110th Congress' Obstruction of Colombia-US Free Trade Agreement Foolishly Harms American Exporters As Well As Colombian Businesses & Democracy

http://www.azcentral.com/arizonarepublic/opinions/articles/0312wed2-12.html


To a freer Latin America


Mar. 12, 2008 12:00 AM


By obstructing a free-trade agreement with Colombia, Congress is achieving a mathematical impossibility.




If opposition to the deal made no sense in terms of rational self-interest when it was sealed between the U.S. and Colombia in 2006, it makes even less sense now. Less than zero sense.

The agreement signed in November 2006 effectively stabilized an imbalance between the countries.


Most Colombian exports to this country arrive largely duty-free, courtesy of the 1991 Andean Trade Preference Act, which reduced or eliminated trade barriers to Latin American countries that took effective steps to fight drug-trafficking. A former narco-terror hell on Earth, Colombia has taken greater steps to fight the narcotics cartels than, arguably, any nation in the region.


The same relaxed trade rules do not hold for U.S. exports to the South American nation, however.


In 2006, for example, Arizona companies exported a relatively paltry $9.8 million worth of manufactured goods and electronics to Colombia, according to the U.S. Department of Commerce. And they paid a healthy fee for that privilege, including tariffs of 10 to 20 percent.


Congressional approval of the Colombian free-trade agreement would strike that imbalance and almost certainly would prove an immediate godsend to Arizona manufacturers that do business with Bogota.


Even as a matter of politics, the obstruction makes no sense.


Since assuming office in 2002, Colombian President Alvaro Uribe has made huge progress in stabilizing his formerly war-torn nation. He has created one of the most stable democracies on a continent that otherwise seems to be backsliding toward its tragic roots of totalitarianism, despotism and revolution.


Uribe's long-standing friendship with the U.S. - which is to say, his friendship with President Bush - is the source of his unpopularity on Capitol Hill, of course.


That political principle - any friend of my enemy is my enemy - took center stage on March 1 when Uribe sent his commandos a mile and a half into neighboring Ecuador to take out an encampment of narco-terrorists, killing notorious rebel leader Raul Reyes.

Many congressional Democrats condemned Uribe for daring to chase the murderous, kidnap-happy

terrorists into a nation that fawns over the drug-running revolutionaries.

Many of them, too, sided in the resulting border flare-up with Uribe's mortal enemy in South American, Hugo Chavez, the leftist president of Venezuela whose popularity in Congress is directly proportional to his hostility to Bush.


Trade protectionism, and the economic menace that surely would accompany it, is in the air this election season.


But snubbing a trade deal with staunchly democratic Colombia - a deal that is pure win-win for the U.S. - makes no sense, regardless.


Congress is protecting no one by fighting the Colombia trade agreement. It should approve the measure now.

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."