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Volume 23, Number 68                                    Monday, April 7, 2014

Trade Reports International Group

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Sanctions on Russian Expropriation

The Commerce Department on Friday announced it has added a company located in the occupied Crimea region of Ukraine to the Entity List in response to Russian expropriation of the company (WTD, 4/11/14).

The Entity List designation imposes a license requirement for the export, re-export or in-country transfer of controlled items to the company, with a presumption of denial.

The company, Chernomorneftegaz, is a regional oil and gas company in Crimea and a subsidiary of the Ukrainian company Naftogaz.  But its assets are now being overseen by Russian government interests following their seizure by the Crimean Parliament, Commerce’s Bureau of Industry and Security stated.

The addition of Chernomorneftegaz to the Entity List sends a strong message of US condemnation of Russia’s incursion into Ukraine and expropriation of Ukrainian assets, Undersecretary of Commerce for Export Administration Eric L. Hirschhorn said in announcing the move.

Commerce’s action is in conjunction with a parallel action by the Treasury Department.

The move, according to Commerce, aligns with Executive Order 13660 that says actions and policies of persons who have asserted governmental authority in the Crimean region without the authorization of the Government of Ukraine threaten the national security and foreign policy of the United States.

In subsequent executive orders – 13661 and 13662 – the President further found that the actions and policies of the Russian government with respect to Ukraine, including the deployment of its military forces to and purported annexation of Crimea, undermine Ukraine’s democratic processes and institutions, threaten Ukraine’s peace, security, stability, sovereignty and territorial integrity and contribute to the misappropriation of its assets.

Also on Friday Treasury designated Chernomorneftegaz because it is complicit in the misappropriation of state assets of Ukraine or of an economically significant entity in Ukraine.

Meanwhile, Canada announced on Friday that is imposing additional sanctions on Russia in response to the Ukrainian crisis.  It imposed sanctions on two additional individuals – chair of the Sevastopol Electoral Commission Valery Medvedev and Mikhail Malyshev who chairs the Crimean Electoral Commission, along with Crimean oil and gas company Chornomornaftogaz.

Pritzker and Her Ukraine Counterpart

Commerce Secretary Penny Pritzker on Friday met with Ukrainian Minister of Economic Development and Trade Pavlo Shermeta to underscore the Obama Administration’s commitment to strengthening his nation’s economy.  The two discussed ways in which the US private sector can support Ukraine’s economic stability and growth.

US companies have been present in Ukraine for more than two decades – and they are committed to remaining and growing in the market, Ms. Pritzker stated.  The Secretary also praised Ukraine’s commitment to undertaking the economic and political reforms that will enable additional US firms to do business in Ukraine.

Meanwhile on Capitol Hill, a bipartisan group of 38 members of Congress on Friday urged Treasury Secretary Jacob Lew and Secretary of State John Kerry to sanction Russian state arms dealer Rosoboronexport.

The group, led by Reps. Rosa DeLauro (D-Conn) and Kay Granger (R-TX), contend that the secretaries have the authority to do so under a recent Executive Order issued by President Obama in response to Russia’s actions in Ukraine.

The sanctions are necessary, they wrote in a letter, to block any payments to the firm for the procurement of Mi-17 helicopters.

Last month a group of lawmakers – also led by Reps. DeLauro and Granger – asked Secretary of Defense Chuck Hagel to take similar actions, but the Defense Department has yet to act.  Last year the Pentagon entered into a $553.8 million contract to purchase 30 Mi-17 helicopters from Rosoboronexport for the Afghan National Security Forces, despite opposition in Congress.

       



A ‘Possible Way Forward’ on ITA

Geneva – Switzerland has suggested “a possible way forward” to overcome divergences in the classification of 55 products based on HS 2007 nomenclature which is proving to be a major hurdle in stalled negotiations to expand coverage of the World Trade Organization’s Information and Technology Agreement, WTD has learned (WTD, 3/18/14).

