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 Volume 24, Number 143                                                                                                                                  Monday, July 20, 2015

Trade Reports International Group


Breakthrough On ITA

  Geneva – Twenty-five World Trade Organization members working on an expanded Information Technology Agreement achieved a breakthrough of sorts on Saturday by persuading South Korea and China to agree on a final list of 201 product lines for zero tariffs – compromising over a dispute on including liquid crystal display monitors (WTD, 7/17/15).

 Seoul gave up its bid for LCDs in return for inclusion of lenses used in electronic devices, WTD has learned.  Korea also secured a concession when two medical devices items were placed in the “ex-outs” category.  “Ex-outs” refer to a subcategory for a main harmonized tariff line with the specific description of the ITA products.  Low-end medical devices exported by China will have considerably diminished access into the Korean market under the arrangement supported by the United States.

 High-end medical devices from US companies are currently covered in the Korea-US free trade agreement.

 Nations now will consult with their capitals and hopefully have a formal agreement on the new list by Friday, according to WTO Director General Roberto Azevêdo.

 The core ITA negotiator group includes the European Union, the United States, Japan, China, Korea, Australia, Switzerland, Norway, New Zealand, Singapore, Turkey, Taiwan, Malaysia, Thailand, the Philippines, Hong Kong, Costa Rica, Israel, Croatia, Bahrain, Montenegro, Iceland, Guatemala, Colombia and Albania.

 Following difficult negotiations at the EU mission last week, Brussels brokered a compromise between Korea and China to include only lenses under HS 6 classification.  The final deal involved some give-and-take between Korea and China, WTD was told.

Taipei’s Disgruntlement

 At Saturday’s session, Taipei expressed sharp concern over the final list, saying products of interest to itself had not been taken on board.  But China and Korea – the two main protagonists that were unable come to an agreement on a dozen core ITA tariff lines for the past nine months – expressed satisfaction with the final outcome.

 In the end China refused to relent to Korea’s demand for including LCD terminals, saying it had already showed considerable flexibility last year in its bilateral agreement with the United States.  The US-China agreement became the backbone for the expanded ITA negotiations.

 From an initial list of 350 items, the final list has been pruned to 201 – due mostly to China’s insistence on removing products.

 Nevertheless, Washington praised the weekend breakthrough as ushering in the first tariff-cutting  deal accomplished by the WTO in 18 years.

 Eighty WTO members make up the current ITA, representing some 97 percent of global trade in the sector.  Since the ITA went into force in 1997, global trade covered by the ITA has more than tripled, rising to more than $4 trillion in annual trade.  The latest agreement, according to the US Trade Representative’s office, has the potential of upping that total some $1 trillion.

 New products to be included in the expanded ITA include medical equipment, GPS devices, video game consoles – where tariffs of 30 percent will fall to zero, computer software and next generation semiconductors – tariffs of 25 percent will go to zero.

       









Diplomatic Relations With Cuba

 The United States and Cuba today formally restore diplomatic relations, ending a half-century freeze – a move a State Department official called a “symbolic step” toward closer relations (WTD, 7/16/15).

 Secretary of State John Kerry today will meet with Cuban Foreign Minister Bruno Rodriguez – the first high-level Cuban official to visit Washington.  Mr. Rodriguez will preside over a ceremony restoring the Cuban Interests Section to embassy status.

 Mr. Kerry will not attend the ceremony at the Cuban Embassy, although a small delegation of lower-level US government officials will be present to watch the flag raising, according to an official briefing reporters on Friday.

 The US Interests Section in Havana also becomes a full-fledged embassy today.  But there will be no ceremonial reopening or flag raising until Secretary Kerry visits next month, the official said.

 President Obama has made clear he thinks Congress should end the trade embargo.  But the restoration of diplomatic ties will allow more US citizens to travel to Cuba, where they will have the support of a US embassy, the official commented.

 The two senior diplomats are expected to have “substantive” discussions on a number of issues when they meet today, according to State Department spokesman John Kirby.  He declined to give details but noted ongoing bilateral discussions in areas like access to telecommunications, cooperation on health care, human rights and migration.

       



Affordable Access to Medicines

 Two House Democrats Friday raised concerns that the Obama Administration is pushing drug patent provisions in the TransPacific Partnership negotiations that would make it harder for consumers in the United States and the other 11 TPP countries to find affordable generic medicines (WTD, 7/17/15).

