Mexico’s Seade and House Speaker Pelosi Upbeat on Vote This Year on USMCA

Posted on 11/01/2019 7:06 AM

U.S., China top negotiators to confer by phone today; Ross: Phase 1 in 'good shape'

In today's updates:

* U.S., China seek site to sign Phase 1 trade deal
* Top U.S., China trade negotiators to confer today via phone
* Commerce Sec. Ross: U.S. pretty comfortable that Phase 1 deal is in good shape
* U.S. plans to maintain some tariffs on Chinese goods for three more years
* Mexico’s top North American negotiator upbeat on USMCA vote in House
* Pelosi will allow USMCA vote in return for concessions on labor & enforcement
* WTO rules India violated global trade rules
* House votes along party lines to approve guidelines for impeachment
* Cotton AWP edges higher
* President Trump, a lifelong New Yorker, switches his residency to Florida
* Popeyes' popular chicken sandwich is coming back to the menu
* Jobs update looms amid manufacturing struggles

Markets: China factory activity at brisk pace in Caixin reading on manufacturing. The Caixin/Markit China Manufacturing PMI for October rose to 51.7, up from 51.4 in September, and the third increase in a row. The October reading was the highest mark for the index since February 2017 when it also reached 51.7. New export orders contributed to the rise, moving into expansion territory for the first time in five months. Total new orders increased at the fastest rate in over six years. The official China manufacturing PMI issued Thursday remained in contraction territory.

Unintended consequences. The rise of cell-cultured meat raises important questions about whether meat that hasn't been killed for consumption can be considered kosher or halal (meat prepared as prescribed by Muslim law).


U.S./China trade policy update:

  • U.S., Beijing seek site to sign trade deal. President Trump said China and the U.S. are in the process of selecting a new site to sign what he has called phase one of a broader trade agreement between the two countries. “The new location will be announced soon,” Trump wrote on Twitter on Thursday. “President Xi and President Trump will do signing!” Trump called Phase 1 “about 60% of total deal” that he is seeking.
  • Top trade negotiators from U.S. and China will speak on phone today, according to a statement from China's Commerce Ministry. “The two sides are going to continue pushing negotiations and other work as originally planned,” the ministry said in a brief statement on its website, citing an unnamed spokesperson. A White House spokesman confirmed that call, saying it would include China Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Bob Lighthizer.
  • Commerce Secretary Wilbur Ross told Fox Business Network that the U.S. is pretty comfortable that the Phase 1 deal is in good shape and that the U.S. hopes it can be signed around the same timeframe as the cancelled mid-Nov. APEC meeting.
  • China’s Ministry of Justice published a draft rule today that would allow foreign-funded firms to make stock and bond issuances in China and overseas and would let foreign investors in China repatriate profits. The draft rule is aimed at facilitating a foreign investment law that would take effect Jan. 1, 2020.
  • China’s plan for Hong Kong. At the end of a secret meeting of top Communist Party leaders, China announced a vague new plan to “safeguard national security” in Hong Kong after months of anti-government protests. It could mean that Chinese authorities will impose new security laws on the territory. A mass rally is expected in Hong Kong this weekend.
  • USTR is indicating it plans to maintain some of its tariffs on more than $350 billion worth of Chinese goods for three more years, according to a Federal Register notice published today (link).

Mexico’s top North American negotiator upbeat on USMCA vote in House before Thanksgiving. Jesús Seade, after talking with House Speaker Nancy Pelosi (D-Calif.) and U.S. Trade Representative Bob Lighthizer says he’s optimistic the White House and lawmakers can reach an agreement on the U.S.-Mexico-Canada Agreement (USMCA) before Thanksgiving. Seade was basing his outlook on conversations this week with House Speaker Nancy Pelosi and U.S. Trade Representative Bob Lighthizer. New Delhi said it was entitled to pursue policies under exemptions allowed for developing countries, even if they were transitioning away from that status.

Seade stressed that any changes agreed to between Lighthizer and Democrats is really a “proposal of sorts” because it will require a stamp of approval from Mexico and Canada. But Seade said he’s optimistic the changes will be acceptable to Mexico — which would allow for Mexico City to approve the changes “in a few days,” clearing the path for Congress to vote on USMCA ratification before the end of the year. But if not, Mexico could be forced to get back into negotiations with the U.S. and offer counterproposals, he said.