In a confidential job document circulated last Friday, Switzerland suggested that since the HS2007 is the nomenclature that most affects the Information Technology Agreement’s product coverage, the model list contained in JOB(07)/96 – a document prepared by the WTO Secretariat for explaining the changes that result from the introduction of the 2007 edition of the Harmonized Commodity Description and Coding System in relation to the ITA – could be used as a starting point for bridging the differences among members over classification.

Switzerland wants the WTO Secretariat to prepare a short and simple list for the remaining 37 ITA items and their possible classification in HS2007.

Formal Meeting in Fall

Before a formal ITA Committee meeting this fall, “ITA participants would be required to indicate which items their classification diverges from the list prepared by the Secretariat,” Switzerland proposed.

Based on the WTO Secretariat document, “participants would then be able to assess the next steps that could be undertaken to reduce any eventual remaining divergences in the classification of such ITA products.”

The ITA-II talks remain at an impasse.  Major industrialized countries, such as the United States, the European Union, Japan and South Korea, among others, are stymied over whether to accept China’s long list of sensitive products it wants exempted from the final deal.

A number of ITA members expect an agreement over the final list of products in an expanded agreement and be reached at the mid-May Asia-Pacific Economic Cooperation trade ministers meeting in China, WTD was told.

      



US Appeals Rare Earth Case

Geneva – The United States last week appealed a recent World Trade Organization dispute settlement panel ruling against China over its illegal export restrictions on 17 rare earths, tungsten and molybdenum, saying the judgement contains an error based on erroneous findings on issues of law and legal interpretation (WTD, 4/10/14).

But Washington told the WTO it would drop its appeal if China, itself, decides not to appeal the panel report or if the Appellate Body were not to modify or reverse the legal findings of the case.

The United States raised the appeal on certain legal interpretations developed by the panel.

 Washington said it wants the Appellate Body to review aspects of the lower panel ruling that are inconsistent with the provisions of the Dispute Settlement Understanding – particularly the panel’s failure to make an objective assessment of the facts.

In a separate development, China appealed a recent panel ruling in its dispute concerning imposition of simultaneous US antidumping and countervailing measures on 25 Chinese products.

      


Around the Globe

           ●          New US Ambassador to China Max Baucus said the China-US relationship is considered the “most important bilateral relationship in the world” and the two countries should not be distracted by differences, the China Daily newspaper reported (WTD, 4/11/14).  In a speech at the Boao Forum for Asia on Friday in Hainan province, Baucus highlighted the strong common economic interests of the two nations and said both sides need to “keep talking, keep working with each other and keep finding ways to address differences.”

He said that as long as both sides work really hard, challenges like the territorial disputes in the South and East China seas will not be as big as they seem to be.  “National security will not be that high-profile if we really work hard to keep economic ties robust,” the US ambassador said.  In highlighting how closely the two nations’ economic interests are aligned, Baucus said more than 700,000 jobs in the United States have come from China and that each year more than half-a-trillion dollars in goods and services change hands between the two countries.

“Forty years ago, it would be difficult to imagine the interdependency that we have today,” said Baucus, who added that annual bilateral trade four decades ago was less than $100 million, with nearly no direct investment in each market.

            ●           China’s tougher stance on imports of genetically modified corn is roiling U.S. agribusiness, largely halting trade in the biggest U.S. crop in its fastest growing market, Bloomberg news service reported (WTD, 3/28/14). By one industry estimate, exports are down by 85% compared with last year.

Since mid-November, China repeatedly has refused shipments of U.S. corn, saying officials detected that some contained a genetic modification developed by Syngenta AG that Beijing hasn’t approved.  The rejections have hurt grain-trading companies such as Cargill Inc. and fueled frustration with what some U.S. executives say is Beijing’s opaque regulatory process when its clout as an importer is growing. China is the world’s fastest-growing market for corn.  Some U.S. industry observers suspect China is using concerns over the Syngenta product to cover commercial motives.

In the first full tally of the impact, a U.S. grain-industry group says the rejected shipments have come to nearly 1.45 million metric tons. That is far more than the 545,000 tons that Beijing has reported and the roughly 900,000 tons that has circulated in news media.

