WTD's Friday Afternoon Podcast for December 21, 2012

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http://washingtontradedaily.com/2012wtdpodcast1221.mp3

WTD's Friday afternoon podcast for December 14, 2012

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http://washingtontradedaily.com/2012wtdpodcast1214.mp3

A "Right-On" Blog From the NFTC

Here's a "right-on" blog by National Foreign Trade Council Vice President Bill Reinsch -- who I almost always agree and have since the 1970s.  Jim Berger

December 7, 2012
Fear of Failure

The trade policy community is seized right now not only with Trans-Pacific Partnership (TPP) negotiations but also with the likelihood we will launch an equally significant negotiation with the European Union.

While a U.S.-EU negotiation appears to have significant support at the highest political levels, I detect less enthusiasm among the actual negotiators who would be charged with reaching an agreement. This should come as no surprise – these are the same people who have been beating each other up for more than 20 years on a wide variety of regulatory and standards issues with precious little to show for it. (If you have any doubts about that, I refer you to the infamous chicken episode of several years ago.)

In my view, this time will be different because of the competitive challenge China poses for both of us. If the Americans and Europeans can work together to develop common standards and regulations, our combined market power will help make them global standards. If we do not, then we risk seeing Chinese standards become the de facto global standard by virtue of their market power. In other words, as Ben Franklin said in a different context, "we must all hang together or most assuredly we will all hang separately."

Making progress on standards harmonization is also important because it is where the greatest opportunity for trade gains between the U.S. and EU lies. Aside from some peaks, tariffs are generally low, labor and environment issues are less divisive than with other countries, and, aside from agriculture, access barriers are less onerous than elsewhere. What American companies most often complain about is the thicket of regulations in the EU they must navigate through in order to sell their products and services, and European companies have the same complaint about us. So, progress in this area would have the double benefit of enhancing trade between two very large and highly integrated markets and of pursuing a common policy in dealing with the Chinese economic challenge.

So, what is holding us back? Apparently, it is fear of failure. Negotiators on both sides have said, privately, that these negotiations "cannot fail," meaning that we should not launch them until we are entirely sure they will succeed. Of course, 100 percent certainty is an elusive commodity in the best of circumstances, but in order to approach that in this case both sides have entered into extensive pre-negotiation discussions intended to assess the odds of failure. In the process, they have also settled on some confidence building measures, mostly in agriculture, which, if successfully completed, will presumably demonstrate to each side that the other is not only serious, but that it can deliver.

That may well work, but the process is disturbing nonetheless because it is tantamount to a negotiation before the negotiation. If we pre-negotiate everything, what is left to talk about once the "real" negotiation is launched? More important, the real question is what's wrong with failure? Being afraid to fail amounts to being afraid to risk, an attitude that runs counter to what most successful businesses are doing in today's hyper-competitive marketplace. America has been built on risk and on failure. We fail constantly, pick ourselves up, and try again. It's one of our endearing qualities, and we should remember it as we consider launching new trade negotiations. The price of not trying is far higher than the momentary embarrassment of failure.

Here's WTD's Friday Afternoon Podcast for December 7, 2012

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http://washingtontradedaily.com/2012wtdpodcast1207.mp3

WTD's Friday Afternoon Podcast for November 30, 2012

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http://washingtontradedaily.com/2012wtdpodcast1130.mp3

THE SECOND TERM

Almost $6 billions of dollars were spent by the two political parties over the past year to pay for the Presidential and Congressional election contests – and the end result was essentially no change.  Barack Obama remains President; the House and Senate both have picked up a few Democrats.

But Republicans still control the House and Democrats are running the Senate – so don’t expect any easy answers for at least the next two years.

With no worries about getting re-elected in another four years, many Democrats in Washington are expecting – hoping – that President Obama will take a more active stance in promoting Democratic policies, including in trade.

But there is likely to be nothing new.  The domestically oriented President will stay on that track – perhaps turning even more inward looking.  Trade will not be a priority for the second term.

But, what’s the trade agenda for the second term?  Old stuff –

1)   As late as a few weeks ago in the heat of the political campaign, Mr. Obama told MSNBC news in an interview that he still intends to pursue a major reorganization of trade agencies – into a new Department of Business.  On paper, it may be a good idea, but analyses of similar past plans have shown rearranging boxes in an organization chart have very little real impact.

Congress is likely to kick that ball off Capitol Hill shortly after it is mentioned again in January’s State of the Union Address – as happened in January this year when the President first proposed it.  The rub is two-fold.  Essentially abolishing the US Trade Representative’s office – a creation of Congress and a darling of the powerful House Ways and Means and Senate Finance committees – simply won’t happen.

The broader problem is getting the half-dozen oversight committees in both chambers to give up their special jurisdiction over agencies like the US Export-Import Bank, aid and trade and the US Small Business Administration, along with USTR.

2)   The TransPacific Partnership – Entering its fourth year of negotiation among 11 Pacific/Asian nations very little has been seen.  Prospects – and attention from the White House – also appears to be fading.

After an optimistic scenario of reaching a final agreement was dashed in 2011, this year is coming to an end with another miss.  The United States this year had three consecutive negotiating sessions in the United States – with the serious intent to conclude an agreement before the end of the year.  That’s not a possibility.

There also have been indications expressed by negotiators of the growing frustrations with the lack of progress driven, they say, by an unrealistically tough “no-compromise” US negotiating stance.  Some delegations are restating their threat to abandon the effort – and turn to a host of other bilateral and regional trade efforts in waiting.

3)  European Union-US Free Trade Accord.  Former British Prime Minister Winston Churchill once had the idea of a United States of Europe, which would include the then free nations of Western Europe, the United States and Canada.  Since then a free trade agreement between the world’s two greatest economies has been an unattainable wish.  The same problem that thwarted similar efforts over the past half century exist today – different ways of doing things.

In practice, a commercial US-EU FTA already exists.  Duties on both sides have little effect on the amount and pace of transAtlantic business ties.  What is – and has been – the rub are the different approaches to domestic regulations, which make simple trading of goods and services across the Atlantic not so easy.  Those separate approaches are deeply rooted in domestic concerns over the health and safety of each’s citizenry.

Reaching a so-called “gold standard” FTA just ain’t going to happen this century.

4)  Export Controls Reform.  Since the ongoing effort to streamline US export controls involves only one government – albeit several agencies, that project is likely to come to fruition next year.  But as more than one US reform official told WTD, what is emerging is far from what former Secretary of Defense Robert Gates had in mind when he announced the objective over two years ago.

As of today, not all militarily critical goods and technologies are coming off the US Munitions List – which will continue to be jealously guarded by the departments of State and Defense.  Munitions list goods that do move over to the more commerce-oriented Commerce Department for review now fall into a category of its own – where exports would generally be allowed to 36 of the closest US allies.

Mr. Gates originally had in mind the transfer of all Munitions List goods to a single control list – arranged in an pyramid-shaped arrangement.  The pointed top would include “crown jewels” of US technology not available elsewhere in the world and would be prohibited from any kind export.  The middle tier would be license-able products and services to a score of friendly US buyers.  Goods and technologies in the broad-based third-tier would be freely exportable.

At this point in the reform, it is still uncertain whether there will be any real impact on US exports at all.

And then there’s Congress – which will also have its say.

Jim Berger

WTD's Friday Afternoon Podcast for November 9, 2012

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http://washingtontradedaily.com/2012WTDpodcast1109.mp3

http://washingtontradedaily.com/2012WTDpodcast1109.mp3