Volume 22, No. 19 -- May 13, 2002

COMMISSION RECOMMENDS NEW RULES ON PRISON LABOR IN CHINA

Concerns that a congressionally created commission on China would take a hard line on U.S. relations with Beijing are beginning to be realized (see WTTL, April 15, page 4).  Although the first formal report of the U.S.-China Security Review Commission won't be issued until June, the group has already begun making recommendation to Congress for new legislation.

On May 10 the commission said it intends to recommend enactment of legislation to shift to importers from Customs the burden of proof that goods from China and other countries have not been made by prison or forced labor.  Its recommendation, if adopted, could lead to the automatic detention of imports, if charges are made that they were the product of forced or prison labor.

"The U.S. law is not adequately or effectively enforced," the commission claimed.  It called for legislation to require importers to certify that their goods aren't made with prison or forced labor.  "Once credible charges are made that a company is importing goods made by forced or prison labor, U.S. Customs officials would investigate the charges prior to allowing importation," it suggested.  "The products would be permitted into the U.S. only if the investigation concludes that no forced labor was used," it recommended.  Goods also would be denied entry if China blocked or ignored a Customs request for an inspection of the suspect facility.

This isn't the commission's first recommendation.  In March it urged House members to enact legislation to codify a controversial policy statement issued in 2001 by Laura Unger, the then-acting chairman of the Securities and Exchange Commission (SEC).  Unger had sent a letter to Rep. Frank Wolf (R-Va.) expressing her view that companies doing "material business" in countries subject to Office of Foreign Assets Controls (OFAC) sanctions should reveal that fact to investors.  Legislation to adopt that policy is pending in the House.  China Commission member William Reinsch, the former under secretary for export administration, was on record dissenting from its recommendations on both prison labor and SEC rules.
 

SENATE SET AT LAST TO PASS FAST-TRACK LEGISLATION

Enactment of the president's fast-track negotiating authority appears all but certain sometime this year, following agreement May 9 between Senate Republicans and Democrats on the Trade Adjustment Assistance (TAA) provisions of a trade package.  While more debate in the Senate remains on several controversial amendments (see story page 2) and a House-Senate Conference Committee still lies ahead, the deal to expand worker assistance should assure enough Democratic votes in both chambers to pass the legislation by a comfortable margin.

The key to enactment is likely to come from New Democrats who voted against fast-track in the House in December because aid for displaced workers wasn't part of it.  For example, Rep. Anna Eshoo (D-Calif.), who co-sponsored TAA in the House, said she voted against fast track for that reason.  Although she has not yet taken a stand on the new Senate bill, "she was pleased with the compromise," one of her aides told WTTL.

The Senate deal will allow action on a package of legislation that includes TAA, fast track (or Trade Promotion Authority), the Andean Trade Preferences Act (ATPA), the Generalized System of Preferences, and Customs authorization.  Finance Committee Chairman Max Baucus (D-Mont.) said he hoped the Senate would vote on final passage by May 16.  With Democratic and Republican leaders promising to oppose most amendments to the package, debate may be limited.

After months on negotiations to iron out an agreement on TAA, senators finally reached a deal during a frenzied day of talks that were driven by threats from both Democrats and Republicans to kill the package.  Unless a compromise was reached, Senate Majority Leader Tom Daschle (D-S.D.) said he would pull the legislation from the floor with no commitment on when it would be taken up again.  Sen. Phil Gramm (R-Texas) was also poised to raise a point of order that could have scuttled the package.  Gramm objected to Daschle=s last-minute inclusion of provisions that would have paid for health insurance for displaced steelworkers for one year.

Faced with the imminent failure of the center piece of its trade legislation agenda, the White House stepped into the talks and persuaded Republicans to bow to most Democratic demands on TAA.  President Bush's legislative affairs chief Nicholas Calio spent the day huddled with senators in Baucus's private hideaway office in the Capitol or in Vice President Cheney's executive office off the Senate chamber.

