Zients would bring trade background to chief of staff role

With help from Zi-Ann Lum and Sarah Anne Aarup

Quick Fix

— President Joe Biden’s expected next chief of staff, Jeff Zients, helped Barack Obama win approval of Trade Promotion Authority in 2015 and was a strong advocate for the Trans-Pacific Partnership agreement. He also unsuccessfully proposed consolidating USTR, the U.S. Export-Import Bank and other U.S. trade agencies into the Commerce Department.

— Mexican President Andrés Manuel López Obrador’s plan for a trilateral government committee to reduce North America’s dependence on Asian imports by 25 percent appears to be moving forward.

— House Foreign Affairs Chair Michael McCaul (R-Texas) has warned Commerce Secretary Gina Raimondo that his upcoming 90-day review will determine whether the Commerce Department “should continue to lead implementation of the export control system.”

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Quick Fix

ZIENTS’ TRADE HISTORY: The 56-year-old Duke University alumni was once rumored to be Obama’s choice for USTR to replace Ron Kirk, who served from 2009 to 2013. Zients lost out to Mike Froman, who was White House deputy national security adviser for international economic affairs before moving across F Street to lead the trade agency.

Zients previously worked for Biden as counselor to the president and coronavirus response coordinator from January 2021 to April 2022. He served in a number of capacities for Obama, including as White House budget director.

Mixed record: He raised hackles on the Senate Finance and House Ways and Means committees in early 2012 with a proposal to create a “one-stop shop” for exporters by merging the Commerce Department’s core trade and functions with USTR, the U.S. Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency and the Small Business Administration. The idea never got any further.

Later, Zients worked closely with the congressional trade committees to win Trade Promotion Authority so Obama could finish negotiations on the TPP. However, the Obama administration’s hope of getting congressional approval of the 12-nation pact withered throughout the 2016 presidential campaign and disappeared completely after Donald Trump won the election.

Though the TPP was reviled by most Democrats, Zients joined other Obama administration officials in characterizing it as the “most progressive trade deal ever” negotiated. Of course, the proponents also included Biden, who was vice president at the time.

Time will tell: Biden’s outgoing chief of staff Ron Klain has been keen to stay on the good side of the AFL-CIO and other labor groups, which is one reason the administration has been reluctant to negotiate new tariff-cutting agreements.

The new chief’s main job will be managing Biden’s day-to-day affairs, so it remains to be seen whether the change in personnel will be followed by any change in trade policy. Only time will tell, one industry aide said.

“Zients might tip the balance of internal debate in a more pro-trade direction but the policy will not change unless Biden wants it to,” a former U.S. official added. “I think they chose Zients because he is a great manager with a record of getting things done.”

Still, his appointment will likely be seen positively by Japan and other trading partners who continue to push the United States to rejoin the TPP.

EXIM’S LONG, SLOW COMEBACK: The U.S. Export-Import Bank still hasn’t completely bounced back from the political battles of the last decade that denied its board of directors an operating quorum for nearly four years.

But things could be looking up for the 89-year-old export credit agency, our colleague Ari Hawkins reports.

For the first time since 2015, there’s only one vacancy on the five-person board of directors. Its president and board chair Reta Jo Lewis is determined to make the bank a bigger player again. And there are almost four more years before its current charter expires.

“When we did not have a board quorum, and we were not able to put together large deals, we lost some ground,” Lewis said. “Now we’ve got to make that up. And that’s why we’ve been very aggressive working with directors, managers and supervisors to tell the EXIM story.”

Glory days: But the bank is still a long way from its heyday in the aftermath of the global financial crisis, when its annual credit authorizations exceeded $35 billion. That’s compared to only $5.2 billion in fiscal 2022, which ended on Sep. 30.

“After four years of not being fully functional, by the time EXIM opened back up again, industry found other sources of finance, and generally stopped relying on the United States,” said Fred Hochberg, who was chair and president of EXIM from 2009 to 2017.

“Some corporations went to other countries for financing, a number of banks with large departments that provided export credit financing contracted or were shut down and corporations just generally found other ways to do business,” Hochberg added.

LOPEZ OBRADOR’S NORTH AMERICAN IMPORT SUBSTITUTION PROJECT: López Obrador mentioned the 12-member trilateral committee during his closing remarks at the North American Leaders summit. There was no reference to it in the official joint statement or on the “key deliverables” handout.

The Mexican president went so far as to announce four appointments to the committee to represent Mexico: Foreign Minister Marcelo Ebrard, Finance Minister Rogelio Ramírez de la O, Secretary of the Economy Raquel Buenrostro Sánchez and businessman Alfonso Romo Garza.

“I’m hearing that he’s serious about this. There’ll be a meeting [this] week in Mexico City to put that together,” Louise Blais, special adviser on U.S. and international affairs at the Business Council of Canada said Friday at a Wilson Center event. The meeting will be between Mexican officials to forge next steps on the committee.

Big if true: Reuters reported that Ebrard said the countries plan to reshore 25 percent of imports from Asia, and Mexico’s embassy in Washington relayed the same information to Morning Trade. That would potentially affect hundreds of billions of dollars worth of trade since the United States by itself imported $1.24 trillion worth of goods from Asia in 2021.

About $504 billion of those Asian imports came from China in 2021. The rest were from other countries, including many like Japan, South Korea, Vietnam, Malaysia and Indonesia that the United States is asking to agree to new trade rules in areas like agriculture, labor and the environment as part of the proposed Indo-Pacific Economic Framework.

What’s missing: Canada and the U.S. have yet to make official announcements related to the trilateral committee. Once they do, Morning Trade will be looking for details of how those two governments describe the new committee and its goals.

