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Washington, D.C. -- House Democrats sent a letter to the President after the release of the National Trade Estimates report urging President Bush to take immediate action to address the unfair trade barriers standing in the way of U.S. exports. (Letter and its appendix attached below.)
"After the loss of almost three million manufacturing jobs since January 2001, and the growing problem of outsourcing in the services sector, it is time to stop taking inventory and time to start producing results for American workers, farmers and businesses," said the authors of the letter.
The letter urges the President to direct the United States Trade Representative (USTR) to begin immediate consultations with five key U.S. trading partners - China, the European Union, Japan, South Korea, and India - and to file within 60 days seven additional cases in the World Trade Organization (WTO) if consultations do not resolve each case.
The cases include ones involving European subsidies to Airbus, various Japanese and Korean barriers to U.S. exports of autos and auto parts, India’s non tariff barriers on textiles, lack of intellectual property protection by India, and a growing number of areas in which China is not living up to its WTO commitments, such as denial of trading rights and distribution barriers.
The letter highlights the fact that "[i]n the three years the Bush Administration has been in office, USTR has brought an average of fewer than three cases per year in the WTO. By contrast, the Clinton Administration brought approximately ten cases per year in the WTO."
The Democrats also announced they would introduce legislation to revive a key tool of U.S. law used by past Republican and Democratic administrations - the so-called "Super 301" statute. The legislation would require USTR to prioritize foreign market barriers to American products and services and take action (through the WTO in most cases) if the problem cannot be resolved in 60 days. They ask the President to work for swift passage of this legislation and in the meantime to re-instate its provisions at once by Executive Order, as President Clinton did on three occasions in the 1990s.
"(I)t is not enough simply to sign a trade agreement and move on to negotiating the next one. To restore credibility to the trading system, agreements have to be enforced," the letter to the President said.
The letter was sent by House Democratic Leader Nancy Pelosi (D-CA), House Democratic Whip Steny Hoyer (D-MD.) Ways and Means senior Democrats Charles B. Rangel (D-NY), Sander Levin (D-MI.), and Robert T. Matsui (D-CA), and Reps. John Spratt (D-SC), George Miller (D-CA.), James Clyburn (D-SC), Ron Kind (D-WI), Jim Davis (D-FL), Adam Smith (D-WA), Max Sandlin (D-TX), and Artur Davis (D-AL).
March 31, 2004
The President
The White House
Washington, D.C. 20500
Dear Mr. President:
We are writing to urge that your Administration start to enforce vigorously the rights of American workers, farmers and businesses under U.S. trade agreements. Today, your Administration released, as required by law, the "National Trade Estimates" report, an annual "inventory" of trade barriers to U.S. exports of goods and services, investment and intellectual property rights.
In recent years, the NTE report and other Administration reports have time and again identified a number of important barriers - among them, European subsidies to Airbus, various Japanese and South Korean barriers to U.S. exports of autos and auto parts, non-tariff barriers on U.S. textile imports applied by India, lack of enforcement by India of U.S. copyrights and trademarks, and a growing number of areas in which China is not living up to its commitments under the World Trade Organization (WTO), such as denial of trading and distribution rights. In many of these areas and others, the USTR has, in its 2001, 2002, and 2003 reports carefully documented these problems, but taken no action to redress or eliminate them.
After the loss of almost three million manufacturing jobs since January 2001, and the growing problem of outsourcing in the services sector, it is time to stop taking inventory and time to start producing results for American workers, farmers and businesses. In the three years that the Bush Administration has been in office, USTR has brought an average of fewer than three cases per year in the WTO. By contrast, the Clinton Administration brought approximately ten cases per year in the WTO.
Consequently, we urge you to direct the USTR to request immediate consultations with five key U.S. trading partners - China, the European Union, Japan, South Korea and India - and to file within 60 days seven additional cases in the WTO, unless during the "consultation" period the problem in each case is successfully resolved. The details of each case are set forth in an Appendix to this letter.
These are priority practices that violate America’s trade agreements, are unfair and block American exports of goods and services. Six of the cases have been exhaustively documented by your USTR itself in the last three NTE reports. One, involving the so-called Wi-Fi problem in China is relatively new. However, China’s extraordinarily bold and discriminatory actions in that case have already caused significant damage to U.S. high technology companies and are almost certain to cause substantially more harm in the coming months unless the Administration takes swift action to challenge these egregious practices, rather than just repeating its entreaties to China at however senior a level. Another market access practice, involving Japan’s ongoing manipulation of its currency, is causing major damage to the American automotive, auto parts and other industries, and is inexplicably missing from these NTE reports.
