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Washington Trade Daily

Volume 17, Number 40 Monday, February 25, 2008

Trade Reports International Group

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Focusing on an ‘Open, Positive’ Road

Bogota’s attention now is focused on keeping an “open and positive” road with the United States to ensure that a historic free trade agreement is finally approved by Congress – “this year, next year or the following,” Colombia’s Ambassador to the United States Caroline Barco told WTD on Friday (WTD, 2/19/08).

Ms. Barco participated in a panel on US agricultural trade with Latin America at the annual Agriculture Department outlook conference.

Putting economic statistics aside, Ms. Barco suggested final implementation of the accord is important for the country’s – and region’s – political stability. Many in the region outside of the economy are waiting to see if the United States will follow through and approve the accord. In short it will boost Colombia’s standing in the Andean region as well as provide greater regional integration.

Ms. Barco said she meets with House Ways and Means Committee Chairman Charles Rangel (D-NY) regularly. She told WTD she did not think the Administration would force a vote on the FTA this year – and risk it going down to defeat.

Colombia’s Congress has already approved the accord.

Own Trade Agenda

Meanwhile, Bogota continues its own trade expansion efforts. Colombia is wrapping up a free trade accord with Canada. An FTA with Chile is currently under Congressional review. It also is discussing a similar arrangement with the four countries of Mercosur – Brazil, Argentina, Paraguay and Uruguay. Discussions continue in Colombia about a FTA with Asia, she noted.

In remarks with WTD, Ms. Barco said she was not surprised by the results of the recent visit to her country by a number of US labor officials. She noted to WTD that many unions in her country also oppose the measure, maintaining it will bring greater unemployment.

Ms. Barco said homicides in her country are down 40 percent nationwide and kidnapings have fallen by 80 percent. Unemployment also is down significantly – to 11 percent. Colombia’s minimum wage has climbed upwards by 10 percent.

The government of President Uribe also has boosted assistance to rural areas – where economic and political instability have been most pronounced. Payments to the rural sector have grown from $442 million to $644 million this year. That program has hit drug producers hard, Ms. Barco commented.

Benefits of the FTA to US growers should be obvious, commented Deputy Agriculture Secretary for Farm and Foreign Agricultural Services Mark E. Keenum. He cited projections that two-way trade with Colombia will far exceed the current $32 million once a FTA is in effect. A great majority of Colombian exports to the US market enjoy duty-free access under the Andean Trade Preference program – which is likely to be extended by Congress this year.

But US exports there – including agriculture – often face stiff tariffs. Colombian tariffs of 18 percent are currently applied to imports of soybeans and products, 11 percent for wheat – which is not produced in the country – and 6 percent on corn imports. Major agricultural exports to the United States include palm oil, sugar, cut flowers, coffee, fruits, vegetables, rubber, fish and dairy products.

Agriculture Secretary Ed Schafer plans to take a delegation of members of Congress to Colombia in mid-March in hopes of solidifying more support for the accord.

A Focus on ‘Special’ Products

Geneva – The United States and key members of the Cairns Group of farm exporting countries on Friday called for reducing the number of “special” products in the Doha Development Agenda to a maximum of 8 percent of tariff lines, WTD has learned (WTD, 2/22/08).

The proposal was immediately dismissed by the Group-of-33 developing-country coalition.

At a “Room F” meeting focusing on “special” products, the United States – along with Australia, New Zealand, Canada, Thailand, Uruguay and Paraguay – circulated their own elements of “special” product modalities that significantly differed from what negotiating chair Crawford Falconer had suggested in the revised draft modalities text. The US proposal calls for 4 percent of tariff lines to have 25-percent tariff cuts with another 4 percent subject to 15 percent reductions. The proposal also allows for one percent of tariff lines in the second category “under a filter mechanism”to be subject to no cuts at all.

