Congressman Rangel and Other House Ways & Means Committee Majority Members Provide Political Cover for Clinton & Obama to Promote Trade Protectionism

http://waysandmeans.house.gov/


U.S. Must Enforce Laws to Break Down Trade Barriers


March 28, 2008


Committee on Ways and Means, U.S. House of Representatives


WASHINGTON, DC – Senior House Democrats today sent a letter to President Bush, renewing their call for stricter enforcement of U.S. rights under trade agreements. The letter was sent in anticipation of the Administration’s annual "National Trade Estimate" (NTE) report listing barriers to U.S. exports.

[The 2008 National Trade Estimate (NTE) Report is accessible here:
http://www.ustr.gov/assets/Document_Library/Reports_Publications/2008/2008_NTE_Report/asset_upload_file365_14652.pdf ].

In their letter, the Democrats expressed hope that the Administration would move past merely inventorying the systemic, recurring trade barriers that U.S. companies face, and, and to take a positive step forward and begin enforcing U.S. rights more vigorously."


In the Democrats’ view, stricter enforcement of trade laws would avoid further growth of the U.S. trade deficit and unsustainable levels of foreign-owned U.S. debt.


In 2007, the U.S. trade deficit was $711.6 billion – the third highest in history and a shocking five percent of the U.S. economy. Over the past six years alone, foreign-owned debt has more than doubled, currently standing at $2.4 trillion or 17 percent of U.S. gross domestic product (GDP). As noted in the letter, the Bush Administration has accumulated more debt to foreign governments and individuals than all previous administrations combined.


The Democrats' letter is accessible here: http://waysandmeans.house.gov/media/pdf/110/cbr%20potus.pdf .


[A REVIEW OF THE POINTS MADE IN THIS LETTER WILL REVEAL CERTAIN TRUTHS, THEY BEING: 1) THE ADMINISTRATION ARGUABLY HAS FAILED TO PROTECT U.S. PROPERTY RIGHTS BY NOT VIGOROUSLY ENFORCING WORLD TRADE ORGANIZATION (WTO) RULES AGAINST VIOLATING WTO MEMBER NATIONS; 2) THE U.S. TRADE DEFICIT NO LONGER REFLECTS STRICTLY LOW-COST, VALUE-ADDED IMPORTS - RATHER IT NOW INCLUDES ALSO HIGH TECHNOLOGY IMPORTS DUE TO CORPORATE OUTSOURCING/ OFFSHORING; AND 3) THE RESULTING TRADE DEFICITS FROM NONENFORCEMENT OF WTO LAWS AND THE GROWING HI-TECHNOLOGY IMPORTS ARGUABLY CREATES MORE FOREIGN-OWNED U.S. DEBT AS U.S. CITIZENS BUY MORE & MORE OF PRODUCTS DESIGNED, DEVELOPED & MANUFACTURED FROM OVERSEAS SOURCES ON CREDIT. ]


[AND, ARGUABLY, THE USTR SHOULD HAVE LONG AGO BEGUN CONSULTATIONS WITH VARIOUS U.S. KEY TRADING PARTNERS, AS A PRESAGE TO COMMENCING A POSSIBLE WTO ACTION AGAINST PARTICULAR WTO MEMBER GOVERNMENTS IF U.S. CONCERNS ABOUT MARKET ACCESS TRADE BARRIERS ARE NOT ADEQUATELY ADDRESSED.


THE QUESTION, HOWEVER, IS WHICH KEY TRADING PARTNERS HAVE IMPOSED THE MOST EXTENSIVE, SYSTEMIC AND DAMAGING TRADE BARRIERS AGAINST CRITICAL U.S. PRODUCTS AND PROCESSES, OR HAVE DIMINISHED THE VALUE OF OR OTHERWISE EXPROPRIATED KEY U.S. ASSETS UNDERLYING HI-TECHNOLOGIES WHICH SERVE AS THE CORE OF AMERICA'S 21ST CENTURY ECONOMY?? HERE IS WHERE THE RANGEL REPORT GOES ASTRAY AND IS ARGUABLY DISINGENUOUS. THE RANGEL LETTER FOCUSES ON THE FOLLOWING U.S. TRADING PARTNERS: CANADA, CHINA, THE EUROPEAN UNION, JAPAN, KOREA, MEXICO RUSSIA AND THE UNITED KINGDOM].


