USTR puts Russia’s WTO commitments under the microscope

USTR puts Russia’s WTO commitments under the microscope

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USTR’s annual review of Russia’s WTO compliance is shining the spotlight on a long list of bilateral trade irritants, in areas ranging from farm goods to uranium.

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WTO members hope to make some progress on tough agricultural issues by their ministerial conference next year, but a big, big deal remains far on the horizon.

— Xi Jinping’s “dual circulation strategy” may sound like something discussed at an HVAC convention, but former U.S. trade officials say it bears watching.

IT’S MONDAY, SEPT. 28! Welcome to Weekly Trade, where if you live long enough, you eventually see Neil Young singing a Beatles song with Paul McCartney, even if it happened 11 years ago. I mean, I just had to look. Got the scoop on how many holes it takes to fill the Albert Hall or a news tip to share? We’re here: [email protected] and [email protected].

RUSSIA WTO COMMITMENTS UNDER THE MICROSCOPE: The U.S.-Russia Business Council is pressing the Trump administration to address a long list of Russian government policies and proposals that it says potentially violate World Trade Organization rules. It made the submission as part of USTR’s congressionally mandated annual review of how well Moscow is honoring the commitments it made in 2012, when it joined the WTO.

It’s not all bad news: The USRBC devoted slightly more than one page of its submission to praising steps Russia has taken over the last year, including its “Regulatory Guillotine” initiative, which has terminated thousands of regulations. The group also noted that the World Bank now ranks Russia 28th on its ease-of-doing-business index, which is above several EU member states including France, Portugal and the Netherlands, as well as Switzerland and Japan.

But it mostly is: The next dozen pages identify a long list of Russia policies and proposals that USRBC labels as “areas of concern.” Those include various import and export regulations, subsidies, standards and technical regulations, trade-related investment measures, local content requirements, national treatment concerns, compulsory licensing … well, the list goes on.

U.S. meat exporters, who got hit by Russian retaliation after the U.S. imposed sanctions on Moscow for its actions in Ukraine, also weighed in. There has been “a consistent disregard by Russia for upholding its WTO commitments as related to the importation of U.S. red meat,” the U.S. Meat Export Federation said in its filing.

Dairy to uranium: U.S. dairy producers, pharmaceutical companies and the movie and music industries also lodged complaints with USTR. So did Urenco USA, a nuclear fuel company, which complained about unfair competition from Russian state-owned enterprises and market access barriers that thwart sales of U.S. uranium to one of the world’s largest nuclear fuel markets.

In that vein, Sens. John Barrasso (R-Wyo.) and Martin Heinrich (D-N.M.) have introduced S. 4694, the Russian Suspension Agreement Extension Act of 2020, which would extend and expand existing U.S. limits on Russian uranium imports. “Vladimir Putin and his satellite states are using uranium as a geo-political weapon,” Barrasso said.

Next step: USTR will release its annual report in late 2020 or early 2021, but Morning Trade will be surprised if much more is said after that until next year’s review process. The U.S. has filed just one WTO case against Russia in the past eight years. That was in August 2018, in response to Moscow’s retaliation for Trump’s steel tariffs.

JUDGE HALTS TRUMP’S TIKTOK DOWNLOAD BAN: A federal judge halted the Trump administration’s executive order to ban downloads of Chinese-owned video-sharing platform TikTok from U.S. mobile-app stores on Sunday, hours before it was set to take effect.

The decision: Washington, D.C., District Judge Carl Nichols granted TikTok’s request for a temporary injunction against the ban, set to take effect at 11:59 p.m. Sunday. It was the latest development in an ongoing legal battle between TikTok and the Trump administration over the president’s efforts to restrict the app’s U.S. operations.

WTO STRIVES FOR PROGRESS ON AG IN 2021: There is widespread agreement that a significant outcome on agriculture is needed at next year’s WTO’s next ministerial conference to preserve the credibility of the organization, WTO Agriculture Committee Chair Gloria Abraham reported to members on Friday, a Geneva trade official said.

Abraham, who is the ambassador from Costa Rica, was appointed to the post in July. She has held 36 meetings with members and group coordinators since the beginning of September to learn their priorities for the negotiations, as well as how the long-running talks can be adapted to deal with the changed situation caused by the coronavirus.

Don’t expect too much: Abraham said it was also clear that not all concerns could be resolved by next year’s meeting and that talks would have to continue beyond then.

Many members remained interested in imposing new disciplines on trade-distorting domestic support, and hope for some incremental progress at the WTO’s 12th ministerial conference. They would also like progress on market access barriers, but have muted expectations about what can be achieved, the Geneva official said.

Two more negotiating group meetings will be held in November and December, where WTO facilitators working with Abraham will report on their activities. Members will also have an opportunity to submit new ideas and proposals.

