Monthly Archives: September 2017

SOUTH KOREA READY TO PLAY HARDBALL WITH KORUS

South Korean Trade Minister Kim Hyun-chong had a stark message for lawmakers and other officials he met with last week: Seoul is willing to let President Donald Trump kill the pact, rather than bow to unreasonable U.S. demands for concessions to bring bilateral trade more into balance.

01_INTL_KORUS_FTA_02“He’s not going to beg and grovel to stay in this,” a source familiar with one of Kim’s meetings told Morning Trade.

The comment comes hot on the heels of an Axios report this week that said Trump gave U.S. Trade Representative Robert Lighthizer 30 days to get new trade concessions from South Korea or he’ll withdraw from the five-year-old KORUS agreement. A USTR spokeswoman declined to say whether Lighthizer had actually given South Korea 30 days’ notice and, if he did, when that period would end.

Last week, Kim told reporters from the South Korean press that he expected that the U.S. “will continue to use the threat of termination as leverage.”

Kim’s other main point: Cutting trade ties with South Korea will only push the country, as a matter of necessity, economically closer to China, the source said.

Kim also stressed that the South Korean government is making its role in the U.S.-initiated process of revisiting the pact as transparent and flexible as possible, the source added. That included agreeing to a U.S. request to meet in Washington on Wednesday despite it being a holiday week in South Korea. The two countries are slated to discuss changes to the pact through a special committee established by the agreement.

A CALL FOR CLARITY AS KORUS MEETING LOOMS

 Against that backdrop of uncertainty, many in the trade community are hoping Lighthizer and Kim can find a way out of the delicate situation when they meet in Washington on Wednesday.

“What I would hope, maybe rather than expect, is that they would come out with a plan for a way forward,” Troy Stangarone, senior director of congressional affairs and trade at the Korea Economic Institute, told Morning Trade. At one end of the spectrum, they could continue to meet under the KORUS committee process to make technical changes to a discrete set of issues; at the other end, they could pursue a full-scale renegotiation, complete with USTR formally notifying Congress under trade promotion authority, he said.

However, it’s hard to see how withdrawing from KORUS would help the Trump administration address concerns about the U.S. trade deficit with South Korea, especially in autos, Stangarone said, pointing to a 2016 study by the U.S. International Trade Commission that estimated the U.S. trade deficit with South Korea would have grown to $44 billion in 2015 without the agreement, compared to the $28.3 billion that year under the pact.

 

U.S. GROUPS URGE PRUDENT APPROACH TO CHINA TRADE IRRITANTS
U.S. business groups are providing lots of ammunition for USTR’s Section 301 investigation into how American companies are hurt by China’s intellectual property and technology transfer practices. But many are including a note of caution in the comments they file.

“Any action by the U.S. government in response to China’s unfair policies and laws should be carefully constructed and well-grounded in objectivity,” the American Chamber of Commerce in Shanghai said in its remarks. “A tit-for-tat trade war would be damaging for all parties. Given the scale of U.S. investment in China, and the significant size of China business for many U.S. corporations, it is important that U.S. actions not put those interests at risk.”

In a similar vein, the National Foreign Trade Council cited concerns about China’s actions in a variety of areas, including cloud computing, trade secrets protection and rules for licensing technology. But it urged the Trump administration to “work through these and other trade-related problems with China in ways that are consistent with the open, rules-based trading system that the United States have built.”

The U.S.-China Business Council stressed the “ultimate goal” of the 301 probe should be the elimination of any discriminatory practice that is uncovered, rather than imposing penalties or restricting trade. “Any related trade actions taken by the United States should be compliant with U.S. international trading obligations, able to withstand a challenge at the World Trade Organization, and address the concerns of American companies about the protection of their intellectual property and technology,” the business group said.

From Politico’s Morning Trade

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U.S. unlikely to accept NAFTA gender chapter with teeth: trade experts

 

David MacNaughton, the Canadian ambassador to the U.S., says the Americans are not yet convinced

H2T5VF3TDRFXFNQLWBVWUIUATUThe Liberals want a feminist North American Free Trade Agreement, but trade experts say that will depend on reassuring the United States no one could use it to hold their feet to the fire.

“I think U.S. support for such a chapter (on gender equality) would hinge upon the soft or hard nature of the commitments in any proposal with respect to gender,” said Wendy Cutler, a former trade negotiator for the U.S. government.

“If it’s largely aspirational and has soft commitments, with no dispute settlement and no obligation to accede to other agreements, then I think it’s something the administration would consider favourably,” said Cutler, vice-president of the Asia Society Policy Institute in Washington, D.C.

In other words — no real consequences for failure.

The U.S. and Mexico have already been asking high-level questions about the scope and impact of the proposed chapter on gender equality, according to Angella MacEwen, a senior economist with the Canadian Labour Congress.

“They were looking at the language the Canadians had proposed and were saying, ‘Why would we do this?”‘ said MacEwen, who is familiar with that aspect of the talks.

“Would this change anything?”

The answer could be a matter of perspective.

The new ‘gold standard’

The Canadian Press has not seen the proposed text, but several sources both in and outside of government said it is modelled after the gender chapter the Liberal government added to its free trade deal with Chile.

That pact — the second in the world — had both countries agree that working to include women and girls is key to long-term economic development and reaffirm their commitment to international agreements on gender rights.

They also set up a committee to oversee that work.

It also made clear, however, that nothing in the gender chapter could be subject to the dispute resolution mechanism that applies to the rest of the trade deal.

“The Chile chapter is really weak,” said MacEwen.

It is this kind of symbolism that had the Conservatives pushing back against the idea of wrapping gender equality into the new NAFTA, calling it a distraction from the goals of creating jobs and securing market access for Canadians.

International Trade Minister Francois-Philippe Champagne said the fact that gender rights are on the table at all — and codified in the Canada-Chile deal — is an important step.

“It’s a journey,” he said in an interview.

“The fact that we even have a discussion around what should be the content, how far it should go, what will be the process to review the clause from time to time, for me is already a step forward,” said Champagne.

“The gold standard now needs to include a gender chapter.”

Turn virtues into venom?

Colin Robertson, a former Canadian diplomat, said he thinks the progressive trade agenda the Liberals have been championing is getting noticed because of the recognition that the many benefits of trade have not been shared equally.

“Gender specifically is really about equal treatment and empowerment, especially of women, and this crosses the North-South-East-West divide,” said Robertson, vice-president and fellow at the Canadian Global Affairs Institute.

“Even Trump recognizes its salience.”

The Liberal government might be bringing gender issues into other areas too.

MacEwen said Canada has proposed language on things like pay equity, child care and women in trades in the preamble to the labour chapter, although they are not hard obligations.

“Canada doesn’t have pay equity, so we wouldn’t be in compliance with the chapter, but it does talk about the importance of moving towards it,” she said.

David MacNaughton, the Canadian ambassador to the U.S., said he expects gender equality to come up during the third round of NAFTA negotiations beginning Saturday in Ottawa.

He also suggested previous talks revealed the Americans are not yet convinced.

“They didn’t immediately sign on,” he said.

Dan Ujczo, an international trade lawyer specializing in Canada-U.S. matters, said there is some concern a chapter on gender could have unintended consequences.

“Can these virtues turn into venom?” said Ujczo.

Parental leave concerns

The concern is that language on parental leave, for example, be used to challenge labour and employment laws in the U.S. that do not grant a year of paid parental leave, which is available in Canada.

“Could some of these broadly worded provisions then be used to attack otherwise legitimate federal and state laws in the U.S.?” said Ujczo, who is with the cross-border firm Dickinson Wright, in Columbus, Ohio.

