Friday, July 27, 2012

The Obama Adminsitration Report Card -- nothing to be proud of.

President Obama’s first term is almost up – and WTD has decided to play the role of teacher and hand out a report card on the Obama Administration’s efforts on trade over the past almost four years.

Grades will be based on what has been accomplished – not what has been promised. Therefore expect to see a lot of "incompletes".

Also, grading is based on what actions the Administration had pledged to make – not what many expect should have been taken.

The areas for grading also pertains to aggressive US trade – promoting exports and market access – generally not on imports unless there is an impact on exports.

1. US Beef Hormones and EU QuotasF – Almost from day-one, brand new US Trade Representative Ron Kirk said he intended to impose stiff sanctions against the European Union for its consistent refusal to abide by a years-old World Trade Organization decision saying Brussels had no scientific reason to block imports of US beef treated with growth hormones.

On May 6, 2009 – after his first meeting with a foreign counterpart – then EU trade commissioner Catherine Ashton – Mr. Kirk announced his first big victory for US trade. It was an agreement – which came to full fruition at mid-year – where the EU agreed to increasingly raise its quotas on nonhormone-treated US beef in return for the United States dropping the sanctions threat.

Mr. Kirk agreed – and called it a great negotiating success. It was a great negotiating success for Brussels since the result was a continued ban on US hormone-treated beef imports from the United States – no change – in return for increasing the caps on nonhormone US beef, which US producers had been unable to fill then or since.

One action had nothing to do with the reaction.

2. EU Poultry BanF – One of the last actions of the outgoing Bush Administration was to impose stiff sanctions on the European Union for its refusal to import US poultry treated by chlorine baths in an anti-microbials treatment – a common practice in the United States. Brussels cut those exports off in 1997.

The Bush Administration had made the issue a top priority for its last TransAtlantic Economic Dialogue meetings – but made no progress. The new Obama Administration took the matter off its TransAtlantic Economic Council agenda and pigeon-holed it in the WTO agriculture committee in October 2010.

3. Doha Development AgendaF – From the first weeks of the Obama Administration, high-ranking US officials were frank that Washington had little time or patience to work on the conclusion to the almost decade-old Doha Development Agenda multilateral trade round in Geneva. New Agriculture Secretary Tom Vilsack was to first to publically comment early in his tenure to visiting foreign officials not to expect the Administration to pay any attention to the negotiations until the country gets out of the current economic recession. Guess what – the recession continues and the round is all but over.

Numerous academic studies during the interim have shown multi-billion dollar benefits of a new international trade agreement. They were probably underestimates.

4. Mexican TruckingC – After more than four years of wrangling with Congress on the issue of access for Mexican trucks on American highways – and reciprocal access for US trucks on Mexican roads – the Transportation Department developed a pilot program early this year, which has opened the US market to select Mexican drivers. Not sure – and few seem to care – about US access to Mexican highways.

The pilot project resulted in the gradual reduction of punitive Mexican tariffs – affecting some $2.4 billion in US exports – on more than 90 US-exported products because of US violation of commitments made in the North American Free Trade Agreement.

5. The Colombia Free Trade AgreementC – An already woefully belated US-Colombia free trade agreement handed to the incoming Obama Administration by the Bush Presidency in 2009 took another three years to approve and implement. It was finally and officially implemented on May 15 of this year.

While the Obama Administration dallied and delayed – and tried to pressure Colombia on non-related items like violence against union leaders there – US exports suffered as other major trading countries strengthened their own trade ties with the country.

6. The US trade agreement with South KoreaD – known as KorUS – had a similar fate. Washington refused to move the signed agreement to Congress at the behest of organized labor and a very small minority of House members.

A minor change in the auto provisions in the Bush agreement was finally worked out in "side discussions" in 2011 which created marginally better access for US auto exporters. The change came at the high price of Korea continuing high tariffs on US pork exports to the country – a natural trade.

During the long period of inactivity, Seoul had signed a giant FTA with the European Union – and with other big economies – further undermining the basis for increased US trade.

KorUS is the largest US free trade agreement since the North American Free Trade Agreement.

The agreement went into effect on March 15, 2012.

7. A US-Panama free trade agreement. – (I) – There was a similar story for the Panama FTA, with USTR Kirk himself and several other members of Congress urging quick consideration of the FTA by the end of 2010 at the latest. There are rumors that the accord will go into effect on October 1, this year, but nothing official.