[IT IS INTERESTING TO SEE IN THE RANGEL LETTER THAT WHILE THE EUROPEAN UNION (EU) IS INCLUDED AS A KEY U.S. TRADING PARTNER WITH WHICH THE USTR SHOULD ENGAGE IN CONSULTATIONS TO PROTECT U.S. RIGHTS, NOT MUCH IS MENTIONED ABOUT THE MANY VERY EXPENSIVE AND COMPLEX NON-TARIFF ENVIRONMENTAL AND HEALTH (SUSTAINABLE DEVELOPMENT)-RELATED SANITARY AND PHYTOSANITARY, LABELING & TRACEABILITY, PRE-MARKET REGISTRATION, CONFORMITY ASSESSMENT REGULATORY-BASED TECHNICAL BARRIERS TO TRADE WHICH THE EU HAS ADMITTEDLY ERECTED AGAINST THE U.S. SINCE AT LEAST 2002. THESE REGULATORY RESTRICTIONS WHICH DOUBLE AS DISGUISED TRADE BARRIERS, HAVE AFFECTED BILLIONS OF DOLLARS $$$$ OF U.S. EXPORTS, AS WELL AS, DIMINISHED THE EXERCISE AND VALUE OF U.S. PROPERTY RIGHTS. CONSEQUENTLY, THEY HAVE RESULTED IN A SIGNIFICANT TRADE DEFICIT WITH EUROPE, WHICH THE RANGEL REPORT FAILS TO MENTION.


APPARENTLY, THERE IS A 'GOOD' REASON FOR THIS. MR. RANGEL AND HIS COLLEAGUES ARE UNLIKELY TO ADMIT IT, BUT THEY WISH TO ADOPT THESE VERY SAME EXPENSIVE AND COMPLEX REGULATORY REQUIREMENTS HERE IN AMERICA SO THAT AMERICAN BUSINESS ARE PLACED ON THE SAME COSTLY FOOTING AS THEIR EUROPEAN COUNTERPARTS. THIS IS WHAT THE DEMOCRATS AND THE EUROPEANS REFER TO AS 'LEVELING THE PLAYING FIELD' OR TRANSATLANTIC 'REGULATORY HARMONIZATION'. PERHAPS, THIS IS LARGELY WHY CONGRESSMAN RANGEL AND HIS COLLEAGUES HAVE EFFECTIVELY GIVEN EUROPE A 'PASS'.


INDEED, REGULATORY RESTRICTIONS NOW LOOK POLITICALLY PALATABLE TO THE DEMOCRATIC PARTY PRESIDENTIAL CANDIDATES AS A 'QUICK FIX' FOR THE CURRENT TRADE DEFICITS, EVEN THOUGH THEY KNOW FULL WELL THAT EARLY 20TH CENTURY HISTORY HAS SHOWN HOW TRADE PROTECTIONISM BY ONE COUNTRY CAN DEVOLVE INTO A SERIES OF SIMILAR PRACTICES EMPLOYED BY OTHER NATIONS THAT RESULT IN MORE & MORE TRADE PROTECTIONIST DEVICES BEING ERECTED. IN FACT, THE TRADE PROTECTIONISM OF THAT ERA WAS PARTLY RESPONSIBLE FOR THE EVENTS THAT LED TO WORLD WAR II!!! THE INTERNATIONAL TRADING SYSTEM WAS CREATED TO PREVENT THAT FROM EVER OCCURRING AGAIN.


[IN ADDITION, THE RANGEL LETTER FAILS TO MENTION EITHER BRAZIL OR THAILAND, TWO OF THE LEADING NATIONS RESPONSIBLE FOR TRYING TO CHANGE THE INTERNATIONAL LEGAL PARADIGM FOR INTELLECTUAL PROPERTY - PATENTS, COPYRIGHTS & TRADE SECRETS, SO THAT THEY MAY ACQUIRE U.S. SCIENCE & TECHNOLOGICAL KNOW-HOW AT CONCESSION-RATE PRICES!!! DOCUMENTARY EVIDENCE DEMONSTRATES HOW THESE TWO NATIONS HAVE, FOR AT LEAST 8 YEARS, LED AN INTERNATIONAL GROUP OF DEVELOPING COUNTRIES, WITH THE ASSISTANCE OF WELL-FUNDED HEALTH & INFORMATION ACTIVIST GROUPS, TO CHANGE INTERNATIONAL TRADE, INTELLECTUAL PROPERTY AND HEALTH LAW. THEY HAVE UTILIZED A NUMBER OF DIFFERENT UNITED NATIONS AGENCIES & ORGANIZATIONS TO CONVERT PRIVATE INTELLECTUAL PROPERTY RIGHTS INTO THE PUBLIC INTERNATIONAL GOODS OF FREE HEALTHCARE AND FREE DIGITAL KNOWLEDGE. BRAZIL AND THAILAND HAVE WORKED TOGETHER IN THE WTO, WORLD HEALTH ORGANIZATION (WHO), WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO), THE UN COMMISSION ON HUMAN RIGHTS (UNCHR), THE UN DEVELOPMENT PROGRAM (UNDP) AND UN EDUCATION, SCIENCE & CULTURAL ORGANIZATION (UNESCO). IN FACT, BOTH BRAZIL AND THAILAND HAVE, WITHOUT LEGAL JUSTIFICATION, ISSUED COMPULSORY LICENSES AGAINST U.S.-OWNED DRUG PATENTS, WHICH IS ESSENTIALLY THE SAME THING AS A GOVERNMENT DECLARING EMINENT DOMAIN ON ONE'S PRIVATELY OWNED HOME. INTERESTINGLY, U.S. SENATOR PATRICK LEAHY AND OTHER CONGRESSIONAL DEMOCRATS HAVE PROPOSED LEGISLATION WHICH WOULD ALLOW THE U.S. GOVERNMENT TO DECLARE COMPULSORY LICENSES ON THE PATENTS AND COPYRIGHTS OF U.S. TAXPAYER-OWNED HI-TECHNOLOGIES!!! PERHAPS, THIS IS LARGELY WHY CONGRESSMAN RANGEL AND HIS COLLEAGUES HAVE GIVEN BRAZIL AND THAILAND A 'PASS'.