That is why Ujczo said he thinks Canada will need to put significant effort into reassuring the U.S. administration of President Donald Trump the gender chapter will not be enforceable.

That raises another question.

“An agreement without enforcement is just an agreement to agree and so really, what’s the point?” he asked.

By Joanna Smith, The Canadian Press

Levin: No Democratic support for NAFTA without Mexican labor reform

Rep. Sander Levin (D-MI), a key Democrat on the House Ways and Means committee, said Monday that the labor text the U.S. was considering tabling at the third round of North American Free Trade Agreement talks was not robust enough to address Mexican labor issues — and predicted that few, if any, in his party will back a retooled deal without significant reforms.

Protest Against Mexican Government Anti-Labor Reforms

Sources have said the U.S. is expected to table text on labor during the third round. Levin, who was in Ottawa early in the round, said U.S. negotiators were set to decide by Monday whether to table the labor text, adding that there was opposition to doing so from those in the labor movement.

“It’s very rudimentary,” Levin, a former ranking member and chairman of Ways and Means, told reporters after a Council on Foreign Relations event in Washington, DC. “It’s very incomplete. It doesn’t begin to do the trick.”

Sources told Inside U.S. Trade last week that the nascent U.S. proposal was “unorthodox” — and noted that the U.S. summary of its negotiating objectives, unveiled in July, said the U.S. would “ensure that these labor obligations are subject to the same dispute settlement mechanism that applies to other enforceable obligations of the Agreement.”

Levin said the U.S. position, which was largely taken from the Trans-Pacific Partnership, does not do enough to address the issue of labor costs.

“It’s not nearly enough to address this basic structural problem,” he said of the text. “It’s a very major issue.”

During his remarks, Levin said “Mexico’s industrial policy of suppressed low wages, combined with increase security of investment, became a magnet for its industrial growth. A key factor has been the maintenance of very low labor costs, ingrained in a structure that suppresses any voices to workers in the workplace.”

Levin also lamented the use of “protection agreements” that cover Mexican workers “without a voice as to a contract, or even of their existence, often signed before there are any employees.”

“Ensuring labor rights in Mexico will help workers there climb out of poverty, while protecting American jobs and wages from a race to the bottom,” Levin said.

Last Friday, Mexican Foreign Minister Luis Videgaray Caso said that Mexico was willing to address labor reforms in NAFTA and that it was in Mexico’s “best interest” to do so.

Levin predicted on Monday that few if any in his party will back an updated North American Free Trade Agreement without significant Mexican labor reform.

“Without dramatic changes occurring before there would be a vote on the revised NAFTA, under these conditions, I don’t think there would be virtually any Democratic support in Congress,” Levin said.

Levin said “a lot of work” was needed on the labor cost issue, as well as on rules of origin and intellectual property, but he added that “I think we’re at the start of meaningful negotiations.”

Asked about congressional consultations on NAFTA as the talks progress, Levin said there had been “useful,” bipartisan discussions with Commerce Secretary Wilbur Ross and with U.S. Trade Representative Robert Lighthizer, but added that “I think they need to very much now have much more meaningful discussions with Congress and they need to so in a way that they quickly become public.”

Also expressing concern about the U.S. labor proposal was Jerry Dias, the president of Unifor, a major Canadian union. He sent Lighthizer a letter on Sept. 25, warning against the use of TPP language on labor in a new NAFTA.

Dias said TPP does not include any explicit reference to the eight core International Labor Organization obligations, is silent on gender equality, and is insufficient in the areas of child labor and penalties for governments or employers breaching labor rights.

Dias also urged the U.S. Trade Representative to rectify the “sustained and recurring” and “in a manner affecting trade” requirements brought to light earlier this year in the context of the U.S. labor complaint against Guatemala under the Dominican Republic-Central America Free Trade Agreement.

“Aside from all that is not contained in the TPP,” he added, “I am most concerned that — when tested — U.S. trade language is ill-equipped to ensure enforceability of the standard it sets. I look no further than the recent decision of the panel appointed under Chapter 20 of the DR-CAFTA, with respect to a U.S.-led complaint on labour rights in Guatemala.”

“It is not enough for us simply to lament the panel’s decision,” Dias continued. “Untouched, the U.S. runs the risk of having that panel decision influence future decisions. Fortunately, NAFTA renegotiations are upon us. This is our first opportunity, collectively, to address the shortcomings of the DR-CAFTA language, and to draw on the experience to better improve our approach to labour rights. We have to take advantage of this moment. We cannot fail.” — Anshu Siripurapu 

http://www.cbc.ca/news/politics/nafta-gender-chapter-experts-1.4304197

Sources: U.S. NAFTA sunset proposal ties potential termination to trade deficit

A sunset clause the Trump administration wants to include in NAFTA 2.0 would be tied to the U.S. trade balance with Mexico and Canada, giving the president the discretion to decide — based on an assessment of trade deficits — whether to withdraw from the deal after five years, sources tell Inside U.S. Trade.

legal-sunset-clause-contract-off-the-plan-writing-300x256

Administration officials discussed the proposal this week with the congressional committees of jurisdiction and received bipartisan pushback against the idea, as well as counter-proposals from Republicans, these sources say.

The idea that the Office of the U.S. Trade Representative was looking to propose such a provision in NAFTA became public last week when Commerce Secretary Wilbur Ross floated “a systematic re-examination” of the agreement as a policy the U.S. was seeking to advance.

Before the proposal made its way to Capitol Hill, it reportedly also faced pushback in the interagency process. Following Ross’s comments, key Republican lawmakers and many in the business community came out against the idea.

USTR said in July that the top U.S. negotiating objective for the modernization of NAFTA was to “improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries.” To date, however, U.S. negotiators have not tabled a specific proposal for how to tackle the trade deficit through the renegotiation of the agreement.

Sources said the proposal does not lay out a “hard trigger” or specific deficit numbers. Instead, they said it is designed to give “a lot of discretion to the president” in deciding whether a certain deficit is a sufficient reason to terminate the agreement.

In discussions about the proposal, sources said administration officials argued to congressional staff that President Trump was more likely to approve a new deal if it included a sunset clause that would not only allow him to unilaterally withdraw but also empower him to base his decision on the status of the deficit — a longstanding priority for Trump.

That way, one source noted, USTR Robert Lighthizer would be able to tell the president “you can pull out in five years if the deal isn’t what I said it was going to be.”

Sources described the proposal as “huge” and said it could set a “dangerous precedent” that some believe would prove to be a red line for lawmakers on both sides of the aisle.

“It seems to me like the agreement already has a sunset provision in the form of the president’s authority to withdraw from it using whatever set of politically driven standards he wants, like the trade deficit,” one source said.

“If anything,” the source argued, “Congress should be looking to place limits on the president’s authority in this regard, not expand it.”

NAFTA’s Art. 2205 sets up a six-month process for withdrawal from the agreement after one party submits written notice to the others. Section 125 of the 1974 Trade Act provides the president the authority to withdraw or end trade agreements “upon due notice, at the end of a period specified in the agreement.” NAFTA was negotiated under fast-track authority provided by the Omnibus Trade and Tariff Act of 1988, and Section 1105 of that act applies Section 125 of the 1974 act to agreements negotiated with the authority granted by the 1988 act.

Legal experts, however, are debating whether Congress could take action that would prevent a U.S. withdrawal, or whether the president has unilateral power to terminate the deal.