8. AfricaC-minus – African leaders were ecstatic when President Obama – himself a man of color and with an African father – entered the White House. It took only a few weeks to temper that enthusiasm.

Credit should be given to Assistant US Trade Representative for Africa Florizelle Liser – with 10 years of career-building at USTR – for her efforts to move her own agenda by suggesting over the years concrete ideas for free trade agreements with the major countries along with innovative new ideas on promoting investment and US business opportunities there going beyond the Bush Administration’s historic African Growth and Opportunity Act.

But by mid-2009, USTR Kirk had sent a direct message to developing African economies to reform your ways, diversity out of apparel and stop asking the United States for more and more trade preferences. He called it a "tough love" strategy.

As an example, the USTR has refused to do anything on Capitol Hill to continue the important third-country fabric provision of the African Growth and Opportunity Act which allows African producers to use fabric from producers outside of the region – including China – to quality for duty-free access to the United States for their apparel. It is a major concern to the industry there. That provision is set to expire on September 30 – and has yet to be renewed by Congress.

Meanwhile, several apparel producers have abandoned the African market because of the uncertainties.

On broader market access-related issues, the Administration has been just as slow in following through on Ms. Liser’s suggestions.

Not until June of this year did President Obama call Africa the "next big market" and promise a broad-based trade and investment strategy for the continent. Here are the less-than-ambitious details: It includes the possibility of a bilateral investment treaty and a trade facilitation and customs arrangement with the East African Community. The focus, the Africans were told at the latest AGOA annual meeting, would be on intra-regional trade, not increased US market access.

Also announced was a new Trade and Investment Partnership initiative that could lead to an ultimate free trade agreement in the East African Community of Burundi, Kenya, Rwanda, Tanzania and Uganda.

The United States took pains to explain any such move would take years and years to accomplish.

Also late this year, the Obama White House took some steps toward closer economic and trade relations with South Africa in the guise of a new Trade and Investment Framework Agreement – but not re-launching a Bush Administration initiated US-Southern African Customs Union free trade agreement, which would include Botswana, Lesotho, Namibia, South Africa and Swaziland.

Too little and too late.

9. Bilateral Investment TreatyF – The US bilateral investment treaty program is an important tool to give US companies – and foreign firms as well – the confidence that their investments abroad, many in some risky markets, will be protected against things like expropriation and restrictions on the repatriation of profits. The Obama Administration from the beginning has refused to sign any BITs event though they are sorely needed and requested by major markets like Egypt, India, China and Russia.

Earlier this year, the Administration completed a three-year review of the existing model BIT – making only some tangential changes. In the interim, the BIT program stopped in its tracks. Preliminary negotiations have begun in some major markets, so says the State Department that runs the program. But no results yet.

8. US meat access abroad.D – An occurrence of mad-cow disease in late 2003 led to a almost immediate near global cut-off of US beef exports. Since that time the Bush Administration – followed by President Obama – made only half-hearted efforts to rebuild that market in key importers such as China, Japan, Taiwan and South Korea.

Even though the international body on animal health standards has declared the United State to be safe from Bovine spongiform encephalopathy, only a few markets have been partially re-opened despite US desires. Japan is the most closed – taking in US beef only from cattle of less than 20 months of age; South Korea limits its imports of cows of 30 months and less; China takes in no US beef; Taiwan’s Congress recently moved to open the door slightly. Japan late last year agreed to an internal review of its policies.

The Obama Administration has taken no hard actions to reopen those markets, essentially abandoning the lucrative markets to Australia.

Perhaps beef access should have been where the United States put its loudly-touted "enforcement" efforts.

9. Middle EastF – The Obama Administration signed a "strategic partnership" with Egypt in May 2009. But since then – and notably since the "Arab Spring" revolutions of a year ago – the United States has done nothing to advance any relationship with either the new governments or the people of the geopolitically important Middle East and North African region. In fact, it has intentionally made the relationship worse by publically announcing a "pivot" from the region to the more important Asian region shortly after the popular revolutions.

Perhaps Washington is more confident in dealing with "dictators" like former President Mubarak who it knew and could bribe rather than the democratic revolutions it cannot buy. Despite the "strategic" relationship with Egypt, the United States continues to shun – and at the same time damaging its own credibility as a responsible nation-state – even discussions of a bilateral trade agreement, which the new leaders in Cairo have pleaded for unashamedly from the beginning.

The best President Obama could do was lay out a new multilateral "engagement" plan that would encourage the growth of stable democracies and inter-regional as long as it didn’t cost anything.

