Trade issues, relatively neglected in 2009 as a new president and a strengthened Democratic majority in Congress focused on other issues, are set to take on a larger profile in 2010 as policymakers look to trade to help boost domestic employment. The Obama administration is expected to focus on negotiating two multilateral agreements and strengthening enforcement of existing pacts. Congress, meanwhile, will consider issues such as trade preference reform and food safety as well as a customs reauthorization bill.
This article presents a summary of some of the major trade-related issues likely to come up in 2010. For a more comprehensive overview of the 2010 trade agenda, please click here for a white paper prepared by ST&R’s government affairs team.
Pending FTAs. In recent weeks administration officials have repeatedly signaled an interest in advancing the free trade agreements the U.S. has already negotiated with Colombia, Panama and South Korea. These FTAs have languished for several years due to congressional concerns about labor rights in Colombia, Panama’s status as a tax haven and limited access to Korea’s auto and beef markets.
In his annual State of the Union address in January, President Obama spoke of the need to strengthen trade relations with these three countries but did not mention the FTAs. In a follow-up meeting with Republicans he expressed hope that “we can move forward with some of these trade agreements” but indicated that this may take several years. The president said he will be “talking more about trade this year” as part of this process, but he emphasized that “it’s going to have to be trade that combines opening their markets with an enforcement mechanism, as well as just opening up our markets.” Deputy U.S. Trade Representative Demetrios Marantis added in a recent speech that while “there is a lot of skepticism about international trade … I think we will be able to increase the support for trade both in the Congress as well as across the country” by working to address the concerns that have been raised and by creating jobs through trade policy.
Nevertheless, administration officials have still not indicated when legislation to implement the FTAs might be submitted to Congress. In this context it is significant that a majority of the Democratic members of the House are supporting a bill that calls for existing FTAs to be renegotiated and future FTAs to include strengthened provisions on a whole host of issues. The bill (H.R. 3012, the Trade Reform, Accountability, Development and Employment Act) is not expected to become law but does serve to indicate many lawmakers’ current sentiments on trade.
New FTAs. Although the Doha Round negotiations are unlikely to see much if any progress this year, the Obama administration is pursuing only one new FTA, a regional agreement dubbed the Trans-Pacific Partnership that currently encompasses Singapore, Chile, Brunei, New Zealand, Australia, Peru and Vietnam. This choice appears to signal a focus on more commercially significant FTAs that would provide meaningful export opportunities, which could be easier for Congress to accept. The TPP is seen as a good place to start, given that the U.S. already has FTAs with several of the countries involved and that the agreement has the potential to expand within a fairly short time to include other major markets.
Critics have said that the three pending FTAs are based on a “failed model” and that they will push for stronger provisions in several areas. The administration has responded by promising that the TPP agreement will be an FTA for the 21st century and will not use previous FTAs as a template. That position has garnered the tacit backing of congressional critics, who told the president in a recent letter that they believe the TPP offers an opportunity to redefine and redirect U.S. trade policy so that it “creates and retains good jobs in the U.S., fosters sustainable and equitable development worldwide, and promotes solutions to our global economic and climate challenges.” Even the Teamsters Union, an outspoken opponent of FTAs in the past, has said it will support a TPP agreement that addresses these concerns.
The first round of TPP negotiations is slated for March 15 and another round is expected sometime in June.
Preference Program Reform. After several years of false starts, a full-fledged effort to reform U.S. unilateral trade preference programs is expected in 2010. Possible changes include revising the eligibility criteria with respect to labor, the environment and intellectual property rights; amending the competitive need limits, which allow continued benefits for imported goods that otherwise exceed certain volumes, to curtail preferences for certain products; and adding new benefits for least-developed countries. Observers say legislation could be introduced and marked up in the Senate as early as this spring.
China. Until recently, neither the Obama administration nor Congress had much interest in pushing China on trade irritants for fear of jeopardizing economic recovery efforts, among other things. That may well change in 2010. The administration is making a major effort to double exports over the next five years as part of an effort to increase domestic employment, and observers say further opening China’s market will be vital to that initiative.
As a result, the issue of China’s currency, which is widely regarded as being undervalued, could see greater attention. Already some lawmakers have signaled plans to reintroduce legislation calling for punitive measures if Beijing does not revalue its currency. That effort could gain steam after Commerce Secretary Gary Locke told lawmakers in a recent letter that while he agrees that “China’s currency practices should be assessed no differently than any other subsidy allegation” in the course of countervailing duty proceedings, the requirements of current CV duty law makes such an analysis difficult. There is also increasing speculation that the Treasury Department may take the unprecedented step of naming China a currency manipulator in its upcoming semiannual report on exchange rate practices. “Maybe that will finally get China’s attention and lead to a more level playing field for U.S. exporters,” Senate Finance Committee Ranking Member Charles Grassley, R-Iowa, said recently.
It remains to be seen, however, just how far the administration is prepared to go. At a Feb. 3 event with the Senate Democratic Conference, Sen. Arlen Specter, D-Pa., asked President Obama if he would support an effort to revoke the bilateral agreement between the U.S. and China concerning China’s accession to the WTO, which Specter said “gives China such an unfair trade advantage.” Obama responded that he “would not be in favor of revoking the trade relationships that we’ve established with China.” The president said that while he has shown a willingness to “enforce our trade agreements in a much more serious way,” the future of the United States “is going to be tied up with our ability to sell products all around the world, and China is going to be one of our biggest markets.” He acknowledged that currency valuation is a key issue but said the U.S. should not use it as an excuse to “shy away from the prospects of international competition.”
