The Washington Post editorialists are not persuaded by President Obama’s odd pleas to the Brazilians to drill more offshore while the Administration slow walks domestic drilling permits in the Gulf of Mexico. From today’s lead editorial, “Oil NIMBY-ISM“:

WHEN WAS the last time an American president stood before an audience in a foreign country and announced that he looked forward to importing more of its oil? Answer: Just over a week ago, when President Obama joined political and business leaders in Brasilia in hailing the fact that their newly discovered offshore petroleum reserves might be twice as large as those in the United States. Americans “want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers,” Mr. Obama said….

Mr. Obama’s enthusiasm for punching holes in the ocean floor off Brazil is hard to reconcile with his decision, announced Dec. 1, to keep the waters off the East and West coasts and the eastern Gulf of Mexico off-limits to exploration indefinitely. His policy was a reversal of an earlier decision he had made to open some of those areas. We can understand that reversal, after the massive oil spill in the western Gulf last year. And, demonstrating a measure of flexibility even after the disaster, the administration has announced five deep-water drilling permits in the western Gulf since the spill.

The Post’s reference to NIMBY-ism makes the point that by pushing energy development overseas, the Obama Administration sends it to countries less able or inclined to protect the environment, e.g., Nigeria or Angola.

Today’s Post editorial is just the latest in a wave of pointed criticisms against President Obama for his short-sighted remarks in Brazil on energy development. Others: (continue reading…)

The Nov. 22 Financial Times, “Big trade opportunity for Mexico and Brazil,” reports that Mexico and Brazil have announced the start of negotiations that could lead to a Free Trade Agreement (FTA) between the two countries. Why do American manufacturers care?  Because Mexico and Brazil are the second and 8^th largest markets for U.S. exports globally. The deal would seriously affect U.S. competitiveness and exports to these two large and rapidly growing markets.

Consider Brazil.  Brazilian data show that it bought $22 billion of American manufactured goods and $3 billion from Mexico in 2008.  But in the three years since 2005, while U.S. manufactured goods have been losing market share in Brazil, Mexico’s manufactured goods exports to Brazil nearly quadrupled –- and that was without any trade preferences.

Both American and Mexican producers now have to pay significant import duties to sell to Brazil.  But once an FTA between Brazil and Mexico goes into effect, Mexican machinery and transportation equipment will enter Brazil duty-free, while comparable U.S. exports will face import duties of over 11 percent.  That means Mexican-made manufactured goods will have a significant price preference – large enough to divert American exports.

Also, while American manufacturers currently have duty-free access to the Mexican market while Brazilian manufacturers don’t, a Brazil-Mexico FTA would change that and make Brazilian products more competitive in Mexico – our second-largest market in the world.

The world is evolving, and countries are all making deals with each other. It is not just Mexico that seeks preferential access to the Brazilian market –- the huge European Union wants an agreement with Brazil as well. Yet here we sit, losing ground every month with the mythology that trade agreements are bad for us.

The only good news here is that Brazil and Mexico have only just started on the road to an FTA. There is still time for the Administration and the Congress to recognize that to sell overseas and double exports, we have to have competitive access to growing markets around the world – and that can only be done through trade agreements.

Those who oppose trade agreements probably don’t realize that in fact they are actually advocating a trade strategy of having American manufacturers be the only ones in the world facing tariffs and other trade barriers.  Hopefully when they think about this, they will increasingly see this is not really the path they want to be on.

Frank Vargo is the National Association of Manufacturers’ vice president for international economic affairs.

The National Association of Manufacturers (NAM) Vice President for International Economic Affairs Frank Vargo issued the following trade commentary regarding the Paris meeting of trade ministers this week to discuss the Doha Round:

The only way that a balanced Doha Round outcome that benefits all nations – including the United States, but especially including the least developed countries – can be obtained is if U.S. Trade Representative Ron Kirk and his negotiating team make it plain that the United States will settle for nothing less.  The U.S. has been the primary force for global liberalization in all previous rounds of global trade negotiations, and that role now falls to Ambassador Kirk in the Doha Round. In Paris this week, Ambassador Kirk stood firm, saying “The real question is whether India and Brazil and China are ready to assume a role and responsibility commensurate with their benefits that have been realized under global liberalization…We can talk around it, but that’s the only way this is going to happen.”  The NAM agrees, and believes this is the only way a successful Doha Round is possible.  We appreciate Ambassador Kirk’s clear and determined position, which has led to a growing number of WTO members beginning to support the U.S. view. 

The Wall Street Journal editorial Friday (“The Madness of Cotton“) on resolution of the U.S.-Brazil Cotton dispute overlooks completely the most salient and important point – that the U.S. deal with Brazil forestalled the imposition of ruinous retaliatory duties not only on American manufactured products and agricultural goods, but on the key currency of America’s best hopes for 21^st century economic growth and innovation – intellectual property rights (IPR).

