House Republican leaders have moved to keep their promise to Rep. Jim DeMint (R-S.C.) to change import requirements for apparel from the Caribbean and Andean region before dealing with any other trade legislation. In a last-minute maneuver, the House Rules Committee attached language to a supplemental spending bill (H.R. 4775) to limit the duty-free treatment of apparel from those regions to goods assembled or cut from fabric not only wholly formed in the U.S. with U.S. yarn but also to fabrics dyed, printed and finished in the U.S.
Other controversial amendments, particularly on raising the federal debt ceiling, triggered two days of bitter debate in the House on the measure. Finally, after midnight on May 24, lawmakers approved the rule on the amendment by a 213-201 vote and passed the amended legislation by a 280-138 margin.By attaching the amendment to the appropriations bill, GOP leaders avoided going through the House Ways and Means Committee, where Chairman Bill Thomas (R-Calif.) adamantly opposed the change. House Speaker Dennis Hastert (R-Ill.), Majority Leader Richard Armey (R-Texas) and Majority Whip Tom DeLay (R-Texas) gave a written promise to DeMint to revise the textile rules in order to get his vote for fast-track legislation in December (see WTTL, Dec, 10, page 4). They handed him the letter on the House floor after the time for the vote had already expired and the measure still didn't have a majority.
A companion appropriations bill is
still pending in the Senate, where lawmakers expect to start floor action
on it when they return from their Memorial Day recess on June 3.
The Republican leadership's promise to DeMint won't be fulfilled until
the textile change is enacted into law.
BIS SEEKS WHITE HOUSE INTERVENTION TO SETTLE NIGHT VISION DISPUTE
The Bureau of Industry and Security (BIS) is trying again to get the National Security Council (NSC) to step in and settle the interagency dispute over licensing conditions and jurisdiction for night vision products. In a position paper sent to State, Defense and NSC, BIS officials call for resolving the conflicts over night vision products as part of the current NSC review of Category 12 of the Munitions List, which includes military-use night visions products.
Toward the end of the Clinton administration in 2000, officials in the then-Bureau of Export Administration (BXA) tried without success to get the White House NSC to resolve the emerging interagency conflict over these products, which include cameras used for building security systems and apparatus worn by rescue squads and firefighters. Although another attempt to elevate the issue was made at the start of the Bush administration, the subject fell between the cracks during the transition period.The review of ML Category 12 has given BIS a new hook with which to raise the issue again. The agency's position paper addresses two primary concerns: (1) the licensing process and approval conditions for products that are clearly on the Commerce Control List (CCL) and (2) the commodity jurisdiction (CJ) for items that have been the subject of interagency disputes (see WTTL, April 15, page 1).
With nearly 1,200 applications in 2001, night vision products are one of the largest categories of licenses BIS handles and the most contentious. Application backlogs occur regularly as Defense, State and Commerce disagree over license conditions. Members of industry complain that applications for CCL night vision products take longer to get approved and have more conditions attached, particularly on specifications, than do items subject to ML licensing by State.
BIS wants to get interagency agreement on the licensing process and conditions imposed on approvals, BIS Deputy Assistant Secretary Matthew Borman told the Sensors and Instrumentation Technical Advisory Committee (SITAC). "Our position is that metrics should not be imposed as license conditions unless there is a very thorough vetting among the industry and they're reflect in regulations," he said. "License conditions, such as metrics, which are not reflected in the regulations shouldn't be popping up because that is no way to do business," Borman added.
The BIS paper addresses three types of licenses: individual commodity sales, sales to distributors and demonstration models. The agency has proposed slightly different conditions for each of these products, Borman explained. It also recommended a comparison of conditions applied to CCL products versus those on the ML. BIS wants NSC as part of the Category 12 review to clarify which products go on the two different lists.
"Certainly the touchstone for us
is whether there is a predominance of commercial or military use for these
items," Borman said. He said other agencies agree on that standard.
The ongoing, working-level NSC review is expected to take about eight weeks
to complete and will culminate in a political-level interagency meeting
in July to settle any unresolved issues.
