With help from Lauren Gardner
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— USTR is poised to begin dispute settlement proceedings aimed at removing Canadian dairy import barriers in what would be the first enforcement action under the barely five-month-old NAFTA do-over agreement.
—The WTO General Council faces a deadline this month to decide on India and South Africa’s request for a broad intellectual property commitment waiver they say is needed to help countries combat the Covid-19 crisis.
— The United States and Brazil have one more week to reach a deal on ethanol, sugar and corn trade issues before hitting a self-imposed deadline.
It’s Monday, December 7! Welcome to Weekly Trade. I dunno, but for my money John Lennon’s world-weary ”Happy Xmas! (War is Over)” beats Paul McCartney’s upbeat ”Wonderful Christmastime” on any Top 40 list of rock star holiday music hits.
USTR SET TO FILE DAIRY CASE AGAINST CANADA: Robert Lighthizer is set to announce an enforcement action under the U.S.-Mexico-Canada agreement targeting Canada’s treatment of American dairy exports, Morning Trade has learned.
The announcement could come as soon as today. When it does, it will be the first such enforcement action taken under the USMCA, which went into effect July 1.
Details of the dispute are still unknown, but the U.S. Dairy Export Council, the National Milk Producers Federation and lawmakers from milk-producing states have complained Canada is not living up to USMCA provisions directing it to open its market.
The announcement could come in the form of a request for consultations, the first step in the USMCA’s dispute settlement process. In that case, Canada would have 15 days to respond for any perishable items cited in the dispute, and 30 days for non-perishables, like powdered milk.
USTR did not respond to a request for comment on the coming action. But a spokesperson for Mary Ng, Canada’s minister of Small Business, Export Promotion and International Trade, defended her country’s tariff rate quotas for U.S. dairy products, which U.S. producers say Ottawa structured to protect its domestic producers.
“Like all aspects of the Canada-U.S. trade relationship, Canada takes its obligations very seriously,” said spokesperson Youmy Han. “Canada’s administration of its dairy TRQs is in full compliance with its commitments under the new NAFTA.”
U.S. dairy producers have pressed USTR to act on the TRQ issue and others since June, and they were joined in August by more than 100 bipartisan members of the House and 25 senators who wrote to Lighthizer asking him to “ensure compliance” with the new deal.
INDIA, SOUTH AFRICA PUSH FOR COVID-19 IP WAIVER: A group of countries led by India and South Africa are fighting an uphill battle to persuade the U.S. and other major pharmaceutical manufacturers to agree to a temporary waiver that they say is needed to ensure WTO intellectual property rules do not prevent widespread distribution of vaccines, therapeutics and other essential goods to fight the coronavirus.
Practical effect: The waiver would shield members from a WTO legal challenge if they take any action that would normally violate the WTO’s intellectual property rights agreement known as TRIPS. India and South Africa asked for the waiver on Oct. 2, starting a 90-day clock for the WTO’s General Council to decide whether to grant it or not.
Members discussed the issue during an informal meeting last week of the WTO’s TRIPS Council and it was clear once again that there is no consensus in favor of granting the waiver. But rather than formally deny the request, the General Council could decide at its next meeting on Dec. 16-17 to extend the deadline for making a decision on the issue.
What the waiver entails: The proposed waiver would cover obligations in part two of the TRIPS agreement: Section 1 on copyright and related rights, Section 4 on industrial designs, Section 5 on patents and Section 7 on the protection of undisclosed information.
It would last for a specific number of years, as agreed by the General Council, and until widespread vaccination is in place globally and the majority of the world’s population is immune. Members would review the waiver annually until its termination.
Kenya, Eswatini, Mozambique and Pakistan have signed up as co-sponsors. The African Group, which has 43 members, could join in the coming days following consultations in capitals.
As new diagnostics, therapeutics and vaccines for Covid-19 are developed, there are significant concerns about how they will be made available promptly in sufficient quantities and at affordable prices to meet global demand, supporters argued last week.
The opponents: The EU, U.S., Japan and many other countries oppose the waiver. Those include Brazil, which was at the forefront of a similar fight over HIV/AIDS drugs in the past. Brazil said it believed the TRIPS Agreement provides sufficient policy space for members to adopt necessary measures to protect public health without upsetting innovation efforts
The EU said the right approach is public-private cooperation with the pharmaceutical industry to develop and manufacture the vaccines combined with global governmental cooperation to guarantee rapid and equitable access for people in all countries.
The EU also noted that the TRIPS Agreement allows countries to issue “compulsory licences” for the domestic production of vaccines in public health emergencies if needed.
The U.S. emphasized the significant investment made by governments to facilitate and accelerate the development, manufacturing and distribution of Covid-19 vaccines, therapeutics and diagnostics. It also stressed that strong intellectual property protections are needed to encourage companies to risk huge sums of money to develop new drugs.
Indian rebuttal: India argued the vaccines probably would not have been developed so quickly without government grants. Therefore, it was not really the intellectual property rights protection system that delivered the results, India said.