Sources said Republican staff members, in response to USTR’s proposal, pushed back against the high level of discretion it would give the president and suggested instead a sunset process similar to the one laid out for the Trade Promotion Authority law.

Under TPA, “trade authorities procedures shall be extended if (and only if) the President requests such extension and neither House of Congress adopts an extension disapproval resolution” before the date that TPA expires. The current law expires on July 1, 2018, and the president can ask for it to be extended until July 1, 2021.

USTR’s sunset proposal, however, is designed not to require congressional action, sources said.

Many sources said the proposal was inconsistent with TPA — because, they argued, pushing for a provision to sunset a trade agreement is outside of the administration’s negotiating authority.

Another inconsistency with TPA, these sources said, is the trade deficit angle: The law does not include it as an objective for trade negotiations — or mention deficits at all. Congress could also argue that unilaterally pulling out of a trade agreement that lawmakers have voted on is an overreach on the administration’s part.

Many observers, however, were unsurprised by the sunset clause idea because, as one source put it, the proposal “has Lighthizer’s fingerprints all over it.”

Those sources referred to Lighthizer’s involvement in the 1994 Uruguay Round implementing legislation, when he lobbied his former boss, then-Sen. Bob Dole (R-KS), to demand the creation of a commission to review WTO decisions and determine whether WTO dispute panels had exceeded their authority in cases involving the U.S.

The proposal, which Lighthizer drafted, and which was informally referred to as “three strikes and you’re out,” would have triggered a vote in Congress to determine whether to stay in the WTO if the commission made three affirmative rulings over a five-year period.

Dole and the Clinton administration eventually agreed on a compromise that allowed for a vote to pull out of the agreement every five years. The provision is still in the law but has never led to a vote, sources said.

Section 125 of the WTO implementing bill outlines the process for congressional disapproval of U.S. participation in the organization. Under that section, “The approval of the Congress of the WTO Agreement shall cease to be effective if, and only if, a joint resolution is enacted into law.” Sources said the provision is written in such a way that the decision to hold a vote would be up to congressional leadership, which they said makes it unlikely that a joint resolution would ever be passed.

Negotiators from the U.S., Mexico and Canada are meeting this weekend in Ottawa for the third round of NAFTA talks, at which the Trump administration had initially planned to have all of its texts tabled. But sources said last week that the target appeared unlikely to be met, with one describing it as “a softer goal these days.”

After consultations on highly controversial proposals with staffers on Capitol Hill this week, some sources said USTR would be highly unlikely to table all text at the third round. Lawmakers, they suggested, could move to block some of the latest proposals, including the sunset provision, from moving forward.

The three countries have planned on seven rounds of talks, with the goal of concluding negotiations by the end of this year. But Lighthizer this week said it was unclear whether the negotiations would result in a successful conclusion. He also declined to comment on the sunset proposal.

Canada’s ambassador to the U.S., David MacNaughton, said last week that he first learned of the sunset proposal “some months ago” from members of the Trump administration, but added that he had yet to find a U.S. official who could explain to him what the benefit of such a provision would be.

MacNaughton and his Mexican counterpart, Ambassador Geronimo Gutierrez, said at an event in Washington last week that their governments were not in favor of such a provision and noted that the proposal would likely be shot down by the U.S. business community before it could even get to the negotiating table.

“I’d be surprised if this flies with either Congress or the NAFTA partners,” a former trade official said. “What this all means is that it will be a long, drawn-out process.” — Jenny Leonard (jleonard@iwpnews.com)

 

 

Congress notified on NAFTA trade remedy changes

OTTAWA – The Office of the U.S. Trade Representative has formally notified Congress of expected changes to U.S. trade remedy laws as a result of renegotiating NAFTA, clearing a statutory hurdle that would allow the revised pact to be signed anytime after March 21, POLITICO has learned.

capitol-diagramThe United States, Canada and Mexico are striving to finish their work on updating and modernizing NAFTA by the end of the year, which would be extremely quick for a trade negotiation. However, President Donald Trump is eager to make good on his promise to revamp the NAFTA deal and rack up a legislative victory.

Under Section 5(b)(3) of the 2015 trade promotion authority law, USTR must notify key congressional committees of any potential changes to U.S. trade remedy law at least 180 days before a trade pact is signed. USTR sent that notification letter to Congress on Friday evening, just before the start of the third round of talks on revising the 23-year-old NAFTA pact this week in Ottawa. A House Ways and Means Committee spokeswoman confirmed that it had received the letter.

Once a trade deal is signed, the U.S. International Trade Commission has 105 days to conduct an economic analysis. If a revised NAFTA agreement were signed on March 22, the ITC would have until July 5 to complete its investigation, and theoretically a vote could occur anytime after that.

However, TPA also requires the administration to give Congress another notification 90 days before signing the agreement and to publish the text of the pact 60 days before signing. So, in order to have the deal ready to sign on March 22, USTR would also have to reach a deal in December and publish the text in January.

Four more rounds are currently scheduled for the NAFTA talks this year, with the last round expected in early December before top trade officials from the United States, Canada and Mexico head to Buenos Aires for the Dec 10-13 World Trade Organization ministerial conference.

Let Them Eat Imports: Food Under NAFTA and WTO

Food Imports to United States Soar During NAFTA-WTO Trade Agreement Era, Threatening American Farmers and Food Safety

DEOztMKUwAA-SDbWith the Third round of NAFTA negotiations underway in 2017- it’s helpful to look back at some of the figures and information of the history of how NAFTA has unfolded.

In the mid-1990s, supporters of the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) sold the deals to U.S. farmers and ranchers as the new path to economic success – hyping the agreements’ prospects for increasing exports.1

U.S. farmers would export their way to wealth, the NAFTA and WTO proponents promised. Unfortunately, while U.S. food exports have increased since these deals, much of these gains have been swamped by surges in food imports under the deals. 

In 2015, the total volume of U.S. food exports stood just 12 percent higher than in 1995, the year that the WTO took effect and one year into NAFTA. In contrast, imports of food into the United States in 2015 towered 128 percent above the 1995 level.2 

If these figures are surprising, that is because typically agricultural trade data is reported on the basis of value (the dollar figure) not volume. When agricultural trade data is based on value, spikes in international prices can look like, and often get reported as, a jump in agriculture exports. But what looks like a “surge” in exports really reflects increased world market prices, not major increases in the volume of U.S. exports.

The value of U.S. food exports has closely tracked international food prices, which became highly volatile after implementation of the WTO. (The WTO required countries worldwide to eliminate many policies that controlled supply and set price floors and ceilings.)

Starting in 2007 and peaking in 2011, world agricultural commodity prices were at historically high levels. Although prices have dropped in the past year, they remain considerably higher than in the previous two decades. As a result, agricultural trade data based on value appear to show significant export gains when compared to values before NAFTA and the WTO. But, in fact, U.S. agricultural export volumes have remained comparably flat, as shown in the graph above. In 2015, for example, the Food and Agriculture Organization’s international food price index was 46 percent above the median price level for 2004.3  While this high price pushed the value of U.S. food exports 81 percent above the 2004 level, the volume of U.S. food exports were a mere 18 percent above the 2004 level. 4

Gauging the track record of U.S. food trade without the distortion of short-term price spikes requires an analysis of the volume, not just the value, of U.S. exports and imports. Measured by volume, imports of food into the United States have risen more steadily and to a greater degree than U.S. food exports under NAFTA and the WTO, as shown in the graph below.5 
In 2015, the volume of U.S. food exports was only 12 percent higher than in 1995, the year the WTO took effect. In contrast, U.S. food imports in 2015 were 128 percent higher than in 1995.6  As a result, the share of Americans’ food that is imported, versus produced here, has increased. The much greater rise in imports over exports is more notable given historically high international food prices since 2007, which would be expected to dampen the volume of U.S. food imports. Absent this price effect, the volume of U.S. food imports would likely be even higher today.