ACTA. The U.S. and a handful of other countries are working to conclude by the end of 2010 an Anti-Counterfeiting Trade Agreement. U.S. officials have said that the objective of the ACTA negotiations is to create a new, state-of-the art agreement that will help governments combat more effectively the proliferation of counterfeit and pirated goods, which undermines legitimate trade and in some cases contributes to organized crime and exposes consumers to dangerous fake products.
The latest round of negotiations was held in Mexico Jan. 26-29 and the next round is scheduled for April in New Zealand. Trading partners taking part in the talks include Australia, Canada, the European Union and its 27 member states, Japan, Mexico, Morocco, New Zealand, Singapore, South Korea and Switzerland.
The Obama administration has taken a number of steps to increase the transparency of the ACTA negotiations, but critics say more is needed. There is speculation that the U.S. is pushing its negotiating partners to publicly release a draft text of the agreement later this year, but as of yet it is unclear whether this will in fact happen.
Customs Reauthorization. Prompted in large part by trade community concerns that U.S. Customs and Border Protection needs to restore the balance between its trade facilitation and trade enforcement efforts, a wide-ranging customs reauthorization bill was introduced in the Senate last August, received a hearing by the Senate Finance Committee in October, and could be marked up this April or May. A similar bill is currently being drafted in the House.
Prospects for this legislation are unclear. Progress could be slowed if jurisdictional issues arise among the congressional committees that oversee trade and homeland security. In addition, the trade community is expected to seek the removal or revision of certain provisions, including one that would allow import data collected for national security reasons to be used for commercial enforcement efforts.
Miscellaneous Trade Bill. Congress is expected to move fairly expeditiously to reinstate the duty suspensions and reductions for hundreds of imported goods that expired Dec. 31. As a first step, a bill that includes provisions already vetted by the International Trade Commission and incorporated into the House MTB introduced Dec. 16 could be approved by the end of March, though there is little expectation that it will be retroactive. A second bill that includes additional provisions could then be introduced in late spring or early summer and advanced later in the year.
Export Control Reform. Industry observers and congressional aides say 2010 could finally see movement toward a broad reform of U.S. export control policy. The Obama administration is conducting a high-level review of export controls with the aim of making it easier for U.S. companies to do business abroad while also protecting national security interests. Possible measures include an updated Export Administration Act as well as various regulatory changes that do not require congressional authorization.
One key element in the reform effort is that the Obama administration is pushing to substantially increase U.S. exports as a way to boost domestic employment. A January 2010 study by the Milken Institute asserts that a “responsible modernization of export controls for certain goods and certain countries” could aid that effort, producing higher export growth in “the high-value-added areas in which the United States excels” and increasing total employment by 340,000 jobs over the next decade.
Food and Product Safety. No major product safety legislation is expected in 2010 given that both Congress and the administration are continuing to deal with implementation of the Consumer Product Safety Improvement Act passed in 2008. However, efforts to revise the CPSIA in light of some of the difficulties identified to date are a possibility, as are measures to address emerging product safety concerns such as the replacement of lead with cadmium in children’s toys and products.
Instead, it is anticipated that lawmakers will focus their attention on finalizing a comprehensive bill to reform federal food safety efforts. The Senate Health, Education, Labor and Pensions Committee unanimously approved its version of a food safety bill last November, following the House of Representative’s approval in July of a somewhat different bill. A final measure, which is likely to include new fees and restrictions on imports, could be sent to the White House for the president’s signature before the end of the year.
Mexican Trucks. In March 2009, Mexico imposed tariffs of 10% to 45% on $2.4 billion worth of U.S. exports in retaliation for the termination of a U.S. pilot project that allowed up to 100 Mexico-domiciled motor carriers to operate beyond the border commercial zones and the same number of U.S. carriers to operate in Mexico. Affected products include Christmas trees; certain fruits, vegetables, juices and nuts; health and beauty items; tableware, kitchenware and glassware; manmade fiber yarn; carpets; jewelry; home appliances; sunglasses; and pens and pencils.
Despite pleas for action by affected U.S. industries, the Obama administration had done little to address this issue. That changed recently when USTR Ron Kirk visited Mexico City and said there is “a sense of urgency” to find a solution. This is unsurprising given that the Mexican tariffs are a restriction on U.S. exports, which have now become a major priority for the administration. With language prohibiting the pilot project having been excluded from the fiscal year 2010 transportation spending bill, Kirk said, “we have at least the green light to go forward and start those consultations with Congress” on how to resolve this dispute.
Environment. With legislative action on climate change increasingly unlikely this year, prospects for regulatory action could improve. Last December the Environmental Protection Agency made a finding that current and projected concentrations of six key greenhouse gases in the atmosphere threaten the public health and welfare of current and future generations. While this finding itself does not impose any requirements on industry or other entities, it is a prerequisite to finalizing the greenhouse gas emission standards for light-duty vehicles that the EPA proposed in September 2009. There is also some concern that this increased regulation could eventually extend to foreign-made goods.
