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Recent NAFTA Talks With Mexico, Canada Labeled ‘Good’ By U.S. Treasury Secretary

The Trump administration is focused on reaching a trade deal with Canada and Mexico over the North American Free Trade Agreement (NAFTA), and wants Congress to ultimately approve any changes, according to Treasury Secretary Steven Mnuchin.

But Sen. John Barrasso (R-WY) said he thinks it would be smarter for the White House to bypass Congress by concluding a "skinny," or "NAFTA Lite," deal.

Meanwhile, Mnuchin said the United States will not lift new tariffs on steel and aluminum from China, even as both countries said over the weekend trade talks had been "constructive" and China had agreed to purchase more American goods and services.

'Never Was A Trade War'

In an interview Monday on CNBC, Mnuchin said China and the United States had "made very meaningful progress" in their bilateral trade talks, but it was now up to both sides to implement a final agreement. He said the United States agreed to suspend tariffs totaling $150 billion, and China agreed to suspend $50 billion in tariffs it had applied on American goods in response.

"This has been a trade dispute all along," Mnuchin said. "It never was a trade war; it's a trade dispute on significant issues."

President Trump first proposed levying a 25% tariff on steel imports and a 10% tariff on aluminum imports on March 1. Three weeks later, he issued a proclamation calling for suspending the tariffs until May 1 while negotiations were ongoing. Although the White House extended trade negotiations with Canada, Mexico and the European Union on April 30 for another 30 days, Chinese imports were hit with the tariff on May 1.

Mnuchin said there is a "massive opportunity for the U.S. to become a major supplier of energy to China." To illustrate the point, he mentioned last November's joint development agreement (JDA) with three Chinese companies to develop liquefied natural gas (LNG) exports from Alaska.

"They have incredible amounts of demand at these prices for our shale and our LNG," Mnuchin said. "I think we can easily get about $40 or $50 billion of energy [sales], and if we can produce and send more with infrastructure, they can even take more.”

However, during testimony before the Senate Appropriations Financial Services Subcommittee on Tuesday, Mnuchin said the tariff on steel and aluminum imports from China will remain in force.

"Those were not part of our discussions," he told the Senate panel. "We were merely focused on the proposed $150 billion [of tariffs]. Those are not being touched.”

He said the president has instructed the Commerce Department and U.S. Trade Representative Robert Lighthizer “to have discussions with other countries. In certain places [the tariffs] have already gone into effect. In certain places they are on hold pending discussions with those other countries and getting various assurances."

In a joint statement last Saturday, China and the United States said both sides had "agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details." Negotiations were ongoing, the two nations said.

The JDA calls for China's state-owned Sinopec Group, the Bank of China and China Investment Corp. to work with the Alaska Gasline Development Corp. to develop the Alaska LNG project. The project has been estimated to cost $43 billion and would have the capacity to annually export up to 20 million metric tons of LNG.

'NAFTA Lite'

On NAFTA, Mnuchin said he had "good" conversations with finance ministers from both Canada and Mexico last week.

"I think there is a desire on all three parties to try to get this deal done," Mnuchin told CNBC, adding that Lighthizer "has done an enormous amount of work. We'll see where we get over the next few weeks.

"The president is involved in these discussions. I know he's had conversations with [Canadian Prime Minister Justin] Trudeau. We'll see where we get. We're still trying to get a new deal done. That is a priority for the president, but he wants a good deal and that's what he's focused on."

Earlier in the day, Barrasso, a member of the Senate Committee on Energy and Natural Resources, told CNBC that NAFTA was a big source of debate among his Senate colleagues. While he believed the current version of NAFTA was "working well" for the U.S. economy and Trump could possibly get a "better deal" in ongoing negotiations with Canada and Mexico, Barrasso said he would "rather not" see a revised NAFTA come to Congress for its approval.

"There's ways that Lighthizer has to do kind of a 'NAFTA Lite,' if you will, without needing to go to Congress," Barrasso said. "The question is: How can NAFTA be changed to our advantage, [so it] doesn't have to go back to Congress to get another vote?

"To try to get this passed in Congress is a lot of heavy lifting. And most people in Congress, certainly on the Republican side and the trader side, would say let's leave it as it is. If you can work around the edges to improve it for the United States, absolutely do that."

Mnuchin said he had heard of the "NAFTA Lite," or "skinny" deal on NAFTA, but that for now the Trump administration is "still focused on a new NAFTA that would go through Congress.

"We easily can look at the 'skinny deal' as an alternative, and that's something that the president can consider. For the moment, the president is focused on the agreement that he wants to get between the three countries, and then we'll figure out how to get it through Congress."

Earlier this month, House Speaker Paul Ryan (R-WI) had set a May 17 deadline for Congress to receive a notification that the United States would sign a deal over NAFTA. Three days earlier, Lighthizer said significant issues remained.

"For many weeks now, the United States, Mexico and Canada have engaged in intensive, continuous discussions to renegotiate NAFTA, building on the seven rounds of rigorous negotiations that have taken place since August 2017," Lighthizer said. "The negotiations have covered a large number of very complex issues...such as intellectual property, dairy and agriculture, de minimis levels, energy, labor and more."

Trade Group Recommendations

Several trade associations, including many representing the oil and gas industry, have submitted comments on an interim final rule outlining a procedure for requesting an exemption to the tariffs on steel and aluminum imports. The interim final rule, conceived by the Commerce Department, was published last March in the Federal Register.

At issue are specialty steel products, which are used in oil and gas pipelines and at LNG export facilities. The oil and gas industry and its allies argue that such products meet the criteria for an exemption from the 25% tariff on steel imports because there is an insufficient supply of comparable products from domestic steel manufacturers.

Last week, the trade groups, which include the American Petroleum Institute, the American Gas Association, the Association of Oil Pipe Lines, the GPA Midstream Association, the Independent Petroleum Association of America and the Interstate Natural Gas Association of America, recommended a list of 11 changes to the interim final rule.

The first recommendation called for tariff exclusions to be applied both retrospectively and prospectively, with relief granted for a minimum of five years and subject to renewal thereafter. Other recommendations focused on metrics Commerce would use to determine the demand for and quality of the aforementioned specialty steel products.

"Impediments to developing, transporting, refining and distributing domestic oil and gas resources could reduce supplies of critical fuels used by consumers, the U.S. military and manufacturers, which could have the unintended consequence of negatively affecting the national security upon which these tariffs are premised," the trade groups wrote.

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