 Reps. Jan Schakowsky (D-Ill) and Rosa DeLauro (D-Conn) said TPP negotiating documents they have seen made clear the United States is fighting for stringent data exclusivity provisions that would benefit US pharmaceutical companies to the detriment of low-income consumers.

 And the United States mostly is standing alone in its insistence on provisions like 12-year data exclusivity for biologics and the expanded use of “ever-greening,” which allows drug companies to hold on to their patents by making minor changes.

 The fact the US side has virtually no support among other TPP members on the access to medicines issue will give Congress some leverage to convince the White House to change its proposals, Ms. Schakowsky said.  But so far the Administration has ignored concerns raised by members on access to medicines and other outstanding issues, the two lawmakers stated.

 With a key TPP trade ministers meeting later this week, the members said they will keep “shining a spotlight” on the issue.

       



US Duties on Indonesian Coated Paper

 Geneva – Indonesia today will call for establishment of a World Trade Organization dispute

settlement panel to adjudicate over US antidumping and countervailing measures on certain of its coated paper (WTD, 3/16/15).

 At a Dispute Settlement Body meeting, Indonesia will request a panel on the grounds that the US measures violate several core provisions in the WTO subsidies and countervailing measures and antidumping agreements.

 Indonesia and the United States failed to come to an accommodation in informal consultations.

 The United States is expected to block the request but will not be able to do so a second time under WTO rules.

 Indonesia also will call for establishment of a panel against the European Union on its antidumping measures imposed on biodiesel imports from Indonesia.

      

Around the Globe

             ●         EU and US officials said Friday they had picked up the pace in talks on the world’s biggest free trade accord, although they did not discuss the main sticking point – investment protection, Agence France-Press news service reported from Brussels (WTD, 6/9/15).  Negotiations on the Transatlantic Trade and Investment Partnership (TTIP) began optimistically in 2013 but have gotten bogged down on growing reservations in the EU, especially over US demands that private companies be allowed to take governments to court to seek redress.

 Earlier this month, the European Parliament said the Investor-State Dispute Settlement (ISDS) system – a feature in other US trade deals – undercut democratic oversight and should be replaced by a public court procedure.  EU chief negotiator Ignacio Garcia Bercero and his US counterpart Dan Mullaney told reporters after the 10th round of TTIP negotiations in Brussels that both sides were committed to pushing ahead with the talks.

 “We have worked this week with strong political wind in our wings,” Garcia Bercero said, citing recent solid support for the accord in the US Congress, from US President Barack Obama and from the G7 group of top industrial countries.  “We had no discussion on investment protection or ISDS,” he said, when asked if the subject had come up.  Mullaney, who cited the recent European Parliament decision as an endorsement for moving ahead, said “both sides now have clear guidance to get TTIP done and to bring home an agreement.”

 Garcia Bercero said the European Commission, the executive arm of the EU which conducts the negotiations on behalf of the 28-nation EU, understood the concerns voiced over ISDS.  “We will be able to put through a proposal in many ways different from the existing ISDS regime. We will now be working to finalise a proposal once we have gone through discussions with member states and the Parliament,” he said.

 EU Trade commissioner Cecilia Malmstroem earlier this year proposed creating an international investment court to hear disputes.  Mullaney said the United States also understood the issues raised, which had come up previously in its own consultations on ISDS.

 Both Garcia Bercero and Mullaney stressed that the week’s talks had gone well, with each side filling out their positions on key sectors such as services – which account for about two-thirds of activity in a developed economy – and public procurement and regulatory compatibility.  “We have an opportunity to conclude TTIP in the Obama term (which ends January 2017) but there is still a lot of work to do,” Mullaney said.

 EU chief negotiator Ignacio Garcia Bercero suggested that a common text on two-way procurement could be ready by the end of the year.

 Perhaps the biggest advance in the negotiations, both negotiators told a concluding press conference, was the submission of services market access offers, including a proposed negotiating text by the EU.  Services make up the bulk of bilateral trade, commented chief US negotiator Dan Mullaney.

 The new services offer is more ambitious and eliminated some of the reservations in the previous EU one, said Mr. Bercero.  There also is a negotiating text on electronic commerce – a priority for both sides.