Along with Baucus, Calio and Gramm, Sens. Charles Grassley (R-Ohio) and John Breaux (D-La.) and a dozen legislative aides struggled to reach an accord not just on TAA but on the entire trade package.  "I didn't think we would get a deal today," one aide said at the end.  "I thought we were going to fail today and pull the bill down.  I think the administration helped a lot.  I think they had a bigger picture in mind than Senator Gramm," he added.

The final compromise, which was substituted for the original Daschle package May 10, provides for an expanded TAA that would cover health insurance through a 70% tax credit, grant secondary workers of supplier companies new TAA benefits, and pilot test a wage insurance program.  GOPers had to give up demands to allow displaced workers the choice of selecting the health insurance programs they want.  They will be limited to COBRA or state-run systems unless they had alternative coverage before losing their jobs.

In exchange, the Democrats agreed to withdraw the so-called steel legacy insurance provisions and adopted milder language on future investment provisions similar to NAFTA's Chapter 11.  They also promised to "protect the integrity of the bill," which means they will oppose amendments to the fast-track language.  Daschle noted one exception to that promise, saying he would support an amendment to reinsert the steel legacy provisions.
 

DAYTON-CRAIG AMENDMENT BECOMES LAST BIG LEGISLATIVE FIGHT

Before the fast-track legislative package clears the Senate the week of May 13, lawmakers will have to beat back an expected amendment that could force future trade agreements to require 60 votes for ratification.  To be co-sponsored by Sens. Mark Dayton (D-Minn.) and Larry Craig (R-Idaho), the amendment would allow any senator to raise a point of order objecting to the implementing legislation for any trade deal, if the measure would amend U.S. trade laws, including antidumping, countervailing duty and Section 201 safeguard rules.

Because a point of order under Senate rules requires a 60-vote majority to be overruled, opponents of the amendment say it would in effect force all implementing legislation for trade deals to get 60 votes rather than a simple 51-vote majority.  "I think all of us have been concerned over time that you can negotiate away certain trade remedy provisions, and it's take it or leave when you come back," Craig told reporters May 10.

"Yes, you can always vote against it.  But once you produce a trade package, business and industry say yes that's what we want, and it is very difficult to do that," he added.  "So you see a progressive erosion of the ability of this body to participate in any way in something that is constitutionally one of our responsibilities," said Craig, who claims the amendment has 26 co-sponsors.

"I've said, go negotiate anything you want, but when you come back, you not only have to say here is what we've done, but here are some of the changes in the law that we've made.  And we have the right to participate in that in a slightly different way through the point of order," he explained.

In one of his early fast-track proposals, Finance Committee Chairman Max Baucus (D-Mont.) included a provision that would have required a 60-vote majority for approval of future trade agreements.  At that time, he argued that every trade bill that has passed the Senate in the last two decades has required a cloture vote that needed 60 votes to move the legislation.  Now Baucus says he will oppose Dayton-Craig as part of his agreement with Sen. Charles Grassley (R-Iowa) to oppose any changes to the fast-track part of the pending trade package.

Bush administration officials and Senate Republican leaders, along with business community and agriculture groups, have mounted a strong campaign against the Dayton-Craig amendment.  At a May 10 press conference, U.S. Trade Representative (USTR) Robert Zoellick called it "a dangerous amendment."  There is "definitely" a chance the amendment could pass, warned Commerce Under Secretary Grant Aldonas.

In addition to Dayton-Craig, the Senate probably will debate and vote on an effort by Sen. Jay Rockefeller (D-W.Va.) and Barbara Mikulski (D-Md.) to get the steel legacy insurance pro-visions put back in the bill.  Although Baucus and Grassley agreed to amend the fast-track bill to include stronger wording on state-investor relations, Sen. John Kerry (D-Mass.) might still want additional provisions included.  The Baucus-Grassley compromise would require future investment provisions, similar to those in NAFTA Chapter 11, to limit the rights of foreign investors to treatment "no better and no less" than that given domestic investors.
 

NEW TEXTILE GROUP WILL SEEK TOUGHER ACTION AGAINST IMPORTS

Textile manufacturers and unions that feel they haven't gotten enough protection from Washington will announce the launch of a new trade group May 14 with the aim of raising pressure against further liberalization of textile and apparel import policies and heading off new con-cessions, particularly on tariffs, in international trade negotiations.  In the works for several months, the American Textile Trade Action Coalition (ATTAC) is backed by Milliken & Co., the giant textile manufacturer, and UNITE, the union representing textile and garment workers.