The results of the Bush USTR’s hands-off enforcement approach are, unfortunately, all too clear. Trade agreements, of course, are not solely responsible for the poor trade or economic performance of the last three years. Yet, in each year of this Administration, various records associated with the U.S. trade deficit have been set. Last year, for example, the goods trade deficit set a record high of $549.4 billion, the U.S. saw the deficit in advanced technology products climb 65 percent, and total goods exports were down $58 million from 2000.
Simply put, it is not enough just to sign a trade agreement and move on to negotiating the next one. To restore credibility to the trading system, agreements have to be enforced.
Finally, today legislation is being introduced to revive a key tool of U.S. law used by Republican and Democratic administrations alike in the past - the so-called "Super 301" statute. This legislation will help call attention to the most important barriers to U.S. exports and strengthen the hand of the United States to make sure it gets what it bargained for in trade agreements. We hope that the White House will work for swift passage of this legislation this spring.
Until the legislation is passed, we are calling on you to re-instate its provisions at once by Executive Order, as President Clinton did on three occasions in the 1990s.
Without vigorous and responsible enforcement, trade agreements will increasingly be seen to be part of the problem. By contrast, a policy of expanded trade under agreements that shape the terms of trade, coupled with vigorous enforcement of those agreements, can be a part of the solution.
Sincerely,
Nancy Pelosi, Steny H. Hoyer , Charles B. Rangel, Sander M. Levin, Robert T. Matsui, George Miller, John M. Spratt, Jim Davis, Ron Kind, Adam Smith, Jim Clyburn, Max Sandlin, Artur Davis
APPENDIX:
Three Years with Little Progress on Key Barriers for U.S. Exporters
The following are some of the key market barriers to U.S. exports that are documented in the National Trade Estimates (NTE) report. Action on these cases is long overdue.
For the past three years, the Bush Administration has failed to take action on these and other important cases documented in its own NTE. The Bush Administration been asleep at the wheel in enforcing U.S. trade agreements. From 2001-2003, foreign countries filed 31 WTO cases against the United States, while the Bush Administration brought only seven WTO cases during that time.
A few new cases brought earlier this election year does not make up for three years of neglect that have had serious consequences for American exporters. The Clinton Administration brought an average of ten WTO cases per year against barriers to U.S. exports; the Bush Administration, even with its recent flurry of activity, has brought barely three per year.
The list set out below is not an exhaustive list of foreign barriers in need of action; it excludes a number of very prominent issues that have received attention elsewhere - including, e.g., the China currency manipulation issue and rampant intellectual property piracy in China.
• China - Keeping Out U.S. Exports Via Limitations on "Trading Rights" and "Distribution Rights": 2 Years of Non-Compliance and Counting
• Barrier to U.S. Exports: While China exported $152 billion to the United States in 2003, it only imported about $28 billion from the United States. One reason for this disparity is that China has long used "trading rights" - limitations on who can import, how much they can import, and for what purposes - and "distribution rights" - controls on critical distribution channels - to block imports of products that compete with Chinese goods. If no one has the right to import or distribute American goods, then they are effectively barred from China. This problem affects all U.S. export sectors. In a key WTO commitment, China agreed to eliminate restrictions on trading and distribution rights in three phases. But China has missed each WTO deadline so far. Even when it has finally issued regulations, many of these restrict trading and distribution rights in a manner inconsistent with China’s WTO obligations. Concerns with China’s trading and distribution rights have been noted in each NTE published by the Bush Administration: 2001 NTE (49-50, 60), 2002 NTE (51-52, 61-62), 2003 NTE (53, 64-65).
• Action: U.S. companies ranked "trading rights" and "distribution rights" as the number one and number three WTO compliance issues of concern in China, respectively, according to a recent U.S.-China Business Council survey. Due to China’s continued recalcitrance on these issues vital to American exporters, the USTR should begin immediate action under the WTO dispute resolution system to ensure China complies fully and on schedule with these critical WTO commitments.
• China - Blocking U.S. Exports and Forcing Tech Transfer through China-Only Product Standards
• Barrier to U.S. Exports: Until 2002, the U.S. enjoyed a trade surplus in Advanced Technology Products (ATP). In 2003, however, the U.S. experienced a record $27 billion trade deficit in ATP goods, 75 percent of which was accounted for by China. China has targeted a number of ATP industries in its industrial strategy, including the semi-conductor and Wi-Fi industries. In order to create a domestic Wi-Fi industry, the Chinese Government has created a new standard for Wi-Fi products based on an encryption standard that is incompatible with existing global rules and available only to a select group of Chinese-owned companies. These new policies have effectively shut off U.S. exports into the Chinese market and forced U.S. firms to work with -- and transfer valuable advanced technology to -- these hand-picked Chinese companies. Trade barriers to U.S. exports related to standards and technical regulations in China have been identified each year of the Bush Administration: 2001 NTE (51), 2002 NTE (53), 2003 NTE (54). Concerns with the mandatory standard for Wi-Fi technologies are documented in USTR’s 2003 Report on China’s WTO Compliance (36-37).
