International Economic Law and Policy Blog

The USMCA Rapid Response Mechanism: What Do Workers Expect?

I want to thank Kathleen Claussen for succinctly summarizing last week’s Second USMCA Rapid Response Labor Panel. Many of us missed the panel discussion while participating in the fantastic ASIL International Economic Law Interest Group Biennial Conference (my kudos to the organizers).

Professor Claussen points out the Mexican government’s concern that “Some of the workers expressed the expectation of obtaining benefits that go beyond the powers of these panels.” If one were to look at the Biden administration’s characterization of the USMCA Rapid Response Mechanism (RRM), one could understand why expectations in Mexico have become, perhaps, a bit exaggerated. Under a headline How has [the RRM] empowered workers?, the Biden administration’s USTR notes:

These cases have directly benefited over 36,000 workers: 

• provided nearly six million dollars in backpay and benefits to workers, 
• ensured wrongly terminated workers were reinstated, and
• helped secure free and fair elections in which workers selected independent unions to represent them.

The RRM tool had become “so effective in delivering real results to workers that the U.S. has seen a significant increase in petitions.”

The Biden administration’s accomplishments in returning workers to their rightful positions under Mexican labor laws (meaning they have the job, salary, and opportunity to vote for unions without discrimination or interference) are laudable. However, I am not sure that suggesting to workers that they will become empowered through financial gains was foremost in the minds of the USMCA’s negotiators [if you’re interested in the mindset of the USMCA’s RRM negotiations, you will likely enjoy Bob Lighthizer and the late Kevin Middlebrook’s respective accounts].

Rather than read the minds of the USMCA’s negotiators, I’d like to weigh in on the views and expectations of Mexican workers. This is not to suggest that I, from my perch in the United States, have any more business representing the views of Mexican workers than did the Biden administration. On the contrary, I was so uncomfortable with the way the U.S. government was characterizing Mexican workers that I asked two researchers in Mexico, Alex Covarubias-V and Cirila Quintero Ramírez, to conduct an empirical investigation to ask the workers, themselves, what they thought about the Mexican labor law reform, the USMCA RRM, and the role of the U.S. government in empowering them.

The RRM Empirical Study

We document our methodology, key findings, and recommendations here. Our questionnaire distinguished workers at auto facilities in Mexico who had faced an RRM case (“RRM Workers”) from workers at auto facilities that had not faced an RRM case (e.g., “Unionized Non-RRM Workers” or “Non-RRM Workers”).

Instead of explaining all 69 pages worth of findings, below are some key points related to the views and expectations of the workers we spoke with in the Mexican auto sector (chosen due to its central importance under the USMCA).

An important takeaway from the findings is that significant discrepancies exist in the awareness and expectations of RRM Workers and Non-RRM Workers. As the Biden administration explained, the former category of workers has received considerable workplace gains. Those workers had also received shopfloor training on their labor rights and enforcement possibilities. By sharp contrast, the latter category of workers was relatively unfamiliar with their labor rights, the USMCA, or the RRM, and had incredibly low expectations of the U.S. government and the RRM. That discrepancy helps explain, however, why Mexican workers may be so interested in RRM panels. The USMCA and its RRM have created a regime whereby benefits are only accrued through ex post enforcement, rather than ex ante training and empowerment. Like it or not, the fates of Mexican workers seem to hinge on U.S. and panel intervention.

Key Finding #1: Most Workers Don’t Have High Expectations; They Don’t Know the USMCA Exists

The Mexican government worries that workers’ expectations are too high about what the USMCA RRM panels can accomplish. Presumably, it only spoke with RRM workers (workers at facilities that had participated in an RRM). Of the workers we spoke with, only 21% of non-RRM workers had any idea that the RRM existed, or that they could use it. That sharply contrasts with the 70% of RRM workers who were aware of it. Furthermore, when we explained to the non-RRM workers what the RRM was (and how they could anonymously raise complaints about violations of their freedom of association and collective bargaining rights), slightly less than half told us they’d be willing to use it.

Key Finding #2: Most Workers Aren’t Aware that the U.S. Government is Monitoring and Enforcing Their Labor Rights, Although Most Are Okay with That Role

Like the above, most of the workers we spoke with were unaware that the U.S. government was monitoring and enforcing their labor rights under the RRM, while most of the RRM workers knew about it. What surprised me, however, was that most workers approved of that role when we explained it to them.

Key Finding #3: Most Workers Assume the U.S. Government has Mixed Motives

We wanted to dig a little deeper into what workers expected would come out of the USMCA RRM, so we asked them what they thought the U.S. government was trying to accomplish by using the Mechanism. We offered them a series of non-exclusive options concerning U.S. government motivation. Our two most popular options were that the U.S. government was using the Mechanism to (1) protect workers in Mexico; and (2) protect workers in the United States. This parallel is indicative of labor provisions in trade more broadly; that is, a government can enforce labor-rights commitments in trade instruments to strengthen working conditions and raise wages in a foreign country for altruistic and protectionist purposes, given the link between wages, working conditions, production costs, and competition.

The workers’ responses also showed that some workers were a little less trusting of the U.S. government’s motives. Nearly half told us they thought the United States hoped to raise the costs of production in Mexico and exercise power over Mexico.

Despite those mixed reviews, most of the workers we spoke with in the Mexican auto sector expressed their hope that the U.S. government would put more pressure on its factory to respect labor rights.

