Volume 22, No. 5 -- February 4, 2002


The Bureau of Export Administration (BXA) is working to develop more standard conditions for attaching to approved export licenses for similar products, the agency told Congress in its annual report.  "With more than 99 percent of all approved applications being approved with conditions, having pre-approved conditions for specific exports will significantly reduce the time to issue a license," BXA said.  It already has boilerplate conditions that it applies to "deemed export" licenses and for night vision products.

In the fiscal year that ended Sept. 30, 2001, BXA received slightly more applications (10,884) than it did the year before (10,701) but completed fewer reviews (see table below).  Despite the 2% drop in the cases handled, the average review time for ruling on applications given interagency review increased to 44 days from 43 days in 2000.  In fiscal 2001, 86% of all applications were given inter-agency review.  The average review time for cases that didn't get examined by State, Defense or other agencies declined to 12 days from 15 days.


                    FY 2001                  FY 2000              FY 1999

TOTAL      10, 771                      11,039                  12,598

Approved     8,806 (82%)             8,861 (80%)         9,311 (74%)
Denied          225 (2%)                 398 (4%)             1,160 (9%)

RWA          1,740 (16%)             1,779 (16%)         2,124 (17%)

The drop in the percentage of license denials was attributed to the easing of export restrictions on Indian and Pakistani entities.  During the year, the agency also lifted sanctions on Serbia.  The continuing lifting of control levels for high performance computers also eased the load. The use of BXA's Web-based Simplified Network Application Process (SNAP) has nearly replaced the older Export License Application and Information Network (ELAIN) as the preferred method for submitting electronic licenses.  SNAP now handles 54% of all applications submitted to BXA and 88% of all electronic submissions.


American steel companies and steel workers will have to come up with a sharply reduced request for help in picking up the tab for health care benefits for retirees, if they want any chance of getting Congress to pass legislation to pay for those so-called "legacy" costs.  A federal bailout of those liabilities is a key element of a U.S. Steel plan for consolidating companies in bankruptcy protection and closing down excess capacity (see WTTL, Dec. 10, page 3).  The third leg of that stool is President Bush's expected imposition of Section 201 import relief for the most sensitive steel product lines.

Steel companies and the United Steelworkers have begun discussions on how much to cut the health benefits of retirees.  "They're trying to work something out to see if the federal government would be willing to participate in some kind of compromise that might not necessarily guarantee the same legacy package they now have, but one that would go a long way," Sen. George Voinovich (R-Ohio) told WTTL.
The steel industry's legacy costs include both pensions and health insurance for retirees.  If steel companies go bankrupt, their pensions would be covered by federal pension insurance programs.  "There is no question the government is going to have to pick up the cost of pensions," Voinovich said.  The level of pension payments, however, is likely to be less than company benefits.

The health care side of the legacy nut includes coverage for retirees who are under 65 and not eligible for Medicare and those over 65 who get their supplemental insurance and additional benefits paid for by their old employers.  The total tab for these health care legacy costs has been put at $965 million per year and up to $10-12 billion over several years.  Congress has rarely picked up health care costs for retired workers, with coal miners being the one example most often cited.  Proposals to pay drug and dental benefits for retired steelworkers could clash with the broader debate over extending drug benefits to all Medicare recipients and health benefits for other unemployed workers.

Rep. Peter Visclosky (D-Ind.) made four unsuccessful attempts to attach legacy amendments to legislation at the end of 2001.  His proposal would provide about $800 million annually for three years to help the industry consolidate.  Three of his attempts were rejected by the House Rules Committee and a fourth try was blocked by a point of order on the House floor.

Voinovich said he has talked to Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans to get administration support for picking up the legacy tab but has not gotten a commitment from them.  "The number one thing is to get the take from the administration, because if they are going to fight it, forget it," Voinovich said.


A potential deal to address textile and apparel trade from the Caribbean and help pass fast-track legislation faces the risk of being sunk by Democrats who don't want to give North and South Carolina Republicans an easy victory in an election year.  At issue is the promise House GOP leaders gave Rep. Jim DeMint (R-S.C.) to change the dying and finishing rules for Caribbean apparel in exchange for his vote for fast track (see WTTL, Dec. 10, page 4).

Senate staffers are reviewing proposals offered by the textile, apparel and retailing industries to counterbalance DeMint's changes with other benefits for the Caribbean, Africa, and Andean countries.  Among these suggested counterweights would be an increase in the amount of apparel that could be made with regional fabric, reversing a Customs rulings on knit-to-shape operations and changing other rules affecting such products as tee-shirts, bras and hosiery.
Some of these proposals came last summer when the dying and finishing issue first came up.  Changes that would benefit imports from Africa won the support of Ranking Ways and Means Member Charles Rangel (D-N.Y.).  Despite this backing, some Democrats reportedly question helping the House Republicans or the Bush administration keep their promise to DeMint.

Four North Carolina Republicans voted for fast-track, which Democrats say may make them vulnerable in the fall.  Other sources say only Rep. Robin Hayes (R-N.C.) faces a tough fight in the election.  Nonetheless, with the House so closely divided, even one seat could be critical to control of the House next year.  Sen. Jesse Helms (R-N.C.) may try to add DeMint's changes to the Senate version of fast track in an effort to help his fellow Tarheels.  An aide to DeMint said his boss hasn't seen any new proposals for implementing the changes he is demanding or for changing other apparel rules.  The promise to DeMint would require the dying, printing and finishing steps for U.S. textiles used in Caribbean-assembled goods to be done in the U.S.

