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Tom Linebarger, chief executive of US manufacturer Cummins, captured the hopes of many in corporate America last week as he spoke of the fate of the US-Mexico-Canada Agreement (USMCA), the trade deal to replace Nafta hatched by US president Donald Trump last year with America’s neighbours. 

The deal has yet to be ratified by the US Congress, amid opposition from Democrats on Capitol Hill to certain provisions. Mr Trump made things more complicated by threatening to impose levies on all Mexican goods if the Mexican government didn’t act to curb migration.

“Now I think what we need to do is get back to business”, Mr Linebarger said.

The Trump administration is certainly hoping that a compromise with Nancy Pelosi, the Democratic House speaker, can be reached before the August recess, despite the furore over the Mexico tariffs. In a sign that negotiations are getting serious, Ms Pelosi last week named members of a task force of House Democrats who have been charged with discussing their specific concerns with the White House in four areas — labour standards, environmental provisions, drug pricing measures and enforcement.

“We actually have a pretty narrow universe that we need to address,” said a senior administration official.

But that sense of optimism is not shared by all on Capitol Hill. A senior Democratic congressional aide warned that there were still significant differences. “We are sincere about getting this done,” the aide said. “It’s just that I don’t think that people . . . properly appreciate how much work is still to be done, because the administration acts like they are ready to go and if you peel back the onion you see that no one is ready to go yet.”

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The administration last month sent a so-called “draft statement of administrative action” to Congress on USMCA, which is the precursor to the implementing bill. The document still contained some big gaps in contentious areas, which led some Democratic aides to dismiss it as “half-baked” and complain that the administration was not effectively engaging with Congress.

That claim was rejected by a senior administration official who insisted that unresolved areas would be filled in with “solutions” once a deal was reached with Democrats. “We are primed to make a lot of progress very quickly,” the official said.

Both Canada and Mexico are rooting for speedy US ratification, and the topic will be on the agenda when Justin Trudeau, Canada’s prime minister, visits Washington this week.

A big fear is that Mr Trump could lose patience and threaten to withdraw the US from Nafta altogether if he cannot get enough support from the Democrats. But they know that uncertainty surrounding trade in North America will linger, whether or not USMCA is passed, if the US president continues to use levies to gain leverage at any moment — as he did with Mexico.

“What do you actually accomplish by replacing Nafta, if [Mr Trump] is going to continue to threaten essentially to shut down that border, not just to the movement of people, but to the movement of goods?” one Democratic aide said.

Drumbeat grows against Trump’s China tariffs

There has been a big shift in sentiment in the US business community’s attitudes towards China in recent years.

Corporate America has become increasingly frustrated with Beijing for its discriminatory regulatory practices, state-driven economic policies and theft of intellectual property, leading many US chief executives to have some sympathy for Mr Trump’s trade war even if they disagreed with the tariffs.

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But that is being tested. In recent days, the drumbeat of opposition from top US business lobby groups to Mr Trump’s adversarial stance has grown louder. The main worry is that the scale of the new tariffs — worth 25 per cent on $300bn of Chinese goods — would eclipse those already in place, affecting many more products and sectors and damaging the economy.

Many companies are adapting supply chains and changing their pricing to cope, but these changes are often costly. Many chief executives either backed Mr Trump’s trade war, or remained silent, expecting that an agreement was on the horizon that might even offer some advantages.

But if the only outcome is more tariffs, a decoupling of the two economies and more geopolitical tension, expect business to cry foul more often.

In reply

Seen from abroad, watching Congress remembering its powers over trade is like seeing an old bull rousing itself from its torpor, bellowing and snorting and generally reminding interlopers that no one crosses its field unless it says so, writes Free Trade co-author Alan Beattie in Brussels.

Congress — particularly under the Republicans, clearly terrified of blocking Mr Trump’s trade offensive — has done little more than issue the occasional angry grunt while he exercises executive power to impose tariffs.

But a House controlled by Democrats concerning an actual trade deal, an area in which Congress indisputably has a say, looks like a different matter. The Democrats’ objections seem carefully targeted: not that the revised deal is too onerous, but that its enforcement, particularly of labour rights, isn’t good enough. Complaining that USMCA actually gives Mexico too easy a ride seems from here like a good way of placating organised labour while outflanking Mr Trump on toughness.

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The European Parliament, as ever, is looking across the Atlantic with envy at Congress’s ability to be such a pain. 

The number — 20

The types of goods targeted by India as it moved to impose retaliatory tariffs on US products. 

Chart choice

The rise and fall of Chinese investment in the US — from our big read on CRRC, the state-owned rail company. 

Further reading

● Where global governance stops and national sovereignty kicks in (Project Syndicate)

● Our editorial leader on the US-China tech war (FT)

● A glimpse into autarchy: former FT reporter Anna Fifield has written a book about Kim Jong Un, North Korea’s dictator. Here’s our review. (FT)

China has cut some tariffs — on America’s competitors (Peterson Institute for International Economics)



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