[INSTEAD, MR. RANGEL AND HIS COLLEAGUES DEVOTE CONSIDERABLE INK TO 'BASHING CHINA' WHICH, FOR SOME UNEXPLAINABLE REASON, DEMOCRATIC POLITICIANS ARE OBSSESSED WITH, AS ARE THEIR EUROPEAN COMMISSION COUNTERPARTS.]


[A CLOSE REVIEW OF THE NATIONAL TRADE ESTIMATE REPORT WILL REVEAL THAT EUROPE IS SECOND ONLY TO CHINA IN THE NUMBER OF 'TRADE BARRIERS' LISTED AND DESCRIBED. THE REPORT DEVOTES 45 PAGES TO EUROPE, AND 67 PAGES TO CHINA, BUT EUROPE IS NOT REALLY BEING FOCUSED ON BY MR. RANGEL!!].


FURTHERMORE, THE NATIONAL TRADE ESTIMATE REPORT SHOWS THAT THE FOLLOWING COUNTRIES HAVE BETWEEN 10 and 20 PAGES OF DESCRIBED TRADE BARRIERS, BUT ONLY JAPAN & RUSSIA ARE MENTIONED, NOT TAIWAN, SOUTH AFRICAN CUSTOMS UNION OR INDIA. HAVE MR. RANGEL AND HIS COLLEAGUES GIVEN THESE COUNTRIES A 'PASS' AS WELL???


[THE FOLLOWING COUNTRIES HAVE FEWER THAN 10 PAGES ALLOCATED TO THEM, BUT THEY ARE ALSO INCLUDED ON MR. RANGEL'S 'BAD BOY' LIST:

- KOREA – 5 PAGES;
- CANADA – 10 PAGES;
- UNITED KINGDOM – ¼ PAGE.

WHAT IS INTERESTING HERE IS HOW THE U.K. IS CITED FOR PHARMACEUTICAL MARKET ACCESS BARRIERS BASED ON OVERLY CONTROLLED PRICING SCHEMES: THIS PROVIDES ONE MAJOR EXAMPLE OF WHY U.S. DRUG PRICES ARE SO HIGH – NAMELY, B/C U.S. PHARMA COMPANIES FIRST SUBSIDIZE THE COST OF DRUG DEVELOPMENT IN OTHER COUNTRIES WHICH DO NOT PAY HIGH ENOUGH PRICES FOR APPROVED DRUGS THAT WOULD PROVIDE THESE SAME U.S. COMPANIES WITH ADEQUATE RETURN ON INVESTMENT (ROI) TO REINVEST INTO NEW INNOVATIVE PRODUCTS.


ARGUABLY, IF MR. RANGEL AND HIS COLLEAGUES ON THE COMMITTEE ON WAYS AND MEANS FOCUSED INSTEAD ON ASKING THE ADMINISTRATION TO NEGOTIATE WITH OTHER COUNTRIES, INCLUDING THOSE IN EUROPE, TO RAISE THE ACCEPTABLE LEVEL OF DRUG PRICES PER THEIR GOVERNMENT-RUN MEDICINE REIMBURSEMENT PROGRAMS, SAY 10-15%, THIS WOULD EASE PRICE PRESSURES IN THE U.S. SOMEWHAT, AND MOST LIKELY RESULT IN MORE AFFORDABLE, CUTTING-EDGE MEDICINES].


[The OECD nations, including the United States, have effectively been subsidizing the health care costs of developing country governments and citizens. Unfortunately, this subsidization has not occurred with all OECD members paying their fair share. Considering the extent of pharmaceutical price controls currently being imposed in countries such as Australia, Canada, Japan, and the Member States of the EU, some of which are extremely proud of their social welfare systems, it is arguable that Americans are likely to bear most of these costs, especially in the near term.


In fact, this concern was duly noted within a recent 2004 United States Commerce Department study evaluating pharmaceutical pricing in high income countries. It called for higher patented drug prices in Canada, Europe, Japan, Australia and other OECD countries in order to reduce the degree to which American consumers subsidize global drug development costs.


The report concludes that these countries have been free-riding off American patent rent extraction by setting government reimbursement prices too low. . . A recent speculative estimate, based on industry data and calculations . . . suggests that eliminating OECD price controls on patented drugs would increase revenues by $17.6 to $26.7 billion per
year, with additional R&D of $5.3 to $8 billion per year. Implicit in this estimate is the assumption that about a third of incremental revenues would be spent on R&D. . . ."

