Statement of the U.S. Chamber of Commerce

Transcription

1 Statement of the U.S. Chamber of Commerce ON: Advancing the U.S. Trade Agenda The World Trade Organization TO: U.S. House of Representatives Committee on Ways and Means Subcommittee on Trade DATE: July 16, 2014 The Chamber s mission is to advance human progress through an economic, political and social system based on individual freedom, incentive, initiative, opportunity and responsibility.

2 The U.S. Chamber of Commerce is the world s largest business federation representing the interests of more than three million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. More than 96% of Chamber member companies have fewer than 100 employees, and many of the nation s largest companies are also active members. We are therefore cognizant not only of the challenges facing smaller businesses, but also those facing the business community at large. Besides representing a cross-section of the American business community with respect to the number of employees, major classifications of American business e.g., manufacturing, retailing, services, construction, wholesalers, and finance are represented. The Chamber has membership in all 50 states. The Chamber s international reach is substantial as well. We believe that global interdependence provides opportunities, not threats. In addition to the American Chambers of Commerce abroad, an increasing number of our members engage in the export and import of both goods and services and have ongoing investment activities. The Chamber favors strengthened international competitiveness and opposes artificial U.S. and foreign barriers to international business. Positions on issues are developed by Chamber members serving on committees, subcommittees, councils, and task forces. Nearly 1,900 businesspeople participate in this process.

3 The U.S. Chamber of Commerce is pleased to take this opportunity to address the priorities of the U.S. business community before the World Trade Organization (WTO). The Chamber is the world s largest business federation, representing the interests of more than three million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations, and is dedicated to promoting, protecting, and defending America s free enterprise system. The Chamber is firmly committed to the global rules-based trading system embodied by the WTO. In the view of Chamber members, the U.S. business community needs the WTO today as much as ever. Its rules inform national policy at home and abroad, and its dispute settlement system commands global respect. The multilateral trading system has benefited the entire world. Eight successful multilateral negotiating rounds have helped increase world trade from $58 billion in 1948 to $22 trillion today. This is a 40-fold increase in real terms, and it has helped boost incomes in country after country. While this rising tide of commerce has brought gains for developed countries, its most dramatic benefits have accrued to developing nations. As recently as 1993, 1.9 billion people nearly half the world s men, women, and children lived on $1.25 a day or less, in constant 2005 dollars. Since then poverty totals have been falling fast. By 2000 the number of people in absolute poverty had fallen to 1.7 billion, and the share of world population to 28%. The most recent estimates issued by the World Bank find the totals down to 1.2 billion people and 17.5% of population. While no single factor explains these income gains, the rise in international commerce has by all accounts played a major role. The economic growth that trade helps fuel contributes to educating the young, building essential infrastructure, strengthen the institutions of governance, and combating measles, malaria and other preventable illnesses. In the post-war era, these efforts have helped developing countries add two decades to life expectancy and cut the mortality rate of children under age five by 50%. However, the long impasse in the Doha Development Agenda negotiations led many to call into question the WTO s role as a forum for market-opening trade negotiations in recent years. In this context, it is difficult to exaggerate the importance of the success achieved at the WTO s 9th Ministerial Conference held in Bali, Indonesia, on December 3-7, To show the support of the U.S. business community for the WTO s work, the Chamber has repeatedly led multi-sectoral business delegations to Geneva in recent years, and it ratcheted up this work over the past two years. The Chamber assisted in organizing the U.S. business delegation to the Bali Ministerial and arranging meetings there with a diverse array of officials and private sector delegates from other countries. Our message was simple: The U.S. business community needs the WTO to succeed. Trade Facilitation Agreement At the Bali Ministerial, trade ministers unanimously endorsed the first multilateral trade agreement since the organization s creation in The Chamber warmly welcomed the Trade 1

