Volume 22, No. 39 -- October 7, 2002

Posted Monday, October 7, 2002 12:00 am

This Week:

* Washington preparing concept paper for WTO talks on trade rules
* U.S. firms in Vietnam support its market-economy designation
* U.S.-Chile FTA negotiators review new proposals
* Morocco, Central American FTA talks to start early in 2003
* Australia FTA negotiations will wait for next round
* China commission proposes more aid to help Beijing meet WTO obligations
* ITA's privatization policy in CVD cases gets court okay
* Briefs: Export enforcement, Miscellaneous tariffs, Barium Carbonate, Wire Rod, Ex-Im Bank.

WASHINGTON WILL FOCUS ON TRADE DISTORTIONS IN WTO TALKS ON RULES

The U.S. will urge Doha Round negotiators to focus on the underlying causes of unfair trade rather than on changing current WTO rules, according to Commerce Assistant Secretary for Import Administration Faryar Shirzad. In a "concept paper" Washington will submit at a coming meeting of the Doha rules negotiating committee, the U.S. will emphasize the need to make sure remedial trade mechanisms, such as antidumping and countervailing duty laws, are functioning properly and transparently, Shirzad told a conference in Washington Oct. 2.

The approach the U.S. will take "has been reflected in some of the work we have been doing at the OECD on steel," he explained. In those talks, the U.S. has called on other countries to join it in seeking to eliminate distortions in the steel sector, including subsidies, anticompetitive behavior and lack of market access. "That approach is a window into the type of approach we hope to take" on market disciplines in the Doha Round, Shirzad said.

In addition, the U.S. will stress the importance of procedural fairness and transparency, seeking to get other countries to adopt the administrative procedures the U.S. follows. Another part of the concept paper will address the effectiveness of remedial actions, particularly circumvention of orders. That was an unfinished item from the Uruguay Round, Shirzad noted. The U.S. also will seek to address the adverse rulings that have come from dispute-settlement panels and the WTO Appellate Body. These rulings have drawn complaints from members of Congress and especially from Finance Committee Chairman Max Baucus (D-Mont.). Shirzad said the administration will consult with Congress before it presents its paper in the talks.

U.S. FIRMS ARGUE FOR VIETNAM'S MARKET ECONOMY STATUS

American companies operating in Vietnam have rallied in support of Hanoi's request to be considered a market economy in the current antidumping investigation of imports of frozen fish fillets from Vietnam. At the same time, the Catfish Farmers of America (CFA), which filed the complaint, has asked the International Trade Administration (ITA) to launch a "critical circumstances" investigation of the imports, claiming they have surged since the case was filed.

In a letter filed in response to ITA's request for comments on whether Vietnam should still be considered a nonmarket economy (NME) in the investigation, the American Chamber of Commerce in Vietnam detailed the current conditions in Vietnam. American businesses know a market economy when they see it, and Vietnam is just as much a market economy as many of the economies the United States classifies as market economies," it noted.

The Amcham cited a long list of U.S. companies that are now operating in Vietnam. These include Coca-Cola, Citibank, American International Group, IBM. Motorola, HP-Compaq, Mobil, Shell, and J. Walter Thompson, as well as law firms such as Baker & McKensie, White & Case and Coudert Brothers. "Vietnam allows foreign investment in all sectors of the economy except for limited areas that are specifically restricted or prohibited," the organization pointed out.

American Standard told ITA it has been operating a joint venture business in Vietnam since 1997, producing toilets and bathroom fixtures. It said it has not faced problems with exchange rate conversion needed to pay for the import of raw materials. Since it does not do business locally in dollars, its Vietnam subsidiary "must and does exchange Vietnam Dong for U.S. dollars for these current account transactions," it said. "No prior government approval is needed and the process is simple and often done electronically," it added.

American Standard also claimed that wages are market driven. It said wages have been rising above Vietnam's minimum wage requirements as more foreign firms have invested in the country and competition has grown for experienced workers. "In fact, qualified labor shortages in areas such as sales, marketing and finance are driving wages higher at accelerating rates and causing significant retention problems," the company told ITA.

New York Life Insurance International said it entered Vietnam in December 2000 after the U.S. and Vietnam reached their Bilateral Trade Agreement (BTA), which guaranteed market access for U.S. life insurance firms. The agreement is supposed to lift foreign equity limitations on joint ventures by 2006. "However, the government of Vietnam has allowed foreign wholly owned insurance subsidiaries in advance of that time frame," it wrote.