See Kevin Outterson, Nonrival Access to Pharmaceutical Knowledge, Submitted to the CIPIH (Jan. 3, 2005), at note 190, ¶ 7.2., available at: http://www.who.int/intellectualproperty/submissions/KevinOutterson3january.pdf. ]

Policy Implications: Clinton and Obama on International Trade Policy, NAFTA, and SWF’s

Policy Implications: Clinton and Obama on International Trade Policy, NAFTA, and SWF’s


By Osman Aziz


ITSSD Intern, Blogmaster of the ITSSD Journal on Economic Freedom


Much rhetoric has been exchanged on the campaign trail regarding the status of free trade and the future (or lack thereof) it has in American foreign policy. Both democratic hopefuls Hillary Clinton and Barack Obama have been in a perpetual state of flux over the status of NAFTA (North Atlantic Free Trade Agreement) and the perceived ills that it has accrued for the people of America. However acidic such criticisms of free trade may have appeared on the cameras, questions abound to the actual positions of each candidate on the undeniable progress that trade liberalization has taken in the world. Given the track record, neither Obama nor Clinton actually appear to be enemies of a free trade paradigm, which begs the question as to why such critical stances need to be taken against free trade agreements that, on the whole, have provided greater benefits than damages.


“In the minds of hard-core opponents of free trade, both Mrs. Clinton and Mr. Obama have checkered records in the Senate on trade agreements. Both voted against the Central American Free Trade Agreement but supported a trade pact with Peru last year, citing the inclusion of labor and environmental provisions that were not part of Nafta. Opponents, however, said crucial provisions in Nafta that led to jobs being shipped overseas were also part of the Peru agreement. Mrs. Clinton and Mr. Obama were also among only a dozen Senate Democrats who voted for a trade agreement with Oman in 2006.”[1]


The questions being framed as a position of political pandering is undeniable given the records that both candidates have on trade; but the irrefutable consequences of publicly assailing free trade policies could carry over to other aspects of international trade policy. Recent controversy over the ascendancy of Sovereign Wealth Funds (‘SWFs’) and the apparent lack of “transparency” that they possess has sparked a backlash from Democrats and protectionists alike who point to, without proper knowledge, the inherent “political” interests involved in such funds. Senator Obama’s position on altering the tax code to subsidize businesses that keep jobs in the US also smack of an underlying misunderstanding of economic efficiency and the effect such a position can have on inflating the prices of consumer goods by retaining inefficient employment capacities for higher wages.[2]


The Senators' indirect call for more governmental intervention in the reshaping of NAFTA and the US’ global trade policy seems to reflect a broader ideological agenda. First, it would seem that the candidates are attempting to label ‘trade’ as the cause of what many anticipate will be a US recession. Second, it appears that the Clinton-Obama strategy is to cast more not less governmental intervention in the marketplace as the necessary ‘change’ or ‘solution’ that will bring the US out of its current economic malaise. However, with little to say about the causes and eventual outturn that the current subprime crises harbors with it, protectionism and the scepter of populism may only serve to drive the US economy into further disarray. What appears to underlie these sentiments, are the overlooked benefits that such agreements as NAFTA have really had on the US and the region as a whole.


“While it is politically incorrect to say so, NAFTA has been good for all of North America. By opening the continent to investment and trade, capital has found more efficient uses, with benefits to producers and consumers alike. In NAFTA's first decade after 1993, trade between the U.S. and Mexico multiplied to $232 billion from $81 billion. Trade with Canada has also blossomed, with Canadian exports to the U.S. by surface transport rising 79% in a decade and U.S. exports to Canada increasing 38%. The deal also increased U.S. productivity. U.S. firms found they could be more globally competitive by putting some manufacturing in Mexico or Canada while retaining high-end production in the U.S.” [3]


By virtue of the fact that the same can be said regarding the projected benefits of the US-Peru FTA a year down the road reveals the hidden side that neither Senator is willing to uncover, namely the increase in economic efficiency that is followed by the passing of such free trade agreements. The very fact that increases in real GDP for all three nations member to NAFTA by approximately 50% each is evidence unto itself of the successes it has yielded, adding further distress to either the withdrawal, or the amending of an agreement that has worked so far.[4] Unilateral withdrawal from NAFTA, a trade agreement that has epitomized the inherent benefits of trade liberalization would be a fool hardy move and would send the wrong signal to the rest of the world regarding the US’s stance on international treaties, which up to this point has been maintained by a track record of trust and reciprocity. The fact that much rhetoric over NAFTA was staged in Ohio begs the question as why such sentiments are not being capitalized on in Texas. Given the fact that Ohio suffers from a six percent unemployment rate may help to explain the shifting positions of Senators Clinton and Obama (whether or not job loss can be attributed to NAFTA is a matter discussed later). The fact that such critical stances haven’t been assumed in Texas is evidence of the Democrats’ incessant need to position regarding the matter of free trade.


