Mara Lee

Appropriations bills for fiscal year 2019 that are moving through both chambers of Congress ignored the president's suggestion to cut the Harbor Maintenance Tax (see 1802150028), and aim to dedicate more funding for dredging, locks maintenance and jetty maintenance. The tax is currently $0.125 per $100 of cargo value. In the current fiscal year, the government is spending $1.4 billion out of the Harbor Maintenance Trust Fund. The House appropriations bill recommends increasing that to $1.6 billion; the Senate version recommends $1.53 billion. Steve Fisher, executive director of the American Great Lakes Ports Association, said, "$130 million more, that's quite a bit."

The Commerce Department has launched an investigation into the need for tariffs on cars and auto parts in a move widely seen as an attempt to pressure Mexico to accept a NAFTA rewrite. Commerce Secretary Wilbur Ross said on May 24 that "there is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” and the department will explore whether by damaging the U.S. economy and reducing research in auto-related technology, the decline of domestic auto and auto part manufacturing therefore is a national security issue. Currently, SUVs and trucks face a 25 percent tariff, while cars and auto parts face a 2.5 percent tariff outside the NAFTA region, or if a Canadian or Mexican vehicle fails to meet a 62.5 percent rules of origin quota.

A bipartisan group of senators, led by the No. 2 man in Republican leadership, asked the treasury secretary, commerce secretary and U.S. trade representative not to loosen export controls for China as they consider how to narrow the bilateral trade deficit. The letter, sent May 22, said loosening export controls on sensitive technology "would bolster China’s aggressive military modernization and significantly undermine long-term U.S. national security interests." Including Sen. John Cornyn, R-Texas, Sen. John Thune, R-S.D., and Minority Leader Chuck Schumer, D-N.Y., 14 Republicans, 12 Democrats and Independent Sen. Angus King of Maine signed the letter. The missive also brings up the possible softening of sanctions on Chinese telecom giant ZTE: "In addition, we urge you not to compromise lawful U.S. enforcement actions against serial and pre-meditated violators of U.S. law, such as ZTE. Export control and sanctions laws should not be negotiable, because fidelity to the rule of law is a key part of what distinguishes the U.S. from a country like China that is ruled by a Communist dictatorship."

Sen. Joe Manchin, D-W.Va. largely agrees with President Donald Trump that the U.S. has been on the losing end of most trade agreements, Manchin said while speaking at an event on trade May 23 at the Heritage Foundation. Manchin said he's happy with the trade relationships the U.S. has with Canada and Europe, but, "other than that, we're very skeptical." He said he likes where adviser Peter Navarro is going and how U.S. Trade Representative Robert Lighthizer, approaches trade, but he doesn't like other views in the administration. "I think [Trump] has had a lot of infighting, which is to be expected, but it's the undecidedness right now that is causing a lot of inaction."

The Senate Banking Committee approved by a 23-2 vote on May 22 an amendment that would prohibit President Donald Trump from changing the seven-year export ban for ZTE -- or any other Chinese telecom company penalties -- until the administration tells Congress the company is no longer violating the law, and has not done so for a year, and is fully cooperating with investigators. Sen. Chris Van Hollen, D-Md., who introduced the amendment to the Foreign Investment Risk Review Modernization Act, said after the vote: "We know ZTE is a repeated and flagrant violator of U.S. laws -- there’s absolutely no question of their culpability. Yet the President of the United States is fighting to protect jobs in China at a company that may be spying on Americans and has been sanctioned by our government. This is deeply troubling, regardless of your political party."

More than 60 percent of the Senate's 51 Republicans sent a letter to U.S. Trade Representative Robert Lighthizer telling him a "take-it or leave-it strategy" of presenting a NAFTA rewrite at the same time as a withdrawal announcement would not be successful. "In the past, you have suggested that your goal is to achieve overwhelming bipartisan support for a modernized NAFTA. We believe this goal is only achievable through a strategy to constructively engage Members of Congress as required by TPA [Trade Promotion Authority] and without attempting to force a choice between negative outcomes," the letter says.

Supply chain professionals and trade group executives praised the progress U.S. government agencies have made in trade facilitation, and pointed to areas where they could still make progress, during the Global Supply Chain Summit hosted by the U.S. Chamber of Commerce on May 22. The Unified Cargo Processing pilot, which is soon expanding from seven ports of entry to nine (see 1803300020), has reduced crossing time by up to 75 percent, according to Lance Jungmeyer, president of the Fresh Produce Association of the Americas. He also talked about how private industry can help CBP be more business friendly, such as with private dollars helping to fund a 3.5-mile shortcut from the Mariposa port of entry in Nogales, Arizona, to the highway. He said they're lobbying CBP to set up a donations acceptance program to build a cold storage inspection facility at a port of entry, too. He said his group would also like to see Canada try unified cargo processing with CBP.

The Trump administration's decision to stop the implementation of Section 301 tariffs while the U.S. and China formalize a deal has left many wondering which country is coming out ahead. China economics expert Derek Scissors, an American Enterprise Institute scholar who briefly advised the Trump administration on the Section 301 investigation, thinks it's too early to say. "I didn’t think he would agree to a deal where we have nothing on the table. I’m shocked at that. I assume more is coming," he said. "Right now this is an IOU for a deal."

Now that it is seemingly too late for Congress to ratify a new NAFTA in December (see 1805110025), predictions about what happens next vary widely. Treasury Secretary Stephen Mnuchin said on CNBC that the administration could pursue a "skinny NAFTA," and a Republican senator suggested that would be the best course of action, though a full rewrite is still preferred, Mnuchin said.

The European Union submitted to the World Trade Organization on May 18 the list of products it will impose 25 percent tariffs on if the U.S. does not spare it from steel and aluminum tariffs next month. The initial list, which runs to 181 items, is designed to counteract the tariffs on almost $7.2 billion worth of steel and aluminum that will be subject to duties from the United States under Section 232. Only 1.2 billion of that is aluminum. The EU could begin collecting tariffs on these items as soon as June 20. The list includes peanut butter, orange juice, cigarettes, steel, pipes, motorcycles and yachts.