ATTAC's establishment reflects a long-running split within the textile segment of the textile and apparel industries and the objections of some firms to the policies of the American Textile Manufacturers Institute. (ATMI).  In January, ATMI was forced to cut its staff by 25% after it lost half its income over three years resulting from a loss of members due to bankruptcy and consolidation.  ATMI sources say they have had nothing to do with the formation of ATTAC and no communications with its organizers.  They also claim they don't expect their members to join the competing group (see WTTL, March 18, page 4).

"We've been plagued by lackluster trade associations," complained John Nash Jr., Milliken's Washington counsel.  He noted that the textile industry has lost 700,000 jobs.  "The textile industry has lost more jobs than exist in the steel industry," he said.  "The only rule in Washington is that the squeaky wheel gets attention," Nash argued.  "Our industry has been supine."

The industry was especially stung by its failure to keep textile-state lawmakers in the House from voting for fast-track legislation in December.  Textile and union representatives are trying to play up the primary defeat of Rep. Tom Sawyer (D-Ohio) May 7.  News reports of the campaign had claimed he faced union opposition because of his vote for NAFTA in 1993.  Rather than a nine-year, delayed reaction to that vote, other reports contend Sawyer's fate was complicated by redistricting which threw him into a heavily industrialized district.  That seat is currently held by Rep. James Traficant (D-Ohio), who has been convicted on several felony charges but intends to seek reelection anyway as an independent.
 

 * * * BRIEFS * * *

EXPORT ENFORCEMENT: Bureau of Industry and Security (BIS) and Thompson/Center Arms of Rochester, N.H., have settled charges that firm exported rifle and pistol scopes to Argentina, Czech Republic and Switzerland without approved licenses.  Company, without admitting or denying guilt, agreed to pay $25,000 civil fine.  But BIS will suspend payment of $12,5000 of that fine for year and waive it, if firm remains in compliance with export control rules.

RUSSIA: Ex-Im will begin providing long-term financing for both public and private sector in Russia.  Until now it has limited help to short- and medium-term financing.  Nonetheless, it has $1.8 billion in total exposure in Russia.  "Ex-Im Bank's action results from Russia's improved economic performance and commitment to economic reform," said Ex-Im Vice Chairman Eduardo Aguirre Jr.

CHINA: State in May 7 Federal Register announced rescission of its policy of denial for Munitions List license applications for McDonnell Douglas and Douglas Aircraft as well as China National Aero-Technology Import and Export Corp. (CATIC), CATIC-USA, China National Aero-Technology International Supply Corp., Yan Liren, Hu Boru and Robert Hitt based on settlements in 2001 of charges against all parties related to diversion of machine tools to unauthorized consignee in China (see WTTL, Nov. 26, page 4).  Denial policy remains in place for Tal Industries, which was convicted of violating EAA.

OECD: USTR Robert Zoellick won't be attending annual meeting of OECD in Paris May 15-16 so he can be around in case he's needed during Senate debate on fast-track legislation.  OECD members will hold special session May 16 with 13 developing non-member countries to assess progress on WTO Doha Round.  Commerce secretary traditionally leads U.S. delegation to OECD, and Secretary Evans will be at meeting along with Deputy USTR Peter Allgeier.

AFGHANISTAN: President Bush has restored its eligibility for normal-trade-relations (NTR) status effective June 7.  Afghan goods have been denied NTR tariff benefits since 1986.

JAPAN: With consultations having failed to resolve U.S. complaint against Japanese import restrictions on U.S. apples due to alleged fire blight, Washington has asked WTO to establish dispute-settlement panel to judge dispute (see WTTL, April 8, page 4)

OCTG: On 4-1 vote May 10, ITC made preliminary ruling that U.S. industry isn't injured by allegedly dumped oil country tubular goods from 13 countries: Austria, Brazil, China, France, Germany, India, Indonesia, Romania, South Africa, Spain, Turkey, Ukraine, Venezuela.

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.