4 Facilitation Agreement (TFA), the principal deliverable in the Bali Package, as a cost-cutting, competition-enhancing, anti-corruption agreement of the first order. It promises to streamline the passage of goods across borders by cutting red tape and bureaucracy and promoting border modernization for customs clearance around the globe. Today, production inputs come from all around the world to produce products with the greatest value for the consumer, and nearly 60 percent of all international trade is in intermediate goods. Manufacturers have come to rely on efficient border processes to keep trade costs low and speed products to market, and reducing transaction costs at the border allows retailers to charge customers less. Trade facilitation also unleashes the potential for small and medium-sized businesses to access global markets. Speed, efficiency, and predictability are vital to the success of traders of every size, sector, and region. The final agreement has surprised observers with its quality as countries accepted stronger commitments than had been anticipated. Unlike free-trade agreements (FTAs) negotiated by two or several parties, the dynamic at the 159-member WTO often leads to the lowest common denominator, but the final version of the TFA is still impressive. To illustrate, the agreement includes more than 120 shalls (indicating obligations binding on all parties) and only a few dozen instances where governments made weaker best endeavor commitments. In fact, the Peterson Institute for International Economics in 2009 estimated the trade facilitation element in a completed Doha Round would add almost four times as much to global economic output ($385 billion) as the Round s provisions eliminating tariffs and other trade barriers on agricultural and manufactured goods ($100 billion) even though the latter were supposedly the deal s core deliverables. The OECD estimates that for every 1% reduction in global trade costs, global incomes rise by $40 billion, and the TFA can cut trade costs by almost 15% for low-income countries and 10% for high-income countries. In a major change for dozens of developing countries, the TFA will require countries to transition fully to modern border practices under which goods are cleared through customs independently of the final determination of duties and taxes. Countries will migrate to electronic processing of required information to allow clearance through customs before goods arrive in the country. Countries will also look to modernize risk-based targeting. The TFA also requires countries to provide expedited customs clearance for air cargo, which accounts for about 40% of world trade in goods by value. Today, there are scores of countries that provide no such facilities for express shippers. While U.S. FTAs typically include a binding commitment for such shipments to be cleared within a specific number of hours, that was not possible in this much broader agreement, but the TFA does include an obligation to release goods delivered by air as soon as possible after arrival. The TFA also includes binding obligations for customs authorities to: Publish all customs forms, rules, and procedures on the Internet; Afford opportunities to comment on new or amended customs laws and regulations and maintain regular stakeholder consultation; Issue advance rulings (prior to importation) on a good s tariff classification and provide for administrative or judicial appeal; 2

5 Establish a de minimis value below which duties are not required in order to expedite the release of low-value shipments (though no specific value was set); and Adopt authorized operator programs to speed clearance for firms that have established a good record of compliance with customs regulations, as in trusted trader programs such as C-TPAT. The true value of a trade agreement lies in its effective implementation. To that end, WTO Members have been laboring to meet a deadline later this month to submit so-called Category A commitments under the Agreement. In this process, they will list all the provisions they commit to fully implement by the time the Agreement enters into force in July Particularly in the case of developing countries, this represents an opportunity to highlight a strong commitment to efficient customs and port procedures before the global business community and private investors, and bold reformers are likely to see economic benefits in the form of increased trade, investment, and growth. The Chamber has noted with concern that a number of WTO Members have in recent weeks indicated they plan to abandon the unanimous commitment to the Bali Package achieved in December and instead argue that implementation of the TFA must be contingent on completion of the Doha Round. This position sends a terrible signal at a moment when the WTO has managed to regain some credibility as a forum for meaningful and productive trade negotiations. From a development perspective, it is vital that WTO Members press forward with a TFA implementation strategy to promote economic growth and development. Further, if this small minority of WTO Members somehow managed to overturn the consensus at Bali, it would do nothing to advance the Doha Round it would more likely sound its death knell. It would deny developing nations the extensive benefits of the TFA which would accrue disproportionately to the world s poorest nations as well as the Bali Package s commitments relating to development and agriculture. Modern border practices will generate win-win outcomes for not only individual countries, but the global economy as a whole. The Chamber is making concerted outreach to developing country governments to encourage them to take on these Category A commitments in a fulsome manner and to underscore the international business community s keen interest in seeing these reforms advance. We strongly support the administration s efforts to ensure the TFA enters into force in a timely manner and on the most commercially meaningful terms. Information Technology Agreement Another immediate priority is to conclude negotiations to expand the product coverage of the 1996 Information Technology Agreement (ITA), which has delivered a cornucopia of innovative technology products to the world. Today, 70 countries are members of the ITA, and they account for 97% of world trade in IT products, which has reached about $4 trillion annually nearly one-fifth of global merchandise trade. Extending free trade to the hundreds of new tech products invented since the ITA was negotiated nearly two decades ago will multiply its benefits. On the table are products such as GPS devices and Bluetooth technologies. Among the U.S. priorities is the inclusion of multi- 3