USTR FORCED LABOR STRATEGY DETAILS COMING “SOON”: This Wednesday marks one year since U.S. Trade Representative Katherine Tai announced plans for the agency to develop its “first-ever” focused trade strategy to combat forced labor.

The effort has spawned fears in the business community of new import restrictions. That “should be a last resort, not the primary tool,” the U.S. Chamber of Commerce argued during a public comment period that ended in early August.

Agency update: A USTR spokesperson told Morning Trade Friday the initiative remains a top priority “and we look forward to sharing more details on our strategy soon.”

The agency has met with stakeholders, academics, business representatives and labor leaders to solicit their input and has worked with allies and partners to incorporate anti-forced labor priorities into the U.S. bilateral and multilateral trade agenda, the spokesperson added.

That includes the new U.S.-Japan Task Force on the Promotion of Human Rights and International Labor Standards in Supply Chains, he said.

Different approaches: During a panel discussion last week in Davos, Tai said she believed Canada and the United States were the only countries that have a complete ban on imports that are produced in whole or in part using forced labor. However, she seemed to indicate the new U.S. strategy would not try to persuade all countries to take the same approach.

“We are delighted to be working with partner countries who share our vision, but who have different systems,” Tai said. Many countries impose a “due diligence perspective, which is the requirement to know what your supply chain looks like, how your goods are being produced, and whether or not forced labor is being employed at any stage,” she noted.

It’s clear that “no one stands for slave labor and everyone knows that the right answer is global supply chains should not be built on the exploitation of human beings in that very, very gross form,” Tai said. “However, how do you implement this? For us, it is a complete ban.”

MCCAUL WARNS COMMERCE ON EXPORT CONTROLS: McCaul accused the Commerce Department’s Bureau of Industry and Security of failing to adequately respond to his request for information on how it ensures that sensitive American technology is not transferred commercially to any entities influenced or controlled by the Chinese Communist Party.

“BIS’s dereliction in providing basic transparency and accountability is a contributing factor for my forthcoming 90-day review” of whether the department should continue to administer commercial export controls, he said in a letter to Raimondo,

Deadline: McCaul asked Raimondo to provide the requested information by “no later” than Friday. Otherwise, the Foreign Affairs Committee will “use the authorities available to it to enforce these requests as necessary, including through compulsory process,” he wrote.

THE WTO ROAD FROM DAVOS TO ABU DHABI: Switzerland hosted its traditional World Trade Organization mini-ministerial Friday on the sidelines of Davos to set targets for the larger group’s conferences in Abu Dhabi next year and in Cameroon a year or two after that.

Key players: USTR Katherine Tai, Chinese Vice Commerce Minister Wang Shouwen and top EU trade official Valdis Dombrovskis attended the meeting, along with WTO Director General Ngozi Okonjo-Iweala and representatives from 20 other members.

Top goals: Ministers focused on implementation of the deals countries reached at the WTO’s 12th Ministerial Conference in June on removing harmful fisheries subsidies and regarding Covid-19-related trade and health, as well other ongoing efforts, such as the plurilateral e-commerce negotiations, according to the Swiss readout of the meeting.

They also discussed the broader topic of WTO reform, including “the commitment at MC12 to conduct discussions with a view to having a fully functioning dispute settlement system accessible to all Members by 2024,” Switzerland’s top trade official Guy Parmelin said in a chair’s statement. “Most participants highlighted this objective as a priority.”

Fishing for good will: Switzerland ratified the WTO fisheries subsidies deal on Friday, making it the first country to do so. And that same day, Brussels pledged a million euros to the Fisheries Funding Mechanism, which helps poorer countries to implement the fisheries deal.

EU’s aims: Dombrovskis also set out what Brussels wants by the Cameroon conference. That includes the super thorny questions of industrial policy and trade and the environment, according to DG Trade top civil servant Sabine Weyand.

Tai’s activities: Tai spent four days in Europe, beginning in Brussels, where she signed a tariff-rate quota agreement to preserve the U.S.’s existing access to the EU market for various agricultural commodities following the U.K.’s departure in January 2021.

The new TRQ allocations are based on the historic pattern of agricultural exports to the remaining 27 EU member states and “will restore favorable market access for multiple U.S. agricultural products, including for U.S. rice, almonds, wheat, and corn,” USTR said.

Tai also met one-on-one with Parmelin, U.K. Secretary of State for International Trade Kemi Badenoch, Canadian Trade Minister Mary Ng and Australia’s Assistant Minister for Trade Tim Ayres and participated in the launch of the new Coalition of Trade Ministers on Climate.

Environmental trade talks: One of the new coalition’s priorities, according to its mission statement, is to “promote trade and investment that foster the diffusion, development, accessibility and uptake of goods, services and technologies that support climate mitigation and adaptation in both developed and developing countries.”

That sounds potentially like it could lead to another attempt to negotiate an environmental goods agreement, even though an initial effort failed in 2016 when China balked at making certain tariff cuts. Last fall, Okonjo-Iweala expressed hope for revival of the talks. However, Tai has been loath to negotiate any tariff-cutting agreements.

International Overnight

— German leader sees trade truce with U.S. in first quarter, POLITICO reports.

— Chinese President Xi Jinping seeks a break from foreign friction as he wrestles with Covid and a faltering economy, POLITICO reports.

— Senior Australian official asks China to remove trade impediments, Reuters reports.

— Brazil, Argentina discuss preparations for a common currency, The Financial Times reports.

— South Korea’s early trade data showed a decline in exports persisting this month in the latest sign of a global economic slowdown, Bloomberg reports.

— India and Vietnam are set to begin talks on a potential trade agreement, Mint reports.

— Sen. Joe Manchin said he didn’t realize the U.S. and the European Union do not have a free trade agreement when he wrote stringent new requirements for the electric vehicle tax credit that the EU says will unfairly disadvantage its members, Bloomberg reports.

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.