DEMOCRATS WILL HAVE STRONG HAND IN FAST-TRACK CONFERENCE
The strong bipartisan support in the Senate May 23 for fast-track negotiating authority legislation (H.R. 3009) is likely to give Democrats the upper hand in the long, contentious House-Senate Conference Committee negotiations that will start when lawmakers return from their Memorial Day recess. To keep Democratic votes in the Senate and add them in the House, the conference will be under pressure to preserve the generous worker benefits added to the Senate's Trade Adjustment Assistance (TAA) provisions, as well as strong language on labor and environment negotiating goals (see WTTL, May 20, page 3).
The result may give President Bush fast-track authority but with more conditions and restrictions than any previous president. Although Congress often fails to provide close oversight of trade talks, U.S. negotiators will have to consult more with lawmakers and will have less flexibility than in previous trade talks.After the Senate gave final approval to fast-track legislation by a 66-30 margin, House Ways and Means Committee Chairman Bill Thomas (R-Calif.) said the conference process "should begin immediately so that the bill can be signed into law before the fourth of July." Despite that call, the conference is likely to be long and contentious, partly because of Thomas himself.
"I think it's going to be a long
conference," said Sen. Charles Grassley (R-Iowa), the Finance Committee's
Ranking Member. "When you're with Congressman Thomas, you have a long conference.
The more days we meet, the more opportunities he has to talk to the press,"
Grassley added. "I've learned to be very patient with Congressman
Thomas." But Grassley acknowledged that Thomas will lead the
effort to get changes that many Senate Republicans
want in the final legislation.
Thomas also is likely to spark friction with House Democrats on the conference
committee. The Democrats have chaffed under his chairmanship for
over a year and were angered by his handling of the fast-track bill that
passed the House.
Democrats are already preparing to fight to keep in the final legislation the Senate amendment sponsored by Sens. Mark Dayton (D-Minn.) and Larry Craig (R-Idaho). Although Dayton-Craig isn't likely to stay in the final bill in the same form it cleared the Senate, the conference may have to accept some language restricting future changes in U.S. trade laws.
Ahead of the conference, 105 Democrats
wrote to House Speaker Dennis Hastert May 23 calling for the Dayton-Craig
amendment to be retained in the bill and expanded to give the House the
same right as the Senate to object to any implementing legislation that
changes U.S. trade laws. Signers of the letter included Minority
Leader Richard Gephardt (D-Mo.) and Minority Whip Nancy Pelosi (D-Calif.),
as well as Ways and Means Democrats Charles Rangel (N.Y.), Robert Matsui
(Calif.) and Sander Levin (Mich.).
WORKING GROUPS HAVE TROUBLE MAKING PROGRESS IN FTAA TALKS
A combination of regional economic crises, elections and a lack of political-level directions has blocked five working groups negotiating the Free Trade Area of the Americas (FTAA) from making significant progress. As a result when Western Hemisphere vice ministers met in Panama the week of May 13, they were presented with 50-60 major unresolved issues that could have prevented the start of market access talks that were scheduled to begin May 15. To get negotiations back on track, the vice ministers set a new timetable for talks and adopted an "open architecture" approach to allow countries to make offers in any form they wish.
This "provisional step" aims to get the talks started but "is not tenable in the long run," said Clodoaldo Hugueney, Brazilian under secretary for trade. The working groups were instructed to come up with proposed solutions to the negotiating modalities in time for the next vice ministerial meeting in August in the Dominican Republic. The goal is to have all these issues resolved before the FTAA heads of state summit in Quito, Ecuador in November.The five working groups were supposed to be preparing the groundwork for market access negotiations on merchandise, services, agriculture, investment and government procurement. Once the mechanics are settled, the new timetable for talks calls for initial offers to be made between Dec. 15 and Feb. 15; requests for further improvements in the offers to be made from Feb. 16 to June 15; and then for additional revisions to be negotiated after that.
