USTR

U.S. Blows Hard at Chinese Wind Power Subsidies

by Fran Smith on December 23, 2010

in Energy, Ethanol, International, Sanctimony, Trade

Well, the U.S. has taken it one step further — it has gone to the World Trade Organization for “consultations” about China’s green energy subsidies, specifically for wind power manufacturing. As a result of investigations triggered by a United Steelworkers’ complaint, U.S. Trade Representative Ron Kirk announced on December 22, 2010, that the U.S. is requesting consultations with China under the WTO’s dispute settlement provisions.

The U.S. says that under China’s Special Fund for Wind Power Manufacturing program,

. . . China appears to provide subsidies that are prohibited under WTO rules because the grants awarded under the program seem to be contingent on Chinese wind power equipment manufacturers using parts and components made in China rather than foreign-made parts and components.

According to a USTR press release, China is giving large grants to Chinese manufacturers of wind turbines and their components while excluding foreign parts manufacturers.

The size of individual grants currently available under the Special Fund for Wind Power Manufacturing ranges between $6.7 million and $22.5 million, and the recipients of these grants – Chinese manufacturers of wind turbines and Chinese manufacturers of parts and components for wind turbines – can receive multiple grants as the size of the wind turbine models increases. USTR estimates that grants provided under this program since 2008 could total several hundred million dollars.

These consultations are the first stage of the WTO’s dispute settlement process. In many cases, the parties at this point will reach an agreement to resolve the issue.  If agreement isn’t reached, the next stage is more serious and formal — it involves adjudication by a WTO panel and perhaps by the Appellate Body, and then the ruling’s implementation.

Some observers caution that the U.S. should be wary, as it could face challenges to its own funding of green energy programs and its “Buy American” program:

In President Obama’s stimulus bill, $71 billion was dedicated to clean energy funding, with an additional $20 billion for loan guarantees and tax incentives to support clean energy projects.  President Obama’s budget proposes $150 billion over ten years in clean energy and efficiency programs.  Clean energy job creation is also one of the central tenets of the Administration’s new Middle Class Task Force.  Given these policies, and other proposals pending in Congress, the United States needs to tread carefully in denouncing green-energy subsidies as violations of WTO rules.

In terms of green energy, the best approach is to let the market work, without subsidies that distort that market. Government support through green subsidies and incentives for particular industries, whether by foreign governments such as China or by the United States, are a form of industrial policy intervention to pick winners (and losers) and can lead to unintended consequences in addition to the trade implications, e.g., heavy support for corn ethanol and its effect on food prices and the environment.

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Stalled Korea FTA May Get a Boost

by Fran Smith on October 26, 2010

in Agenda for Congress, International, Trade

U.S. Trade Representative Ron Kirk is scheduled to meet today with Korean Trade Minister Kim Jong-hoon in San Francisco to discuss the pending U.S.-Korea Free Trade Agreement.  Hopes are high that with this discussion some lingering issues (autos and beef) holding up the pact could be resolved before President Obama’s upcoming meeting with South Korean President Lee Myung-bak at the G-20 Summit in Seoul in mid-November.

The National Association of Manufacturers has focused on the importance of the FTA in building market share for U.S. manufacturers, who, with the stalled trade agreement, are losing out to countries that have already signed trade agreements reducing tariffs for their goods and services exported to South Korea.  An earlier post at OpenMarket made that point as well.

South Korea has not been shy about entering into trade deals.  Just this month, the European Union and South Korea signed a trade agreement that opens up both markets.  According to the Korea Herald,

South Korea has so far signed six FTAs with 17 countries including Chile, Singapore, the four-member European Free Trade Association (Norway, Switzerland, Iceland and Liechtenstein), the 10-member ASEAN, India and the U.S. All of them except for the one with the U.S. have taken effect.

As Gabriel Sahlgren wrote in a 2007 CEI Issue Analysis:

The agreement is expected to abolish about 95 percent of tariffs on all industrial and consumer goods within three years, and remove most of the lingering 5 percent within a decade. According to a study by the U.S. International Trade Commission, the deal would increase U.S. GDP by $10.1-11.9 billion, and may boost annual trade between the countries by as much as $17.8 billion.  But critics ignore those gains.

