Washington Trade Daily

Volume 20, Number 122 Trade Reports International Group Tuesday, June 21, 2011

Pressure Mounts in Russia WTO Talks

There is a pretty good chance better than even that Moscow will finally finish negotiations to join the World Trade Organization so it can become a member next year, Undersecretary of State for Economic, Energy and Agriculture Robert Hormats said yesterday (WTD, 6/20/11). Mr. Hormats shied away from saying the negotiations could be completed by August. A lot more tough give-and-take are needed before then. But, the US official told a meeting on the topic at the Carnegie Endowment for International Peace, that the United States expects a lot of progress before August, when negotiators are expected to take a break. Last week Russian President Medvedev suggested that the negotiations could be completed by the end of July. Russias accession to the WTO is the single highest priority in US trade relations, Deputy US Trade Representative Miriam Sapiro said in St. Petersburg last week. As for political opposition from Georgia already a WTO member Mr. Hormats said both sides are now in discussions. Under WTO rules, a single member can block accession of another. It is imperative and beneficial to both the United States and Russia that the country takes a greater role in the world economy, Mr. Hormats quoted President Obama. With that, the State Department official said, comes responsibility. One of the reasons for his optimism, Mr. Hormats told the gathering, is the way Moscow has acted in recent years from loosening government holds on state-owned corporations, to cooperating with the United States on innovation endeavors, to moving away from a corrupt business environment, to reducing restrictions on foreign investment. Mr. Hormats is co-leading an innovation initiative with the country. A year ago few would predict that accession negotiations would have progressed as far and fast as they have, Mr. Hormats suggested. Do More to Privatize Russia, however, needs to do more to privatize some of its biggest companies such as nationwide banks and manufacturing companies. We are seeing changes there that show they are trying to meet high-level WTO standards,:Mr. Hormats commented. Moscow also must demonstrate more effort in ensuring that intellectual property rights protections it has already passed into law over the past years are adequately enforced. Congress will take a close look at that track record when time comes to review Russian trade policies in an expected debate over Jackson/Vanik, Mr Hormats suggested. The United States and Congress, he said, expect laws to be enforced. Another encouraging development is the number of Russian companies that are demanding better protection for their own intellectual property. The top economic official at State noted, however, US concerns over new investment rules in the automotive sector. Even though it is not a member, Moscow has signed onto the Organization for Economic Cooperation and Development anticorruption principles which it is striving to implement, Mr. Hormats noted. Now the United States wants Moscow to participate in the ongoing OECD re-write of its guidelines for multinational corporations.

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Pressing For a Bigger Harvest

Geneva World Trade Organization Chief Pascal Lamy yesterday said he will continue to press members and the various Doha Development Agenda negotiation groups to adopt five issues on the plus side of a development agenda for ministers meeting in December (WTD, 6/17/11). At a closed-door meeting with trade envoys from the Group-of-7 countries the United States, the European Union, China, India, Brazil, Japan and Australia Mr. Lamy suggested that the five issues should supplement the already agreed-to duty-free/quota-free and cotton Doha harvest, WTD was told. The list includes trade facilitation, agricultural export competition, the monitoring mechanism for the Special and Differential Treatment flexibilities, trade in environmental goods and services and some aspects of fisheries subsidies. In parallel, work will continue on nontariff barriers in industrial goods, transparency in the regional trade agreements and issues concerning the multilateral environmental agreements related to WTO rules. Not mentioned by the Director General, WTD was told, was a suggestion by the United States and Australia for a standstill commitment on applied tariffs. Little Headway WTD was told that the three-hour meeting made little headway in building a consensus among the G-7 on some of the core issues. Even on duty-free/quota-free market access and cotton for the least-developed countries there was disagreement. The United States has said that it could not deliver on either unless there was reciprocal market access coming from China, India and Brazil. Regarding export competition which includes export subsidies, export credits, food aid and the operations of state trading enterprises another big industrialized member said it would agree to include export subsidies only when its demands on export credits, food aid and other issues, including some aspects of antidumping, are met, WTD was told. Broad differences also remain over how to handle government fisheries subsidization. And on environmental goods and services, one major industrialized country asked for complete market access for over 150 products. Developing countries, on the whole, have insisted that market access is not part of the harvest. The G-7 remains divided on the trade facilitation as well. One participant said only the Special and Different Treatment monitoring mechanism can be agreed at this juncture.