“As fiercely as they've fought in Ohio over the issue, the rivals haven't focused much on free trade in Texas, which has seen job growth and a huge spike in exports since NAFTA went into effect in 1994. ‘Every trade agreement has winners and losers,’ said Southern Methodist University economist Thomas Osang, who studies free trade. Texas had many of the industries poised to benefit, notably electronics and chemicals, and those industries outweighed losers such as lumber and furniture roughly 2-1.”[5]


Although Senators Clinton and Obama capitalize on protectionist and neo-mercantilist rhetoric in securing the votes necessary for election, the potential policy implications that such talk will have up to this point seems innocuous at best. What should come at greater concern are new up and coming issues such as SWF’s and sparking further regional trade agreements after aggregate bilateral agreements stabilize macroeconomic policy. Hostility to these new issues have already arisen on the campaign trail, and with no definitive voting record to base any judgment off of, speculation becomes a tricky game. The recent move by the Department of the Treasury to increase oversight of SWF’s and the additional pressure being applied to the IMF, although not nearly as caustic as the perspective promoted by Clinton and Obama, smacks of the age old argument surrounding “oversight” and regulation.


“Second, we have proposed that the international community collaborate on the development of a multilateral framework for best practices. The International Monetary Fund, with support from the World Bank, should develop best practices for sovereign wealth funds, building on existing best practices for foreign exchange reserve management. These would provide guidance to new funds on how to structure themselves, reduce any potential systemic risk, and help demonstrate to critics that sovereign wealth funds can be responsible, constructive participants in the international financial system.”[6]


This sort of even-handed approach by US lawmakers and Hillary Clinton is diametrically opposed to the position adopted by Barack Obama. Citing that the largest investment arms are located predominantly in the Middle East, Obama crafted the debate surrounding SWF’s as a matter of the US’s reliance on oil from the region while ignoring wholesale the fact that such investment vehicles as the Abu Dhabi Investment Authority and Kuwait Investment Authority are reacting as developing countries would be expected to act. Although Senator Obama does echo the sentiment regarding oversight and greater transparency that Senator Clinton trail-blazed, it seems as though it is difficult to assess how these two candidates will react when placed in the Oval Office and are tasked with the responsibility to react to new trends originating from developing nations. The apparent dearth of information regarding such emerging trends as decoupling theory and international financial integration on the part of the politicians vying for office so far reflects a more deeper and profound misunderstanding of the macroeconomic policies that will need emerge in the near future to handle such trends. Subsidizing producers in the US that produce consumer goods will only provide for more expensive goods, which coupled with a weakening dollar, will severely affect foreign nations’ economies which rely off of a robust trade with the US.[7] It seems that the only ostensibly legitimate contentions that the Democrats have so far leveled against the existing establishment are issues over labor and environmental policies.


Contentions over NAFTA: Why the Labor Rights/Environmentalist/Job Loss argument carries little to no weight


The contention that NAFTA has provided for a negative paradigm in terms of labor rights and environmental protections reflect yet another disturbing trend, that of misinformation. Although much talk has been thrown about regarding the lack of a sustainable provision for labor rights in NAFTA, the very fact that a supplemental labor stipulation under the North American Agreement on Labor Cooperation (NAALC) is provided for under NAFTA contradicts such claims.[8] The existence of a five year strategic agreement through the Commission of Environmental Cooperation also provides a framework through which environmental policy can be worked out.[9] Both Hillary Clinton and Barack Obama lambaste NAFTA as the sole perpetrator in the loss of jobs across the board within the US to foreign firms. Although NAFTA never promised a net total increase in jobs themselves, the fact that overall productivity increased significantly during the years that NAFTA has been in affect provides a clear contradiction to the overarching contention of job loss.


“U.S. employment rose from 112.2 million in December 1993 to 137.2 million in December 2006, an increase of 25 million jobs, or 22 percent. The average unemployment rate was 5.1 percent in the period 1994-2006, compared to 7.1 percent during the period 1981-1993… Growth in real compensation for manufacturing workers improved dramatically. Average real compensation grew at an average annual rate of 1.6 percent from 1993 to 2006, compared to just 0.9 percent annually between 1980 and 1993”[10]


The hidden benefits of an increase in overall productivity translate into cheaper consumer goods that would have been much more expensive if left to inefficient producers within the US. Constituency, instead of fact, seems to be playing a more significant role in swaying the supposed sentiments of both Senators Clinton and Obama (although the leaked memo detailing Obama’s “political positioning” may serve to shed a different light on things)[11]. Senator Clinton, whose reliance on the AFL-CIO has pushed her to a more protectionist stance, differs marginally from Senator Obama, whose support hails from the Teamsters and the Service Employees International Union, both of which benefit from increased trade with other nations.[12] Without a clear agenda from either democratic candidate on what they see as the ills of NAFTA and free trade, it seems as though the stances that each candidate has so far amplified has been done so with more emotion than substance. The three primary contentions that each candidate has regarding NAFTA specifically are addressed already within the agreement or are on their way to being accomplished under the current framework, leaving much to be asked about the actual disagreements each candidate has with not only NAFTA, but with free trade as a progressive paradigm.