* * * * *

The KORUS-FTA is not a perfect agreement, but it would generate so many economic and political gains for the U.S. that the benefits appear greater than its attendant problems. It would increase U.S. GDP by $10.1- 11.9 billion and bilateral trade by $17.8 billion annually, boost America’s standing in the region, and generate momentum for the cause of global free trade. Finally, to ratify it would bolster good relations with South Korea, an important ally, which negotiated and renegotiated the agreement in good faith.

An agreement that would make sense economically and politically — what’s not to like?

USDA may increase sugar quotas

by Fran Smith on April 14, 2010

in Agriculture, International, Trade

The Wall Street Journal reported today that the U.S. Department of Agriculture may increase the import quotas for sugar to address a tightening supply and possible shortages.  Currently, about 40 countries can export a specified quantity of sugar to the U.S. under what’s called a tariff rate quota (TRQ).  TRQ sugar has low or no tariffs, while above those amounts, sugar is subject to stiff tariffs. Only one country, Mexico, under the North America Free Trade Agreement, is not under the quota system.

Under the 2008 Farm Bill, the USDA had to wait until April 1, 2010 to decide whether to increase the quotas.  Last week, the U.S. Trade Representative announced that it was reallocating some of the 2010 quota amounts that hadn’t been used by certain countries to quota-holding countries that are exporting sugar to the U.S.   Brazil, the Dominican Republic, the Philippines, and Australia received the bulk of the reallocations.

The TRQ system is part of the U.S. sugar program that keeps the price of U.S. sugar generally twice as high as the world price through domestic supply constraints, import restrictions, and price supports for U.S. producers. It’s a central planning approach that raises the cost of sugar and sugar-containing products for consumers, causes job losses as confectionery firms are hit by higher costs, and harms poor sugar-producing countries that can’t compete with U.S. “subsidized” sugar.  See some CEI ideas for terminating this program.

U.S. avoids Brazil’s retaliatory tariffs — for now

by Fran Smith on April 7, 2010

in Agriculture, International, Trade

With Brazil poised to retaliate against the U.S. for its cotton subsidies that were deemed unfair by the World Trade Organization, the two countries announced on April 6 that they had reached an agreement to forestall Brazil’s announced actions to slap tariffs on about 100 U.S. products imported by Brazil, including several products relating to intellectual property.  The tariffs and countermeasures were to go into effect today.

In making the announcement U.S. Trade Representative Ron Kirk and U.S. Secretary of Agriculture Tom Vilsack said that the agreement takes steps to recompense Brazil  over the shorter-term while continuing discussions regarding how to eventually resolve the cotton dispute through further negotiation and the 2012 Farm Bill.  Under the WTO’s finding in the cotton dispute brought by Brazil, that country was entitled to impose about $820 million in countermeasures.

The USTR press announcement detailed that the U.S. will establish a fund of approximately $147.3 million per year on a pro rata basis to provide Brazil with technical assistance and capacity building.  The U.S. will also modify its Export Credit Guarantee Program, and make a risk-based determination whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the U.S.

One can only hope that the fix the U.S. found itself in as a result of giving in to cotton producers and other special interests in the 2008 Farm Bill will make policymakers realize that providing subsidies and hand-outs to special groups can be costly for other producers and consumers.  But don’t bet on that.  Farm bills are one of the worst examples of bi-partisan lawmaking, with politicians ever ready to provide  pork for their farm constituents – with taxpayer money that they think of as their own.

Trade still has some support

by Fran Smith on March 24, 2010

in International, Trade

Some politicians haven’t yet abandoned free trade, even in the face of widespread demagoging on the issue.  As Scott Lincicome notes, five Republican Members of Congress joined together in a March 22 letter to Majority Leader Steny Hoyer (D-MD) to request that the Administration submit three pending trade agreements to Congress for a vote.  The letter points out that the Free Trade Agreements with Panama, Colombia, and South Korea have been languishing for several years since they were signed.   The letter offers a strong defense of trade and doesn’t just focus on the benefits of exports:

“Trade agreements bolster American exports, create jobs, and keep the United States competitive in an increasingly global market.  In fact, according to the U.S. Trade Representative, ‘U.S. manufacturing exports support nearly six million jobs including one in six manufacturing jobs.’  Furthermore, trade agreements forge alliances in politically important regions, and encourage competition and innovation, which yield higher quality goods at lower prices for consumers.  President Obama put it best in his recent State of the Union Address: ‘If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores.’”