Response to the Mexican Government

If the Mexican government is concerned about workers’ expectations, it should devote more time and resources to educating them. Educate them on their rights under the labor law reform, their collective bargaining agreements, the USMCA, and its RRM. We found that most non-RRM workers had not received this necessary training. It’s no surprise, then, that its workers are placing their hopes in a foreign government and are allowing themselves to have high expectations for the labor panels. Until the Mexican government takes up the gauntlet, empowerment in Mexico will continue to rest on enforcement measures in trade, and that seems to benefit only some categories of workers while creating foreign dependencies.

Thinking to the Future

The Trump administration helped create the RRM, so it is no surprise (or should be no surprise) to see its USTR continue to use the Mechanism as aggressively as the Biden administration. Assuming that the USMCA continues to exist (that assumption’s doing a lot of work, I know), we should consider how it and the RRM should be reformed to effectuate the parties’ objectives. While I am happy that Professor Claussen and others are thinking of the panel side of things, it is equally important that we think of ways to reduce Mexico’s dependency on USMCA enforcement to educate and empower its workers. There are several avenues to explore, from how training is carried out, to whether U.S. labor attachés follow formal procedures when visiting facilities, and how and whether workers and unions should have a voice in remediation plans.

Many of us are working on these issues, and if you are interested in joining the conversation, please reach out: [email protected].

Second USMCA Rapid Response Labor Panel Hears Arguments in Mexico

On May 15 and 16, the second panel convened under the USMCA/TMEC/CUSMA Facility-Specific Rapid Response Labor Mechanism (RRM) held a hearing in Mexico to review the arguments of Mexico and the United States concerning worker rights at Atento Servicios, S.A. de C.V. (MEX-USA-2024-31A-01).  This panel proceeding stems from the United States’ request that Mexico review the collective bargaining situation at Atento nearly a year-and-a-half ago.  USTR requested the establishment of a panel more than a year ago.

The Atento situation is noteworthy for several reasons.  First, this is the first state-to-state free trade agreement (FTA) panel hearing of the Trump Administration, but it is of course not a traditional FTA dispute.  The RRM is a special tool under the USMCA, and this is only the second RRM panel to reach the hearing stage.  Last year, another panel agreed with Mexico concerning a mining facility that there was no qualifying denial of rights (or that the panel did not have jurisdiction, depending how you view the panel’s commentary).  

Second, unlike the last panel convened under the RRM, this panel is reviewing alleged labor violations in the context of the services sector, specifically in telecommunications, which creates new considerations for the penalties that the parties may impose. 

Third, this panel includes one member who also served on the first panel by chance, although there are repeat players across several RRM panels currently underway.  The most recent panel convened under the RRM, for instance, is made up entirely of panelists who have previously served, suggesting that perhaps some members of the roster are opting out from selection. 

Let me review in brief the primary arguments of the parties concerning Atento. 

Overview of the primary arguments

The Atento panel is charged with making a determination “as to whether there is a Denial of Rights” at the relevant call centers per Article 31-A.8 of the USMCA.  In this instance, like the last, the United States and Mexico disagree about whether there has been a qualifying “Denial of Rights” under the terms of the USMCA. 

Mexico again characterizes its position as jurisdictional: it claims that the panel does not have jurisdiction over the situation at Atento because this particular call center is not a “Covered Facility”, whereas the United States claims that the call center is a Covered Facility under the USMCA and that there are three Denials of Rights that have not been cured despite the Mexican government’s involvement with the firm. 

Mexico sought during the first RRM panel proceedings and now this one to delineate a boundary that the United States cannot cross under the current language of the Agreement.  Mexico has argued twice that the RRM is not a blank check for the United States to act as labor police for all of North America.  Rather, the USMCA demarcates a trade-related sphere in which the two governments are intended to work together on labor matters.  There is necessarily a limit to where the United States has a say.  The first RRM panel agreed with Mexico on this point and drew those boundaries fairly narrowly.  Here again, Mexico asks this panel to find the RRM inapplicable to the Atento call center in question.

The United States’ response is to reject Mexico and the first RRM panel’s definition of Covered Facility.  Although it accepts that there is a boundary, USTR argues that this call center is covered by the Agreement and the prior RRM panel got the meaning of Covered Facility wrong. 

With a broader definition in mind, the United States then goes on to argue that Mexico’s intervention at the relevant call centers to remediate the labor rights violations was necessary but not sufficient under Mexican law to remedy the workers’ collective bargaining rights. By contrast, Mexico maintains that if the panel finds that the Atento call center is a Covered Facility, there is no ongoing Denial of Rights there – anything that might have been a Denial of Rights has been remediated.

With each RRM situation that goes to a panel, the panels and the parties are forging new ground in their elaboration of the processes intended by the Agreement – an agreement which is otherwise very much under fire and under scrutiny.  For instance, we learned at the hearing that the panel and the parties spent time earlier in the week speaking with workers as part of the verification process that is envisioned by the Agreement.  The Labor Chapter and engagement between the parties under the Labor Chapter appear to be proceeding somewhat apace since the start of the Trump Administration. 

As we wait for the panel’s decision in the coming weeks, I will just flag three interesting exchanges from last week’s hearing in case you couldn’t dedicate your Thursday and Friday to Zooming in. 

Covered facilities and “manner affecting trade” -- again

Let’s take a closer look at the “Covered Facility” discussion.  Mexico repeatedly argued that the United States was trying to turn the RRM into an appellate court and to “go beyond what was agreed by the parties in the USMCA” by trying to extend the panel’s jurisdiction to facilities not covered by the Agreement.  This exchange of arguments between the parties led to yet another discussion of the phrase “manner affecting trade” in the USMCA and the footnote accompanying that language in the Labor Chapter which is the origin of the foundational language for the meaning of “Covered Facility”. 