Pelosi on Thursday said she will allow a vote in return for concessions on labor and enforcement provisions. Pelosi said talks between congressional Democrats and Trump administration officials over changes to the pact with Canada and Mexico were in the “last mile,” and she was optimistic that an agreement could be reached. “If we can come to terms, [which] I think we are close to doing, this will be a template for future trade agreements,” Pelosi said. “We have an opportunity to do it right,” she added. “This trade agreement is really helpful to the lives of America’s working families and you don’t help America’s working families by pauperizing people in Mexico,” she said. “I voted for NAFTA. I had my disappointments about it. I didn’t want this to be just NAFTA plus a little bit. I want this to be structurally different in terms of who benefits, starting with American workers.”

The WTO ruled India violated global trade rules by providing up to $7 billion in annual export subsidies to its companies, after the U.S. had challenged New Delhi’s incentive schemes. The decision was hailed by U.S. Trade Representative Bob Lighthizer as a “resounding victory” that would allow American companies to compete “on a level playing field”, despite the fact that the Trump administration has questioned the effectiveness and fairness of the WTO’s dispute settlement system.

Other items of note:

  • House passes impeachment resolution by a margin of 232 to 196. A resolution was passed laying out the framework for the next phase of the impeachment inquiry. No Republicans supported the measure, and just two Democrats broke ranks to oppose it — Collin Peterson of Minnesota and Jeff Van Drew of New Jersey. The inquiry into the president’s dealings with Ukraine will now move to a public phase. Hearings will no longer be held behind closed doors and past private testimony may be published. Democrats could bring charges against Trump before the end of the year.

  • President Trump, a lifelong New Yorker, switched his residency to Florida. Gov. Andrew Cuomo of New York shot back, saying “Good riddance.”

  • Cotton AWP edges higher. The Adjusted World Price (AWP) for cotton moved up to 57.33 cents per pound, effective today (Nov. 1), from 57.11 cents per pound the prior week. This keeps the AWP at its highest point since the week ended July 12 and well above the national average loan rate of 52 cents per pound.

  • Popeyes is putting the chicken sandwich that became so popular this summer back on its menu after fighting supply constraints. The sandwich will be back on Sunday, Nov. 3, with hopes that it will remain on the menu on a permanent basis. The problem was mostly in the supply chain, Felipe Athayde, President of Popeyes for the Americas, told Time. “We literally ran out. There was no more chicken for the chicken sandwich,” he said. Getting the chicken sandwich back on the menu, a process that has taken about two months, meant Popeyes had to shore up its chicken supply. According to Athayde, it took several weeks to find chicken suppliers that met the company’s strict specifications for quality and quantity and build up an amount that can handle another round of soaring demands.

Markets. The Dow on Thursday fell 140.46 points, 0.52%, at 27,046.23. The Nasdaq lost 11.62 points, 0.14%, at 8,292.36. The S&P 500 declined 9.21 points, 0.30%, at 3,037.56.

Jobs update looms amid manufacturing struggles. The October Employment report is expected to show a subdued increase in nonfarm payrolls for the month — 70,000 to 90,000 depending on the pre-report expectations source. The GM strike situation looms large in the picture because even though it has now been resolved, the strike was still in place during the survey week for the jobs update due this morning. But even without the GM situation included, the manufacturing and retail services sectors have been struggling. Both are factors that could result in this jobs update coming in at a potentially disappointing mark. The unemployment rate could tick up from the 50-year-low mark struck in September, but it will still be at a very low rate, underscoring the U.S. labor market remains tight. But despite that tightness, wages have not responded sharply higher as employers seek to find hard-to-get workers. They have utilized non-wage efforts to attract and retain workers, and the September annual increase in wages at 2.9% was the smallest in more than a year. So, unless that changes significantly in this report, wage inflation is not expected to start pushing inflation higher and pose a new challenge for the Fed to consider in its monetary policy decisions ahead, which are now at a pause, based on comments from Fed Chairman Jerome Powell.


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