Soon
Baltimore President Obama will submit long-pending free trade agreements with Colombia, Panama and South Korea to Congress soon, US Trade Representative Ron Kirk said yesterday (WTD, 6/20/11). Speaking to the US Conference of Mayors gathered here for their annual meeting, Mr. Kirk said the Administration is committed to seeing all three trade deals approved along with an extension of Trade Adjustment Assistance. Meanwhile, the Administration and House Republicans continue negotiations aimed at reaching a deal on renewal of expanded TAA benefits that expired earlier this year. The White House has said it will not submit the three FTAs for approval without agreement on TAA. We are working every day with our partners in the House and Senate toward the informal markups that need to be held before these agreements are formally submitted, Mr. Kirk told the mayors. And we are also urging Congress to reach an agreement on TAA so that these agreements are not delayed. Once an agreement is reached on TAA, the White House will be ready to move forward on the trade agreements.

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Getting the three trade deals passed is critically important because of the potential benefits to a US economy still struggling to create jobs. The three FTAs are estimated to create 75,000 new US jobs and add $12 billion to US gross domestic products, Mr. Kirk said. Exports are making a major contribution to US economic recovery. US exports rose 17 percent last year, which puts us on pace to meet President Obamas National Export Initiative goal of doubling exports by the end of 2014, Mr. Kirk told the mayors.

Conflict Minerals
The State Department will soon issue a public statement urging US companies to begin exercising due diligence in ensuring that their products were not made with so-called conflict minerals, Undersecretary of State Robert Hormats said yesterday (WTD, 5/18/11). Companies will be urged to use the Organization for Economic Cooperation and Developments Five-Step Framework for Risk-Based Due Diligence in the Mineral Supply Chain. The Securities and Exchange Commission, meanwhile, is working on final regulations for companies to disclose whether conflict minerals are used in their products. Ensuring that minerals like gold, tungsten, tin and tantalum mined in violence-plagued regions of Africa do not profit perpetrators of that violence will not be easy, Mr. Hormats told a program sponsored by the Woodrow Wilson Center. But it is essential that progress is made in developing reliable clean supply lines in the region. The official urged US companies not to shun the region because of the difficulty of certifying supply chains. Many poor people in the region depend on mining for their livelihoods. Rather than shutting down trade, the goal is to create legitimate trade, with traceability and accountability. The US government is working on a clean supply chain pilot project to demonstrate that minerals can be cleanly sourced from the region, he said.

An Open US Investment Policy

President Obama released a statement yesterday reaffirming US commitment to an open investment policy and encouraging other countries to adopt similar policies (WTD, 6/16/11). My Administration is committed to ensuring that the United States continues to be the most attractive place for businesses to locate, invest, grow, and create jobs. We encourage and support business investment from sources both at home and abroad, the President said. The Administration last week unveiled a SelectUSA initiative aimed at encouraging foreign companies to invest in the United States. Investments by foreign companies create good-paying jobs, contribute to economic growth, boost productivity and support US communities, the White House statement said. US subsidiaries of foreign-domiciled companies employ more than five million Americans. These companies invest in innovation in the United States, spending over $40 billion each year on research and development. Taking steps to ensure that we remain the destination of choice for investors around the world will help us win that competition and bring prosperity to our people, the White House stated. Consistent with our national security and while ensuring a level playing field for American investors, we will do just that.

FDAs Imported Foods Strategy

The Food and Drug Administration yesterday unveiled a new strategy to meet the challenges
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posed by rapidly rising imports of FDA-regulated products and a complex global supply chain (WTD, 5/19/11). The FDA report calls for the agency to transform the way it conducts business and to act globally in order to promote and protect the health of US consumers. FDA-regulated imports have quadrupled since 2000, the agency pointed out. Highlights of the report include four key elements ! the FDA will partner with its counterparts worldwide to create global coalitions of regulators focused on ensuring and improving global product safety and quality; ! the coalitions of regulators will develop international data information systems and networks and increase the regular and proactive sharing of data and regulatory resources across world markets; ! the FDA will build in additional information gathering and analysis capabilities with an increased focus on risk analytics and information technology and ! the FDA increasingly will leverage the efforts of public and private third parties and industry and allocate FDA resources based on risk. The FDA has already increased the number of foreign drug manufacturing inspections by 27 percent between 2007 and 2009 and has opened a series of international offices in key locations. FDA also has collaborated with its counterparts in the European Union and Australia on drug inspections, worked to harmonize certain aspects of drug regulation via the International Conference on Harmonization and joined the Pharmaceutical Inspection Cooperation/Scheme which is an organization of the drug manufacturing inspectorates from 39 countries. The FDA and other global leaders are also creating an expanded global regulators forum for medical devices.

