For SPI Members Only – March 31, 2006

In This Edition

Issue Alert! | Hill Activity | China Update | Trade Enforcement | Trade Agreements and Negotiations | Member Services | Export Promotion | Global Business Council

Demonstrate the Power of Plastics! . . . The Treasury Department will soon release its semi-annual Report to Congress on International Economic and Exchange Rate Policies. Treasury’s analysis will include a determination of whether China has engaged in currency manipulation. Over the past several months, SPI, the National Association of Manufacturers (NAM), and other industry groups have urged Treasury to cite China for currency manipulation. This citation would require the department to invoke formal consultations with China to obtain specific commitments to adopt a market-oriented currency system. Since July 2005, when China implemented certain exchange rate reforms, the yuan has strengthened against the dollar by slightly more than 3 percent – far short of well-documented analyses that estimate the degree of undervaluation to range from 25–40 percent. These considerations provide compelling reasons for Treasury to cite China in its upcoming report. For the first time, Treasury is seeking public comments on its foreign exchange rate report. This comment period enables the plastics industry to inform Treasury in no uncertain terms that we support and want Treasury to cite China in its upcoming report. SPI is calling on its members to take this opportunity to let your voice be heard on this important issue. Simply click here and in only a few minutes, you can join the voices of other U.S. companies that are pressing Treasury to exercise its authority and find that China has manipulated its currency to the detriment of U.S. manufacturers. But act quick! Treasury must receive your letter by April 7.

For more information on Treasury’s annual report, please contact Karen Toliver or Gennie Ross.

Senators Grassley and Baucus Introduce New Trade Legislation . . . On March 28, 2006, Senator Charles Grassley (R-IA), chairman of the Senate Finance Committee, and Senator Max Baucus (D-MT), the Committee’s ranking member, introduced the “U.S. Trade Enhancement Act of 2006.” The bill is aimed at resolving “contentious currency and trade enforcement issues between the U.S. and other countries,” particularly China. It overhauls the legal framework in which the Department of Treasury analyzes the foreign exchange rate practices of U.S. trading partners (see the issue alert above concerning Treasury’s pending report under existing law). Instead of citing countries for “currency manipulation,” Treasury would identify those currencies that are “fundamentally misaligned” with macroeconomic conditions. The agency would make this determination after consulting with a newly established Advisory Committee on International Monetary and Financial Policy and the chairman of the Federal Reserve. Treasury would still be required to submit an annual and semi-annual report to Congress, but the Grassley-Baucus bill adds new enforcement provisions that would penalize countries for failing to reform their exchange rate policies after Treasury has determined that their currencies are “fundamentally misaligned.” The penalties include a prohibition on new financing from the Overseas Private Investment Corporation and multilateral banks, as well as formal consultations under International Monetary Fund procedures.

Other provisions of the Grassley-Baucus bill are aimed at strengthening enforcement of U.S. trading rights. The bill would elevate the General Counsel to the U.S. Trade Representative (USTR) to a Senate-confirmed position focused on trade enforcement. Also, USTR would be required to prepare a report identifying the most egregious trade barriers to U.S. exports and work to resolve trade enforcement priorities identified by Congress.

The Grassley-Baucus bill does not contain a provision concerning application of U.S. subsidies law to China and other non-market economies. Such a provision, which was anticipated to be modeled after S. 1421, sponsored by Senator Susan Collins (R-ME), would have provided a remedy to U.S. manufacturers for harm caused by unfairly subsidized exports to the U.S. market. SPI and other industry groups have been lobbying in favor of S. 1421 as a WTO-consistent measure to remedy such unfair trade practices, including China’s undervalued yuan. Senators Grassley and Baucus stated that they are still considering this matter, but felt it is “too complicated” to address at this time. Although SPI supports a new mechanism to clarify Treasury’s authority to address adverse foreign exchange rate practices of U.S. trading partners, SPI is disappointed by the Senators’ decision to exclude the subsidies provision because it leaves U.S. plastics manufacturers with no remedies to address unfair subsidization by China and other non-market economies. Nonetheless, SPI will continue to work for enactment of an effective remedy.

SPI’s press statement on the Grassley-Baucus bill...

Access the text of the bill...

Vote on Schumer-Graham Bill Postponed Again . . . According to Inside U.S. Trade, Senator Charles Schumer (D-NY) and Senator Lindsey Graham (R-SC) recently informed the press that they have agreed to postpone a Senate vote on their bill until late September. The so-called Schumer-Graham bill would impose a 27.5 percent tariff on all Chinese imports in retaliation for China’s failure to substantially revalue the yuan. The Senators’ agreement to postpone the Senate vote comes after a week-long trip to China in which they met with Chinese officials and business leaders. Upon their return, the Senators expressed greater optimism about U.S.-China trade relations, particularly China’s understanding that it must permit the yuan to rise over the next several months. The Senators also rejected the premise that the Grassley-Baucus bill (see story above) would reduce support for their tariff bill.

China Issues RoHS-Like Regulation . . . The Chinese government has issued the final version of its regulation, which, as of March 1, 2007, will restrict the use of lead and several other hazardous substances in electronics and information industry products. Modeled after the European Union’s “Restriction on Hazardous Substances in Electrical and Electronic Equipment” (RoHS), the new Chinese regulation, called “Administrative Measure on the Control of Pollution Caused by Electronic Information Products” is widely known as “China RoHS.” The Chinese measure will ban the use of lead, mercury, cadmium, hexavalent chromium, PBBs, PBDEs, and “other toxic and hazardous substances or elements designated by the State.” There are important differences between the Chinese and EU regulations, and many of the implementation details of the Chinese measure remain unclear. The Chinese authorities plan to list specific covered products in a “catalogue” expected out later this year. Covered products will be subject to a compulsory product certification administered by the CNCA, China’s certification body. SPI is working with NAM and other industry groups, as well as with the U.S. government to ensure that the plastics industry’s concerns are communicated to the Chinese authorities. We need your input on how this regulation may affect your business.

