No deal yet on EU critical minerals

With help from Graham Lanktree

QUICK FIX

— The EU’s trade chief made the rounds with U.S. officials in Washington last week, but the critical minerals deal that Brussels desperately wants is not yet finished.

— House lawmakers will hold hearings this week that center on President Joe Biden’s policies to compete with China on trade. You can expect Republicans to bare teeth.

— British trade officials will make the trek to Oklahoma this week to sign their fourth state-level agreement. But still, that federal free trade agreement remains elusive.

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Driving the day

EU TALKS OVER CRITICAL MINERALS CONTINUE: The U.S. and European Union are still hammering out the details of their critical minerals agreement, even as leaders on both sides seem eager to reach a speedy resolution, EU Trade Commissioner Valdis Dombrovskis told reporters.

The U.S. finalized a similar agreement with Japan last month and an EU deal has been expected to follow shortly thereafter. But Dombrovskis declined to provide a concrete timeline when pressed for an update after his meeting with U.S. Trade Representative Katherine Tai on Thursday.

The so-called “free trade agreements” with Japan and the EU will make their automakers eligible for certain electric vehicle tax credits embedded in the U.S. Inflation Reduction Act, a law that some U.S. trade partners have decried as protectionist for, in their eyes, unfairly discriminating against foreign-made automobiles.

Dombrovskis told reporters Friday that the U.S.-Japan deal provides a “good basis” for the talks. “Essentially, we don’t see reasons why we should be treated worse than Japan,” he said. The arrangement with Japan saw both sides agree to avoid imposing tariffs on five critical minerals.

Still making the case: Dombrovskis said the EU continues to press other parts of the administration to make concessions for European automakers as it implements the law. For instance, there are also conversations with Treasury Secretary Janet Yellen about how broadly her department can interpret the legislation’s local assembly requirement.

But the Biden administration has already angered Congress with its interpretation of the law. A bipartisan swath of lawmakers, including Sen. Joe Manchin (D-W.Va.), have accused the Biden administration of twisting the text of the law and undermining its domestic manufacturing requirements in order to placate foreign allies.

Even calling the final critical minerals pact a “free trade agreement” has upset members of Congress who say the administration is redefining the conventional understanding of the term. Dombrovskis said the EU won’t be weighing in on “domestic procedural debates” but is willing to call the deal whatever it takes.

As for whether the agreement needs EU members’ approval, “it depends on the content of the agreement,” Dombrovskis said. But he added the EU is “aiming for an executive agreement” that does not need to win the support of individual countries.

Geneva on their mind: The subject of reforming the World Trade Organization’s dispute settlement process briefly arose in the Tai-Dombrovskis confab. Most notably, the pair confirmed their intention to strike a deal in time for the 13th Ministerial Conference scheduled for February.

The EU is open to creating a new two-tier dispute settlement process that doesn’t revive the long-defunct Appellate Body, Dombrovsksi said, acknowledging that the U.S. has concerns with past rulings. But an appeals process is needed to “ensure consistency in decision making” and avoid contradictory interpretations of trade rules, he added.

More problems, more meetings: Dombrovskis joined a bevy of finance and trade leaders in Washington for the spring meetings of the World Bank and International Monetary Fund. One major theme prevailed: The global economy is coming apart at the seams and needs to be sewn back up, POLITICO’s Zachary Warmbrodt writes.

The mood around the global gathering was described as “chaotic,” “disjointed” and “kind of depressing.” What was your impression of the meeting? Send your host a note. Trade appears to be both at the center of the division and, to some attendees, a part of the potential solution.

Here’s what WTO Deputy Director-General Anabel Gonzalez had to say: “I believe it is no exaggeration to say that almost three decades after the creation of the WTO, the rules-based trading system is at a crossroads.”

HOUSE REPUBLICANS READY CHINA HEARINGS: The House Ways and Means Committee will hold a pair of hearings this week that offer the panel’s Republicans a chance to take aim at the Biden administration’s trade policies toward Beijing.

On Tuesday, the trade subcommittee will discuss opportunities for the U.S. to counter China’s trade and investment agenda. The full committee then convenes Wednesday for a hearing on the “U.S. Tax Code Subsidizing Green Corporate Handouts and the Chinese Communist Party.”

The witness list for both hearings have not yet been made public.

China has become the geopolitical boogeyman that both Democrats and Republicans use to attack their opponents’ economic agenda. At the hearings, expect Republican lawmakers to argue that clean energy incentives will be a boon for Beijing, even as Democrats argue they will spur domestic manufacturing of electric vehicles and other technologies of the future.

President Joe Biden took a swipe of his own on Friday: “MAGA Republicans in Congress want to cede the clean energy future to China, make us dependent on overseas supply chains, export jobs overseas, and weaken our energy security,” Biden tweeted.

Then came another on Saturday: “MAGA Republicans want to cut the CHIPS and Science Act and strip away our investments for the next generation of science and technology. That would mean ceding the future of innovation and technology to China. We’re not going to let them undo the progress we’ve made,” he tweeted.

Speaking of China: POLITICO’s Olivia Beavers traveled with lawmakers to Taipei, Taiwan, where one Republican in particular had harsh words for Beijing. Among his many remarks on the trip, House Foreign Affairs Chair Michael McCaul (R-Texas) compared Chinese President Xi Jinping to Adolf Hitler while shoulder to shoulder with the Taiwanese vice president.

U.K. TO INK A DEAL WITH OKLAHOMA: British Trade Minister Nigel Huddleston will travel to Oklahoma this week to sign the U.K.’s fourth state-level trade deal, the Sunday Times reports. The U.K. already has similar arrangements with Indiana, North Carolina and South Carolina, and the Sunday Times reports another 10 U.S. states are in the pipeline, including California, Georgia and Tennessee.

The U.K. has been signing those memorandums of understanding in lieu of a free trade agreement at the federal level. To date, the Biden administration remains opposed to the idea of reinvigorating trade talks begun by former President Donald Trump.

IRA latest: But federal engagement is still happening. In the same report, the newspaper writes that U.K. Prime Minister Rishi Sunak and Business and Trade Secretary Kemi Badenoch are lobbying U.S. officials for the U.K. to be given favored-nation status so that British companies can benefit from provisions in the Inflation Reduction Act without needing to relocate.

International Overnight

— Poland and Hungary have blocked grain imports from Ukraine in an action that EU officials called “unacceptable,” Reuters reports.

— More Chinese migrants are taking a dangerous journey through Latin America to enter the U.S. via the southern border, The Wall Street Journal writes.

— The German government is endorsing a trade pact between the EU and Indonesia, per the AP.

— U.S. manufacturing commitments have doubled in the wake of industrial subsidies, according to the Financial Times.

— A French parliamentarian writes in Foreign Policy that “a self-reliant EU is a better partner than a dependent one.”

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected], [email protected] and [email protected]. Follow us @POLITICOPro and @Morning_Trade.