Family Farmers Hit Hardest

Smaller-scale U.S. family farms have been hardest hit by the import influx caused by deals like NAFTA and the WTO. About 198,000 small U.S. family farms have gone under since NAFTA and the WTO took effect, a 23 percent decrease in the total number.7  After the WTO required elimination of various U.S. price support and supply management policies, small farmers were also hard-pressed to survive the increasing year-to-year volatility in prices paid for commodities, making investment and planning more difficult than before the WTO.

Food and Agricultural Trade Becomes Chaotic Under NAFTA/WTO, Yielding Historic Deficits

The United States has experienced wide swings in food and agricultural trade under the WTO. In 2005, the United States became a net food importer for the first time since the U.S. Department of Agriculture started reporting data in 1967.8  Trade deficits have become the norm for U.S. agriculture under NAFTA, as indicated in the adjacent graph. High imports and lackluster exports have continued to wrack U.S. family farmers with deficit surges.

The average annual U.S. trade deficit in agricultural goods with Canada and Mexico in the five years before NAFTA nearly tripled (a 174 percent increase) in the five years after the deal took effect. 

Key Exports Remain Stagnant under NAFTA while Imports Soar

Some U.S. farming sectors have suffered not only a flood of imports under NAFTA, but have also seen very little gains on the export side, even with the post-2007 spikes in international prices, despite promises to the contrary. As the adjacent graph shows, small gains in U.S. beef and live cattle exports have been swamped by high imports throughout the NAFTA era.9

As another example while total U.S. vegetable imports from Canada and Mexico have nearly quadrupled (a 287 percent increase) under NAFTA, U.S. vegetable exports to NAFTA partners have remained relatively flat (a 72 percent increase). The U.S. vegetable deficit with Canada and Mexico has soared to $4.6 billion, nearly 10 times the pre-NAFTA level, as the graph below indicates.10 

U.S. corn is, however, an exception – U.S. corn exports to Mexico in the three years after NAFTA soared 377 percent above the level in the three years before the deal. In 2015, the United States exported 33 times as much corn to Mexico as before NAFTA.11  But when the flood of U.S. corn in Mexico caused corn prices to plummet 66 percent for Mexican farmers, 2.5 million farmers and agricultural workers in Mexico lost their livelihoods, many of whom resorted to migration.12  In NAFTA’s first seven years, the annual number of people emigrating from Mexico to the United States more than doubled.13

U.S. Meat Exports Go Bad Under the Korea FTA

Despite the record of failed promises under NAFTA and the WTO, the same claims about booming exports were made to push the U.S. “free trade” agreement (FTA) with Korea in 2011. The Obama administration promised that U.S. exports of meat would rise particularly swiftly under the Korea FTA, thanks to the deal’s tariff reductions on beef, pork and poultry. For example, in a factsheet used to promote the FTA, the White House claimed: “Tariff eliminations on Korea’s existing 40 percent tariff will further boost beef exports, saving an estimated $1,300 per ton of beef imported to Korea – savings that would total $90 million annually for U.S. beef producers at current sales levels.”14  

Ironically, U.S. meat exports to Korea have plummeted faster than many other exports – export declines in some meat sectors were steeper than the overall 10 percent decrease in U.S. goods exports to Korea from the year before FTA implementation to the fourth year of the deal (meat imports have not been affected, since the United States does not import beef, pork or poultry from Korea). In contrast to the administration’s promise, U.S. pork producers saw their exports to Korea crash by $77 million – a 17 percent decline – in the first four years of FTA implementation, in comparison to the year before the FTA took effect.

Comparing 2011, the year before the FTA, to 2015 export levels, poultry producers have faced a 96 percent collapse of exports to Korea under the FTA – a $132 million reduction. U.S. beef exports only reached pre-FTA levels in the pact’s fourth year after declining an average of 11 percent during the first three years of the agreement. Notably, the growth of U.S. exports of beef to Korea since the FTA is much lower than the trend it was on from 2006 to 2011, as the graph below shows.

Even including the recovery in beef exports after a decline in the first two years of the Korea FTA, U.S. meat producers have lost a combined $57 million in beef, pork and poultry exports under four years of the Korea FTA (from the year before the deal to the recently completed fourth year of FTA implementation), as indicated in the graph above.15

The U.S. pork industry blames the post-FTA downfall of U.S. pork exports to Korea on a foot-and-mouth disease-related surge in U.S. pork exports in 2011.16  But this narrow focus on foot-and-mouth disease ignores the broader growth trajectory of U.S. pork exports, a trajectory that should have continued under the FTA but did not, as shown in the graph below. In the 10 years before the financial crisis-spurred global downfall in exports in 2009, U.S. pork exports grew at an annual rate of 22 percent (using the FTA-relevant 12-month period).17

Starting from the 2010 level (the first post-crisis year) and applying this pre-crisis growth rate, U.S. pork exports under the FTA in 2015-2016 would be expected to surpass $840 million. Instead, they barely passed $370 million, 55 percent below the level that historical growth would predict.18  Had the foot-and-mouth disease outbreak not occurred, it is indeed possible that U.S. pork exports to Korea would not have been as high in 2011. But even if this is the case, it cannot explain why U.S. pork exports under the FTA have fallen significantly below the long-term growth trend.

Regarding U.S. poultry exports to Korea, USDA notes that Korean consumption of chicken hit record highs in 2011 as Koreans substituted beef and pork consumption (given the foot-and-mouth disease outbreak) with increased chicken consumption, driving a surge in poultry imports from the United States.19  Some industry groups may try to use this data to explain away the downfall in U.S. poultry exports to Korea under the FTA, framing the 2011 increase as an anomalous spike and the subsequent reduction since the FTA as an expected result of the end of the foot-and-mouth disease outbreak.

But while Korea’s poultry consumption and importation levels indeed increased in 2011, they increased to an even greater degree in 2010, when foot-and-mouth disease was not a significant factor in the poultry market. According to USDA’s own data, Korean poultry consumption rose 11 percent in 2010 compared to 8 percent in 2011, while Korea’s poultry imports from the United States climbed 86 percent in 2010 compared to 58 percent in 2011.20 As such, the 2011 increase in U.S. poultry exports to Korea, far from being an anomalous disease-related spike, seems to fit a larger growth trend.

Also in 2015, the Korean government enacted a nation-wide ban on nearly all imports of American poultry due to several isolated bird flu outbreaks in Minnesota and Iowa despite the promises made by U.S. officials that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade. This ban occurred as chicken consumption per capita in Korea has risen in each year since the Korea FTA entered into force.21 The ban on American poultry has meant that Koreans have been eating more chicken, just not U.S. chicken.