 Regulatory coherence discussions also led to some concrete results, added EU’s Bercero.  The United States and the EU have introduced compatible regulations leading to a single development program for biosimilar medicines – of particular importance to each other’s generic pharmaceutical sectors.  In practice, he explained, biosimilar medicines approved in the EU can be considered as a reference for the US approval process – and vice versa.

 Negotiators made good progress as well on trade rules, competition policy, customs and state-to-state dispute settlement.  Discussions also were held on energy and raw materials trade.

 Talks will get down to the thorny issue of tariff reductions in the months ahead, suggested USTR’s Mullaney.  Most tariffs are already low, but there are a few items with double digit tariffs in the EU.  The US intent is to eliminate all tariffs.

 Discussions on labor and the environment will get underway in earnest in September – at the next formal round.

 Both chief negotiators also pledged to work quickly to get a final agreement before President Obama leaves office in January 2017 – and to patch together an outline of the agreement by the end of this year as directed by Group-of-Seven leaders last month.  Mr. Mullaney said negotiators must take advantage of every day to reach that goal.  “There is a lot of work to do.”

             ●         China’s Ministry of Commerce is urging the U.S. government to reconsider the recent decision by the International Trade Commission to levy import duties on Chinese consumer tires, saying the U.S. Commerce Department used “many unfair and discriminative practices” to derive the duty rates, Xinhua news agency reported (WTD, 7/15/15). The decision by the U.S. to impose anti-dumping and countervailing duties on Chinese passenger and light truck tires “will severely damage the export benefits of the Chinese enterprises involved in this case,” the Ministry said in a prepared statement, and therefore “expresses strong dissatisfaction” with the move.

 The ministry said the Chinese government “will defend its own rights and interests according to the (World Trade Organization) rules, noting that it has flagged “serious concerns” to the U.S. on several occasions.  In the statement, China urges the U.S. “to abide by the international trade rule once again, carefully use the trade remedy measures, take responsible attitude and actions, correct the wrong practices and maintain the multilateral trade system and the overall situation of the trade and economic relationship” between the countries.

             ●          Americans may covet Cuba’s hand-rolled cigars or daydream about sunbathing on its glittering beaches, but Cubans crave Louisiana agriculture products, especially the Bayou State’s rice, Gannett news service reported (see related report this issue).  And as the United States continues on its path of normalizing diplomatic relations with the forbidden isle, Louisiana farmers believe opening up free trade with Cuba can ultimately be a boon for agriculture.

 “Cuba has the potential to buy half our crop, about 600,000 tons,” said Acadiana farmer Richard Fontenot, who grows rice and other crops in Ville Platte. “I’ve heard they really favor our rice, and they consume a ton of it.”  Cuba and the United States are on the verge of reopening embassies on each other’s shores for the first time since President John F. Kennedy cut ties with the country in the 1960s. President Obama favors a gradual lifting of decades-long trade and tourism restrictions, although the embargo remains law for now.

 “If we ever get this deal going it’s going to be a big boost,” said Elton Kennedy, who grows thousands of acres of rice in northeastern Louisiana and operates three rice mills. “Cuba used to be one of our biggest customers. Cubans love our rice.”  Farmers and agriculture officials say Louisiana is perfectly positioned to cash in on trade with Cuba because of its close proximity to Louisiana ports.

 But the connection isn’t complete yet. Even with relaxed restrictions U.S. farmers can’t sell their commodities to Cuba unless it’s an all-cash transaction.

             ●         Sigmar Gabriel, Germany’s vice chancellor and economy minister, flew to Iran on Sunday, becoming the first top Western official to visit the country since world powers and Tehran reached a historic nuclear deal (WTD, 7/15/15).  On the three-day trip, Gabriel is scheduled to hold talks with Iranian President Hassan Rouhani, three ministers, the head of the central bank and the chamber of commerce.

 Eric Schweitzer, the president of Germany’s Chambers of Commerce and Industry (DIHK), said the visit by Vice Chancellor Sigmar Gabriel, who is also Germany’s economy minister, and a dozen German trade delegates was a “sign of encouragement” after years of market loss.  German exports to Iran sank from 4.7 billion euros to 2.1 billion euros ($5.1 to 2.3 billion) between 2010 and 2013. Foodstuffs, however, led a recovery to 2.4 billion euros over the past year.  The DIHK’s foreign trade chief, Volker Trier, forecast a four-fold increase over the next four years. “A better signal is unimaginable,” he added.