The chair has suggested a maximum entitlement of 12 percent to 20 percent of tariff lines for self-designed “special” products. There would be an entitlement to 6 percent of tariff lines taking a cut of 8 percent to 15 percent; a further 6 percent would come under cuts of 12 percent to 25 percent.

Indonesia – coordinator for the G-33 coalition – described the US proposal as “unhelpful.” The G-33 reiterated that it is willing to work on the basis of the proposals contained in the draft – but would oppose any move to insert new elements at this point, such as the Cairns/US proposal.

Negotiations chair Falconer told WTD he reckons the final agreement would stay within the ranges he proposed in the revised draft.

There was slight progress in some areas of the market access pillar negotiations during last week’s “Room E” meetings. Mr. Falconer said there were some constructive ideas – “You’re into hand-to-hand combat now.”

The chair will proceed with another round of talks beginning today on the remaining issues in the market access pillar and then take up domestic support and export competition. He said members will take a one week “pause” before assembling again to consider a final revised draft text.

Mr. Falconer warned members that it would be “next to impossible” to move into a “horizontal” process without sufficient progress in the revised draft. “If you want to narrow things down, it’s necessary to make faster progress,” he argued.

Further postponement of compromises cannot be continued, the chair stated.

LDCs and the DDA

Geneva – Least-developed countries participating in the Doha Development Agenda trade negotiations are disappointed that their core development concerns have been given short-shrift because of increased preoccupation with the headline issues in agriculture and market-opening for industrial modalities, says the Agency for International Trade Information and Cooperation – an inter-governmental organization assisting the poorest countries in the round (see related report this issue).

“All our members are angry that their core concerns in the Doha Agenda, especially the implementation of duty-free, quota-free commitments in the Hong Kong Ministerial Declaration, are given short shrift in the run-up to finalizing modalities in April,” commented AITIC Director Esperanza Duran in an interview with WTD.

Concerns also apply to much-delayed LDC modalities in the services negotiations, Ms. Duran commented. “While attempts are being made to convene a ‘signaling’ conference to improve the quality of revised offers, there is silence on how to create a credible framework for LDCs to advance their interests in global trade in services,” she argued.

Now a decade old, AITIC assists developing countries in implementing their WTO commitments and addressing specific concerns in the DDA.

AITIC’s Duran noted that LDC issues – including difficulties faced by the small and vulnerable economies – are scheduled to be taken up in dedicated special sessions of the Committee on Trade and development. But progress to date has been “patchy.” She cautioned that the poorest countries cannot be expected to “sit on the sidelines” and merely watch the resolution of big issues concerning industrialized and more advanced developing countries.

Ahead of this week’s LDC ministerial meeting starting in Maseru, Lesotho, the AITIC chief said trade ministers must announce a revised schedule on how they will implement “Annex F” commitments in the Hong Kong Ministerial Declaration at the time of concluding modalities in agriculture and NAMA. “Annex F” addresses the “cotton” issue and “duty-free/quota-free” access for least developed countries. “Along with the finalization of modalities in agriculture and nonagricultural market access, our members want a credible framework that spells out a revised timeframe to implement the commitments on the cotton issue as well as duty-free/quota-free market access,” she told WTD.

‘Cotton’

On “cotton,” Ms. Duran warned “there cannot be an eleventh-hour agreement because of the failure by one member to indicate what it proposes to do in regard to the proposals in the revised modalities.” “Annex F” requires the United States to slash its cotton-specific supports and provide immediate market access to the four major West African producers.

Refusal by the United States to submit a promised offer on “cotton” “is a grave concern for the four cotton producers – Benin, Mali, Burkina Faso and Chad. They rightfully fear a last minute agreement without much discussion, Ms. Duran stated.

Even the duty-free/quota-free commitments agreed in the 2004 Hong Kong Ministerial Declaration are not fully implemented, Ms. Duran lamented. Only the European Union has done so; Japan is ready to implement about 97 percent of its commitments, she said.

