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The Trade Guys Podcast Summary: USMCA and EU Tariff Dispute

Core Content

This episode of The Trade Guys podcast, hosted by H. Andrew Schwartz, Scott Miller, and Bill Reinsch, discusses the current status of the United States-Mexico-Canada Agreement (USMCA) and the ongoing trade dispute between the U.S. and the European Union (EU) over Airbus subsidies. The conversation also touches on broader implications of trade agreements and the political dynamics within the U.S. Congress.

Main Points

1. USMCA Negotiations

• The USMCA is expected to pass in 2019, with the Speaker of the House expressing openness to the agreement, which is not tied to any specific political party.
• The U.S. administration, led by Robert Lighthizer, has shown flexibility in addressing Democratic concerns, particularly in the areas of labor, environment, and pharmaceuticals.
• The process has been cooperative between the administration and Congress, with both sides working to resolve differences.
• Mexico has already ratified the agreement, while Canada is still waiting for its election results, though both major parties support it.

2. Key Issues in USMCA

• Labor and Environment: Democrats have expressed concerns over labor standards and environmental provisions. The administration has made progress on labor reform and enforcement, but environmental issues, especially the inclusion of the Paris Agreement, remain contentious.
• Pharmaceuticals: There is ongoing discussion about data protection periods for pharmaceuticals, with the U.S. currently at 12 years, while the agreement proposes 10 years. The administration argues that the agreement is already aligned with U.S. law and that changing it would require legislative action.

3. Political Dynamics

• The letter from 102 Democratic members calling for climate provisions is seen as a political maneuver rather than a substantive demand.
• The Democratic leadership has not publicly endorsed the letter, indicating that it may not be a decisive factor.
• The administration and leadership are likely to move forward with the agreement if they have sufficient votes, especially from Republicans.

4. Timeline for USMCA

• Negotiate in September
• Draft in October
• Vote before Thanksgiving

5. EU-Airbus Dispute and Tariffs

• The U.S. is threatening $4 billion in tariffs on EU goods, including Italian coffee, Parmesan cheese, and Scotch whiskey, in response to a 30-year-old dispute over Airbus subsidies.
• The dispute is based on WTO rulings, and the U.S. is using the mechanism of "suspending concessions" to pressure the EU.
• The EU is also suing the U.S. for its support of Boeing, and both sides have won in different aspects of the case.
• The U.S. is likely to impose tariffs first due to the timing of the dispute resolution.

6. Broader Implications of Trade Agreements

• Trade agreements have evolved from being primarily about tariffs to addressing non-tariff barriers such as environmental and labor standards.
• This shift makes trade agreements more complex and politically sensitive.
• The U.S. and EU have a long-standing and often tense relationship, with the EU seen as a potential competitor to U.S. interests, particularly in the aerospace industry.

Key Information

• The U.S. and EU trade dispute over Airbus is a legal and long-standing issue, with the U.S. now poised to take action.
• The U.S. has shown willingness to work with Congress to resolve USMCA concerns, but not all issues have been settled.
• The inclusion of climate change in trade agreements is controversial, as it may complicate the negotiation process.
• The EU is attempting to negotiate a resolution to the dispute, but the U.S. appears to be favoring a tariff approach.
• The U.S. and EU relationship is described as "fraught," with a history of trade tensions and political disagreements.

Conclusion

The episode concludes with the hosts expressing optimism about the USMCA passing in 2019, while acknowledging the complexity and sensitivity of the EU trade dispute. They also highlight the importance of understanding trade agreements in terms of broader political and economic dynamics, and the potential for trade to become a platform for addressing non-economic issues.