Labor and trade friends and family know that this phrase has a fraught history.  It was the language on which the United States lost its first labor dispute under an FTA, and it was language that was “corrected” in the Trans-Pacific Partnership Agreement negotiations at the last minute – that “correction” was then carried over to USMCA.  (I described a similar exchange from almost exactly a year ago when the first RRM panel, dealing with a mine called San Martín, struggled with the same question.)

In the San Martín situation, the panel concluded that a complainant Party must show that the facility in question produces a service that is “exported to the complainant Party’s market” or produces a service that “competes with a service of a Party in a Party’s territory” (i.e., “a like or substitutable . . . service is exported by the complainant into the respondent Party’s territory”).  If the Atento panel were to apply the same standard, the United States appears to concede that it would lose.  Consequently, as noted above, it rejects this definition and is trying to re-litigate the matter, including in its closing arguments on Friday when it argued that the purpose of this language is “to ensure that [the panel is] . . . not covering labor activities or labor violations that do not have a relationship to trade.  An example of that would be . . . if a case was brought to us about government workers or workers in a hospital that . . .  aren't working in a sector or an industry that is involved in North American trade and therefore having this necessary link to the trade agreement.”  We will see if this panel considers the prior panel’s report to be influential in its own thinking.

The role of the RRM panel

The two governments have struggled in both the first RRM proceeding and now this one to define what the scope of the panel’s work ought to be.  At the hearing last week, the United States argued that the panel’s role “is to determine whether Mexico has complied with its international obligations” – an argument Mexico repeatedly rejected. 

As noted above, the USMCA is clear that the panel is charged with determining whether there has been a Denial of Rights (stemming from any source) at a work site, assuming the work site is covered by the Mechanism in the first place.  The hearing followed a “verification” in which the panel spoke directly with affected workers from at least one call center run by Atento.

Mexico’s position is that the reformed labor relief process in Mexico has been activated and it played out at the call centers; there is no evidence of any USMCA-qualifying Denial of Rights today and the United States simply wants too much from the Mechanism.  The fact of the matter may be that the United States designed a tool for facility-specific purposes though it lacks facility-specific data. 

Checks and balances on the RRM process

Mexico also expressed concern at the hearing that Mexican workers are getting confused about the Mechanism and what it affords them: “Some of the workers expressed the expectation of obtaining benefits that go beyond the powers of these panels.”  In reality, the roles of each of the parties have evolved as both have experimented under the RRM.  With each situation that comes before them, the entities involved learn more about what each side intends and how it will carry out its work.  The hard part remains trying to figure all that out from the outside if you are an employer or worker seeking to exercise your rights in the face of the Mechanism when so little is made publicly available. 

To be sure, the Mechanism is not a substitute for the Mexican labor reforms.  Here I do think the parties are on the same page, but adversarial environments like these panels may not be helping, especially if the United States demands more from the reformed labor process in Mexico than it is entitled.

But look at their track record of some success.  With nearly three dozen cooperative efforts between the parties to address alleged denials of rights at facilities in Mexico, including three begun in the Trump Administration, the two governments have no doubt done a lot to ensure that workers’ rights are protected and the playing field leveled multiple times over, including where they have had a deterrent effect.  (We reviewed many of these successes, and the ongoing challenges, at a recent event held at Georgetown Law together with El Colegio de Mexico.)

That does not mean there is no room for improvement.  It might help if the parties were to convene the panelists as required by the USMCA and its Rules of Procedure to “coordinate the drafting of the report on the functioning of the [Mechanism]” per Article 31-A.3.6 and 31-A.B.6.  A couple different less official reviews are underway that one hopes will be of use to all three parties in their upcoming re-evaluation of the Agreement, but the future of how the United States views the relationship between trade and labor will no doubt also be affected by the major cuts the Trump Administration has made to the Bureau of International Labor Affairs at the U.S. Department of Labor.  If the Trump Administration wants to continue to be assertive in its stance with Mexico on trade and labor issues, it will have to find new ways to support its work under the Mechanism and the many supporting cast members across the government.

Is the U.S. Pulling Back on Its Hormone-Treated Beef Demands?

In my recent post about the U.S.-UK trade deal, I noted the discussion of hormone-treated beef at the White House press conference, including a response by U.S. Trade Rep. Jamieson Greer to a reporter's question. I did not take his answer, or the General Terms of the U.S.-UK deal, to indicate a change in the U.S. position on this issue, which has traditionally been that bans on hormone-treated beef are not science-based, violate international trade rules as a result, and should be removed.

Then last Thursday, I came across this Washington Post headline: "In U.K.-U.S. trade deal, hormone-fed beef is off the menu." The article elaborates as follows:

U.S. Agriculture Secretary Brooke Rollins, who said during the Oval Office announcement of the deal last week that she wanted Britain to take “all meats,” seemed to soften that stance following talks in London this week. During a news conference Tuesday, Rollins suggested that American exporters might make concessions and wean themselves from ranching and processing practices that are standard in the United States but rejected by British and European regulators.

...

Rollins, in response to a question, acknowledged that more American farmers are dropping the methods. “Our agricultural producers, our cattle producers obviously are constantly watching what the markets look like,” she said. “If the markets are calling for a specific type or they see more opportunities somewhere, then I think we, potentially, do see some movement in the market.”

The American practice of treating processed poultry with a chlorine wash has declined in recent years, she said, adding that only about 5 percent of the birds now get a bleach bath.