Food Safety Jeopardized

Current U.S. food trade trends also pose serious risks to food safety, as our current trade agreements both increase imports and set limits on the safety standards and inspection rates for imported foods. WTO and NAFTA required the United States to replace its long-standing requirement that only meat and poultry meeting U.S. safety standards could be imported. Under this standard, only meat from plants specifically approved by USDA inspectors could be imported. But WTO and NAFTA – and the FTAs that followed – required the United States to accept meat and poultry from all facilities in a trade partner country if that country’s system was found to be “equivalent,” even if core aspects of U.S. food safety requirements, such as continuous inspection or the use of government (not company-paid) inspectors, were not met.22 USDA has found 49 nations’ meat and/or poultry safety systems to be equivalent.23Equivalence determinations have allowed U.S. meat imports to persist even after infrequent USDA spot checks of a sample of a country’s processing plants have found major health threats.24

The threat that WTO and FTA rules pose to domestic food safety standards is not hypothetical.  For instance, China used the WTO to challenge a U.S. prohibition on imports of chicken from China. As required by the WTO and requested by China, USDA had initiated an equivalence determination on cooked chicken from China and was moving toward allowing its importation. Alarmed by the recent avian flu epidemic in China and the concerning findings of USDA’s on-site inspections of sanitary conditions at Chinese chicken processing facilities, Congress intervened and cut off funding for the equivalence determination. A 2010 WTO ruling declared that the U.S. ban violated China’s WTO rights.25 The Obama administration launched a successful campaign to pressure Congress to lift the funding ban, warning that failure to do so would result in WTO-authorized trade sanctions against the United States. In August 2013, USDA declared China’s system for processed poultry to be “equivalent,” opening the door to more U.S. imports and less U.S. vetting of processed chicken from China.26

Even without the safety-eroding meat equivalence rule, the WTO and NAFTA-enabled flood of imports has jeopardized public health by overwhelming the ability of limited U.S. inspectors to ensure the safety of the food supply. The Food and Drug Administration (FDA) only physically inspects about 1 percent of the food imports that it regulates (vegetables, fruit, seafood, grains, dairy, and animal feed) at the border.27 Imported seafood rates are even lower, with the FDA checking only 0.1 percent of imported seafood for drug residues.28 Only 6.7 percent of beef, pork, and chicken is physically inspected at the border by the USDA.29 Incidence of food borne illnesses such as salmonella and vibrio in the United States have increased since the WTO and NAFTA went into effect, despite repeated reforms to improve domestic safety standards.30 Among the most notorious NAFTA-related food borne illness outbreaks was the illness of Michigan schoolchildren and teachers in 1997. A severe hepatitis A outbreak related to strawberries imported from Mexico resulted in 163 children and teachers becoming ill, several seriously.31


ENDNOTES

1Charles Conner, “Agribusiness Food Producers Back NAFTA,” Memphis Commercial Appeal, Aug. 15, 1993; Jennifer Lin, “In Texas, High Noon over NAFTA,” Knight-Ridder Newspapers, Oct. 31, 1993.
2These figures reflect food trade with the rest of the world, defined as the following HTS 2-digit codes: meat/poultry, fish/seafood, dairy, vegetables, fruits/nuts, coffee/tea/spices, milling products, meat/fish preparations, animal/vegetable fats, sugars/confectionary, cocoa products, cereal/flour preparations, vegetable/fruit/nut preparations, miscellaneous edible preparations and beverages. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed Jan. 12, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx. Even in the recessionary year of 2009, when import levels crashed, food imports comprised 17 percent of food consumed by Americans by volume, compared to 11 percent before NAFTA and the WTO. Economic Research Service, “Import Shares of US Food Consumption Using the Volume Method,” U.S. Department of Agriculture, 2009. Available at: http://www.ers.usda.gov/media/563776/import_1.xls.
3Food price information in this paragraph and the accompanying graph comes from Food and Agriculture Organization of the United Nations, “FAO Food Price Index,” May 6, 2014. Available at: http://www.fao.org/worldfoodsituation/foodpricesindex/en/. Analysis of all available years of food price index data (from 1990 through 2015) shows that the median food price index occurred in 2004. In the graph, the food price index, export volumes and export values have been indexed to the 2004 level (which is equated to zero) such that the level in any given year can be read as the percentage above or below the 2004 level.
4Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed Jan. 12, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
5Ibid.
6Ibid.
7Farming typologies and numbers come from the USDA. Small family farms consist of “farming occupation” farms grossing less than $250,000 per year (“lower sales” and “higher sales”), while large farms include family farms grossing more than $250,000 per year (“large” and “very large”) and nonfamily farms.  Comparisons are between 2015 and 1996, the latest and earliest data available for those typologies.  Economic Research Service, “Agricultural Resource Management Survey: Farm Financial and Crop Production Practices,” U.S. Department of Agriculture, updated Nov. 27, 2016. Available at: http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-produ….
8This reflects the inflation-adjusted dollar value between 1967 and 2015 of U.S. trade in food. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed June 9, 2016. Available at: http://www.fas.usda.gov/gats/default.aspx.
9In the graph, beef is defined as SITC 011 and live cattle is defined as SITC 00111 and 00119. All data adjusted for inflation. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed Jan. 12, 2017. Available at: http://dataweb.usitc.gov.
10In this paragraph and the accompanying graph, vegetables are defined as SITC 054 and vegetable trade is presented in inflation-adjusted values. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed Jan. 12, 2017. Available at: http://dataweb.usitc.gov.
11Corn is defined as SITC 04490 in this inflation-adjusted comparison. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed Jan. 12, 2017. Available at: http://dataweb.usitc.gov.
12John B. Judis, “Trade Secrets,” The New Republic, April 9, 2008.
13Jeffrey Passel, D’Vera Cohn, and Ana Gonzalez-Barrera, “Net Migration from Mexico Falls to Zero—and Perhaps Less,” Pew Hispanic Center, April 23, 2012, at 45. Available at: http://www.pewhispanic.org/files/2012/04/Mexican-migrants-report_final.pdf.
14The White House, “The U.S.-South Korea Free Trade Agreement: More American Jobs, Faster Economic Recovery through Exports.” Available at: http://www.whitehouse.gov/sites/default/files/09272011_wh_overview_fact_….
15For this report, beef is defined as SITC 011; pork is defined as SITC 0122, 0161, and 0175; and poultry is defined as SITC 0123 and 0174. The U.S.-Korea FTA entered into force on April 2012, so FTA-relevant years represents April of the stated year to March of the following year. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed Jan. 18, 2017. Available at: http://dataweb.usitc.gov/.
16“U.S. Meat Exports to Korea Decline Year-On-Year, Due To One-Off Factors,” Inside U.S. Trade, Jan. 24, 2013.
17The growth rate is determined using the compound annual growth rate method. “FTA-relevant period” refers to the 12-month period that is comparable to the first year of FTA implementation: April of one year through March of the following year.
18These numbers reflect a comparison of U.S. pork exports in the second year of FTA implementation compared to the export level that would be predicted at the pre-crisis growth rate.  Pork is defined as SITC 0122, 0161, and 0175. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed Jan. 19, 2017. Available at: http://dataweb.usitc.gov/.
19Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 4, 2012, at 4. Available at:  http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr….
20Ibid.
21For years 2012-2013, Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 5, 2013. Available at:  http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr…. For years 2013-2016, Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 9, 2016. Available at:  https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20P….
22For more information, see Mary Bottari, “Trade Deficit in Food Safety,” Public Citizen report, July 2007. Available at: http://www.citizen.org/documents/FoodSafetyReportFINAL.pdf.
23USDA has deemed each of the 49 nations to have equivalent food safety systems for at least one of these products: meat from cows, swine, goats, sheep, or horses; poultry; or eggs. See Eligibility of foreign countries for importation of products into the United States, 9 C.F.R. § 327.2 (2014); Eligibility of foreign countries for importation of poultry products into the United States, 9 C.F.R. § 381.196 (2014); Eligibility of foreign countries for importation of egg products into the United States, 9 C.F.R. § 590.910 (2014).
24See Mary Bottari and Winifred DePalma, “The WTO Comes to Dinner: U.S. Implementation of Trade Rules Bypasses Food Safety Requirements,” Public Citizen report, July 2003. Available at: http://www.citizen.org/documents/EQUIVALENCYFINALREPORT.PDF. See also “NAFTA’s Broken Promises: Fast Track to Unsafe Food,” Public Citizen memo, Fall 1997. Available at: http://www.citizen.org/trade/article_redirect.cfm?ID=1894.
25See Panel Report, United States — Certain Measures Affecting Imports of Poultry from China, WT/DS392/R, 29 Sept. 2010.
26Food Safety and Inspection Service, “Frequently Asked Questions – Equivalence of China’s Poultry Processing System,” U.S. Department of Agriculture, Sept. 26, 2013. Available at: http://www.fsis.usda.gov/wps/portal/fsis/newsroom/news-releases-statemen….
27U.S. Government Accountability Office, “Imported Food Safety,” May 2016. Available at: http://www.gao.gov/assets/680/677538.pdf.
28U.S. Government Accountability Office, “Seafood Safety: FDA Needs to Improve Oversight of Imported Seafood and Better Leverage Limited Resources,” April 2011, at 21. Available at: http://www.gao.gov/assets/320/317734.pdf.
29Food Safety and Inspection Service, “Quarterly Enforcement Report for Quarter 4, Fiscal Year 2013,” U.S. Department of Agriculture, 2013, at Table 3a. Available at: http://www.fsis.usda.gov/wps/portal/fsis/topics/regulatory-compliance/re….
30Centers for Disease Control and Prevention, “Table 2b FoodNet–Incidence of Laboratory–Confirmed Infections by Year 2013,” accessed June 9, 2014. Available at: http://www.cdc.gov/foodnet/data/trends/tables/2013/table2a-b.html.
31Lawrence K. Altman, “Tainted Strawberries’ Danger Has Eased, U.S. Officials Say,” The New York Times, April 4, 1997. Available at: http://www.nytimes.com/1997/04/04/us/tainted-strawberries-danger-has-eas…. “HAV-Tainted Frozen Strawberries,” Hepatitis Control Report, Spring 1997, Vol. 2, No. 1. Available at: http://www.hepatitiscontrolreport.com/State3.html

