Week in Review: Mnuchin heads to G20; Lighthizer confirmation hearing; expected Xi visit

By Meg Kelly

March 17, 2017

 

Mnuchin: US wants to avoid trade war

 

Before heading to the G20 finance ministers’ meeting in Germany, Treasury Secretary Mnuchin attempted Thursday to assuage global concerns about US protectionist rhetoric. He said the United States does not want a trade war, but is working to fix unfair trading practices, which would benefit the global economy. "It is not our desire to get into trade wars," Mnuchin said. "The president does believe in free trade but he wants free and fair trade."

 

The comments came several days after Chinese Premier Li Keqiang said that China does not want a trade war with the United States, but noted that American firms would be most hurt by such actions. “Recently I came across an article from an authoritative international think tank. It says that should a trade war break out between China and the United States, it would be foreign-invested companies, in particular US firms, that would bear the brunt of it.”  He then went on to say, “We do not want to see any trade war breaking out between the two countries. That would not make our trade fairer.”

 

Delegates to the G20 are concerned about a change in a draft of the main communique that reportedly resulted from pressure from the Trump administration. The draft has been changed from vowing to avoid protectionism to instead advocating “free and fair trade” to reflect Trump’s concerns. This has led Germany, as the host country, to take the unusual step of writing a second document, stressing the importance of global free trade, which will be an attachment to the main communique.

 

Mnuchin also softened comments made by some in the administration alleging German currency manipulation. Mnuchin acknowledged that the euro is used by many countries and affected by many factors. He reiterated that a strong dollar is good for the long-term US economy, but declined to comment on short-term repercussions.

 

Lighthizer confirmation hearing touches on trade with China

 

US Trade Representative-designate Robert Lighthizer faced the Senate Finance Committee on Tuesday to start his confirmation process, and made clear that he supported an “America First” trade policy, and that China is a Trump administration priority for trade enforcement.

 

In his opening statement and in response to several questions from senators, Lighthizer said that the United States would use all existing tools to address problems with trading partners, including the World Trade Organization (WTO) and US unilateral actions. But he also said the WTO was not fully equipped to handle overcapacity or situations that go beyond trade policy, saying, “I don’t believe the WTO is set up to deal effectively with a country like China and their industrial policy.” He suggested several times that new options were needed to address those problems, but did not indicate whether those should be through the WTO or domestic US law.

 

Lighthizer did not directly address tariffs, but repeatedly mentioned using existing US trade laws to make overcapacity “uneconomic.” He indicated the way to do so would be to enforce US trade laws—including through use of self-initiated trade remedies cases that would impose tariffs—and encouraging trading partners to do the same, as well as potentially bringing WTO dispute settlement cases and, “more imaginative solutions” that he did not detail. The goal, he said, was “to make it more and more expensive to keep non-economic activity, which is having this negative effect on the economy.”

 

In highlighting his plans to work closely with other department heads on trade, he deferred to the Treasury department regarding currency manipulation, saying that China had certainly been a currency manipulator in the past, but it is up Treasury to evaluate its current practices. Lighthizer also acknowledged the administration’s focus on the trade deficit, but said he is not planning to pursue its reduction when it is not economically beneficial. “Our objective is to get more efficiency in the market, to get rid of trade barriers everywhere.”

 

President Xi Jinping expected to visit Mar-a-Lago

 

President Xi Jinping is expected to meet President Donald Trump April 6-7 at Trump’s “Winter White House,” his Mar-a-Lago resort in Palm Beach, Florida. The two are expected to largely focus their discussions on North Korea. USCBC will report more details on the potential agenda and discussions as they become available.

 

China advances WTO case against EU, but not US -- yet

 

This week marked the date for China to request a dispute settlement panel for its case against the EU and US at the WTO regarding its non-market economy status. Beijing decided to pursue the panel—but only against the EU. It requested the panel on Monday, March 13, which will likely be rejected by Brussels and lead to further legal action in April. The case against the United States could continue at any point in the future, however, so the issues remain unresolved.

 

Nominations and confirmation:

  • Three key nominations have been announced for the Treasury Department; all are subject to Senate confirmation:

    • Jim Donovan for deputy secretary of the Treasury.

    • David Malpass for under secretary of the Treasury for international affairs.

    • Adam Lerrick, visiting scholar at the American Enterprise Institute, for assistant secretary of the Treasury for international finance.

  • A confirmation hearing for US Ambassador-designate to China Terry Branstad has not yet been scheduled by the Senate Foreign Relations Committee.

Event: Foreign Investment Reviews and the New Administration

 

Please join the US-China Business Council (USCBC) for a discussion about the current Committee on Foreign Investment in the United States (CFIUS) process, its role in the US-China trade relationship, and the possible changes under consideration. Panelists will include Rodney Faraon, partner of Crumpton Group, Stephen Heifetz, partner of Steptoe & Johnson, and Jeff Zelkowitz, head of financial and M&A practice at APCO Worldwide.

 

This event is for members and invited guests of USCBC only. Registration is required.