Manufacturers are appalled by European Union (EU) action purporting to be in compliance with a World Trade Organization (WTO) finding that the European subsidies for the launch of Airbus aircraft are illegal and must cease. 

Despite the fact that the WTO found that every single grant of aid to launch Airbus aircraft was a WTO-illegal subsidy, which includes every aircraft model Airbus produces or has produced, the EU proposes to keep granting those subsidies.

An EU spokesman went so far in a press quote as to say that the new Airbus A350 under development is “… outside the (WTO) Airbus case…” 

WTO dispute settlement rulings are not a historical exercise only looking at the past, but are the guidelines for WTO-consistent behavior in the future.  It is unacceptable that the EU would continue to engage in the same WTO-illegal action of the past, even while it grudgingly faces the necessity of compensating the United States for its commercially-harmful past action.

The NAM agrees fully with the USTR that the United States cannot and will not accept anything less than an end to this subsidized financing.  We urge the full and effective pursuit of all avenues in the WTO to bring about this result. (continue reading…)

Trying to regain the momentum for the Doha Round of global trade talks, the National Association of Manufacturers and other business groups outlined a set of priorities and strategies in a letter Wednesday to Karel De Gucht, the European Union’s trade commissioner, and U.S. Trade Rep Ron Kirk.

Reuters covered the story today, “Business groups press emerging economies over Doha“:

BRUSSELS, July 22 (Reuters) – Brazil, China and India must use their growing economic might to help revive deadlocked global trade talks, a coalition of business lobby groups said in a letter to U.S. and European Union trade negotiators.

The letter …is the latest sign that interest is growing in completing the Doha round of talks, which was launched in 2001 to help poor countries prosper through trade but has been stalled since 2008.

The business groups, from Europe or the United States, said the Doha round would progress only if Europe and the United States convince the big emerging economies to reduce tariffs on important industrial sectors and services.

Right. As the letter (available here) stated:

The success of the Doha Round depends on the willingness of the large emerging countries —especially Brazil, China and India—to assume the responsibility commensurate with the economic benefits they have been realizing as a result of global trade and investment liberalization. The large emerging countries now have the fastest growing economies in the G-20, and will clearly be major beneficiaries of the Doha Round. With their new economic power, they are now clearly distinguished from the least developed members of the WTO and, as a result, have a new and greater responsibility to share in leading the Doha Round forward in the NAMA, agriculture and services negotiations. Indeed, most of the significant additional market access available for the least developed countries lies in the reduction of market access barriers to the rapidly emerging economies—which could substantially boost south-south trade.

The NAM was joined by Business Europe, the Business Roundtable, Coalition of Service Industries, European Services Forum and the U.S. Chamber of Commerce. Chris Wenk of the Chamber writes about the letter at the Chamber Post, “Deliverable from Chamber Doha Mission.”

Reuters, “WTO Doha round deal unlikely in 2010“:

US business groups said on Wednesday they expect slow progress in world trade talks in 2010 despite a goal set by President Barack Obama and other leaders to finish the long-running negotiations this year.

“I think it’s going to be difficult to conclude in 2010,” said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. “I think it will probably be next year.”

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

Ah well, the strangeness and wonder of the WTO negotiating process continues. Consider, for example, the Chairman’s report at the conclusion of the 7th WTO Ministerial meeting that ended yesterday. (Report available here as .doc.)

The report states, “There was wide support for building on progress made to date. There was also support for not attempting to reopen stabilized texts.” (My emphasis.) This statement refers, among other texts, to the Non-Agricultural Market Access (NAMA) text that the U.S. has not accepted. The clear implication from yesterday, though, is that many consider the text to be done, agreed, and not to be revisited.

Stabilized texts? Excuse me, but when the NAMA chairman Luzius Wasescha wrote that text at the end of last year, he stated right in his own text that, “Even though the included text is accepted as a basis for further work, we are far from a consensus among Members.” He also added “Anyhow, everything is conditional in the deepest sense.”

Whoa! By what magic elixir do we move from that December statement to the Ministerial Chairman’s statement yesterday that there is strong support for considering the text wrapped up and immutable? Is this sleight of hand? Or does the WTO have all the collective memory of a computer with a fried hard drive?

