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KORUS Agreement Has Shown Strong Results on Two-Year Anniversary

March 15th marked the two-year anniversary of the Korea-U.S. Free Trade Agreement’s (KORUS FTA) entry into force and the facts are clear. Despite what some trade critics say, exports of U.S. manufactured goods to Korea have increased.  Thanks to KORUS, more than 95 percent of U.S. industrial and consumer goods are entering the Korean market duty-free, and as a result, exports of U.S. manufactured goods to Korea have gone up 3.1 percent or $1 billion since the agreement was implemented. Specifically, exports of electrical equipment, appliances and other components jumped 22.5 percent and exports of pharmaceuticals experienced a huge increase of 52 percent! Moreover, U.S. manufactured goods saw an increase in exports to Korea of 9.2% from January 2013 to January 2014, while manufactured goods exports from Korea to the U.S. only increased 3.1 percent.

The U.S. Trade Representative’s (USTR) Office released a fact sheet on the enhanced opportunities the KORUS agreement has created over the last two years. “In its second year, this landmark agreement continues to provide tangible benefits for American businesses, workers, and farmers exporting to our sixth-largest trading partner,” USTR stated.  As USTR notes, the overall U.S.-Korea trade balance has been negatively impacted by decreases in corn and fossil fuel exports due to the U.S. drought in 2012, but those events are unrelated to the agreement’s implementation. USTR also noted slowed economic growth in Korea over the past two years was associated with decreased demand for all of its imports – not just those from the United States. In addition, the European Union’s free trade agreement with Korea entered into in July 2011, so it is likely that manufacturers in the EU had the advantage of moving their products into Korea’s market first.  As the global economy continues to improve, we hope to see even stronger U.S. exports to Korea.

At the same time, the NAM is working closely with our members, USTR and the Korean government to resolve some key issues with KORUS implementation including customs issues for certain U.S. exports to Korea and an array of non-tariff barriers, especially in the auto sector, which greatly impede manufacturers’ access to the Korean market. Last week, Korean ambassador to the United States Ahn Ho-young expressed a commitment to addressing any outstanding issues with implementation of the KORUS agreement. It is critical that Korea remain focused on resolving these challenges and that the Korean government continue working with the U.S. government to respond to market access concerns from manufacturers in the United States – especially if it is serious about seeking accession to the Trans-Pacific Partnership (TPP) agreement.

Additionally, more work needs to be done to ensure that manufacturers in the United States are aware of the new export opportunities in Korea resulting from the KORUS FTA. Manufacturers can visit FTA Tariff Tool to determine tariff levels for their exports to Korea.

While it’s still too early to determine the full impact of KORUS on U.S. manufactured goods exports, a closer look at the numbers reveal that they are headed in the right direction, and manufacturers believe that continued cooperation with Korea will only strengthen our economic ties and expand the benefits of the KORUS agreement.

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NAM Applauds Critical Step Taken by the Pacific Alliance

The NAM welcomes this week’s announcement by the Pacific Alliance – Chile, Colombia, Mexico and Peru – that they have signed an agreement to eliminate tariffs on 92 percent of goods. The other 8 percent of tariff eliminations will be phased in over time. The Alliance of these Latin American nations was kicked off in April 2011 and formalized in June 2012. Together, these four countries comprise 210 million people – more than a third of Latin America’s population and more than Brazil’s. Combined they boast an economic output of 35 percent of Latin America and the Caribbean’s GDP and roughly 50 percent of Latin America’s trade flows. The Alliance’s objectives include economic integration and a gradual move towards the free circulation of goods, services, capital and persons. But perhaps one of the Alliance’s primary goals is to deepen the region’s trade ties with Asia, whose markets are rapidly expanding.

This critical first step by the Alliance is substantial and much needed in a region where trade-liberalization has been under attack in recent years. For example, Argentina has broken a number of its core WTO commitments and the United States, Canada and others have a pending WTO case against them. There are also ongoing concerns about Brazil’s use of localization requirements to effectively close its market to U.S. and other exports. The four members of the Pacific Alliance, on the other hand, have long supported the ideals of free trade and market-opening agreements.