 

January 2017
(View PDF here)

Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy

This Congressional Research Service paper from 2015 lays out the rules behind fast track and what the role of congress should be in trade policy.

Congressional_Research_ServiceLegislation to reauthorize Trade Promotion Authority (“TPA”), sometimes called “fast track,” was introduced as the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA- 2015; H.R. 1890/S. 995) on April 16, 2015. The legislation was reported by the Senate Finance Committee on April 22, 2015, and by the House Ways and Means Committee the next day. TPA, as incorporated into H.R. 1314 by substitute amendment, passed the Senate on May 22 by a vote of 62-37.

In the House of Representatives, the measure was voted on under a procedure known as “division of the question,” which requires separate votes on each component, but approval of both to pass. Voting on June 12, TPA (Title I) passed by a vote of 219-211, but TAA (Title II) was defeated 126-302. A motion to reconsider that vote was laid by Speaker Boehner shortly after that vote. The previous grant of authority expired on July 1, 2007. TPA is the process Congress has made available to the President to enable legislation to approve and implement certain international trade agreements to be considered under expedited legislative procedures for limited periods, provided the President observes certain statutory obligations.

TPA defines how Congress has chosen to exercise its constitutional authority over a particular aspect of trade policy, while giving the President added leverage to negotiate trade agreements by effectively assuring U.S. trade partners that final agreements will be given timely and unamended consideration. On July 30, 2013, President Obama first publicly requested that Congress reauthorize TPA, and he reiterated his request for TPA in his January 20, 2015, State of the Union address. Legislation to renew TPA was introduced in the 113th Congress (H.R. 3830) (S. 1900), but it was not acted upon.

TPA reflects decades of debate, cooperation, and compromise between Congress and the executive branch in finding a pragmatic accommodation to the exercise of each branch’s respective authorities over trade policy. The expedited legislative procedures have not changed since first codified in the Trade Act of 1974 (P.L. 93-618). Congress, however, has required that the authority to use TPA be periodically reauthorized, and at times has chosen to revise trade negotiation objectives, the consultative mechanism, and presidential notification requirements. While early versions of fast track/TPA received bipartisan support, later renewal efforts have been more controversial, culminating in a more partisan vote on the 2002 TPA renewal.

Future debates on TPA renewal may center on trade negotiation objectives, congressional oversight of trade negotiations, trade agreement enforcement, and clarifying the congressional authority over approval of reciprocal trade agreements and trade policy more generally, among others. TPA renewal may become a more pressing issue in the 114th Congress because current trade negotiations on the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TISA) are in progress. Technically, TPA is not necessary to begin or even conclude trade negotiations, but it is widely understood to be a key element of defining congressional authority, and of passing trade agreement implementing legislation.

Therefore, its renewal can be construed as signaling serious congressional support for moving ahead with trade negotiations. Addressing congressional concerns over the definition and operation of TPA may be a central part of the debate. Although there appears to be support for renewal of TPA in Congress, the details of the legislation are likely to be subject to considerable debate, including the specific treatment of any related TAA program reauthorization. This report presents background and analysis on the development of TPA, a summary of the major provisions under the expired authority, and a discussion of the issues that have arisen in the debate over TPA renewal. It also explores some of the policy options available to Congress.

Learn more about these subject areas:

The U.S. Constitution and Foreign Trade ……………………………………………………………………….

The Evolution of the Congressional-Executive Partnership ………………………………………………

Creation of “Fast Track Trade Negotiating Authority” ……………………………………………………..

Subsequent Renewals of Trade Agreements Authority …………………………………………………….

The Trade Agreements Act of 1979 ………………………………………………………………………….

The Trade and Tariff Act of 1984 …………………………………………………………………………….

Omnibus Trade and Competitiveness Act of 1988 (OTCA) ………………………………………..

A Hiatus ……………………………………………………………………………………………………………….

The Bipartisan Trade Promotion Authority Act (BTPA) of 2002 ………………………………….

The Bipartisan Comprehensive Trade Priorities and Accountability Act of 2015

(BCTPA) …………………………………………………………………………………………………………..

The Elements of TPA ………………………………………………………………………………………………………..

Trade Agreements Authority…………………………………………………………………………………………

Implementation of Trade Agreements ………………………………………………………………………….

Expedited Legislative Procedures ……………………………………………………………………………….

Negotiating Objectives ………………………………………………………………………………………………

Notification and Consultation ……………………………………………………………………………………..

Limiting Trade Agreements Authority ……………………………………………………………………

Sunset Provision ………………………………………………………………………………………………….

Extension Disapproval …………………………………………………………………………………………

Procedural Disapproval ………………………………………………………………………………………..

Consultation and Compliance Resolution (CCR) …………………………………………………….

Withdrawal of Expedited Procedures ……………………………………………………………………..

Congressional Procedures Outside TPA ………………………………………………………………………

Hearings and “Mock Markups” ……………………………………………………………………………..

Side Agreements and Letters …………………………………………………………………………………

Informal Agreements ……………………………………………………………………………………………

Possible Issues for Congress …………………………………………………………………………………………….

The Need for and Timing of TPA ………………………………………………………………………………..

Definition and Scope of Negotiating Objectives ……………………………………………………………

Consultation and Notification ……………………………………………………………………………………..

