MARCH 2006

Inside Washington by Janet Kopenhaver, AWPA Director of Government Affairs

TRADE

. President Bush Releases 2007 Budget Proposal

In his 2007 budget proposal released on February 1, President Bush promised an "aggressive agenda" that furthers US economic interests abroad by opening foreign markets through the negotiation of bilateral and multilateral trade agreements. The budget proposes a spending increase for those agencies in the Department of Commerce (DOC) which promote and enforce international trade, such as the International Trade Agency (ITA), and a decrease in the DOC's domestic programs. Budget priorities for the ITA include ensuring that China and other key nations honor their WTO commitments and that China's market is open to US exports.

. United States and South Korea Announce Initiation of FTA Talks

On February 2, USTR Rob Portman announced that the United States and South Korea had agreed to enter formal bilateral Free Trade Agreement (FTA) negotiations. In a Feb. 2nd statement Ambassador Portman said "this is the most commercially significant free trade negotiation [the United States has] embarked on in 15 years" and that "removing trade and investment barriers between [the] two nations through an FTA will increase market access for our farmers, ranchers, workers and businesses to the dynamic and growing Korean economy, boosting trade in goods and services."

Portman also noted that "few countries better represent the promise of open markets, democracy and economic reform than Korea." The parties have not set a date for the first round of negotiations.

Two-way trade was $72 billion in 2004, making South Korea the US's seventh-largest trading partner. The US is the second-largest market for Korean exports. However, South Korea's farmers are bitterly opposed to opening their country's agricultural markets, and their political clout could scuttle a deal.

A 2001 study by the US International Trade Commission estimated that a USKorea free trade agreement could increase US exports to Korea by $19 billion and US imports from Korea by $10 billion.

. Other FTAs in Progress

There was also movement on other Free Trade Agreements. US and Colombian negotiators plan to resume negotiations with the hopes of concluding a deal soon. However, there are still some outstanding issues that need to be addressed, including those dealing with agriculture and intellectual property rights. Colombia and Ecuador have been continuing negotiations with the United States with the hope of creating a USAndean Free Trade Agreement, which would include Peru.

The President has already notified Congress that he intends to sign the bilateral trade deal with Peru, setting the stage for that signing to take place in April. The US and Peru concluded negotiations on December 7, 2005. Total two-way goods trade with Peru was $5.8 billion last year. The four Andean nations, including Bolivia, an observer in the talks, represent a combined market share of about $7 billion for US exports.

Finally, President Bush signed into law the legislation to implement the Bahrain Free Trade Agreement. The House had previously overwhelmingly approved the legislation to implement this agreement by a vote of 327-95. The US Senate approved the pact by unanimous consent. Two-way trade between these two countries was $887 million in 2003. US exports to Bahrain in 2003 totaled $509 million.

. USTR Appoints New Assistant for Congressional Affairs

On February 3, 2006, the Office of the United States Trade Representative (USTR) stated that Justin J. McCarthy, Assistant USTR (AUSTR) for intergovernmental affairs and public liaison, has been appointed AUSTR for congressional affairs. In this role, McCarthy will oversee congressional consultations and organize congressional outreach. USTR Portman stated that his "goal is to actively involve House members and senators from both sides of the aisle in the trade agenda" and noted that McCarthy's "work on Capitol Hill and his successes in the private sector have demonstrated his effectiveness in working with Congress."

. House Democrats Introduce Bill Creating New Congressional Office

On Feb. 8, senior House Democrats introduced legislation that would create a new Congressional office to handle unfair trade complaints. They claim this office is needed because the Bush Administration is not doing all it can to open markets abroad for US exports and foreign trade barriers are contributing to the high US trade deficit. This bill would establish an independent office, called the Congressional Trade Enforcer, to investigate US industry complaints of foreign practices that hamper US exports. The office could recommend to the USTR that it bring certain complaints to the WTO. If the Administration took no action within 45 days, it would trigger a vote on legislation in Congress to direct the Administration to bring a case.

USTR Rob Portman defended the Administration's trade enforcement practices stating, "When our trading partners do not live up to their obligations, we are prepared to take legal action." He cited US dispute filings against the EU over aviation subsidies and Turkey on rice import restraints as recent examples. The bill has only attracted Democratic co-sponsors so far, but House Ways & Means ranking Democrat Charlie Rangel believes that Republicans would climb on board as the November election approaches.

Meanwhile, Senate Finance Committee Ranking Member Max Baucus (D-MT) has introduced his own trade enforcement legislation in (S 2317) in his respective chamber to strengthen the United States Trade Representative's (USTR) trade enforcement capabilities and to expand Congress' role in monitoring international trade relations and eliminating foreign trade barriers. The "Trade Competitiveness Act of 2006" authorizes $5 million in additional funds to create a Senate-confirmed Chief Enforcement Officer at USTR with a supporting Executive Branch taskforce that includes representatives from the Departments of Agriculture, Commerce, State and Treasury.

The Chief Enforcement Officer would be charged with investigating and advocating action on particular trade enforcement issues. The bill also requires USTR to work closely with Congress in prioritizing and "breaking down the biggest barriers to US trade worldwide." USTR would be required to provide a timeframe and a list of options for enforcing trade agreements. The legislation calls on the International Monetary Fund (IMF) to "more aggressively condemn currency manipulation for trade purposes" and requires the Administration to consider federal and state sovereignty when negotiating, implementing and enforcing trade agreements. No timetable exists for Congressional consideration of the bill.

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