New Trump Administration’s Trade Negotiations: What’s Next?
October 18, 2018
On October 16, the Trump administration formally notified Congress that it intends to negotiate trade agreements with Japan, the European Union, and the United Kingdom. The formal notifications carry significance even though negotiations with each of the three governments had already been announced, albeit less formally. By notifying Congress, the administration has bound itself to the procedures laid out in the 2015 Trade Promotion Authority (TPA) law. TPA requires the administration to follow congressional negotiating objectives contained in the law and to consult with Congress throughout the negotiation. In return, trade agreements submitted to Congress under TPA cannot be amended and are subject only to an up or down vote.
Q1: What happens now that Congress has been notified?
A1: Under TPA, the president must notify Congress of its intent to enter trade negotiations at least 90 days before negotiations begin. That means the earliest date at which official negotiations with the European Union and Japan could be held is January 14, 2019. The United States and the United Kingdom will not be able to start formal negotiations until the United Kingdom leaves the European Union on March 29, 2019. Meanwhile, the administration will consult with Congress over specific detailed negotiating objectives for each of the negotiations. Those objectives must be published publicly online at least 30 days before negotiations can be held. The objectives reflect the administration’s trade policy but also should align with the negotiating objectives Congress placed in the TPA law.
Q2: Are there any clues in the notifications about what the administration is seeking in the negotiations?
A2: Each separate notification to Congress carries just a few hints about the administration’s priorities in each negotiation.
Japan: In the notification regarding negotiations with Japan, the administration criticized Japan as an “underperforming” export market for U.S. goods, despite it boasting the third largest economy in the world. The administration highlighted automobiles, agricultural goods, and services as priority sectors that face tariffs and non-tariff barriers in Japan. A joint statement issued by President Trump and Japanese Prime Minister Shinzo Abe in September announcing the negotiations listed those areas but also put parameters on the outcomes. For the United States, the two countries agreed that outcomes in the motor vehicle sector would be designed to boost jobs in the United States. For Japan, the two countries agreed that outcomes on agricultural, forestry, and fishery products would not exceed market access commitments Japan has made in previous trade agreements. Despite that understanding, the U.S. Agriculture Secretary Sonny Perdue said earlier this month that the United States could look for access to Japan’s agricultural market beyond what Tokyo agreed to in its free trade agreement with the European Union. The notification also holds open the prospect of a phased negotiation, where agreements on some issues are reached before others. A phased approach was alluded to in the September Trump-Abe statement.
The European Union: Unlike the Japan notification, the EU notification does not specify sectors of concern. Instead, it claims that U.S. exporters in “key sectors” face longstanding tariff and non-tariff barriers. As is the case with the Japan notification, the EU notification also informs Congress that negotiations with the European Union may be staged. It is expected that the two sides will first tackle regulatory issues and move on to tariffs in a later phase of the talks. The lack of specificity about sectors the Trump administration wants to negotiate over does nothing to alleviate the ambiguity about the scope of the negotiations. In a July joint statement following European Commission President Jean-Claude Juncker’s visit to the White House, the two countries committed to negotiating towards zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. U.S. and EU officials, however, have clashed over whether agricultural market access should be up for negotiation. Trump administration officials have claimed agricultural market access should be on the table, but EU officials argue the joint statement made clear that agriculture is outside the scope of the negotiations.
The United Kingdom: The language in the notification of negotiations with the United Kingdom is more positive than the language found in the other two notifications. The Trump administration will seek an “ambitious trade agreement” that will address tariff and non-tariff barriers as well as create “cutting edge obligations for emerging sectors” that the United States and the United Kingdom are most competitive in. Unlike the EU and Japan notifications, there is no mention of a phased approach to the U.S.-UK talks. Meetings of the U.S.-UK Trade and Investment Working Group also offers some insight into the scope of trade negotiations between the two countries. The working group , which is intended to lay the groundwork for trade negotiations between the two countries once the United Kingdom has left the European Union, has discussed issues including goods trade, services, investment, intellectual property, and small and medium-sized enterprises.
Q3: How are these initiatives different than the Obama-era negotiations with the European Union for a Transatlantic Trade and Investment Partnership (TTIP) and Japan via the Trans-Pacific Partnership (TPP)?
A3: Although the Obama administration negotiated with the European Union, including the United Kingdom at the time, and Japan, as part of the TPP, the new Trump administration negotiations will be different for several reasons. On the European side, the most important difference has been borne out of Brexit, which has led the United States to engage with the United Kingdom for trade talks separate from its impending negotiations with the European Union. The United Kingdom’s absence from the impending U.S.-EU trade negotiations will likely change the Trump administration’s calculus about some issues that were advanced between the Obama administration and the European Union in the context of the TTIP. Additionally, the scope of the upcoming talks between the United States and the European Union will be narrower than those held between the Obama administration and the European Union. The top EU trade official Cecilia Malmstrom said in September that an “early harvest” could be achieved on regulatory issues, such as differing standards in the automotive and pharmaceutical sectors. However, in late August, Malmstrom said the talks could result in a “limited trade agreement focused on tariffs on goods only.” The TTIP, by comparison, would have covered tariffs and non-tariff barriers, as well as a slew of other issues such as intellectual property, investment, labor, the environment, state-owned enterprises, regulatory cooperation, and more. Those areas, however, could be within the scope of the U.S.-UK negotiations.
A similar story appears to be playing out with Japan. Prospects of salvaging work done in the TPP for a U.S.-Japan trade agreement are questionable because the TPP was made up of 10 other countries in addition to the United States and Japan. Additionally, the scope of the U.S.-Japan negotiations is likely to be far less ambitious than what was covered in the final TPP agreement. The September Trump-Abe joint statement, as well as the U.S. notification sent to Congress this week, focuses on the agricultural and automotive sectors, as well as services. The TPP covered those areas, plus others, similar to the TTIP.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jack Caporal is an associate fellow with the CSIS Scholl Chair in International Business.
Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2018 by the Center for Strategic and International Studies. All rights reserved.