The NAM cataloged today some of the most onerous foreign unfair barriers faced by manufacturers in the United States in its submission to the Office of the U.S. Trade Representative as it prepares its National Trade Estimate Report on Foreign Trade Barriers (NTE). These barriers limit the ability of manufacturers in the United States to grow by exporting and making overseas sales and need to be addressed urgently to grow the U.S. manufacturing sector. (continue reading…)
Purported TPP Investment Text Confirms Pro-Rule of Law and Transparent Processes, but Raises Questions about Some TPP Countries’ Commitment to Fairness and the Rule of Law
Last night, WikiLeaks put out what it claims is the draft of the investment text being negotiated in the Trans-Pacific Partnership (TPP).
For manufacturers in the United States, many of whom use foreign investment to spur U.S. exports and make overseas sales, the text looks familiar because it is substantially based on the highly detailed U.S. model investment negotiating text that has been publicly available on both the websites of the Office of the United States Trade Representative (USTR) and the Department of States since the Obama Administration completed its multi-year review of the investment text in April 2012. That review, which was public and sought input from stakeholders throughout the United States, resulted in a strong investment negotiating document that seeks a more level playing field for our nation’s manufacturers and other job-creators in this country. (continue reading…)
Manufacturers cheered when the U.S.-South Korea Free Trade Agreement (KORUS FTA) entered into force three years ago yesterday. The deal aimed to open Asia’s fourth largest economy to U.S. exports of industrial goods and a wide array of other products and services. It established strong transparency rules, competition policy and intellectual property and other protections that sought to establish a level playing field.
While the KORUS FTA is still being implemented and challenges remain, manufacturers are seeing important gains. Roughly 80 percent of Korean tariffs on U.S. products have already been eliminated, helping to drive strong sales of plastics, processed foods, semiconductor equipment and many other manufactured products. Overall, U.S. manufactured good exports to South Korea increased $2.6 billion between 2012 and 2014, reaching a record high of $37.4 billion last year. (continue reading…)
U.S. Scores WTO Victory Against Discriminatory Argentine Import Restrictions; Manufacturers Look for Quick Redress
The World Trade Organization (WTO) Appellate Body issued a decision on January 15 finding Argentina’s import restrictions on U.S. and other imported goods breached the international trade rules that Argentina had adopted in joining the WTO.
Since 2012, Argentina had, through its Declaración Jurada Anticipada de Importación or “DJAI,” and other measures, imposed limits on imports and other trade restrictive measures that have limited the ability of U.S. manufacturers to export and participate successfully in the Argentine market. These measures are estimated to affect billions of dollars of U.S. exports each year. (continue reading…)
Official negotiations to expand the Information Technology Agreement (ITA) have been suspended due to a lack of progress by the Chinese delegation on its negotiation position. China’s delegation has asked for the removal of more than 100 products from the ITA negotiation – a so-called “sensitivities list.” No date to resume discussions has been announced.
The NAM recently joined a diverse coalition of businesses and business groups this week to renew our call for a meaningful expansion of the ITA.
The ITA is one of the most commercially successful trade agreements in the history of the World Trade Organization (WTO) and has boosted innovation and productivity, lowered consumer costs, and created jobs in its brief 16 years in existence.
From 1996 to 2008, total global trade in information and communications technology products increased more than 10 percent annually, from $1.2 trillion to $4.0 trillion. An expanded ITA could bring an additional $400 billion in high-tech trade under ITA coverage and increase world GDP by $190 billion, ITIF reported.
Stability and certainty are critical to ensuring U.S. trade preferences deliver on their promise to promote economic development abroad and provide access to manufacturing inputs lower prices here at home. So when the U.S. Administration decides to review a country’s eligibility for benefits under a trade preference program, it’s based on serious and longstanding concerns – not a temporary diplomatic dust-up.
The NAM welcomed last week’s announcement by the Office of the U.S. Trade Representative (USTR) regarding its 2012 Annual Review under the Generalized System of Preferences (GSP). GSP is a trade preference program that has been in place since 1976. It allows duty-free imports from 127 developing countries. The NAM supports GSP as a means to further international development, to bring developing countries in compliance with basic standards of the rule of law, and to reduce the cost of manufacturing inputs imported from those countries.