Example two: Press reports indicate at the end of the conference European officials lamented, “Doha does not seem to be fully on the agenda of the United States … there is no sign today that the Americans are ready to go forward.” (AFP report.) One said, “They want more concessions for a more acceptable package for the US Congress. Now, the problem is to find a way without damaging what has been achieved so far.”

What hypocrisy! In private, European government officials and business representatives are quite free in admitting their analysis conforms perfectly with the U.S. view – they are getting virtually no new market access out of the proposal so far. But they are willing to accept that, because they believe if they were to press for more industrial market access, the developing countries would turn right around and demand more European concessions in agriculture.

That has the Europeans terrified, for they feel they have given all they possibly can in agriculture. One more grain of wheat will break the European back and result in a revolt that will cause them to pull out of the whole deal. So they would rather build Fortress Europe around their agriculture and forgo market access gains in the rest of the world.

Example three: Indian officials still indicate a reluctance to have India participate in sectorals (but not the same degree of “shut-the-door” resistance I saw last year). But at the same time, India has free trade agreements cooking or under discussion with China, Japan, the European Union and Canada – and when India’s Prime Minister visited Washington recently, he indicated a free trade agreement could be possible with the United States as well. So my question is, who’s left? Why can’t you make cuts in the Doha Round?

The problem isn’t that the United States isn’t showing leadership, for it is. I spoke with Ambassador Ron Kirk a couple of times in Geneva this week. He knows the point to the Doha Round is getting meaningful market opening, and he knows the road to Doha goes through Beijing, New Delhi, and Brasilia. The problem isn’t U.S. leadership. The problem is getting others to get off their defensive agendas and join the United States is a commitment to open markets and grow world trade. (continue reading…)

(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…)

In the November 4, 2009, Toronto Globe and Mail, World Trade Organization (WTO) Director General Pascal Lamy was quoted as saying that a Doha round deal can be concluded soon: “We are nearly there,” he said, “but there remain a few nuts to crack, mostly the U.S.”

The National Association of Manufacturers (NAM) finds this comment unfortunate and distressing. The United States, which was instrumental in creating the post-World War II trading system that has served the world so well, which has led other nations – sometimes kicking and screaming – to liberalize world trade and open their markets in every negotiation since the Geneva Round of 1947, and which is pressing so hard for global market opening in the Doha Round, is not a “nut to be cracked.”

Rather than singling out the United States and seeking to pressure the Obama Administration to accept a deal the Bush Administration had already rejected, Mr. Lamy should focus his efforts on those WTO members who are still reluctant to offer substantial new market access. U.S. negotiators have been working tirelessly for a deal that creates significant and genuine new market openings that would benefit not just American firms, but firms in all countries – including in the poorest countries, who are key intended beneficiaries of the Doha Round.

Based on the recent estimates of the prestigious Institute for International Economics, without the sectoral tariff cutting agreements the U.S. is working so hard to achieve, the current (un-agreed) Doha Round text would barely increase world manufactured goods exports one percent. Furthermore, most of that gain would not occur for up to 10 years. And the situation in the services negotiations is even worse.

For over eight years the U.S. has been consistent in saying that only a balanced and ambitious outcome – not just for U.S. producers, but for all producers globally — is acceptable. The Doha Round is not there yet, and will not get there if Mr. Lamy continues to view the U.S. as a nut to be cracked rather than reinforcing the U.S. effort to obtain more trade liberalization globally.

Frank Vargo is Vice President, International Economic Affairs, National Association of Manufacturers

From an author who embraces the attack on property rights by the government of Rafael Correa, a news release, “Ecuador president Correa to override drug patents in order to provide affordable medication“:

(NaturalNews) The President of Ecuador, Rafael Correa, announced Sunday that he planned to override a number of pharmaceutical patents in order to provide more affordable medicines to the People of Ecuador. In a statement, Correa explained that access to medicine is a “human right” and that he intends to seek “compulsory licenses” to acquire medications considered indispensible.

Under current World Trade Organization rules, countries have the right to seek such “compulsory licenses” that override traditional patent rights. Current WTO rules require that such countries negotiate with the patent owners to determine fair compensation.