Please contact Gennie Ross or Marie Martinko to discuss the new China RoHS regulation.

Representative Thomas Seeks Investigation of Medical Device Trade Barriers . . . On March 7, 2006, Congressman Bill Thomas (R-CA), chairman of the House Ways and Means Committee, requested that the International Trade Commission (ITC) initiate a fact-finding investigation of the impact of international barriers on U.S. exports of medical devices and equipment. Inside U.S. Trade reports that Japan, the largest market for such products, will be the focus of the ITC’s investigation because many industry participants consider Japan’s regulatory environment to be overly burdensome and restrictive. Representative Thomas, on behalf of the Committee, asked the ITC to review U.S. exports to Japan during the past five years and compare Japan’s regulatory regime to other major markets for U.S. medical devices and equipment. Thomas asked the ITC to complete its report within a year. Many plastics companies manufacture medical devices that are subject to Thomas’s request. SPI’s staff will monitor the course of the investigation and seek input, where appropriate, from interested members.

USTR Holds Public Hearing on U.S.–Korea Free Trade Agreement (FTA) . . . On March 14, 2006, USTR held a public hearing on the prospective U.S.–Korea FTA. Several U.S. companies and industry groups stated their objectives and concerns. A wide array of manufacturing and agricultural groups testified at the hearing, including the U.S.–Korea Business Council, NAM, and the United Auto Workers. NAM stressed the importance of addressing non-tariff barriers in South Korea, which are severely impeding the ability of U.S. exporters to compete in the Korean market. In particular, NAM drew attention to non-tariff barriers in the automotive sector and emphasized the trade-distorting impact of Korea’s competition policy. The first formal round of talks on the U.S.–Korea FTA is scheduled to begin on June 5, 2006 in Washington, D.C. and will be followed by another negotiating round July 2006 in Seoul. With member input, SPI staff is developing the plastics industry’s priorities in the negotiation and will engage in continuous dialogue with USTR officials during the talks for this FTA.

For more information on the U.S.–Korea FTA, please contact Karen Toliver.

Temporary Suspension of U.S. Import Duties on Your Inputs . . . Is your company compelled to import inputs because there is no U.S. manufacturer of the product? Do you pay import duties on such products? If so, then you may be eligible to obtain temporary suspension of the import duties and a corresponding reduction in your input costs. The Senate may soon consider requests from U.S. businesses to temporarily suspend import duties on products of interest to their constituents. These suspensions will be enacted through a Miscellaneous Tariff Bill. To be eligible for the temporary duty suspension, there must be no U.S. production of the product and the potential loss of revenue to U.S. Treasury (from the lifting of import duties) cannot exceed $500,000 annually.

If you are interested in determining if you have imports that are potentially eligible for inclusion in the MTB, please immediately contact Gennie Ross.

Commerce Department to Lead Trade Mission to Europe in May . . . The U.S. Commercial Service is organizing a “Gateway to Europe” trade mission on May 14–18, 2006. Participants will visit Amsterdam and Brussels and attend briefings, business appointments, and networking activities. The Commerce Department is targeting several sectors, including automotive parts and services, environmental technology, medical equipment, consumer products, and telecommunications equipment and services.

More information about the mission...

Commerce Department Export Promotion Webinars . . . The U.S. Commercial Service is offering a series of free web seminars for U.S. companies seeking to enter or increase their presence in key foreign markets. On April 4, 2006, you can learn about “Opening Markets in India” from a senior commercial officer at the U.S. Embassy in India. This webinar will be followed by a program on “Selling Overseas 101: Strategic Exporting” on May 22, 2006.

More information on this program...

More information on doing business in India

GBC Program on Central and Eastern Europe . . . Always at the forefront of global issues impacting the plastics industry, the GBC is organizing a breakfast program to be held during NPE 2006. Attendees will hear about developments and business opportunities for plastics manufacturing in Central and Eastern Europe and Russia. The event will take place on Tuesday, June 20, 2006 at 8:00–9:30 am. Speakers will include Helmar Franz, executive vice president, Ningbo Haitian Group Co. Ltd., Jim Peck, corporate vice president and general counsel, Nypro Inc., Charles Sholtis, CEO, Plastic Molding Technology Inc., and a representative of the U.S. Department of Commerce (invited).

Registration will open soon through the NPE 2006 website.

Trade Mission To Central Europe . . . The GBC is planning a business development mission to Central Europe in late September 2006. The participants will meet with government officials and plastics industry representatives and build key contacts to utilize in future expansion in the region. Central Europe is a dynamic and growing market for plastics products, with a wealth of opportunities in the automotive, packaging, and consumer goods sectors. The region’s low-cost and highly-educated workforce makes it an ideal base for sales to both Western Europe and further east to Southeastern Europe and Russia. Join other plastics industry executives interested in learning how to enter and establish a presence for their companies in this exciting region!

For more information, please contact Gennie Ross.

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 Gennie Ross. More information on the GBC and its activities is available on the SPI website.

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