Volume 23 No. 8 -- February 24, 2003

In This Issue:

* Big Firms Still Dominate Exporting, Census Reports
* Customs Gives Out $329 Million in Byrd Amendment Money
* Zoellick Hits Japan on Doha Round Agriculture Positions
* U.S. to Launch New Initiative on Trade and WTO with China
* Exports Drop for Second Year in Row, As Deficit Soars
* Briefs: Cuba, Cotton, OFAC, Sanctions, State, Ex-Im
 

BIG FIRMS STILL DOMINATE EXPORTING, CENSUS REPORTS

Years of effort by Commerce, the Small Business Administration and other government agencies to increase the number of small and medium-size firms that are exporting has done little to change the basic makeup of the U.S. exporting community.  In terms of value, 7,548 large firms with 500 or more employees accounted for 71% of all goods exports in 2001, the latest year for which data are available, according to a new Census Bureau report.

Among manufacturers the concentration is even greater with the top 100 exporters accounting for 54.5% of the value of manufactured exports.  Census classifies exporters as manufacturers, wholesalers and all others, which includes services firms and freight forwarders.  When all these groups are counted together, the top 100 companies shipped 41% of all U.S. goods exports in 2001, Census reported.

Overall, Census identified 238,284 exporters in 2001.  Of these, 154,845 also exported in 2000, suggesting that many firms are only occasional exporters.  It classified 212,568 exporters as small with 100 or fewer employees.  These companies contributed just 21% to total counted exports.

Most exporters (62.1%) export to only one country.  Another 23.9% export to two to four countries.  Just 1.5% of exporters can be considered global traders with exports to 25 or more countries.  Export destinations are also concentrated with 100,515 firms exporting to Canada, 45,565 to Mexico, 39,107 to the United Kingdom, 29,166 to Japan and 26,228 to Germany.
 

CUSTOMS GIVES OUT OVER $329 MILLION IN BYRD AMENDMENT MONEY

Congressional opposition to repealing the Byrd Amendment has a price tag.  It's the $329 million Customs distributed to U.S. petitioners in antidumping and countervailing cases in the year that ended Sept. 30, 2002, with $1.7 billion more waiting for future distribution.  The largess of the Byrd Amendment will make it difficult for lawmakers to repeal the law to comply with a ruling that declared it inconsistent with World Trade Organization rules (see WTTL, Feb. 10, page 4).

Customs Feb. 19 released the tally of funds it disbursed last year, and as expected the largest number of payments -- but not the biggest dollar amount -- went to steel firms that are the most active users of U.S. trade laws.  Steel companies divided more than $38.6 million in Byrd money and have millions in claims still pending.

Rather than the "legacy" costs that steel producers carry for retired workers, Byrd funds could become a legacy annuity for many of them.  This money is sweetening the current merger frenzy in the industry, since successor firms will be eligible to receive the funds for acquired companies.  Payments so far have gone to makers of carbon and stainless steel as well as forged products and pipe.  Collected duties are distributed under Customs regulations, which divide up the funds among various petitioners in a case once the tariffs are liquidated.

 Steel wasn't alone in garnering the benefits of the law, formally known as the Continued Dumping and Subsidy Offset Act of 2002.  Also getting money were producers of pasta, mushrooms, fibers, chemicals, honey, ball bearings, ferroalloys, magnesium and cement.  Twenty seven crawfish farmers divided nearly $7.5 million in duties on crawfish tail meat from China, with Atchafalaya Crawfish Processors getting the largest single payment of $793,382.

Among the biggest individual winners under the law were ball bearing firms Torrington and Timken, which received $71.4 million and $53.9 million, respectively, in fiscal 2002 from several different cases.  Micron Technology was paid $14.4 million from dumping tariffs of DRAMS from Korea.  DuPont got $7.1 million from antidumping duties on aramid fibers from the Netherlands.  Seven candle manufacturers split $69.5 million in antidumping duties on petroleum wax candles from China, with Candle-Lite alone receiving $39.2 million.  Newell Rubbermaid received $1.2 million and Regalware $1.1 million from duties on imports of stainless steel cookware from Korea.
 

ZOELLICK HITS JAPAN ON DOHA ROUND AGRICULTURE POSITIONS

While the European Union (EU) is usually seen as the main stumbling block to progress on agriculture issues in the Doha Round, U.S. Trade Representative (USTR) Robert Zoellick turned the spotlight on Japan Feb. 16 following a frustrating mini-ministerial of trade officials in Tokyo.  The Japanese "resist tariff cuts in agriculture even though Japanese manufacturing and service industries could benefit a great deal from a spark in global trade," Zoellick told a press con-ference.  "In our view, they're sacrificing Japan's strength on the alter of rice," he complained.