All talk and no action.

10. Anticounterfeiting Trade Agreement.F – The jury is still out on the benefits of the controversial Anticounterfeiting Trade Agreement on which the Obama Administration devoted a lot of time and resources during its first two years in office. It is still unclear whether new authorities to close down "counterfeiting" websites, for instance, will hinder or help intellectual property distribution – and economic benefits – abroad.

So far Congress has decided not to deal with the sensitive a freedom-of-speech "hot potato". Parliaments in an increasing number of the dozen signatory nations are voting it down – including the European Union.

ACTA overall is simply a bad idea that won’t stand on its merits.

11. National Export InitiativeB – President Obama in his 2010 State of the Union address to Congress called on the nation to double exports by the end of 2014. Good sentiment, but little effort behind it. Like the "Export Now" initiative of the 1980s, US exports are being pushed by a weakened and declining dollar – not much more, including any innovative new programs.

Also of note is that the 2009 export base on which the outcome will be measured is the lowest in recent US history. Getting up from lying in the gutter is not that difficult; getting up and running is another matter.

What is the Administration doing to improve exports – creating a new White House Export Promotion Cabinet, relaunching the dormant President’s Export Council and sponsoring more trade missions.

The United States is well on track for doubling exports by that time – if the European Union market does not totally collapse – but what about the benefits of a strong dollar. Not a factor for this Administration, apparently.

12. Israel FTAF – In the middle of 2010 the Obama Administration decided it was time to upgrade and expand the US-Israel free trade agreement – the first ever signed with the United States. The 27-year-old accord covered only tariffs on goods, leaving out nontariff barriers, services and agriculture.

What has the United States done on negotiating an updated agreement? Nothing.

13. Export ControlsI – In early 2010 then Secretary of Defense Robert Gates noted that the Cold War was over and that the United States should sell more high technology goods and services abroad. So he directed a multi-agency export control reform effort that was suppose to address very restrictive controls of what were once militarily critical technology, taking the function out of the hands of the "defensive" State and Defense departments and hand it over to a more export-oriented Commerce Department.

The idea was to improve the US industrial and defense base by creating more opportunities for cooperation with major US allies and promoting innovation and development through exports.

Good idea.

That effort has been underway for the past two years and controls officials are hoping to have a big package wrapped up early next year.

But we will have to wait and see before giving it a grade. There is a lot of effort going into the reform process, but quite a few observers are now saying the effort over the past two years have weakening Mr. Gates’ original idea and looking now more like shifting deck chairs around on the Titanic.

14. Information Technology AgreementI – Another incomplete grade goes to the US effort to expand a decade-old World Trade Organization Information Technology Agreement which allows free trade among its 40-some signatories.

Talks began in earnest last year – after the collapse of the Doha Development Agenda negotiations – but apparently are not close to any agreement. The European Union – a major participant in the arrangement – would rather have a re-crafted agreement, which would bring on board the elimination of nontariff barriers to trade in information and communications technology goods and services.

The United States remains steadfast in calling only for modest changes – the additional of new products and the expansion of membership.

15. India Nuclear AgreementI – A lot of negotiating with India and Congress was expended over the past three years to allow US nuclear energy suppliers to enter the lucrative Indian energy market.

However the agreement is not yet fully in place for the United States – but not for other countries like Russia or France – because of India’s hesitancy to waive legal liability for US suppliers in case of any mishap.

No construction contracts have yet been issued to US companies.

16. Russia PNTRI – US companies may now have more difficulty getting or expanding in the Russian market unless Congress finally agrees to take the country off of the Cold War era Jackson/Vanik emigration trade restrictions law. Congress has yet to do so and the Obama White House has done little to convince Congress to do it.

It is now harder than ever to repeal Jackson/Vanik in an election year than in the previous two or three years, when the Administration ignored the issue.

One tangible issue hanging on removal of Russia was Jackson/Vanik is the years-long ban on imports of US poultry. Moscow last year agreed to reopen its market as soon as it received permanent normal trade relations.

Russia becomes a member of the WTO on August 22. Congress is set to recess next week until September with no action on permanent normal trade relations.

17. EU-US free trade agreement. – I – The United States and the European Union will have another go at some sort of transAtlantic free trade agreement with a final recommendations from a high-level officials group by the end of the year. Officials have played down prospects for a comprehensive agreement, saying they are looking at prospects for an FTA "with clear eyes."