Around the Globe

! Sen. Bob Casey has made it clear hes unlikely to support the Obama administrations push for free trade agreements left unfinished by the Bush administration, The Morning Call newspaper reported (see related report this issue). But with the White House moving forward, the Pennsylvania Democrat is asking that before any trade agreement is decided, workers and US companies are promised protection from any resulting closures or lost jobs. Monday morning Casey visited a small chemical manufacturing company in Bethlehem Puritan Products to stress the importance of trade assistance in the face of more foreign competition. Casey, who faces re-election next year, wants Congress to vote on the trade adjustment assistance as a stand-alone bill before the trade agreements are debated. And he wants the assistance extended for five years at the same rate about $1 billion that was included in an enhanced version in the 2009 stimulus law. He introduced his own legislation Monday afternoon to do just that, offering it as an amendment to an economic development bill pending on the US Senate floor. The program has long been noncontroversial, but in these budget-cutting times, some lawmakers argue that the increased assistance in the stimulus was meant to be temporary. But others, like Casey, say that with unemployment still so high, its not the time to be cutting aid. ! Huawei is once again finding itself in the US government hot seat on claims that the companys growth was the result of Chinese government financial aid, Reuters news service reported (WTD, 6/16/11). Bill Plummer, Huaweis vice president of external affairs, was quick to dismiss the allegations, saying that they are fundamentally and utterly incorrect. Fred Hochberg, U.S. Export-Import Bank president said that Huaweis meteoric rise was made possible by a $30 million credit line from the Chinese Development Bank. This backing allows Huawei to significantly reduce its cost of capital and to offer financing to their buyers at rates and terms that are better than their competitors, Hochberg said in a speech last week. In response to Hochbergs claims, Plummer said that in 2004, the CDB and Huawei did agree to make as much as $10 billion in export credits to potential Huawei customers, not Huawei. Huawei

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and the US government havent been on the greatest terms in recent years. The Chinese company was forced to abandon its proposed acquisition of server company 3Leaf Technologies when the Obama administration raised national security concerns about the deal. Earlier in 2008 Huawei had to abandon a planned acquisition of 3Com. ! Irans largest shipping company used a vast network of shell companies to move $60 million through New York bank accounts over the past three years in violation of US trade sanctions, prosecutors said on Monday according to a Dow Jones news service report (WTD, 6/8/11). In a 317-count indictment, Manhattan District Attorney Cyrus Vance Jr. alleged that Islamic Republic of Iran Shipping Lines, or Irisl, and its affiliates used aliases in Singapore, the United Arab Emirates and the U.K. to trick banks into processing wire transfers that normally would have been blocked or seized. They would create new companiescorporate alter egosto take the place of the sanctioned companies in international transactions, Mr. Vance said. The international shipping industry conducts business primarily in US currency and therefore firms involved in international shipping must have access to the U.S. financial system, he said. Irisl didnt respond to requests to comment. The Manhattan District Attorneys office has historically pursued cases internationally, using New Yorks status as one of the financial capitals of the world as a basis for bringing such cases. A tip about a year ago led to the unraveling of a vast network of shell companies involving Irisil, according to a person familiar with the matter. In a coordinated announcement on Monday, the Office of Foreign Assets Control at the Treasury Department named an additional 10 entities and three individuals as being affiliated with Irisl. Since 2008, Treasury officials have designated a total of 121 companies and individuals affiliated with Irisl. ! An international group of farm unions has called on agriculture ministers from the Group of 20 leading economies (G20) to oppose further liberalization in global agricultural trade in order to boost food security, Reuters news service reported from Brussels (WTD, 6/20/11). G20 farm ministers meet in Paris later this week to discuss Frances push to tackle rising food prices, but limiting trade liberalization in agricultural goods is not among the proposals up for discussion. In a joint declaration issued on Monday, farm groups from Europe, Africa, Asia and North America defended the use of trade tariffs and production quotas by countries to secure food supplies and stabilize prices. We would like to send out a very clear and precise message today to the ministers of the G20 who are going to be meeting over the next few days, Paolo Bruni, of EU farm union Copa-Cogeca, told a news briefing in Brussels. The World Trade Organization is not working. Its not working because many countries believe that agriculture can be treated just like any other economic sector. The market needs rules, it cannot be left to work for itself, Bruni said. The declaration broadly backed Frances G20 proposals to tackle speculation on agricultural commodity markets, and limit export restrictions on humanitarian food aid. But G20 agriculture ministers are not expected to support the farm unions call to oppose further liberalization of agricultural trade in future global or bilateral agreements. Instead, G20 farm ministers will spell out their desire to see a successful conclusion to the currently stalled Doha Round of global free trade talks, according to draft conclusions prepared for the meeting. ! European Union foreign ministers harshly condemned the regime of Libyan Col. Moammar Gadhafi on Monday, saying there could be no impunity for crimes against humanity and urging his followers to distance themselves from such crimes, the Associated Press news service reported from Luxembourg (WTD, 6/3/11). Time is not on Gadhafis side, the foreign ministers said in a statement. He has lost all legitimacy to remain in power. The 27 foreign ministers, meeting in Luxembourg, toughened the EUs sanctions against the regime by adding six port authorities controlled by Gadhafis forces to its asset-freeze list. The ports were not named. The statement said the officials were concerned about the humanitarian situation, particularly in the city of Misrata and in the western mountains, and said charity organizations must be granted unhindered access throughout Libya without delay. It reiterated the offer made many times, but never accepted to support the delivery of humanitarian aid with an EU military force if requested to