As part of the annual review, USTR considered petitions to suspend or withdraw GSP benefits from certain countries — including from Ecuador, which shipped products worth $107 million to the United States under the program last year. There are a number of criteria considered when determining eligibility for GSP, including the extent to which a country provides adequate and effective protection for intellectual property rights and whether it acts in good faith to enforce arbitral awards in favor of the United States. USTR has accepted a petition for review against Ecuador related to serious concerns about its enforcement of arbitral wards. According to USTR, next steps in reviewing Ecuador’s eligibility will be announced by a Federal Register Notice.
The NAM strongly urges USTR to examine carefully whether Ecuador has lived up to its GSP eligibility requirements, including as they relate to the recognition and enforcement of arbitral awards. The NAM has long been concerned with Ecuador’s repudiation of its legal obligations and its breaches of the basic rule of law.
U.S. preference programs should not be treated as entitlements, but rather as partnerships between the United States and nations willing to live up to strong eligibility criteria that are fully implemented. Ecuador’s eligibility must be reviewed thoroughly and rigorously based on statutory eligibility criteria to ensure that it is meeting these standards.
The next steps in the GSP review process present an opportunity for Ecuador to demonstrate its capacity to abide by the rule of law and become a role model for other developing nations. If Ecuador can sufficiently prove its willingness to meet the high-standards of the GSP program and its other international obligations, that nation and its many small businesses that gain from GSP will continue to enjoy the benefits of the program.
This morning, President Obama made it official this morning when he announced the nomination of Michael Froman to serve as United States Trade Representative (USTR).
Mr. Froman’s plate will be full as our global challenges mount with ongoing weakness in the global economy. However, these are issues that he has keenly been aware of in his position as deputy national security advisor for international economic affairs and in his prior work in and out of the government over the past two decades. Mr. Froman’s experience in international trade and with senior foreign government officials should be a strong asset as he becomes the lead trade official for the United States.
Trade is a vital issue for manufacturers as 95 percent of consumers live outside the United States. Opening new markets and leveling the playing field is critical for manufacturers’ success in creating more opportunities for the 12 million men and women who make things here, as well as for their communities and our economy.
Topping our list of action items:
First, market-opening trade and investment agreements. Recently, NAM President and CEO Jay Timmons laid out manufacturers’ goals for ongoing trade negotiations, and we remain hopeful that these talks can achieve the robust outcomes that are necessary to spur growth and innovation.
Second, the protection and enforcement of intellectual property (IP) rights globally. Manufacturers’ concerns over the theft of IP grow by the day. Challenges remain strong in India and China and in other parts of the world. If left unchallenged, these threats to IP protection will destroy manufacturers’ ability to compete—and compete fairly.
These are just two big issues that we must address as a nation. Manufacturers need action on a robust trade and investment agenda, and we stand ready to work with Mr. Froman to tackle these challenges in the days ahead.
Linda Dempsey is vice president of international economic affairs, National Association of Manufacturers.
President Obama’s FY2014 budget was released this morning, and it includes some mixed messages on trade. Perhaps most significantly, the budget proposal includes a plan to reorganize – and consolidate – the government’s trade functions. As outlined in the FY2014 budget proposal, the President would like to consolidate six primary business and trade agencies into a new Department. The new Department would include the Commerce Department’s core business and trade functions, the Small Business Administration (SBA), the Office of the U.S. Trade Representative (USTR), the U.S. Export-Import Bank (Ex-Im), the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency. It would also incorporate related programs from a number of other departments, including the Agriculture Department’s business development programs, the Treasury Department’s Community Development Financial Institutions Fund program, the National Science Foundation’s (NSF) statistical agency and industry partnership programs, and the Bureau of Labor Statistics.
The President outlined a similar proposal in his 2012 State of the Union address, with a resoundingly negative reaction from the business community. In response to that plan, the NAM joined more than 80 other business groups in a letter arguing that subsuming USTR into a broader trade and business government department would severely harm its credibility and hamper USTR’s ability to play its unique coordinating role within the U.S. government. USTR is statutorily responsible for developing and coordinating U.S. international trade and direct investment policy as well as overseeing negotiations with other countries. The head of USTR is the U.S. Trade Representative, a Cabinet member who serves as the President’s principal trade advisor, negotiator, and spokesperson on trade issues. The NAM continues to be troubled by this reorganization proposal, given the importance of trade to manufacturers in the United States.