            ●          Russian leader Vladimir Putin has threatened to cut off gas supplies to Ukraine unless it starts repaying a huge debt and unless the EU agrees to joint talks on its economic future, the EU Observer reported (see related report this issue).  He said in a letter sent to 18 European leaders on Thursday (10 April) that “in the event of further violation of the conditions of payment, [Russian firm Gazprom] will completely or partially cease gas deliveries.”

He noted: “Undoubtedly, this is an extreme measure. We fully realize that this increases the risk of siphoning off natural gas passing through Ukraine’s territory and heading to European consumers.”  He added that “in order to guarantee uninterrupted transit, it will be necessary, in the nearest future” for Ukraine to buy $5 billion worth of gas to be pumped into its storage vats.  Putin said Ukraine’s gas debt for this year alone is $2.2 billion.  But he noted that Russian discounts for Ukraine gas since 2009 amount to $35.4 billion.

            ●          Undersecretary of State for Economic Growth, Energy and the Environment Catherine Novelli met with Ukrainian Central Bank Governor Stepan Kubiv, Minister of Finance Oleksandr Shlapak, and Minister of Economic Development and Trade Pavlo Sheremeta to discuss a range of strategic and economic issues, State said (see related report this issue).  The working group discussed ways of moving President Obama and Prime Minister Yatsenyuk’s economic agenda forward, focusing on U.S. assistance efforts, increasing bilateral trade and investment flows, combating corruption, and carrying out economic reforms.

Ms. Novelli commended Ukraine for the reforms already begun, citing the Rada’s recent passage of the two anti-corruption measures, an information law, and a procurement law, all demonstrating to the international community Ukraine’s commitment to reform.  Participants discussed trade issues, with Mr. Sheremeta outlining Ukraine’s proposed one-way preferential access to the EU market starting May 1, and Deputy Assistant US Trade Representative Betsy Hafner proposing various ways in which Ukraine and the United States might cooperate more closely on trade.

            ●         The US Export-Import Bank and the Eastern and Southern African Trade and Development Bank on Friday signed a $100 million memorandum of understanding.

According to the MOU, Ex-Im Bank and PTA Bank will explore options for utilizing up to $100 million in Ex-Im Bank medium- and long-term loan guarantees and/or direct loans to finance US exports to sub-Saharan Africa that target both diaspora businesses in the United States and PTA Bank’s member states.

            ●          The United States has called for The Bahamas to immediately drop all of its duties on US products coming into this country on “day one” of The Bahamas’ accession to the World Trade Organization – a request which the government has rejected on the basis that it could wipe out the domestic economy, according to the minister of financial services, the Standard newspaper reported.  Disclosing some of the background to The Bahamas’ bilateral negotiations over the terms of its bid to join the WTO, Ryan Pinder said that the US government has not been “amenable” to The Bahamas’ phasing in tariff reductions on US goods. “Phasing in” refers to the ability to reduce the duty rate levels over a number of years.

However, he suggested that the government has struck back on the issue, suggesting that a phased-in reduction of tariffs on US goods – the vast majority of all imported goods coming into The Bahamas – would be more appropriate.  He was speaking at a meeting on Wednesday between members of the Bahamas Chamber of Commerce and Employers Confederation and David Shark, deputy director general of the WTO, who is in the country to engage with stakeholders over The Bahamas’ accession process.

            ●          Taiwan should use trade talks with the U.S. to prove its commitment to economic reforms needed for entry to the broader Trans-Pacific Partnership before seeking to join that pact, said the U.S.’s unofficial envoy to the island Bloomberg news service reported (WTD, 4/10/14). “Taiwan is still exploring whether it’s prepared to make the economic reforms that the TPP will require,” Christopher Marut, Director of the American Institute in Taiwan, said in an interview April 9 in Taipei.