U.S. PROPOSALS FOR CHILE MAY BE TOO MUCH, TOO LATE

The U.S. and Chile may not be able to overcome the time they lost in negotiations on a Free Trade Area (FTA) while waiting for Congress to enact fast-track negotiating authority. At the latest talks in Atlanta Sept. 26 to Oct. 2, the U.S. presented an armful of new proposals for moving the talks forward, but the volume of new offers and the time it will take Chile to respond could push completion of the talks off until next year (see WTTL, Sept. 16, page 1).

One of the main tasks facing Chile is "how to process all the information we have received and decide where we go from here," one Chilean source told WTTL. "We are reaching the point in the negotiations where everyone is looking over their shoulders," he added. "We want to be very cautious how we move forward." The Chilean negotiating team returned to Santiago after the Atlanta meeting and is working "round the clock" to prepare responses to the U.S. proposals for the next set of talks in Santiago the week of Nov. 4, he said.

At the latest talks, the U.S. presented new proposals on investor-state investment disputes, agriculture, and government procurement. It offered ideas on how to address labor and environment issues but no text. The Chileans also presented offers on agriculture and government procurement. The U.S. proposal on investor-state disputes attempted to build on the existing provisions of Chapter 11 of the NAFTA, the Chile-Canada FTA, and guidance Congress gave in the Trade Act of 2002, according to Assistant U.S. Trade Representative Regina Vargo, who led the U.S. negotiating team.

The American proposal on investor disputes calls for more openness and transparency in these cases, including the public availability of documents, an expedited process that could lead to summary dismissal of a complaint, a way to treat frivolous suits, and clarification of the legal standards for expropriation and compensation, particularly regarding the interpretation of direct and indirect expropriation. The proposal also seeks to assure that foreign investors in the U.S. don't have greater rights than U.S. citizens. Negotiators also discussed the possibility of a side letter that would commit the two sides to possible negotiations in three years on the creation of an appellate mechanism to review decisions.

The discussions on labor and environment focused on language that would require both countries to enforce existing laws and not "in a manner that affects trade," Vargo said. "That is our focus moving forward," she added. There is still no written text on how the U.S. or Chile would enforce a panel finding which determined either country wasn't enforcing its laws properly.

In the agriculture area, the U.S. presented proposals for phasing out import restriction on four baskets of products. Some farm goods would see quotas and tariffs eliminated immediately, while others might be liberalized in four years, eight years or in an undefined period. Under fast-track legislation, the U.S. must justify any deal affecting the most-import-sensitive agriculture products. For some of these, the U.S. may seek to extend market opening over 10 to 15 years.

U.S. TO LAUNCH FTA TALKS WITH MOROCCO, CENTRAL AMERICA

The U.S. will formally start FTA talks with Morocco and five Central American countries after Jan. 1, 2003, USTR Robert Zoellick informed Congress on Oct. 1. Complying with the pre-negotiation notification requirements in the fast-track provisions of the Trade Act of 2002, Zoellick also provided lawmakers with an outline of the goals the U.S. will seek to achieve in the talks.

Most of the listed goals were merely general statements of objectives which are similar to the aims in the FTA talks with Chile and Singapore and in other trade negotiations. No specific problems were identified (see WTTL, July 15, page 4). The U.S. has already held several rounds of talks with representatives from Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua in preparation for full-blown FTA negotiations.

AUSTRALIA WILLING TO WAIT IN FTA QUE, TRADE MINISTER CLAIMS

With Washington's FTA negotiating plate filling rapidly, Australia has become resigned to the fact that it will have to wait its turn before it can begin bilateral trade talks with the U.S. In talks with USTR Robert Zoellick Oct. 2, Australian Trade Minister Mark Vaile continued to press the case for a U.S.-Australia FTA, but came away with only a commitment that such talks were on the Bush administration's agenda for future negotiations.

Statements from Zoellick and the White House have shown "that there is a consistency in the order of countries that have been identified as prospective and possible bilateral FTA partners," Vaile told reporters after meeting with Zoellick. "It seems to me that the administration is following fairly well along that consistent outline of the countries that they identified," he added. "If you look at that, Australia is starting to filter towards the top in the that regard," Vaile said.

