Volume 22, No. 22 -- June 3, 2002

PUTIN PRESSES BUSH TO EASE EXPORT CONTROLS ON RUSSIA

The easing of U.S. export controls on Russia will depend on Moscow doing more to support American aims in the Wassenaar Arrangement, Commerce Secretary Don Evans suggests.  On returning from Russia after President Bush's trip there, Evans said there is no timetable for  completing a review of controls on Russia.  "We're asking them to work with us in the Wassenaar Arrangement.  We're encouraging their support," Evans told reporters May 28.   "I'll be interested to see what comes out of that," he said (see WTTL, May 20, page 1).

At a joint appearance with Russian President Putin at St. Petersburg University May 25, President Bush admitted that some of the barriers to trade with Russia are coming from the West and have to be eliminated.  "Export controls on high-tech goods are problematic," Bush said.  "We're now reviewing that in the United States," he added.  Bush's statement on export controls was part of a broader move toward improving trade relations with Moscow (see story below).

Putin said he and Bush discussed missile technology controls.  "We dedicated a substantial portion of our discussion time precisely to this issue, which I consider very important, if we are to remove many of the things that are obstacles in allowing high-tech to come to Russia," Putin said through an interpreter.  "These obstacles and limitations were placed upon us back in the days of the Soviet Union, and by their inertia continue on and on," he added.

The Russian leader pointed out that U.S. controls don't keep Russia from getting high-tech goods, they only force it to get them from other sources.  "Many of the products come into Russia from third countries -- from Europe, from Asia and not from the United States," Putin said.  "That's why a great amount of time was spent by President Bush and myself in trying to find ways to remove these obstacles," he continued.

In 2001, the Bureau of Industry and Security (BIS) handled 366 applications for exports to Russia, about 30% as many as were handled for China.  The average review time for these licenses was 72 days, just five fewer than the average for Chinese applications.   BIS approved 77% of those applications; denied 2% and returned 22% without action.
 

BUSH ADMINISTRATION GOES SOFT ON RUSSIA'S WTO COMMITMENTS

In almost every phase of trade relations, from export controls to poultry and from the World Trade Organization (WTO) to U.S. trade laws, President Bush's May 24-25 visit to Russia marked the launch of the Bush administration's new "be-nice-to-Russia" trade policy.  In joint statements and at public appearances, Bush and Russian President Putin hailed a new economic relationship that is intended to buffer disagreements over missile defense, proliferation and trade with Iran.

Rather than using the summit to push Putin to improve Russia's market-access offers in its WTO accession talks, Bush issued a statement with Putin saying they "reaffirm our commitment to working together to accelerate Russia's entry on standard terms."  Several U.S. industries, particularly in the services sector, had hoped Bush would use the meeting to make a stronger case for opening markets in the WTO accession process (see WTTL, May 27, page 4).

The phrase "standard terms" is "the new catchword being used by people in the administration," one trade lawyer noted. "It's almost as if they all sit around in the morning memorizing it," the lawyer added.

"Standard terms" suggests a much weaker goal than the Clinton administration set for China's WTO accession.  On numerous occasions before China reached its final WTO accession deal, then-U.S. Trade Representative (USTR) Charlene Barshefsky said Washington wanted China to join the trade body "on the basis of commercially meaningful commitments that provide greatly expanded market access and ensure compliance with WTO obligations."

During a joint appearance with Putin at St. Petersburg University, Bush said Russia's WTO accession starts "with having a president who thinks you ought to be in the WTO, and I think you ought to be in."   Accession "ought to be based upon the rules that every other nation has had to live up to.  Nothing harsher, nothing less harsh," Bush said.  Picking up quickly on Bush's statement, Putin quipped: "The president of Russia has to want to be a member of the WTO, and he said he's for it.  If that's sufficient, I'm in."

On returning from Russia after Bush's trip, Commerce Secretary Don Evans said the U.S. is "supportive in encouraging Russia's entry to the WTO, we have a working group working with them on that potential accession, but there are 144 countries in the WTO and everyone comes in under the same rules and the same standards."

Regarding the timing of Russia's accession, Evans had a mixed view.  "It's hard to judge the timing on it, but the main message is that the bar's the same for everybody.  We don't raise it for a country; we're not going to lower it for a country," he said.  Evans said "it could be realistic" for Russia's accession to be completed by the next WTO ministerial in Mexico in September 2003.  "It could be possible," he said.
 

