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What we’re covering this week --

  US Trade Representative Michael Froman begins the week in China for bilateral talks before traveling to Auckland, where the trade minister of the 12 TransPacific Partnership countries meet to formally sign the agreement.


             ●          Monday, House Ways and Means Committee Chairman Kevin Brady (R-Texas) speaks at a Heritage Foundation event to release its 2016 Index of Economic Freedom.

             ●          US Trade Representative Michael Froman continues bilateral meetings in Beijing that began over the weekend.

             ●          Tuesday, the National Advisory Committee for Labor Provisions of US Free Trade Agreements holds an open meeting.

             ●          Wednesday, Colombian President Juan Manuel Santos speaks to the US Chamber of Commerce and at the Woodrow Wilson International Center for Scholars.

             ●          Thursday, TPP trade ministers meet to sign the agreement.

             ●          The American University’s School of International Service holds a program with Peru Ambassador Luis Miguel Castilla on the TPP George Washington University hosts Costa Rica Ambassador Roman Macaya.



Volume 25, Number 18                       Tuesday, January 26, 2016

Trade Reports International Group

A Safe Harbor Deadline

   Both sides are in a “pinch” to meet a January 31 – perhaps February 2 – deadline to resolve a lingering dispute over the protection of consumer information under a now defunct Safe Harbor agreement between the United States and the European Union (WTD, 12/14/15).

 US and EU officials are meeting this week in Brussels to review a “final” proposal on the safekeeping of Europeans’ personal data which, commented Commerce Secretary Penny Pritzker in Davos late last week, should satisfy all of Brussels’ demands – making the US system for protecting consumer information “essentially equivalent” to laws across Europe.

 Commerce Department Deputy General Counsel Justin Antonipallai told an informal session on Safe Harbor yesterday that the latest proposal offers the EU assurances that personal data will be protected by businesses and government agencies as well as offer channels for European complaints about the misuse of their personal data.

 Last October the European Court of Justice decided that consumer protection strictures in the 2000 Safe Harbor agreement did not match minimum requirements in the EU.  Two years ago when Washington and Brussels decided to draft a new Safe Harbor program, Brussels had presented 13 recommendations – none of which have been met, said EU embassy official Andrea Glorioso.

 Mr. Antonipallai expressed hope yesterday that a final agreement can be reached by the February 2 scheduled meeting of the EU so-called Article 29 working party.

 Should agreement prove unattainable by next Tuesday, some 44 separate data protection authorities could start reviewing complaints and possibly stop the flow of data across the Atlantic.

National Security

 The biggest roadblock to settlement, officials and experts say, is how US intelligence and law enforcement agencies will be constrained under Safe Harbor.  That issue, commented Mr. Glorioso, remains uncertain.

 The House last year passed legislation (HR 1428) that spells out the rights of citizens – including Europeans – to challenge the use of personal data held by US agencies.  The Senate Judiciary Committee intends to mark up the bill for full Senate action on Thursday.  Although not a requirement, said Mr. Glorioso, putting such guarantees into law would be helpful.

 The most immediate problem to solve now is the transfer of data between the United States and the EU, commented Mr. Glorioso.  A broader debate on the collection of information from European citizens for security and law enforcement purposes will come later.

 One aspect of the proposed US offer, Ms. Pritzker said in Davos and echoed at yesterday’s session, will be the ability of both sides to review the program annually.

 Speaking earlier at the forum, Federal Trade Commissioner Terrell McSweeny said she is hopeful that an accommodation can be achieved by next week.  Over the 15 years of the agreement with the EU, the FTC has shown it does not shy away from violations.  Some 39 enforcement actions have gone through the agency to date.

       



The Havana Club Trademark

 Geneva – The European Union and Cuba joined together yesterday to tell the United States at the World Trade Organization that US Patent and Trademark Office’s move to give Cubaexport legal title to the Havana Club trademark failed to resolve a years-old dispute, WTD has learned (WTD, 9/29/15).

 Last week the PTO accepted a petition from Cubaexport to assume ownership of the patent – taking it away from Bacardi.

 At a regular Dispute Settlement Body meeting, Brussels and Havana reminded Washington that full compliance with the 2002 Appellate Body required the United States to repeal Section 211 (Bacardi Act) of the US Omnibus Appropriations Act.  Under Section 211, the US barred the registration or renewal of the Havana Club trademark under the ongoing embargo against Cuba.

 The EU had challenged Section 211 on behalf Pernod Ricard at the WTO in 1998.  The French company entered into a joint partnership with Corporacion Cuba Ron for marketing Havana Club rum.