COMMISSION WANTS TO HELP CHINA'S WTO COMPLIANCE

The U.S. needs to help China develop WTO-consistent laws and regulations and train its bureaucracy to enforce them, urges the Congressional-Executive Commission on China in its first annual report issued Oct. 2. Created in 2000 legislation granting China permanent-normal-trade-relations (PNTR) status, the commission says other countries, including the European Union (EU), are providing more technical aid to Beijing and could gain an advantage over American companies, if the Chinese adopt their forms of regulation and trade administration.

The commission notes reports that the EU may be planning to spend $100 million in technical assistance to China in coming years. The PNTR legislation authorized U.S. support for technical assistance to China through Commerce's Commercial Law Development Program (CLDP), but Congress never funded the program. The commission calls on Congress to appropriate the funds. It also urges the Bush administration to develop a comprehensive plan for providing such assistance.

The report identifies continuing labor, religious and human rights violations in China, but takes a more measured approach in trying to get Beijing to stop is persecution and restrictive practices. While congressional members of the commission admit that China's human rights performance has slipped since adoption of PNTR, co-Chairman Doug Bereuter (R-Neb.) says the commission "avoided extreme language" in an effort to seek a more cooperative relationship with China.

COURT SUPPORTS NEW ITA VIEW ON TREATING PRIVATIZED INDUSTRIES

Court of International Trade (CIT) Judge Judith Barzilay has given her blessing to a new approach ITA has adopted for determining whether subsidies given to a government-owned entity pass through to its new owners after it goes through privatization. Ruling (Slip Op. 02-115) on the ITA's remand determination in a CVD case against carbon steel plate from France, Barzilay said the agency correctly followed her remand instructions and looked at the "facts and circumstances" in the privatization of French steel producer Usinor.

ITA's treatment of the Usinor privatization has gone through several rounds of legal challenge. Its original methodology was rejected by the Court of Appeals for the Federal Circuit in 2000 in the case of Delverde StL v. U.S. The CIT ruled against ITA's first attempt to correct its procedures, and sustained its second attempt despite opposition from U.S. steel producers.

The rejection of ITA's old methodology by two U.S. courts adds credence to a WTO dispute-settlement panel's parallel findings against the U.S. approach to privatization. The agency initially ruled that earlier subsidies passed through to Usinor's new owners despite privatization. It imposed a CVD of 6.86%. The circuit court declared that ITA couldn't automatically consider the subsidies as passing through just because the new firm had some of the same owners as the old firm. It said the agency had to look at the specific facts and circumstances of the privatization. On remand, ITA found that the overwhelming majority of purchasers of the privatized firm had paid full fair-market value. It recalculated the subsidy to be zero.

* * * BRIEFS * * *

EXPORT ENFORCEMENT: BIS has issued temporary denial order blocking export privileges of Yaudat Mustafa Talyi of Slidell, La., and two of his firms, International Business Services and Top Oil Tools, because of alleged export of oil field equipment to Libya and Sudan without BIS or OFAC licenses.

MISCELLANEOUS TARIFFS: Chances are dimming for congressional action on miscellaneous tariff bill before lawmakers adjourn in next few weeks. Senate Finance Committee canceled markup of Senate version Oct. 2. "It was canceled because there could be too many mischievous amendments," Finance Chairman Max Baucus (D-Mont.) told WTTL. These amendments were not related to trade, he said.

BARIUM CARBONATE: In response to petition filed by Chemical Products Corp., ITC and ITA have initiated antidumping investigation into imports of barium carbonate from China.

WIRE ROD: ITC Oct. 2 made final ruling that dumped imports of carbon and alloy steel wire rod from Brazil, Canada, Indonesia, Mexico, Moldova, Trinidad and Tobago, and Ukraine, as well as subsidized imports from Brazil and Canada are injuring U.S. industry. It found imports from Germany to be negligible. On 4-1 vote it made negative determination of critical circumstances on imports from Moldova and Ukraine. Meanwhile, Canadian steel producer Ispat Sidbec has asked for NAFTA Review Panel to review ITA's final countervailing duty ruling.

EX-IM BANK: Senate Banking Committee moved quickly with confirmation hearing Oct. 4 on nomination of Philip Merrill to be new Ex-Im president and chairman. President Bush sent nomination to Senate Sept. 30. Committee will try to vote on confirmation week of Oct. 7. Merrill, whose name surfaced early as potential candidate to succeed John Robson, who died in March, is chairman of board of Capital-Gazette Communications, which publishes several regional newspapers and Washingtonian magazine. Nomination has business community support and is considered noncontroversial, according to committee staff.