Bernie Sanders urges Trump to abandon push to get USMCA approved
— U.S./China trade policy update:
- China talks are near a 'final round,” according to Treasury Secretary Steven Mnuchin, who said Saturday that the U.S. and China were close to finishing their trade talks and indicated that a deal could be announced soon. “I think we’re hopeful that we’re getting close to the final round of concluding issues,” Mnuchin told reporters Saturday. He said administration officials, including U.S. Trade Representative Bob Lighthizer, would have a pair of conference calls this week with Chinese negotiators to clear up the remaining issues and that they were “discussing whether more in-person meetings are necessary.” Mnuchin cautioned that despite making progress, he wanted to “be careful ... this is not a public negotiation ... this is a very, very detailed agreement covering issues that have never been dealt with before.” He declined to elaborate on what had been agreed to. “I don’t want to get into the details of the negotiations, specifically on tariffs,” he said.
- "This is way beyond anything that looked like a bilateral investment treaty," Mnuchin stressed. Meanwhile, U.S. negotiators have reportedly tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing.
- The U.S. is open to facing “repercussions” if it doesn’t live up to its commitments in a potential trade deal with China, Mnuchin said. “There are certain commitments that the United States is making in this agreement, and there are certain commitments that China is making,” Mnuchin told reporters Saturday at the IMF meetings in Washington. “I would expect that the enforcement mechanism works in both directions, that we expect to honor our commitments, and if we don’t, there should be certain repercussions, and the same way in the other direction,” he said.
- “Talk is going around DC that the U.S. and China may keep the original $50 billion in tariffs,” says China-watcher Bill Bishop, “but that the Trump administration has asked the Chinese to move theirs away from targeting the GOP base to less politically sensitive sectors, even proposing alternative industries to the Chinese side.”
- The U.S. will want to sign a trade agreement with China if it (1) ends forced technology transfers, (2) improves intellectual property protection, (3) reduces industrial subsidies for state companies, (4) reduces the current trade gap, (5) establishes an enforceable currency measure to avoid China from manipulating its currency to increase exports, including better disclosure of China's central bank’s foreign exchange operations, and (6) includes an enforcement mechanism that deals with trade agreement violations.
- Differences linger on enforcement mechanism language still being discussed. The U.S. insists that any deal must be enforceable and allow the U.S. to verify China’s actions and punish any violations. China, on the other hand, wants it to more balanced. Treasury Secretary Steven Mnuchin said last Thursday that the two sides had agreed to set up “enforcement offices” to monitor progress on trade reforms. The coming deal may incorporate a series of targets and time frames for China to deliver on its commitments. A new kind of a court of appeal will be led by Chinese Vice Premier and chief trade negotiator Liu He and U.S. Trade Representative Bob Lighthizer to manage disputes.
- Crunch time for USTR Lighthizer. “The coming weeks will determine whether President Trump’s bet on Lighthizer has paid off,” according to the Financial Times. “If the USTR pushes the Chinese too far, the talks could collapse, which would deal a big blow to Trump’s top political priority and the heart of his trade agenda. If Lighthizer settles too easily, Trump can expect a domestic backlash for having struck a weak agreement, which would also create a problem for him heading into the 2020 re-election battle.”
- About those potential big Chinese purchases of U.S. farm and energy products... The Financial Times reports that people familiar with the talks say that “Lighthizer has delegated much of the responsibility for negotiating large-scale purchases of U.S. goods by Chinese buyers to U.S. Commerce department officials. This part of the accord is being drafted to satisfy Trump’s appetite for a reduction in the bilateral trade deficit, but Lighthizer sees it as less central to the negotiations.” As for Lighthizer, the article gives him a lot of kudos. “Lighthizer was never Beijing’s first-choice negotiating partner. But over time officials in Beijing have grown to appreciate Lighthizer as the only senior Trump administration official who could genuinely deliver a deal,” the FT article notes. “They don’t like Lighthizer but they like that he knows what he’s talking about and respect him for that,” said one person who recently met with senior Chinese economic and financial officials. “They recognize he has a better grasp on the issues than anybody else in the [Trump] administration.”
- Issue differences between the two countries go beyond the current trade talks. They include the South China Sea issue, Taiwan, technological rivalry, cyber governance and data control.