DON’T FORGET ABOUT THE CHINA REVIEW: USTR is also conducting its annual review of Beijing’s commitments with WTO rules. Not surprisingly, that drew three times the submissions as the Russian review. After all, China is still the third-largest U.S. trading partner, despite all the tariffs thrown around by both sides over the past two years. Russia is not even in the Top 15.

Problems? What problems?: This year’s comments included a rebuttal from the China Chamber of International Commerce to USTR’s 2019 report, which characterized China’s record of compliance as “poor,” to say the least. What was the Chinese business group’s own analysis? Basically, that everything is OK.

“We believe that if all the information submitted by CCOIC is fully considered … then USTR will be able to come to an objective conclusion that China has not only fully and completely complied with its WTO obligations and commitments, but has also … undertaken a lot of market openings that [are] beyond its WTO obligations,” the group said.

Hmm: At the other end of the spectrum, the Coalition for a Prosperous America, which has backed Trump’s combative approach to trade with China, argued that it was futile to even try to address complaints against China within the WTO.

“The problems with China’s compliance with WTO rules stem from the fact that China likely never intended to bend to the spirit or the letter of these rules,” CPA said.

USTR’s next report could come out around the one-year anniversary of the phase 1 deal since on January 15. But even the Trump administration acknowledges that agreement addressed only a fraction of the irritants in the U.S.-China trade relationship.

XI’S “DUAL CIRCULATION” IDEA DRAWS SCRUTINY: Former U.S. Trade Representative Michael Froman on Friday warned that Chinese President Xi Jinping’s “dual circulation” strategy could make it harder for U.S. companies to export to China depending on how it is implemented.

Xi first raised the idea in May, and later explained that China will mainly rely on “internal circulation” for its development, referring to its domestic market. That will be supplemented by “external circulation,” or trade with the rest of the world.

The strategy could be a positive development if it means China will rely less on exports to fuel its economy and more on internal demand, Froman said during a discussion with China policy specialists at the Center for Strategic and International Studies.

“On the other hand, if it’s combined with the notion of import substitution … then that won’t be a positive and it will be the cause of new tensions between China and the rest of the world,” Froman said. “But I’m hopeful that those in China who are still pushing for reform will find a way to use this emphasis on dual circulation … to lead to great openness, not less openness.”

Another former USTR, Robert Zoellick, said Xi could reveal more about his intentions during the upcoming plenary of the Chinese Communist Party’s Central Committee in October.

“I think the concept here is to have a baseline of growth that, regardless of what happens outside China, can preserve the system,” Zoellick said during a discussion hosted by the Washington International Trade Association.

U.S. INDUSTRY SLAMS CHINA’S “RECOVERED PAPER” IMPORT BAN: The American Forest and Paper Association has asked USTR for help in reversing China’s new ban on imports of recovered paper products, which the group said violates Beijing’s WTO commitments.

China has been a huge market for U.S. used paper, which Chinese mills turn into new products, such as the packaging paper and materials used to wrap and protect goods sold in both the domestic market and overseas.

Even before the new ban, Beijing was tightening quality requirements on recovered paper imports. But AFPA said the latest step goes too far: “It is inexplicable that China can export goods valued in the hundreds of billions of dollars to the U.S. packaged in paper and paperboard materials at the same time it plans to ban imports of recovered paper and paperboard that is used to produce these packaging materials.”

Recyclers’ lament: The broader U.S. recycling industry has been struggling for years with China’s crackdown on imports of scrap materials. What was a $5.2 billion market for U.S. scrap exporters in 2016 had dwindled to just $1.8 billion last year.

A lightbulb goes on: Amid the U.S. industry’s continued frustration, the Chinese government seems to have finally recognized a distinction between the “solid waste” imports that it apparently intends to ban entirely in 2021 and “recycled raw materials” like aluminum, brass and copper scrap, the Institute of Scrap Recycling Industries said.

But “few recyclers in the world will be able to meet” the strict quality standards and compliance requirements that China plans to impose, ISRI said.

Not much hope: The industry group thanked USTR for all its hard work on the issue, but said it was not banking on any big changes in Beijing’s approach. “We have not found the Chinese Government to be receptive to dialogue on these measures, as we are sure members of the [intergency] Trade Policy Staff Committee have encountered,” ISRI said.

The Wall Street Journal compares where Trump and Biden stand on trade.

— North Korea accuses South Korea of illegally crossing border, POLITICO reports.

— EU tells UK it is time to commit to key elements of a trade deal, Bloomberg reports.

— Mick Mulvaney says he believes the U.K. and EU can reach a trade deal, BBC reports.

—Through the first two-thirds of 2020, China has made less than one third of the purchases needed to meet the total targets for 2020, the Peterson Institute for International Economics reports.

— U.S. steel rebar producers want Belarus government representatives barred from a Sept. 30 hearing on the country’s bid for market economy status, the law firm Wiley says.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected]; [email protected]; [email protected]; [email protected] and [email protected]. Follow us @POLITICOPro and @Morning_Trade.





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