 The potential lay in German vehicles and tools, building materials, water and waste management, energy from renewable sources and health services, the DIHK said.

             ●         The much-awaited nuclear deal with Iran will mark a new stage not only for the international community but also for the geopolitical dynamics, especially in terms of Turkey’s standing in the region, Agence France-Presse news service reported (see related report this issue).  On June 14, Iran signed a deal entitled as “Joint Comprehensive Plan of Action” with five permanent members of the U.N. Security Council (the U.S., UK, France, Russia and China) plus Germany, to curtail much of its nuclear infrastructure in return for ending draconian sanctions built over the past nine years and targeting its economy.

 The first reaction of Turkey, who was supporting a diplomatic solution to this issue, was to hail the deal as being primarily in favor of Turkish economic interests, and to state its key importance for the stability, security and peace in the Middle East.  Turkey and Iran share the same land border that has been intact since 1639.  Between 2009-2010, Turkey and Brazil had offered to mediate between the West and Tehran for the denuclearization issue, although the attempt failed at the end because of the lack of political willingness.  In a news conference on June 14, Foreign Minister Mevlut Cavusoglu said that transparent implementation of the deal would be vital, and that the easing of sanctions against Iran would also bring economic benefits to Turkey, which is one of the major trading partners of Iran.

             ●          With bilateral trade extremely low, India and Russia have initiated steps to remove the hindrances and boost commerce by signing an agreement in the area of customs and moving to liberalise business visas, the Economic Times reported.  The bilateral trade during the last year was just USD 9.51 billion and Prime Minister Narendra Modi and Russian President Vladimir Putin discussed ways to increase it when they met in Ufa on July 8.  The two countries have fixed a target of USD 30 billion to be achieved by 2025.  “The fact that trade and investment is not up to expectations was widely accepted by the leaders of the two countries,” Indian Ambassador to Russia P S Raghavan told PTI here while referring to the Ufa meeting.




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On the Web......

Asia


Economy.  Asian Development Bank report on the economy of developing Asia.  (available at:  http://www.adb.org/publications/asian-development-outlook-supplement-july-2015?utm_source=daily&utm_medium=email&utm_campaign=alerts )  issued:  7/17/15.



Asia-Pacific


TPP.  Statement by Rep. Levin on human rights practices in Malaysia and the TransPacific Partnership.  (available at:  http://democrats.house.gov )  issued:  7/17/15.



Business


FCPA.  Justice Department statement on violation of the Foreign Corrupt Practices Act.  (available at:  http://www.justice.gov/opa/pr/louis-berger-international-resolves-foreign-bribery-charges )  issued:  7/17/15.



Cuba


US Relations.  State Department background briefing on US relations with Cuba.  (available at:  http://www.state.gov/r/pa/prs/ps/2015/07/245049.htm )  issued:  7/17/15.



European Union


TTIP.  European Union guide on the TransAtlantic Trade and Investment Partnership.  (available at:  http://trade.ec.europa.eu/doclib/docs/2015/july/tradoc_153635.pdf )  issued:  7/17/15.


TTIP.  US-European Union closing press conference on the TransAtlantic Trade and Investment Partnership round of negotiations.  (available at:  http://www.euintheus.org/press-media/10th-ttip-negotiation-round-press-conference/ )  issued:  7/17/15.


TTIP.  Minutes of the May 26 advisory committee meeting on the TransAtlantic Trade and Investment Partnership.  (available at:  http://trade.ec.europa.eu/doclib/docs/2015/may/tradoc_153460.pdf )  issued:  7/17/15.


TTIP.  Peterson Institute for International Economics report on auto trade regulations and the TransAtlantic Trade and Investment Partnership.  (available at:  http://www.piie.com/publications/pb/pb15-10.pdf )  issued:  7/17/15.



Human Rights


TPP.  Statement by Rep. Levin on human rights practices in Malaysia and the TransPacific Partnership.  (available at:  http://democrats.house.gov )  issued:  7/17/15.