“We have moved over the last decade completely away from the, quote, chlorine chicken,” she said.

A Trump administration retreat on the safety standards discussion would mark a big shift on an issue that has been raising hackles on the U.S. side of the negotiating table for round after round of talks.

It is certainly true that "[a] Trump administration retreat on the safety standards discussion would mark a big shift." But is that what was being signaled here by Rollins? When I read the Post's account, I had some doubts about their interpretation of the remarks by Rollins, so I looked for the video of the news conference and put together a transcript.

Here was the first question and the response by Rollins:

Q: British farmers are concerned [that] the agreement is really one way for the US to push a relaxation of rules on agricultural produce, especially on hormone grown beef. Can you guarantee your trade partners in the UK, its farmers, that you're not going to be doing that?

Rollins: Well, I think the first and possibly the biggest takeaway from last week, from my perspective, was that this was not a one way street. I mean, clearly I am here and am the biggest fan and cheerleader of American agriculture, but at the end of the day, this is about opening up markets. This is about taking down barriers and walls that have been built. This is about expanding choice between our two countries. And it's interesting, I just in the last meeting, talked about, you know, aligning with our partners. And there is no greater partner than the UK. I mean, from the very beginning, I guess once we got past the revolution, but since then, the partnership between our two nations has been really what has driven freedom and opportunity and prosperity in the entire world. So it makes so much sense that last Thursday, this was the first trade deal announced, and again, while President Trump and your Prime Minister are working to elevate and to ensure that your own people and our own people are protected and reaching new levels of prosperity, at the end of the day, when it is those partnerships with our allies like the UK that are just so very important. So while in fact, we are excited about getting American beef, ethanol, et cetera, hopefully down the line, rice, seafood, other products are coming into your country, this is also about getting more of your country's products into ours as well. And when we have that increased food security, that's increased national security for both of our nations.

Her answer here seems to be a careful attempt to avoid the question. But the questions on this issue kept coming.

The second question was a little hard to decipher but I think got most of it:

Q: Just on the hormone beef thing, I've been hearing that some producers are already shifting from hormone free beef in the US in anticipation of market access in the UK. ... Is that a signal that things are starting to reshape US agriculture from the ground up?

Rollins: Yes. Well, thank you for that. The first thing I think that's very important to say is that we have decades of research that show that the beef produced in America, whether it is hormone or hormone free, is entirely safe, and we believe one of the crown jewels of our American agriculture industry. I am from Texas, this is my background, so I know this industry and area very, very well. And I could not be more proud of our beef cattle industry in America. Having said that, our agriculture producers, our cattle producers, etc, obviously, are constantly watching what the markets look like. And if the markets are calling for a specific type, or they have more opportunity somewhere, then I think that we potentially do see some movement in the market. It's very early to say exactly.

This answer involved a mild effort to defend hormone-treated beef, along with an acknowledgement that U.S. producers will take into account the types of products a particular market wants.

And then later during the press conference, there was this final question on the issue:

Q: Steve Reed, our Environment Secretary, has absolutely ruled out, saying, we're never going to have chlorine chicken in the UK or hormone beef. I believe you said that you want to talk about all meats. So do you think any tariff reduction will be contingent on accepting chlorine chicken or hormone beef?

Rollins: Well, let's first talk about chlorine chicken. I think that is a narrative in your country that perhaps we have not done a good enough job pushing back on. Only about 5% of our chicken in America is actually treated that way, with the chlorine. So we have moved, over the last decade, completely away from the, quote, chlorine chicken. So that's, I think that's a really important myth to dispel, and I'm grateful to do that. I think the conversations are continuing, and I think that building the relationships, just for me yesterday, being with Mr. Reed, and Mr. Reynolds today, being with several of your other leaders and building those relationships and having those conversations and ensuring that both of our countries, we're putting our countries first, but in doing so in partnership. I know that there are probably different views on this. But the more we can talk, the more that, frankly, I also can talk to y'all, the people that you're reporting to, ensuring that the right news and message is moved out based on data and scientific study is really, really important, and just looking forward to a really strong partnership moving forward.

Here, Rollins emphasized the high level of non-chlorine chicken in U.S. production, although she later referred to "data and scientific study," which I think is a way to say that U.S. chlorine-washed products are safe, and people in other countries should be allowed to buy them. In addition, it's worth noting the higher figure for hormone-treated beef, which I generally see as around 80%.

Based on all this, is the Post's characterization correct? Is the Trump administration going to pull back on traditional U.S. demands about selling hormone-treated beef and chlorine-washed chicken in foreign markets? I am a bit skeptical. Taking into account the full context above, I don't think Rollins was necessarily suggesting a pullback. I think maybe she was aware that her audience was a group of UK media folks, and therefore she was trying to phrase things carefully and avoid inflaming tensions. A headline like "U.S. demands hormone-treated beef be sold in UK" would obviously hurt these negotiations, and she didn't want to say anything that had a negative impact. But I didn't take her remarks to suggest that U.S. demands are going to change.

Having said that, I suspect the U.S. negotiators understand the limits of what is possible here, and probably do not have high expectations that foreign governments will make the changes that U.S. industry is pushing for, either immediately or through subsequent enforcement of the trade deal's SPS rules. The U.S. government balancing exercise between what the domestic industry wants and what foreign governments are willing and able to give is a delicate one. What would be interesting to hear (but we in the general public probably never will) is how exactly the U.S. presents its demands on these issues in the behind the scenes negotiations, and whether there is any change in emphasis relative to how things were done in the past.

