With help from Doug Palmer, Ximena Bustillo, Mark Scott, Eric Wolff and Barbara Moens.
Editor’s Note: Weekly Trade is a weekly version of POLITICO Pro’s daily Trade policy newsletter, Morning Trade. POLITICO Pro is a policy intelligence platform that combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
— Former Vice President Joe Biden hopes his “Buy American” plan will win him union votes in the Midwest, even if free trade advocates say it’s not good policy.
— Leaders at the Organization for Economic Cooperation and Development are warning of a trade war over digital services taxes after a global deal for taxing Amazon, Google and others was pushed to next year.
— And the White House this weekend said it would keep tariffs on imported solar panels higher than expected, setting the rate at 18 percent for 2021, rather than the scheduled 15 percent.
IT’S TUESDAY OCTOBER, 13! Welcome to Morning Trade, where your host finally waded through the 24 candidates vying for two at-large seats on the D.C. Council, not to mention the Board of Education and ANC races. But while local elections are vibrant in D.C., 700,000-plus Washingtonians still won’t cast a ballot to be represented by a voting member in Congress. Who represents you? Let us know: [email protected] and [email protected].
BIDEN COURTS UNION VOTERS WITH BUY AMERICAN SCHEME: Biden has countered President Donald Trump’s nationalist approach to trade by offering his own plan to beef up the federal government’s “Buy American” mandate. That may help him at the polls in union-heavy states like Ohio and Michigan that Trump won in 2016, but is it good policy? Most free-trade advocates say no.
Reshoring risk: Bill Reinsch, a senior adviser at the Center for Strategic and International Studies, warned recently about the potential for an Buy American expansion to backfire if it turns into a mandate to reshore production to the United States.
“The cost [of reshoring production] will almost certainly be higher than the current cost,” Reinsch wrote. “In addition, bringing supply chains back home will make it more difficult to sell to the foreign markets we are leaving. With 95 percent of the world’s consumers offshore, the key to U.S. economic growth is more trade, not withdrawal.”
Analysts split: Still, during his first presidential debate earlier this month, Biden pointed to a report by Moody’s Analytics which concluded his economic plan would create 7 million more jobs than Trump’s over the next four years, assuming the Democrats gain control of the Senate and keep the House.
Some analysts, such as Gary Hufbauer at the Peterson Institute for International Economics, are skeptical that Buy American mandates create any new jobs. But Scott Paul, president of the Alliance for American Manufacturing, said he’s encouraged by Biden’s plan, especially after Trump’s own Buy American initiatives failed to deliver much.
Trump’s orders merely encouraged federal agencies to consider additional purchases of U.S.-made goods and “did not at all require or expand any Buy America or Buy American provisions in a meaningful, major way,” Paul said. “There hasn’t been a really discernible change in policy. … It’s been all hat, no cattle.”
OECD WARNS OF DIGITAL TAX ‘WAR’ AS DEAL PUSHED BACK: A deal on how large tech companies like Amazon and Google should be taxed worldwide has been delayed until the middle of next year, POLITICO Europe reported Monday.
Delayed to 2021: Members of the Organization for Economic Cooperation and Development were expected to strike an agreement on the so-called Digital Services Tax by the end of 2020, but Pascal Saint-Amans, who heads the tax policy center at OECD, told reporters the new rules would now likely be decided by June 2021.
But that’s easier said than done. Major sticking points — notably the U.S. demand that the whole system be voluntary — still need to be hammered out. Brussels hopes it can team up with African nations to push Washington into accepting a deal.
Argue now, pay later: The Europe team understands that governments that have (or will soon have) digital tax legislation on the books are likely to postpone collecting money tech giants to give the OECD process more time to play out. That, in turn, is hoped to cool things down in the U.S. where retaliatory tariffs could still be in play.
In July, USTR announced a list of $1.3 billion worth of French goods that could be hit with 25 percent duties in retaliation for France’s approval of a digital services tax. It suspended the application of those duties to provide more time for the OECD talks. But in early June, USTR also launched new investigations aimed at the EU and nine individual countries that could lead to tariffs, and Deputy U.S. Trade Representative C.J. Mahoney said last week progress in the DST talks is the way to avoid those tariffs.