Momentum for progress on U.S. trade issues, from intellectual property protection to pork exports, is “certainly still there,” said Marut. The AIT helps facilitate bilateral ties in the absence of a formal diplomatic relationship.  President Ma Ying-jeou, addressing a forum in New York and Washington via video conference on April 9, called for U.S. support to join the TPP, a trade alliance that would link the world’s biggest economy with that of 11 other nations around the Pacific. Ma said diversifying trade partners beyond China, which buys about 40 percent of Taiwan’s exports, would be in the interest of the U.S.  The U.S. is seeking to wrap up a TPP agreement with the current parties to the talks, and has signaled that other countries should look to join at a later stage, rather than risk delaying the pact. Premier Li Keqiang said yesterday that China might seek to join the TPP negotiations, while South Korea has also flagged interest.

            ●          Membership to a Pacific free-trade pact could cause resentment in Southeast Asia as it would leave some nations in the region better positioned to access US market than others, a top Philippine official said on Thursday, the Associated Press news service reported (WTD, ). Philippine Secretary of the Department of Finance Cesar Purisima proposed inviting all 10 members of the ASEAN to join the nascent Trans-Pacific Partnership (TPP), even if most of them cannot for now meet the conditions for joining.

Purisima said that would demonstrate a clear pathway for entering the pact, without lowering standards.  ASEAN is itself striving to reduce trade barriers among its members, but only four of them are negotiating members of the TPP. They are Brunei, Malaysia, Singapore and Vietnam. Those outside the TPP are Cambodia, Indonesia, Laos, Myanmar, Philippines and Thailand. “If there’s a lag between the joining of the others in a high quality agreement such as TPP, there can be resentment, especially as we continue to integrate,” Purisima told the Center for Strategic and International Studies think tank.

He said countries like the Philippines would be at a major handicap for products where they compete for the US market with the four other countries.  However, he said this would incentivize reforms. The Philippines would have little choice but to make constitutional or legislative changes needed to enter the TPP if exclusion from the pact was hurting businesses and jobs, he said.

            ●          Korea’s trade ministry said Sunday that it is seeking ways to remove non-tariff barriers set by its main trade partners on concerns they may sap Seoul’s overseas shipments, Yonhap news agency reported.  China topped the list with 35 cases of non-tariff barriers, followed by the U.S. with 31 and Japan with 31, according to the trade ministry and the Korea International Trade Association (KITA). The number of the European Union’s non-tariff barriers reached 29, trailed by Indonesia with 22 cases and Vietnam with 19.

Countries around the world are forging bilateral and multilateral free trade deals, but they are also building up non-tariff barriers in a bid to prevent an excessive influx of foreign goods and services from hurting their industries.  In the latest success for Seoul, the U.S. agreed to allow Korea’s “samgyetang” to be imported to its markets in the first half of 2014, 10 years after the Seoul government requested the U.S. to do so, according to the trade ministry.

            ●          Negotiations between South Korea and China aimed at forging a bilateral free trade pact have entered a “critical” stage, Chinese Premier Li Keqiang said, calling for the two nations to speed up the process of talks to reach a “high-level” agreement, Yonhap news agency reported from Beijing (WTD, 4/2/14).  Li made the remarks during a meeting with South Korean Prime Minister Chung Hong-won on Thursday evening on the sidelines of a regional economic forum on China’s southern island of Hainan, according to a statement released by China’s foreign ministry on Friday.

“At present, the China-Korea FTA negotiations have entered a critical stage,” the statement quoted Li as telling Chung.  Li hopes South Korea and China will “speed up the negotiation process to reach a high-level agreement with the overall balance of interests.”  South Korea and its biggest trading partner, China, began their formal free trade negotiations in May 2012. Since then, they have held 10 rounds of negotiations.

            ●          Two-way trade between Canada and China spiked by nearly eight times this past decade, the Chinese Consul General in Toronto said according to a report in the Toronto Sun.  During a meeting with the Toronto Sun editorial board last Thursday, Consul General Fang Li said China-Canada relations are improving because China is “changing” as a country. This has created massive increase in trade — from $7 billion to $55 billion (U.S.) — improvement of visas and a higher number of visitors to Canada.