The Pacific Alliance is being characterized as a living agreement and Costa Rica has indicated its intention to sign on as a full member. A prerequisite of acceding to the Alliance is having free trade agreements in force with the other members. While Costa Rica has agreements with all four, its deal with Colombia has not yet been implemented. Notably, the United States has observer status, along with 22 other nations, including Germany, Great Britain, and Italy which will not be allowed to join as full members as they fail to meet the second requirement, which is having a coastline on the Pacific.

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Congress Needs to Act NOW on the MTB

Tomorrow marks an unfortunate anniversary for manufacturers in America.  400 days will have passed without Congressional action on the Miscellaneous Tariff Bill (MTB).

For three decades, Congress has supported manufacturing in America by suspending import taxes on necessary manufacturing inputs and raw materials that are not available in the United States and must be imported from other countries. The last MTB enacted into law expired on December 31, 2012, which has resulted in significantly higher costs and in some cases, reduced hours for workers and even layoffs.

The MTB strengthens manufacturers’ global competitiveness by cutting their production costs. Doing so supports thousands of domestic manufacturing jobs. In fact, the MTB enacted in 2010 was estimated to support 90,000 jobs, increase U.S. production by $4.6 billion and expand U.S. GDP by $3.5 billion. Moreover, failure to pass a new MTB will result in a staggering $748 million tax hike on manufacturing over the next three years. This translates into a whopping $1.857 billion in economic losses. Manufacturers across a broad range of industries are already paying this $748 million tax and are calling on Congress to act as swiftly as possible on this commonsense, bipartisan and jobs-supporting legislation.

Numerous manufacturers, like Glen Raven in Burlington, North Carolina, rely on the MTB in order to make their products here in the United States. The President and CEO of Glen Raven, Leib Ohmig, recently shared with the NAM the importance of the MTB to his business: “Glen Raven is one of the world’s leading manufacturers of performance fabrics used in the furniture, automotive, safety, marine and sun shade industries. Since the raw materials required to manufacture these fabrics are no longer available in the United States, Glen Raven relies on the MTB to ensure these inputs can be sourced competitively. The expiration of the MTB has resulted in a significant tax on American manufacturing and made companies less competitive in the global marketplace. Glen Raven urges Congress to promptly pass the MTB as a means to spur much needed job creation and economic growth in the United States.”

DuPont also relies heavily on the MTB for their crop protection business. James Hay, Business Director for DuPont Crop Protection, North America said, “Duty suspensions increase the competitiveness of our U.S. manufacturing base by lowering our input costs and providing us the tools to sustain U.S. production. Lower manufacturing costs provide opportunities for business growth to support our company’s mission of sustainable growth.”

For companies like Glen Raven, DuPont, Lasko Products, BASF, Bayer CropScience and many others, the MTB is critical to keeping their costs low, enhancing their competitiveness in the global market, and most importantly, to sustaining and growing manufacturing jobs here in the United States.

Congressional action on this critical jobs bill is long overdue.  Tell Congress to ACT NOW!

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Manufacturers Welcome Environmental Goods Talks at WTO

On Friday the United States, European Union, China and several other countries announced negotiations to expand global trade in green goods. The nations are exploring opportunities to reduce tariffs on environmental products, building on the APEC List of 54 Environmental Goods, through negotiations at the World Trade Organization (WTO).  Negotiations that result in the elimination of tariffs on environmental technologies would significantly help manufacturers of innovative products cut their costs and would improve access to cutting edge technologies for countries all over the world.

Some countries currently apply tariffs as high as 35 percent on environmental goods.  The nations entering into the green goods talks make up 86 percent of the global market in environmental goods, and global trade in environmental goods is worth an estimated $955 billion. Efforts to liberalize trade with respect to these products will have a substantial impact on manufacturers in the United States who develop and produce products aimed at solving environmental challenges, enhancing their ability to minimize costs and create new manufacturing jobs.