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do so by the U.N. ! The European Union wants its ambitious free trade agreement with South Korea to serve as the model for other deals it is pursuing in Asia, a trade official said Monday according to an Associated Press news service report from Seoul. The EU and South Korea will see their tariff-slashing pact go into effect July 1 in the culmination of a process that began in May 2007 when the two sides launched negotiations. The agreement is the EUs first in Asia. The free trade agreement that we have concluded with Korea is very much the model of the type of trade agreement that we would very much wish also to be able to conclude with other Asian countries, said Ignacio Garcia Bercero. Garcia Bercero was Brussels chief negotiator for the deal that will eliminate 98.7 percent of duties on trade between South Korea and the 27-member EU, which is the worlds largest economic bloc, within five years. ! Following three months of consecutive decline, foreign direct investment flows into India grew by about 43% to $3.12 billion in April 2011, the Press Trust of India reported from New Delhi. The country received $2.17 billion worth of FDI in April 2010. Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany and the UAE are the major investors in India. In April, the maximum investment came from Singapore ($1.17 billion), followed by Mauritius ($976 million), Japan ($235 million), France ($220 million), and Cyprus ($170 million). During the month, the sectors that attracted the maximum FDI include services ($658 million), construction activities ($311 million), power ($256 million), computers and hardware ($96 million), telecommunications ($46 million) and housing and real estate ($38 million). ! Thailands trade balance returned to surplus in May after a deficit the previous month, despite a slowdown in exports in following Japans March 11 quake-tsunami, government data showed on Monday Agence France-Presse news service reported. Exports grew 17.6 percent from a year earlier to $19.46 billion, after a 24.6 percent rise in April, as the auto sector felt the squeeze from reduced parts from Japan following the twin disaster, the commerce ministry said. Imports grew 33.8 percent to $19.19 billion, resulting in a trade surplus of $277.5 million. In April Thailand posted a deficit of $797 million. The government said it was confident its forecast for export growth of between 12 and 15 percent for the whole of this year would be achieved.

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On the Web......
Agriculture DDA. National Farmers Union statement on the Doha Development Agenda agriculture negotiations. (available at: http://files.e2ma.net/5030/assets/docs/06201 1callforcoherence.pdf ) issued: 6/20/11. European Union US Relations. European Union statement on US trade relations with the United States. (available at: http://europa.eu/rapid/pressReleasesAction. do?reference=IP/11/755&format=HTML&a ged=0&language=EN&guiLanguage=en ) issued: 6/20/11.