Despite promises of full free access for least developed countries, those countries will face a major hurdle if there is no proper framework on rules-of-origin, Ms. Duran stated. She noted that many LDCs suffer because of severe competition from other developing countries which have favorable origin agreements with a number of industrialized countries.

AITIC also has called for an immediate agreement on the much-delayed LDC modalities in the Doha services negotiations. Without preferential treatment for developing-country suppliers they will never gain a foothold in the global services market, Ms. Duran stated.

Ms. Duran also challenged the need for LDCs to “substantially” bind their industrial tariffs as proposed in the latest revised draft modalities text. “This is a development round with the major goal of bringing the poorest countries into world trading system. They should not be burdened with commitments,” she argued.

Around the Globe

Campaign 2008

Appealing to union voters in a dry wall manufacturing plant in this crucial primary state, Sen. Barack Obama (D-Ill), Sunday afternoon said that even though he has repeatedly said the passage of NAFTA was bad for the country, he would not try to repeal it, the Associated Press news service reported (WTD, 2/20/08). “I don't think its realistic for us to repeal NAFTA,” he said during a town hall meeting on the economy.

He argued arguing that because the trade deal had been passed more than a decade ago, it was entrenched in the economy, and any attempt to repeal it “would actually result in more job loss ...than job gains.” In the fierce fight for votes in Ohio, where NAFTA is not popular among many blue collar Democrats, Obama has repeatedly attacked Sen. Hillary Clinton (D-NY) for the trade deal pushed by President Bill Clinton and passed in Congress in November 1993. “Yesterday [Saturday], [Clinton] said NAFTA was negotiated by the first President Bush, not by her husband,” Obama said today. “But let's be clear: It was her husband who got NAFTA passed. In her own book, Sen. Clinton called NAFTA one of Bill's successes.”

Said Obama, “One million jobs have been lost because of NAFTA, including nearly 50,000 jobs here in Ohio. And yet, 10 years after NAFTA passed, Sen. Clinton said it was good for America. Well, I don't think NAFTA has been good for America – and I never have.”

Saturday, Clinton took issue with an Obama mailer being distributed in the Buckeye State that included a quote implying that Clinton had described NAFTA as “a boon” to the economy. “Shame on you, Barack Obama,” Mrs. Clinton said at a news conference after a morning rally, holding the fliers and shaking them in the air as she spoke.

Agriculture Secretary Ed Schafer says the nation's largest beef recall has set back negotiations to ship US beef to Japan and South Korea, the Associated Press news service reported (WTD, 2/22/08). Those markets closed to the US cattle industry in 2003 after a scare over mad-cow disease.

Schafer said Friday at a convention of meat packers and processors in Monterey that he's hopeful trade talks will continue, but says the Hallmark Packing and Westland Meat Co. recall has diplomats asking why the US can't ship safe meat. The USDA ordered the recall of the beef after the U.S. Humane Society released undercover video that showed slaughterhouse workers at the Chino-based companies kicking and shoving sick and crippled cows and forcing them to stand with electric prods, forklifts and water hoses.

Heightened US and European scrutiny on the investments by emerging nation's sovereign funds has increased trade friction and will hurt the global economy, China's central bank warned Friday according to an Agence France-Presse news service report from Beijing (WTD, 2/11/08). “Countries like the United States and those in the EU also strengthened their scrutiny over investments made by sovereign wealth funds from emerging economies,” the bank said in its latest quarterly report.

“This has led to escalating trade frictions, which will bring negative impacts on the healthy development of the world economy and the orderly correction of global imbalances.” Cashed-up sovereign wealth funds from China, Singapore and oil-rich Middle East nations have been taking advantage of the recent economic turmoil in the US and elsewhere to buy into prized financial institutions. Several US lawmakers have expressed concern over China's financial maneuvers, saying it could pose a threat to American economic security.

China's ambassador to the United States chided America for its protectionist trade sentiment while touting China's contributions throughout the world, the Associated Press news service reported from Indianapolis (WTD, 2/22/08). Ambassador Zhou Wenzhong, speaking Friday before about 200 people at Indiana University-Purdue University Indianapolis, also reiterated his country's hardline stance against Taiwan, saying its independence is out of the question.

