On Friday, Huawei chief financial officer Meng Wanzhou flew home to China from Canada after reaching an agreement with U.S. prosecutors to end the bank fraud case against her, a point of tension between China and the United States.

Within hours of the news of the deal, the two Canadians who were arrested shortly after Meng was taken into custody were released from Chinese jails and were on their way back to Canada. Beijing had denied that their arrests were linked.

When asked if the White House was involved in brokering a “prisoner swap,” White House press secretary Jen Psaki rejected the premise.

The deferred prosecution agreement with Meng was “an action by the Department of Justice, which is an independent Department of Justice. This is a law enforcement matter,” she said, adding, “There is no link.”

But Psaki also confirmed that in a call on Sept. 9, two weeks before the announcements, Chinese President Xi Jinping brought up Meng’s case and U.S. President Joe Biden pressed for the release of the two Canadians, businessman Michael Spavor and former diplomat Michael Kovrig, who had been held in China for more than 1,000 days.

“It should not come as a surprise that President Xi raised the Huawei official, but…there was no negotiation on this call. These two leaders raised the cases of these individuals but there was no negotiation about it,” Psaki said.

When asked, Psaki said she had no information on whether Biden knew about the status of the negotiations between Meng’s lawyers and the Justice Department.

Meng had been arrested at Vancouver International Airport on a U.S. warrant, and was indicted on bank and wire fraud charges for allegedly misleading HSBC in 2013 about the telecommunications equipment giant’s business dealings in Iran.

The years-long extradition drama had been a central source of discord in increasingly rocky ties between Beijing and Washington, with Chinese officials signaling that the case needed to be dropped to help end a diplomatic stalemate.

Psaki emphasized the deal announced on Friday did not indicate a softening of U.S. concerns about Chinese behaviour.

“Our policy has not changed, our policy toward China,” Psaki said. “We are not seeking conflict. It is a relationship of competition and we are going to continue to hold the PRC to account for its unfair economic practices, its coercive actions around the world and its human rights abuses,” she said, using the acronym for the People’s Republic of China.

— Reporting for Reuters by Alexandra Alper and Steve Holland.

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The European Commission has stressed that any beef deal will not increase overall beef imports and that all the beef coming in would be hormone-free, in line with EU food safety rules. The deal needs European Parliament approval.

“The agreement that we sign today will lower trade barriers in Europe and expand access for American farmers and ranchers,” Trump said at a gathering of European Union officials and cowboy-hatted American ranchers in the White House Roosevelt Room for the announcement.

The agreement was then signed by U.S. Trade Representative Robert Lighthizer, Stavros Lambrinidis, the European Union’s ambassador to the United States and EU representative Jani Raappana.

Trump joked that his administration was working with the EU “on a 25 percent tariff on all Mercedes-Benz and BMWs coming into our nation.”

“So, we appreciate – I’m only kidding,” he said to laughter.

But talking to reporters later, he said imposing the tariffs on European autos remained a possibility.

“Auto tariffs are never off the table,” Trump said. “If I don’t get what I want, I’ll have no choice but maybe to do that. But so far they’ve been very good.”

The beef deal could help alleviate some of the damage to the domestic agricultural industry because of tariffs Beijing has imposed on U.S products in retaliation for U.S. levies on China.

Trump said in the first year duty-free U.S. beef exports to the EU will increase by 46 percent and over seven years will rise 90 percent further. “In total the duty-free exports will rise from $150 million to $420 million, an increase of over 180 percent ,” he said.

Without mentioning China by name, Lambrinidis said the United States and Europe could work together to stand against countries that did not compete fairly in the global market.

“The agreement shows us that as partners we can solve problems,” he said.

Quota

EU sources and diplomats in June said a deal had been reached to allow the United States a guaranteed share of a 45,000 tonne European Union quota.

There are 17 U.S. slaughterhouses approved to export beef to Europe, run by companies including Tyson Foods Inc, National Beef Packing Company, Greater Omaha Packing and JBS USA’s Swift Beef Company, according to U.S. Department of Agriculture records.

“Our ability to participate in trade with the EU over the years has been challenged by limitations,” Tyson said. “This agreement provides the opportunity for a more consistent flow of high quality beef product to meet customer and consumer demands.”

Opportunities for U.S. meat producers to export beef to the EU under the quota have been inconsistent as other suppliers such as Australia, Uruguay and Argentina have been approved to ship under the quota.

The U.S. beef industry believes spotty access to the market is a reason why more American farmers do not raise their cattle without hormones, which speed up growth. The EU bans beef from cattle treated with synthetic growth hormones.

“The biggest problem with the European market has been the uncertainty,” said Kent Bacus, director of international trade for the National Cattlemen’s Beef Association, an industry group.

U.S. farmers have suffered from trade disputes with other trading partners, including China and Mexico. China last year imposed retaliatory tariffs on American farm goods including pork.

Friday’s announcement coincides with Trump ratcheting up Washington’s trade dispute with China. On Thursday, he said he would impose a 10 percent tariff on $300 billion of Chinese imports from Sept. 1 and threatened to raise tariffs further if Chinese President Xi Jinping failed to move faster on striking a trade deal.

