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On November 30, the leaders of the United States, Canada, and Mexico signed the US-Mexico-Canada Trade Agreement (USMCA), modernizing the 1994 North American Free Trade Agreement (NAFTA) and “rebalancing” trade relations between the three countries, according to the US administration.  Before the new pact officially takes effect, however, the legislatures of all three countries need to approve the agreement.

The USMCA would preserve the massive trading and shared-production networks that support millions of jobs in the United States, Mexico, and Canada. Those networks support North America’s ability to compete effectively with China, Europe, and other economic powers. Approving USMCA this year would thus appear to be in the economic interest all three countries, providing certainty for the $1.3 trillion in three-way trade and for the many businesses, workers, and farmers that depend on the commerce and co-production that interlinks North America. Since USMCA will last at least sixteen years, its approval should provide certainty to encourage private sector investment in strengthening North America’s continental marketplace.

Amid the chaos over Brexit, few have noticed the quiet, but steady, progress on the transatlantic trade policy agenda. The European Parliament voted on March 14 against a resolution that called on European Union member states not to endorse negotiating mandates that authorize the European Commission to start talks with the United States. The defeat of that resolution sets the stage for a productive spring season of trade talks between the United States and the EU that focus on non-tariff barriers, as we recommended in August 2018.

An opportunity arises from the British Parliament having voted to delay Brexit. If the British government gets approval from the European Union next week for an Article 50 extension, the months ahead should be used to finally get to the truth about the opaque sources of money spent in the 2016 referendum before implementing its results.


This will only happen if British politicians and investigators prioritize quickly getting the public more conclusive answers. And it is important because the evidence revealed thus far raises the suggestion that the 2016 referendum on whether the United Kingdom should remain in the EU was targeted by a foreign adversary violating British sovereignty to undermine its democracy.

Since the July 2018 agreement between US President Donald J. Trump and European Commission President Jean-Claude Juncker to start trade negotiations, US Trade Representative Robert Lighthizer and European Commission Trade Commissioner Cecilia Malmström have met five times—most recently on March 6. They have yet to agree on the issues to negotiate. The European Union wants to discuss only tariffs on industrial goods and easing assessment of conformity with technical standards; the United States insists that agriculture must be on the agenda.

Beyond the lack of an agreed upon agenda and, in particular, the difficulties of dealing with agricultural issues, the differences between the United States and the EU on the governance process and approach to trade makes speedy progress in the trade talks unlikely. Meanwhile, the clock is ticking: Trump has until May 18 to impose tariffs—probably at 25 percent—on US imports of cars and car parts. A Department of Commerce report, released on February 18, was reportedly supportive of a conclusion that car imports threaten US national security. The EU—having protested against negotiating under threats of tariffs—has promised to retaliate and cease all talks if the United States imposes tariffs. Expect more fireworks as we approach May 18.

The Trump administration broke another policy precedent with its March 4 decision to activate a decades-old US law on Cuba, ostensibly to punish Cuba for propping up Nicolás Maduro’s regime in Venezuela and for its ongoing suppression of human rights, as well as to put additional pressure on Maduro to step down. The unilateral policy decision threatens to further antagonize key US allies, particularly the European Union (EU) and Canada—both of whom have otherwise been largely consistent with the Trump administration on Venezuela policy—while likely stopping short of achieving the desired impacts on Havana and Caracas.

For the first time since enactment of the 1996 Cuban Liberty and Democratic Solidarity (Libertad) Act, the Trump administration is allowing lawsuits to be brought in US courts under Title III of this law. Title III allows US nationals whose property in Cuba was confiscated by the Castro regime following the 1959 Cuban revolution to bring federal court actions against foreign entities “trafficking” in (i.e. using) those properties. Title III has never been used, as every president since the law’s passage has suspended it. The main rationale for this consistently bipartisan approach was that it would have negative repercussions on allies and partners.

The Trump administration has suspended, until further notice, a scheduled tariff increase—from 10 percent to 25 percent on $200 billion of Chinese imports—citing progress in trade negotiations between Washington and Beijing. Reportedly, talks have focused on six areas: forced technology transfer and cyber theft, intellectual property rights, services (in particular financial services), currency manipulation, agriculture, and non-tariff trade barriers. If successfully concluded, these provisions will form a new binding trade agreement between the United States and China, but one that will not be subject to congressional approval, as negotiations were undertaken in the context of addressing China’s unfair trading practices referred to in US President Donald J. Trump’s order to impose tariffs by invoking Section 301 of the Trade Act of 1974. Trump has set high expectations, wanting to hold a “signing summit” with Chinese President Xi Jinping at his Mar-a-Largo resort by the end of March. Despite the apparent momentum in the talks, it is unclear that the negotiations will remove all of the trade barriers and economic grievances between both sides.

US approaches to Iran and Venezuela provide a study in contrasts

While the Trump administration’s decision to reimpose sanctions on Iran will be ineffective because the United States does not “have the support of our allies,” its approach to Venezuela—working in concert with friends—“represents more the way things ought to be done,” former US Treasury Secretary Jacob J. Lew said at the Atlantic Council in Washington on February 19.

As the Trump administration and the US Congress increasingly view sanctions as effective means to achieve the United States’ foreign policy objectives, Lew, who also served as White House chief of staff to then President Barack Obama, had some advice: “Sanctions are most effective when there is broad buy-in around the world amongst our allies.”

Driven by understandable distrust of US President Donald Trump’s continued relationship with Russian President Vladimir Putin, a bipartisan group of US senators have introduced legislation that, if passed, compels the Trump administration to increase the pressure on Moscow. The Defending American Security from Kremlin Aggression Act of 2019, or DASKAA, is a revisited, and improved version of the similarly named bill that was introduced in response to Trump’s widely panned July 2018 summit with Putin in Helsinki. Several additional Russian-related outrages later, this bill introduced by Senators Graham, Menendez, Cardin, Gardner, and Shaheen likely has a better chance of becoming law than its predecessor, which languished in a Congress distracted by a Supreme Court fight, the summer recess, a competing Russia sanctions bill, and the pre-election environment.

As US-China trade tensions calm down, they could escalate quickly on the transatlantic front

While a US delegation led by Trade Representative Robert Lighthizer and Commerce Secretary Steven Mnuchin is in Beijing to try to de-escalate the current tariff tensions ahead of a March 1 deadline, clouds are gathering on the transatlantic trade front. A draft motion tabled by the European Parliament (EP) last week could end trade negotiations before they even officially start—and pave the way for US tariffs on European cars and car parts. With the US Commerce Department’s investigative report into whether foreign automobiles are a security threat to the United States due by February 18, European hesitation about the negotiating mandate could prove fatal.

On January 28, the Trump administration again turned to sanctions to ratchet up pressure on Venezuela’s Nicolás Maduro to step down.

The new sanctions measures severely limit key US revenue streams for PdVSA—Venezuela’s state-owned oil and natural gas company—by mandating that any money intended for PdVSA be deposited into blocked accounts, accessible only with authorization from the Trump administration. While PdVSA’s US subsidiary, Citgo, may continue to purchase and import petroleum products (at least until July 27), all payments must also be made into a US-based blocked account. Should that authorization expire, the result will effectively be a US oil embargo affecting a major source of crude oil for the southern United States. Further, the sanctions immediately ban the export of US diluents to Venezuela.  This ban will hamper Venezuelan production in the near term as replacing the US suppliers will take time and likely be more expensive.



    

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