 A key agenda item at the mini-ministerial was how to move the World Trade Organization (WTO) agriculture talks forward and especially whether to use a draft negotiating proposal presented by the chairman of those talks, Hong Kong's ambassador to the WTO, Stuart Harbinson (see WTTL, Feb. 17, page 4).  Although the draft has been criticized for both going too far and not far enough, the ministers agreed the text "will be the catalyst for future work," Zoellick reported.

Japanese resistance to farm reform has put it on the EU's side in its complaints about the Harbinson draft.  "Japan has had its economic position in trade negotiations held hostage to 2% of the economy and 1.8% of its population," Zoellick said.  He focused particularly on Tokyo's 500% to 1000% tariffs on rice.  "Japan needs to face the reality," he declared, noting that "most of the Japanese farmers are not full-time farmers."   The WTO system would allow Japan to support them with payments as long as the aid wasn't tied to production, he added.
 

U.S. TO LAUNCH NEW INITIATIVE ON TRADE AND WTO WITH CHINA

The U.S. is set to announce a new initiative with China aimed at speeding up its implementation of World Trade Organization (WTO) commitments and creating an alliance in Doha Round negotiations. The new "trade dialogue" will try to address specific complaints that have arisen about Beijing's trade-opening measures, while also supporting Washington's effort to isolate the EU and Japan in the WTO talks.  In Beijing Feb. 17, USTR Robert Zoellick said the new program will seek to "roll up our sleeves and get into both bilateral issues and some global issues."

One area of focus will be an effort to get China's support for the U.S. "zero-tariff" proposal in the Doha talks.  "While China is absorbing its current tariff reductions on manufactured goods, I was urging them to look towards a longer time horizon because, under our proposal for the WTO to eliminate all tariffs in ten years, within ten years a very competitive China would be able to take advantage of this," Zoellick said.

He also noted that China's growing software and information technology industries have the same interest in protecting intellectual property rights as U.S. firms.  "This is an area where our businesses will work with us, and the Chinese government and Chinese businesses share the same interest," he said. China in 2002 became the third largest source of imports for the U.S., surpassing Japan and ranking behind Canada and Mexico (see story below).
 

EXPORTS DROP FOR SECOND YEAR IN ROW, AS DEFICIT SOARS

Consumer spending not only bolstered the U.S. economy in 2002, it also helped sustain global trade, according to trade figures for last year released by Commerce Feb. 20.  Imports of consumer goods, as defined by Census and not counting autos, jumped 8% from 2001, accounting for an extra $23.3 billion in imports. They far outpaced the growth of imports in general, which grew just 2%.  With the U.S. manufacturing sector in a slump, imports of capital goods and industrial supplies  actually dropped 3%.

The usually large U.S. surplus in services trade shrank almost $20 billion, because the 4% increase in services exports to $290 billion didn't grow as fast as services imports, which jumped 14.7% to $241.3 billion.  As a result, the services surplus couldn't offset as much of the goods deficit as in the past. The decline in goods exports and the growth of goods imports produced a $484.4 billion merchandise deficit and a record goods and services deficit of $435.2 billion (see table below).

Exports in almost every sector declined last year, with pharmaceuticals being one of the few on the plus side.  But the increase in drug exports was over-shadowed by the 21% increase in imports.  Drug imports have been driven primarily by increased shipments from Ireland where major pharmaceutical companies have set up operations to take advantage of corporate tax breaks and easier access to the EU.

Exports of high-tech goods, also called advanced technology products, slid 10.5% in 2002 to $178.6 billion, as imports stayed nearly level at $196 billion.  This caused the usual U.S. surplus in these goods to shift to a $17.5 billion deficit.  Ironically, two sectors that had import restrictions imposed in 2002, steel and lumber, both saw imports grow last year, with steel imports rising 3.7% and wood product imports jumping 12%.

 The U.S. merchandise trade deficit with China moved solidly into first place as the largest misbalance at $103 billion.  The deficit with Japan was nearly unchanged at $70 billion.  Economic problems in Argentina, Brazil and Venezuela helped nearly double the U.S. deficit with Latin America to $18 billion.  The slow economy in the EU contributed to an increase in the U.S. deficit to $87 billion from $61.3 billion.