18. Plurilateral Services AgreementI – Since the beginning of the year the United States has been expending a lot of energy in Geneva to create a plurilateral international trade in services agreement with some two-dozen like-minded participants. But there is a big divide on how inclusive that agreement would be – whether it would apply to all nations even though they have not signed onto its disciplines or only the 20-some current negotiators. The United States wants no "free riders."

19. Georgia FTAI – Early this year, President Obama himself – and to the surprise of many US trade officials – promised visiting Georgia President Saakashvili a look at a bilateral free trade agreement. What’s happened since – some discussion, nothing else.



(When this reporter discussed Washington Trade Daily’s recent in-depth report on the trade policy of a new Romney Administration – which contained a long list of positive trade initiatives, such as a US-Latin free trade agreement and ones with the Association of Southeast Asian Nations and Japan – a senior-level Obama trade official said Romney had not trade policy. The Obama Administration’s trade policy is "enforcement, enforcement, enforcement."

Reluctantly, WTD would have to give the Administration a "B+" on enforcement. From the beginning – at his Senate confirmation hearing in mid-2009 – then US Trade Representative-designate Ron Kirk said his policy would focus on enforcing US trade laws and international trade agreements.

Mr. Kirk has come pretty far – but it took a long time. Creation of the much-touted interagency International Trade Enforcement Center happened only a few months ago.

The number of export-related enforcement actions, however, have been few, with most still under appeal –

Perhaps what would have pushed the "B+" to a solid "A" would have been citing China under US law for keeping its yuan artificially low to gain trade. The Obama Administration, since the beginning in its semiannual reports to Congress, came right up to the line, but ultimately refused to cite the country. Citing China, essentially, would make the issue a matter of policy and force a negotiation – either bilaterally or multilaterally – on the very real issue.

Most academics and some prestigious economists agree, a strengthened renmimbi would help to increase trade with China – particularly imports – and bolster a weak domestic economy. It also would open a whole new US export market in the country – especially for US small- and medium-size businesses.

The United States gets an "A" for convincing the Philippines – via World Trade Organization dispute resolution – to do away with its discriminatory excise taxes on some brands of liquor, which come from abroad. Big deal.

The Obama White House just announced relaxation of US sanctions against Burma – now known as Myanmar. The move would also allow US foreign investment in the rapidly changing military-run country. WTD gives the White House an A for quick action mixed with some political courage in taking the move – unlike its actions in the Middle East.

But recently ranking US officials have been warning about moving too fast to welcome Myanmar into the family of nations.

Here are mentions of some imported-related actions – extracurricular activities – which the Obama Administration embarked on since 2009 –

1. imposition of punitive duties – without any indication of domestic industry – on Chinese-made auto tire imports.

2. a stiffening of Buy America laws in 2009.

3. a partial victory in the World Trade Organization this month over Chinese export restrictions on a number of raw materials used for industrial purposes. The United States argued that the restrictions have led to inordinately high prices of the commodities on world markets and wide-spread shortages – hence stemming US exports.

4. China’s indigenous innovation program. After bilateral pressure from the United States, China agreed to revise its controversial indigenous innovation program that favored government procurement of technologies that originated in Chinese development.

5. The United States is winning a subsidies challenge against the European Union in the development and launch of new commercial aircraft by Airbus. The EU similarly is winning the same argument in its case against US government support for Boeing.

6. The United States in 2010 won a case in the WTO against European Union import duties on products that Washington said should be covered under the duty-free Information Technology Agreement. Items included set-top boxes with communications functions, flat panel displays and multifunctional copying devises.

7. The United States won a case in the WTO aimed against China’s discriminatory policies that restricted the activities of international credit-card payment services in the country.

8. The United States in 2011 convinced Beijing to modify some of its industry support for its own wind energy power sector.

9. The United States last September asked China to discuss its high countervailing and antidumping duties on imports of US poultry and parts. US exports are down from $1 billion to less than $100 million, according to USTR.

10. The United States in March filed a formal WTO dispute settlement request against Chinese export restraints on rare earth and some other minerals that are critical in the manufacturing of electronic products.

11. The United States earlier this month brought a case to the WTO on the imposition of unfair Chinese antidumping and countervailing duties on imports of US-made automobiles – worth upwards of $3 billion.

The question is how many successful piece-by-piece enforcement actions equal a good trade policy. One former USTR told me recently that "enforcement is not trade policy."

Overall, the grades are nothing to be proud of.

Jim Berger

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