Editorial note: CPA believes trade law enforcement must be drastically increased, however enforcement is not enough without a goal to balance overall trade.
[John Veroneau and Shara Aranoff| April 6, 2016 |Politico]
Donald Trump and Hillary Clinton may not agree on much, but they have both criticized the government for failing to adequately enforce U.S. trade agreements. On Capitol Hill, lawmakers have echoed that sentiment. At a recent hearing, for example, Sen. Orrin Hatch expressed similar concerns with our trading partners not living up to their commitments.
The situation is not as bleak as the campaign trail suggests, but as the number of trade agreements and their scope have grown, a crucial problem has emerged: We lack the tools needed to enforce them. Faced with deteriorating political support for U.S. trade agreements, Congress should create a new tool for U.S. companies to protest unfair trade practices. Doing so will help ensure that our partners live up to their commitments and restore the public’s confidence in open markets.
Congress has played an important role in providing the executive branch with the tools and resources necessary for strong trade enforcement. For instance, when it became concerned that U.S. trade interests were being subordinated to broader foreign policy interests, Congress — through the Trade Expansion Act of 1962 — created the Office of the United States Trade Representative within the Executive Office of the President. And when countries began systematically blocking U.S. manufactured goods, Congress — through Section 301 of the Trade Act of 1974 — expanded the opportunity for U.S. companies to directly petition USTR to block imports from these offending countries.
Over the past 40 years, the importance of exports for U.S. employment and the role of trade agreements in assuring access to foreign markets have grown dramatically. More than ever, American jobs rely on strong enforcement of our trade agreements. In light of proposed new trade agreements like the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, Congress should reassess whether additional enforcement tools are needed to ensure that our trade partners fulfill their responsibilities.
Currently, U.S. exporters confronting unfair or discriminatory trade practices bring their concerns to USTR informally or through formal processes like the Special 301 Report, which publicly identifies major market-access barriers facing U.S. companies. In consultation with other federal agencies, USTR then decides whether or not to raise the allegation with our trading partner. If the government decides to press the issue, the countries sometimes reach a voluntary resolution, but often, our trading partners deny the claims. USTR may decide that the only way to resolve the matter is through formal enforcement proceedings. Through such proceedings, neutral arbitrators identify specific violations of trade agreements, issue legally binding orders to the violators to come into compliance and impose sanctions for continued noncompliance.
Over the years, USTR has consistently been willing to press other countries over alleged trade violations. But the sheer number of trade agreements and alleged trade violations strains the agency’s capability to effectively respond to every allegation. Over the past 25 years, the United States has negotiated global trade obligations with 162 countries and bilateral trade obligations with 25 countries. This trend has exposed two problems with the current enforcement system.
First, USTR lacks resources to sufficiently assess the credibility of all trade enforcement claims. With fewer than 300 professionals, USTR is stretched very thin in light of its responsibilities to both negotiate new agreements and enforce existing ones. USTR’s $55 million budget is significantly less, for example, than the $90 million budget allocated for the Department of Labor’s programs to protect workers outside the United States.
Second, USTR is sometimes in an awkward and potentially conflicted position by virtue of its dual role in both deciding whether a trade claim is credible and then prosecuting the claim. For instance, if bringing an enforcement action would be politically inconvenient for an administration, the USTR may feel constrained in objectively assessing the validity of an alleged trade violation.
Congress should address these problems by increasing the USTR’s budget and creating a new enforcement tool by which U.S. companies could seek an opinion on an alleged trade violation. We call it a Trade Enforcement Advisory Opinion. To do so, lawmakers should expand Section 332 of the Tariff Act of 1930, which allows Congress to ask the U.S. International Trade Commission to conduct general fact-finding investigations with respect to U.S. trade and competitiveness issues. The ITC is an independent and nonpartisan agency that is widely viewed as both authoritative and objective, free from political interference. For instance, Congress in recent years has requested Section 332 investigations on whether India’s industrial policies discriminate against U.S. trade and investment, the impact of tariff cuts on certain environmental goods and the effectiveness of the Africa Growth and Opportunity Act.
Congress should expand its use of Section 332 beyond general investigations by enabling the ITC to issue Trade Enforcement Advisory Opinions regarding specific allegations of trade violations. The process would work like this: A qualified U.S. company would file a detailed petition with the Senate Finance Committee and the House Ways & Means Committee requesting the ITC to determine whether a foreign country has violated a trade agreement in a specific way. The committees would review the petition and, upon agreement between the chairs and ranking members, would send the petition to the ITC to determine whether there is a “reasonable basis” to conclude that such a violation occurred. The ITC would review the claim, including providing opportunity for comment by the foreign government and other stakeholders and issue a determination within 120 days. All submitted materials and ITC determinations would be public, and the ITC’s determination would be advisory only, so it would not obligate the administration to initiate an enforcement action against a trading partner.
Enabling the ITC to issue Trade Enforcement Advisory Opinions would serve several purposes. First, it would provide Congress with an enhanced but still appropriately limited role in trade enforcement. Lawmakers would still not be able to force the administration to undertake enforcement proceedings, but they would be able to petition the ITC to investigate specific allegations of trade violations. Since the ITC is an independent agency that would conduct its proceeding in a transparent manner, any finding of a “reasonable basis” for asserting a trade violation would pressure USTR to take action, even if it is politically damaging to the administration. Furthermore, the ITC’s reputation for neutrality would enhance USTR’s authority to press our trading partners over alleged trade violations.
Second, it would provide U.S. companies with an opportunity to obtain timely and independent assessments of whether there is a credible claim of a trade violation, so that they can make more informed decisions about how to respond to trade problems.
Finally, even if the ITC finds no reasonable basis to support a trade violation claim, such findings will help identify where trade agreements could be strengthened. For instance, if a foreign country denies U.S. companies access to its market in ways that are discriminatory but not in violation of an existing trade obligation, an ITC finding could help identify a hole in the current agreement to be addressed in a future negotiation.
Noncompliance with trade obligations hurts U.S. companies and workers while undermining public support for trade agreements. Congress should significantly increase funding for trade enforcement and create a new tool by having the ITC issue Trade Enforcement Advisory Opinions. Doing so will ensure that free trade agreements are in the best interests of U.S. companies and workers.
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