• Action: China's state-mandated product standard is a violation of the WTO's Agreement on Technical Barriers to Trade (TBT) and China’s decision to provide the standard only to Chinese companies is a violation of the TBT Agreement and the "national treatment" obligations of Article III of the core WTO Agreement, known as the General Agreement on Tariffs and Trade 1994 (GATT). Together these actions are blocking exports from the highly competitive U.S. Wi-Fi industry. In the past, USTR has allowed China to drag out resolution of disputes, but this has allowed a culture of non-compliance to grow within China. USTR should insist that China’s regulation and proposed implementation date of June 1 be cancelled (not simply postponed) and replaced with a WTO-consistent approach. If China does not take these steps prior to June 1, USTR should begin action immediately under the WTO dispute resolution system.
• European Union -- Subsidies for Airbus
Barrier to U.S. Exports to the EU and Other Countries: In 2003, the U.S. trade deficit with the EU was more than $94 billion - second only to China’s $124 billion deficit. Yet, the EU maintains a number of barriers to U.S. exports and engages in a number of policies that reduce U.S. exports to third country markets, including in the civilian aircraft industry. In 2001, seven EU Member States committed a total of $3.1 billion to Airbus for the development of the Airbus A380 "super-jumbo" airliner project. The repayment obligations for these contributions are at non-commercial interest rates. These and earlier subsidies have given Airbus an unfair advantage leading to increased global market share at the expense of U.S. competitor Boeing, America’s largest exporter. EU Member state subsidies to Airbus have been noted in each NTE published by the Bush Administration: 2001 NTE (120-122), 2002 NTE (122-123), 2003 NTE (120-121).
• Action: EU government subsidies for Airbus should be challenged under the WTO Agreement on Subsidies and Countervailing Measures. USTR should begin immediate action under the WTO dispute resolution system to eliminate these practices. U.S. rights should also be enforced under the separate 1992 U.S.-EU Agreement on Large Civil Aircraft, negotiated by the first Bush Administration.
• India - Non-Tariff Barriers on U.S. Textiles and Other Products
• Barrier to U.S. Exports: The United States ran a $9 billion trade deficit with India in 2003. One cause of this imbalance is India’s heavily protected market, which even after steps taken in recent months remains one of the most heavily protected in the world. Until January, India used to block American exports through various "special" and "additional" duties. While these have in many cases been lowered or eliminated, India has replaced them with a combination of non-tariff barriers, including unjustified and excessive testing requirements, that continue to block access to American textiles and other products. Exports of textiles alone were valued at $187 million in 2003. These barriers have been identified by the Bush Administration for three years running, yet no action has been taken: 2001 NTE (180), 2002 NTE (177) and 2003 NTE (171).
• Action: USTR should begin immediate action under the WTO dispute resolution system to eliminate these WTO-inconsistent practices.
• India - Non-enforcement of U.S. Copyrights and Trademarks
• Barrier to U.S. Exports: Piracy of U.S. copyrighted materials, including movies, music and software, is a significant problem for U.S. firms. According to the International Intellectual Property Rights Alliance, losses to U.S. firms due to the piracy of movies, music, software and books in India may be as high as $500 million per year. As much as 84 percent of "entertainment software" and 70 percent of business software in India may be pirated. India has not yet issued an adequate optical disk law. Additionally, India refuses in many cases to recognize U.S. trademarks and restricts the use of trademarks by foreign firms unless they invest in or supply technology to India, clear WTO violations. As a result of these and other problems, India has been on the intellectual property "priority watch list" as one of the worst offenders for almost a decade. These problems have been amply documented by USTR, including each year of the Bush Administration: 2001 NTE (183-184), 2002 NTE (180-181), 2003 NTE (174-175).
• Action: In order to bring India’s trademark law into compliance with its WTO commitments, USTR should begin immediate action under the WTO dispute resolution system to ensure that India provides WTO-consistent recognition to U.S. trademarks. USTR should press India through WTO consultative procedures to improve significantly India’s efforts to stop copyright piracy - including movies and software - and develop standards for effective seizure of infringing materials and materials predominantly used to create infringing goods (as required by Article 46 of the WTO TRIPs Agreement).
• Japan - Gaining Export Advantage and Limiting Imports via Currency Manipulation
• Trade Distortion: While the issue of China’s exchange rate practices has received much attention, Japan’s active intervention in currency markets has been largely ignored. Yet, Japan’s practices, with no fixed peg as a justification, are a much more clear case of exchange rate manipulation. In 2003, the Government of Japan spent over $190 billion intervening in currency markets to prevent the dollar from falling against the yen. In just the first two months of 2004, Japan has already spent almost $135 billion to manipulate the dollar-yen exchange rate. These actions have become so egregious that on March 2, Fed Chairman Alan Greenspan issued a warning about them. By maintaining its artificially low exchange rate, Japan is giving its exporters an unfair advantage in the United States and hurting the competitiveness of U.S. products there - some estimate that Japan’s practices lead to a 15 to 20 percent price advantage for Japanese products.