- The possible U.S./China trade accord would be a so-called executive agreement that would not be submitted to Congress for ratification. But some lawmakers and others are concerned that any U.S./China deal would not have the same legal structure as a free-trade agreement.
- “Donald Trump wants a deal. He needs a major political win to open his campaign for re-election, and there are few other foreign policy achievements he can credibly claim,” opines Ian Bremmer, a foreign affairs columnist and editor-at-large at Time. “Chinese President Xi Jinping wants a deal too. He’s managing a long-term slowdown of China’s economy and needs to avoid criticism at home that the “new era” of Chinese power he has proclaimed has forced his country and its economy into an unwelcome international spotlight. The negotiators representing the two governments want an agreement that will satisfy the political needs of their Presidents while resolving enough problems in U.S.-China trade relations to give the deal a chance to stand the test of time.” Link
- China confirms starting review of antidumping duties on U.S. DDGs. China's Ministry of Commerce confirmed today (Monday) that it is reviewing antidumping duties currently in place on imports of U.S. distillers' dried grains (DDGs), with the review likely to be completed in year. The review will determine "whether it is necessary to continue to impose anti-dumping and anti-subsidy measures on imported DDGS from the United States," the agency said on its website. Interested parties can submit information and evidence on the review within 20 days, the agency said. Reuters reported last week that the U.S. Grains Council had submitted a request to the Chinese ministry to review the duties placed on imports of U.S. DDGs.
- Former Obama administration trade official suggests a key change in U.S. strategy. Wendy Cutler, who was acting deputy U.S. trade representative during the Obama administration, urged President Donald Trump to forget his “preference for unilateral actions” and work with the European Union, Japan and other allied nations in a bid extract maximum benefit from trade talks with China. “While the U.S. market accounts for roughly 18% of Chinese exports, that number reaches 40% when including the EU and Japan, and half of all Chinese exports if Australia, Canada, Mexico, and South Korea — countries that share American concerns — are included,” Cutler wrote in a report (link) for the Asia Society Policy Institute, where she is vice-president. She credited Trump’s tariff war with “bringing China to the negotiating table,” but said “it could be even more effective in addressing these fundamental issues by working closely with like-minded countries.” “While the United States has been at the forefront of criticizing these policies and practices, they also impact China’s other trading partners, distorting trade flows and straining the global trading system,” the report said. The report estimated that the 10-month trade war has led to tit-for-tat tariffs affecting almost $400 billion in trade.
— EPA again calls for comments on RFS waivers. The Environmental Protection Agency (EPA) said it is again seeking public comment (link) on a proposal to divulge more details about small refineries seeking exemptions from U.S. biofuel mandates, including previously shielded information. EPA in a draft notice said it is opening a 15-day window for comments on revealing “basic information” about exemption requests, including the name of each petitioner and the nature of the request. The 15-day timeline will begin once the call for public comments is published in the Federal Register — today's edition does not include the call for comments.
EPA wants additional comments on their proposed rule released Nov. 16, 2016. EPA said it is reopening the comment period to "codify a determination that basic information related to EPA actions on petitions for RFS small refinery and small refiner exemptions may not be claimed as CBI (confidential business information)." EPA said "the proposed regulations would specify that with respect to each decision on a small refinery/refiner exemption request, we would release to the public the petitioner’s name, the name and location of the facility for which relief was requested, the general nature of the relief requested, the time period for which relief was requested, and the extent to which EPA granted or denied the requested relief."
The initial comment period on the rule was to have closed Jan. 17, 2017, but several groups, including the American Soybean Association, Corn Refiners Association, Global Renewable Strategies and Consulting, LLC, Growth Energy, Iowa Biodiesel Board, Iowa Renewable Fuels Association and others, sought an extension of that comment period. EPA on Dec. 27, 2016, extended the comment period to Feb. 16, 2017.
EPA said it was "not seeking comment on any other aspects of the proposed REGS rule at this time, and any comments received on topics other than the proposed CBI determination will be deemed beyond-the-scope," the agency said in the pre-publication notice on their website.