 In January 2002 the WTO Appellate Body issued a verdict in favor of the EU ruling against some parts of the US law on grounds that they violated national treatment and most-favored obligations under the Trade-Related Intellectual Property Rights agreement.

 Washington has essentially ignored the WTO ruling.  But yesterday it said renewal of the Havana Club trademark was a “significant positive development” and an “important step.”  Brussels concurred that the PTO move was a”very positive step” – but added that it did not resolve the trade dispute.

 Cuba described the US decision as a “just and positive step” on the grounds that it recognized the rights of a Cuban company.  But without repeal of Section 211, Cuba said the Havana Club trademark could be cancelled at any time.

       



WTD Interview

Talking to Mr. Cuellar

 Pro-trade Texas Democrat Henry Cuellar thinks Congress will approve the TransPacific Partnership this year – but with relatively little support from his fellow Democrats who are under pressure from organized labor to oppose the trade deal (WTD, 1/25/16).

 The 28 House Democrats who voted for Trade Promotion Authority last year so that President Obama could conclude the TPP are sure “yes” votes, Mr. Cuellar told WTD in an interview Friday.  “The 28 are going to stick,” he said.  “I have talked to a lot of them.  They are not going to flip flop.”

 But how many more Democrats will vote for TPP in the end remains unclear at this point, according to Mr. Cuellar.  Where the votes are will become clearer over the next month or so.

 It will be up to Republican Congressional leaders to decide when the vote on TPP will take place.  Mr. Cuellar said he would prefer to see a vote come in the “May, June or July” period, even though Senate Majority Leader Mitch McConnell (R-Ky) is urging a vote in a post-election “lame duck” session.

 “There is some risk to waiting until after the elections,” Mr. Cuellar said.  Some members will want to put off a vote on TPP even longer – until a new President takes office.

 Further complicating a “lame duck” vote is the fact that most of the Presidential candidates – from both political parties – oppose TPP.  Democratic front-runner Hillary Clinton has been careful in her comments about the TPP, saying that she has concerns, rather than outright opposing the deal like Sen. Bernie Sanders, he noted.  Mr. Cuellar pointed out that Ms. Clinton called the TPP a “gold standard” agreement when she was President Obama’s Secretary of State.

June or July

 While he can understand the rationale for waiting until after the elections, Mr. Cuellar said he prefers an early summer vote.  “If we have the votes in June or July, I would say let’s go for it at that time.”

 Mr. Cuellar – who is a member of the moderate House New Democrat Coalition – said he talked last year to Democrats who opposed TPA but indicated they were open to supporting TPP depending on the shape of the final package.  He is hoping that those members will end up voting for TPP.

 But “a lot depends on how much pressure traditional democratic constituencies keep on lawmakers to vote against the TPP,” Mr. Cuellar told WTD.  The unions are doing a good job in rallying support against the deal.  And if they keep the pressure up, some Democrats who are now leaning toward TPP might end up voting against it.

 When talking to fellow Democrats about the TPP – particularly freshmen and second term members who say they are getting pressure from organized labor to oppose the deal – Mr. Cuellar said he uses his own experiences to reassure them.  He first took a pro-trade stand as a new member himself on the US-Central America free trade agreement – despite strong pressure from unions to vote against it.

 Even though he had an 88-percent positive voting record with organized labor, “it didn’t matter,” Mr. Cuellar said.  “They tried to make an example of me over CAFTA.  They came after me.  They spent millions against me.”

 Organized labor is taking the same stand on the TPP, warning members that they will withhold support and financial contributions.  Mr. Cuellar said he does not blame organized labor for taking that stand.  He acknowledges that there are “winners and losers” in any trade deal.

 Mr. Cuellar tells colleagues worried about voting for the TPP that he survived union anger over his pro-trade stances.  “You’re not going to lose an election because of a trade vote.  That’s never happened before as far as I know.  If you lose, it’s going to be for other reasons.”

 Mr. Cuellar acknowledged that he has a “general, philosophical disagreement” with his own political party when it comes to trade.  “It’s a mistake for my party to be anti-trade, point blank.”

 Democrats should be supportive of the TPP in particular because it has the strongest worker rights and environmental protection provisions of any trade agreement, the member said.  The Obama Administration has done a “good, good job” in the TPP on those issues, which should appeal to Democrats.

Arguments in Favor of TPP

 Mr. Cuellar also makes other arguments in favor of the TPP – such as the economic benefits of having duty-free access to the fast-growing Asia-Pacific region and the importance of the United States writing the rules for global trade.  “What I tell my Democratic friends is – If you want to have a say so in how the world rules are in trade, you’ve got to participate.  If you isolate yourself, somebody else is going to fill the vacuum.  And if it’s not us, it’s going to be China or someone else.”