The letter was signed by Representatives Tom Price (GA), Charles W. Dent (PA), Wally Herger (CA), Mark Steven Kirk (IL), and Kevin Brady (TX).  Now, if only some Dems would join in to make these same arguments.

Movement on the U.S.-Korea FTA?

by Fran Smith on July 29, 2009

in International, Trade

It looks like things may be moving – slowly — on the trade front.  The U. S. Trade Representative has published a notice in the Federal Register asking for comments on the pending U.S.-Korea Free Trade Agreement.

The United States Trade Representative (USTR) is assessing how and to what extent the free trade agreement (FTA) between the United States and the Republic of Korea (Korea) signed on June 30, 2007 makes progress in achieving the applicable purposes, policies, priorities, and objectives of the Bipartisan Trade Promotion Authority Act of 2002 (”TPA Act”) (19 U.S.C. 3801 note) as set out in section 2102 of the TPA Act and carries out the provisions of the May 10, 2007 Congressional-Executive Agreement on Trade Policy.

Comments are due September 15, 2009. And, of course, comments have to be compiled and evaluated.  Then, the implementing legislation for Congress to consider has to be submitted.  All this, of course, is happening in an environment of increased skepticism about trade, plus an overloaded Congressional agenda, with massive health care and energy bills, not to mention the restructuring of the financial system.

Here’s some information published by CEI on the U.S. Korea trade agreement.

Your Interests Are My Interests

by Cord Blomquist on March 11, 2009 · 2 comments

in Features, Regulation, Tech & Telecom, Zeitgeist

If you’re a fan of professional print journalism, you may be a little worried as of late.  Denver’s Rocky Mountain News just closed its doors after nearly 150 years in the news game.  Meanwhile the San Francisco Chronicle and the Seattle Post-Intelligencer are both on life support.  Even the New York Times, the largest newspaper in America, has cut its dividend and mortgaged its headquarters for $225 million.

It seems clear that the age of broadsheet newspapers is coming to an end, yet the web hasn’t come to its rescue.  Partially this is because ad rates from the old world of print were inflated to reflect the size of the total audience of the paper.  Online ads, by contrast, are micro-targeted at just those folks who advertisers believe are most likely to buy their products or services.  This makes sense, but the numbers involved are still staggering.

Consider that the New York Times online as of 2007 had about 13 million unique users.  Compare that to its weekday circulation of 1.1 million and its weekend circulation of about 1.6 million.  The Grey Lady’s web presence had tenfold the reach of the paper, yet online revenue made up only about 10% of the Times total revenue.  That means that a product with ten times the reach is getting only 1/10th of its old-school equivalent.

Long story short: the industry needs all the help it can get.

This is where Google comes in.  Along with being a giant in the search industry, Google is empowering a network of publishers to the tune of $4.2 billion in revenue passed to them in 2007—according to members of Google’s DC office, the 2008 numbers are even larger.  In fact, Google knows it is better to give than to receive—it gives more money out to its publisher network than it keeps for itself in profits.

Now this giant of monetization is introducing an even better advertising mechanism, Google’s “Interest Based Advertising” program.  IBA works by collecting information whenever a user visits a site that features a Google AdSense network ad.  This information is turned into a sort of a profile that helps to focus ads on a per-user basis, rather than just basing that ad on the content of the web page alone.

This means that advertisers will have a more effective means of getting their message out online—news that should be music to the faltering print news industry’s ears, not to mention their loyal readers.

Understandably, this news sounds ominous to many.  Tracking your browsing?  And we were worried about the Bush administration tapping our phones!

However, unlike when dealing with government looky lous, you have the choice to tell Google to mind their own business.  Also, Google is telling consumers about the program.  Folks concerned with privacy issues call these elements “notice” and “choice.”

The notice comes in the form of clear labels on all Google-based ads, something the company already does with the exception of some of their print ads.  Currently, all ads served by Google feature their name, but some don’t feature the name of company paying for the ad spot.  Now that will change.  Users will know that Google is serving the ad and who’s paying them to do so.