The United States was found to be in violation of subsidies on cotton by the World Trade Organization, and Brazil was authorized to retaliate against American products because those subsidies still exist. However, in a precedent-setting decision that should send chills down the spine of every advanced manufacturing nation on earth, Brazil was also given the right to retaliate against our IPR. Break patents, steal licenses, refuse payment of royalties – this is far from the standard practice of tariff retaliation that follows some WTO dispute settlement decisions.

Can you imagine the economic devastation to American companies that would have resulted from a billion dollars worth of retaliation against American IPR by Brazil? The ability to generate new ideas and new products, new processes and innovations is at the heart of America’s manufacturing competitiveness. Facing a very real threat to this key element of our economy, the Office of the U.S. Trade Representative and the U.S. Department of Agriculture should be commended for reaching a deal with Brazil.

Keep in mind, this is a stop-gap deal. If we could prevail upon Congress to immediately make changes to this particular subsidy, Brazil would lose its rights to retaliate. However, that won’t happen, and the best place for alterations is the next Farm Bill. Until we can get the necessary changes made, we’d be facing enormous retaliation on manufactured goods AND IPR by Brazil. Rather than have more than a billion dollars worth of U.S. goods and IPR face retaliation, USTR and Agriculture signed this shorter-term agreement. It’s the right move, it’s the smart move, and the business community strongly supported it.

In that deal, the United States agreed to provide funding for agricultural research in Brazil for a short time period while we reform the underlying cotton subsidy practices in the 2012 Farm Bill that resulted in the WTO judgment against us. That’s how the WTO works – an unfair trading practice is identified and most often immediately or quickly modified. The U.S. Congress will need to examine these subsidy programs and modify them to prevent future trade disputes.

But this is a far less onerous task than to watch the innovations, inventions and uniqueness of our manufacturers’ intellectual property rights be taken and used against us. Retaliation against our goods and farm products would have been bad enough – we’ve been watching it happen in the Mexico trucking dispute for over 14 months. But to have IPR targeted would have been a terrible precedent that, in the future, would have emboldened China, India and other nations to action as well.

(Frank Vargo, the National Association of Manufacturers’s vice president for international economic affairs, is blogging from Geneva this week at the ministerial meeting of the WTO. )

The WTO 7th Ministerial Meeting opened yesterday afternoon, with Director General Lamy calling for unity (remarks), and minister after minister urging that the Doha Round conclude in 2010. U.S. Trade Representative Ron Kirk told the gathering not to confuse process for substance and urged countries to call for a round that would generate greater market access for all. (Kirk’s remarks.) There were some signs of support for this, with some ministers referring to ambition and balance, and some suggesting that we should consider different approaches, since we really hadn’t gotten very far. But despite these welcome signs, there has not been what one could call a rising tide demanding a stronger outcome.

Instead of unity, the gulf between those who want a strong outcome and those who want to hold back became even more obvious. Rather than offering any indications the time had come to begin serious negotiations, Brazil’s Minister Amorim instead chose to come out attacking the United States and re-writing history. Amorim accused the United States of “delaying the conclusion of the round because they want to have some few dollars more in some specific sections.” Wrapping Brazil in the flag of the least developed countries, he said that reducing trade barriers would hurt tariff revenues in the poorest countries and impair their ability to cope with climate change obligations. (Reuters coverage.)

What’s wrong with this picture? Well, first, once again Amorim implied that the least developed countries will have to cut their tariffs, which is untrue. Aside from the advanced developing countries like Brazil that have become global export figures, the developing countries don’t have to do anything in the Round.

Second, Amorim again is seeking to promote his revisionist view of Doha history by stating the United States is asking for new concessions, ignoring the multitude of negotiating sessions over the past eight years in which the United States has consistently said the industrial package had to be viewed as a whole – the tariff cutting formula, sectoral agreements, and exceptions from tariff cuts.

There is nothing new here. The United States has pressed consistently for both industrial and advanced developing countries to cut their barriers, while Brazil has wanted to keep its tariff protection. Amorim expressed horror that the United States thinks the Doha Round is about opening markets.

Third, Amorim stated that under what’s on the table now, Brazil is already committed to cut its applied tariff rates more than the United States, so “it is unreasonable to expect that concluding the round would involve additional unilateral concessions from developing countries.” That’s not so.

WTO data show that the formulas would have the United States cut its applied tariffs in half, while Brazil would cut its applied tariffs only by about 1/8 – from an average of 11 percent to about 9.7 percent. Moreover, Brazil’s tariffs would stay at an average of 11 percent for nine years, and only ten years out would fall to 9.7 percent. And, get this – even then only about 40% of Brazil’s tariffs would take any cut at all. What kind of market access is that?

This is what caused former Deputy U.S. Trade Representative Peter Allgeier to once quip that he finally understood what NAMA (Non-Agricultural Market Access) stood for – it meant “No Additional Market Access.”

It is time for Brazil to stop the rhetoric, show the leadership worthy of a major global player, and sit down and negotiate a deal that will have Brazil grant significant new market access and get significant new market access in return – and do this in services as well. You think? (continue reading…)