SPI: International Trade Update

For SPI Members Only – February 17, 2006

In This Edition

HILL ACTIVITY

SPI Members Lobby for Enforcement of U.S. Trade Laws . . . Citing China’s impact on the plastics industry’s trade position, SPI members urged their congressional representatives to support stronger enforcement of U.S. trade laws, particularly with respect to China, during last week’s congressional visits. As reported in SPI LINK, on February 7–8, 2006, SPI members flew to the nation’s capital to visit with lawmakers. Participants included Peter Jones, Wexco Corporation (Lynchburg VA); Gene Steadman, Celanese/Ticona (Washington D.C.); Rob Kittredge, Fabri-Kal (Kalamazoo MI); and Walter Cox, Xaloy (New Castle PA). The “Manufacturers’ Fly-In” was organized by the National Association of Manufacturers (NAM) in Washington, DC. SPI members met with the offices of Senators Judd Gregg (R-NH), John Sununu (R-NH), Carl Levin (D-MI), Debbie Stabenow (D-MI), George Allen (R-VA), and John Warner (R-VA). For more information on this event and other opportunities to get involved in SPI’s public policy activities on Capitol Hill, please contact Natha Freiburg at (202) 974-5216 or nfreibur@socplas.org.

Repeal of the Byrd Amendment Enacted . . . On February 8, 2006, President Bush signed S. 1932, the Deficit Reduction Act of 2005, into law. The legislation implements several spending reforms estimated to reduce the U.S. budget deficit by $39 billion. Among the measures included in the package was a repeal of the Continued Dumping and Subsidy Offset Act, commonly known as the “Byrd Amendment.” This law distributed antidumping and countervailing duties to U.S. producers who had petitioned and/or supported the underlying unfair trade proceedings. After the World Trade Organization (WTO) ruled that the law violated WTO rules, several U.S. trading partners imposed retaliatory duties when the United States did not repeal it subsequent to the adverse WTO decision. Distribution of duties to eligible U.S. producers will continue for goods that are entered before October 1, 2007.

House Democrats Propose New Trade Policy . . . House Ways and Means Committee Democrats, including Ranking Member Charles Rangel (D-NY) and Trade Subcommittee Ranking Member Ben Cardin (D-MD), recently introduced a bill aimed at strengthening enforcement of U.S. trading rights. The bill (H.R. 4733) calls for the creation of an independent office of “Congressional Trade Enforcer” to identify foreign countries’ violations of international trade rules and investigate U.S. industry complaints of foreign practices that hamper U.S. exports. H.R. 4733 would also give Congress authority to compel USTR to launch dispute settlement cases against U.S. trading partners. The lawmakers also propose the creation of an Office of Market Access within the Trade Enforcer’s office to provide technical and legal assistance to small businesses interested in petitioning USTR to file WTO cases against trade violations. Click here to view a news release on H.R. 4733.

Senators Seek to Withdraw China’s PNTR . . . On February 9, 2006, Senators Byron Dorgan (D-ND) and Lindsey Graham (R-SC) introduced a bill that would repeal China’s permanent normal trade relations (PNTR) status, which Congress granted in October 2000. Given China’s standing as a communist country under U.S. law prior to 2000, PNTR status was a prerequisite for China’s membership in the WTO because it qualified China for the same status as other WTO members under U.S. law. During a press conference to unveil the new bill, Senator Dorgan identified piracy, currency manipulation, violations of its own labor laws, and regulatory barriers as the unfair practices that most seriously affect U.S. trade with China. Senator Dorgan believes that revocation of China’s PNTR status and re-institution of annual reviews of its trade practices before the U.S. extends normal trade relations would provide “a powerful incentive for China to change its policies” and begin trading with the U.S. more fairly. Even though the new Dorgan-Graham bill is bipartisan, most observers believe it is unlikely to receive Congressional approval because it could have strong repercussions for China’s WTO membership and U.S.-China trade relations overall. Like the Schumer-Graham bill that would impose a 27.5 percent duty on all Chinese imports, many view the Dorgan-Graham bill as primarily a symbolic gesture unlikely to be enacted into law.

