GIVE CLIMATE PEACE A CHANCE: The environmental groups, in a letter to top EU and U.S. trade officials provided first to Morning Trade, also called on the trading partners “to commit to a Climate Peace Clause to protect climate policies around the world from trade disputes.” The correspondence signed by the Sierra Club, the European Trade Justice Coalition and more than three dozen other organizations comes as EU Trade Commissioner Valdis Dombrovski is headed to Washington this week for talks with U.S. Trade Representative Katherine Tai and other administration officials. It follows months of EU complaints about new U.S. subsidies contained in the Inflation Reduction Act. That led the two sides last year to appoint a bilateral task force to thrash over the concerns. In the meantime, the EU has kept alive the possibility of challenging some of the measures at the WTO if a negotiated settlement cannot be reached. TTC initiative: The IRA dispute overshadowed the most recent meeting of the U.S.-EU Trade and Technology Council in December. However, both sides agreed at that time to launch a new “transatlantic initiative on sustainable trade” to support development of low-carbon economies. In their letter, the environment groups urged the EU “to refrain from challenging the IRA with trade instruments,” and encouraged the EU and European governments to come up with their own programs to support the development of climate-friendly technologies. They also proposed that the two sides agree to a broader climate peace clause that would protect a government program anywhere that is aimed at speeding the transition to green technologies from being challenged at the WTO or through other mechanisms. Dombrovskis’ visit comes as the U.S. and the EU are preparing for the next TTC meeting in Sweden in the first half of the year. They also face a deadline this fall to conclude a new pact to discourage trade in high-carbon emission steel. USTR BLASTS CHINA IN ANNUAL REPORT: USTR’s annual report on China’s compliance with World Trade Organization rules runs 70 pages this year, two less than the 2021 version. That tiny reduction in length belies the worsening state of relations over the past 12 months, as exemplified most recently by the furor over the Chinese spy balloon. A fine-tooth comb and steady eye are needed to detect all the changes made to the 2022 edition, which USTR released late Friday afternoon, more than two months later than its traditional release date of Dec. 11, the anniversary of China’s entry into the WTO in 2001. However, U.S. Trade Representative Katherine Tai’s statement sums up the tone. Bad for the world’s workers: “More than 20 years after it acceded to the World Trade Organization, China still embraces a state-led economic and trade approach that runs counter to the open, market-oriented principles endorsed by all members of the organization,” Tai said. “China’s approach makes it an outlier and continues to cause serious harm to workers and businesses in the United States and around the world.” This report, Tai continues, “details the scale of China’s non-market policies and practices and is a reminder that the international trading system must continue to work together to defend our shared interests against these harmful actions.” Phase 1 deal trashed: As in the 2021 edition, the Biden administration makes clear that it does not highly regard the “phase 1” trade deal that its predecessor negotiated with Beijing. “The reality is that this Agreement did not meaningfully address the more fundamental concerns that the United States has with China’s state-led, non-market policies and practices and their harmful impact on the U.S. economy and U.S. workers and businesses,” the report said. “New strategies” same as the old: A section on what “new strategies” are needed to deal with the many challenges that China presents also is largely identical to the 2021 version, with the addition of one stressing the need for the U.S. “to invest in, and build policies supportive of, the industries of today and tomorrow.” That’s an after-the-fact addition reflecting approval of the CHIPS and Science Act, the Inflation Reduction Act and the Infrastructure Investment and Jobs Act since the 2021 report was drafted. The three other new strategies are repeats from last year: engaging bilaterally with China to address concerns and hold it accountable for its existing commitments, including the maligned phase 1 deal; updating or developing new domestic tools to secure a more level playing field with China; and working with allies to put pressure on Beijing to change. Silent on 301 tariff review: There was no update in the report on USTR’s ongoing statutory review of the tariffs that former President Donald Trump imposed on more than $300 billion worth of Chinese goods. Read more about the report here. PRESIDENT’S TRADE