ALSTON&BIRD LLP. Trade Update. Los Angeles February 11, 2011 Copyright 2011 Jonathan M. Fee All Rights Reserved

Transcription

1 ALSTON&BIRD LLP Trade Update Los Angeles February 11, 2011 Copyright 2011 Jonathan M. Fee All Rights Reserved

2 The State of Affairs The trade scenario in the Americas is pretty stable CAFTA, NAFTA, Haiti, Peru are in place and everybody s accustomed to them Passage of the Colombia and Panama FTAs would complete the set Now is the opportunity to consolidate and grow, to work with what we know, and to source from established bases

3 GSP and Sleeping Bags Sen. Jeff Sessions (R-AL) has a hold on legislation to extend the GSP, the trade preference program covering annual imports of about $20 billion (except textiles and apparel, of course) from beneficiary developing countries Why? He wants to remove GSP treatment for sleeping bags from Bangladesh to benefit Exxel Outdoors, which makes sleeping bags in Alabama This would be inconsistent, some say, with an administrative process, already in place, by which aggrieved US producers can seek removal of specific articles from the GSP

4 Some Opposition We re at a point in time in America that we can't resolve every trade agreement in favor of our competitors... At some point we have to insist that trade rules be followed fairly, said Sen. Sessions Exxel competes with CellCorp, which imports sleeping bags from Bangledesh duty free in Kentucky, whose Senator, Majority Leader Mitch McConnell, supports renewal of the GSP

5 Why Care About Sleeping Bags and GSP? Extension of the GSP, Trade Adjustment Assistance (TAA) and the Andean Trade Preference and Drug Eradication Act (ATPDEA) passed the House last December 15, but fell apart in the Senate, partly over sleeping bags As a compromise, TAA and ATPDEA (not GSP) were temporarily extended to tomorrow (February 12)

6 The Princess and the Pea Sen. Kyl (R-AZ) and some other Republicans don t want a further TAA extension unless it tied with approval of the Colombia FTA Senate Democrats, on the other hand, don t want to extend ATPDEA without TAA Ways and Means staff oppose leaving sleeping bags out of GSP because they fear the precedent for future GSP extensions

7 Last Minute Solution? This week on Tuesday, the House was prepared to pass a measure under a suspension of rules to extend TAA to July 1 and ATPDEA The Senate could have come back in the morning on Thursday, giving the President the theoretical chance to sign the law before Saturday s expiration Then the process will be repeated in the summer

8 USTR Ron Kirk Testifies USTR Ron Kirk was scheduled to testify for the first time before the Ways and Means Committee on Wednesday this week He was expected to get questioned about China, the three stalled FTAs, TPP negotiations, Doha, and Russia s entry to the WTO

9 President Obama Speaks to US Chamber And we finalized a trade agreement with South Korea that will support at least 70,000 American jobs - a deal that has unprecedented support from business and labor; Democrats and Republicans... That's the kind of deal I ll be looking for as we pursue trade agreements with Panama and Columbia and work to bring Russia into the international trading system (Feb. 7, 2011)

10 What Did He Mean? We should probably expect the Administration to push passage of the Korea FTA first, because it has such unprecedented support Panama and Colombia FTAs evidently don t enjoy such unprecedented support and presumably need more work

11 Colombia FTA ATPDEA still works (at least until Saturday!); but periodic renewal makes it uncertain Last summer, Secretary Clinton told reporters in Colombia she and Obama would push Congress for passage, and on January 28, she said the Administration would submit it for a vote this year But a USTR spokesperson said last week that Clinton s statement did not represent inter-agency consensus

12 The Issue is Still Labor Violence Before we can consider any free trade agreement with Colombia, Congress must receive assurances from this Administration that it will indeed enforce labor laws in our free trade agreements and set a no-tolerance policy when it comes to labor-related threats and violence... Colombia leads the world in labor rights violations, with thousands of murders and death threats directed at union members and leaders Sen. Sherrod Brown (D- OH), letter to USTR Ron Kirk (Jan. 27, 2011)

13 Strong Words from Leader McConnell We ve heard Secretary Clinton, Senator Baucus, and Ambassador Kirk all express support for submitting a Colombia FTA to Congress... But the President s own pronouncements continue to fall short... It is not enough for the President to say good things about free trade while siding with labor bosses over job creators and the vast majority of American workers who do not belong to unions and who would largely benefit from opening markets overseas... We shouldn't allow labor union bosses to have veto power over economic policies that benefit us all Floor Speech (Feb. 7, 2011)

14 Prospects The prospects aren t great; the Colombia FTA really needs to be presented by the President, and there does not seem to be much interest New president Santos was expected to add distance from the supposed association of President Uribe with lack of progress on rights issues; but that apparently is not the case Even less likely in the 2012 election year