If cooler heads don’t prevail, OECD Secretary General Angel Gurria was blunt: “You could get a trade war,” if countries proceed with their own unilateral digital taxes, he told an online audience yesterday. “Trade war is always bad.”
DOMBROVSKIS TELLS US TO DROP AIRBUS-RELATED TARIFFS: EU trade chief Valdis Dombrovskis has told the U.S. to remove tariffs on more than $7 billion worth of EU goods or face higher duties on exports to Europe, the Financial Times reports. He told the paper that dropping the Airbus-related duties would help rebuild the two sides’ trade relations.
Last year the U.S. imposed additional duties on a whole range of EU products, including French wine and Italian cheeses, in retaliation for subsidies to European aircraft manufacturer Airbus, following a WTO ruling.
The EU is awaiting a WTO decision, due Thursday, on whether it can raise tariffs on U.S. products over state aid for Boeing.
WHITE HOUSE SLOWS SOLAR TARIFF DROP FOR FINAL YEAR: The White House on Saturday issued a proclamation that will make the tariff on solar panels and cells 18 percent starting in February, rather than letting it fall to 15 percent as scheduled.
The tariff began at 30 percent in 2018 and stepped down 5 percentage points each year, leaving it 20 percent today. The decision comes as part of a legally required mid-term review of the tariff.
Bi-facial exemption closed: The announcement also said the White House would close an exemption for two-sided solar modules, but the proclamation will have little impact on the ongoing litigation over that exemption.
Solar sector peeved: The Solar Energy Industries Association, a U.S. trade group, said the Wite House’s decision “counters critical needs of our country right now, jeopardizing jobs, economic recovery in the face of a pandemic and a clean environment.”
SEIA CEO Abigail Ross Hopper added that the decision “may run counter to law” and that her group would “consider every option to reverse this harmful approach.”
Manufacturing probe on tap: Perhaps more concerning for solar installers, the proclamation also calls on the International Trade Commission to conduct another investigation to see if the tariffs are increasing domestic solar manufacturing. The commission could potentially extend the tariff if it finds that U.S. production is not being adequately protected.
Of course, all of this will hinge on the outcome of the November election, as Biden wants to implement a clean energy standard and is unlikely to extend a future solar tariff.
USTR EYES FURNITURE IMPORTS IN VIETNAM LUMBER CASE: The U.S. Trade Representative’s new investigation into Vietnam’s lumber trade focuses on reports the country is importing large amounts of illegally-harvested and traded lumber from Cambodia and the Democratic Republic of Congo, according to the Federal Registrar notice launching the probe.
The trade agency also expressed concern that Vietnamese enterprises used illegally harvested lumber to make some of the $3.7 billion worth of furniture they exported to the U.S. in 2019. A negative finding could open the door for USTR to impose tariffs on those exports.
Industry reaction: The International Wood Products Association, a group representing North American wood importers and other segments of the industry, urged USTR to quickly resolve the issue with Vietnam to “provide certainty for business.”
“Vietnam is an important trading partner for wood products and a significant growing market for U.S. hardwoods,”, Cindy Squires, the group’s executive director, said in a statement.
“It is important to keep in mind that if any illegally harvested products are exported to the United States, the Lacey Act and U.S. obligations under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) currently provide effective and targeted tools for the U.S. government to take action,”Squires added.
USTR will be taking public comments until Nov. 12.
— The Commerce Department announced it would impose tariffs on nearly $2 billion worth of aluminum imports from 18 countries, POLITICO Pro reports.
— The E.U.’s chief Brexit negotiator is looking for wiggle room in negotiations over how much U.K. fish the continent should accept in a new trade deal, POLITICO Europe reports.
— The U.S. could put tariffs on Scottish salmon imports if the U.K. refuses to accept American chlorinated chicken and hormone-injected beef, the Daily Mail reports.
— Eat Out to Help Out scheme was launched in the U.K. to help restaurants recover from the pandemic, but it may not be enough, according to the BBC.
— The U.K. announces plans for 10 new inland border sites to help facilitate long lines during Brexit transition changes, the Guardian reports.
— The U.K. government is split over how to regulate carbon emissions after Brexit, Bloomberg reports.
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.