Zhou also noted that many “China-related” trade protection bills have been introduced in the US Congress. “The growing protectionist sentiments and the tendency to politicize economic and trade issues are especially worrisome,” Zhou said.

European Union Trade Commissioner Peter Mandelson left for China Friday on a three-day visit to prepare the first high-level trade dialogue between the two trading powers, Xinhua news agency reported from Brussels (WTD, 2/11/08). During his visit, Mandelson planned to have his first meeting with the new Chinese Minister of Commerce Chen Deming, aiming to take forward the establishment of an EU-China High Level Economic and Trade Mechanism, the commission said in a press release.

The mechanism, which was agreed at the last EU-China Summit in November, is designed for vice-premier level discussions on strategies in EU-China trade, investment and economic cooperation, and to coordinate bilateral projects, studies and develop plans in priority sectors. It will cover issues affecting the trade imbalance, including effective market access, intellectual property rights, environment, high technology and energy, among others.

Canada plans to push ahead and negotiate a free trade deal with Colombia despite human rights concerns that have stalled a similar agreement between Bogota and Washington, signed over a year ago, Reuters news service reported from Ottawa (see related report this issue). Trade Minister David Emerson said on Friday that Ottawa sought an agreement with “strong provisions on labor and the environment.”

The United States and European Union Friday announced a joint operation combating counterfeit goods resulted in the seizure of over 360,000 counterfeit integrated circuits bearing over 40 different trademarks (WTD, 2/12/08). The joint operation took place in November and December of last year. At their 2006 Summit, the European Union and the United States committed to implementing the “EU-US Action Strategy for the Enforcement of Intellectual Property Rights.” This operation, targeting counterfeit semiconductors, implemented the “joint IPR border enforcement action” portion of the strategy as agreed to by the EU and US. These products were selected for the joint operation because they present safety and security risks in addition to IPR infringement risk.

Foreign investment in the Russian economy stood at $120.9 billion in 2007, up 120 percent compared with 2006, the Federal Statistical Service reported on Friday according to the Interfax news agency. The reasons for the rise are a significant increase in the volume of loans taken abroad and growing direct foreign investment.

Mexico's trade deficit widened unexpectedly in January amid a surge in imports of gasoline, equipment and machinery, Dow Jones news service reported from Mexico City. The Finance Ministry said Friday that Mexico registered a $2.16 billion trade deficit last month, with exports up 17.2 percent year-on-year to $22.26 billion, and imports up 18 percent at $24.42 billion. It was wider than December's $1.11 billion trade gap and the $1.7 billion deficit in the year-ago month.

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On the Web

Africa

China. Report by China on its trade and economic relations with Africa. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/WT/COMTD/W164.doc ) issued: 2/20/08.

US Relations. White House statement on US-Africa relations. (available at: http://www.whitehouse.gov/news/releases/2008/02/20080222-1.html ) issued: 2/22/08.

Agriculture

Developing Countries. Third World Network report on international agricultural trade and developing countries. (available at: http://www.twnside.org.sg/ ) issued: 2/08.

China

Africa. Report by China on its trade and economic relations with Africa. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/WT/COMTD/W164.doc ) issued: 2/20/08.

European Union. European Union statement on visit to China by trade commissioner Mandelson. (available at: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/282&type=HTML&aged=0&language=EN&guiLanguage=en ) issued: 2/22/08.

Foreign Investment. Royal Institute for International Affairs report on foreign investment in China. (available at: http://www.chathamhouse.org.uk/publications/papers/view/-/id/588/ ) issued: 2/08.

3COM. 3COM corporation announcement of withdrawal of proposed Chinese investment. (available at: http://www.3com.com/corpinfo/en_US/pressbox/press_release.jsp?INFO_ID=281478 ) issued: 3/20/08.

