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Telecommunications Agreement with Mexico Will Help Manufacturers

This morning the United States signed an agreement with Mexico that should significantly improve the competitiveness of U.S. telecommunications equipment in the important and growing Mexican market. In 2010, bilateral trade in these products totaled about $25 billion. 

In another demonstration of the value to U.S. manufacturers of the North American Free Trade Agreement (NAFTA), Mexico will no longer require that U.S. products be (redundantly) tested in Mexico to demonstrate they meet Mexican standards/technical requirements. Under the “Mutual Recognition Agreement (MRA) for Conformation Assessment of Telecommunications Equipment,” Mexico will allow recognized American testing facilities and laboratories to test products and  certify that they meet Mexican requirements, and vice versa. 

Not having to ship products to a Mexican facility and pay for testing should reduce costs for U.S. telecommunications equipment manufacturers.  It should be of particular value to smaller manufacturers for whom redundant testing can be a significant cost hurdle.  It should also speed product entry as U.S. equipment can be tested in one facility at the same time to both U.S. and Mexican standards.

The National Association of Manufacturers thanks the U.S. Trade Representative Ron Kirk for getting this agreement done, the first with a Latin American country.  The NAM has long supported Mutual Recognition Agreements as one way among many to reduce the expense and time associated with meeting foreign standards and technical regulations that may have only minor differences with U.S. requirements. We encourage USTR to continue to look for commercially meaningful MRAs with other trade partners to help enhance America’s competitive edge.  Well done!

Stephen Jacobs is senior director of international business policy, National Association of Manufacturers.

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Recognizing the Doha Round is Broken

The Asia-Pacific Economic Cooperation (APEC) trade ministers who met in Big Sky, Montana, today finally took a hard-nosed look at the state of the World Trade Organization Doha negotiations and admitted that what the United States has been saying for several years: the gaps in expectations for opening new market opportunities around the world are unbridgeable in the current context.  As Ambassador Kirk noted, “we are not in good shape.”  

We welcome this recognition of reality that should help the WTO move forward in a constructive way, rather than continuing to chase its tail in a desperate hope that given enough time the pieces will magically fall into place. 

So the question now becomes what to do with the pieces of Doha that aren’t broken.  We hope that in this period of reflection WTO Members will give serious consideration to moving ahead in concluding negotiations in areas that can garner consensus. One of these issues should be the trade facilitation negotiations aimed at simplifying and speeding procedures for getting goods through customs formalities.

In an age when a large portion of exports are delivered in hours by air rather than weeks or months by sea, the length of time and costs of customs clearance procedures needs to be reduced so components can get to manufacturers and finished products to customers more rapidly. This is not a zero-sum negotiation that involves mercantilist concessions; it is classic win-win. 

Ministers should also give greater consideration to so-called plurilateral agreements that don’t require every WTO country to sign on, such as the Information Technology Agreement. It should be expanded to provide zero-duty treatment for more high-tech products. The existing agreement dating from 1997 has been very successful and reduced costs for manufacturers that rely on information technology products to enhance their competitiveness. There could be other plurilateral agreements that could garner sufficient support–perhaps environmental goods and services.

The WTO is a strong and vital organization and its value should not be assessed on what happens with the Doha negotiations. An organization that deals forthrightly with the situation it faces will be a strong one. 

As is said, the first step to recovery is the recognition that there is a problem.

Stephen Jacobs is senior director of international business policy, National Association of Manufacturers.  

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Setting the Record Straight on Manufacturing Investment Overseas

A commonly held misperception that U.S. manufacturing companies investment abroad necessarily means the loss of jobs here in the United States.  This misperception fails to understand the nature of U.S. foreign direct investment (FDI) abroad, which is mostly to serve the local market.  Why else would nearly half of multinational manufacturers’ workers be located in high-wage Europe and Canada?  In 2008, over 70 percent of U.S. manufacturing foreign direct investment by value was in developed countries, and only 4 percent of total FDI was in China.

Fewer than 10 percent of these overseas workers are in China. Even during the relatively high growth years from 2000-2008 manufacturing jobs at U.S. manufacturing multinationals’ foreign affiliates increased by only 314,000 – and more than a third of those were located in Europe.

Roughly 90 percent of these foreign manufacturing affiliates’ sales were to local markets, not to export back to the United States. Foreign affiliates are key export targets for U.S. manufacturing multinational companies. In 2008 alone these affiliates received nearly half ($240 billion) of their total U.S. parent’s exports.

