Office of U.S. Trade Representative
Kirk Emphasizes Working with China
In a presentation to the U.S.-China Business Council on June 2, 2009, new U.S. Trade Representative Ron Kirk struck a very positive message about China (as compared to more aggressive messages from comparable Bush appointees). Kirk noted that China could become an even larger market for U.S. exports. He emphasized that the Obama Administration wants to resolve impasses with China through diplomacy and negotiation – not litigation. He also noted the time it takes to resolves issues through WTO litigation and commented that was unacceptable in a tough economy like we are experiencing today.
Obama Administration officials, consistent with their overall messaging with other foreign powers, have emphasized building a positive relationship with China, as opposed to the bully pulpit. Kirk noted that the two principal tools that the Administration would use to work with China would be the Joint Commission on Commerce and Trade headed on the U.S. side by himself and Commerce Secretary Gary Locke; and the Strategic and Economic Dialogue, led on the U.S. side by Secretary of State Clinton and Treasury Secretary Geithner. The Bush Administration was muc more aggressive with China and was not hesitant to harangue Chinese leaders or to initiate litigation through the WTO.
One could question whether Obama/Kirk’s approach is an intelligent one to take with a Communist government like the People’s Republic of China. Only time will tell. We will continue to report on the U.S./China relationship in the trade update.
Possible Change in Mexican Retaliatory Tariffs
As reported in prior trade updates, in April 2009, Mexico had imposed retaliatory ad valorem tariffs of ten to forty five percent on certain U.S. imports into that country, including several writing instrument HTS items. The new tariffs were in retaliation for the Obama Administration’s canceling a U.S. Department of Transportation program allowing Mexican trucking companies access to the U.S. market (and vice versa). There had been various press reports that the Obama Administration was developing a new program with more emphasis on safety; however, no program has been publicly announced to date.
In early June, the Mexican Undersecretary for Trade Negotiations, Beatriz Leycegui, hinted that Mexico may seek to impose the tariffs on new HTS items (ones not previously covered) to put more pressure on the Obama Administration to restore the Mexican trucking program.
The Obama Administration, working through the U.S. Department of Transportation, is developing a new pilot program for Mexican trucks to operate in the U.S. It has “vetted” the program with various industry and labor stakeholders. However, it has not yet been transmitted to Congress. Until a revised Mexican trucking program is adopted by the Congress, the Mexican tariffs are likely to remain in place. It would cause even more commotion if the Mexican Government were to start adding new HTS items (and perhaps dropping others.)
USTR is trying to gather reports of U.S. companies adversely affected by these tariffs. It is expected that although the issue involves motor carriage and safety, that USTR will lead the U.S. negotiations to resolve this impasse. We will continue to report on this important trade issue in future trade updates.
U.S. Department of Commerce
Exports Decline Again in April
On June 10, 2009, the U.S. Census Bureau, Bureau of Economic Analysis, of the U.S. Department of Commerce (“Commerce”) announced a corrected report for April 2009 showing a decrease in the exports of goods and services of $2.8 billion. This follows similar decreases in March and January of 2009. According to the report for April, there was a decrease of $1.3 billion in industrial supplies and materials, a decrease of $1.1 billion in capital goods and a decrease of $0.5 billion in consumer goods. With the exception of February 2009, which showed a slight increase in exports, exports have declined for eight consecutive months. As a point of reference, the average exports for January-April 2009 were $124 billion as compared to $151 billion the same time last year. Taking $27 billion out of the U.S. economy every month is obviously very significant. Exports had been the one bright note for a U.S. economy which was highly dependent on imports, particularly imports from Asia. However, exports have fallen off dramatically, and are one of the many reasons for job losses in the U.S.
U.S. Congress
Cuba Anyone?
With the Democrats in control of both Houses of Congress, and Obama in the White House, U.S. policy on travel to Cuba is changing quickly. President Obama already has indicated his desire to expand trade with Cuba and allow greater travel to that country. Now Senator Max Baucus (D-MT) is planning on holding a hearing on his bill, S. 1089, which would end the ban on travel to Cuba and allow greater trade in agriculture. In this writer’s opinion, Cuba will be open for trade within the next couple of years. There were more than fifty bills introduced on this topic since January and with the exception of a few right wing Republicans in South Florida, there is now bipartisan support for lifting the trade embargo with Cuba. If you are interested in exporting writing instruments to Cuba, now is probably time to think about it. Cuba anyone?