Category Archives: Politics

New US trade measures against China TBA


U.S. trade officials will announce a major trade enforcement action against China on Tuesday, according to an advisory from the U.S. Trade Representative’s office. The advisory, which was obtained from a business group, said U.S. Trade Representative Ron Kirk “will hold a press conference to announce a major trade enforcement action against China.” It gave no other details.

via Scott Lincocome.

Revenue-neutral tariff cuts are tricky business

Sallie James:

[B]ecause implementing the FTAs (which will lower tariff revenue) and paying for the billion-dollar-plus TAA extension “requires” offsets, the draft language specifies in Sec. 601 that revenue should be raised by increasing customs user fees.

Scott Lincicome:

But “customs fees” are simply hidden taxes on import consumers.  A quick review of the US Customs website on “customs users fees” makes this clear.  They’re paid (mainly) by commercial transporters bringing goods (imports) into the United States, thus raising the costs of importation…

[A]ssuming that the agreement would raise US customs users fees (or implement new ones) in order to generate revenue for the federal government, it would probably violate GATT Article VIII, which governs WTO Members’ imposition of “Fees and Formalities connected with Importation and Exportation” (in other words, customs fees).  The key provision of Article VIII reads:

1.(a) All fees and charges of whatever character (other than import and export duties and other than taxes within the purview of Article III) imposed by contracting parties on or in connection with importation or exportation shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.

The politics of the Doha round and US PTAs

At VoxEU, Richard Baldwin and Fred Bergsten are debating the state of trade politics. Baldwin thinks that the Doha round is the greatest opportunity for meaningful increases in US exporters’ market access and is pessimistic about the outcomes of pursuing a series of bilateral trade deals. Fred Bergsten thinks that the Doha round is failing because it doesn’t offer meaningful market access improvements and defends the Free Trade Area of the Asia Pacific proposal.

Will AGOA be renewed in 2015?

Rosa Whitaker, who helped create the African Growth and Opportunity Act (AGOA) as assistant USTR for Africa under President Clinton, thinks that AGOA may not be renewed.

Instead, the idea gaining currency in Washington is a version of trade preference reform in which Agoa-like benefits are extended to all “least developed countries”, leaving Africa with no exclusive trade benefits and SA [South Africa], with its middle-income status, completely out of the loop.

Though a relaxed rule of origin for fabric inputs will expire at the end of 2012, AGOA won’t expire until 2015, so I think it’s a bit early to be sounding alarm bells. The US is supposed to strike a Doha deal in the meantime, for example.

Previous posts on AGOA include thinking about identification, dynamic vs static gains, and binding constraints.


Obama on PTAs with Korea, Colombia, and Panama

Yesterday, President Obama said at the Chamber of Commerce:

We finalized a trade agreement with South Korea that will support at least 70,000 American jobs. And by the way, it’s a deal that has unprecedented support from business and labor, Democrats and Republicans. That’s the kind of deal that I will be looking for as we pursue trade agreements with Panama and Colombia, as we work to bring Russia into the international trading system.

Keith Hennessey, Director of the NEC under President Bush, says:

The problem is that the U.S. already has trade agreements with Panama and Colombia. The President is in reality saying that he is undoing those deals… When President Obama arrived, he said the South Korea FTA negotiated during the Bush Administration was a bad deal for the United States. Rather than submitting it to Congress for approval, he directed his USTR Ron Kirk to renegotiate certain parts of it with the Koreans… We see from yesterday’s remarks that the President wants this to be the model for future trade agreements. This gives labor unions and their Congressional allies tremendous leverage to water down or even block FTAs they don’t like.

That’s one interpretation of the remarks. It’ll be interesting to see what the administration actually does on trade going forward. Given the relative economic unimportance of these PTAs, I think the efforts to wrap up the WTO’s Doha negotiations this year may be more interesting.

Doha at Davos: WTO negotiations back on the global stage

Remember those WTO negotiations called the Doha round? They’re back!

In November, Germany, the U.K., Indonesia, and Turkey commissioned Peter Sutherland and Jagdish Bhagwati to co-chair a report on the Doha negotiations and their future. Its release (pdf) this afternoon, coupled with informal talks by 25-30 trade ministers (UPDATE: more details from WSJ) at the Davos festivities, has people talking about the Doha round’s prospects in 2011. The report provocatively calls for a deadline to the negotiations, saying that:

No individual player is willing to be the first to declare the Round moribund, knowing that they will then be accused of precipitating its demise. At the same time, there is not sufficient political momentum to push for a final deal. The only way to change this is to make the prospect of failure concrete, collective and unavoidable. At the G20 level political leaders should set themselves a deadline within 2011 by which the Round must be completed or declared a failure. This deadline should be inflexible and bind all players at the level of Heads of Government.

Richard Baldwin, one of the members of the commission, thinks Doha is likely to succeed this year. His VoxEU column emphasizes US domestic political considerations in explaining the timing:

If the final Doha package is not before the US Congress by mid-2011, it will get caught up in the electoral cycle. Given the poisonous atmosphere on trade in the US – made much worse by high unemployment and Tea Party populism – the Obama Administration would most likely suspend further talks until 2013 at the earliest. This would pose a very real danger. If Doha were put on hold until 2013, there is a good chance that it would never get done.