Information Technology


ITA.  US Trade Representative’s office statement on the World Trade Organization Information Technology Agreement.  (available at:  http://ustr.gov  )  issued:  7/18/15.


ITA.  US Chamber of Commerce statement on the agreement in the Information Technology Agreement negotiations.  (available at:  http://uschamber.com )  issued:  7/18/15.


ITA.  Information Technology Industry Council statement on the World Trade Organization negotiations on the Information Technology Association.  (available at:  http://itic.org )  issued:  7/18/15.


ITA.  Consumer Electronics Association statement on the Information Technology Agreement in the World Trade Organization.  (available at:  http://ce.org )  issued:  7/19/15.



Internet


Electronic Commerce.  World Trade Organization report of its committee on electronic commerce.  (available at:  https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=133337,133361,133360,133355,133357,133358,133359,133330,133331,133315&CurrentCatalogueIdIndex=0&FullTextSearch= )  issued:  7/17/15.



Malaysia


TPP.  Statement by Rep. Levin on human rights practices in Malaysia and the TransPacific Partnership.  (available at:  http://democrats.house.gov )  issued:  7/17/15.



Motor Vehicles


TTIP.  Peterson Institute for International Economics report on auto trade regulations and the TransAtlantic Trade and Investment Partnership.  (available at:  http://www.piie.com/publications/pb/pb15-10.pdf )  issued:  7/17/15.



Trade Policy


TPA.  Coalition for a Prosperous America statement on Trade Promotion Authority.  (available at: http://prosperousamerica.org )  issued:  7/17/15.


What we’re covering this week –

     The Senate this week is debating a highway bill that includes a four-year reauthorization of the US Export-Import Bank.  Meanwhile, trade ministers from the 12 countries negotiating the TransPacific Partnership are meeting in Maui.

 Here are some of the events we’ll be following this week:


             ●          Monday, the Center for Strategic and International Studies sponsors a program on Kazakhstan’s accession to the World Trade Organization, with speakers including US Trade Representative Senior Director for WTO Accessions Cecilia Leahy Klein.

             ●          Tuesday, TPP trade ministers begin meeting in Maui.

             ●          The House Foreign Affairs Committee holds a hearing on the Iran nuclear agreement.  Secretary of State John Kerry and Treasury Secretary Jack Lew are among the witnesses.

             ●          Gabon Ambassador Michael Moussa-Adamo and Lesotho Ambassador Eliachim Molapi Sebatane talk about the African Growth and Opportunity Act at the National Press Club.

             ●          Wednesday, CSIS sponsors a program on developing a Transatlantic strategy for Southeast Asian Cooperation.  European Union Ambassador David O’Sullivan and Vietnam Ambassador Pham Quang Vinh are among the speakers.

             ●          Agriculture Secretary Tom Vilsack speaks on food innovation at 1776.

             ●          Thursday, the Atlantic Council sponsors a program on energy and US global leadership with Sens. Lisa Murkowski and Mark Warner.

             ●          On Friday, TPP trade ministers are slated to hold a closing press conference.



Our  Blog


Updated:    7/5/15

 WTD’s

Friday Afternoon

Podcast

2015podcast0724.mp3

Straight talk.   

Click the highlighted text to hear snippets from WTD’s straight talk.

•  A brief intellectual exchange on trade between AFL-CIO President Richard Tumka and Peterson Institute for International Economics President Adam Posen heard March 18.

•  Here’s an impassioned response from trade critic Rep. Rosa DeLauro to a stock “blame it on China” response about why we need a TransPacific Partnership agreement given during a House Appropriations agriculture funding hearing by Administrator of the Foreign Agricultural Service Phil Karsting on March 19.

•  The sound of one hand clapping.  Here’s the applause President Obama got on March 9 when he spoke to the National League of Cities asking for their support for his trade policies.

•  Senate Finance Committee Chairman Orrin Hatch tells WTD that he will talk to his ranking Democratic Ron Wyden again on Trade Promotion Authority legislation, but  he is death on any proposal to make trade more difficult than it already is.

•  Comments by two veteran trade officials on secrecy in the TransPacific Partnership negotiations – first Chile Ambassador to the United States Juan Galbriel Valdes and then Taiwan Minister of Economic Development John Chen-Chung Deng.