With help from Doug Palmer and Megan Cassella
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— President Donald Trump predictably touted his trade victories during the State of the Union speech, but he did not offer any detail on his 2020 trade agenda.
— WTO Director-General Roberto Azevêdo said there is a growing realization in Geneva that structural changes are needed to respond to U.S. complaints over the operation of the dispute settlement system.
— The U.K. could release negotiating objectives for a trade deal with the U.S. as soon as Thursday, but it’s still unclear when British Prime Minister Boris Johnson will visit Washington.
IT’S WEDNESDAY, FEB. 5! Welcome to Morning Trade, where your host can’t wait for the exciting trade and tax episodes on the new CBS political drama “Ways and Means.” Send me your made-for-TV trade show ideas or any news tips: abehsudi@politico.com or @abehsudi.
Driving the Day
SOTU LOOKS BACK, NOT FORWARD, ON TRADE: Perhaps the most noticeable part of Trump’s State of the Union address on Tuesday night was what wasn’t there: any mention of his path forward on trade.
Trump ran through a list of trade accomplishments toward the start of his speech, name-dropping both the “phase one” China deal and the USMCA in an address that leaned heavily on the strength of the U.S. economy as a selling point for his administration.
But he did not talk about any trade negotiations that are on the horizon — with the U.K. and European Union, for example — nor did he mention that talks with Beijing are still ongoing. That comes after the White House hinted ahead of the speech that Trump was likely to use it as an opportunity to provide details on phase two.
“For decades, China has taken advantage of the United States,” Trump said. “Now, we have changed that.”
A partisan celebration: In highlighting the U.S.-Mexico-Canada Agreement, Trump once again did not give any credit to House Democrats who helped shepherd the pact across the finish line in Congress. He did, however, highlight that it was the first major trade deal to earn strong support from labor unions in years, a nod to the AFL-CIO’s ninth-inning endorsement of the pact (which, of course, came only after Democrats succeeded in making significant changes to its labor, environmental, enforcement and drug pricing provisions).
Our fact-check and annotation of the full State of the Union is here.
ZOELLICK TRASHES TRUMP’S CHINA DEAL: Former U.S. Trade Representative Robert Zoellick had harsh words Tuesday for Trump’s bilateral trade deal with China. “I don’t think it will work, but it’s got political spin,” Zoellick, who’s also a former head of the World Bank, said at a Washington International Trade Association event.
Zoellick, who served as trade representative under George W. Bush, identified six big challenges in the U.S.-China relationship: Beijing’s market access barriers, its use of state capitalism, its ambitions to dominate future technologies, its Belt-and-Road initiative, its foreign security policy and the “creepy” ways it keeps tabs on its own citizens.
The tariffs imposed by Trump “are not the right wrench” for dealing with any of those issues, but they do have the political advantage of resonating with Trump’s base, Zoellick said.
He warned that Trump is likely to ratchet up tensions with Beijing again next year, if he’s reelected in November. Zoellick added he expects Trump to follow through on threats to get tough with the European Union on trade, but concern about hurting the U.S. economy may stop him from imposing tariffs on European autos until next year.
AZEVÊDO: STRUCTURAL CHANGES NECESSARY FOR DISPUTE PROCESS: Azevêdo said conversations in Geneva are shifting toward how to make the WTO’s embattled dispute settlement body more agile and less political.
“I think most likely we’re going to have structural changes on how the Appellate Body operates and how the dispute settlement mechanism operates in general,” he said at the WITA event.
The WTO chief said there is a “sense of urgency” in the U.S. to improve the dispute process and other aspects of the organization. The U.S. has forced a crisis at the WTO’s highest dispute panel by blocking the reappointment of members to the Appellate Body over complaints that the panel has strayed too far from its legal mandate and disregards procedural constraints.
Next steps: Azevêdo didn’t meet with U.S. Trade Representative Robert Lighthizer or Trump during his visit but said he can return anytime to help turn ideas into concrete proposals. “I need somebody to tell me, ‘This is the time,’” he said.
“A lot in Geneva is about the mindset,” he said. “If people don’t believe that we actually are going to change things, they’re going to say the right things, they’re going to do the right things, but they’re not really going to commit and take the risks that are necessary.”
Currency wars: Azevêdo also cast doubt on a U.S. move that will allow it to impose countervailing duties on countries accused of manipulating their currency. The WTO chief downplayed the connection between currency valuation decisions and trade actions — a link underlying the Commerce Department's new rule.