This action by Correa joins Ecuador’s recent declaration that it would not honor the illegitimate debt that had been placed on the country by foreign banks (under previous administrations). This bold move allowed Ecuador to renegotiate its debt for roughly 30 cents on the dollar. Much of that debt was considered “predatory debt” by academics who understand the way the World Bank and other first-world banking interests attempt to place debt burdens on many smaller nations as a tactic for exerting long-term influence over their economies.

Right. And the Barbary Pirates had legitimate grievances against the United States, too.

See also the AP story, “Ecuador pres: National labs to ignore drug patents.”

Also, on September 25, major U.S. business groups sent a letter to the leaders of the Senate Finance Committee and House Ways & Means Committee urging Congress not to reward Ecuador and Bolivia for undermining rule of law by renewing Andean trade preferences for those countries. The letter from Business Roundtable, Emergency Committee for American Trade, National Association of Manufacturer, National Foreign Trade Council, United States Council for International Business, and U.S. Chamber of Commerce is available here.

The World Trade Organization (WTO) sided with the United States Wednesday and slapped China for its restrictions on selling copyrighted U.S. films, music, books and other media. (WTO report.) China has been forcing companies to route imports through Chinese state-owned or controlled enterprises, while restricting reading material and music. The U.S. argues that this opens the door to the vast amount of Chinese counterfeiting in these media. And we’re talking about real money for U.S. producers –$3.6 billion lost sales in China of legitimate media in just 2008 alone.

A very important case filed by the U.S. and the European Union in June of this year against China for restricting exports of raw materials is still in the early stages. The U.S. is concerned that the Chinese export restraints hurt U.S. “downstream producers” of goods by limiting access and raising world market prices for the raw materials, while lowering the prices that domestic Chinese producers have to pay. The case covers nine materials: bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc. (USTR news release.)

The National Association of Manufacturers has long supported the use of WTO cases as a legitimate trade enforcement tool after negotiations fail. The seven cases brought against China since it joined the WTO in 2001 have produced results in areas like semiconductors, foreign financial information suppliers, packaging paper and auto parts. Although it is always preferable to avoid a litigation process, the use of WTO cases doesn’t mean the U.S.-China trade relationship is crumbling – it’s the way trade disputes between mature trading partners are settled – without a costly trade war.

More …

• USTR news release, “World Trade Organization Report Upholds U.S. Trade Claims Against China“
• Motion Picture Association of America news release, “MPAA’s Dan Glickman Hails WTO Decision“
• National Journal, “WTO Rules Against China On Copyrights“
• WSJ Law Blog, “WTO Ruling a Possible Boon to U.S. Copyright Holders“
• Agence France Presse, “China may appeal WTO order on films, music“

(Pat Mears is the NAM’s Director for International Commercial Affairs)

So what happened? Well, the proximate cause of the failure was the hang-up on India’s and China’s insistence that they and other developing countries be able to break their WTO tariff bindings if they felt they had to protect themselves against surges of food imports if prices fall.

Why was that such an important issue? Because tariff bindings are one of the pillars of the GATT-WTO system ever since 1947. A binding is an inalterable promise that you will never ever raise tariffs above that bound rate. You exchange concessions with other countries and bargain on rates, and what you end up with is the rate at which you will lock your tariff in.

If the Doha Round had permitted bindings to be violated for some food products, it would have meant loss of market access for existing food exports, but would also have meant that a basic premise of the WTO had been undone – with the inevitability that this undoing would spread.

The issue was so central that it really consumed full attention, a fire so intense that it drew the air out of other issues. Everything else halted. And in the end, the two sides could not agree. Those wanting protection just would not be satisfied with something within the present rules.

But more broadly, there was little meeting of minds here. Pascal Lamy, the Director-General, took a real risk in calling this meeting. He figured if there was any chance of doing a deal this year, the agreement on terms of negotiation had to be done now. If the basketball was going to go through the hoop, there had to be a backboard off which to bounce it – and that was this meeting of ministers.

But, to be trite, it was a bridge too far. Issues just weren’t ready, whether they were in manufactured goods or agriculture. Ministers were being asked to make decisions on matters on which their deputies had been unwilling to agree – and based on my experience, just because you bring in someone with a higher title, that country’s position is not going to change.

