Tue. Oct 19th, 2021


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Hello from Pittsburgh, where your intrepid reporter bravely pulled (yes, caught a plane) to bring you all the latest news from the first trade and technology summit by top US and EU officials.

I’m glad to announce that the early flight from DC apparently had half the staff of the US Trade Representative Office (USTR) and Commerce Department, along with Secretary of Commerce Gina Raimondo and US Commerce Chief Katherine Tai . The EU delegation, including EU Commerce Chief Valdis Dombrovskis, was also in full force – all of which had the slightly comical effect of making our trip to Pittsburgh seem a bit redundant, as the relevant characters were all in DC. Perhaps this is part of the Biden administration’s effort to make the rust belt feel part of the beating trade policy. Whatever the reason, it’s wonderful to be in Pittsburgh and it’s good to leave one big metropolis for another from time to time. I will definitely try a lot to see some of the sights of this amazing city in Pennsylvania.

Our note today contains a bit of the summit, which is yet to begin at the time of writing, but is mainly focused on steel (speaking of Pittsburgh) and aluminum, the topics of an outstanding piece of beef between the Trump era between the two sides.

Mapped watersmeanwhile look at the rise in price for the humble pea.

We want to hear from you. Send any thoughts to trade.secrets@ft.com or send me an email aime.williams@ft.com

Is Europe on track with the quota?

So here we are in Pittsburgh (can you say I’m excited to leave DC?) For the first Trade and Technology Council to be held between the US and the EU. For a moment it seemed as if the French would do it derail It. We have written extensively on the TTC (as it is called), and we expect that all joint statements made today will be based on concepts developed by Trade secrets, rather dull.

As my colleague Alan Beattie remarked in Brussels, some of the most pressing issues on the agenda will really be dealt with better at Member State level (see his note on the state of affairs on export controls) here). The US knows this, although it has not prevented Raimondo from telling us that she hopes to make progress on the issue this week (“this is a top priority”). There will, of course, be some more commitments to ‘tackle non-market economies’ and all the jazz, and European diplomats insist the meeting is still a good thing, as it creates a new forum to talk forward. .

Yet there is one item that is not on the agenda, which is actually very busy — US tariffs in the Trump era on European steel and aluminum. In 2018, Trump imposed hefty taxes on steel and aluminum imports from Europe and other countries that are controversial on the basis of national security (so-called Article 232 tariffs), and although a solution has been reached with Canada and Mexico, no one with Europe.

In May, the two sides has reached a detente when Europe agreed to postpone the increase in its retaliatory tariffs on clothing, bourbon and motorcycles until 1 December, but the clock was ticking. Valdis Dombrovskis, EU’s chief trade officer in Washington, said on Tuesday that Brussels should actually decide what it does – whether it wants to reduce tariffs or not – closer to the beginning of November, which means an agreement in more or less’ a month must be reached. Dombrovskis would have some serious meetings about the tariffs with both Raimondo (the Article 232 tariffs fall under the jurisdiction of trade) and Tai before leaving for Pittsburgh.

So, what’s the way forward? Learned traders are looking at various ideas, including tightened monitoring mechanisms to stop the transfer (whereby steel from countries known to produce too much, tariffs evaded by processing via a third country) and quotas, with a tariff caused when imports rise historical norms. This is usually roughly calculated as the average of the previous three years.

In this I suspect, lies some of the dispute between the EU and the US. You will recall that Canada was quite angry when Bob Lighthizer removed their aluminum tariffs and then reintroduced them based on what he said was an increase in imports. Opponents of the tariffs argued that yes, there was more Canadian aluminum entering the US than when it was subject to tariffs, but the volume was at a similar level as 2017 and earlier.

There is also some difficulty in complying with the WTO if the S232 tariffs are converted to ‘security measures’ intended to deal with a sudden flood of imports. Yesterday, Dombrovskis was very careful not to think about whether he thinks US transactions with Canada and Mexico, or the tariffs, comply with the WTO. But he did say that any agreement with Europe would comply with the WTO, and that it ‘respects’ historical trade flows before Trump tariffs. It sounds to us a lot like Europe is running on quota, but we really could not get out of Dombrovskis anymore before his meetings with Tai and Raimondo.

A broader point: the legality of the S232 tariffs has been challenged by several countries. Both Europe and Washington would like to avoid an embarrassing battle at the WTO, which in this case would be forced to decide on the legitimacy of a trade response to a national security issue. It will not bode well for the reputation of the WTO among its many skeptics in Washington: it will no longer have to hand over ammunition to its enemies.

To conclude, it is important to remember that the steel industry in particular is a powerful political component, and mills in the states, President Biden, want to try to win Indiana, Ohio and Pennsylvania. United Steelworkers, the union, supports the rates, as does the AFL-CIO, the largest federation of American unions. And if we know one thing about Biden’s trade policy, we know it’s workers ‘centered’, so union support seems significant. However, there are many U.S. companies that have complained about the tariffs on steel and aluminum, including companies that process raw allies into things like cans and large plate or plate form.

However, the Biden administration, which seeks to pursue a trade policy that wins the votes of manufacturing workers, must tread carefully. By simply removing the tariffs, it will not be reduced – it will not go well, for example, in Pittsburgh. The name of their mighty football team? The Steelers.

Mapped waters

They may not be the most glamorous global commodity, but the humble pea sees something of a rise in price. The prices of Canadian peas, which are frequently used by meat substitute manufacturers, have risen too late.

Not only is this about the increasing demand for alternative non-meat protein forms, it also reflects a shortage of supplies that could lead to a drought in Canada this summer. Claire Jones

Line chart of Canadian yellow pea lifts ($ per ton) showing pea prices rising

Trade links

Gina Raimondo said it the Biden administration will insist US companies trade with China even though Washington is taking an increasingly difficult stance on Beijing on human rights and national security. “As the president said, we have no interest in a cold war with China. “It’s too big an economy – we want access to their economy, they want access to our economy,” Raimondo said.

Meanwhile, the EU Commissioner for the Internal Market Thierry breton is in Asia to court Tokyo and Seoul as partners in the European Chips Act, set Europe as a buffer amid trade tensions between America and China. (Nikkei, $).

New research suggests staying in China Belt and road initiative has left many lower and middle income countries saddled with ‘hidden debt’ a total of $ 385 billion. The findings imply that many countries’ financial burdens are linked President Xi Jinping characteristic foreign policy initiative has been systematically under-reported for years.

Strandbloei has an excellent Twitter thread explains the problems with global supply chains. And finally, in the latest issue of the Trade Talks podcast, hosts Soumaya Keynes and Chad P. Bown discusses Europe’s trade policy and why the I develops a myriad of new policy tools to address concerns about trading by trading partners.

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