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August 2, 2021

This Week in Trade for July 30

Last week (July 26 — 30)

White House Issues Buy America NPRM. The Biden administration issued a Notice of Proposed Rulemaking July 28 that seeks to make a number of changes to the Buy America regime. Most notably, the NPRM envisions immediately increasing the domestic content requirement for qualifying domestic goods from 55% to 60% followed by a phased increase to 75% as well as beefing up reporting requirements. The Buy America NPRM also seeks to bolster domestic supply chains by applying enhanced price preferences to select critical products and components identified by the Critical Supply Chain review, mandated under E.O. 14017, and the pandemic supply chain strategy called for under E.O. 14001. The White House says, "These preferences, once in place, would support the development and expansion of domestic supply chains for critical products by providing a source of stable demand for domestically produced critical products." Not surprisingly, the Biden administration move received a chilly reception from our major trading partners who historically have taken a dim view of the Buy America regime as it limits their ability to bid for U.S. government contracts.

House Science Committee Advances China Competition Bills. The House Science Committee July 27 marked up a package of measures aimed at bolstering domestic research and with an eye towards competing with China. The five bills, including the NIST for the Future Act, serve as part of the House response to the Senate-passed U.S. Innovation and Competition Act, along with the House Foreign Affairs Committee-passed EAGLE Act. The Senate bill includes $52 billion in subsidies for U.S. semiconductor production, but the CHIPS Act funding is not included in the House package. A House-Senate conference committee to resolve the differences is expected later this year. Additional trade measures, including a reauthorization of Trade Adjustment Assistance (TAA) and import restrictions on imports made with forced labor from China, could also be added to the final package.

China Takes Aim at EU's Carbon Border Tax. Reuters reported July 26 that China is raising initial objections to the EU proposal to institute a carbon border adjustment mechanism (CBAM) for certain carbon intensive products beginning in 2026 as violative of WTO principles. "CBAM is essentially a unilateral measure to extend the climate change issue to the trade sector. It violates WTO principles … and (will) seriously undermine mutual trust in the global community and the prospects for economic growth," said Liu Youbin, a spokesman of the Ministry of Ecology and Environment said at a media briefing. The development highlights the potential trade complications that could arise as the EU proposal moves forward. Senate Democrats have also raised the possibility of instituting a similar mechanism in the tax infrastructure reconciliation bill, a move that would surely draw trade challenges from China as well as other nations.


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