ADR in the WTO

With the Appellate Body appointments process still blocked, people have been looking for alternative approaches in WTO dispute settlement. The MPIA is one alternative. With Paraguay recently joining, the MPIA is now up to 28 parties (including the EU-27). And as noted here, the MPIA is about to hear its second appeal. Beyond the MPIA, there was recently a WTO arbitration related to Australia's modification of its GATS commitments.

All of this makes it a good time to talk about alternative dispute resolution in international law, with a focus on trade law. For those interested in these issues, the ILA Committee on ADR in International Law will be hosting a webinar on May 28 on "Resolving international trade disputes through ADR: Ambitions, possibilities, practicalities." The description of the event is as follows:

Stakeholders have long called for more use of alternative dispute resolution (ADR) to resolve trade disputes – yet use of formal ADR in the WTO has been low. Our speakers will examine past use of ADR in trade disputes, obstacles to ADR, and proposals to facilitate ADR. When are disputes amenable to ADR – or not? Why do governments and stakeholders choose ADR – or not? Would ADR procedures help – or not? When can ADR deliver a better solution than adjudication?  

Amy Porges is the moderator, and the speakers are:  

• Smrithi Bhaskar and Katherine Connolly (Sidley Austin LLP Geneva) 
• Marco Tulio Molina Tejeda. (Molina & Associates, Geneva. As DCM of the Guatemalan Mission to the WTO, Molina was the convenor of the WTO informal process on DS reform which produced the ADR proposals in JOB/GC/385)
• Hunter Nottage (Director, Economic Growth, New Zealand Ministry of Business, Innovation and Employment)   
• Discussant: Niall Meagher (Executive Director, ACWL)

You can register here.

Does the Trump Administration Want a Strong or a Weak Dollar?

In a recent post, I brought up some of CEA Chair Stephen Miran's comments on the role of the dollar as the reserve currency, and wondered what the Trump administration's plans were on the value of the dollar:

... [Miran] makes clear that he wants the dollar to remain the reserve currency (during the Q & A, he said "dollar dominance is a great thing"), but it's clear that such a policy will limit the prospects for any adjustment taking place. Maybe he is saying that his "burden sharing" options can operate as an alternative way to reduce deficits, even with the dollar remaining as the reserve currency, but that has the problems noted above (among others). Or do they have in mind a plan to weaken the value of the dollar while keeping its role as the reserve currency? Would Trump be OK with that plan? I hope someone presses them on these questions.

Last week, I was excited to hear someone better placed than me to get an answer press the administration on these questions. At a House hearing with Treasury Secretary Scott Bessent, Rep. Bill Foster (D-IL) asked the following about a strong vs. weak dollar (starts at 1:15:25 of the video):

Foster: I'd like to speak today about the strength of the US dollar and the decline of US manufacturing. ... in terms of the strength of the dollar, it's affected by many things, including central bank policies, interest rates, tariffs, and the balance of trade. But in the long run, I believe that the strength of the dollar reflects the world's confidence in the US economy and the competence of US leadership and the value of products made by American workers and our reputation as a fair place to do business and the rule of law in America. Now, Secretary Bessent, earlier this week, you ran an op-ed in the Wall Street Journal, echoing many of the points you made in your testimony. And in that op-ed, you promised, inter alia, more jobs, more manufacturing, more deregulation, lower taxes, less national debt, all while maintaining a strong dollar. On the other hand, Stephen Miran, Trump's choice for the chair of the Council of Economic Advisers, wrote a paper last year, arguing for weakening the dollar through something he called the Mar-a-Lago Accords, which you have reportedly been placed in charge of negotiating. The President himself has just been all over the map on almost a daily basis, on whether a strong dollar or a weak dollar will make America great again. So my question is, what is it? Does the administration support a strong dollar or a weak dollar?

Great question! Maybe we'll finally get some clarity here!

Bessent began his answer this way:

Bessent: I'll work a little backwards. [The] Miran paper was when he was in the private sector, and I think it related to a range of outcomes. ... I believe that the conditions for a strong dollar, they are important for international competence. And again, when we think of strong dollar, what is a strong dollar? Is it the composite on the Bloomberg of all currencies? Is it a trade weighted dollar? And then we can also look at bilateral relationships, because much of that could be not so much a strong dollar, but other countries manipulating and suppressing their currencies ...

It's not clear whether that response was leading up to an answer, and at that point Foster jumped in again:

Foster: We lived through that in the Bush administration, and his non-reaction to what China was doing, I know all about that. But I think it's interesting to look at the historical record here. I think I have behind me, you know, a plot of the strength of the US dollar under recent presidents. ... And what it says is remarkable. It says that under every president, from every Republican President, Reagan, Bush, Bush Junior, Trump one or now Trump two, the dollar has weakened. Under every Democratic president, without exception, Clinton, Obama, Biden, the dollar has gone up significantly. And I don't think that's an accident. I think it's because of all the factors we've included, predominantly the confidence that the US will maintain a well regulated and and well governed economy and a fair place to do business. ... The argument in favor of weak dollar. It should make manufacturing easier in the United States, ... that's one of the arguments for it. But if you look at the historical record here, if you just look at, for example, change in manufacturing employment under Democratic and Republican presidents, it's remarkable. For longer than you or I have been alive, Democratic presidents have increased manufacturing employment, and Republican presidents have decreased manufacturing employment. You know, from FDR, Truman, Kennedy Johnson, Carter, Clinton, Obama and Biden, all increased manufacturing employment. Eisenhower, Nixon, Ford, Reagan, Bush, Bush II, it all dropped. I don't think this is an accident, but the thing I want to ask you about is, how did the Republicans manage to weaken the dollar and weaken manufacturing employment at the same time? Because it seems like that's completely crossways to the narrative that we're hearing from this administration.