AGENDA NEXT: USTR got the China report out the door in time for the annual release of the President’s Trade Agenda by midweek. It seems unlikely any big new initiative will be announced, but it sets the stage for Tai to testify before House Ways and Means and the Senate Finance committees in coming months. Meanwhile, we’re also still waiting for results of USTR’s year-old effort to develop the agency’s first strategy to address forced labor concerns around the world. All that and APEC too: Senior officials from the 21 members of the Asia Pacific Economic Cooperation forum wrap up two weeks of talks Tuesday in Palm Springs, Calif. White House deputy national security adviser Mike Pyle chaired the meeting — the first of four in the run-up to the annual APEC summit in San Francisco in November, which could mark Chinese President Xi Jinping’s first visit to the U.S. since 2017. (Wouldn’t it be funny if Xi came by balloon?) SECOND IPEF ROUND SET FOR MID-MARCH IN BALI: Sarah Ellerman, the acting assistant USTR for Southeast Asia and the Pacific, will co-lead the U.S. interagency delegation in Bali with Sharon Yuan, a counselor in the Commerce Department. Ellerman is chief U.S. negotiator for Pillar 1 of the IPEF negotiations covering labor, environment, agriculture, digital trade and other issues. Yuan heads the U.S. team for the three other pillars covering supply chains; clean energy, decarbonization, and infrastructure; and tax and anti-corruption. Early results possible: Marisa Lago, undersecretary of Commerce for international trade, left open the possibility that some portions of the IPEF could be concluded in coming months. “There is a desire to get each pillar done fast, and not hold up, not take a single undertaking approach” requiring every issue to be resolved before any results can be produced from the talks, Lago said at a recent event hosted by the Washington International Trade Association. Lago also said the talks are proceeding at a “blistering” pace and that Commerce Secretary Gina Raimondo is pushing hard for results from the Commerce portions this year. Detroit meeting: Foreign IPEF country officials have suggested there could be an early harvest of some IPEF provisions in May, when the United States hosts the annual APEC trade ministers meeting in Detroit. Most, but not all, of the 14 IPEF countries are also APEC members. Australia hosted the first full negotiating round in December 2022, and India hosted a special negotiating round for Pillars 2, 3 and 4 earlier this month. USTR said additional details regarding the Indonesia negotiating round will be provided at a later date. U.S.-UKRAINE WARTIME TRADE SNAPSHOT: U.S. exports to Ukraine plummeted from a high of $309 million in February, the month Russian President Vladimir Putin launched his attack, to just $51 million in December, the latest Commerce Department data shows. In contrast, U.S. imports from the war-torn nation staged a rebound in the second half of the year. After falling from $212 million in January to $52 million in May, they scraped their way back to $200 million in November and $106 million in December. Two-way U.S. trade with Ukraine — both before and after the 2022 invasion — is much smaller than EU trade with the one-time Soviet republic. However, WTO trade data shows the U.S. was Ukraine’s fifth largest import provider in 2021. Biggest drop, part one: The value of Ukraine’s biggest export to the United States — steel-making materials — fell from $1 billion in 2021 to $452 million in 2022. However, in two other big categories — oilseeds and drilling equipment — Ukraine’s exports to the United States actually increased in 2022 to $158 million and $215 million, respectively, despite the conflict. Biggest drop, part two: Ukraine imported $867 million worth of passenger cars from the United States in 2021. That fell to $171 million last year, an 80 percent decline. The second largest pre-war U.S. export to Ukraine — metallurgical grade coal — fell by 71 percent to $137 million in 2022 and the third — agricultural machinery — fell by 25 percent to $118 million. More wartime distortions: Tellingly, U.S. sales of pharmaceuticals to Ukraine increased 158 percent in 2022 to $225 million. Commercial exports of tanks, artillery, missiles, rockets, guns and ammunition increased over 2,000 percent to $161 million. The U.S. also sold $21 million of military ships and boats to Ukraine and $3.5 million of military trucks and armored vehicles. While overall U.S. exports to Ukraine fell 43 percent last year, shipments of certain consumer items increased sharply, in a glimpse of how the war is impacting lives. Those included toys, games and sporting goods; musical instruments; glassware and chinaware; textiles and clothing; stereo equipment; cookware, cutlery and tools; and tobacco.
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