Green goods negotiations are part of an effort to build on the WTO’s success in concluding negotiations on a Customs and Trade Facilitation agreement at last year’s Bali Ministerial Round.  Manufacturers applaud continued efforts by the WTO to multilaterally liberalize trade but cutting and eliminating tariffs and working to remove non-tariff barriers that stifle trade and economic growth and it is critical that WTO negotiators from all countries at the table seek to build consensus on a list of goods that would have a commercially meaningful impact on trade in green goods.

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Third Round of Transatlantic Trade and Investment Partnership Talks Kick Off in Washington This Week

U.S. and European negotiators have been meeting this week in the third round of Transatlantic Trade and Investment Partnership (T-TIP) talks. The United States and the European Union (EU) already have the world’s largest commercial relationship, accounting for nearly half of global economic output. Despite these robust commercial ties, manufacturers see tremendous opportunities to strengthen further the U.S.-EU economic relationship.

The T-TIP agreement has the potential to boost economic growth and jobs on both sides of the Atlantic, and to demonstrate the strong leadership of the United States and the EU to the rest of the world. Manufacturers have a number of priorities in these negotiations.  During today’s T-TIP stakeholder event, I discussed a few key areas of importance to manufacturers: regulatory cooperation, investment, customs & trade facilitation, cross-border data flows, and privacy issues.

Among the NAM’s primary objectives regarding regulatory issues are to strengthen transparency and public participation in the process of developing rules and regulations, as well as remove unnecessary regulatory barriers to trade and prevent future divergence between EU and U.S. regulations, where appropriate. Regulatory barriers not only limit market access, but also substantially increase costs for both U.S. and EU manufacturers, undermining their global competitiveness. We urge negotiators to work with specific industry sectors to identify areas where greater cooperation is possible, and emphasize that work to eliminate unnecessary regulatory divergences and prevent future divergences must be demand-driven.

While the United States and EU already share a vibrant cross-border investment relationship, the NAM also places a high priority on continuing to promote strong cross-border investment through the adoption of strong and enforceable rules in the T-TIP.  Such rules reflect core rule of law principles found both in the U.S. and EU and should also set a strong precedent for negotiations with third countries.

Manufacturers also strongly believe that the T-TIP agreement should reduce the cost of business operations and processing through improved customs and trade facilitation provisions. The agreement should include a robust de minimis level to enhance opportunities for small and medium sized companies and incorporate other rules to enhance trade flows and reduce red tape.

In addition, the T-TIP should ensure that cross border data flows are permitted while also safeguarding IP rights, and to prohibit localization requirements to use local information infrastructure to conduct business. Manufacturers are increasingly using digital platforms to reach new customers and to produce more efficiently around the world.  The T-TIP needs to incorporate rules that promote opportunities in an increasingly digital economy.

A growth-producing U.S.-EU agreement will enhance efficiency for manufacturers, and will not impose rules or standards that would undermine innovation and thwart economic growth. The need for a meaningful transatlantic trade agreement has never been greater and the NAM strongly urges negotiators to take full advantage of the momentum that has been created over the last two years, to produce an agreement with the strongest economic outcomes possible.

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It’s Time to Renew the Generalized System of Preferences

The Generalized System of Preferences (GSP) expired on July 31 of this year and an act of Congress is required to restore these trade benefits. GSP is a tremendously important U.S. trade preference program created to promote economic growth in developing countries through trade. Because of the duty-savings on imports from GSP beneficiaries, many manufacturers in the United States have an incentive to purchase raw materials and inputs from these developing countries. Without GSP, many manufacturers’ costs are higher and their competitiveness undermined. It is due time that Congress move forward on this bipartisan initiative.