On NAMA – Non-Agricultural Market Access – we actually made a little progress. The non-tariff barrier text was so non-controversial that no one even mentioned it. On tariffs, we have known the tariff cutting formula is too weak to open markets for us, so we had to look for deeper cuts in major industrial sectors. The goal here in Geneva was to move Brazil, China, and India away from absolute refusal to even talk about sectorals and to a position where they would at least be willing to enter into beginning to negotiate sectorals.

This was the NAM’s bottom line. I don’t know if, had the Ministerial gotten to that point, we would actually have achieved that objective, but all three of the countries were moving somewhat in that direction. On the other hand, the terms were weakening somewhat, so we don’t know what would have come of this.

Where do we go from here? NAM President Governor Engler has called for a cooling-off period. Everyone must recognize that there is now no way to conclude these negotiations before the end of this Administration. The new Administration needs to come on board and begin looking at this, and there will also be a new EU Commission.

There is no point in picking up where we left off. People need to think about what they really want and what they are willing to give up for it. But we must resist the wags who can’t wait to pronounce this the end of the WTO. Absolutely not. And here I am going to agree with Indian Trade Minister Kamal Nath, who said, “My confidence in the institution of the WTO remains intact, and we will take this up and move forward.”

The World Trade system should actually be viewed the stronger for having just gone through a difficult process of disagreement. It is flexible enough to withstand this, so long as we do not become its enemies and accuse the institution of failure, rather than a failure of some large new countries to realize that it is give and take, not take and take.

The NAM will certainly be looking at ideas on how to move ahead. One excellent idea that perhaps can gather traction is that of an environmental sectoral that would reduce or eliminate tariffs on products meant to help clean the environment. There are other possibilities as well. Since non-tariff barriers were non-controversial, maybe some of those could move ahead – so long as we get away from the idea nothing can happen outside a huge round.

I want to end my last blog from Geneva by saying how proud I am of Amb. Susan Schwab, Presidential Assistant Dan Price, Commerce Under Secretary Padilla, Ambassadors John Veroneau and Peter Allegeier, and the entire U.S. interagency negotiating team. They worked ceaselessly, with little sleep, looking for ways to make this thing work. If anyone could have made it happen, it was them. But even they couldn’t make it work when others just said no.

Thanks for reading these blog posts, and I look forward to coming back to Washington and to home.
NAM’s Man in Geneva
Frank Vargo

For the previous reports from Frank Vargo, NAM’s vice president for international economic affairs, please click here.

A quiet day in Geneva, at least on the surface. The major event today was the long-anticipated “signaling conference” on services, in which countries indicated what they were prepared to do in liberalizing services. The Coalition of Services Industries indicated it was very pleased, and hoped that substantial new offers would be made as a result.

On NAMA, this has been a day of very intensive bilateral negotiations. The U.S. has been working in close tandem with the EU, and both have been pressing for China, Brazil, and India to step up to the plate. There seems, for the time being at least, to be some distance opening up between Brazil and India – in which Brazil is making some reasonable statements, indicating willingness to move ahead, and not being shrill in its tone. India, on the other hand, continues to be extremely difficult and critical.

Not too much to report. NAM was asked to speak for manufacturers at a meeting of Congressional staff who are here in Geneva, along with the Farm Bureau for agricultural interests. There is a lot of congressional concern for what this deal might do to affect import-sensitive industries and a lot of questions as to how there can be enough gain for export-oriented industries.

Also met again with U.S. negotiators, and continue to admire the job they are doing. It is not easy to be in bilateral meetings all day, be in green room and other WTO meetings, plan the next day, examine strategies, report back to Washington, etc.

Tomorrow will bring more bilateral meetings, and probably a meeting of the Green Room in which about 30 countries will give their reactions to the Lamy text developed yesterday. Most of them apparently will say in general it is OK, but they have problems in that the U.S. and Europe aren’t doing enough in agriculture. Many of them also oppose the anti-concentration language in the text for NAMA and the provision for sectorals.

Could be an interesting day tomorrow.

NAM’s Man in Geneva
Frank Vargo