Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. EXCLUSIVE — TRADE FIGHT ON TAP: Sens. Ron Wyden (D-Ore.) and Crapo are urging USTR Katherine Tai to pledge to retaliate if Canada moves forward with its digital service tax on American tech giants that is slated to come into force next year, according to a letter dated Oct. 10 and obtained by Morning Trade. “We appreciate you previously noting that ‘[i]f Canada adopts a DST, USTR would examine all options,’” the lawmakers said, referencing comments USTR made in February 2022 vowing to consider retaliatory options in response to Canada’s proposed digital service tax. “Canada’s political leadership has not been dissuaded. You must now make clear that your office will immediately respond using available trade tools upon Canada’s enactment of any DST. When you take these steps, you do so with our full support.” Reminder: The Canadian government is planning to impose a 3 percent digital service tax on Jan. 1, 2024, despite most of the 140 economies participating in an effort led by the Organization for Economic Cooperation and Development agreeing to a one-year extension of a moratorium on similar digital services taxes through the end of next year. The revenue tax would affect large technology companies like Meta, including corporations with online marketplaces like Walmart and Amazon. “We must not allow foreign governments to target U.S. companies and the Americans they employ simply because their hard work and innovation has led them to becoming global leaders in this critical sector,” the lawmakers said, referencing data from the Bureau of Economic Analysis. Katherine Cuplinskas, a representative of the Canadian government, pushed back against the letter in a statement to Morning Trade, which said “Canada's priority and preference has always been a multilateral agreement.” “Canada strongly supports international efforts to end the corporate tax race to the bottom and to ensure that all corporations, including the world’s largest corporations, pay their fair share. The Canadian government has been clear for several years that it would move forward with its own Digital Services Tax if a global agreement is not reached,” Cuplinskas added. Congressional backlash builds: Eighteen Democrats and 23 Republican lawmakers signed a House letter last month warning that Canada’s digital services tax could damage bilateral relations between the two North American partners. IPEF TRADE TALKS UNDERWAY: USTR is finalizing several portions of the IPEF trade pillar which could be announced next month, while progress on thornier disputes over critical minerals and the digital economy is not expected to make significant headway until 2024, per sources familiar with negotiations, and an Indonesian government readout. “The United States is targeting several clusters in the IPEF Pillar I to be completed by November 2023. So far, IPEF member countries have expressed support for technical assistance projects, investor forums, upscaling skills, networking and capacity building as a form of real benefits that can be achieved together quickly,” per a translation of the readout, which added that USTR Katherine Tai would focus on the remaining clusters next year. Airlangga Hartarto, coordinating minister for economic affairs of Indonesia, emphasized the importance of discussion over critical minerals cooperation and that he hopes “this can be discussed at the 6th round of IPEF negotiations in Kuala Lumpur, Malaysia.” Quick reminder: Tai hosted a virtual trade ministerial meeting last week ahead of the sixth IPEF negotiating round slated for Oct. 15-24 where the 14 countries are expected to make headway on the remaining trade, clean economy and fair economy pillars. The trade pillar is expected to cover legally binding commitments over contentious disputes, which could make agreements more difficult to reach compared to the Commerce-led initiatives. Notably, agreements over critical minerals and digital priorities are not expected to be finalized by the end of next month, per two persons familiar with negotiations who were granted anonymity because they are not authorized to speak on record. EU, U.S. PUSH BACK DEADLINE FOR REACHING GREEN STEEL DEAL TO JANUARY: Brussels and Washington are pushing back a self-imposed end-of-October deadline for reaching a green steel and aluminum deal to January, three EU trade diplomats told Morning Trade. This comes as the United States and the European Union scramble to come up with concrete deliverables for a transatlantic summit Oct. 20 in Washington. Not only reporters procrastinate. The Biden administration and the European Commission are cooking up a political statement that promises to land an agreement by Jan. 1 that would lay to rest the possibility of reimposing Trump-era steel and aluminum tariffs. Way forward: EU countries approved on Monday a so-called non-binding instrument(NBI) that would allow the Commission to negotiate the joint statement with the United States on the way forward for the green steel agreement. This interim agreement would allow both sides to save face and to work out a political outline that would then be ironed out at the technical level.
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