15 Panama Delay The president of the National Assembly was identified as having been indicted for murdering a US serviceman, and he didn t step down until too late in the Bush administration to get the deal done Panama is expected to ratify a tax information exchange agreement soon, requiring the identification of owners of bearer securities, relieving some US concerns that Panama is a tax haven Also expected to improve labor issues But Panama s prospects are no better than Colombia s

16 Korea the Best Prospects This is the only FTA that the President identified as having unprecedented support in his US Chamber speech The biggest change pushing the FTA forward is a supplemental auto agreement Duty elimination on cars will be delayed in both countries Number of US autos exempt from new Korean safety standards quadrupled to 25,000 per year New exemption for US cars from planned fuel efficiency and emission standards until 2015

17 No Relief to US Beef Exporters Korea has not agreed to give up its prohibition against imports of US beef more than 30 months old Senate Finance Committee Chair Max Baucus (R-MT) promised actively to oppose the FTA without relief for US beef exporters He probably does not have enough support to stop the FTA; but it could be unusual to consider an FTA without the chair

18 NCTO Opposes Korea FTA Weak enforcement rules will help China destroy more American textile jobs It gives big Korean firms more favorable terms than US textile companies Textile jobs should matter as much to this Administration as jobs anywhere else NCTO Website

19 Trans-Pacific Partnership Negotiations are pending with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam Textile provisions are not yet fleshed out yet The most interesting aspect is the inclusion of Vietnam, the first substantial apparel producer in the Far East and the first non-market economy to be considered for a FTA with the United States

20 Expected CAFTA Changes Change the sewing thread rule to include single yarn sewing thread (watch out for effective date) Change short supply to allow yarns and fabrics for more than just the outer shell exclusive of collars and cuffs of apparel goods Change short supply to allow designations of fabrics containing foreign elastomeric yarn Increase the cumulation limits (regarding inputs from Mexico) by 25 percent to allow for the Dominican Republic s participation in cumulation

21 GSP DFQF Proposal A proposed bill in the last Congress would have extended duty free, quota free (DFQF) GSP treatment to apparel from least developed beneficiary countries, which include many (but not all) of the AGOA lesser developed countries and Bangladesh and Cambodia For trousers, shirts, blouses and coats, Bangladesh and Cambodia DFQF access would be limited to 50 percent of the SMEs of these products exported to the U.S. in 2007

22 AGOA Opposition AGOA countries opposed the DFQF proposal for Bangladesh and Cambodia, calling them hyper competitors who would do irreparable harm to AGOA trade They also note that least developed countries are defined differently than AGOA lesser developed countries, and that some of the AGOA countries would lose DFQF treatment after AGOA expires in 2012

23 Prospects Dim Ways and Means Chair Dave Camp (R-MI) and Trade Subcommittee chair Kevin Brady (R-TX) are preoccupied with extending the GSP; and Brady is said to prefer reform to be tailored to countries or regions In the Senate, Finance Committee ranking member Orrin Hatch (R- UT) is not known to be as interested as his predecessor, Charles Grassley (R-IA)

24 Afghanistan and Pakistan ROZs Would allow duty free treatment of apparel imported from reconstruction opportunity zones (ROZs) covering all of Afghanistan and the portion of Pakistan that borders Afghanistan All garments would be eligible from Afghanistan ROZs; only selected garments (not including cotton trousers and cotton knit shirts) would be eligible from Pakistan ROZs

25 Prospects Uncertain With concerns about extension of the GSP itself, this feature is also less likely to be introduced in this Congress One of its greatest advocates, Rep. Chris Van Hollen (D-MD) was removed from his seat on the Ways and Means Committee with the Republican ascendancy

26 Festive Articles Several years of litigation resulted in duty-free treatment of certain utilitarian articles (e.g., apparel and rugs) in heading 9505 Then, following a WCO change, the United States added a note to chapter 95 saying that, with minor exceptions, such utilitarian articles were not duty free Last summer, CBP asked ITC to conduct an investigation and recommend restoring duty-free treatment

27 Proposed Chapter 98 Provision Utilitarian articles, each incorporating a symbol and/or motif that is closely associated with a festive occasion (for example, Christmas, Easter, Halloween or Thanksgiving), the foregoing articles used or displayed principally during that festive occasion and not typically at any other time, under the terms of U.S. note 9 to this subchapter Free

28 Consultation and Layover The festive articles proposal cannot be implemented until after the President presents it to the committees (Ways and Means and Finance) This consultation and layover feature adds a legislative policy feature that can also be politicized

29 Prospects This will be a slow trade developments year Korea will likely pass, Panama and Colombia might not CAFTA fixes will likely pass Currency manipulation will stay in the news GSP, ATPDEA and TAA will lurch through extensions Other issues (spending, jobs, tax) will likely overshadow trade It will be a time to consolidate and grow in known production bases and business models

30 Jon Fee Alston & Bird LLP 950 F Street, N.W. Washington, D.C jon.fee@alston.com