"It is widely recognized in the organization that it is very rare that you see exchange rate policy being driven by trade," he said. "Trade is just one small aspect of that conversation."
EU ENVOY: WE OPPOSE DESTROYING THE WTO: At the same WITA event, EU Ambassador to the United States Stavros Lambrinidis said the EU was working “very hard” toward some kind of near-term trade deal with the United States. In a brief hallway conversation with Morning Trade, he had no update on when new European Commission President Ursula von der Leyen would be in Washington for talks with Trump.
During a panel discussion with other Washington-based ambassadors, Lambrinidis underscored the EU’s commitment to the multilateral trading system and criticized the Trump administration for pointing out flaws in the WTO without providing “concrete proposals” to fix them.
“We absolutely, positively, do not like, do not support unilateral efforts to destroy the WTO and the international trading system. We do not want ‘might is right’ international trade,” Lambrinidis said. “It’s easy to identify issues that need reform. But it’s a very different thing to work hard and achieve a political consensus and negotiate a reform.”
U.K. NEGOTIATING OBJECTIVES EXPECTED SOON: U.K. Secretary of State for International Trade Liz Truss could unveil the U.K.’s negotiating mandate for a U.S. trade deal on Thursday, POLITICO’s London Playbook reported this week.
Date for Johnson visit still murky: However, plans for Prime Minister Boris Johnson to visit the U.S. this month for talks with Trump have been put on ice for now. “We’re still hoping to go over before the G-7 [at Camp David] in June,” a senior source said.
One U.S. industry official expected the negotiating objectives soon but had not heard a precise day. The source also still expected Johnson to visit before Easter on April 12.
USTR MUM ON REPORT ABOUT LEAVING GPA: The Office of the U.S. Trade Representative on Tuesday declined to respond to questions about a Bloomberg report that the United States is considering leaving the WTO’s Government Procurement Agreement.
A U.S. exit from the GPA would eliminate foreign companies’ preferential access to government procurement contracts at the federal level and in most states. It would also diminish the competitiveness of U.S. firms to bid on government projects in foreign countries. The access the U.S. provides under the deal is more than twice the amount of access provided by the next five largest countries or blocs combined, likely fueling White House outrage over a lack of reciprocity.
Through the GPA, the U.S. has opened access to about $837 billion worth of procurement contracts. The next five largest GPA parties — the European Union, Japan, South Korea, Norway and Canada — have provided access to about $381 billion worth of procurement, according to a 2017 Government Accountability Office report.
BRITISH BUSINESS CHIEF MET WITH GERRISH: In another sign of increased activity on the U.S.-U.K. trade front, the head of Britain’s largest business organization met with Deputy U.S. Trade Representative Jeffrey Gerrish on Monday. Carolyn Fairbairn, director general of the Confederation of British Industry, will give a speech at the Atlantic Council today on “the U.K.’s global trade future.”
G-7 BUSINESS LEADERS URGE MORE COOPERATION: Business leaders from the G-7 countries — the United States, Canada, France, Germany, Italy, Japan, the U.K., and the EU — agreed Tuesday on the need for increased multilateral engagement to confront common challenges.
The annual “B7 Summit” at the U.S. Chamber of Commerce kicked off discussions to determine the global business community’s recommendations and proposals for G-7 leaders in June, when the U.S. hosts the G-7 meeting at the Camp David presidential retreat.
Top business priorities include preserving the vital role of the World Trade Organization and leveling the international economic playing field, U.S. Chamber CEO Tom Donohue said in a statement. Countries should also leverage the power of business and business innovation to address sustainability challenges, including climate-related risks, he said.
NAVARRO AIDE HEADS TO K STREET: Hunter Morgan, a White House staffer who worked for Peter Navarro and Stephen Miller on trade and immigration matters, will be a senior adviser at Ballard Partners, our POLITICO Influence colleagues report.
Ben Howard, another staffer who worked in the White House legislative affairs office, will be a vice president at the Duberstein Group. Morgan and Howard both expect to register as lobbyists, according to their firms.
International Overnight
— The White House is working with U.S. tech companies to create advanced software for 5G networks, The Wall Street Journal reports.
— China’s economy, still reeling from a trade war, now faces the shock of a pandemic, The Washington Post reports.
— Huawei said it would set up manufacturing bases in Europe to produce 5G equipment, Agence France-Presse reports.
THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: abehsudi@politico.com; mcassella@politico.com; dpalmer@politico.com; srodriguez@politico.com; jyearwood@politico.com and pjoshi@politico.com. Follow us @POLITICOPro and @Morning_Trade.
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