[1] The New York Times. Despite NAFTA Attacks, Clinton and Obama Haven’t Been Free Trade Foes. February 28, 2008.
[2] The Wall Street Journal. CAPITAL: Decoding Candidates on Trade. February 21, 2008
[3] The Wall Street Journal. Unilateral Democrats. February 28, 2008
[4] US Department of Commerce. NAFTA-A Success for Trade. October 2007
[5] Todd J. Gillman, Gromer Jeffe. McClatchy - Tribune Business News. Punches Fly over Trade, Rival Tactics as Democrats Debate in Ohio. Washington: Feb 27, 2008.
[6] US Department of the Treasury. Under Secretary of International Affairs David H. McCormick Testimony Before the Joint Economic Committee. February 13, 2008
[7] The Economist. Finance and Economics: An Independent Streak: Decoupling 1. Jan. 26th 2008
[8] Office of the US Trade Representative. NAFTA-The Road Ahead. (2007)
[9] Office of the US Trade Representative. NAFTA Environment Ministers Adopt Trade and Environment Stratgeic Plan. (06/23/2005)
[10] Office of the US Trade Representative. NAFTA Facts: NAFTA Benefits. (October 2007)
[11] Financial Times. Obama under fire over NAFTA Memo. March 3, 2008
[12] Bhagwati, Jagdish (Financial Times). Obama’s free trade credentials top Clintons. March 3, 2008

Clinton & Obama Protectionist Trade Rhetoric Will Harm Developing Country Economic Growth Prospects and America's Image Abroad

http://www.newsweek.com/id/117841?from=rss


What the World Is Hearing


A senior Latin American diplomat says, 'We might find ourselves nostalgic for Bush, who is brave on trade.'


By Fareed Zakaria


NEWSWEEK

Updated: 1:01 PM ET Mar 1, 2008


Despite their spirited squabbling, the two Democratic candidates are united in the view that one of the big benefits of electing either of them would be an improvement in America's reputation and relations with the world. Hillary Clinton promises to send special envoys to foreign capitals the day after she's elected. Barack Obama offers to reach out to America's foes as well as friends. Unfortunately none of this will matter if they continue to spout dangerous and ill-informed rhetoric about trade.


For the rest of the world—particularly poorer countries—nice speeches about multilateralism are well and good. But what they really want is for the United States to continue its historic role in opening up the world economy. For a struggling farmer in Kenya, access to world markets is far more important than foreign aid or U.N. programs. If the candidates think they will charm the world while adopting protectionist policies, they are in for a surprise.


Already the mood is shifting abroad. Listening to the Democrats on trade "is enough to send jitters down the spine of most in India," says the Times Now TV channel in New Delhi. The Canadian press has shared in the global swoon for Obama, but is now beginning to ask questions. "What he is actually saying—and how it might affect Canada—may come as a surprise to otherwise devout Barack boosters," writes Greg Weston in the Edmonton Sun. The African press has been reporting on George W. Bush's visit there with affection and, in some cases, by contrasting his views on trade with the Democratic candidates'. The Bangkok Post has compared the Democrats unfavorably with John McCain and his vision of an East Asia bound together, and to the United States, by expanding trade ties.

For Obama, the backlash could be greatest because he's raised the highest hopes. A senior Latin American diplomat, who asked to remain unnamed because of the sensitivity of the topic, says, "Look, we're all watching Obama with bated breath and hoping [his election] will be a transforming moment for the world. But now that we're listening to him on trade—the issue that affects us so deeply—we realize that maybe he doesn't wish us well. In fact, we might find ourselves nostalgic for Bush, who is brave and courageous on trade and immigration."


The facts about trade have been too well rehearsed to go into them in any great detail, but let me point out that NAFTA has been pivotal in transforming Mexico into a stable democracy with a growing economy. And, in Lawrence Summers's words, "[it] didn't cost the United States a penny. It contributed to the strength of our economy because of more exports and because imports helped to reduce inflation." Trade between the NAFTA countries has boomed since 1993, growing by about $700 billion.


There are no serious economists or experts who believe that low wages in Mexico or China or India is the fundamental reason that American factories close down. And labor and environmental standards would do very little to change the reality of huge wage differentials between poor and rich countries' workers.


An argument one often hears from the candidates' supporters is that they don't really mean what they say, that their actual proposals on trade agreements involve only minor tinkering. It is an odd defense of candidates promising change, honesty and a new approach to politics to say that they are being cynical and hypocritical. Besides, both candidates are proposing to renegotiate NAFTA, which is a terrible idea. (And one that has prompted the Canadian prime minister to retort that if that happens, his country, too, would like to get more concessions from the United States.) Hillary Clinton has proposed that free-trade deals be re-evaluated every five years, which is absurd. The benefits of trade deals rest on the fact that they are permanent.


But both candidates surely know that no one is really paying attention to their policy papers on the topic. It is their general attitude and rhetoric that matter. And on this crucial topic they are pandering to the worst instincts of Americans, encouraging a form of xenophobia and chauvinism and validating the utterly self-defeating idea of protectionism.