Cuba

US Relations. State Department statement on Cuba. (available at: http://www.state.gov/secretary/rm/2008/02/101249.htm ) issued: 2/24/08.

Customs

WTO. World Trade Organization/World Bank self assessment guide for trade facilitation. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/tn/TF/W143R1.doc ) issued: 2/21/08.

Developing Countries

Agriculture. Third World Network report on international agricultural trade and developing countries. (available at: http://www.twnside.org.sg/ ) issued: 2/08.

Market Access. World Trade Organization communique on market access for least developed countries. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/WT/COMTD/LDCW41R1.doc ) issued: 2/21/08.

Doha Development Agenda

Fisheries. Statement by New Zealand in the Doha Development Agenda on fisheries subsidies. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/tn/rl/W218.doc ) issued: 2/21/08.

Rules. Statement by Hong Kong in the Doha Development Agenda on de minimus calculations in import investigations. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/tn/rl/W219.doc ) issued:

European Union

China. European Union statement on visit to China by trade commissioner Mandelson. (available at: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/282&type=HTML&aged=0&language=EN&guiLanguage=en ) issued: 2/22/08.

IPR. Customs and Border Protection and European Union joint announcement on first joint effort on counterfeit seizures. (available at: http://www.eurunion.org ) issued: 2/22/08.

Egypt

Foreign Investment. Government of Egypt report on foreign investment in Egypt. (available at: http://www.investment.gov.eg/MOI_Portal/en-GB/Information+Center/Publications/Reports_and_Indicators/Foreign+Egypt/ ) issued: 2/08.

Fish and Fisheries

DDA. Statement by New Zealand in the Doha Development Agenda on fisheries subsidies. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/tn/rl/W218.doc ) issued: 2/21/08.

Foreign Investment

China. 3COM corporation announcement of withdrawal of proposed Chinese investment. (available at: http://www.3com.com/corpinfo/en_US/pressbox/press_release.jsp?INFO_ID=281478 ) issued: 3/20/08.

China. Royal Institute for International Affairs report on foreign investment in China. (available at: http://www.chathamhouse.org.uk/publications/papers/view/-/id/588/ ) issued: 2/08.

Egypt. Government of Egypt report on foreign investment in Egypt. (available at: http://www.investment.gov.eg/MOI_Portal/en-GB/Information+Center/Publications/Reports_and_Indicators/Foreign+Egypt/ ) issued: 2/08.

Inward. Association for Competitive Technology report today on foreign direct investment. (available at: http://www.actonline.org/ ) issued: 2/22/08.

Swaziland. World Bank report on foreign investment in Swaziland. (available at: http://www.worldbank.org/ ) issued: 2/08.

Imports

DDA. Statement by Hong Kong in the Doha Development Agenda on de minimus calculations in import investigations. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/tn/rl/W219.doc ) issued:

India

US Relations. Remarks by US Trade Representative Schwab to the US-India Business Council. (available at: http://www.ustr.gov/ ) issued: 2/20/08.

US Relations. US Trade Representative’s office statement on US relations with India. (available at: http://www.ustr.gov/Document_Library/Press_Releases/2008/February/United_States_India_Discuss_Key_Trade_Issues.html ) issued: 2/22/08.

US Relations. Vision Statement by the US-India advisory council on US-India relations. (available at: http://www.ustr.gov/Document_Library/Recent_News/Section_Index.html ) issued: 2/22/08.

Intellectual Property Rights

European Union. Customs and Border Protection and European Union joint announcement on first joint effort on counterfeit seizures. (available at: http://www.eurunion.org ) issued: 2/22/08.

Swaziland

Foreign Investment. World Bank report on foreign investment in Swaziland. (available at: http://www.worldbank.org/ ) issued: 2/08.

Telecommunications

WTO. World Trade Organization video debate on international telecommunications. (available at: http://www.wto.org/english/forums_e/debates_e/debate7_e.htm ) issued: 2/22/08.

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