I was on the edge of my seat waiting for more, but then unfortunately time expired. I think Bessent is now supposed to answer this question in writing. We'll see what he comes up with.

The "General Terms" of the U.S.-UK Trade Deal: A Few Answers, Still Lots of Questions

On Thursday, U.S. and UK officials held a press conference on a new trade deal, and issued some press releases, remarks, and fact sheets, as well as a "General Terms for the United States of America and the United Kingdom of Great Britain and Northern Ireland Economic Prosperity Deal" (EPD) document that provides additional details.

It's not clear how long it will take to get to a final version of the deal or to release a full legal text that is in effect. On the timing, the General Terms document states: "The United States and United Kingdom are immediately beginning negotiations of the EPD to develop and formalize the proposals made in this document." And on the legal effect, while the General Terms states that "[t]his document becomes operative on May 8, 2025," it also says "[b]oth the United States and the United Kingdom recognize that this document does not constitute a legally binding agreement."

Regardless of all that uncertainty, we have a few details of what is in, or is likely to be in, the deal, so let's take a look. When the U.S. pushed the UK into a trade negotiation by imposing the IEEPA tariffs, alongside the Section 232 steel/aluminum and auto tariffs, what was the result?

IEEPA tariff remains

A White House fact sheet states: "The reciprocal tariff rate of 10%, as originally announced on Liberation Day, is in effect." That's a big deal, with the UK conceding on a major point. With this tariff still in effect, UK exports are much worse off than they were prior to April 2.

If a deal on these terms looks unbalanced, can the UK government fight off criticisms that it got bullied into making too many concessions? Based on their press release, I can see how they are trying to spin this as a win. But it can be hard for governments to control these narratives. To some extent, the perception in the UK may depend on what other governments do in their own negotiations. If I understand the stated Trump administration position, the best that countries can hope for with regard to the "Liberation Day" tariffs is to end up with a 10% tariff. We'll see if that holds, but regardless I am interested in seeing (1) how each country will handle this in the negotiations, and (2) how the results play politically in different countries, especially when these countries start comparing their negotiating results.

Autos

On autos, the UK was able to get a TRQ under which most of its usual quantity of exports can be imported at a rate of 10%. The White House fact sheet says: "The United States will agree to an alternative arrangement for the Section 232 tariffs on UK autos." In this regard, "[u]nder the deal, the first 100,000 vehicles imported into the U.S. by UK car manufacturers each year are subject to the reciprocal rate of 10% and any additional vehicles each year are subject to 25% rates." And the General Terms document explains that: "The United States will create a quota of 100,000 vehicles for UK automotive imports at a 10 percent tariff rate, and an accompanying arrangement for attendant auto parts for such autos." The UK press release adds some more details: "Car export tariffs will reduce from 27.5% to 10% - saving hundreds of millions a year for Jaguar Land Rover alone. This will apply to a quota of 100,000 UK cars, almost the total the UK exported last year."

Most UK auto exports to the U.S. are items I can't afford: Rolls Royce, Aston Martin, and Bentley, and something described as "McLaren supercars." While this tariff adjustment doesn't help me or most Americans, these UK producers are not in as bad a place as they were with the full Section 232 tariffs, although of course they are worse off than before the Section 232 tariffs.

Beef and Ethanol

Agriculture is always a big issue for farm state members of Congress (many of whom are Republicans), and my sense is some of them have been holding off criticism of the Trump tariffs in the hopes that they will get something out of these negotiations. On agriculture, the White House fact sheet says: "This trade deal will significantly expand U.S. market access in the UK, ... [including] more than $700 million in ethanol exports and $250 million in other agricultural products, like beef."

Starting with beef, the General Terms says:

U.S. beef exports to the United Kingdom are currently subject to a 20 percent tariff within a quota of 1,000 metric tons (mt). The United Kingdom will remove the 20 percent tariff. Additionally, the United Kingdom will create a preferential duty-free quota of 13,000 mt for U.S. beef. In return, the United States will reallocate to the United Kingdom 13,000 mt of its existing “Other Countries” tariff rate quota (TRQ) for beef. 

This UK market opening helps U.S. producers out a little bit, although of course what they really want is to be able to sell hormone-treated beef in the UK. The UK press release appears to shoot this down: "There will be no weakening of UK food standards on imports." On this issue, hormone-treated beef (and chlorine-washed chicken) came up in a question at the press conference, and US Trade Rep. Greer answered:

I would just say that it's very clear, and we have in the [General Terms], that we are going to discuss all of these types of issues, and obviously the importing country, whether it's us or them, you gotta follow the rules on those types of things. But our point is the rules need to make sure that they are based on science, and that's our expectation. We know the UK believes that too. So we want to come to an accommodation. We want the consumers in each country to be able to choose what they want and give them the information.

My interpretation of his answer is that the same sorts of international SPS rules used in the past will be relied on here, rather than the UK immediately opening its market to these products. For what it's worth, the General Terms has the following to say on this subject:

The United Kingdom and the United States plan to work constructively in an effort to enhance agricultural market access. Further, both countries positively support future discussions to strengthen bilateral agricultural trade. The United Kingdom and the United States affirm that imported food and agricultural goods must comply with the importing country’s sanitary and phytosanitary (SPS) standards and other mutually agreed standards. The United Kingdom and the United States commit to working together to improve market access for agricultural products, to highlight concerns, and to increase agricultural cooperation on areas such as certain export verification programs to facilitate greater trade, and more formal bilateral engagement through international standard setting bodies.