6 component semiconductors (MCOs) and flat-panel displays. By one estimate, a commercially significant expansion of the ITA could add an estimated $190 billion to global GDP annually. Despite considerable progress, the ITA expansion talks were suspended in July 2013 and again in November. These actions were triggered by China s insistence that dozens of tariff lines be dropped from consideration or subjected to extraordinarily long phase-outs. No other country has adopted such a cautious stance, and many WTO Members have objected to this position. China s stance is difficult to understand as it is the largest exporter of IT products and even has a trade surplus in many of the product categories it seeks to exclude. Further, the Information Technology Industry Council estimates that an ambitious outcome in these negotiations could save China s tech sector $7 billion in reduced tariffs on their overseas sales each year. The Chamber was one of 35 top business groups from dozens of developed and developing countries that in July sent a letter to Chinese Vice Premier Wang Yang to reconsider this position. While the July meeting of the U.S.-China Strategic and Economic Dialogue did not yield a breakthrough in the ITA negotiations, the Chamber is continuing to urge Chinese officials to redouble their efforts in the weeks ahead to close the gap with the other parties pursuing an ambitious outcome in these negotiations. Indeed, this is a propitious year to conclude these negotiations as China is host to the 2014 Asia-Pacific Economic Cooperation meetings. The ITA was first proposed within APEC, and it would be fitting for this group of countries to show leadership again in securing a commercially meaningful expansion of the ITA s product coverage. Environmental Goods Agreement The U.S. Chamber of Commerce also supports the recently launched negotiations for a multilateral trade agreement to eliminate tariffs on environmental goods. On July 8, 14 WTO Members, including the United States, China, and the 28 member states of the European Union, inaugurated the Environmental Goods Agreement (EGA) negotiations with the goal of eliminating the steep tariffs that many countries apply to such products as solar hot water heaters, turbines used for the generation of electricity, catalytic converters, and products to control air pollution and treat wastewater. The EGA promises to lower the cost of goods that help keep clean the air we breathe, the water we drink, and the land we farm for future generations. The proposed agreement has drawn the Chamber s enthusiastic support because it is both pro-growth and pro-environment. As the Office of the U.S. Trade Representative has noted, global trade in environmental goods approaches $1 trillion annually. However, some countries apply tariffs to these goods as high as 35%, discouraging use of environmentally-friendly technologies. A study by the World Bank entitled International Trade and Climate Change investigated the role of tariff barriers on environmental goods and services. It found that China applies a 15% tariff to clean coal technologies; so does India, which applies the same steep tariff on wind and solar technologies. Brazil slaps duties of 18% on solar technologies and 14% on wind turbines and related goods. 4

7 In today s generally low-tariff world, these duties stand out as excessive. According to a report by Australia s Institute of Public Affairs, in Asia and Latin America the average tariff on environmentally sensitive technologies is between 15 and 20 per cent. If governments want to promote the wider use of environmental goods, they can do something immediately remove their tariff barriers. The countries taking part in the EGA negotiations account for 86% of global trade in environmental goods. The parties have begun to reach out to additional countries, such as Brazil and India, to encourage them to join the initiative. The Chamber appreciates that these negotiations aim to build on the APEC Leaders commitment to reduce tariffs on a list of 54 environmental goods to make them cheaper and more accessible. However, we support efforts to expand the list to additional products as well. Further, we welcome the commitment by U.S. officials to ensure that the EGA will complement efforts to remove barriers to trade in environmental services, such as air pollution monitoring and solid and hazardous waste treatment, as part of the Trade in Services Agreement (TISA) negotiations. Finally, our members believe the EGA must include a regular review of product coverage. In this sense, the EGA should be a living agreement that keeps pace with technological advances and promotes adoption of new, green technologies and products. Enforcement Trade agreements hold little value for American business if they are not fully enforced. The Chamber has long pressed for consistent and vigorous enforcement of trade agreements entered into by the United States, including the wide-ranging body of rules embodied in the WTO agreements. These agreements provide U.S. workers, farmers, and businesses with assured access to overseas markets on terms that are clear and predictable. In addition to addressing tariffs and non-tariff barriers at national borders, these agreements also provide important guarantees for U.S. businesses operating inside foreign markets. The WTO agreements provide critical protections for intellectual property, guarantee the rights of U.S. companies to bid for government contracts, and ensure that U.S. companies receive national treatment (i.e., the same rights and responsibilities granted local firms). U.S. officials should place the highest priority on fulfilling these guarantees. The United States has the right and responsibility to press other governments to live up to their commitments under trade agreements. When governments fail to do so, the first recourse should be to engage them in direct talks. If consultations fail to bring full compliance, dispute settlement procedures established under the WTO offer avenues to ensure proper enforcement of these commitments. In recent years, for instance, the United States has filed WTO cases against Chinese export restraints on raw materials and rare earths and import barriers affecting auto parts, and these actions have borne some fruit. Going forward, trade officials should not hesitate to bring 5