There appears to be no doubt that House leaders will keep their promise to DeMint, but they will have to offer opponents of these changes, including Rangel and Ways and Means Chairman Bill Thomas (R-Calif.) something in exchange.  DeMint's aide said his vote for fast track was the offset for the change in the dying and finishing rule.  "If they want him to pay more, then we'll have to look at that," he said.  The issue was expected to be discussed among House and Senate Republican who attended a Jan. 30-Feb. 1 retreat in West Virginia.


Concern about losing any farm-state votes for fast-track legislation has again forced U.S. Trade Representative (USTR) Robert Zoellick to put off Australia' request for setting a specific date for starting negotiations on a Free Trade Agreement (FTA).  In two hours of talks with Australian Trade Minister Mark Vaile Jan. 30, Zoellick noted the "roader congressional atmosphere" hat is dictating the timing of the start of FTA talks, one senior trade official said.

Zoellick and Vaile agreed to have their staffs continue talks aimed at deciding what a potential U.S.-Australia FTA might cover.  That exercise, however, appears aimed at only marking time until Congress completes action on fast track, since the model for future FTAs has been set by ongoing talks with Chile and Singapore.  Labor and environment issues are not likely to be a concern, because Australia is an industrialized country that nearly matches U.S. standards.
Agriculture, however, is a major problem for an FTA deal.  Given the close vote on fast track in the House in December, the White House doesn't want to risk losing any support by opening talks with Australia until the legislation is signed.  The U.S. farm community has opposed a U.S.-Australia deal, pressing instead for farm issues to be dealt with only in the broader context of a new WTO round.  Once FTA talks actually start, they are expected to move quickly, although agriculture issue are likely to be the last and toughest ones resolved.

Australian agriculture competes directly with many of the most import-sensitive farm sectors in the U.S.  Thus, the talks are likely to face early trouble over the treatment of trade in beef, pork, sugar and dairy products.  There have also been complaints about Australian restrictions on table grapes from California because of worries about disease.

Vaile addressed some of these issues, along with Australian objections to the pending farm bill in Congress, in a separate meeting with Agriculture Secretary Ann Veneman.   They discussed the U.S. quota on Australian beef and U.S. complaints about Australia's sanitary-phytosanitary rules.  "There was a two-way flow as far as SPS issues were concerned -- you know issues the U.S. has with us and issues that we have with the U.S.," Vaile told reporters after the meetings.


Although no allegations of wrongdoing have been raised yet, the Senate Finance Committee Jan. 31 asked three trade-financing agencies to provide information on the support they've given Enron, the troubled energy firm, in the last 15 years.  The requests appear to be separate from questions that have surfaced about the help Vice President Cheney and Commerce Secretary Don Evans may have given the firm to resolve problems it had with contracts in India.

Finance is one of nearly a dozen committees looking into Enron's problems, and the letters suggest trade assistance could become the next track of Enron influence lawmakers will be following.  The joint letter from Finance Chairman Max Baucus (D-Mont.) and Ranking Republican Charles Grassley (R-Iowa), asked the Export-Import Bank, the Overseas Private Investment Corp. and the Trade and Development Agency for information dating back to 1985.
The committee wants each agency to submit a list of all Enron activities they have supported, including the amount of money involved, who made the decision to approve or disapprove the financing, any ex-parte communications from Congress, the administration or the private sector in support of the assistance and applications and information Enron submitted.  It also asked for minutes of meetings where the cases were discussed, if applicable.


Canada won't change its entire system for selling government-own timber to satisfy the demands of the U.S. lumber industry, Canadian Trade Minister Pierre Pettigrew declared in Jan. 31 speech to Forest Products Association of Canada.  He said he is still waiting for an official U.S. response to proposals Canadian provinces made in December for increasing the amount of timber sold at auction (see WTTL, Jan. 28, page 3).

"There are some hard-line interests in the U.S. who want to continue dealing with this issue as they have in the past," he said in his prepared remarks.  "If the [Bush] administration comes back with a proposal that Canadians can work with, then I am confident that we can move forward with a negotiated solution.  If they come back with the idea that they can change completely the way we manage public forests in Canada, then a negotiated solution will not be possible," he said.


In search of an alternative to the million theoretical operations per second (MTOPS) metric for controlling exports of high-performance computers (HPC), the Bush administration is examining the application of HPCs as a factor for license requirements.  In the report President Bush sent to Congress in December explaining his decision to raise the HPC control level to 190,000 MTOPS, the White House said the administration "has identified a number of very high-end national security applications that require computational levels well above 190,000 MTOPS."

Computers above that level "are required for certain cutting-edge conventional weapons applications, such as, significant increases in grid resolutions for modeling of ocean currents and the ocean floor for submarine operations; simulation at the billion (vice million) atom level of the fracture properties of new ceramic materials for armor; modeling in 3-D (vice 2-D) of impacts on reinforced bunkers for development of better bunker penetrators; and modeling of air/water flows over an entire aircraft or vessel, as opposed to merely discrete parts, in high-speed maneuvers," said the report obtained by WTTL.
"The administration is examining the feasibility of protecting our ability to execute these unique applications through more focused controls," it added.  But the report noted that many of the most advanced uses of HPCs require other technology and equipment to be useful.  "The computer is only one element," it said.  Countries also need to have machine tools, composite materials, manufacturing expertise, integration knowledge, and extensive prototype testing.

 * * * BRIEFS * * *

USTR: David Spooner, press secretary to Rep. Sue Myrick (R-N.C.), expected to be named chief textile negotiator.  He was among candidates from start of Bush administration.

EXPORT ENFORCEMENT: Japanese national Hideo Nakagawa was arrested in Los Angeles Jan. 31 on warrant from grand jury that indicted him and Hakko, Ltd. of Tokyo on charges of conspiring to export Generation II night vision equipment without approved license.

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.