Additionally, Google is allowing users to choose—this is the control part—how they’re classified by the new program.  Their Ads Preferences Manager will let users view, delete, or add interest categories associated with their browser so that the advertising they see will at least be relevant to them.

Finally, Google is also giving consumers the ultimate control over the program in the form of a set of tools to permanently opt-out.  They have even designed plug-ins for browsers that will maintain your opt-out choice.

It remains to be seen how this program—and others started much earlier by Yahoo! and other Google competitors—will increase revenues for publishers.  However, since all of these systems are designed to serve more relevant ads to consumers, it would seem that all parties involved stand to benefit.

Yet, there is sometimes no satisfying the privacy alarmists. The AP relayed this comment from EPIC’s Marc Rotenberg:

“This is a very serious development,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center. “I don’t think the world’s largest search engine should be in the business of profiling people.”

Yet, with all Google is doing to allow users to opt-out of this system, one wonders if Mr. Rosenberg and those who share his opinion believe there should be any innovation whatsoever in online advertising, or if the industry should simply come to a stand-still.

Criticism of Google’s plan seems especially dubious given the alternatives offered.  Mr. Rotenberg believes that the FTC should reexamine Google’s merger with DoubleClick.  Translation: consumers are too dumb to manage their privacy, so the FTC should do it for them by tearing apart business deals that are deemed unsavory.

The appropriate level of privacy in our lives can’t be set by the government. It can only be set by free people able to explore the full range of choices offered in the marketplace.  When you consider not only Google’s consumer-friendly ad program, but other products like pre-paid cell phones, nameless debit accounts, proxy servers, anonymous email accounts, and the like, privacy seems to be out there for those who want it.

The best advice for those who want privacy: don’t go online.  The Internet is the modern public square, no more a private retreat than is a public park.  Technologies can help to mask your identity, but ultimately much can be found out about who you are online.  The only thing stopping that now is the free market’s respect for contracts and the choices of consumers.  Attacking that very freedom to choose is no way to secure great privacy in the future.

If Obama Rewrites NAFTA, Canada Could Hit Back Hard

by Fran Smith on December 4, 2008 · 2 comments

in Energy, Trade

As President-elect Obama fills his Cabinet and top-advisor positions, he has not yet named a U.S. Trade Representative, but, as CEI noted, he purportedly has offered the job to Rep. Xavier Becerra (D-CA). Becerra had joined the chorus to redo the North America Free Trade Agreement, even though he did vote for the trade pact in 1993.

To revisit NAFTA and try to include protectionist measures would be a huge mistake. What many NAFTA critics may not realize is that the trade agreement benefits all three countries — the U.S., Canada, and Mexico — and the U.S. has some sweet deals from NAFTA.

Take a look at just one benefit the U.S. would stand to lose if NAFTA were rewritten. It’s likely that the Canadians would try to renegotiate the extremely preferential treatment the U.S. receives in energy imports from Canada. (Canada by far is the U.S.’s largest provider of crude oil and petroleum imports. Mexico has usually been the second.)

Under NAFTA, the U.S. is guaranteed a regular supply of oil and gas from its Northern neighbor at preferential prices except in very limited circumstances.

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The Richardson appointment was nice, but…

by Ivan Osorio on December 3, 2008 · 2 comments

in Economy, Trade

When was the last time the U.S.’s top trade official wasn’t a strong advocate for free trade? It may happen in the new Obama Administration.

According to numerous news reports, President-elect Obama has offered the post of USTR to Rep. Xavier Becerra (D-Calif.), a 16-year member of the House, who serves on the powerful Ways and Means Committee that oversees trade and is a close ally of Speaker Nancy Pelosi — his website lists him as “Assistant to the Speaker.”

Becerra’s record on supporting free trade is a mixed bag. He voted to hold up the Colombia Free Trade Agreement. He voted for the Peru free trade agreement, but against the Oman FTA and the Central America-DR FTA. He is a strong proponent of including non-trade issues in trade agreements, particularly labor and environmental provisions that could act as protectionist trade barriers by forcing poor countries to adopt rich countries’ standards.

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