Preliminary 2002 v. 2001 U.S. Merchandise Trade Figures
(in billions)

	2002  Exports	2001  Exports	%  Change	2002  Imports	2001  Imports	%  Change
TOTAL	$682.6	$718.8	-5%	$1,167.0	$1,146.0	+2%
BY COUNTRY/REGION
Canada	160.8	163.4	-1.6	210.6	216.3	-2.6
Mexico	97.5	101.3	-3.7	134.7	131.3	+2.6
European Union	143.7	158.8	-9.5	226.1	220.1	+2.8
Germany	26.6	30.0	-11.2	62.5	59.1	+5.8
France	19.0	19.9	-4.3	28.4	30.4	-6.6
United Kingdom	33.3	40.7	-18.3	40.9	41.4	-1.2
Japan	51.4	57.5	-10.5	121.5	126.5	-4
China	22.1	19.2	+15	125.2	102.3	+22
NICs*	69.8	72.0	-3	91.9	93.2	-1.4
South/Central America	51.6	58.2	-11	69.5	67.4	+3.2
BY SECTOR
Agriculture	49.5	49.4	--	49.7	46.6	+6.5
Aircraft, parts, engines	60.0	62.2	-3.4	25.7	31.4	-18
Autos	78.4	75.4	+4	203.9	189.8	+7.5
Clothing	5.5	6.5	-15.7	63.8	63.9	--
Chemicals-Organic	16.4	16.4	--	30.2	29.7	+1.7
Chemicals-Inorganic	5.5	5.6	-1.8	6.0	6.2	-2
Crude Oil	.09	.19	-53	77.4	74.3	+4
Iron & Steel	5.3	5.5	-4	12.9	12.4	+3.7
Metalworking Machines	5.2	5.8	-11	5.9	7.4	-20
Pharmaceuticals	17.3	16.6	+4.6	40.6	33.5	+21
Semiconductors	42.3	45.1	-6	26.0	30.4	-14.4
Telecommunications	22.2	27.9	-20	23.2	24.6	-6
Wood Products	1.6	1.6	--	7.9	6.7	+12

*NICs= Hong Kong, Korea, Singapore and Taiwan

 * * * BRIEFS * * *

CUBA: Five proposals to liberalize trade and relations with Cuba were dropped from Omnibus Spending bill Congress enacted Feb. 13 because of veto threat from White House, claims Cuba Policy Foundation.  Provisions would have eased travel restrictions, controls on personal remittances, financing of farm trade, as well as fund joint antinarcotics efforts and impose more accountability on OFAC travel licensing.  "Pressure from the House congressional leadership and a veto threat from the White House over the Cuba language led the spending bill's negotiators to drop all of the Cuba language," Foundation charged.  Meanwhile, Sens. Max Baucus (D-Mont.) and Chuck Hagel (R-Iowa) introduce bill (S. 403) Feb. 13 to lift Cuban trade embargo.

COTTON: U.S. Feb. 19 used its right to block initial effort of WTO Dispute Settle-ment Body to establish panel to hear Brazil's complaint against U.S. subsidies for upland cotton producers.  Panel likely to be formed at next DSB meeting.  Brazil claims Washington provided $4 billion in subsidies for cotton in marketing year ending July 31, 2002, while production during year was only $3 billion.

OFAC: Treasury's Office of Foreign Assets Control published final rules in Feb. 11 Federal Register on procedures it will follow for weekly release of information on civil penalties and settlements it reaches with firms.  Agency will release all penalty information starting from March 2002.  Information on settlements from May 1998 to March 2002 was released previously under court ruling in Freedom of Information Act suit and is available on OFAC's website.

SANCTIONS: State in Feb. 19 Federal Register imposed AECA and EAA sanctions on NEC Engineers Private and its president, Hans Raj Shiv for alleged activities related to proliferation of chemical and biological weapons.  Entities had been operating in India but have moved to Middle East and Eurasia, State said.  Sanctions include bar to U.S. government procurement and import into U.S.  "The Indian government has been conducting its own investigation into the activities of NEC and affiliated companies, has taken steps to try to prevent further proliferation exports, and has arrested two principals of the company," State said in statement.

STATE: In Feb. 14 Federal Register, State formally realigned its Office of Defense Trade Controls (ODTC), eliminating title of director of ODTC.  New structure within Bureau of Political-Military Affairs will be headed by deputy assistant secretary for defense trade controls, who will also serve, at least for now, as managing director of defense trade controls.  Managing director will head Directorate of Defense Trade Controls (DDTC).  Under this position will be four offices, each headed by director: Office of Defense Trade Controls Management (ODTCM), Office of Defense Trade Controls Licensing (ODTCL), Office of Defense Trade Controls Compliance (ODTCC) and Office of Defense Trade Controls Policy (ODTCP).  Changes became effective Jan. 29.

EX-IM: Under MOUs signed by Bank and ITA, callers to Ex-Im's 1-800-565-EXIM seeking trade financing advice will be connected directly to ITA's Trade Information Center.  Ex-Im will assign staff to TIC to answer questions about Bank programs.

CORRECTION: Proposed BIS Office of Technology Evaluation will be known as OTE not OTA, as gremlin inserted in story in WTTL, Feb. 10, page 1.

Copyright 2003 by Gilston Communications Group.  Reproduction or retransmission in any form is prohibited.  Washington Tariff & Trade Letter is published weekly 50 times a year.  Email: Info@WTTLonline.com