In 2008 the U.S. exported 22 percent of U.S. manufactured products.  U.S. manufacturing investments overseas are simply not the cause of the trade deficit.  Taking a close look at the figures shows that, excluding petroleum and coal products, manufacturing multinational corporations actually produced a trade surplus in 2008 of over $100 billion! These are the facts about U.S. manufacturing investment abroad.

Stephen Jacobs is director of international business policy for the National Association of Manufacturers.

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Tackling Trade Barriers

Today, U.S. Trade Representative Ron Kirk issued the annual National Trade Estimate (NTE) report to Congress which describes significant barriers to U.S. trade and investment plus the actions USTR and others in the U.S. government are taking to address them. Click here to go to the report. Again this year, USTR has issued, along with the NTE, parallel reports on Technical Barriers to Trade (TBTs) and Sanitary and Phytosanitary (SPS) Barriers.  The National Association of Manufacturers welcomes the identification of these barriers and urges the USTR to go on to seeking their elimination. 

Manufacturers are adversely affected by non-tariff barriers including  standards and conformity assessment issues around the world.  They can add significantly to the cost of an export, often a multiple of the tariff rate that is charged.  For example, a report on the impact of non-tariff barriers in Asia found that they can have a tariff equivalent ranging from 11.7% to 58.5% in one country and ranging from 6.3% to 60.5% in another! 

The NAM recognizes that not all non-tariff trade barriers are illegal under international trade rules.  However, when the U.S. negotiates a trade agreement, it has the opportunity to seek the elimination of many of these non-tariff barriers…just as it has done in the pending Korea, Colombia and Panama Free Trade Agreements.  So if we want to get serious about tackling non-tariff barriers, the United States must pass these three FTAs and negotiate more.

 To tackle the barriers you have got to get into the game.

Stephen Jacobs is director of international business policy at the National Association of Manufacturers.

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Administration Makes Intellectual Property Rights Enforcement Recommendations

Today Intellectual Property Rights Enforcement Coordinator (IPEC) Victoria Espinel and her team released extensive recommendations for legislative changes to ensure our intellectual property rights (IPR) laws are effective and to remedy deficiencies. Manufacturers believe these changes, some of which the NAM has been recommending for two years, will improve the enforcement of intellectual property rights.

We applaud the Administration and IPEC for their pro-active efforts to prevent the entry of counterfeit goods into domestic commerce because intellectual property is the lifeblood of American manufacturing.  We are especially pleased by the recommendation to authorize Customs to share pre-seizure information about products with right holders to help it determine if the products are counterfeit. This is a change manufacturers have sought for a long time.

Manufacturing, yes manufacturing, is as dependent on intellectual property like patents, trademarks, trade secrets, trade dress and copyrights as copyright-based industries that receive considerably more attention. Counterfeiting and piracy are existential threats to manufacturers, the people they employ, and the consumers who come in contact with their products and services. (continue reading…)

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Still Waiting on Korea, While EU and Japan Move Forward on Trade

While the National Association of Manufacturers is disappointed that President Obama and Korean President Lee were unable to close out the U.S.-Korea Free Trade Agreement negotiations this week, we fully support their efforts. The KORUS FTA would be the largest bilateral U.S. trade deal since NAFTA, and it matters to U.S. manufacturers. The agreement eliminates tariffs on 95 percent of consumer and industrial products between the countries within three years, opening up the world’s seventh largest economy. But the NAM has said from the day the agreement was signed that the U.S. auto industry believes there has to be more market access in Korea, particularly by reducing non-tariff barriers. We sincerely hope that when the U.S. and Korean trade negotiators meet again, that they will achieve that market access so that the United States can begin receiving the benefits of free trade that our competitors are about to receive. The stakes are getting higher.

In just the past week, the United States’ two largest trading partners have announced aggressive trade policies to ensure that their exporters have new access to world markets and keep their economies competitive. Meanwhile, the United States continues to debate whether to take Korea, Colombia and Panama’s offers to eliminate for American exporters their tariffs and other trade barriers. Both Japan and the EU have free trade agreements with these countries already or are proposing to negotiate them.

Japan has long remained in the shadows of international economic leadership because of its inward looking agriculture policies, but the Japanese government announced this week that it will press ahead with fundamental domestic reforms in order to implement comprehensive free trade agreements. It said it will put all goods on the table in trade negotiations. It is going to resume free trade negotiations with Korea. At the same time, Japan will be seeking a China-Japan-Korea FTA and an East Asian Free Trade Agreement (EAFTA). Unlike the United States, Japan also wants to speed up a study of a possible agreement with the European Union.

On the other side of the world, European Commission on Nov. 9 announced a trade policy to help revitalize Europe’s economy. (continue reading…)

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