Policy Updates: USTR Official Urges Renewal and Reform of NAFTA, Not Termination

Posted on 11/21/2017 3:50 AM

Lawmakers want NAFTA 2.0 economic impact assessment

USTR official urges renewal and reform of NAFTA, not termination. The U.S. Trade Representative’s (USTR's) top lawyer emphasized renewal and reform of the North American Free Trade Agreement (NAFTA) rather than termination during a field hearing in the Texas city where the leaders from the United States, Canada and Mexico inked the trade pact in 1992.

Stephen Vaughn, USTR’s general counsel, said his boss, Robert Lighthizer, knows there are NAFTA winners but believes the trade agreement needs rebalancing to address regions and industries that lost jobs. The fifth round of negotiations to reshape NAFTA is scheduled to wrap up today in Mexico City.

Vaughn said the Trump administration’s five-year sunset proposal would allow the U.S., Canada and Mexico the opportunity to review and determine if the renegotiated trade agreement is effective. He also said the administration considers long-running U.S. trade deficits with Mexico and other countries as indicators that those countries have used subsidies, unfair trade policies and other means to undercut American businesses. “In the last 10 years, our trade deficit in goods and services with Mexico has exceeded $500 billion. Our trade deficit in goods and services with Canada over the same period was more than $100 billion. Together, that’s a difference of over $600 billion in the last decade,” Vaughn said. Vaughn echoed President Trump when he said Mexico and Canada have benefited more than the U.S. under NAFTA and are reluctant to agree to U.S. proposals ending their advantages.

Meanwhile, Sen. John Cornyn (R-Texas), chairman of the Senate Finance Subcommittee on International Trade, has called on the Trump administration to remember that border states like Texas have benefited under NAFTA, which took effect in 1994 after receiving Congressional approval. In 2016, Texas exported $232 billion in goods around the world with $90 billion in products going to its top market, Mexico. Canada was the number two destination. “NAFTA worked as intended,” Cornyn said Monday, as he opened the hearing at the San Antonio Marriott Plaza Hotel Conference Center.

Lawmakers demand economic analysis of changes to NAFTA. A bipartisan group of 18 senators representing key farm bill states are demanding that the Trump administration conduct an economic analysis of the effects that changes to NAFTA might have on the crop and livestock sectors. "It is imperative that before any changes are made to NAFTA, or any other free trade agreement, that economic analysis that illustrates the impact on the full supply chain of the industries involved be shared," the senators wrote in a letter to Commerce Secretary Wilbur Ross that was copied to U.S. Trade Representative Robert Lighthizer and USDA Secretary Sonny Perdue. The letter includes signatures from Senate Agriculture Chairman Pat Roberts (R-Kan.) and John Thune (R-S.D.), John Cornyn (R-Texas) and Chuck Grassley (R-Iowa).

"Given your recent comments regarding agriculture and international trade, we find it essential that Congress' voice be heard," the lawmakers wrote, referencing how Ross said earlier this year that the potential for a NAFTA withdrawal to harm farmers is an "empty threat." Ross also recently blamed the agriculture industry's "screaming and yelling" about the NAFTA renegotiation for making the talks more difficult. "International markets have taken years to build, and it is imperative that no steps be taken to jeopardize those gains," the senators wrote. "We must continue to move the global presence of U.S. agricultural products forward, not backward."

Yellen to exit Fed once Powell confirmed as Fed chief. Fed Chairwoman Janet Yellen made official what may had expected – she will leave the Fed when her successor is in place. That successor will presumably be current Fed Governor Jerome "Jay" Powell who has a Nov. 28 confirmation hearing coming up. Yellen's term atop the Fed expires Feb. 3, 2018, but her term as a Fed Governor does not expire until 2024. “I am gratified that the financial system is much stronger than a decade ago, better able to withstand future bouts of instability and continue supporting the economic aspirations of American families and businesses,” Yellen told President Donald Trump in a resignation letter. “I am also gratified by the substantial improvement in the economy since the crisis.”

She also pledged she would "do my utmost" to ease the transition to Powell as the next Fed chief. This now means President Donald Trump will have the opportunity to name four additional members of the U.S. central bank.

Yellen has been part of the central bank’s leadership since 1994, with a break from 1997 to 1999 to serve as chair of the Council of Economic Advisers under former President Bill Clinton. She served on the Fed’s board from 1994 to 1997, as San Francisco Fed president from 2004 to 2010, as vice chair of the board from 2010 to 2014, and as chair since then.

Trump backs up expectation that infrastructure, welfare reform coming. President Donald Trump pledged that infrastructure efforts would be the next focus for the administration once tax reform is wrapped up. Plus, welfare reform is also on the list, he noted. "We'll be working on health care, infrastructure and welfare reform. We're looking very strongly at welfare reform, and that will all take place right after taxes — very soon, very shortly after taxes," Trump said. "So we'll be submitting plans on health care, plans on infrastructure, and plans on welfare reform — which is desperately needed in our country — soon after taxes."

Ag haulers win 90-day waiver for ELD with additional guidance on tap. Agricultural haulers will be given a 90-day waiver on the federal mandate for the use of electronic logging devices (ELDs) and the Federal Motor Carrier Safety Administration (FMCSA) will also issue additional guidance on hours of service.