U.S. CHAMBER FRETS AS U.K.-EU TALKS FALTER: The prolonged negotiations between the United Kingdom and the EU over the terms of their future trade relationship are rattling nerves on this side of the Atlantic. “We strongly urge negotiators on both sides to make the tough choices and find the pragmatic solutions to unlock a mutually acceptable agreement as soon as possible,” Myron Brilliant, executive vice president at the U.S. Chamber of Commerce, said.
The U.K.’s departure from the EU Single Market and Customs Union on Jan. 1 is already expected to create significant disruptions for American investors and exporters, but Brilliant said the magnitude of disruption “will be far greater” without a deal before then.
“A successful outcome here is essential. We all have a stake in minimizing frictions in the flows of goods, services, data, people, and capital between the U.S., U.K. and EU. A robust U.K.-EU deal can also help facilitate timely conclusion of a U.S.-UK trade agreement, which we hope can be accomplished early next spring,” Brilliant said.
LAST CHANCE THIS YEAR FOR CONGRESS TO EXTEND TARIFF RELIEF: Manufacturers and other importers are part of the fray pressing Congress to include their favorite provisions in a massive spending bill that needs to be approved by Thursday.
They are specifically focused on renewal of the Miscellaneous Tariff Bill and the Generalized System of Preferences.
“We urge you to include the Miscellaneous Tariff Bill in the upcoming omnibus spending package,” a 215-member business coalition led by the National Association of Manufacturers said in a letter to congressional leaders.
A spokesman for Senate Finance Chairman Chuck Grassley (R-Iowa) said the senator supported renewal, but “Democrats have been evasive about what exactly their position is for the better part of a year. We can only determine if the bill is ready if we know the position of our Democratic colleagues. And we still don’t with barely any time left this year.”
The MTB temporarily waives duties on raw materials and other inputs that manufacturers use to make finished goods. The House passed the latest iteration of the bill in 2018 by a vote of 402-0, and the Senate approved it unanimously.
NAM estimates a three-year renewal would spare manufacturers more than $1.5 billion in tariff payments. If it is not renewed, manufacturers and other businesses will face increased tariff charges of more than $1.3 million per day on products which are not made in the U.S. or available in domestic markets, the group said.
GSP program: A different coalition of nearly 300 companies and trade associations want Congress to renew the Generalized System of Preferences program as part of the massive spending bill needed to keep the government operating past Dec. 11.
The program waives duties on thousands of goods from developing countries to help them create jobs. It also reduces costs for U.S. importers. Last year, American companies saved an estimated $1 billion in tariffs because of the program.
Without renewal, companies will face millions of dollars in additional import taxes beginning on Jan. 1, at a time when they are already struggling with reduced demand because of the coronavirus, the groups said.
Merchandise processing fee: NAM and other manufacturing groups also hope the omnibus spending bill will fix a merchandise processing fee “drafting error” that is costing them millions of dollars.
ONE WEEK UNTIL BRAZIL ETHANOL TALK DEADLINE: Next Monday is the deadline for the U.S. and Brazil to reach an agreement on ethanol, sugar and trade or risk the South American giant hiking tariffs on shipments of the American biofuel.
Brazil’s tariff-free treatment for U.S. ethanol expired in September, but Brasilia said it would extend duty-free access for 90 days to allow for discussion on the broader market access issues.
That puts the deadline for talks around Dec. 14, but neither side has given any indication of progress. The two sides did sign a mini-deal in October, before the U.S. presidential election, covering anti-corruption, trade facilitation and best regulatory practices. But agricultural trade is a notoriously sensitive issue for both sides.
COMMERCE KILLS CRANE “SECTION 232” PROBE: The Commerce Department said Friday it had terminated a Section 232 investigation that could have led to import restrictions on mobile crane imports from Europe, Asia and other origins. Secretary Wilbur Ross said he made the decision at the request of The Manitowoc Co., which had initiated the case. Under the leadership of a new president, Aaron Ravenscroft, the company told Commerce in August it no longer wanted import relief because of the changed economic conditions caused by the coronavirus.
— Biden has picked California Attorney General Xavier Becerra to be secretary of Health and Human Services, POLITICO reports.
— The U.K. and the EU still have not resolved the final “sticking points” blocking a trade deal, the BBC reports.
— The U.S. Justice Department is discussing a deal with Huawei Technologies Co. finance chief Meng Wanzhou that would allow her to return home to China from Canada, The Wall Street Journal reports.
— The White House drafts an executive order that could restrict global cloud computing companies, POLITICO reports.
— Drug industry groups sue Trump administration over most-favored-nations rule, POLITICO reports.
— U.S. moves swiftly to enforce Xinjiang forced labor cotton import ban, The South China Morning Post reports.
— U.S. exports to China still well below Trump’s trade deal target, POLITICO reports.
—NDAA would ban Chinese air bridge firms, POLITICO reports.
— Tough capital controls are gumming up Argentina’s trade flows, Reuters reports.
— Japan’s parliament ratified its trade deal with the U.K., Nikkei reports.
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