Perspective: EPA chief Andrew Wheeler last week told Reuters that the agency may grant fewer small refiner RFS exemptions as RIN prices have gone down, which he thinks should lower the financial burden on refiners. Ethanol proponents want to see follow through on this possibility before getting too excited. An industry source said, “Wheeler will be more pragmatic because he’s more politically astute on the ways of Washington than his predecessor. Consensus thinks that ultimately it’s half the number in 2017 so half of the 1.82 billion RINs waived in 2017.” That would still be above the mark exempted in 2016 of 790 million RINs. Meanwhile, Sen. Chuck Grassley last week wrote a letter to Dept. of Energy (DOE) seeking to know if the DOE changed its procedures to increase the number of recommendations for exemptions under the RFS.
— Democratic presidential candidate Bernie Sanders called on President Donald Trump to abandon his push for the USMCA/NAFTA 2.0. “The NAFTA treaty that Trump renegotiated with Mexico will still allow companies like General Motors to send our jobs to Mexico,” Sanders (I-Vt.) said during a rally at Macomb Community College in Warren, Michigan. “So today, I challenge Donald Trump: For once in your life, keep your campaign promises,” the Vermont senator said. “Go back to the drawing board on NAFTA. Do not send this treaty to Congress unless it includes strong and swift enforcement mechanisms to raise the wages of workers and to prevent corporations from outsourcing American jobs to Mexico.”
— Other items of note:
North Korea leader Kim Jong Un said he was open to a third summit with President Donald Trump if America ceases “unilaterally pushing its demands.” The previous meeting failed after North Korea demanded that all sanctions against it be lifted. Trump tweeted that a third summit would be “good.” Kim also may soon hold his first summit with Russia’s Vladimir Putin.
President Trump flies to Minnesota today for a Tax Day roundtable to promote his tax cuts.
White House weighs broader immigration curbs. Trump and his top aides are weighing rules designed to clamp down on countries whose nationals overstay short-term visitor visas as part of a broader push for new ways to curb immigration, the Wall Street Journal reports (link). The White House also is seeking to push through other rules that would tighten student and investor visas.
Exxon Mobil Corp. accused the Energy Department of selling it tainted crude oil from the U.S. Strategic Petroleum Reserve, according to reports of information obtained through a records request. The development echoes others who have made similar claims, including Royal Dutch Shell PLC and PetroChina Co.
Maryland's House and Senate passed legislation that would require the state to source half of its electricity from renewables by 2030, as well as for utilities to subsidize solar and wind farms, trash incinerators, hydroelectric dams and certain paper mills. The bill now moves to Gov. Larry Hogan (R), who in 2016 vetoed similar legislation, which set a goal of 25% renewable energy sourcing by 2020, but Democrats overrode that veto.
— Markets. The Dow on Friday advanced 269.25 points, 1%, to 26,412.30. The S&P 500 climbed 19.09 points, 0.7%, to 2,907.41. The tech-heavy Nasdaq Composite added 36.80 points, 0.5%, to 7,984.16.
For the week, the S&P 500 rose 0.5% to 2,907.41, while the Nasdaq Composite advanced 0.6% to 7,984.16, and the Dow dipped 0.05%, 12.69 points. The S&P 500 has gained 16% so far this year and is just 0.8% away from a new all-time high.
The CBOE Volatility Index, or VIX, closed at 12.01 on Friday, its lowest level since Oct. 5.
Treasury yields rose to three-week highs as investors put money into riskier assets after data showed Chinese exports rebounded in March, easing concerns about global economic growth. The yield on the 10-year U.S. Treasury note climbed to 2.560% Friday, from 2.498% Thursday. Yields rise when bond prices fall. The yield curve is no longer inverted. 30-year bonds were down 24/32 to yield 2.9745%.
Draghi takes aim at Trump as he targets Fed. "If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%...with almost no inflation," President Trump tweeted on Sunday. "Quantitative tightening was a killer, should have done the exact opposite!" ECB President Mario Draghi took the rare step of sounding concern over the independence of the Fed in the face of the constant criticism and cautiously stuck to the message that an upturn in the European economy is still possible in the second half of 2019. Link to Reuters item.
Oil prices rose. Brent crude was up 0.93% at $71.49 a barrel. U.S. West Texas Intermediate was 0.31% higher at $63.78 a barrel.
Calls for a new Brexit referendum. The idea of a second Brexit referendum is "very likely" to be put before Britain’s parliament again although the government remains opposed to any new plebiscite, according to Chancellor of the Exchequer Phillip Hammond. While the government was opposed to a new public vote, many Labour lawmakers are pressing their leader Jeremy Corbyn to demand a new referendum in talks with the government.