CHINA UPDATE

SPI Applauds USTR’s More Aggressive Trade Policy Toward China . . . SPI has repeatedly urged members of Congress to strengthen the enforcement of China’s trade obligations and adopt meaningful legislation to address the disparities of U.S.–China trade relations. U.S. Trade Representative Ambassador Rob Portman agrees and reported that the U.S. “bilateral trade relationship with China today lacks equity, durability and balance in the opportunities it provides” and needs to be readjusted. Shortly after being confirmed, Portman pledged to conduct a “top-to-bottom review” of U.S. trade policies toward China. On February 15, 2006, USTR issued the results of this interagency review in a report titled, “U.S.–China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement.” The report assesses the benefits and challenges in U.S–China trade relations since China joined the WTO in 2001 and sets forth a series of specific “action items” that USTR plans to adopt to address the imbalance in U.S.–China trade. A key aspect of these actions is the creation of a China Enforcement Task Force at USTR, headed by a new Chief Counsel for China Trade Enforcement. USTR also intends to add staff to its China office and create a new China Task Force as part of the government’s Advisory Committee for Trade Policy and Negotiation (ACTPN). USTR also plans to work with other U.S. government agencies, as well as with foreign trading partners, to strengthen common approaches to addressing trade problems with China on both a bilateral and a multilateral basis.

The report was received positively in Congress by both Republicans and Democrats, and will likely serve as the basis of forthcoming legislative proposals on U.S.–China trade. Senator Charles Grassley (R-IA), Chairman of the Senate Finance Committee, in particular, has repeatedly stated his intention to reevaluate Senate efforts on trade policy toward China following the release of this report. Furthermore, Senator Max Baucus (D-MT), the Finance Committee Ranking Member, is expected to soon introduce legislation aimed at expanding U.S. trade enforcement efforts. For a copy of USTR’s report, click here. For more information or to discuss your company’s concerns regarding trade with China, please contact SPI’s Karen Toliver or Gennie Ross.

Bush Administration Seeks IMF Assistance on Currency Manipulation . . . In a recent speech in Washington, Treasury Under Secretary for International Affairs Tim Adams called on the International Monetary Fund (IMF) to become more active in defining currency manipulation by its members and strengthening its exchange rate surveillance. Adams outlined several proposals to reform the IMF’s exchange rate surveillance activities so that the Fund can both advise its members on their monetary and exchange rate policies and protect the stability and health of the international economy. In his comments, the Under Secretary also noted that the U.S. statute requiring the Treasury Department to determine whether trading partners are unfairly manipulating their currencies is modeled after IMF rules, which are vague and leave much room for political influence in their interpretation. Adams’s speech is widely viewed in Washington as a signal that the Bush Administration intends to refrain from designating any trading partners as currency manipulators without additional input from the IMF on the process for reaching such a determination. Moreover, this speech demonstrated that the Administration has decided to utilize the IMF as a multilateral forum to pressure China to revalue its currency, rather than focus on bilateral engagement with Beijing. Click here to view Under Secretary Adams’s speech. For more information or to discuss how the undervalued yuan affects your business, please contact SPI’s Karen Toliver.

NAM Report Shows Loss of Export Market Share for U.S. Manufactured Goods . . . On February 8, 2006, NAM issued a report on the competitiveness of U.S. industrial exports that shows a decline in the global market share held by U.S. merchandise exports and a marked increase in China’s market share. According to the report, the U.S. share of global exports of manufactured goods declined to 10.2 percent in 2004 from 10.7 percent in 2003 and an average of 13 percent in 1994–2001. In contrast, China’s market share in manufactured products grew from 4 percent in 1999 to 8.3 percent in 2004. According to the report, produced by NAM’s Manufacturing Institute and Council of Manufacturing Associations, the change in the U.S. trade position in manufactured goods is mainly due to a shift in the U.S. economy from a producing economy to a consuming economy. In addition to international trade trends, the new NAM report addresses other challenges facing U.S. manufacturing, including innovation, workforce development, and investment. Click here to download a copy of the report.

