Volume 22, No. 14 -- April 8, 2002

OTHER PRIORITIES DISTRACT ADMINISTRATION'S ATTENTION FROM EAA

House members returning from their spring recess April 8 won't find a compromise Export Administration Act (EAA) waiting for them.  Hopes that congressional staffs and Bush administration officials could use the two-week recess to iron out a bill from all the competing versions failed to materialize because the White House hasn't been able to focus attention on the issue (see WTTL, March 25, page 1).  Representatives from the White House National Security Council (NSC) held one meeting with Capitol Hill staffs on March 25 but no progress was made on drafting a single bill to bring to the House floor.

Industry sources say the problem is mostly due to the White House staff being overburdened by other priorities, including Afghanistan and the conflict in the Middle East, rather than any substantive divisions over EAA legislation.  One result has been a lack of time for interagency review and discussion of the amendments the House Armed Services Committee (HASC) added to the House International Relations Committee's (HIRC) version of the measure (H.R. 2581).

"The administration has not been able to get its act together," one industry representative told WTTL.  He complained that the White House has not organized itself to deal with the EAA legislation and has handled it on an ad hoc basis.  Presidential Assistant Gary Edson is in charge of the effort to get the bill out of Congress, but he has been tied up with other priorities.  Although the administration has repeatedly said it favors the Senate's EAA bill (S. 149), it probably will have to accept some changes coming out of the House.

The lack of work on the bill probably means it won't get to the House floor until late April or May at the earliest, but further delays are likely, if EAA's past history is a guide.  The key to action will be negotiations between the White House and the staff of House Speaker Dennis Hastert (R-Ill.), Majority Whip Tom Delay (R-Texas) and Rules Committee Chairman David Dreier (R-Calif.).  Committee staffs will participate, but it will be up to the GOP leadership to craft the bill that will go to the floor.
 

WORKER ASSISTANCE REMAINS CLOG IN FAST-TRACK WHEELS

President Bush's April 3 call for the Senate to begin floor action on fast-track negotiating authority by April 22 was balm for supporters of the legislation but probably did little to move the measure forward.  Before he left for Congress' spring recess, Senate Majority Leader Tom Daschle (D-S.D.) promised action on a trade package some time before Memorial Day, and that is still his schedule.

While fast-track backers were quick to praise the president's speech, Democrats were just as quick to criticize his failure to mention Trade Adjustment Assistance (TAA) or the need to deal with dislocated workers.  Administration sources tried to deflect that criticism by noting the White House's long-standing recognition that TAA would be part of a final trade package and the work that has been going on to reach a compromise on worker aid.

Over the last two months there has been much finger pointing by Senate Democrats and Republicans over which side is being too hard line over TAA.  Administration officials have presented several proposals for bridging the gap between the two sides, but the offers have been rejected by Democrats.

Three main issues remain unresolved in the TAA debate: extending assistance to secondary workers, adding farmers under the law's scope and providing health care benefits for dislocated workers.  The strongest GOP resistance has been aimed at Democratic demands for adding health insurance provisions, but there has been little progress on the other two issues either.

The president's proposed April 22 deadline for starting Senate debate on a bill is aimed at completing action in both houses of Congress on renewal of the expired Andean Trade Preferences Act (ATPA) before May 16.  Bush has used his administrative powers to defer the collection of duties on Andean imports until that date and cannot extend the delay further.  After that, Andean goods would start having to pay full tariffs on items not covered by other preferential trade programs.  ATPA, along with fast track, TAA, renewal of the Generalized System of Preferences (GSP) and new trade benefits for Africa are all expected to be part of the trade package that will come out of Congress.

Before the Senate gets to fast track, Daschle has said he wants to complete work on energy legislation and the annual budget resolution.  Several other pieces of smaller legislation could get thrown onto the agenda, sources report.  Even when all other legislation is cleared away, the trade package faces several parliamentary hurdles that could tie the Senate up for weeks.

Before fast track gets to the floor, the Senate will need a cloture vote to stop a filibuster by trade opponents.  There are 20 to 30 hard line votes against any trade legislation, congressional sources say.  That number could swell with Republicans, if controversial TAA provisions are attached.  Another cloture vote probably will be needed to cut off debate.  Along the way, as many as 30 amendments are likely to be proposed and debated.  While many of these will be withdrawn or merged into the bill without votes, others could take up hours of floor debate.
 

