talks following the WTO’s 13th ministerial. It’s Monday, May 6. Welcome to Morning Trade! I watched “Saturday Night Live” for the first time in years over the weekend because of the hullabaloo. In defense of JoJo Siwa, I have to admit that I too sometimes feel like a figure skater that joined a street gang. Send us your trade news. Reach us at: ahawkins@politico.com, gbade@politico.com and dpalmer@politico.com. You can also follow us on X: @_AriHawkins, @GavinBade and @tradereporter.   Pro Analysis intel helps you understand the members, committees, and interplay influencing policy debates. Download a complimentary look at Analysis here to help you navigate legislative decision-makers. Already a Pro Analysis subscriber? Visit the Analysis library now.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. Driving the day FIRST IN MORNING TRADE: The geopolitical intelligence firm Horizon Advisory quietly toned down a report tying Japan’s Nippon Steel to China’s state-backed steel industry in an amended publication last month. A lobbyist familiar with the changes confirmed to Morning Trade that they came amid meetings with both Senate and House offices in recent weeks aimed at rebutting the allegations in the initial report. A previous version of the report released in March fueled scrutiny on Capitol Hill over Nippon’s proposed acquisition of U.S. Steel, which is opposed by the steelworkers union and their political allies. President Joe Biden announced his opposition to the acquisition, but did not specify any action he would take to block it. Nippon last week announced they are postponing the transaction by three months after a request from the U.S. Department of Justice, which has opened an antitrust investigation of the takeover. Hill view: Senate Finance Committee member Sherrod Brown (D-Ohio) flagged the Horizon report in a letter to Biden urging an investigation into Nippon’s ties to China’s steel sector, a sentiment backed up by fellow Rust Belt senators at the time. His office circulated the initial version of the report in three parts, which can be read here, here and here. But… the authors of the Horizon report appear to now be walking back various portions that tied Nippon’s operations to major Chinese steel and manufacturing companies, following pushback from the Japanese company, and have tamped down their risk assessment of the acquisition. In particular, the revised report on Nippon Steel’s integration with Chinese steel:  Removes an unnamed report that linked Nippon to various Chinese enterprises China Nonferrous Metals, China Aluminum, China Minmetals Group, Fangda Special Steel, Jiangxi Copper Industry, Tongling Nonferrous Metals and Zijin Mining.  That now-removed citation also originally said Nippon sells products in more than 30 territories in China, and established seven offices in Xinjiang, Kunming, Shanghai and Luoyang. Nippon said it’s never had an office in Xinjiang, while Horizon didn’t directly respond to a question about the reference. Tweaks its assessment of Nippon’s integration with China’s market from presenting an “obvious national security risk,” to say the proposed acquisition presents “potential risks that seem yet to be incorporated into broader assessments.” Removes claims that Nippon currently operates in China’s Xinjiang province — amid international alarm over human rights abuses against the region’s Uyghur minority. Removes a description of Nippon Steel as a “core” contributor to China’s steel sector, and strikes a line claiming Nippon’s business touches “every aspect of the [Chinese Communist Party’s] industrial policy program.”  Strikes a description of Nippon Steel Plant Engineering and Beijing JC Energy & Environment Engineering as representing the “largest” of Nippon’s overseas subsidiaries. Horizon Advisory told Morning Trade the changes reflect revisions meant to “streamline and clarify text and update for Nippon Steel’s statement that it does not have a presence in Xinjiang.” The statement did not address why it removed linkages between Nippon and various Chinese steel and manufacturing firms, or softened the language around its risk assessment. Nippon said in a statement that the original report “contained significant inaccuracies and misrepresentations” to draw conclusions about Nippon’s China operations. “The fact that the authors have since retracted many of its most blatant falsehoods speaks for itself,” the company said. Nippon also said its Chinese operations account for less than five percent of its total global production. Hill holds firm: Brown’s office similarly acknowledged updates to the initial version but said the reports’ warning about links to China’s steel industry remains unchanged. “The administration must thoroughly examine any ties between Nippon and China as part of its broader investigation into the danger this merger poses,” Kevin Donohoe, communications director for the Ohio senator, told Morning Trade. Around the World GETTING CORNY: The U.S. doubled down on claims that Mexico has failed to demonstrate its restrictions on genetically engineered corn stem from valid scientific concerns, according to a public filing. The new submission to the USMCA dispute settlement panel from the U.S. — dated April 2 and made public last week — marks the latest wrinkle in a long-running dispute that dates back to a 2020 decision from Mexican President Andrés Manuel López Obrador. The U.S. slammed Mexico for not conducting a scientifically sound risk assessment for its policy to restrict GMO corn — a violation of USMCA rules. “Mexico presents hypotheses that it posits could be food safety issues — based on a curated selection of dubious articles — but never actually performs the analysis necessary to demonstrate that these are, in fact, food safety concerns,” the U.S. writes. The Mexican administration argues restrictions on GM corn are needed to protect human health and the genetic integrity of its own white corn that is widely used in tortillas in a written submission, dated earlier this year. What’s next?: Mexico will deliver its rebuttal later this month, according to a tentative timetable released in April. The panel expects to issue its final report in the fall. MINI-MINISTERIAL MEETINGS: Australia hosted a mini-ministerial of trade ministers last week in Paris to advance key issues months after the WTO’s MC13, according to a readout from Japan’s Foreign Affairs Ministry. The meeting featured officials from the United States, India, Japan and China among others. Japan's readout of the meeting said “participating ministers actively exchanged views on how to move forward the discussions at the WTO, including those on WTO Reform.” REGULATORY REVIEW AUTO WORKERS BLAST TAX ‘LOOPHOLE’: The United Auto Workers accused the Biden administration on Friday of undermining a tax credit provision of the Inflation Reduction Act. Jason Wade, a top adviser to UAW President Shawn Fain, complained the Treasury Department's "willful misinterpretation" of the law created a “loophole” that encourages the offshoring of electric vehicle production — a charge the Biden administration denies. ITA TO AFRICA: Commerce Department’s International Trade Administration is organizing a “Rail and Port Trade Mission” to South Africa and Angola to connect U.S. manufacturers to buyers, as part of a G7 infrastructure project aimed at increasing trade in the region, according to a May 3 Federal Register notice.   DON’T MISS POLITICO’S ENERGY SUMMIT: The future of energy faces a crossroads in 2024 as policymakers and industry leaders shape new rules, investments and technologies. Join POLITICO’s Energy Summit on June 5 as we convene top voices to examine the shifting global policy environment in a year of major elections in the U.S. and around the world. POLITICO will examine how governments are writing and rewriting new rules for the energy future and America’s own role as a major exporter. REGISTER HERE.     TRADE OVERNIGHT — Taiwan and the United States concluded another round of talks on agriculture, labor and the environment under their bilateral initiative on 21st-Century Trade, USTR said. — Sen. Mike Braun’s economic ties to China didn’t matter in 2018. Why is it contentious now?, per POLITICO Pro. — Farmworkers lack protections that could help stop the spread of bird flu, POLITICO Pro reports. — Putin plans to meet Xi in China days after his new term starts, Bloomberg reports. — With dueling approaches, the U.S. and EU hit the tech giants hard, per POLITICO Pro. THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com, gbade@politico.com and ahawkins@politico.com. Follow us @POLITICOPro and @Morning_Trade.   Follow us on Twitter Ari Hawkins @_AriHawkins Doug Palmer @tradereporter Gavin Bade @GavinBade Adam Behsudi @ABehsudi Emily Cadei @emilycadei   Follow us

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