18 Aug 2017
USTR Outlines U.S. Trade Enforcement Priorities
The Office of the U.S. Trade Representative plans to pursue an “aggressive” trade enforcement agenda that includes both offensive and defensive measures, according to a recent report to Congress. These efforts will include everything from monitoring and communication, to helping trade partners implement their commitments on time, to dispute settlement at the World Trade Organisation or remedial measures under U.S. trade laws. USTR states that its enforcement actions will be designed to increase U.S. economic growth and job creation, promote reciprocity with trading partners, strengthen the United States’ manufacturing base and ability to defend itself, and expand agricultural and services exports.
USTR states that its primary objective is defending the U.S. Department of Commerce’s ability to apply appropriate antidumping and countervailing duties to combat distortions caused by mainland China’s non-market economy system and government subsidies that are injuring U.S. workers and industries. In this context the report highlights the international steel and aluminium markets, which “are currently experiencing significant oversupply” that is due in large part to “production from excessive and uneconomic capacity” in mainland China and has caused “the suppression of U.S. and global prices, and the displacement of U.S. exports in foreign markets.”
The report also emphasises defending trade remedies more broadly, noting that foreign governments are increasingly challenging at the WTO not only specific U.S. AD and CV duty orders but also U.S. trade remedy laws and practices in general. As a result, USTR vows to “vigorously enforce” U.S. rights in this area, stating that it is “critical” for WTO members to “fully recognize [the] centrality” of trade remedy laws to the international trading system.
The report lists several other trade enforcement priorities as well but does not appear to indicate any heightened initiatives in these areas. For example, USTR states that a “critical component” of the administration’s “aggressive efforts” on intellectual property rights will be identifying IPR-related market access barriers and the steps necessary to address them, but USTR’s annual Special 301 report has done this for many years. Other long-standing efforts that USTR plans to continue include identifying and confronting unjustified barriers stemming from technical regulations, standards and conformity assessment procedures, such as the growing number of foreign regulations that restrict the marketing, advertising and labelling of food, alcoholic beverages, infant formula and energy drinks, and pursuing the elimination of traditional trade barriers such as import licencing restrictions, non-science-based sanitary and phytosanitary measures, export subsidies and discriminatory content requirements.
Meanwhile, a new initiative by Senate Democrats seeks to “fundamentally transform [U.S.] trade policies by giving American workers and small businesses the tools to combat those countries that try to cheat on trade and a stronger voice in negotiating trade agreements.” Press sources characterise the plan as an effort to reclaim momentum on this issue, which played a major role in last year’s presidential election, but point out that it contains few new ideas and in many cases aligns closely with objectives advanced by President Trump. Democrats say they plan to introduce legislation this fall to start implementing the plan, which focuses on the following provisions.
Circumvent the WTO
The plan would establish a new independent trade prosecutor who would challenge unfair trade practices outside of the WTO or free trade agreement mechanisms. These processes take many years to resolve problems, the plan states, and WTO decisions in particular have eroded a number of U.S. trade enforcement tools.
The trade prosecutor would be housed at a new office in the U.S. International Trade Commission and would thus be able to address “more trade cheating than USTR is currently able to” (e.g., subsidies, forced technology transfers, cyber espionage, intellectual property theft, import restrictions) under strict timelines and independent from U.S. foreign policy goals and WTO constraints. If foreign countries are found to be in violation and do not agree to eliminate offending policies they would face retaliation in the form of U.S. market access restrictions in proportion with a U.S. company’s losses or the foreign company’s unfair advantage.
Review Foreign Acquisitions
The plan would establish a new council of independent economic experts that would have the authority to consider major investments, mergers and acquisitions by foreign entities and to stop such deals if they would create significant market distortion or have other detrimental economic impacts, including intellectual property leakage, loss of market share in critical industries and U.S. job losses. The council’s consideration would focus on entities that either have ties to or are directly controlled by certain governments or state actors that do not abide by market principles or have a history of intellectual property theft. The plan explains that countries like mainland China and Russia are using state-owned enterprises to acquire U.S. companies in an effort to “siphon trade secrets and technology to directly compete with other U.S. firms.”
The plan seeks to ensure that NAFTA is renegotiated “in the open with workers at the table” (by revamping the trade advisory committee structure and providing regular updates to the public), includes enforceable labour and environmental standards that are “much stronger than those in any past trade agreement,” provides greater and more secure market access for U.S. exports, and creates new economic opportunities in services and digital trade. The plan blames NAFTA’s “unenforceable” labour and environment standards for the offshoring of U.S. jobs and declining U.S. wages, asserts that the agreement benefits primarily large corporations, and claims that Mexico and Canada “have been cheating without repercussions” because NAFTA does not address practices such as currency manipulation and unfair government subsidy programmes.
“Many companies that receive federal grants or loans are outsourcing customer service functions, like call centers that handle sensitive U.S. consumer information, to countries that have poor data security protections,” the plan states. The plan would penalise such contractors by requiring federal agencies to consider a company’s record of outsourcing for three years prior to application for federal contracts and establishing a negative preference of up to ten percent of the cost of a contract for that company for outsourcing activity. The plan would also create “a public ‘shame’ list” of U.S. companies that regularly relocate U.S. jobs overseas and establish a negative preference for issuing certain federal grants and loans for companies on that list.
Moreover, the plan would (i) deny current tax deductions for the cost of moving U.S. production and jobs outside the United States, (ii) create a tax credit of up to 20 percent for the cost of relocating production and jobs to the United States, (iii) require companies that outsource jobs to forfeit up to five years’ worth of tax benefits, and (iv) require companies that move their headquarters overseas to pay their full U.S. tax bills on all profits they hold overseas before such a move.
Expand Buy America Requirements
The plan laments the failure of the WTO Government Procurement Agreement to open foreign markets, stating that “many of our trade partners have much stronger programs and protections favoring their domestic companies.” In response, the plan would (i) require taxpayer dollars to be spent on U.S. companies and U.S. jobs for all federal public works and infrastructure projects, (ii) limit the amount of manufactured products in transportation and water infrastructure projects that can be foreign-made, (iii) limit the amount of foreign production in military contracts, (iv) require up-to-date reporting on the use of Buy America waivers for foreign firms, (v) maintain the existing “melted and poured” standard for iron and steel, with no exceptions, and (vi) restrict the use of Buy America waivers for products from non-market economies.
Address Currency Manipulation
The plan would clarify that CV duty law can address currency undervaluation, require the DOC to investigate currency undervaluation as a subsidy if a U.S. industry requests it, and allow duties to be assessed against countries that manipulate their currencies equal to the effect of that manipulation.