At Davos, David Cameron and Angela Merkel are saying it’s time for Doha to be done. This is the most active discussion of the WTO negotiations in quite a while. Does it mean they’ll get the deal done?

More on the US-Korea PTA revisions

Timely analysis of the modifications to the US-Korea trade deal (pdf) from the Peterson Institute’s Jeff Schott:

In economic terms, the overall impact of the new deal differs little from the old deal. Changes in the tariff schedules reduce the overall benefits of the trade pact but not by very much. Immediate tariff cuts on autos and light trucks have been deferred a few years, but changes in Korea’s regulatory policies and procedures on autos should help mitigate existing problems and preclude the introduction of new nontariff barriers to US exports to Korea…

Under the new agreement the US car tariff, currently 2.5 percent, will be maintained for four years (i.e., until January 2016) and then eliminated. In turn, Korea slowed its own tariff reform… In addition, the US tariff on light trucks, which has been 25 percent since the infamous 1963 US-Europe chicken war, will be maintained for seven years (until 2019) and then phased out over the next three years. Originally, the light truck tariff was to be phased out in 10 equal annual increments…

Do these changes in tariff reforms make much of a difference? Probably not—and definitely not if the Doha Round agreement concludes and begins to cut most-favored nation (MFN) tariffs starting in January 2013, the likely start date if a WTO deal is reached by early 2012… US light truck tariffs would be phased down from 25 percent to 6.1 percent in 2019. So for light trucks, the US MFN tariff would be lower than the KORUS preferential tariff beginning in January 2014.

Will the revised Korea-US PTA be fast tracked?

(Updated 6 Dec 2010, 7pm.)

The US-Korea PTA is back on the table, as US automakers won some concessions from South Korea:

The new supplement agreement allows 25,000 cars per U.S. automaker to qualify for entry into the South Korean market based on U.S. safety standards. That is about four times the amount agreed to under the deal struck in 2007.

It also allows the United States to keep a 25 percent tariff on trucks until the eighth year, instead of beginning to reduce it in the first year. The United States will still have to eliminate the duty in year 10 of the pact.

South Korea is no longer required to eliminate immediately its 8 percent tariff on U.S. auto imports, but will reduce it to 4 percent for four years before eliminating it.

Seoul will still immediately eliminate a 10 percent tariff on U.S. trucks under the revised pact.

South Korea was given an additional two years — until 2016 — to eliminate duties on some U.S. pork products.

The deal needs to be ratified by the Korean National Assembly and the US Congress. Last month, Jeff Schott said that the deal could still be “fast tracked” to Congress because it was signed by President Bush before his trade promotion authority expired. I do not know if yesterday’s revisions (“supplement agreement”) also qualify under the old TPA or if the revised PTA will be subject to Congressional amendments.

UPDATE: Reuter’s Doug Palmer says that White House and USTR both say the revised deal is eligible under the old trade-promotion authority.

The US-Colombia PTA is not about economics

If you approach the subject as an economist, the US-Colombia PTA’s political deadlock is tough to understand. As I noted repeatedly 30 months ago (1, 2, 3, 4) when the PTA was in the news, Colombia’s only meaningful benefit would be making its regularly renewed tariff preferences permanent. US exporters would face lower tariffs in a few areas. Thus, the deal won’t cause substantial change in the economic environment. The PTA’s significance lies in its foreign-policy role, not its economic content.

Nonetheless, writing in the WSJ, Mary O’Grady tries to make the trade deal about economics:

But to make sense of the Obama administration’s opposition to a Colombia FTA—when the U.S. is already open to Colombian exports under the Andean Trade Preference Act (ATPA)—takes real mind-bending.

The advantage for Colombia of the trade agreement is that it will codify ATPA, so it doesn’t have to be renewed every few years. In exchange, Colombia commits to opening to U.S. foreign investment and exports. Consumers, producers and investors in both countries come out winners.

There are also geopolitical gains for the U.S., which benefits from the institutionalization of open markets…

Next year, Ottawa’s Colombia free trade agreement will enter into force, and Canadian producers will join the list of competitors who have an advantage over Americans in the Colombian market. The European Union and South Korea have also signed FTAs with Colombia and will have advantages on the industrial production front.

It’s hard to understand what Mr. Obama is thinking about besides his loyalty to the AFL-CIO. But Colombia’s plans are clear. It wants to trade with the U.S. But if it is rejected, it will simply buy and sell with the rest of the world.

The economics are clear. But I think O’Grady has missed part of the politics. News coverage suggests that Democrats are worried about human rights issue in Colombia, American unions are concerned about violence against Colombian union leaders, and Colombia is arguing that its labor conditions have improved. No one seems to be worried about a flood of Colombian imports hurting US jobs. If that’s the case, then it’s likely fruitless to talk about the economics rather than the politics of the trade deal.