“If China has a runny nose, the world will have a cold,” Li said, referring to the impact China has on the global economy. “From the trade alone, we can see how we’ve developed. We are two big countries, we have the big population, big land. Canada has less population but more rich natural resources. And Canada has the advantage of clean technology, environmental technology, food processing and health fields. I think we need your co-operation so we can make agreements.”

            ●          India’s trade gap in March widened to $10.51 billion, its highest since October 2013, data from the Ministry of Commerce and Industry showed on Friday the Press Trust of India reported. Overseas sales of goods fell 3.15% from a year earlier to $29.58 billion in March.  Merchandise exports for the 2013/14 fiscal year, however, grew 3.98% on year to $312.36 billion. Together with a 8.11% decline in annual imports, that helped sharply narrow the country’s full-year trade shortfall to $138.59 billion from $190.34 billion a year ago.

            ●          Pakistan’s trade imbalance is continuously on the declining side during ongoing financial year 2013-14 because exports have outpaced imports.  The trade deficit - gap between imports and exports of goods - has recorded at $13.931 billion during nine months (July-March) of the ongoing financial year 2013-14 compared to $14.74 billion of a year ago, reflecting a decline of 5.49 percent, according to the data of Pakistan Bureau of Pakistan (PBS).



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On the Web......

Africa


Ex-Im Bank.  US Export-Import statement on relationship with the Southern African PTA bank.  (available at:  http://www.exim.gov/newsandevents/releases/2014/ExIm-Bank-Signs-100-Million-Agreement-with-PTA-Bank.cfm )  issued:  4/11/14.



Asia


US Relations.  East-West Center new publication on the United States and Asia.  (available at:  http://www.asiamattersforamerica.org/asean/ )  issued:  4/11/14.



Australia


Japan.  Japanese statement on the Australia-Japan free trade agreement.  (available at:  http://www.meti.go.jp/english/speeches/20140407_01.html )  issued:  4/11/14.



Customs


Trade Facilitation.  US Trade Representative’s office statement on the Trade Facilitation Agreement.  (available at:  http://www.ustr.gov/about-us/press-office/press-releases/2014/April/Readout-Meeting-USTR-Froman-USAID-Shah-Support-WTO-Trade-Facilitiation-Agreement )  issued:  4/11/14.


Trade Facilitation.  Agency for International Development statement on the World Trade Organization Trade Facilitation Agreement.  (available at:  http://www.ustr.gov/sites/default/files/04112014-USAID-Trade-Facilitation-Infographic.pdf )  issued:  4/11/14.



Developing Countries


Aid for Trade.  World Trade Organization statement on Aid for Trade.  (available at:  http://www.wto.org/english/news_e/news14_e/aid_09apr14_e.htm )  issued:  4/11/14.



Export Controls


Reform.  Coalition for Security and Export Competitiveness letter to President Obama on the export control reform initiative.  (available at:  https://s3.amazonaws.com/emma-assets/ncqab/ab384a6e800745bb8a1b51f8699e575a/CSC_Letter_4-11-14.pdf )  issued:  4/11/14.


Russia.  Letter from several members of Congress on imposing sanctions against Russian arms dealers.  (available at:  http://delauro.house.gov/images/04.11.14%20Lew%20Kerry%20Mi17%20 Letter.pdf )  issued:  4/11/14.



Export-Import Bank


Personnel.  US Export-Import bank announcement of Annette Merash as new Vice President for Trade Finance.  (available at:  http://www.exim.gov/newsandevents/releases/2014/Ex-Im-Bank-Names-Annette-Maresh-VP-for-Trade-Finance-Division.cfm )  issued:  4/11/14.


Southern Africa.  US Export-Import statement on relationship with the Southern African PTA bank.  (available at:  http://www.exim.gov/newsandevents/releases/2014/ExIm-Bank-Signs-100-Million-Agreement-with-PTA-Bank.cfm )  issued:  4/11/14.