FIGHT OVER INVESTMENT SAFEGUARDS MAY BLOCK TRADE LEGISLATION

Just as heated as the battle over TAA and as much a roadblock to fast-track legislation is the fight over how foreign investment should be protected in future trade agreements.  One controversial amendment that is certain to get debated when fast track comes up is Sen. John Kerry's (D-Mass.) expected proposal to prevent the use of NAFTA Chapter 11-type investment provisions in future trade accords to overturn environmental protection laws or actions.  The proposal, strongly backed by environmentalists, would require establishment of a screening mechanism to limit private lawsuits by foreign firms against environmental rules.

The business community has mounted a campaign to defend Chapter 11.  A group of 12 CEOs whose firms belong to the National Foreign Trade Council wrote to U.S. Trade Representative (USTR) Robert Zoellick March 22 to oppose any change in investment protections.  "We often face underdeveloped legal systems and judicial systems that are not independent or impartial," they wrote.  Investor protection standards "are essential" to continued foreign investment, they argued.

Sen. Charles Grassley (R-Iowa) wrote to Zoellick March 28 offering similar arguments for protecting foreign investment.  Grassley said he had "serious concerns over reports that the administration may weaken important investor protections as it pursues future international trade negotiations."  Proposals such as Kerry's screening mechanisms would "undermine the fundamental core of the investor-state dispute-settlement process," he declared.

There had been expectations that the Bush administration might clarify its position on Chapter 11 in proposals it planned to present to Chile during the latest round of free trade agreement (FTA) talks that are starting in Santiago April 8.  Interagency discussions reportedly failed to reach a conclusion on the issue, and U.S. negotiators left for Chile with no plans for discussing the subject in their talks.  Instead, the Santiago sessions will focus on market access for agriculture and industrial products as well as environmental cooperation, USTR sources reported.

The Finance Committee's Democratic and Republicans staffs, along with White House negotiators, hoped to draft a compromise bill that could be brought to the Senate floor as a manager's amendment cosponsored by Chairman Max Baucus (D-Mont.) and Ranking Member Grassley.  Chances for such a deal are fading.

If no agreement on TAA or Chapter 11 can be reached before Senate action, one option Daschle is weighing would let those issues be argued on the Senate floor and subject to amendments by supporters of the opposing sides.  Such an approach would favor Democratic views on both those topics, which is why the administration and GOP are likely to object to it.  This could lead to the ironic situation of Daschle trying to bring the trade package to the floor by April 22, as the president wants, but Republicans and the White House working to block action.

 
RUSSIA BECOMING CENTRAL FOCUS OF WASHINGTON TRADE AGENDA

From poultry and civil aircraft to steel and oil, trade with Russia is moving to the center of Washington's attention and will draw greater interest as it moves closer to accession to the World Trade Organization (WTO) in 2003.  In the immediate future, the House Ways and Means Committee April 11 will hold a hearing on legislation (H.R. 3553) to drop Jackson-Vanik Amendment restrictions on Russia and Commerce continues to ponder ending Russia's treatment as a nonmarket economy under the antidumping law (see WTTL, April 1, page 2).

As expected, the WTO Working Party on Russia's accession circulated its first draft report to members on March 29.  The 123-page text provides an initial assessment of the commitments Moscow intends to make on joining the trade body, including its promised adherence to WTO rules on agriculture, services, intellectual property rights, customs, investment and transparency.  Much of the document is in brackets.  "A lot has to be filled in," one source in Geneva said.

Among the major areas of difficulty left in drafting the report are Moscow's resistance to reducing subsidies for agriculture, especially transportation assistance, along with other subsidies and its lack of commitments in services.  There is also pressure on Russia to sign on to the voluntary WTO civil aircraft agreement to keep it from trying to subsidize aviation sales.  The preparation of the draft, however, is seen as a positive sign by negotiators.  "When there is a first draft, things tend to speed up," the source noted.  WTO and Russian officials are aiming to complete accession talks in time to have Russia's membership approved at the next WTO ministerial meeting, which will be held in June or September 2003 in Mexico.