 At the end of the day “all politics is local,” Mr. Cuellar remarked.  How members vote on TPP will depend on whether their districts will benefit or be hurt by the agreement.  Mr. Cuellar told WTD his own free-trade views come from the fact that his district includes Laredo – which is the largest inland port in the United States.  Almost half of the $1.3-billion in US trade does with Mexico moves through his port.

 Mr. Cuellar said he is urging business groups to be more involved at the district and local level in explaining the benefits of the agreement.  Otherwise, Democratic lawmakers will be making up their minds based only on what they hear from unions.

       



Hydrofluorocarbon Blends From China

 The Commerce Department on Friday announced its affirmative preliminary determination in the antidumping duty investigation of imports of hydrofluorocarbon blends and components thereof from China (WTD, 8/10/15).

 Commerce preliminarily determined that certain hydrofluorocarbon blends and certain single hydrofluorocarbon components from China have been sold in the United States at dumping margins ranging from 91.99 percent to 210.46 percent.

 Commerce preliminary found that critical circumstances exist with respect to T.T. International Company Limited and the China-wide entity.

 In 2014, imports of hydrofluorocarbon blends and components from China were valued at an estimated $109.5 million.

 Commerce is scheduled to announce its final determination by June 13.

       



Around the Globe

             ●          U.S. Trade Representative Michael Froman was welcomed Sunday by Polish entrepreneurs as he worked to finalize a free trade pact between the United States and the European Union, the Associated Press news service reported from Warsaw (WTD, 1/25/16).  Froman said the two sides are trying to conclude the deal, the Trans-Atlantic Trade and Investment Partnership, this year after nearly three years of negotiations.

 There is resistance from some Europeans to the planned agreement, which aims to eliminate tariffs and create common regulatory standards between the world’s two biggest economies. Opponents fear a lowering in food safety standards and the undermining of local regulations by giving international arbitration panels the power to rule over disputes.  In Warsaw, Froman told a group of young Poles with startups, among them software developers, that the deal would be especially helpful to small and medium-sized businesses like theirs. He said they would benefit from a harmonizing of regulatory standards and intellectual property protection.

 “It’s small and medium-sized businesses that are driving the economy. And if we can make life easier for them, it’s good for all of our economies,” Froman said.

 Froman met with the entrepreneurs at the Google Campus in Warsaw, one of several hubs Google has established worldwide to help startups launch. He met with representatives from five companies, taking time to learn about their operations while also talking to them about how the deal, often referred to as TTIP, might help them.

 Speaking to university students yesterday, Mr. Froman stressed that the TTIP will not lower standards or weaken regulations nor will it force the privatization of public services.  “It’s not an effort to undermine the values of either our societies,” he said.  He also stressed the geo-political benefits of the TTIP, saying it is important that Washington and Brussels are the ones setting global trade standards.

             ●          Foreign exchange controls implemented by Nigeria’s government over the past year are hindering the ability of US companies to do business in Africa’s largest economy, according to Commerce Secretary Penny Pritzker Bloomberg news service reported (WTD, 1/11/16).  US companies have “been quite explicit it’s a barrier to trade,” Pritzker said in an interview in the Nigerian commercial capital, Lagos on Monday.

 The policies also hurt Nigerian manufacturers because they import about 52% of their inputs and need dollars to pay for those, she said. Pritzker will raise the issue with Nigerian President Muhammadu Buhari and Vice President Yemi Osinbajo in Abuja, the capital, on Tuesday.  Nigeria’s central bank, with Buhari’s backing, has tried stop the currency weakening amid a rout in prices of oil, which provides Africa’s largest crude producer with almost all export earnings, by restricting imports and foreign exchange trading.

 The regulator has effectively pegged the naira at 197-199 since March. Foreign investors have sold naira bonds and stocks to avoid a devaluation they see as all but inevitable. Forwards prices suggest the currency will weaken 20% to 249.5 per dollar in three months, while the black market rate fell to a record 305 this month.  “It sounds like you’re starting to see factory lay-offs,” Pritzker said. “That’s not good for Nigeria. And, of course, President Buhari is focused on inclusive growth. So, pointing out some of the contradictions between objectives and policies is part of the conversation we’ll have.”

 The US is the largest foreign investor in Nigeria, according to the State Department. Bilateral trade was $18.2 billion in 2012, according to US trade data, in favour of Nigeria.