Imports


ROO.  World Trade Organization summary of latest rules of origin committee meeting.  (available at:  http://www.wto.org/english/news_e/news14_e/roi_10apr14_e.htm )  issued:  4/11/14.



Japan


Australia.  Japanese statement on the Australia-Japan free trade agreement.  (available at:  http://www.meti.go.jp/english/speeches/20140407_01.html )  issued:  4/11/14.



Latin America


US Trade.  Commerce Department statement on trade with Latin America.  (available at:  http://www.commerce.gov/blog )  issued:  4/11/14.



Russia


Sanctions.  Letter from several members of Congress on imposing sanctions against Russian arms dealers.  (available at:  http://delauro.house.gov/images/04.11.14%20Lew%20Kerry%20Mi17%20 Letter.pdf )  issued:  4/11/14.



Ukraine


US Relations.  State Department statement on the economic meeting with Ukraine.  (available at:  http://www.state.gov/r/pa/prs/ps/2014/04/224756.htm )  issued:  4/12/14.


US Relations.  Commerce Department statement on US relations with Ukraine.  (available at:  http://www.commerce.gov/news/press-releases/2014/04/11/readout-meeting-between-us-secretary-commerce-penny-pritzker-and-ukra )  issued:  4/11/14.


World Trade Organization


Aid for Trade.  World Trade Organization statement on Aid for Trade.  (available at:  http://www.wto.org/english/news_e/news14_e/aid_09apr14_e.htm )  issued:  4/11/14.


ROO.  World Trade Organization summary of latest rules of origin committee meeting.  (available at:  http://www.wto.org/english/news_e/news14_e/roi_10apr14_e.htm )  issued:  4/11/14.


What we’re covering this week –

 What We’re Covering This Week


Japan’s chief TransPacific Partnership negotiator will be in town this week to continue efforts to close the big gaps still remain in US-Japan bilateral market access talks.

            ●          Monday, the Peterson Institute for International Economics sponsors a program with Brazilian Deputy Minister of Finance Carlos Marcio Cozendey on Brazil’s role in the global economy.

            ●          Beginning Tuesday, Acting Deputy US Trade Representative Wendy Cutler and Japanese TPP negotiator Takeo Mori continue bilateral market access talks focusing on agriculture and autos.  The discussions are scheduled to continue through Thursday.

            ●          Wednesday, the European Institute sponsors a program on the TransAtlantic Trade and Investment Partnership with speakers including Greek Ambassador Christos Panagopoulos and EU Delegation Trade Section Head Hiddo Houben.

            ●          Also Wednesday, the Institute for Policy Studies holds a discussion on Cuba-US relations with speakers including Cuban Interests Section First Secretary Warnel Lores Mora.

            ●          The bilateral US-Japan TPP market access discussions are scheduled to conclude on Thursday.


Read Our Latest Blog


WTD’s

Friday Afternoon

Podcast

Straight talk.   

Click the highlighted text to hear snippets from WTD’s straight talk.

•  Here’s a brief snippet from remarks April 8 by Senate Finance Committee ranking Republican Orrin Hatch saying he is befuddled over why the President says he supports Trade Promotion Authority but doesn’t do anything about.

•  Here’s Aspen Institute scholar and former Reagan Administration Assistant Secretary of Commerce speaking about with WTD on the many iterations of a US-European Union free trade agreement after a recent Hudson Institute event.

•  Here’s what veteran House Democrat Richard Neal (Mass) – one of four cochairs of the new House TTIP Caucus – told WTD during a reception celebrating the caucus creation on April 3.

•  Here’s what World Trade Organization chief spokesperson Keith Rockwell said in Washington on how and why the WTO is back.

•  Here’s what Council of Economic Advisors Chair Jason Furman told the Joint Economic Committee last week about why there is so little mention of trade in the Economic Report of the President.

•  This is why the European Union is wrong when it says it will never allow imports of US hormone-treated beef, Agriculture Secretary Vilsack tells WTD.