August 2019 Volume 1

WASHINGTON UPDATE

FIA Lobby Firm Report Throughout most of our modern history, Congress has adjourned for the month of August. This year is no exception. And prior to that adjournment, there was a flurry of consequential legislative activity that will have an effect on what can and cannot be done this fall. Against all odds, a massive budget deal was agreed to that will avoid a shutdown, fund the government for the next fiscal year and raise the debt ceiling for an additional two years.This ensures our nation’s capital does not face a fiscal and political tsunami this fall. However, this did not come without a cost as the nation’s deficit and debt continue to increase and new revenues are elusive. This will make it incredibly difficult to accomplish major priorities like infrastructure. Couple that with the fact that investigations of the Trump administration will continue at an increased clip, with all of this happening in the shadow of the presidential campaign kicking into high gear and taking up a great deal of political oxygen. The biggest question mark is what all this can mean for our nation’s trade agenda. Below, we go into more on what you can expect inWashington over the next fewmonths. USMCA The White House continues to work with Speaker Nancy Pelosi and House Democrats on a path forward to getting the United States Mexico Canada Agreement (aka “Nafta 2.0”) passed through Congress. Though there was discussion of the possibility of taking USMCA up before August, that was always more so the hope of House Republicans and was never a realistic option. House Democrats are not ready to vote on the deal in its current form and are calling for the reopening of the agreement to make changes to enforcement provisions, as well as pare down the number of years of patent exclusivity for biologic drugs. Thus far, the White House has shown an unwillingness to do this (and bothMexico and

Canada have not communicated a willingness either). Given that Speaker Pelosi has full control over when USMCA can get a vote in the House of Representatives (and a trade agreement must be voted on in the House before it can get a vote in the Senate), this has created an impasse. To further complicate the process, in June, Speaker Pelosi formed a trade working group whose charge is to work the White House on getting USMCA to a place where it could be acceptable for Democrats to support. Nine members of Congress were appointed with Rep. Richard Neal of Massachusetts, chairman of the Ways and Means Committee, tasked with leading the group; the remaining eight members divided into four subgroups focused on drug pricing, labor, environment and enforcement. The members appointed are a complex mix of folks who are pre-disposed to be supportive of USMCA along with members who are unlikely to vote for the agreement, no matter what changes are made to it. This move was interpreted as one to slow walk the process all but ensuring the agreement would not get a summer vote. From our vantage point, barring some larger deal where this is included in a budget agreement, it is tough to see USMCA passing in 2019. And it is even more unlikely to see it get a vote next year before the presidential and congressional elections. The more likely scenario is that USMCA is taken up in November or December of 2020 in a so-called “lame duck Congress.” CHINA The trade war with China continues, though it is fair to say that it hasn’t escalated yet in ways that some have feared. Yes, there are substantial tariffs currently in place that are having dramatic economic effects across many industries, particularly agriculture (which has a significant effect on the forging industry: if farm country is not making money, then they aren’t buying heavy equipment, which means equipment producers are not ordering our specialty products). Increased pain has been put off for now following the G-20 summit in July where the U.S. and China agreed to halt additional tariffs for the time being. That said, though many in the U.S. business community are pleading with the administration to lift the tariffs that are currently in place, that is unlikely to happen. In the end, the president truly believes that tariffs not only are the most potent arrow in his quiver, but that they are also currently effective at getting countries to do as he asks. One need only look to how he used the threat of tariffs with Mexico to enlist that country’s help in stemming the tide of asylum seekers into the United States to see that the president is willing to use tariffs to solve any problem, economic or otherwise. On top of this, China tariffs make for good politics. No politician has faced major electoral consequences for saying that China is manipulating the system. The question then remains: how long can

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