Before that final accession step, Russia must first complete bilateral negotiations with the U.S. and its major trading partners, especially the European Union (EU), Japan and the countries of Eastern Europe, on their specific bilateral trade problems with Moscow.  A sampling of the issues Washington will raise in those talks is seen in the annual Estimate of Foreign Trade Barriers that the USTR's office released April 2.  The section on Russia cited the "frequent and unpredictable changes in Russian customs regulations and erratic customs enforcement."  It also noted Russia's tariffs and import licensing requirements, local barriers to service providers, government procurement, and contradictory foreign investment rules.

One disputes was settled March 31 when the U.S. and Russia signed a protocol under which Moscow will lift its ban on imports of U.S. poultry by April 10.  "The agreement reached in Moscow establishes a framework for closer cooperation and communication between the U.S. and Russian veterinary officials and provides for improved certification and testing procedures," said a statement by USTR Robert Zoellick and Agriculture Secretary Ann Veneman.

Meanwhile, the White House has called for Congress to remove Russia from Jackson-Vanik restrictions and grant it permanent-normal-trade-relations (PNTR) status before President Bush goes to Moscow in May. The legislation, however, faces two roadblocks.  In the House, because of promises made to Rep. Jim DeMint (R-S.C.) to get his vote for fast track, no trade legislation will move until the House adopts changes to the dying and finishing rules on Caribbean apparel.

In the Senate, Finance Committee Chairman Baucus has questioned granting Russia PNTR before it completes its WTO accession process, which is the way China was treated.  Baucus reportedly is concerned Congress would lose its leverage over the WTO accession process, if it doesn't have Jackson-Vanik as a bargaining chip.

 * * * BRIEFS * * *

THAILAND: In Bangkok April 4, USTR Robert Zoellick said U.S. and Thailand are discussing bilateral trade and investment facilitation agreement, but, at this stage, U.S. is only prepared "to consult about the steps that we can take to move towards a possible free trade agreement" (see WTTL, April 1, page 1).

TRADE BARRIERS: USTR's 2002 National Trade Estimate of Foreign Trade Barriers released April 2 emphasized alleged growth of nontariff barriers.  It claimed increasing use of non-science based sanitary and phyto-sanitary measures, customs procedures and government monopolies to restrict trade.  Report named usual suspects and practices as hurting U.S. exports.  U.S. has already acted on two complaints, requesting WTO dispute-settlement consultations with Japan over its restrictions on apple imports and with Mexico on telecommunications.  Other potential complaints, according to one U.S. trade official, might be Canada's Wheat Board, EU's refusal to approve GMO food products and Korean treatment of imported pharmaceuticals.  While Washington is "looking" at support EU members are giving to Airbus development of jumbo plane, it is "not moving forward with any case at this time," one official said.

STEEL: Five steel firms March 29 filed antidumping and countervailing duty complaints at ITC and ITA against imports of oil country tubular goods from Austria, Brazil, China, Colombia, France, Germany, India, Indonesia, Romania, South Africa, Spain, Turkey, Ukraine and Venezuela.  ITC found no injury from OTCG imports in its Section 201 investigation and products were excluded from President Bush's relief package.  Separately, ITA April 3 made preliminary ruling that imports of carbon and alloy steel wire rod are being dumped by producers in Brazil, Canada, Germany, Mexico, Moldova, Trinidad and Tobago and Ukraine.  Imports from Indonesia were ruled de minimis.  In addition, USTR in April 5 Federal Register issued decision on requests for exclusion of steel products from president's 201 action.

TELECOMMUNICATIONS: In annual Section 1377 report on foreign compliance with telecommunications agreements, USTR's office April 3 said it intends to focus attention on EU and Japanese wireless connection rates, EU pricing of leased lines and Mexico's interconnection policies.

MAGNESIUM: NAFTA Chapter 19 panel March 27 issued orders remanding back to ITA Sunset Review decisions on antidumping and countervailing duty orders on pure and alloy magnesium from Canada.

TOMATOES: Canada wins one.  ITC on 4-1 vote April 2 made final determination that imports of dumped greenhouse tomatoes from Canada are not injuring U.S. industry.  Decision came after Canadian growers asked for NAFTA Chapter 19 panel to review ITA final dumping ruling.

Copyright 2002 by Gilston Communications Group. Reproduction or retransmission in any form is prohibited. Washington Tariff & Trade Letter is published weekly 50 times a year.