GSP is particularly important for manufacturers who cannot source inputs domestically.  Over the years, GSP has helped promote growth and development in the world’s poorest economies by providing unilateral duty-free treatment for up to 5,000 products from 126 countries, while also reducing prices for U.S. producers and consumers. In exchange for receiving GSP benefits, participating countries must meet certain mandatory eligibility criteria.

Manufacturers have been operating without GSP for nearly five months, resulting in significantly higher production costs. Momentive, for example, is a $7.5 billion American manufacturer of specialty chemicals and performance materials with business evenly divided among the U.S., Europe, and Asia.  Momentive develops and produces high-performance resins, silicones and other advanced materials and has a presence in 21 states and in 28 countries worldwide.  Their products are manufactured in New York, Ohio, West Virginia, Florida, North Carolina, Oregon, Indiana and California, and they employ 4,000 people in R&D, manufacturing, marketing, sales and administration in the United States.

“The GSP program helps us remain competitive by lowering the costs of raw materials,” said Roger McCrary, Vice President for Global Trade Management at Momentive. “Our ability to remain an innovative, cutting-edge American company requires access to affordable raw materials. With the increase in tariffs resulting from GSP’s expiration, we need to cut from other parts of our budget, such as R&D. That has an impact on our bottom line and future products. We hope that Congress will resolve the political fight on funding offsets so this tax on raw materials can be removed.”

With the manufacturing sector facing ongoing economic challenges, passing GSP is one small step Congress can take to improve manufacturers’ competitiveness and cut their production costs.  We strongly urge the Senate and House to work collaboratively to identify an offset for GSP that allows its bipartisan passage through Congress as expeditiously as possible.

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Trading Up: Improved Customs Processes, Appropriate De Minimis Commitments and Overall Trade Facilitation are Critical to Growing Exports in the Asia Pacific

As Trans-Pacific Partnership (TPP) negotiators continued significant intercessional discussions this week, manufacturers are focused on their priority issue areas in the 12-country trade talks, from market access to strong protections for intellectual property (IP) and cross-border data flows.  Another key component of growing U.S. exports and one that must be addressed in the final TPP agreement is cutting red-tape at the border and improving customs processes and rules.

The elimination of red-tape at the border would have a significant impact on improving opportunities through trade. A recent World Economic Forum (WEF) study found that reducing global supply chain barriers could increase world GDP by nearly 5% and boost international trade by nearly 15%!

Manufacturers are increasingly linked to a global web of interconnected supply chains. Inputs, materials and components come from all over the world to create products with the greatest value for consumers. As a result, 56% of all international trade today is in intermediate goods – semi-finished products and other inputs.

TPP negotiators should include in the final text of the agreement as many provisions aimed at easing trade facilitation and minimizing customs burdens as possible. Doing so would greatly enhance the tangible outcomes of the TPP agreement.

In addition, unnecessary red-tape can increase transit times, which can disproportionally impact small- and medium-sized manufacturers (SMMs) and increase production costs. One of the most essential provisions in this regard is agreeing to appropriate de minimis standards – basically setting a value below which no duty or tax is charged and clearance procedures, including data requirements, are minimal. To help SMM growth through trade, TPP negotiators should ease the burden of customs paperwork that SMMs face with even low-value shipments of necessary manufacturing inputs. Negotiators can achieve this objective by increasing the de minimis threshold, which would greatly benefit SMMs by stimulating their output.

According to a 2003 paper by the OECD, which recommends the adoption of de minimis thresholds, firms with fewer than 250 employees face trade transaction costs that are 30-45 percent higher than those incurred by larger firms because they don’t have the same “simplified procedures” that large companies implement. These transaction costs become more important during periods of economic turmoil, when SMMs are even more vulnerable to cost burdens. Appropriate de minimis thresholds abroad can also benefit U.S. exporters who are shipping directly to foreign consumers or supplying to foreign companies.

A commercially meaningful de minimis threshold also creates efficiencies at CBP that can benefit manufacturers of all sizes. Collecting duty revenue involves manpower on the part of CBP, and the costs of collecting duties on low-value goods often exceeds the revenue generated from those tariffs.