END OF NME FOR RUSSIA WILL TRIGGER COMPLEX LEGAL PROCESS

The International Trade Administration's (ITA) widely expected decision to end Russia's nonmarket economy (NME) status, which it will make by June 14, will set the stage for a new legal battle over the future of existing antidumping orders and suspension agreements covering imports from Russia.  With the end of NME status, the suspension agreements in some cases may be terminated.  To avoid reverting back to the original provisional antidumping orders with their high margins, Moscow will have to negotiate new agreements.

As an alternative, Russian exporters may petition ITA to launch "changed circumstances" investigations to revise the existing orders based on prices and sales in Russia rather than the surrogate countries used in the original investigations.  Such investigations could take a year to complete, and a modified suspension agreement may need to be negotiated to cover imports during that time.

There are three suspension agreements in place for imports from Russia.  They cover hot-rolled steel, cut-to-length plate and fertilizer grade ammonium nitrate.  U.S. producers of those products are likely to fight to keep high dumping duties on those imports and to oppose significant modification of the suspension agreements, especially regarding import price levels.

"There is a question of how long suspension agreements negotiated with a nonmarket economy can exist once a decision is made that it is no longer a nonmarket economy," one trade lawyer said.   "Russia's nonmarket status is a relatively simple decision, but what comes with it will lead to all kinds of complications," he added.  Although a decision on Russia's NME status may be made by June 14, the exact effective date of the change could be put off to allow pending investigations to be completed.

President Bush announced the deadline for ITA's decision during talks with Russian President Putin in Moscow May 24.  Although he didn't reveal what the decision would be, opponents of the change say they're resigned to the decision going in Russia's favor.  The likelihood of ending Russia's NME status was telegraphed in an ITA ruling dropping NME status for Kazakhstan (see WTTL, April 1, page 3).

Perhaps not coincidentally, European Commission (EC) President Prodi, in Moscow May 29 for the annual European Union (EU)-Russia summit, announced the EU's decision to give Russia market-economy status.  One lawyer told WTTL that there is a suspicion in the trade community that the EU action was orchestrated with U.S. officials to give the Bush administration political cover for its decision.  Several members of Congress, including Democrats and Republicans, have urged ITA not to change Russia's status.  The lawmakers are concerned the switch will reduce U.S. leverage in WTO accession negotiations with Russia.

The EU's action will require legislation, which could take months to enact.  The decision appears linked to EU demands for Moscow to improve its WTO accession offers, particularly regarding the low prices it charges domestic energy users.  "The EU now looks forward to receiving Russia's improved offers of access to its markets in the coming week," the EC said.
 

WASHINGTON DOWNPLAYS RUSSIA'S RESTRICTIONS ON U.S. POULTRY

Another example of Washington's new "be-nice-to-Russia" trade policy is its attempt to lower the rhetoric against Russia's restrictions on imports of U.S. poultry.  After raising threats in March about the impact that Moscow's ban on U.S. poultry would have on bilateral relations and on Russia's accession to the WTO, Washington is now portraying the dispute as a commercial and administrative issue.  Although Russia has ended the ban officially, two shiploads of U.S. poultry reportedly are still not being unloaded in St. Petersburg.

Before President Bush left for his trip to Russia, Agriculture Secretary Ann Veneman said she had received assurances from Russian Agriculture Minister Aleksey Gordeyev that steps had been taken to restore normal trade in poultry and to allow the ships to be unloaded.  "We are cautiously optimistic that trading volume will expand in the near future," Veneman said in a statement.

But just after returning from Russia May 28, Commerce Secretary Don Evans told reporters that the last he had heard the two ships had not been unloaded.  "The last I heard, there were numerous issues that had to be resolved," he said.  Evans also demurred from making any new threats about the failure of Russians to resume the poultry trade.  With the formal ban lifted, Evans made it sound like the issue was now up to the American poultry industry to resolve.

Although the ban has been lifted, the Russians are still imposing administrative rules that keep changing and make U.S. firms reluctant to ship more poultry to Russia.  "The real proof is in the decisions that industry makes," Evans said. "Is the industry willing to invest capital in the export of poultry to Russia?  As I understand it right now that decision is no," he noted.
 

