USBIC advisory: Domestic manufacturers say new Democratic trade bill will stem foreign trade cheating; key loopholes remain

By U.S. Business and Industry Council July 22, 2008

U.S. Business and Industry Council (USBIC) recommended quick passage of a new bill introduced by senior House Democrats to improve the enforcement of U.S. trade agreements and trade laws. But the Council, most of whose 1,550 members are small and midsize manufacturers, added that several provisions should be tightened still further. And Council President Kevin L. Kearns emphasized that more fundamental changes are urgently needed to turn U.S. trade policy into an engine of domestic growth and higher living standards for all Americans once again.
The Trade Enforcement Act of 2008, sponsored by House Ways and Means Committee Chairman Charles Rangel (D.-N.Y.) and Rep. Sander Levin (D.-Mich), chairman of the Ways and Means Trade Subcommittee:
(1) Eliminates some barriers to the use of U.S. trade laws meant to protect American producers from predatory foreign trade practices—especially those engaged in by China and other Nonmarket Economies;
(2) Establishes new sanctions for imports that endanger Americans’ health and safety; and
(3) Creates new government offices to use World Trade Organization dispute-settlement mechanisms more effectively; monitor and respond more actively to foreign trade barriers and other predatory practices; and improve protection of U.S. intellectual property rights.
According to Kearns, “The Rangel-Levin bill contains many useful ideas for helping American victims of foreign trade cheating gain the protection and compensation they deserve. These provisions are essential for maintaining a world-class productive base in America. The bill would also finally require the U.S. government to oppose the World Trade Organization’s longstanding campaign to expand its powers over sovereign governments illegally, and to weaken U.S. trade laws unjustifiably.”
Yet Kearns observed that the bill leaves important enforcement gaps in U.S. trade policy, and that the Council looks forward to working with the bill’s sponsors to address them. For example, the bill increases Congress’ authority over the U.S. Trade Representative’s agenda for eliminating individual foreign nontariff trade barriers. It also creates a new Congressional Trade Enforcer to conduct its own investigations into these barriers and trigger Executive Branch action. Yet Kearns noted that any use of sanctions to secure trade diplomacy goals vis-a-vis WTO members—including the bill’s restoration of the Super 301 procedure—can still be overturned by the WTO’s dispute-resolution process.
Similarly, the creation of a new General Counsel for the Trade Representatives’ office does not per se guarantee that the United States will file more cases at the World Trade Organization, nor that America’s WTO case record will improve. Kearns described as “laudable and overdue” the bill’s efforts to halt the WTO’s overreaching and to strengthen U.S. trade remedies. Such proposals could be valuable in preventing U.S. trade negotiators from agreeing to further restrictions on U.S. trade laws at the current Doha Round of world trade talks, Kearns said.
Yet he noted that the bill does not change the United States’ lack of internationally recognized legal authority to nullify WTO dispute-resolution decisions or to change its procedures unilaterally. And while the bill does limit a president’s discretion in denying relief to domestic industries in China safeguard cases, the chief executive still retains considerable wiggle room.
Although the bill establishes new sanctions for enterprises whose products repeatedly violate U.S. health and safety laws, Kearns pointed out that the application of sanctions at the firm level could be circumvented by use of alternate suppliers and even shell companies %%MDASSML%% especially in countries with either threadbare or politicized legal systems like China. The same problem could undermine the bill’s Import Safety Program, which seeks to identify reliable importers and producers of goods that pose potential health and safety hazards, but which only reviews the records and performance of such companies every five years.
Kearns also noted that the biggest problems draining domestic manufacturers’ global competitiveness, fueling America’s dangerously high trade deficits, and undermining employees’ wages and benefits, remain unaddressed by Congress or the Administration.
Said Kearns, “Even if the Rangel-Levin bill becomes law, the imperative of sweeping trade policy overhaul will remain as strong as ever. Domestic companies and their employees are still being devastated by the NAFTA-spearheaded transformation of U.S. trade policy into an offshoring policy. They still face dynamic mercantilist systems throughout Europe and Asia, which routinely thwart the piecemeal, slow-moving approach of America’s trade law system. They still face discriminatory foreign Value-Added Tax arrangements, which may generate nearly half of the U.S. trade deficit. And they still face currency manipulation from China and Japan in particular.”
Kearns concluded, “The issue of currency manipulation is in the top tier of issues that America’s domestic manufacturers want addressed. The Ryan-Hunter currency manipulation bill should also be passed immediately as a companion measure to the Rangel-Levin measure. Then we’d be making some real progress.”

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