Monday, January 30, 2012

Remember Jackson/Vanik and Jewish Emigration From the Soviet Union?

I was bemused last week reading a long article in the Moscow Times on President Obama’s State of the Union address to Congress earlier in the week. It was interesting to see how the writer parsed each word of the speech relating to the important issue of granting Russia permanent normal trade relations as required under the terms of Moscow’s accession to the World Trade Organization.

The closest the President came to mentioning a repeal of the 1974 Jackson/Vanik provision or simply taking Russia off the list was to mention the need to level the playing field in countries like Russia. By the way, Russia is the only country on the list.

Misleading or just obtuse?

The State of the Union address is an opportunity for the chief executive to outline his plans for the upcoming year – relating especially to the Administration’s legislative agenda.

Repealing Jackson/Vanik – or at the minimum taking Russia off the list – would happen in a "New York minute" in Congress. But the President has to ask. For the past two decades at least the President has had no problem in annually waiving Jackson/Vanik to allow most-favored-nation treatment.

Why the hesitancy?

Some in Washington want to await the outcome of the election in Russia set for mid-March. Some in Congress want to await the outcome of the election in the United States this November.

Free-trade supporter Rep. Kevin Brady (R-Texas) – who chairs the House Ways and Means trade subcommittee – strongly backs permanent MFN for Russia, but said recently that it won’t be easy unless the White House gets behind the push. The President’s remarks in the State of the Union can’t – by any stretch of the imagination – be considered a "push."

So – as he has done in earlier trade issues – the President is putting the United States in a difficult and embarrassing position.

To demonstrate how easy Congressional removal of Jackson/Vanik restrictions on Russia could be, two House members – who can be described on sitting on the opposite poles of the political spectrum – recently established a Russia economic cooperation caucus. They are Rep. Gregory W. Meeks – a liberal Democrat from Queens, New York – and Rep. Dan Burton – a conservative from Indianapolis, Indiana. Given their wide divergence of thinking on almost everything else, it should not be difficult to gain significant support from members in the middle.

Approval in the Senate – which typically prides itself as the more diplomatic chamber of Congress – should be no problem.

Disparities in tariffs are only one aspect of the Jackson/Vanik problem. A senior US trade official explained to an informal gathering of Congressional staff last week that the lack of mutual WTO recognition between the countries creates some potentially serious problems. The United States would have no recourse to dispute settlement if Moscow – for instance – decides to ignore commitments it made bilaterally with the United States on such issues as agricultural imports and enforcement of intellectual property rights.

The day Russia was officially invited to join the WTO last December, both Moscow and Washington were forced to invoke non-application of Article 13 relating to universal permanent MFN treatment.

Jackson/Vanik forbids application of MFN treatment to nonmarket economies that restrict the free emigration of their citizens. Soviet restrictions on emigration are no longer an issue, to say the least. One mid-level Russian official commented to WTD a couple of years back that the law has had its effect and should be removed. He said it was written to pressure the Soviet Union to allow the emigration of Jews from the country – many wishing to go to Israel. The Soviet Union disintegrated and a wave of emigration took place. Now, he noted, those emigrates are returning in a bid to take advantage of opportunities in the rapidly expanding economy.

The official asked rhetorically, maybe Moscow should force them out of the country again to meet the requirements of Jackson/Vanik.

p.s. – Much of the reason for writing Jackson/Vanik into law by then-Rep. Charles Vanik was to help the Presidential bid of Sen. Henry M. (Scoop) Jackson. Shortly after the 1976 election – and Sen. Jackson’s loss in the primaries – Mr. Vanik started to back away from the law. He worked hard during the end of his tenure in the House in the late 1970s – and even afterwards as a Washington lawyer – to overturn the law. He even told WTD in those days that at a minimum he wanted Congress to take his name off the law.

Jim Berger

Thursday, January 19, 2012

Mr. Obama’s Trade Agency Reorganization – DOA on the Hill, But It May Play in Peoria

Initial reaction from Congress to President Obama’s trade agencies consolidation proposal indicates pretty strongly that the plan will be "dead on arrival" on Capitol Hill. The idea of merging the small but effective US Trade Representative’s office into a new super-department, which also would include the trade agencies of the current Commerce Department, the US Export-Import Bank, the Overseas Private Investment Corporation, the Small Business Administration and the US Trade and Development Agency – apparently makes lawmakers and much of the business community uncomfortable.

Even if lawmakers liked the reorganization plan in principle, it’s hard to believe that the White House for one minute believes that the Republican-controlled House – which has been butting heads with Mr. Obama over almost every significant issue that arises – would embrace the idea of giving a Democratic President sweeping new powers to not just consolidate but create new federal agencies and departments.

So the trade agency reorganization – whatever its merits – is probably not going anywhere.

But what it does give the President is a potentially potent talking point he can take on the campaign trail this summer. No, the average American voter has no idea what USTR or OPIC or TDA are, let alone care whether they’re separate agencies or part of a bigger department. But the average voter does care about the size of government and perceived government waste – in other words how taxpayer dollars are being spent.

Now the President can go on the campaign trail and tell voters how he wants to downsize government, get rid of redundant programs and save taxpayer dollars – but Republicans are standing in the way. Mr. Obama can wrap himself in the mantle of leaner government that Republicans usually claim for themselves – and will have a ready response to any charges from whoever ends up as the Republican Presidential candidate that he favors big government.

It also appears to put President Obama on the right side of business – even though US business has serious concerns with some aspects of his proposed reorganization. Mr. Obama is selling his plan as aimed at making the government more responsive to the needs of business – particularly smaller firms. By setting up a one-stop shop that will walk business through the entire process of selling their goods overseas – from identifying foreign buyers to helping finance sales, which by the way is already in place at least in theory – the President is arguing that the US government can be a major boost behind creating more exports and hence new American jobs.