TPP partners should stay at the table to ensure that the TPP negotiations yield the “comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st-century challenges” that TPP leaders called for two years ago. Manufacturers look forward to an ambitious, high-standard and comprehensive agreement that includes strong customs and trade facilitation provisions to ensure that transaction costs and burdens are reduced, easing the flow of goods across borders, and improving the competitiveness of manufacturers big and small throughout the United States.

Trading Up is a blog series from manufacturers, which focuses on the need for a comprehensive, high-standard Trans-Pacific Partnership (TPP) that eliminates barriers, creates concrete new market access and levels the playing field for manufacturers in the United States.

 

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Time is Running Out for Congress to Act on the Miscellaneous Tariff Bill (MTB)

As time on the legislative calendar runs low, one of the easiest and most bipartisan ways for Congress to support manufacturing jobs in the United States is to pass the MTB, which expired 316 days ago.

Up until 2010, Congress had supported manufacturing for thirty years by suspending import taxes on necessary manufacturing inputs that are not available in the United States and must be imported from other countries. Congress has normally done so by voice vote but unfortunately 3 years ago, the linkage was erroneously made between the MTB and Congressional earmarks, which have been banned by Capitol Hill.

The NAM has long believed that the tariff-eliminating provisions contained in the MTB are not at all earmarks. For one thing, they are not directed spending. Instead, they amend the Harmonized Tariff Schedule which applies to all importers – which means they are not limited benefits, either.  So, while some in Congress continue contemplating whether these tax-cutting and job-supporting provisions meet the definition of an earmark, manufacturers in the United States are paying what will amount to a $748 million tax hike which greatly damages their global competitiveness and hinders their ability to retain and create new jobs.

Even well-known conservative leaders and staunch earmark opponents like Americans for Tax Reform President Grover Norquist agree that the duty suspensions are not at all earmarks. In yesterday’s Washington Times piece entitled “Cutting job-killing tariffs,” Mr. Norquist aptly points out that tariffs are taxes and therefore, the MTB is a package of tax cuts. Period. The longer Congress takes to act, the longer manufacturers will be paying a quarter of a billion dollars annually on manufacturing inputs that aren’t even available domestically.  It’s just that simple.

Congress continues to delay action on this critically important bill despite the fact that it enjoys broad bipartisan support in both chambers of Congress and in fact, the House introduced H.R. 2708, the U.S. Job Creation and Manufacturing Competitiveness Act earlier this year.

Now both the House and Senate must act expeditiously to pass this critical legislation and give manufacturers the tariff relief they need to enhance their competitiveness, create jobs and invest in their U.S.-based manufacturing. The 2010 MTB passed in the House of Representatives by a vote of 378-43 and in the Senate by unanimous consent – hardly evidence of a controversial measure.  It’s time for Congress to put their earmark-related questions aside and pass this commonsense, bipartisan jobs bill.

As Mr. Norquist states, the MTB “is a pro-growth tax cut, with broad support that helps American businesses to compete. Let’s pass it.”  It is long past due time to move this bill.

 

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Trading Up: Manufacturers Push for Strong Market-Opening Outcomes and High Standards as Trans-Pacific Partnership Negotiations Move Forward

After 19 formal rounds of negotiations and numerous intercessional meetings, the United States is working with its 11 negotiating partners to see if it can conclude the Trans-Pacific Partnership (TPP) talks by the end of this year. When completed, a final TPP would encompass a nearly $28 trillion market of almost 800 million consumers – or 40 percent of global trade. A comprehensive and high-standard TPP agreement could create important new opportunities for growing exports, expanding sales and increasing the competitiveness of manufacturers big and small throughout the United States.

To achieve such growth, manufacturers are strongly urging negotiators to achieve an agreement that will open markets, level the playing field and set strong standards that will enhance the competitiveness of manufacturers throughout the United States. Specifically, manufacturers are seeking strong and ambitious outcomes in a number of key areas, including market access, particularly with regard to Japan, Malaysia, and Vietnam; intellectual property (IP) rights; investor-state dispute settlement for manufacturers with investments overseas; new rules on cross-border data flows and state-owned enterprises; and, enforceability, including for sanitary and phytosanitary (SPS) provisions.