"While the concerns that have been raised are not really specific to ELDs — they are concerns over how they manage their hours of service — we do feel that, at this time, those items require us to give a little further consideration," Joe Delorenzo, FMCSA director of compliance and enforcement, said during a briefing.

The agency also plans to release guidance on the "current hours-of-service exemption that they have by statute for the transportation of agricultural commodities," Delorenzo stated.

Trucks that do not have ELDs will not be pulled from the road starting Tuesday, Dec. 18, the deadline for compliance, he noted. However, those without an ELD as of April 1, 2018, will be taken out of service.

As for the additional guidance from FMCSA, Delorenzo said the notice to be published in the Federal Register will offer a specific definition of drivers who will receive the 90-day waiver. The main focus in the matter has been livestock haulers who contend the hours of service regulation does not take into account the cargo they are hauling – live animals that are subject to undue stress when trucked for long distances.

The definition of a livestock hauler, Delorenzo said, would draw on a USDA definition from the 1980s defining livestock as several species such as cattle, swine, sheep, poultry and more than are used for food and others that are breeding animals or their offspring.

Additional guidance is also coming on the existing 150 air miles hours-of-service exemption in order to provide clarity to enforcement and industry, the agency said. The guidance is designed to allow industry to maximize the use of this statutory exemption.

Several groups petitioned the FMCSA in late-October to request a compliance extension and the announcement by the agency today (Monday) is a recognition of an ongoing dialogue with these groups.

Under the ELD rule, truckers have an hours of service limit of 11 hours of driving in a 24-hour period. Drivers can be on-duty a total of 14 hours consecutively, including the 11 hours of drive time. After 11 hours are reached, drivers must rest and be off-duty for 10 consecutive hours.

The forthcoming announcement represents the agency’s desire to implement the ELD rule in a manner that improves safety without impeding commerce. "FMCSA has listened to important feedback from many stakeholder groups, including agriculture, and will continue to take steps to ease the transition to the full implementation of the ELD rule,” said FMCSA Deputy Administrator Cathy Gautreaux.

Other items of note:

  • U.S. to label North Korea as ‘sponsor of terrorism’. President Donald Trump said the U.S. would reinstate its designation of North Korea as a state sponsor of terrorism, a week after Trump finished a trip across Asia in which he pressed for more action to stifle Pyongyang’s weapons development. A new U.S. sanction against North Korea, to be announced today, is aimed at influencing "third parties" against doing business with North Korea, Secretary of State Rex Tillerson said. The administration is confident “a number of revenue streams are down” for the North Korean government due to existing sanctions, he said. Meanwhile, Tillerson said U.S. officials have concluded that there are fuel shortages inside North Korea, and he signaled that the Trump administration wants China to do more to increase pressure on the North Korean regime by further curtailing petroleum shipments to the country.
  • Outgoing Fed Chairwoman Janet Yellen participates in a discussion late this afternoon at the New York University Stern School of Business.
  • Senate releases text of GOP tax reform bill. The Senate Finance Committee on Monday night released legislative text of the Republican tax plan that was approved last week. The panel also posted a section-by-section summary of the chairman's mark by Finance Chairman Orrin Hatch (R-Utah) as modified, amended and ordered reported on Nov. 16. The Senate is expected to consider the draft bill when it returns from Thanksgiving recess next week. Link to information.
  • Proposed $3 billion in ag budget cuts being reviewed. The chairmen of the Agriculture Appropriations subcommittees, Rep. Robert Aderholt (R-Ala.) and Sen. John Hoeven (R-N.D.), respectively, are reviewing the Trump administration's proposed $3 billion in USDA offsets for its supplemental request. "We don’t support paying for it by using all of the agricultural offsets in the administration’s request," Hoeven said.
  • Justice sues to block ATT plan to buy Time Warner. The Justice Department (DOJ) moved Monday to block what it calls AT&T's proposed $108 billion acquisition of Time Warner Inc., a deal that would be one of the largest mergers in American history. The DOJ filed a civil antitrust lawsuit arguing that the deal would “substantially lessen competition, resulting in higher prices and less innovation for millions of Americans.” The deal includes CNN, a Time Warner property that has become one of the president’s favorite media targets that he labels "fake news." Trump pledged during the 2016 campaign that he would block the deal. “This merger would greatly harm American consumers,” Assistant Attorney General Makan Delrahim, the head of the department’s antitrust division, said in a written statement. “It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy.” But Randall Stephenson, the chairman and CEO of AT&T, hinted that he shares some of the suspicions that the Justice Department's concern is CNN.

Markets. The Dow Jones Industrial Average climbed 72.09 points, 0.3%, to 23,430.33. The S&P 500 added 3.29 points, 0.1%, to 2,582.14 and the Nasdaq Composite rose 7.92 points, 0.1%, to 6,790.71.

The dollar rose as the euro slipped after a collapse of talks over the weekend left German Chancellor Angela Merkel without a majority in parliament. Ahead is a likely formation of a minority government or new elections, heightening political uncertainty in the country.


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