• Action: There are two steps the administration should take to address Japan’s exchange rate manipulation. First, Congress has directed the Department of Treasury to identify on a semi-annual basis countries that are seeking a trade advantage through exchange rate manipulation. Treasury has consistently failed to call Japan to account for its actions. The next report is due out in mid-April; Treasury should finally cite Japan for its currency manipulation practices. Per statute, Treasury should then initiate intensive consultations to end Japan’s exchange rate manipulation "on an expedited basis." Given the clear and egregious nature of Japan’s manipulation and its impact on U.S. firms and workers, the problem should be addressed within 180 days. If the problem is not resolved by that time, USTR should then immediately initiate consultations under the WTO dispute resolution system, based on Article XV of the GATT, which prohibits WTO Members from "frustrat[ing] the intent" of the WTO through "exchange action."
• Japan - Non-tariff Barriers to U.S. Autos and Auto Parts
• Trade Distortion: In 2003, the U.S. had a $38 billion auto and auto parts trade deficit with Japan, over half of the total trade deficit with Japan and over 7 percent of the total U.S. trade deficit. In 2003, the U.S. sold 10 percent fewer auto parts in Japan than it had in 1997, and 75 percent fewer automobiles. Japan blocks imports of U.S. auto parts using a combination of non-tariff barriers. For example, Japan sharply restricts the number of garages that can perform service repairs through its "certified garage" and "designated garage" system. The Japanese government then restricts the imported products that can be used by these "designated" and "certified" garages through the use of a "critical safety list" of approved products, from which U.S. products are excluded. Minor reforms to this system in the late 1990s have not produced any significant change; in fact, U.S. exports of auto parts have fallen in recent years. These barriers help not just Japanese auto parts companies, but also affiliated automotive companies that benefit from the excessive prices and diminished competition that result from largely excluding U.S. auto parts from the Japanese market. These barriers have been identified by the Bush Administration for three years running, yet no action has been taken: NTE 2001 (255-256), 2002 (242), NTE 2003 (225).
• Action: Several of Japan’s non-tariff barriers in this sector are inconsistent with WTO requirements. Others are actionable under section 301 of the Trade Act of 1974. Since the expiration of the U.S.-Japan Auto Agreement on December 31, 2000, auto and auto parts discussions with Japan have taken place through an Automotive Consultative Group (ACG). The ACG has not been an effective forum to date in persuading Japan to open its market. USTR should initiate an investigation under section 301 into Japan’s auto and auto parts barriers, use the investigation to catalogue Japan’s barriers, pursue further under the WTO dispute settlement system against each barrier that is a WTO violation, and seek a comprehensive market-opening agreement to address the other barriers.
• South Korea -- Discriminatory Taxes and Non-Tariff Barriers to Keep Closed Auto Market
• Barrier to U.S. Exports: South Korea is the world’s fourth-largest automobile producer, yet maintains one of the most closed automobile markets in the world - imports (from any country, not just the U.S.) account for only about one percent of the South Korean market. In contrast to its closed market, South Korean automobile producers have steadily increased their market share in the open U.S. market, leading to an $8 billion U.S. auto and auto parts trade deficit with South Korea. South Korea maintains its closed market through a variety of non-tariff barriers. It imposes eight different taxes on passenger cars, two which discriminate against cars with larger engines - typically U.S. and European cars. The cumulative impact of these taxes can place imports at as much as an 85 percent price disadvantage. South Korea also maintains a variety of other non-tariff barriers to imports, including a recent (October 2003) requirement that foreign automakers re-certify compliance with various Korea-specific product standards -- a time-consuming and costly requirement. These barriers have been identified by the Bush Administration for three years running, yet no action has been taken: NTE 2001 (293), 2002 (256), NTE 2003 (240).
• Action: In 1995 and 1998, the Clinton Administration entered into agreements with South Korea to address some of these issues, a number of which violate the core WTO "national treatment" obligation. While these agreements had limited success, several years of inaction have led South Korea to believe that it can maintain its closed market with impunity. USTR should begin immediate action under the WTO dispute resolution system to address barriers that are inconsistent with South Korea’s national treatment obligations. Further, USTR should begin a section 301 investigation into South Korea’s market access barriers to (1) compile a comprehensive up-to-date list of South Korea’s market access barriers and (2) use this list to build on South Korea’s 1995 and 1998 commitments by negotiating a more comprehensive and effective agreement.
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