President-Elect Donald Trump’s international trade leadership team is now complete.
Robert Lighthizer was announced this week as US Trade Representative. Lighthizer joins incoming Commerce Secretary Wilbur Ross, new National Trade Council head Peter Navarro, and Jason Greenblatt, special representative for international negotiations, as Trump’s picks to set and execute US trade policy.
What might we expect from this team? What are the issues to watch in 2017?
NAFTA. The North American Free Trade Agreement with Mexico and Canada is widely expected to be renegotiated. An update of NAFTA is welcomed by many trade experts. NAFTA came into force in 1994, before the rise of the Internet. Because of the breadth, depth, complexity, and influence of technology on trade today, new rules are needed. Mexico and Canada have signaled a willingness to modernize the treaty—under certain conditions. Scrapping NAFTA altogether, which Trump previously championed, would threaten millions of US jobs.
China. Trump speaks frequently about China’s currency manipulation, steel-dumping and aggressive trade practices. His trade appointees are likely to stand tough on China—and this toughness may serve the US well. However, a proposal to hit some China imports with significant tariffs is meeting resistance. AIM has heard from Massachusetts manufacturers concerned that components they source from China may become prohibitively expensive.
Russia. The US levied trade sanctions on Russia in March 2014, after the Crimea incursion. Many European countries did the same. Given Trump’s frequent praise of Russian president Vladimir Putin and his desire to strengthen ties with Russia, might US sanctions be lifted? Complicating the US-Russia relationship is Russia’s ongoing cyberwarfare against the US, which appears to have affected the recent US presidential election. Trump’s Secretary of State designee Rex Tillerson, CEO of ExxonMobil, is known to have business ties with Russia. More will be learned during confirmation hearings.
Brexit. The 2016 vote by citizens of the United Kingdom to leave the European Union surprised the world. New UK Prime Minister Theresa May is overseeing “Brexit” and has proposed March 2017 as the start date for the two-year process. However, the recent requirement for a Parliamentary vote to approve Brexit and the appointment of a new UK ambassador to the EU have muddied the Brexit waters. The UK is searching worldwide for hundreds of trade negotiators needed to lead trade talks with the EU. Although US President-elect Trump has signaled interest in negotiating a bilateral trade agreement with the UK, that country cannot negotiate any new trade agreements while it is still part of the EU. So any US-UK agreement would have to wait until 2019 or 2020. In the meantime, US and UK diplomats are working to continue and grow the US-UK trade relationship.
Key Europe Elections. The Brexit vote was the first step in the resurgence of populism in Europe. Concerns about immigration and terrorism have driven European voters to rebuff convention and vote for change. Italy’s recent vote was a win for populism and resulted in the resignation of the Italian Prime Minister. France is holding its presidential election in May. Current president Francois Hollande will not seek re-election. Former Prime Minister Francois Fillon beat ex-president Nicolas Sarkozy in the primary to become the conservative nominee for president. Marine Le Pen, leader of the Far Right National Front, is her party’s nominee. A Socialist Party nominee will be selected this month. In Germany, Chancellor Angela Merkel will run for a fourth term in the Fall 2017 elections. She has been Chancellor for 11 years and she leads the Christian Democrats Union party. The EU-US trade relationship is the largest trade relationship in the world, so any changes in leadership in the key EU countries will affect US commerce.
Other issues to watch:
The US Export-Import Bank lacks a quorum and cannot approve loans of more than $10 million. Will the new administration break the logjam? Cuba is now welcoming US commercial cruise lines and airlines. JetBlue—Massport’s largest carrier—hopes to be approved for future non-stop flights between Logan Airport and Havana—but only if the further opening of the Cuba market continues under a new US presidential administration.
Israel is not a significant trade partner for Massachusetts, but there’s a strong Massachusetts-Israel talent pipeline and Israeli-founded companies represent thousands of jobs in the Bay State. Will the recent UN vote on Israeli settlements affect that relationship? Will the Trump administration’s pick for US Ambassador to Israel move the US embassy from Tel Aviv to Jerusalem?
The Trans-Pacific Partnership (TPP) is considered to be on life support, as President-elect Trump has promised to withdraw from this 12-country pact. Key concerns on abandoning TPP are the US relationship with its long-time trading partner Japan, the rising influence of China in the Pacific region, and the likelihood that many Asian countries will now sign on to the China-led Regional Comprehensive Economic Partnership Trade Agreement, or R-CEP, which will lower trade barriers in the region but will not benefit the US.
Other US Free Trade Agreements. The US now has 14 FTA’s covering 20 countries. Will the Trump trade team renegotiate these?
It’s going to be an interesting year for trade.