             ●          Ford Motor Co. is pulling out of Japan and Indonesia, saying that market conditions in each country have made it difficult to grow sales or make sustained profits, the Associated Press news service reported from Detroit (see related report in this issue).  “Japan is the most closed, developed auto economy in the world, with all imported brands accounting for less than 6% of Japan’s annual new car market,” spokesman Neal McCarthy wrote in an email message. The 12-nation Trans Pacific Partnership trade agreement in its current form will not improve Ford’s ability to complete there, he said. Congress could vote on the pact this year.

 Neither market is large for the Dearborn, Michigan, automaker. Last year Ford sold only 6,100 cars and trucks in Indonesia and only 5,000 in Japan, where it has accused the government of protecting domestic brands.  The company in an emailed statement said that the decision was communicated to employees and dealers on Monday. Ford will exit the countries before the end of the year and plans to explain to customers its commitment to servicing cars, providing parts and making warranty repairs.

 McCarthy said auto sales are expected to decline in Japan in the coming years. Analysts have said that’s due to an aging population and declining interest in cars among younger people in urban areas.  In Indonesia, it was difficult for Ford to compete without local manufacturing and vehicles to sell in key market segments, McCarthy said. Ford has restructured its business there but still has less than 1 percent of the market with “no reasonable path to sustained profitability,” he said.

 Ohio Democrat Sen. Sherrod Brown issued a statement blaming the TPP for Ford’s decision to pull out of Japan, because it does not address currency manipulation.  “TPP lacks enforceable currency manipulation provisions and the agreement’s auto rules were written by Japan for Japanese automakers at the expense of American jobs,” he said in a statement.  “The ink isn’t even dry and we are already seeing proof that this massive agreement will sell out American workers and roll back the remarkable recovery of our auto industry.”

             ●          Ottawa is poised to affix a Canadian signature to the text of the controversial Trans-Pacific Partnership accord next week but International Trade Minister Chrystia Freeland insists this doesn’t mean the government is approving the deal, the Globe and Mail reported (see related report this issue).  The Trudeau Liberals remain officially uncommitted to the trade deal reached by the former Conservative government during the 2015 election campaign.

 Ms. Freeland released a statement Monday playing down the importance of Canada signing the Pacific Rim accord text in New Zealand next week and assuring Canadians the Liberals remain on the fence more than 2 ½ months after taking power.  Ms. Freeland explained that the signing ceremony – where countries confirm with their signatures that the text reflects what was negotiated – is not a green light for the deal.  “Signing does not equal ratifying. Only a majority vote in our Parliament can allow the agreement to take force. Signing is simply a technical step in the process, allowing the … text to be tabled in Parliament for consideration and debate before any final decision is made,” Ms. Freeland said in a statement.

 Conservative Party Leader Rona Ambrose, speaking to reporters shortly after Ms. Freeland released her statement, urged the Trudeau government to approve the deal.  The Liberal minister said she’s aware of the fact Canadians are divided on the agreement, which was reached on Oct. 5, 2015, and would eliminate Canadian tariffs on Japanese vehicles and make it easier for manufacturers to use offshore parts in cars. It would be a boon for low-wage Asian suppliers of parts, but a challenge for Canadian firms.  She said she’s spent two months talking to Canadians. “After attending public town halls, participating in over 70 meetings and round tables, and receiving feedback from thousands of Canadians who have written to me, it is clear that many feel the [deal] presents significant opportunities, while others have concerns.”

 Ms. Freeland said she wants to see a major parliamentary debate on the matter. The fact remains, however, that the Liberals have a sizable majority and can easily vote through approval of the deal whenever they want.

             ●          Chinese Premier Li Keqiang has reiterated the urgency and the government’s resolve to cut excess capacity in steel and coal industries, as the country strives to restructure its economy, the China Daily newspaper reported (WTD, 1/11/16).  “China will cut crude steel production capacity by 100 to 150 million tons,” according to a statement issued on Sunday after an executive meeting of the State Council chaired by Premier Li on Friday.

 The State Council didn’t specify the deadline for such cut, but pointed out that China has cut its production capacity of crude steel by more than 90 million tons in recent years.  China will reduce the production capacity of coal by “a relatively large margin,” according to the statement. “Digesting overcapacity in steel and coal sectors is an important measure to promote the supply-side structural reforms,” the statement said, adding that the process will deliver the industries out of trouble and achieve upgrading.  China’s production of crude steel fell 2.3 percent to 804 million tons in 2015, the first time the industry reported negative growth in 34 years.




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On the Web......