TRADE ENFORCEMENT

SPI Needs Your Input on IPR Issues . . . USTR has requested input from the U.S. businesses regarding intellectual property rights (IPR) problems with several countries, including China, India, and South Korea. USTR will be engaging India on IPR enforcement in the coming weeks as a part of a new bilateral Trade Policy Forum. Similarly, USTR is seeking information from U.S. industry on issues to be addressed during the negotiations of the IPR section of the prospective U.S.–Korea FTA (see below). USTR is also considering a formal WTO complaint against China’s IPR enforcement. SPI is working with USTR and other industry groups through the private-sector Coalition Against Counterfeiting and Piracy (CACP) to convey the plastics industry’s specific IPR concerns, but needs input from its members. To share your IPR-related problems with SPI, or for more information about SPI’s activities in this area, please contact Karen Toliver or Gennie Ross by March 10, 2006. Information reported to SPI will be kept confidential.

TRADE AGREEMENTS AND NEGOTIATIONS

U.S.–South Korea Launch FTA Negotiations . . . On February 2, 2006, Ambassador Portman and South Korean Minister of Trade Hyun-Chong Kim announced that the two countries will launch formal negotiations on a bilateral free trade agreement (FTA). SPI is currently analyzing U.S. plastics trade flows with Korea and the U.S. plastics industry’s interests with respect to this new agreement. The FTA will seek to remove tariffs and non-tariff barriers and expand bilateral trade relations. The two sides are hopeful that the talks will be completed by the end of 2006. A successful agreement with Korea would constitute the largest FTA for the U.S. since the North American Free Trade Agreement (NAFTA) with Mexico and Canada was concluded. A U.S.–Korea FTA holds great potential for expanded exports for U.S. manufacturers, and has been enthusiastically endorsed by U.S. business groups such as the National Association of Manufacturers (NAM). As USTR prepares to launch the talks, it is soliciting input from the U.S. private sector on priorities for the negotiations and specific trade barriers that should be addressed. SPI would like your input with regard to trade barriers that you have encountered in exporting to Korea and any specific issues with regard to these negotiations. Please contact SPI’s Karen Toliver or Gennie Ross to share your comments and/or concerns by March 10, 2006.

U.S. Close to Implementing CAFTA with El Salvador . . . Inside U.S. Trade reports that Washington is close to implementing the U.S.–Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) with El Salvador after the Central American country agreed to accept U.S. inspections of U.S. processing plants as sufficient to ensure safe meat imports from the United States. The two sides have also reached an agreement on an outstanding textile and apparel trade issue. With the resolution of these issues, it is now expected that the U.S.–El Salvador FTA will enter into effect on March 1, 2006. According to Inside U.S. Trade, Washington is also close to completing negotiations with Nicaragua on the outstanding food inspection and textile issues. However, talks with Honduras, Guatemala, and the Dominican Republic are proceeding slowly, and have not even begun with Costa Rica, which just completed a presidential election and has not yet ratified CAFTA-DR.

U.S.–Colombia FTA Negotiations Continue . . . Bilateral FTA negotiations between the U.S. and Colombia resumed on February 14, 2005 with the hopes of concluding a deal. This agreement was launched under the wider Andean FTA initiative, which aims to link the Andean countries of Colombia, Ecuador, and Peru in an FTA with the U.S. The U.S. has already completed the negotiations with Peru, while a number of outstanding issues remain in the talks with Colombia and Ecuador. Signaling Colombia’s strong commitment to concluding the talks, the country’s President Alvaro Uribe is visiting Washington to lend his personal support toward resolving the remaining sensitive issues, such as agriculture and intellectual property rights (IPR). In 2004, Colombia was the 18th-largest export partner for the U.S. plastics industry and the 25th-largest import partner. The U.S. plastics industry had a trade surplus of $137.4 million with Colombia in 2004, with exports totaling $251.3 million.