So President Obama can tell voters that he is trying to make the government smaller, save taxpayer dollars and create new jobs – but Republicans are standing in his way. That’s a pretty good argument to take out on the campaign trail and one that may "play in Peoria" even if its DOA in DC.

Mary Berger

Tuesday, January 10, 2012

An Accounting

An Accounting

Washington Trade Daily – now in its 21st year of publication – seems to be leveling off after a significant drop in altitude over the past three years. I’m talking of its subscription base.

Since 1988, when the publication began, subscriptions climbed every year until the economic crisis of mid-2008 and the election of Barack Obama as President. Why? Seems to be a number of reasons –

1. Mid-2008 brought "fears" of a serious recession – even a depression – with commercial banks pulling back loans over a domestic housing financing disaster. What WTD experienced in the last three months of that year was a hesitancy of subscribers to use their credit cards to pay for renewals, which has become a favored way to renew because of the relatively low price of the publication.

(Myself and Mary had planned a long anticipated trip to the Grand Canyon that October. The big ticket items were paid for, but we had no ready cash. So we offered a full five-year renewal to the first subscriber to pay $1,570 via credit card to get ready cash for the trip. The vacation worked out fine.)

(Another instance at the time involved a deposit of a Treasury check from one of our government agency subscribers. My small credit union put an unusual two-week hold on the check until the amount cleared.)

2. By the time the new Administration took office and US Trade Representative Ron Kirk settled into office – around mid-2009 – it was clear that trade policy would not be a priority, despite the crucial effort in Geneva to wrap up a long-overdue Doha Development Agenda trade negotiation and the pending three free trade agreements with South Korea, Colombia and Panama.

Instead, the Administration took its eye off those important agreements and USTR Kirk made his first major trade policy announcement by asking the International Trade Commission to do a series of reports on how the government could improve small business exports.

That decision led to a White House National Export Initiative to double exports in five years from a low point in 2009 – due mostly to the recession. Exports are up, but that is mostly due to a conscious effort on the part of the Federal Reserve to keep the dollar undervalued.

Generally, a greater number of subscribers did not renew during the period because there was nothing major going on in trade in Washington.

(During the time we received more than one e-mail from once loyal subscribers who praised us for our good work in the past, but indicated they would renew should anything happen in Washington. "Let us know," said one email.)

3. While in the economic doldrums of 2009 and 2010, USTR Kirk – apparently via instructions from the President himself – started to downplay the importance of the nearly decade-old Doha Development Agenda negotiations. The United States simply isolated itself from the hard struggles to keep the talks alive – culminating in US insistence that negotiations start again sometime in the future on a difference base.

(WTD was told by a senior US trade official at last year’s Asia-Pacific Economic Cooperation trade ministers’ meeting in Montana to write that the Doha round was over – despite what USTR Kirk told his trade ministers colleagues.)

4. Last year saw an up-tick in activity related to the nine-nation TransPacific Partnership negotiations – about the only game in town.

The fact is the Administration may be too late, especially when it comes to building and maintaining a private-sector coalition that will be needed to lobby Congress and build public confidence in any new trade initiative.

(WTD started to lose US-corporation subscriptions over the past two years. What I found out, since the newsletter goes out on a daily basis via e-mail, is that those email addresses were simply return to us unopened. Corporate headquarters long ago started to downgrade trade staffs and, in some instances, get rid of the only employee in Washington that had responsibility to follow trade matters.)

That will be a serious problem when the Obama Administration attempts to gain Congressional approval for the TPP later this year or next. Except for a few die-hard multilateral corporations, such as Proctor and Gamble and Caterpillar, along with big groups like the US Chamber of Commerce and the National Association of Manufacturers, the Washington foundation for freer trade has simply disappeared.

In real terms, WTD has learned in recent months, the TPP does not matter much to the corporate balance sheet level. Of the eight other nations involved in the free trade negotiations, the United States already has FTAs with half of them – Peru, Chile, Australia and Singapore. New Zealand is well-entrenched in an open trade policy. The other three – Vietnam, Brunei and Malaysia – are developing countries and should fall more properly within a built-up US preferential mechanism.

As one senior corporate executive told WTD recently, there is simply not that much added-value there for his company.

5. The worsening Euro crisis also sis not helping us. Recently, the French embassy had to delay its payment to WTD for several months – actually seeing a lapse in service. WTD found out that it was commanded by Paris not to pay any bills – including its local electric bill. One embassy official told WTD that his office came very close to working in the dark.

I recently told this story to an ambassador of an African country, who laughed heartily, saying he never though such a rich country like France would experience the same problems that African countries face everyday.

Several US- and Geneva- based European offices have had to quit WTD due to their own budget situations.

6. As for the future. Everyone in the corporate world is convinced that either a second Obama Administration or a new Republican presidency will focus on trade and international economic issues. History has shown that the second term of Presidents since the Second World War has focused on foreign affairs – because that is the only way a sitting President can establish his name in the history book.

For Mr. Obama it would be a choice of finding another war to fight somewhere or pursue the international trade agenda – even a transformed international trade round in Geneva.

For Republicans, a basic tenant has always focused on trade.

(ps – President Obama remains a loose cannon on deck and if reelected might continue to pursue a domestic agenda to the detriment of the US standing in the world. "Don’t count it out" is our warning.)

Despite it all, the editors of WTD are optimistic and look forward to a better year – but they don’t believe it will be a fantastic one.

Happy New Year! I hope.

Jim Berger