The working groups have failed to
agree on the basic approach to the negotiations. Differences remain
over whether tariff cutting should start with bound or applied tariffs;
whether service offers should be in the form of positive lists, which identify
specific sectors which will be opened, or negative lists, which open all
sectors except those specifically excluded; whether investment protections
cover both pre-establishment activities as well as post-establishment rights;
and how government procurement rules will apply to states and provinces.
ITC LOOKS TO HISTORY TO JUSTIFY INJURY THREAT IN LUMBER RULING
The International Trade Commission (ITC) had to dance around some conflicting data to justify its ruling that imports of softwood lumber from Canada "threaten" to injure U.S. industry. The commission's final written report relied on past history to support its conclusion that Canadian imports are likely to increase without the imposition of antidumping and countervailing duties and prices are likely to decline (see WTTL, May 6, page 3). The ITC pointed to previous periods when the U.S. and Canada didn't have bilateral agreements in place to control lumber imports as a predictor that a similar pattern is likely without restrictions.
"The evidence demonstrates that imports of softwood lumber from Canada have increased during periods in which there were no restraints on their entry into the U.S. market," the ITC report stated. It also noted that Canadian production capacity grew 10.5% from 1995 to 2001, while capacity utilization declined to 83.7% in 2001 after peaking at 90.5% in 1999. Thus, it found "a likely substantial increase in subject imports." Based on the May 16 report, Commerce moved quickly to issue its order to Customs to start collecting penalty tariffs as of May 22.In its threat determination, the ITC had to finesse the findings it made in ruling there is no current injury to the domestic industry from imports. On the crucial issues of "like product" and price depression, the commission said it found "at least a moderate degree of substitutibility between subject imports of softwood lumber from Canada and the domestic like product and that prices of different species affect the prices of other species." Nonetheless, while it examine six different softwood products, it could find direct price comparisons for only two.
Prices declined during the period
of investigation mainly because of an imbalance between supply, which kept
growing, and demand, which was stable. "The evidence indicates that
both subject imports and the domestic producers contributed to the excess
supply," the report concluded. The domestic industry's financial
condition deteriorated during the period of investigation due to declining
profits which resulted from declining prices, it found.
SERVICES INDUSTRIES COMPLAIN ABOUT RUSSIA'S WTO COMMITMENTS
Hopes for having Russia complete its accession to the World Trade Organization (WTO) by the next WTO ministerial in mid-2003 could flounder on Moscow's failure to make adequate offers to open its services markets. As President Bush was about to meet Russian President Putin in Russia May 23-25, U.S. services industries stepped up their effort to get services issues addressed in the talks the two leaders were to hold on the WTO process.
Ahead of the meeting, representatives of the motion picture, insurance, energy services, legal, and computer services industries complained about the lack of progress in the talks the U.S. and Russia are holding on specific market openings and in the WTO working party negotiating on Moscow's broader commitments to WTO rules (see WTTL, April 8, page 2). The services talks are far behind the market access talks for merchandise, they contend.In a letter to Bush, the Coalition of Services Industries asked the president to urge Putin "to help develop mutual services trade by taking a more expansive approach and making substantially improved services liberalization offers." In a separate letter to Russian Trade Minister Maksim Medvedkov, the Coalition provided a more detailed explanation of the areas where more commitments are needed and how opening these markets will help Russia.
* * * BRIEFS * * *
MTCR: BIS in May 20 Federal Register issued final rule revising MTCR controls based on results of September 2001 MTCR plenary meeting. Changes affect bulk graphite and unmanned air vehicles
CORRECTION: Name of Jon Dyck, Commerce's new chief counsel for export administration, was misspelled in WTTL, May 20, page 4.
CHAIRS AND TABLES: On 5-0 vote May 22, ITC made final determination that dumped imports of folding metal chairs and tables from China are injuring U.S. industry.
STEEL: U.S. May 22 blocked first attempt of WTO Dispute Settlement Body to establish panel to hear EU complaint against Washington's imposition of Section 201 safeguard tariffs on steel.
SUNSET: WTO dispute-settlement panel was established May 22 to hear Japan's complaint against U.S. "Sunset Review" ruling on corrosion-resistant flat carbon steel. This is first of several sunset challenges.
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.
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