U.S.–Panama FTA Talks Continued in Early February . . . Senior U.S. and Panamanian officials held meetings on February 8–9, 2006 with the goal of completing the negotiations on a bilateral FTA. U.S. Agricultural Negotiator Richard Crowder met with Panama’s Vice President and Foreign Minister Samuel Lewis Navarro, as well as with Alejandro Ferrer, Minister of Commerce and Industry. Inside U.S. Trade reports that a major outstanding issue in the U.S.–Panama FTA talks is Panama’s sanitary controls on agricultural imports. The reciprocity of agricultural inspections is also a major problem in the implementation of CAFTA-DR, as the Central American countries have resisted Washington’s demands to allow imports from U.S. farms and processing plants approved by the U.S. Department of Agriculture without certifying these plants through their own inspection agencies (see above).

WTO UPDATE

WTO Again Rules Against U.S. Export Tax Benefits . . . On February 14, 2006, a WTO dispute settlement panel issued a ruling that U.S. export tax benefits in the American Jobs Creation Act (Jobs Act) are not permissible under international trade rules. The dispute stems from an earlier export program known as the “Foreign Sales Corporations,” which was substituted by the Extraterritorial Income Exclusion Act (ETI) in 2000. The European Union (EU) challenged both laws under the WTO rules. Congress adopted The Jobs Act in 2004 after the EU began imposing sanctions of up to $4 billion against U.S. exports in retaliation to FSC/ETI. Following the passage of this law, the EU lifted the sanctions, but challenged the Jobs Act in the WTO, arguing that transition periods phasing out FSC/ETI “failed to rectify the situation.” These transition periods, which are at the heart of the new WTO ruling, expire at the end of 2006. Many members of Congress view the latest EU case with a high degree of negativity and have warned that a move by the EU to re-impose sanctions may seriously affect U.S.–EU trade relations. For more information on this dispute and the latest WTO ruling, click here.

EXPORT PROMOTION – TOOLS TO EXPAND YOUR MARKETS

Free Legal Advice on IPR Protection in China for Small Businesses . . . The Department of Commerce, in conjunction with the American Bar Association and the National Association of Manufacturers, is offering a new China Intellectual Property Rights Advisory Program. Through this program, U.S. small and medium-sized enterprises can request a free, one-hour consultation with a volunteer attorney experienced in both IPR issues and the Chinese market to learn how to protect and enforce their intellectual property (such as trademarks, patents and copyrights) in China. Click here to request your free China IPR legal consultation!

Opportunities for U.S. Companies to Work with Multilateral Development Banks . . . The Department of Commerce and the World Trade Center of New Orleans will host a one-day conference on March 30, 2006 on business opportunities for U.S. companies with five large multilateral development banks. The “Banking on Development” conference will highlight the activities of the World Bank, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, and the European Bank for Reconstruction and Development. The program is organized to promote the economic recovery of New Orleans, LA. Click here for more information and registration.

GLOBAL BUSINESS COUNCIL

GBC Program on Central and Eastern Europe . . . Always at the forefront of global issues impacting the plastics industry, the GBC is organizing a program to be held during NPE 2006. Attendees will hear about developments and business opportunities for plastics manufacturing in Central and Eastern Europe. Stay tuned for more details.

Join the GBC! . . . Does your company experience difficulties in exporting overseas? Are you concerned about import competition in your market? Do you want to have input on planning trade missions to overseas markets and SPI's positions on trade policy matters? Then consider joining SPI's Global Business Council.

The GBC's mission is to increase global awareness and competitiveness by providing resources to SPI members, while fostering growth of the plastics industry worldwide. All SPI members in good standing are eligible to join. If you are interested in joining the GBC, please contact Karen Toliver. More information on the GBC and its activities is available on the SPI website.

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