Washington Insider -- Wednesday

Early Engagement Over NAFTA

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Sen. Hatch: Democrats Holding Lighthizer 'Hostage" Over Unrelated Matter

Democrats were hit hard by Senate Finance Chairman Orrin Hatch, R-Utah, for taking the nominee for U.S. Trade Representative (USTR) "hostage" over a matter that has nothing to do with him.

While Democrats have voiced support for Robert Lighthizer, President Donald Trump's nominee for USTR, some want to attach a miners' benefits bill to a waiver they say the nominee needs because of past work representing foreign governments, which would disqualify him as USTR.

"Mr. Lighthizer is indisputably qualified to serve as USTR, and I believe he has a strong base of bipartisan support," Hatch said in his opening statement. "If we keep this process focused on Mr. Lighthizer and the position he has been nominated to fill, there is no reason he should not be approved by this committee and confirmed by the Senate in short order."

Lighthizer represented several foreign government agencies in trade disagreements with the U.S. while he was with the legal firm Skadden Arps. Federal law blocks someone with such clients from becoming the trade representative unless the House and Senate exempt a nominee through a waiver. As part of his ethics agreement with the Office of Government Ethics, Lighthizer retired as a partner from Skadden, Arps, Slate, Meagher & Flom LLP on January 31.

President Trump has said Lighthizer would be part of a team, along with Commerce Secretary Wilbur Ross and Peter Navarro of the White House National Trade Council, that will set the administration's trade policy. Leaders of the Senate Finance and House Ways and Means committees have stressed to the White House that only USTR has the legal authority to lead U.S. trade negotiations.

Hatch noted previous instances when USTR nominees who were granted waivers with nothing else attached.

During the hearing, Lighthizer said China was high on the list of U.S. concerns. "If you look at our problems, China is right up there," Lighthizer said during the confirmation hearing. While China was a "substantial" currency manipulator in the past, it is "another question" whether that is the case now, he said. "That's up to the Treasury Secretary," he said about China's current status as a possible currency manipulator. He said President Donald Trump is "going to change the paradigm on China."

Resolving the softwood lumber dispute with Canada was at the "top of the list" when it comes to bilateral issues with that country, Lighthizer told the panel. "I like that answer," responded Sen. Ron Wyden, D-Ore., Finance Committee ranking member. Before Trump took office, the two countries tried to reach a new agreement that would have managed the cross-border trade in softwood lumber.

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House Ways & Means Panel to Meet With Trump Trade Team

The House Ways and Means Committee is readying for a trade meeting with the Trump administration's trade team, set for Thursday. Rep. Dave Reichert, R-Wash., chairman of the Ways and Means Trade Subcommittee, said at an event hosted by the Washington Council on International Trade in Seattle on Monday that National Trade Council Director Peter Navarro will be one of the Trump advisers in attendance.

The bipartisan meeting will include members of the president's trade team. Reichert added the meeting is the latest in a string of audiences lawmakers have had with various members of the administration. "This bipartisan meeting has to take place in order for the administration to move forward on trade," he said, noting that Navarro and other advisers continue to say they plan to abide by the requirements set forth in fast-track legislation. "So the process has started."

Reichert added the session will likely include talk of NAFTA, which the administration has indicated to lawmakers is currently taking top priority. "Hopefully this week, with our first bipartisan meeting … we'll get more information on how we'll be moving ahead on NAFTA," he said.

It also remains unclear, he added, whether negotiations would occur among Canada, Mexico and the U.S. at once, or whether the U.S. will discuss the deal first with one country and subsequently with the other.

"What we're told by [Commerce Secretary Wilbur] Ross is we want this to be a systematic and symmetrical discussion and a symmetrical agreement," Reichert said. "In my opinion, the best way to achieve a symmetrical agreement is to have everybody at the table at the same time, so we're encouraging that sort of an approach." Lawmakers, he added, "intend to be engaged."


Washington Insider: Early Engagement Over NAFTA

There has been a lot of talk, including pointed discussions of possible pushback, between the United States and Mexico regarding NAFTA. Now, although it is not clear what the administration is planning to propose regarding both NAFTA changes and/or the U.S. Mexican relationships, Mexico is displaying interest in working to engage on border issues.

For example, The Hill says that the Mexican government and political parties have dispatched several top officials to Washington recently, including three members of Mexican President Enrique Peña Nieto's cabinet along with Margarita Zavala, a former first lady with presidential aspirations.

Also, next week, the early frontrunner for next year's presidential election, left-wing populist Andrés Manuel Lopez Obrador, says he plans to travel to DC.

So, in spite of lack of specifics about the Mexico-U.S. relationship, bilateral ties are still a top issue in Mexican politics. "If we didn't consider this relationship important, this room wouldn't be full," Zavala told a packed house at the Atlantic Council Tuesday.

Newly installed Foreign Relations Secretary Luis Videgaray told the press he came to focus on grievances over the Trump administration's immigration policies. He met with some of Trump's top officials at the White House and voiced his opposition to the administration's plan to deport some Central American undocumented immigrants to Mexico and to separate parents and children caught crossing the border illegally.

Secretary of the Economy Ildefonso Guajardo also held a long meeting with U.S. Commerce Secretary Wilbur Ross this week. The pair struck a collegial tone at a Friday press conference. And Mexican Secretary of Finance Jose Antonio Meade met his U.S. counterpart, Treasury Secretary Steven Mnuchin on Tuesday. But despite the meetings, Zavala said she hasn't seen such tension between the two nations since before the North American Free Trade Agreement was signed.

Zavala said the trade agreement, implemented in 1994 and an increase in cross-border travel aside from migration have strengthened the U.S.-Mexico relationship over the past two decades. But now, she said she's worried Trump's "discourse of hate" could cause lasting damage to that integration.

Trump's relationship with President Peña has been rocky since before the election, mainly over the proposed southern-U.S. wall. Still, Mexican authorities are following up on the "open-door policy" being offered by the White House. Unlike other key U.S. allies like Colombia and Israel, Mexico has to an extent avoided engaging Congress, instead going straight to the White House.

And despite the intensity of visits at the executive level, many in Congress say that when it comes to Mexico, it's been business as usual. Mexico has 50 consulates in the United States, the largest such network by any country in another. The Mexican government recently diverted 1 billion pesos — about $50 million — to the consular system to protect immigrants in the United States.

It also appears that the United States is considering adding energy to the revised NAFTA, in addition to whatever else is proposed.

The original NAFTA did not include major energy provisions because Mexico's nationalized energy company Petroleos Mexicanos was a monopoly then and Mexico has now moved toward a more open market in both oil and electricity. The Congressional Research Service said this week that the "U.S. may want to seek greater access to Mexico's oil sector or to enhance bilateral cooperation on energy production and security." Lourdes Melgar, Mexico's former deputy secretary of energy for hydrocarbons, will discuss how a potential renegotiation of NAFTA might affect hemispheric energy security at an Atlantic Council event later this week.

So, it seems that there is considerable interest in rethinking NAFTA, rather than abandoning it altogether and that the U.S., Mexico and Canada are each considering ways to improve the deal. However, the trade aspect always was less difficult than issues concerning immigration. Confrontations over the proposed wall are now beginning in terms of Congressional budget items and can be expected to continue through coming budget and planning cycle, at least—a lasting and contentious debate with significant implications for producers, which should be watched closely as it proceeds, Washington Insider believes.


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