Canada Trade Policy. World Trade Organization trade policy review of Canada. (available at: http://www.wto.org/english/tratop_e/tpr_e/t p346_e.htm ) issued: 6/20/11. Trade Policy. Canadian government statement on the World Trade Organizations trade policy review of Canada. (available at: http://www.international.gc.ca/media_comm erce/comm/news-communiques/2011/170.as px ) issued: 6/20/11. Export Controls Embargoes. Treasury Department final rule on certain embargoes. (available at: http://www.gpo.gov/fdsys/pkg/FR-2011-0620/html/2011-15168.htm ) issued: 6/20/11. Iran. Treasury Department report on food and medicine exports to Iran. (available at: http://www.treasury.gov/resource-center/sa nctions/Programs/Documents/tsra_non_spe c_06172011.pdf ) issued: 6/20/11. Iran. Treasury Department statement on increased sanctions. (available at: http://www.treasury.gov/press-center/press-r eleases/Pages/tg1212.aspx ) issued: 6/20/11. Korea (North) Treasury Department report on trade with North Korea. (available at: http://www.treasury.gov/resource-center/sa nctions/OFAC-Enforcement/Pages/2011062 0_33.aspx ) issued: 6/20/11.

China Economy. Stewart and Stewart report on Chinas support for its industry. (available at: http://www.stewartlaw.com/stewartandstewa rt/TradeFlows/tabid/127/language/en-US/D efault.aspx?udt_583_param_detail=530 ) issued: 6/20/11.

Doha Development Agenda Agriculture. National Farmers Union statement on the Doha Development Agenda agriculture negotiations. (available at: http://files.e2ma.net/5030/assets/docs/06201 1callforcoherence.pdf ) issued: 6/20/11.

Food and Beverages Safety. Food and Drug Administration announcement of new initiative on imported food safety. (available at: http://www.fda.gov/AboutFDA/CentersOffi ces/OC/GlobalProductPathway/default.htm ) issued: 6/20/11.

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Foreign Investment Inward. White House statement on open investment policy. (available at: http://www.whitehouse.gov/the-press-office/ 2011/06/20/statement-president-united-statescommitment-open-investment-policy ) issued: 6/20/11. Inward. Organization for International Investment statement on open foreign investment. (available at: http://www.ofii.org ) issued: 6/20/11.

Korea (North Export Controls. Treasury Department report on trade with North Korea. (available at: http://www.treasury.gov/resource-center/sa nctions/OFAC-Enforcement/Pages/2011062 0_33.aspx ) issued: 6/20/11.

Russia US Relations. US Trade Representatives office statement on trade relations with Russia. (available at: http://www.ustr.gov/about-us/press-office/b log/2011/june/ambassador-sapiro-travels-rus sia-meet-government-leaders-busine ) issued: 6/20/11.

Health and Safety Food. Food and Drug Administration announcement of new initiative on imported food safety. (available at: http://www.fda.gov/AboutFDA/CentersOffi ces/OC/GlobalProductPathway/default.htm ) issued: 6/20/11.

Trade Policy US. Remarks by US Trade Representative Kirk to the Conference of Mayors in Baltimore. (available at: http://www.ustr.gov/about-us/press-office/b log/2011/june/ambassador-kirk-relays-suppor t-small-businesses-annual-us-confe and http://www.ustr.gov/about-us/press-office/s peeches/transcripts/2011/june/us-trade-repre sentative-ron-kirk-remarks-us-con ) issued: 6/20/11.

India US Relations. US Trade Representatives office statement on US-India trade relations. (available at: http://www.ustr.gov/about-us/press-office/bl og/2011/june/weekly-trade-spotlight-us-india-t rade-relations ) issued: 6/20/11.

Iran Sanctions. Treasury Department statement on increased sanctions. (available at: http://www.treasury.gov/press-center/press-r eleases/Pages/tg1212.aspx ) issued: 6/20/11. Sanctions. Treasury Department report on food and medicine exports to Iran. (available at: http://www.treasury.gov/resource-center/san ctions/Programs/Documents/tsra_non_spec_ 06172011.pdf ) issued: 6/20/11.

World Trade Organization DSB. World Trade Organization summary of the Dispute Settlement Body meeting. (available at: http://www.wto.org/english/news_e/news1 1_e/dsb_17jun11_e.htm) issued: 6/17/11.

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