Putting all of this together, my view on whether U.S. producers will get what they want in terms of selling these controversial products remains the same as it has always been: It's not going to happen. If I were these producers, I would focus on pushing for better market access for their non-hormone-treated/chlorinated products.

On UK exports of beef to the U.S., the UK press release states: "In a win for both nations, we have agreed new reciprocal market access on beef – with UK farmers given a quota for 13,000 metric tonnes." And the General Terms says: "the United States will reallocate to the United Kingdom 13,000 mt of its existing 'Other Countries' tariff rate quota (TRQ) for beef." But note that it is only recently that UK beef exports to the U.S. have resumed, after the mad cow scare of a couple decades ago, and there has been a small amount of exports over the last few years. When I talk about this with trade lawyers who work on beef trade issues, they have a hard time seeing UK beef exports growing much.

And on ethanol, the General Terms says: "the United Kingdom will offer a preferential duty-free TRQ of 1.4 billion liters for U.S. ethanol." The UK press release states: "We will also remove the tariff on ethanol – which is widely used in our manufacturing sector - coming into the UK from the US, down to zero." In terms of the practical impact here, an agriculture expert noted the following on this issue: "The U.S. exported $535 million in ethanol to the U.K. in 2024, according to USDA data, making ethanol the top agricultural export product to the U.K. As the industry touted the news, representatives in the ethanol industry were looking for more details about how the White House came up with the $700 million figure."

Steel

Turning to steel, there are some potentially interesting things here. The UK seems to have mostly gotten out of the Section 232 tariffs. The UK press release states: "The UK steel industry – which was on the brink of collapse just weeks ago – will no longer face tariffs thanks to today’s deal. The Prime Minister negotiated the 25% tariff down to zero, meaning UK steelmakers can carry on exporting to the US. This follows last month’s intervention from the Prime Minister to take control of British Steel to save thousands of jobs in Scunthorpe."

The White House fact sheet adds some detail:

• The United States also recognizes the economic security measures taken by the UK to combat global steel excess capacity and will negotiate an alternative arrangement to the Section 232 tariffs on steel and aluminum.
  • This deal creates a new trading union for steel and aluminum.

What will this "trading union" mean exactly? The Biden administration was trying to negotiate something on green and non-market steel and aluminum with various trading partners. I'm not sure Trump will care about green, but there could be some overlap here with what the Biden administration was doing. The General Terms adds a bit more context:

The United Kingdom will work to promptly meet U.S. requirements on the security of the supply chains of steel and aluminum products intended for export to the United States and on the nature of ownership of relevant production facilities. Understanding the United Kingdom will meet these requirements, the United States will promptly construct a quota at most favored nation (MFN) rates for UK steel and aluminum and certain derivative steel and aluminum products.

The full details of this arrangement are hard to pin down at this point, but an FT piece had some insights:

The UK has accepted strict US security “requirements” for its steel and pharmaceutical industries, in what diplomats see as template that Washington could use to exclude China from other countries’ strategic supply chains.

Thursday’s trade deal offered tariff relief to both industries, but only on the condition that Britain “work to promptly meet US requirements” on their supply chain security and the “ownership of relevant production facilities”.

UK officials said the provision applied to all third countries, but acknowledged that Trump had signalled that China was the intended target.

As industry groups sought to clarify the nature of the US requirements on supply chain security and ownership, trade experts argued that the deal indicated that the Trump administration was stepping up long-standing demands to restrict Chinese inputs to strategically important goods.

... Britain’s Labour government has rejected as “complete nonsense” accusations by the opposition Conservatives that this week’s deal, which also offers tariff relief for UK aluminium, hands Washington a “veto” over supply chains.  “There is no such thing as a veto on Chinese investment in this trade deal, this is not what this trade deal is about,” Darren Jones, Treasury chief secretary, told Times Radio.

One British official said: “The US do not want, given that the UK will have much lower tariffs than the rest of the world, to become somewhere where countries or companies could circumvent their rules via UK exports to the US. Details of that will be worked through.” 

It seems likely that whatever the details are here, they will be a model the U.S. uses for the other trade deals being negotiated.

Airplanes

An adjacent element (i.e., not in the text) mentioned at the press conference was that a British airline would buy $10 billion of airplanes from Boeing. News reports later indicated that IAG was placing a "new order for 32 Boeing 787-10 aircraft for British Airways, and 21 Airbus A330-900neo aircraft," while also disclosing "options exercised in March for six Airbus A350-900s, as well as six Airbus A350-1000s and six Boeing 777-9s." Is this IAG order different from what would have happened without the deal? Did Boeing get more than it otherwise would have?

The White House fact sheet also talks about how the deal "maximizes the competitiveness and secures the supply chain of U.S. aerospace manufacturers through preferential access to high-quality UK aerospace components." At the press conference, Commerce Secretary Howard Lutnick talked about letting "Rolls Royce engines and those kind of plane parts ... come over tariff free."

Issues to be negotiated: Digital, future Section 232 tariffs, compliance, review, MFN/WTO

The official documents make clear that there is still a lot to be worked out.

On digital, I can imagine something fairly significant will come out of this. The UK press release says: "The Digital Services Tax remains unchanged as part of today’s deal. Instead the two nations have agreed to work on a digital trade deal that will strip back paperwork for British firms trying to export to the US – opening the UK up to a huge market that will put rocket boosters on the UK economy." And the General Terms states: "Both countries confirm that they will negotiate an ambitious set of digital trade provisions that will include within its scope services, including financial services."