I know, I know. This is all about the Democratic primaries in states like Ohio and the support of unions. But you can't target these messages so easily anymore. What is said in Ohio is heard in Ghana and Bangladesh and Colombia as well. And isn't the point of leadership to educate and elevate people, not to pander and drag them into the swamp of ignorance and fear? There is a way to speak about the pain of globalization—and about the need for investments in retraining, education, health care and infrastructure—so that we can both compete but also absorb the shocks of a changing global economy. Unfortunately that is not what the Democratic candidates are talking about.


I'm not even sure that protectionist rhetoric works that well in a general election. Americans like optimists. They want leaders who look out at the world and see broad, sunlit uplands. Railing against Mexicans, Chinese and Indians for stealing American jobs smacks of anger, paranoia and fear of the future. Americans want hope, as Obama says, "hope in the face of difficulty, hope in the face of uncertainty, the audacity of hope." Where is that courage now?


URL: http://www.newsweek.com/id/117841



http://news.yahoo.com/s/mcclatchy/20080303/wl_mcclatchy/2867869

Mexicans say changing NAFTA may force them to move to U.S.

By Franco Ordonez, McClatchy Newspapers
Mon Mar 3, 6:17 PM ET



MEXICO CITY — Jesus Velasquez doesn't want to move to the United States. He fears, however, that he may have to if he loses his job selling avocados. Velasquez, 36, says he and his family have benefited from the North American Free Trade Agreement. For him, the alternative is to immigrate to the United States.


"The trade act is good because we have jobs," he said Sunday, speaking loudly over the clamor of hundreds of workers hauling fruits and vegetables off rumbling trucks. "If there are no jobs, more people are going to go to the U.S. I have so many friends who can't find jobs and leave."


As voters in Ohio , Texas , Rhode Island and Vermont prepare to go to the polls Tuesday, some workers and distributors at this 800-acre food market, one of the biggest in the world, are expressing concern about presidential candidates Hillary Clinton's and Barack Obama's threats to pull out of NAFTA unless it's renegotiated.


NAFTA is unpopular in Ohio, a key battleground state for Clinton and Obama, where thousands of manufacturing workers have lost jobs.


Several vendors at the Central de Abasto food market said NAFTA isn't perfect. Prices on many products have risen, and many corn farmers said they've been run out of business because of the influx of cheaper American grown corn. But overall, they say, NAFTA has been good for the country, and they worry what changes the U.S. would seek should it return to the negotiating table with Mexico and Canada.


"People are worried," said Gerardo Peralta, 55, who sells rice, nuts and condiments. "If the U.S. tries to renegotiate, they are going to do what's best for them. That could be bad for Mexico."


Some Mexican leaders sought to downplay the candidates' statements as political rhetoric and "campaign talk."

Sen. Ricardo Garcia Cervantes said that any renegotiation of NAFTA would be based on the issues and not on the "heated statements" made by the American political candidates in hopes of gaining their party's nomination.


"In this electoral environment, one that we have to be very attentive to, we also have to be aware that many of these declarations by the Democratic candidates and Republicans are made for gaining votes," Garcia Cervantes , chairman of the Mexican Foreign Relations Commission for North America , said in a statement.


Mexico has gained because of NAFTA, according to Mexican Economy Secretary Eduardo Soto. He told a gathering last week of U.S., Canadian, and Mexican representatives that the Mexican economy has grown 51 percent because of NAFTA, that nearly 5 million jobs have been generated and that exports to the U.S. and Canada have multiplied five times.


"As representatives of the Mexican government, we do not want to insert ourselves into the U.S. political campaigns," he said. "However, we are convinced that what North America needs is more integration and not less integration. North America needs to look to the future and not return to the past."


Avocados have flourished under NAFTA, but not everyone is in favor of the trade agreement. Last month, hundreds of thousands of farmers clogged Mexico City streets with tractors to protest lifting corn tariffs under the free-trade agreement.


Corn farmers said the entry of cheap imported corn has undermined their profits, and towns are emptying because thousands of small farms have gone out of business. Many head to the U.S. illegally looking for better pay.


"It's not that we're against free trade," said Victor Suarez, the executive director of ANEC, a farmers' coalition, who helped organize the Mexico City rally. "We're in favor of free trade that is balanced— not one that is for corporations and monopolies. We want free trade that is fair for all parties involved."


(Ordonez reports for The Charlotte Observer.)

WTO Finds That China Employed Illegal Protectionist Border Tariffs & Indirect 'Local-Working' Subsidies

WTO rules against China on car parts; Finds in favour of Canada, U.S. and EU


http://www.theglobeandmail.com/servlet/story/LAC.20080214.RCHINA14/TPStory/Business


theglobeandmail.com


STEVEN CHASE


With files from AP


February 14, 2008


OTTAWA -- The World Trade Organization has for the first time ruled against China for breaking global trade law in a precedent-setting case over car part imports that is expected to spur further challenges aimed at forcing Beijing to open its markets.