In looking at the budget proposals for specific departments, the budget proposal would provide additional resources for trade promotion initiatives and agencies. The Commerce Department budget overview includes an increase for the International Trade Administration (ITA), with a proposed a budget of $520 – or a 14 percent increase over the 2012 enacted level. ITA helps promote U.S. trade and investment and also ensures fair trade through rigorous enforcement of trade laws and agreements. The agency is home to the U.S. and Foreign Commercial Service, which promotes U.S. exports and provides commercial diplomacy support for U.S. business interests around the world.
The Commerce Department’s budget proposal also supports the President’s Export Control Reform Initiative, with $112 million for the Bureau of Industry & Security (BIS) to help sustain export licensing and enforcement activities while moving toward a more predictable, efficient and transparent export control system. The proposal would give BIS an $11 million increase from the 2012 enacted level.
The State Department’s budget proposal includes $307 million for the U.S. Trade and Development Agency, USTR, U.S. International Trade Commission and OPIC – a combined $46 million increase over the 2012 enacted level. The President’s budget proposal also includes $131 million for the Ex-Im Bank’s administrative expenses and Inspector General, a $37 million increase over the 2012 enacted level.
Today we heard from President Obama about his plan to reorganize several federal agencies – many of which are critical to manufacturers and their ability to create and retain jobs.
Changes would include combining the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency into a single department in an effort to improve government efficiency and to help promote business. The key question in reviewing this proposal is will it help manufacturers compete, export, invest and create jobs?
Any changes that are considered must focus on improving intellectual property protection, opening markets for exports, improving market access, and more. Additionally, while manufacturers have done well in leaning their processes to improve their competitiveness and would vigorously support the federal government doing the same in this difficult debt and deficit environment, the agencies affected must continue to have the necessary resources to meet their missions.
If the streamlining and efficiency undertaken in this proposed combination of agencies will mean that manufacturers will have less intellectual property protection, for example, it would be a devastating mistake. If, on the other hand, this leaning process will mean doing more with less, it would be a great step forward.
As policymakers respond to the President’s proposals today, we are hopeful that the discussion centers on the key question for manufacturers – will they be better able to compete, export, invest and create jobs as a result? With a 20 percent cost disadvantage already, manufacturers will deeply care about the impact these proposals will have on their ability to compete.
Aric Newhouse is senior vice president for policy and government relations, National Association of Manufacturers.
It is no secret other countries are racing ahead with trade agreements while the U.S. stands idly by. There are 120 free trade agreements being negotiated around the world, and the U.S. is a party to just one.
As for pending trade pacts, the U.S. free trade agreements with Panama, Colombia and South Korea have languished for four years. (But see this post from Monday for a dose of optimism.)
Those countries aren’t waiting for the U.S. The Wall Street Journal reports today that Colombia is seeking to increase its trade ties with China.
Colombian lawmakers passed legislation they hope will open the floodgates of trade with China, where the government plans two high-level trade missions over the next three months, as a long-delayed U.S. trade deal with the South American nation stalls in Congress.
Colombia Trade Minister Sergio Díaz-Granados said Tuesday’s passage of the “Chinese Trade Promotion and Protection” bill—which affords China certain legal guarantees on its investments in Colombia—could also propel talks with China to build a railway that would link Colombia’s Caribbean and Pacific coasts, and would serve as an alternative to the Panama Canal.
Trade officials in Bogotá expressed frustration with the slow pace of progress in Washington, which they say contrasts with Chinese eagerness to invest in Colombia, Washington’s closest ally in South America.
In an interview, Mr. Díaz-Granados said he remained hopeful a free-trade pact with the U.S. would be passed before year’s end, but that Colombia can no longer “sit with its arms crossed, waiting.”
“We’ve been talking about a U.S.-Colombia free trade deal for 20 years, and it’s certainly the trade deal we want more than any other,” Mr. Díaz-Granados said. “But in the meantime, we have to continue working in other directions. Our business leaders need to pursue other markets and diversify.”
The U.S. has been waiting for too long. Every day that lawmakers sit on the trade agreements is a day the country is missing out on opportunities for growth and jobs.