At the same time, the USTR fact sheet has a complaint about digital services taxes: "The United States is disappointed that the UK was unwilling to agree to fully address its discriminatory Digital Services Tax (DST). It is discriminatory, unjustified, and should be removed promptly."

So what does all this mean? Are digital services taxes still in play? Will there be a tech friendly deal with provisions that, at least on their face, constrain domestic regulation? Will such a deal be enforceable? Will it have an actual impact on UK regulation in this area?

The UK also seems hopeful it has shielded itself from future Section 232 tariffs (like this new investigation on aircraft and jet engines). Its press release says: "the US has agreed that the UK will get preferential treatment in any further tariffs imposed as part of Section 232 investigations." How will this commitment be worded in the final legal text? Will the UK really get what it is hoping for? The General Terms adds the following detail:

In addition to products already addressed in this document, the United States and the United Kingdom intend to adopt a structured, negotiated approach to other sectors that may be subject to Section 232 investigations or other tariff measures with a view to a significantly preferential outcome. Any such approach is contingent on the United Kingdom ensuring the security of supply chains, using appropriate measures, of products intended for export to the United States and on the findings of related U.S. investigations of, or other tariff measures related to, such sectors.

Another issue is whether this deal will actually be upheld, and what happens if it is not. Will there be a dispute settlement mechanism to adjudicate disagreements on compliance? Based on the General Terms, I suspect there will not be. All I see is a basic provision allowing for consultations, which I suppose could be used in the situation where there is a dispute over compliance:

The United Kingdom and the United States recognize that the purpose of this arrangement is to deepen our trade relationship based on mutual trust and a shared commitment to fair and reciprocal trade. On request of either country, the United Kingdom and the United States will consult with a view to considering any changes that may need to be made to this arrangement to ensure that it remains mutually beneficial.

So what happens if one side takes an action that the other side believes is not consistent with the terms of the deal? How does each side expect this scenario to play out? It would be useful to get on the same page about this now.

Somewhat relatedly, how durable will the specific terms of this agreement be? The General Terms says: "The United Kingdom and the United States further plan to discuss procedures for review and termination as part of the negotiations of the EPD." This raises the possibility that the U.S. might push for something like the USMCA six year review/extension process, potentially leading to regular renegotiations of the terms, in order to get to a certain result. What would the UK think of that possibility?

And finally, another big systemic issue is the following: Will the tariff lowering take place in a way that can be justified under WTO rules? That's a big one for anyone who cares about a rules-based trading system. The preferential beef and ethanol TRQs noted above are relevant here, as is the following from the General Terms:

Following a reasonable period of negotiation: (i) the United Kingdom intends to reduce its applied tariff rates on a preferential basis on a range of originating goods of the United States in sectors of importance to the United States; and (ii) the United States intends to reduce its applied tariff rates on a preferential basis on a range of originating goods of the United Kingdom in sectors of importance to the United Kingdom.

It seems clear from this language that tariff lowering will not be done on an MFN basis. Could it be justified under Article XXIV? While there may be some disagreement on what constitutes the "substantially all trade" that is required to comply with Article XXIV, the trade covered by the EPD does not seem likely to reach that level. While the WTO Committee on Regional Trade Agreements has not served as an effective check on what happens in bilateral and regional trade agreements, there is the possibility of using WTO dispute settlement here. If other governments see that their producers are at a disadvantage as a result of the preferential tariff lowering, would they file a WTO complaint?

The Second MPIA Appeal

The second appeal of a WTO panel report to the MPIA is underway in the China - IPRs Enforcement (EU) dispute (DS611). It will be interesting to see what approach the arbitrators take in terms of their scrutiny of the panel report. On the fairly technical IP issues that were the main subject of the dispute, along with some systemic issues related to the existence of a measure, how much deference to the panel will the arbitrators show?

With regard to who exactly will be deciding on the approach, the WTO announced on Friday that the following arbitrators will hear the case:

• Dr Penelope RIDINGS (Chairperson)
• Ms Claudia OROZCO
• Mr Mateo Diego-Fernández ANDRADE

Recall that the arbitrators in the first MPIA appeal were:

• Mr José Alfredo GRAÇA LIMA (Chairperson)
• Mr Alejandro JARA
• Mr Joost PAUWELYN

So who is left in the MPIA arbitrator pool that hasn't served yet? At the moment, it is these four:

• Mr Thomas COTTIER
• Ms Locknie HSU
• Ms Valerie HUGHES
• Mr Guohua YANG

(Note that Diego-Fernández Andrade and Yang served on a non-MPIA DSU Article 25 appeal arbitration.)

I said "at the moment" because there's also the question of the makeup of this pool going forward. A WTO document from last July suggests that there could be some adjustments coming to the composition of the pool:

The Members participating in the MPIA wish to inform the DSB that, should the conditions laid down in paragraph 15 of the MPIA communication still prevail on 1 March 2025, the process of partial re-composition of the pool of arbitrators will be launched at that point in time with a call to Members participating in the MPIA to nominate candidates by 31 March 2025. The participating Members intend to finalise the process of partial re-composition by 31 May 2025.

But I haven't heard anything more about this and it's not clear to me whether the process has started.

The next case on the MPIA's docket could be a repeat of the first one: There is a Colombia - Frozen Fries Article 21.5 panel going on right now, with the panel saying it expects to issue its final report to the parties during the third quarter of 2025.