Yesterday's interim decision by the WTO found in favour of Canada, the United States and the European Union, all of which complained that China is raising unfair barriers to imports of foreign car parts.


China only joined the 151-member WTO in 2001 and while the state-heavy economy faces several challenges to its trade behaviour at the global body, yesterday's ruling is the first decision handed down.


International Trade Minister David Emerson cheered the ruling - which is officially secret until March despite being leaked yesterday - saying the decision may help open up a new market for
Canadian auto parts makers.


Print Edition - Section Front


"Hopefully it will bring about change in the practices that China's been applying," he said. "With our companies in such tough shape right now, a growing market is critically important to restoring health to our Canadian auto parts industry."


The WTO ruling is only an interim decision but the global referee's adjudicators have never changed their minds in the final version of their rulings. It could take more than a year for the case to conclude, but when it does, China may be forced to alter its behaviour or face trade sanctions from Ottawa, Washington and Brussels.


The WTO reportedly found that China was breaking agreed-upon global trade rules by taxing imports of car parts at the same higher rate levied on foreign-assembled autos.


"It's rendering it uneconomic for Canadian parts suppliers in this market," Mr. Emerson said of China's tax rate.


Toronto trade lawyer Lawrence Herman with Cassels Brock & Blackwell LLP predicts more WTO challenges of Chinese trade barriers.


Mr. Herman noted China's growing importance as an export destination, particularly for U.S. goods. "I think it's the beginning of many more such cases where the U.S. is taking on China, rightly or wrongly, for not complying with WTO rules," he said. "The huge U.S. trade deficit with China can't be ignored."


U.S. exports to China have more than quadrupled between 1996 and 2006, when they hit $55.2-billion (U.S.). That same year, the U.S. trade deficit with China hit $233-billion.


The three trade powers argued at the WTO that China's tariff was discouraging auto makers from using imported car parts for the vehicles they assemble in China. As a result, car parts firms had an incentive to shift production to China, costing Americans, Canadians and Europeans their jobs, they said.


The ruling will be closely watched by makers of batteries and brakes, seats and spark plugs on both sides of the Atlantic, including U.S.-based Delphi Corp. (General Motors' former parts supplier) and Robert Bosch GmbH in Germany.


China, which can appeal the ruling, claims the tariffs are intended to stop whole cars being imported in large chunks, allowing companies to avoid the higher tariff rates for finished cars. It argues all measures are consistent with WTO rules and do not discriminate against foreign auto parts.


But the U.S. and EU say China promised not to treat parts as whole cars when it joined the WTO in 2001.


[This point is significant in light of the prior 1998 WTO case Indonesia – Certain Measures Affecting the Automobile Industry (WT/DS54,55,59 & 64/R). US and EU allege that two sets of Indonesia measures constitute subsidies that cause ‘serious prejudice’ to their interests within the meaning of SCM Art. 5 (c). They alleged that the effect of the ‘subsidies’ was to displace or impede imports of ‘like’ products from the EC and US into the subsidizing Indonesian market. In other words, the prices of 'like' EC and US autos were significantly undercut by the subsidized national car company, and thus discriminated against in the marketplace.


The first set of measures entailed a ‘grant’ of National Car company status to Indonesian car companies that met specified criteria as to ownership of facilities, use of trademarks and technology. The ‘benefits’ provided were exemption from luxury tax on car National Car sales and exemption from import duties. They were maintainable by meeting increasing local content requirements.


The second set of measures provided that National Cars manufactured in a foreign country by Indonesian nationals and that fulfill (20%) local content requirements shall be treated the same as ‘National Cars’ (exemption from luxury tax and import duties). The 20% local content requirement was deemed satisfied if the overseas car manufacturer ‘counter-purchases’ Indonesian parts and components that account for 25% or more of the cost & freight (C&F) value of the imported cars. Indonesia maintained a duty of 200 percent on imports of finished passenger cars. As a result, almost ALL passenger cars imported into Indonesia including the EC and US models in question were imported as ‘completely knocked down’ (CKD) kits and assembled in Indonesia.


The WTO Appellate Body (AB) did not consider that an unassembled product ipso facto was NOT a ‘like’ product to that product assembled. The AB considered that a tariff classification was a useful tool in ‘like’ product analysis. It noted how the Gen’l Rules for Interpreting Harmonized System stated that any reference in a heading to an article shall include a reference to that article incomplete or unfinished, provided, the incomplete or unfinished article has the essential character of the complete or finished article.


The AB believed that a comparable approach to the relation between assembled and unassembled products made good sense in the context of that dispute. Due to the high Indonesian duties, ‘completely built-up, EC and US producers shipped ‘cars in a box’ to Indonesia. Consequently, they could properly be considered to have characteristics closely resembling those of a completed car. In WTO jurisprudence, the AB employed a ‘Big Accordion’ of ‘likeness’.]

"It will be instructive to see how China responds," U.S. Trade Representative Susan Schwab said in a recent interview with Associated Press. "If, as we hope and expect, China will be found in contravention of its WTO obligations, hopefully that will help those forces within China that have been advocating reform."