Trade Agreement Enforcement ……………………………………………………………………………………

Technical Considerations ……………………………………………………………………………………………

Options for Congress ……………………………………………………………………………………………………… Current Legislation …………………………………………………………………………………………………………

By Ian F. Fergusson
Specialist in International Trade and Finance.

Read the whole report here.

Citizen’s Trade Campaign write to then President Elect Trump

Citizen’s Trade Campaign wrote to then President Elect Trump with calls to change NAFTA during any renegotiations. Now we are entering the third round, these ideas have never been more important.
cover-letter-57c72b575f9b5829f46c27d9

The rubric for assessing a NAFTA renegotiation is clear: Does it put the needs of people and the planet over corporate profits? Does it support — not undermine — good jobs, public health and a more stable climate? If your administration fails to achieve these fundamental goals, or delivers yet another corporate-favoring deal that threatens such priorities, we will oppose it at every step. To create good-paying jobs, eliminate threats to our communities and otherwise benefit the majority, NAFTA must be replaced with an agreement that includes these essential changes:

Eliminate rules that incentivize the offshoring of jobs and that empower corporations to attack democratic policies in unaccountable tribunals. NAFTA was the first U.S. trade agreement to include special privileges for investors and the Investor-State Dispute Settlement (ISDS) regime that make it less risky for employers to relocate jobs offshore, while simultaneously threatening democratic policymaking at home and abroad. ISDS grants new rights to multinational corporations to sue governments before panels of corporate lawyers. These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits. The corporations need only convince the lawyers that a law or safety regulation violates their broad NAFTA rights. Their decisions are not subject to appeal. Already, corporations have used ISDS to challenge bans on toxic chemicals, land use policies, forestry and water policies, financial regulation, court rulings that support access to medicine and protections for our climate. Broad corporate rights, including ISDS, must be eliminated from NAFTA in order to eliminate offshoring incentives and to safeguard nations’ right to democratically determine their own public interest policies.

Defend jobs and human rights by adding strong, binding and enforceable labor and environmental standards to the agreement’s core text and requiring that they are
enforced. NAFTA facilitated a race to the bottom by relegating labor and environmental
concerns to weak and unenforceable “side agreements.” This encouraged corporations to
offshore jobs to the country where they could exploit the lowest labor and environmental standards. U.S. trade agreements since the George W. Bush administration have addressed labor and environmental matters in their core texts, but the required standards were weak, enforcement lax and these later pacts also failed to deliver improved labor or environmental conditions in trade partner countries. Any deal that replaces NAFTA must create a fair playing field by requiring the agreement go into effect only upon each participating country adopting, maintaining, implementing — and enforcing — domestic laws that provide the labor rights and protections included in the International Labor Organization’s Core Conventions and policies that fulfill the Paris climate agreement and other core multilateral environmental agreements. These commitments must be enforceable via an independent dispute settlement process and subject to the same sanctions used to enforce the commercial provisions of NAFTA. Market access must be conditioned on confirmation that labor and environmental commitments are enforced — meaning sustained evidence that conditions on
the ground have improved and withdrawal of trade benefits for backsliding. In addition, the deal must tax imported products made under highly climate-polluting conditions.

Overhaul NAFTA rules that harm family farmers and feed a destructive agribusiness model. NAFTA devastated rural communities in the United States and Canada, while also forcing millions of Mexican farmers and farmworkers off their land, fueling a major increase in forced migration. Moreover, NAFTA’s agribusiness model concentrated wealth in a handful of food processing and trading companies, depleted natural resources, polluted water and the climate and left taxpayers to pick up the tab for agribusinesses’ failure to pay farmers above-cost-of-production prices. NAFTA’s agriculture terms must be changed to achieve balanced trade that supports fair and sustainable food supplies and rural economies. All nations must have the right to democratically establish domestic farm policies that ensure that farmers are paid fairly for their crops and livestock, as well as to establish other farm and food policies, such as inventory management, strategic food reserves, import surge protections and other anti-dumping mechanisms, that protect farmers, workers and consumers.

End NAFTA rules that threaten the safety of our food. NAFTA has enabled a flood of food imports that has overwhelmed food safety inspectors, contributing to a rise in food-
borne illnesses. NAFTA even allows imports of food that does not meet domestic food safety standards, further jeopardizing our health. To make matters worse, our NAFTA partners have used trade tribunals to attack commonsense food labels, such as those that tell consumers where our food came from. To ensure that our food is safe, any deal that replaces NAFTA must require imported food to meet domestic food safety standards, include enhanced border inspection requirements. And, it must require country-of-origin labeling for meat and other food products so consumers can make informed choices, and must otherwise affirm countries’ rights to require mandatory food labeling regimes to inform consumers.

Eliminate NAFTA rules that drive up the cost of medicines. NAFTA prioritizes drug
companies over patients by establishing monopoly protections that shield pharmaceutical firms from competition and increase medicine prices. Those firms hope to use NAFTA renegotiation to gain even further protections by inserting extreme provisions from the TPP. This corporate protectionism is a life-or-death matter, as it can put life-saving drugs out of reach for many. To increase access to affordable medicines, NAFTA’s existing intellectual property protections must be eliminated and no new measures included that would go beyond the existing World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which is already in effect in all NAFTA member countries. Instead, public health protections should be included that enable the United States and other countries to promote the human right to health and ensure access to medicine for all.

Eliminate NAFTA rules that undermine job-creating programs like Buy American.
NAFTA bars each participating government from prioritizing purchases of domestically
made products over those made in other NAFTA countries or from requiring that outsourced government services, such as call centers, employ workers domestically. It also threatens environmentally-friendly purchasing policies and prevailing wage and other labor requirements. This undercuts popular programs that create jobs, support living wages and reduce pollution. To restore such pro-worker, pro-environment policies and ensure that every country has the freedom to choose how to spend its own tax funds, NAFTA’s procurement chapter must be eliminated.

Add strong, enforceable disciplines against currency manipulation to ensure a fair
playing field for job creation. NAFTA allows countries to lower the value of their
currencies to gain trade advantages. Such currency manipulation results in floods of
artificially-cheap imports, while exports are unfairly priced out of other countries’ markets, threatening jobs and entire industries. The United States should work with Mexico and Canada to establish common mechanisms so that together we can confront currency manipulation around the world. Binding disciplines against currency manipulation must be included in trade agreements’ core texts, and domestic U.S. legislation must be enacted that triggers automatic corrective action against currency manipulators, rather than simply  triggering reports or dialogue.

Strengthen “rules of origin” and stop transshipment so as to create jobs and reinforce labor and environmental standards. Allowing NAFTA’s weak “rules of origin” to
continue would incentivize firms to use parts and raw materials made in nations that exploit workers and the environment instead of producing them in a NAFTA country that complies with revised NAFTA labor, environmental and other standards. This is because NAFTA allows goods with a large share of value coming from non-NAFTA nations to qualify for its benefits. For example, a car with only 62.5 percent of its value coming from NAFTA nations gets duty free access if it is assembled in a NAFTA nation. A NAFTA replacement deal must require 90 percent of a product’s value come from a NAFTA nation for it to qualify and must include stronger rules to stop “transshipment” cheating on the rules of origin.