The TPP agreement must include concrete market-opening provisions that will expand the ability of manufacturers in the United States to access the TPP markets, including through eliminating tariff and non-tariff barriers and opening procurement and investment markets. Of particular interest to manufacturers are the markets of Japan, Vietnam and Malaysia where the United States does not already have a trade agreement in place.

A final TPP deal must also produce strong protections and robust enforcement for all types of intellectual property rights, including patents, trademarks, copyrights, trade secrets and confidential data, for all industries. Strong IP protection and enforcement is critical to ensure the competitiveness of manufacturers in all industries across the United States, the Asia-Pacific region and beyond. Securing commitments from all TPP countries that meet or exceed the standard set in the U.S.-Korea FTA and are consistent with U.S. law is vital.

Manufacturers are also urging TPP negotiators to pursue full investor-state dispute settlement for overseas investments. Ultimately, manufacturers will look for the TPP’s investment provisions to at least meet the standards included in the 2012 Model Bilateral Investment Treaty (BIT) text that the Obama Administration reached last year.

A final TPP agreement must also allow for cross-border data flows.  All manufacturers with cross-border investment and sales need policies that ensure their data can move freely across borders, that e-commerce is accepted and that server localization requirements are prohibited.

As well, the TPP should address other concerns that impede manufacturers’ success in the global economy, including through new rules on state-owned enterprises.

Finally, the TPP must be fully enforceable through binding dispute settlement, including new and stronger rules on sanitary and phytosanitary measures.

A comprehensive, market-opening and high-standard TPP agreement would provide enormous benefits to manufacturers big and small, but would also be important to spur growth and new opportunities among the other 11 TPP negotiating partners and their economies.

The TPP economies should stay at the table to ensure that the TPP negotiations yield the “comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st-century challenges” that TPP leaders called for two years ago. Manufacturers can afford nothing less.

Trading Up is a blog series from manufacturers, which focuses on the need for a comprehensive, high-standard Trans-Pacific Partnership (TPP) that eliminates barriers, creates concrete new market access and levels the playing field for manufacturers in the United States.

 

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Congress Should Act NOW to pass the MTB

With the federal government now reopened, Congress should refocus its efforts on passing legislation that strengthens manufacturing and grows the economy.  One of the easiest and most bipartisan ways to achieve this result is to pass the Miscellaneous Tariff Bill (MTB).

For three decades, Congress has supported manufacturing in America by suspending import taxes on necessary manufacturing inputs that are not available in the United States and must be imported from other countries. The last MTB enacted into law expired on December 31, 2012, meaning manufacturers have been operating without an MTB for 289 days, which has resulted in significantly higher costs and in some cases, reduced hours for workers and even layoffs.

The MTB strengthens manufacturers’ global competitiveness by cutting their production costs. Doing so supports thousands of domestic manufacturing jobs. In fact, the MTB enacted in 2010 was estimated to support 90,000 jobs, increase U.S. production by $4.6 billion and expand U.S. GDP by $3.5 billion. Moreover, failure to pass a new MTB will result in a staggering $748 million tax hike on manufacturing over the next three years. This translates into a whopping $1.857 billion in economic losses. Manufacturers across a broad range of industries are already paying this $748 million tax and are calling on Congress to act as swiftly as possible on this commonsense, bipartisan and jobs-supporting legislation.

The MTB enjoys broad bipartisan support in both chambers of Congress and the House has introduced H.R. 2708, the U.S. Job Creation and Manufacturing Competitiveness Act.  Now both the House and Senate must act expeditiously to pass critical MTB legislation and give manufacturers the tariff relief they need to enhance their competitiveness, create jobs and invest in their U.S.-based manufacturing.

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