 

Agriculture


Sugar.  Agriculture Department report on sugar and sweeteners.  (available at:  http://www.ers.usda.gov/publications/sssm-sugar-and-sweeteners-outlook/sssm329.aspx )  issued:  1/25/16.



Asia-Pacific


TPP.  Final text of the TransPacific Partnership agreement.  (available at:  http://www.tpp.mfat.govt.nz/text )  issued:  1/25/16.


TPP.  US Conference of Mayors statement on the TransPacific Partnership.  issued:  1/25/16.


TPP.   Progressive Coalition for American Jobs statement on the TransPacific Partnership.  (available at:  http://www.ers.usda.gov/publications/sssm-sugar-and-sweeteners-outlook/sssm329.aspx )  issued:  1/25/16.


TPP.  Peterson Institute for International Economics report on the TransPacific Partnership.  (available at:  http://www.piie.com/publications/wp/wp16-2.pdf )  issued:  1/25/16.



European Union


Safe Harbor.  Information Technology Industry Council report on the Safe Harbor program.  (available at:  http://www.itic.org/news-events/news-releases/iti-new-report-showing-equal-eu-u-s-data-privacy-protections-should-help-spur-a-new-sa

fe-harbor-agreement )  issued:  1/25/16.


Services.  European Parliament recommendations on a Trade in Services Agreement.  (available at:  http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A8-2016-0009&format=XML&language=EN )  issued:  1/25/16.


Trade Policy.  European Parliament draft working paper on EU trade policy.  (available at:  http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&reference=PE-571.406&format=PDF&language=EN&secondRef=03 )  issued:  1/25/16.



Export Controls


Japan.  Japanese government statement on its end users list.  (available at:  http://www.meti.go.jp/english/press/2016/0122_01.html )  issued:  1/25/16.



Japan


Export Controls.  Japanese government statement on its end users list.  (available at:  http://www.meti.go.jp/english/press/2016/0122_01.html )  issued:  1/25/16.


Motor Vehicles.  Statement by Sen. Brown on Ford’s announcement of moving out of Japan over currency manipulation.  (available at:  http://brown.senate.gov )  issued:  1/25/16.



Motor Vehicles


Motor Vehicles.  Statement by Sen. Brown on Ford’s announcement of moving out of Japan over currency manipulation.  (available at:  http://brown.senate.gov )  issued:  1/25/16.



Services


European Union.  European Parliament recommendations on a Trade in Services Agreement.  (available at:  http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A8-2016-0009&format=XML&language=EN )  issued:  1/25/16.



World Trade Organization


Davos.  Remarks by World Trade Organization Director General Azevedo on the Davos informal ministerial meeting.  (available at:  https://www.wto.org/english/news_e/news16_e/dgra_25jan16_e.htm )  issued:  1/25/16.

 

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Updated: 1/3/16


WTD’S

FRIDAY

AFTERNOON

PODCAST


Straight Talk.

Click the underlined text to hear snippets from WTD’s straight talk. (mp3 files)

 •  Here’s what New Democrat free-trader Rep. Henry Cuellar (Texas) tell WTD in an interview about trade and the upcoming elections.  

•  Here’s an introduction by Woodrow Wilson Center Director Jane Harmon -- a rare species known as “pro-trade Democrats” -- of US Trade Representative Michael Froman on the TransPacific Partnership.

•  Campaign 2016 -- Republican Presidential contender Donald Trump explains his China trade policy to a crowd on Iowa.

•  Campaign 2016 -- Here’s what Republican Presidential contender Donald Trump says about “Made in USA”.

•  Campaign 2016 -- Republican Pr-esidential contender New Jersey Governor Chris Christie says why he’s against the Obama TPP agreement.

•  Here’s why Democratic Presidential contender Hillary Clinton opposes the TransPacific Partnership.

•  A question to and answer from Republican Presidential contender Jeb Bush on the US Export-Import Bank -- and OPIC.

•  Here’s how Nucor steel company CEO John Ferriola describes the Chinese economic monolith.

•  Negotiating in Geneva -- or Can You Hear Me?  --  From chief WTO services negotiator Abdel-Hamid Mamdouh.

•  Here’s how the United States views the future of the Doha Development Round according to Deputy US Trade Representative Michael Punke.

•  Here’s a comment from Senate Foreign Relations Committee Chairman Bob Corker about why he doesn’t want to get into reauthorizing the Overseas Private Investment Corporation -- ala the Ex-Im mess.

•  Here’s a response from World Trade Organization Director General Roberto Azevedo at the Peterson Institute for International Economics on whether the Doha Development Agenda is a vampire.






PODCAST012216.mp3