Considering USMCA and Other Trade Developments

Considering USMCA and Other Trade Developments

This piece was originally published in the January/February 2019 issue of electroindustry.

Craig Updyke, Director, Trade and Commercial Affairs, NEMA

As noted in “Outlook for 116th Congress” (page 16), Congress is expected in 2019 to consider the new U.S.–Mexico–Canada Agreement (USMCA), intended as a modernization of and replacement for the 1994 North American Free Trade Agreement (NAFTA). At present, the prospects are colored by competing priorities: on one hand, demands for changes in the compromise agreement from members of Congress from both sides of the aisle, including the presumptive incoming speaker of the House of Representatives; on the other, the prospect that the Administration could give a six-month notice of U.S. withdrawal from NAFTA, effectively presenting Congress with a choice between USMCA and nothing.

USMCA contains many positive provisions for the electroindustry but also some elements that effectively shrink opportunities for cross-border trade and investment. NEMA will work with Member companies to ensure that Congress understands the value of the trade agreement for electrical manufacturing in North America.

PAUSING U.S.–CHINA TARIFF ESCALATION

NEMA Members that import 82 types of Chinese- made items subject to additional U.S. tariffs were afforded a reprieve from a planned January 1 tariff increase from 10 to 25 percent. While the U.S. and China did not resolve their differences over trade, industrial, or intellectual property policy during a December 1 meeting, the leaders did agree to drop plans for further trade-restrictive measures, including tariffs, during a 90-day period for further negotiations. According to the Administration, the aforementioned policy areas are joined on the proverbial “table” until March 1 by imprecise pledges by Beijing to purchase more U.S. goods to address a large and continually growing bilateral trade imbalance.

NEMA SEEKS ACCESS IN JAPAN AND EU

NEMA provided advice to the Office of the U.S. Trade Representative (USTR) on priorities for trade agreement negotiations with Japan and the European Union. USTR Robert Lighthizer notified Congress in October 2018 of the President’s intent to enter into new trade negotiations with Japan, the EU, and the United Kingdom. NEMA called for trade agreements of the highest standard possible, building on trade liberalization achieved in previous pacts, to ensure U.S. electroindustry exporters gain new market access opportunities.

WTO REPORT CITES BLOCKCHAIN POTENTIAL

A November 2018 paper published by the World Trade Organization cited numerous potential benefits to international traders and governments of distributed ledger technology, popularly known as blockchain. The paper concludes that the main value of blockchain in trade lies in potential cost reductions linked to digitalization.

According to author Emmanuelle Ganne, “By increasing transparency and making it possible to automate processes and payments, Blockchain [sic] has the potential to reduce trade costs significantly, including verification, networking, processing, coordination, transportation and logistics, as well as financial intermediation and exchange rate costs.” The full paper is available at www.wto.org/publications.

“BREXIT” TIMELINE DEFERS U.S. TRADE DEAL

Prospects for a trade agreement between the U.S. and the United Kingdom receded in late 2018, shortly after U.S. Trade Representative Robert Lighthizer notified Congress in October of his intent to initiate negotiations. Under a deal reached in November on the UK’s planned withdrawal from the 28-member European Union on March 29, 2019, a trade agreement with the U.S. could not take effect until 2022 or 2023.

Although Prime Minister Theresa May had not secured approval in Parliament at the time of this writing, the departure agreement would have the UK remain within the EU customs union until a UK-EU trade agreement could be negotiated, thereby meeting the UK business priority to maintain preferential access to its closest commercial partner. If Parliament rejects the November deal in January 2019, however, business and political uncertainty would increase. By remaining in the EU customs union, the UK would not have full authority to negotiate and implement its own trade agreement with the U.S. Officials in both countries could deepen their current dialogue on facilitating bilateral trade, especially between small and medium-sized enterprises, to prepare for a future deal.

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