Require imported goods and services to meet domestic safety and environmental rules. As with imported food, NAFTA requires countries to allow imports of other products that do not meet domestic safety and environmental standards. NAFTA also requires us to import energy, financial and other services and to allow firms from one NAFTA country operating in another NAFTA country to provide services without meeting domestic standards. For instance, NAFTA requires us to permit unlimited access to U.S. roads for trucks from Canada and Mexico even when certain vehicles do not meet U.S. safety and environmental standards and drivers do not hold U.S. Commercial Drivers Licenses. Failure to comply with these terms subjects a country to challenge before NAFTA tribunals that can authorize trade sanctions or orders for cash compensation, both undermining democratic policymaking and workers at firms that follow the domestic rules. These NAFTA terms must be replaced with a simple rule: imported products and services must meet the same standards as domestic products and services, and all service providers — domestic or foreign — must equally comply with a country’s environmental, land use, safety, privacy, transparency, professional qualification and consumer access policies to ensure high-quality products and services, as well as high-quality jobs.

• Add a broad protection for environmental, health, labor and other public interest
policies. NAFTA’s many overreaching rules restrict the policy tools that governments can
use to protect workers, promote public health, tackle climate change and otherwise advance broadly-shared priorities. Other governments, and even corporations, can challenge laws democratically passed by Congress, state legislatures and city councils as NAFTA violations in tribunals operating outside of domestic court systems. This is the case even if such policies apply equally to U.S. and foreign goods, firms and services. If a tribunal rules against a challenged policy, the government can face trade sanctions unless they remove or weaken the policy or be required to pay cash compensation to a corporation or investor that claims to have its NAFTA rights violated. Effectively, NAFTA negotiators created an expansive body of corporate-rigged law outside of normal democratic procedures. But it includes no provision that effectively shields domestic policies created through our democratic procedures from such challenges — only a weak “exception” that does not apply to many of the pact’s rules and that has consistently failed to protect challenged policies. Any deal that replaces NAFTA must include a broad “carve-out” that exempts non-discriminatory domestic policies from all of the deal’s rules, providing a strong deterrent and an early defense against any challenges.

This is only a partial list of needed changes to NAFTA — many others could be added. But a NAFTA renegotiation that does not include these changes would certainly not be “a lot better” for working people.

NAFTA: U.S. wants to insert 5-year termination clause in the agreement

WASHINGTON — The United States is seeking to insert a so-called sunset clause into a new NAFTA, a controversial proposal that would automatically terminate the agreement after five years unless all three member countries agree to extend it.

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That idea has been quietly floated for months by U.S. officials who finally made it public Thursday.

It prompted swift resistance.

Canadian and Mexican officials brushed it off almost as soon as it was publicly revealed, calling it a bad idea that would create economic instability and scare businesses away from long-term investments.

The priority was announced by Donald Trump’s commerce secretary, Wilbur Ross. He confirmed the U.S. will seek some automatic-termination clause to ensure the agreement can be constantly re-evaluated and improved.

“The five-year thing is a real thing that would force a systematic re-examination,” Ross told a forum organized by the website Politico.

“You’d have a forum for trying to fix things.”

Ross said U.S. trade czar Robert Lighthizer, who is leading the NAFTA talks for his country, agrees with him that it’s a good idea. But Ross conceded it’s unclear the other NAFTA countries will ever accept it.

He reiterated his goal of reaching a deal by the end of the year. Afterwards, he said, it will become harder to nail down a deal in 2018 as Mexico and the U.S. have national elections, the U.S. fast-track law is up for renewal and Canada has provincial elections. If there’s no deal, he said the president is serious that he might terminate NAFTA.

“It’s a very real thing,” Ross said of the president’s threat.

“But it is not the preferred option.”

The idea of an automatic sunset appears to be a non-starter.

Shortly after Ross left the stage, the U.S. ambassadors of Canada and Mexico appeared for a panel discussion. Both strongly rejected the idea,and said the U.S. business community would never accept it either.

Canada’s David MacNaughton told reporters he’s been hearing this idea for months in closed-door chats. He said he’s never understood the logic behind it, since NAFTA already has a clause allowing any country to withdraw if it really wants to.

But an automatic-sunset clause is designed for something you intend to end, like a law designed to expire, MacNaughton said. That’s the opposite of a trade agreement — whose inherent goal, he said, is to project long-term predictability.

“One of reasons you do (a trade agreement) is to create an environment within which business can make investments. (In) many of those investments people will look to 20 years’, 25 years’ payback,” MacNaughton said.

“If you have to do it every five years, the pricing of political risk is very high.”

He illustrated his point with a more homespun metaphor: “If every marriage had a five-year sunset clause on it, I think our divorce rate would be a heck of a lot higher than it is.”

Mexico’s ambassador agreed.

“Our views exactly,” said Geronimo Gutierrez. “It would probably have very detrimental consequences for the business community of the United States, Mexico and Canada… Certainty is the key word here.”

Read the full article here.

Globalization and the End of the Labor Aristocracy

Twenty-first century imperialism has changed its form.

honor-labor

In the 19th century and the first half of the 20th century, it was explicitly related to colonial control; in the second half of the 20th century it relied on a combination of geopolitical and economic control deriving also from the clear dominance of the United States as the global hegemon and leader of the capitalist world (dealing with the potential threat from the Communist world). It now relies more and more on an international legal and regulatory architecture—fortified by various multilateral and bilateral agreements—to establish the power of capital over labor. This has involved a “grand bargain,” no less potent for being implicit, between different segments of capital. Capitalist firms in the developing world gained some market access (typically intermediated by multinational capital) and, in return, large capital in highly developed countries got much greater protection and monopoly power, through tighter enforcement of intellectual property rights and greater investment protections.

These measures dramatically increased the bargaining power of capital relative to labor, globally and in every country. In the high-income countries, this eliminated the “labor aristocracy” first theorised by the German Marxist theorist Karl Kautsky in the early 20th century. The concept of the labor aristocracy derived from the idea that the developed capitalist countries, or the “core” of global capitalism, could extract superprofits
from impoverished workers in the less developed “periphery.” These surpluses could be used to reward workers in the core, relative to those in the periphery, and thereby achieve greater social and political stability in the core countries.

This enabled northern capitalism to look like a win-win economic system for capital and labor (in the United States, labor relations between the late 1940s and the 1970s, for example, were widely termed a “capital-labor accord”). Today, the increased bargaining power of capital and the elimination of the labor aristocracy has delegitimated the capitalist system in the rich countries of the global North.

Increasing inequality, the decline in workers’ incomes, the decline or absence of social protections, the rise of material insecurity, and a growing alienation from government have come to characterise societies in both developed and developing worlds. These sources of grievance have found political expression in a series of unexpected electoral outcomes (including the “Brexit” vote in the UK and the election of Trump in the United States). The decline of the labor aristocracy—really, its near collapse—has massive implications, as it undermines the social contract that made global capitalism so successful in the previous era. It was the very foundation of political stability and social cohesion within advanced capitalist countries, which is now breaking down, and will continue to break down without a drastic restructuring of the social and economic order.

The political response to this decline has been expressed primarily in the rise of right-wing, xenophobic, sectarian, and reactionary political tendencies. 21st Century Imperialism. The early 21st century has been a weird time for imperialism. On the one hand, the phase of “hyper-imperialism”—with the United States as the sole capitalist superpower, free to use almost the entire world as its happy hunting ground—is over. Instead, the United States looks significantly weaker both economically and politically, and there is less willingness on the part of other countries (including former and current allies, as well as those that may eventually become rival powers) to accept its writ unconditionally.

On the other hand, the imperial overreach that was so evident in
the Gulf Wars and sundry other interventions, in the Middle East and around the world, continues despite the decreasing returns from such interventions. This continued through the Obama presidency, and it is still an open question whether the Trump presidency will lead to a dramatic reduction of this overreach (“isolationism”) or merely a change in its direction.

BY JAYATI GHOSH | MARCH/APRIL 2017
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