ITA MAY BE ONLY PARTLY IN COMPLIANCE WITH EX PARTE RULING

ITA is doing a better job of preparing written memoranda of meetings between key Commerce officials and participants in antidumping and countervailing duty cases, but is still too slow in putting them in the public case files, the agency has found.  Court of International Trade Judge Jane Restani in 2000 chided ITA for not putting memos of so-called ex parte meetings in the public reading files of trade cases and ordered it to issue a policy statement to remind ITAers about the legal requirement for preparing these memoranda.

A recently released ITA staff review of compliance with the policy statement issued after Restani's ruling (Slip Op. 00-137) found that all ex parte meetings conducted during the three-month period from December 2001 to February 2002 were properly memorialized in writing.  The report identified 41 covered meetings (see WTTL, Nov. 6, 2000, page 3).

While all required memos were written, they weren't always timely, ITA found.  Memos of meetings held close to the date of a preliminary or final determination were not always placed in the public file in time for other parties to react to them.  "Some parties asserted that their ability to fully participate is limited when a covered meeting with another party is conducted within a few days before a preliminary or final decision in a proceeding, thereby leaving insufficient time for other parties to then meet with the department," the report noted.

This complaint was aimed primarily at one case where the covered meeting "was held the day before the statutory deadline for making a final determination in the underlying investigation and for which the ex parte memoranda (sic) was not submitted to the official file until after that statutory deadline," the report stated.  "To avoid this situation, we remind staff to, where possible, avoid holding meetings covered by the ex parte memoranda provision within one week of a preliminary or final decision and to make sure that ex parte memoranda are submitted to the official record as expeditiously as possible," it added.
 

CANADA WILL FUND PR CAMPAIGN AGAINST LUMBER RULING

Canada isn't limiting its challenge of U.S. trade actions against Canadian softwood lumber to the international dispute-settlement process.  Ottawa May 27 said it would spend $20 million to support a public relations campaign in the U.S. to raise public awareness of the impact of the antidumping and countervailing duties on imports on softwood lumber on American consumers.  The government will give $17 million to the Forest Products Association of Canada to support its ongoing campaign and use another $3 million to expand the effort of the Canadian Embassy in Washington to advance the Canadian position on the issue.  "In Washington and elsewhere in the United States, we will aggressively voice our concerns about U.S. actions in sectors such as lumber, agriculture and energy," said Canadian Trade Ministers Pierre Pettigrew.

 * * * BRIEFS * * *

EXPORT ENFORCEMENT: BIS Under Secretary Kenneth Juster May 21 signed order denying export licensing privileges for 10 years to Jabal Damavand Trading Co. of Dubai, United Arab Emirates, for shipping U.S.-origin ferrograph analysis system to Iran in 1998.  Equipment was valued at $438,200.  Firm failed to respond to BIS charging letter, which cited it for illegal export and for evasion of EAR for deceiving U.S. manufacturer, who was told export was going to Dubai.

SARDINES: WTO dispute-settlement panel has sided with Peru in dispute with EU over rules prohibiting use of term "sardines" on canned sardines from Peru.  EU allows only species, Sardina pilchardus, which come from Atlantic, Mediterranean and North Sea to be labeled as sardines.  Peru's sardines are Sardinops sagax.  Panel agreed rules were technical barrier to trade.  It also said EU had obligation to reassess its regulation when international standard, Codex Stan 94, was revised to make sure EU rules still complied.

CHEMICALS: BIS in May 31 Federal Register issued final rules revising EAR chemical controls to implement control changes that Australia Group adopted at its October 2001 meeting.  New rules also impose licensing requirement on exports to Canada of human pathogens and toxins, animal and plant pathogens and genetically modified organisms controlled for CB reasons.  Among products covered in new rules are certain medical diagnostic kits, valves, freeze-drying equipment and protective gear.

NAFTA: After May 28 NAFTA Free Trade Commission meeting in Puerto Vallarta, Mexico, trade ministers from U.S., Canada and Mexico issued joint statement lauding success of NAFTA after eight years.  Trilateral trade among three countries has doubled to $622 billion in that time, they noted.  Ministers also said they were directing their staffs to continue examining implementation of investment dispute provisions of NAFTA Chapter 11 and "to identify shared priorities" concerning their operation.

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.