The dispute between the world’s two top economies has hurt world growth, including in Europe, as it enters its second year.

U.S. and European officials have sought to lay the groundwork for talks on their own trade agreement but have been stymied over an impasse on agriculture.

The agreement on beef could, however, ease tensions between the two sides, which are each other’s largest trading partners.

The Trump administration has been pursuing a host of new trade deals with Europe, China and others as part of the Republican president’s “America First” agenda as he seeks a second term in office, but difficulties in securing final pacts have roiled financial markets.

European stocks on Friday were battered by Trump’s latest salvo against China and Wall Street also took a hit.

– Additional reporting by Andrea Shalal, Jeff Mason and David Alexander and Susan Heavey in Washington, Tom Polansek in Chicago and Foo Yun Chee in Brussels.

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Trudeau is to travel to Washington on Thursday to meet with President Donald Trump to discuss ratification of the new North American trade accord, known as the United States-Mexico-Canada Agreement.

Mexico’s Senate is scheduled to take up the legislation in a full vote on Tuesday.

The Trump administration has been pushing Congress to speed up a vote on the agreement. But the House of Representatives has sought more time to review the deal, with Pelosi pressing for improved enforcement mechanisms for labour and environmental standards.

Republicans, who control the U.S. Senate, have been seeking a vote on the USMCA before the August recess to avoid budget debates and 2020 presidential campaign activity, which is expected to intensify in the autumn.

Pelosi controls the overall House legislative agenda, including trade measures, and many political experts see USMCA as unlikely to come to a vote in that chamber during the summer.

Nevertheless, the U.S. Chamber of Commerce, a powerful business lobby seeking quick passage of the accord, sees progress for the deal as feasible in the short term, despite concerns voiced by Democrats.

“We think the objective of securing a vote on USMCA in the House before the August recess is a reasonable goal,” the chamber’s senior vice-president for international policy, John Murphy, told reporters in a phone call Monday. “The gaps are bridgeable.”

He pointed to Pelosi’s move to appoint a number of House Democrats to a working group with officials at the U.S. Trade Representative’s office to address their concerns as cause for cheer.

Trudeau’s meetings with congressional leaders were first reported by Politico. Trudeau’s meeting with Pelosi is scheduled for 2 p.m. on Thursday, a Pelosi aide said.

Canada’s government confirmed Trudeau will meet with U.S. House and Senate leaders on Thursday but provided no details.

— Reporting for Reuters by Richard Cowan and Alexandra Alper; additional reporting by Steve Scherer in Ottawa; writing by Alexandra Alper.

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Just two weeks before the "position limits" rule was to take effect, U.S. District Court Judge Robert Wilkins sent it back to the U.S. Commodity Futures Trading Commission (CFTC) for further consideration.

The court said the Dodd-Frank law did not give the agency a "clear and unambiguous mandate" to set position limits without showing they were necessary.

It is the second legal setback for regulators struggling to implement the sweeping reforms enacted after the 2008 financial crisis and the first for any CFTC rule in the agency’s history.

CFTC chairman Gary Gensler, who had made reining in speculation a top priority, said he was "disappointed" and considering other options.

"I believe it is critically important that these position limits be established as Congress required," Gensler said in a statement.

Experts said the decision may embolden the financial industry to push ahead with more lawsuits.

"I think outside of Washington, people expected that Congress passes a law the President signs it and these things can immediately go into effect, but it is clear the courts will have a lot to say about how Dodd-Frank is implemented," said James Overdahl, a former chief economist at the CFTC and current vice president at NERA Economic Consulting.

Wilkins also found that the Dodd-Frank bill required the CFTC to prove caps are "necessary" to diminish or prevent excessive speculation. Experts have debated for years whether speculation makes commodity prices more volatile.

The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association, which brought the suit against the agency, lauded the court decision. The groups argued that the regulations would force their members to drastically alter their businesses, cost them tens of millions of dollars, and send customers fleeing.

The ruling is a victory for Wall Street banks like Goldman Sachs and JP Morgan, which had feared the rule would halt growth in their lucrative business selling commodity derivatives to financial investors.

It also offers breathing room for other energy, metal and grain traders who were unsure how the limits would apply to the complex over-the-counter swaps market. Some feared they may inadvertently violate the limits when the first phase came into effect Oct. 12.

Necessity

Wilkins, an appointee of U.S. President Barack Obama who joined the bench in December 2010 after working as a corporate defense lawyer, did not rule on whether the agency had sufficiently weighed the economic benefits of the rule against the costs.

The cost-benefit issue was the crux of a court ruling last year that rejected the Securities and Exchange Commission’s "proxy access" rule that would have made it easier for shareholders to nominate directors to corporate boards.

Instead Friday’s ruling said the Dodd-Frank law did not compel the CFTC to make the rule unless the agency demonstrated that position limits are "necessary."

Experts said that could make it harder for the CFTC to prevail if it does appeal Wilkins’ decision.