8 cases against foreign governments when WTO trade rules lend support and when they can marshal the evidence. Of course, enforcement cuts both ways. The United States must abide by its own obligations under trade agreements. For example, a WTO panel ruled against the United States in the U.S.-Upland Cotton dispute, and years later the United States remains in negotiations with Brazil over measures that will allow U.S. businesses, farmers, and workers to avoid hundreds of millions of dollars in WTO-sanctioned trade retaliation by Brazil. The Chamber has vigorously pressed both governments to resolve this dispute for several years. In addition, Chamber members are very concerned about the U.S.-Certain Country of Origin Labelling (COOL) Requirements dispute brought by Canada and Mexico. The mandatory COOL rule was implemented under the 2009 farm bill to give consumers more information when selecting muscle cuts of meat at retail. The WTO found the rule to be in violation of the WTO Technical Barriers to Trade Agreement. The U.S. responded with a revised rule which was promptly challenged at the WTO. Many experts expect the WTO s adverse ruling to be confirmed later this month. Indeed, there is a real possibility that the WTO will sanction billions of dollars in Canadian and Mexican trade retaliation against U.S. goods. In response, the Chamber has helped organize the COOL Reform Coalition, which is comprised of a diverse group of associations and companies that represent U.S. food, agriculture, and manufacturing industries. The coalition is advocating for U.S. compliance with its WTO obligations. To that end, the coalition has urged Congress to authorize and direct the Secretary of Agriculture to immediately suspend the meat COOL regulations upon a final WTO adjudication of noncompliance with international trade obligations. Such a congressional action would neither pre-judge the pending WTO litigation on this matter nor allow an on-going period of knowing violation of international trade obligations. We have so much to gain from participation in the rules-based international trading system that we flaunt these rules at our peril. Since the WTO was created in 1995, the United States has won and lost cases before dispute settlement panels on a number of occasions. The United States has almost always amended its laws or changed its practices to conform to adverse rulings. It is squarely in the U.S. national interest for the United States to continue to live by the rules of the international trading system. Doha Development Agenda Discussions continue in Geneva with regard to the Doha Round negotiations even as the world has changed in the 12 and a half years since they were launched. For some context, it is worth recalling that in a 2009 research paper the Peterson Institute for International Economics estimated the trade facilitation element in a completed Doha Round would add almost four times as much (roughly $385 billion annually) to global economic output as the Round s and nonagricultural market access portions (a total of approximately $100 billion in annual world GPD gains) even though the latter were seen as the meat of the deal. In addition, there is great promise in the TISA negotiations now underway in Geneva not within the WTO but among a coalition of more than 50 interested countries. The U.S. business community is keenly interested in the TISA, but the fact remains that the WTO 6

9 Members most interested in services trade liberalization are not looking to the Doha Round to address their priorities. In light of these developments, it is unclear whether WTO Members are sufficiently motivated to harvest the potential gains of the Doha Round in the two principal negotiating groups remaining, namely, trade in agricultural and non-agricultural goods. Certainly there is a strong commitment from the United States to make a good faith effort, and that effort is under way. Can new issues be added? The U.S. Chamber has been a strong proponent of new trade disciplines in such areas as digital trade, regulatory coherence and cooperation, investment, stateowned enterprises, and due process in antitrust enforcement. Our members and staff have prepared detailed recommendations and analysis on how to tackle these 21st century issues in trade agreements. However, the 160 Members of the WTO appear to be far from a consensus on whether to address these issues in the Doha Round, in principle or in practice. With a great deal of important work ahead on trade facilitation, negotiations on IT and environmental goods, and trade in services, Geneva s trade community faces a bright and busy future. The Chamber urges officials to put the immediate, the practical, and the necessary at the fore. But the year ahead will also provide opportunity for discussion on how the WTO can build on its recent success to foster economic growth, the rule of law, and new trade opportunities in the decades ahead. 7