"Now that the ‘necessity’ issue is back in play it’s unclear what will happen," said one compliance executive at a major commodity trader. "If it were just the cost/benefit issue it might slow things down…. But necessity is a thornier issue, I don’t know they have the votes."

The agency only narrowly passed the position limit rule in October 2011, in a bid to limit the number of contracts traders can hold in 28 commodities, including oil, coffee and gold. The two Republican commissioners on the five-member panel voted against the limits, questioning the agency’s authority to pass them.

Supporters of the measures were quick to blast the ruling.

Senator Bernie Sanders, an independent from Vermont who has strongly pushed for the trading curbs, on Friday called on the CFTC to appeal the decision, noting Dodd-Frank "clearly required" the CFTC to impose strict limits.

"Sadly, one judge has disagreed and is preventing even the weakest rules on oil speculation limits to go into effect," Sanders said in a statement.

Political blow

Obama and U.S. lawmakers have argued that regulators should be doing more to rein in traders who may be driving up the price of oil for consumers. But Wall Street has argued that regulators have not proven position limits would curb speculation in markets and prevent disruptive price spikes.

Critics said position limits could inadvertently make markets more volatile, not less, because traders would move deals to overseas exchanges with looser regulations, reducing liquidity in U.S. markets.

The ruling comes just as the CFTC shows it is getting tough with excess speculation through enforcement of existing rules.

In the past month alone, firms and individuals have agreed to pay the CFTC more than US$2 million to settle charges involving trades in cotton, oilseed and grain markets that are already subject to limits.

— Alexandra Alper writes for Reuters from Washington, D.C.

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In testimony before the U.S. Senate’s agriculture committee, Commodity Futures Trading Commission chairman Gary Gensler was also expected to outline his agency’s plans to contain the fallout from the Peregrine Financial Group case, including a look at the role of self-regulatory organizations (SRO) that police much of the market.

"Although we do not know the full facts of what happened in this matter, the system failed to protect the customers of Peregrine," Gensler said in prepared testimony. "Just like the local police cannot prevent all bank robberies, however, market regulators cannot prevent all financial fraud.

"Nevertheless, we all must do better."

The stunning downfall of Peregrine, or PFGBest, and its founder, Russell Wasendorf Sr., dealt a new blow to confidence in the futures industry, just months after MF Global Holdings’ bankruptcy, which left customers with a $1.6 billion shortfall and which is still being investigated (all figures US$).

Some of the fiercest criticism has been leveled at the National Futures Association (NFA), the first-line regulator that oversees dozens of smaller brokers, including PFGBest.

"The recent events at Peregrine highlight the necessity of looking at the decades-old system of SROs as first-line regulators and the commission’s role in overseeing SROs," Gensler said.

Two violations

The MF Global and PFGBest scandals have raised questions about the strength of federal commodities regulations designed to segregate and protect customer funds.

Wasendorf was arrested Friday and charged with lying to government regulators. The CFTC charged him with misappropriating customer money in a civil case. His firm filed for bankruptcy.

The NFA eventually uncovered the fraud after it sought to confirm PFGBest’s bank balance electronically. Prior to that, the NFA had conducted such checks through the mail. Wasendorf used a post office box to intercept the bank confirmation requests and forge the documents to conceal the missing customer money, according to an FBI complaint.

"I find that mind-boggling that no one at NFA could discern this," said Senator Tom Harkin, an Iowa Democrat.

Gensler said Tuesday the NFA had just completed an audit of the brokerage in May 2011 and was in the process of conducting another one over the past few weeks when the fraud was uncovered.

Senator Pat Roberts, the committee’s ranking Republican member, slammed Gensler for failing to provide market players a clear plan for a raft of derivatives reforms mandated by the 2010 Dodd-Frank law.

"And as if this weren’t bad enough, the CFTC isn’t doing a good job of what it was created to do — police the financial streets," Roberts added. He said Gensler was "too busy working on his inter-galactic plan" — a nod to the heavy slate of Dodd-Frank reforms — rather than implement reforms after MF Global.

New rules

On the same day as Wasendorf’s arrest, the CFTC moved to approve new customer protection rules requested by the NFA.

One such rule, named for MF Global’s former CEO, Jon Corzine, would require top executives at futures brokers to sign off on major withdrawals from customer accounts.

But Gensler said Tuesday that more steps need to be taken.

"I believe it is critical that we bring the regulators’ view of customer accounts into the 21st century," he said. "We must give the SROs and the CFTC direct electronic access to the FCM’s (futures commission merchants) bank and custodial accounts for customer funds, without asking the FCM’s permission."

He also noted that letters confirming bank balances "must come directly to regulators from banks and custodians."

Gensler hopes to incorporate the new NFA regulations approved last week into the commission’s own rules, so it can "directly enforce" the reforms.

Moreover, he called for giving customers more transparency into their holdings, as well as greater oversight for how SROs such as the NFA conduct examinations.

He said he has asked for a public roundtable to discuss what other customer protections are needed.

— Sarah N. Lynch and Alexandra Alper write for Reuters from Washington, D.C.

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