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March 11 2013 Issue

Monday, March 11, 2013
Sandler, Travis & Rosenberg Trade Report

20 Years On, NAFTA’s Effects Difficult to Measure, Report Says

The Congressional Research Service recently issued a report examining NAFTA 20 years after it was signed. The report finds that NAFTA did not cause the huge job losses in the U.S. predicted by those who feared that companies would move production to Mexico to lower costs, nor did it yield the large economic gains anticipated by supporters.

The economic impact of NAFTA is difficult to measure, the report states, since trade and investment trends are influenced by numerous variables such as economic growth patterns, inflation and currency fluctuations. Between 1993 and 2012 the U.S. saw trade gains of 506% with Mexico and 192% with Canada, compared to 279% with non-NAFTA countries. Many economists have credited NAFTA with helping U.S. manufacturing industries become more globally competitive through the development of cross-border supply chains, and the agreement was instrumental in the integration of the North American auto industry. However, the net overall effect of NAFTA on the U.S. economy appears to have been relatively modest, primarily because total trade with Canada and Mexico was less than 5% of U.S. GDP at the time NAFTA went into effect.

With respect to Mexico, a World Bank study found that NAFTA helped Mexican manufacturers adapt to U.S. technological innovations more quickly, likely had positive impacts on the number and quality of jobs, reduced wide variations in the GDP growth rate, and increased the levels of synchronicity in business cycles in the three partner countries. Some have argued that NAFTA’s success in Mexico was limited by the fact that it was not supplemented by improvements in education, industrial policies and/or infrastructure investment that could have promoted deeper regional integration.

The study adds that from the Canadian perspective the important consequence of NAFTA may have been that “many of the fears of opening up trade with the United States did not come to pass.” For example, Canada “did not become an economic appendage” to the U.S., did not lose control over its water or energy resources, and did not see its manufacturing sector gutted.

“Given the increasing number of regional trade agreements throughout the world and the ongoing Trans-Pacific Partnership” negotiations, the report states, “one general question that policymakers may consider in forming future trade policy is whether or not NAFTA has lost its relevance.” The report notes that NAFTA has served as a model for other FTAs the U.S. and Mexico have negotiated as well as for multilateral negotiations, particularly in areas such as market access, rules of origin, intellectual property rights, foreign investment, dispute resolution, worker rights and environmental protection. Going forward, however, “both proponents and critics of NAFTA agree that the three countries should look at what the agreement has failed to do as they look to the future of North American trade and economic relations.” Policies could include strengthening institutions to protect the environment and worker rights, considering the establishment of a border infrastructure plan, increasing regulatory cooperation, promoting research and development to enhance the global competiveness of North American industries, and investing in more border infrastructure to make border crossings more efficient. 

As expected, two months after being seated the 113th Congress has made little headway on trade and customs issues. House and Senate committees will likely hold hearings on the Obama administration’s trade priorities for 2013 later this month, at which point the legislative agenda could become clearer.

India. The House Ways and Means Trade Subcommittee will hold a hearing March 13 on U.S.-India trade relations. Issues to be discussed at this hearing will include the long-term trade and investment relationship, a potential bilateral investment treaty, agricultural market access barriers, India’s National Manufacturing Policy and other forced localization policies, intellectual property rights protection, compulsory licenses, patent revocations and other policies on pharmaceuticals, and India’s system of cascading tariffs, taxes and other import charges.

Considering that the White House is focused on concluding the Trans-Pacific Partnership, launching talks on a free trade agreement with the European Union, and negotiating a new international services agreement and an expanded pact on information technology products, Rep. Devin Nunes’ decision to focus on India in the first hearing of his tenure as subcommittee chairman is an interesting one. In announcing the hearing Nunes, noting the size of India’s market, said that the “U.S.-India partnership is and will continue to be crucial to the global economy in the 21st century” but that he is “concerned that India has launched a series of alarming policies that harm U.S. job creators and are counterproductive.”

Subcommittee Assignments. After some delay the House Ways and Means and Senate Finance committees have named the members of their trade subcommittees.

In the House, Rep. Devin Nunes, R-Calif., will chair the Trade Subcommittee and will be joined by Republicans Kevin Brady of Texas, Dave Reichert of Washington, Vern Buchanan of Florida, Adrian Smith of Nebraska, Aaron Schock of Illinois and Lynn Jenkins of Kansas, along with Charles Boustany of Louisiana and Peter Roskam of Illinois who are new to the subcommittee this year. Democratic members will include Ranking Member Charles Rangel of New York, Richard Neal of Massachusetts, John Larson of Connecticut, Earl Blumenauer of Oregon and Ron Kind of Wisconsin. Democratic Reps. Jim McDermott of Washington, Lloyd Doggett of Texas and Joe Crowley of New York will not be serving on the subcommittee this year.

In the Senate, the Subcommittee on International Trade, Customs and Global Competitiveness will again feature Ron Wyden, D-Oregon, as chairman. Other Democrats will include John D. Rockefeller IV of West Virginia, Charles Schumer of New York, Debbie Stabenow of Michigan, Maria Cantwell of Washington, Robert Menendez of New Jersey and new subcommittee members Sherrod Brown of Ohio and Michael Bennet of Colorado. On the Republican side Johnny Isakson of Georgia has replaced John Thune of South Dakota as ranking member. Thune will remain a member of the subcommittee along with Orrin Hatch of Utah, Charles Grassley of Iowa and Pat Roberts of Kansas and new subcommittee member Rob Portman of Ohio. Sens. Mike Crapo, R-Idaho, and Bill Nelson, D-Florida, left the subcommittee this year, along with John Kerry, D-Massachusetts, who was named secretary of state.

Domestic Manufacturing. House Minority Whip Steny Hoyer, D-Md., said recently that House Democrats plan to relaunch their “Make It In America” initiative, which seeks to promote domestic manufacturing. Hoyer said this year’s legislative package will include “new proposals” compared to the one announced in 2012, which included provisions to improve the tools available to prevent the evasion of antidumping and countervailing duties, improve the functioning of U.S. export promotion programs, provide specialized training to U.S. Customs and Border Protection agents to prevent mislabeled or transshipped items from entering the U.S., promote increased textile exports, and eliminate the tax deduction for moving expenses for companies sending jobs overseas and providing a new tax credit for companies that bring jobs back to the U.S.

MTB. The miscellaneous trade bill would reinstate hundreds of tariff suspensions and reductions on imports of manufacturing inputs and finished products. The House Ways and Means Committee has announced on its Web site that in order for bills introduced in the 112th Congress to be included in the 113th Congress MTB process, a current MTB disclosure form must be submitted no later than March 28. The committee notes that individual bills will not have to be reintroduced and that no new bills are being accepted at this time. Bills whose sponsors have not returned in the 113th Congress must be adopted by another representative who completes a current disclosure form for that bill.

Other. Following is a list of additional trade-related legislation that has been introduced recently. The texts of these bills are or will shortly be available on the Library of Congress Web site (

H.R. 851 – to amend the tax code to encourage domestic insourcing and discourage foreign outsourcing (introduced Feb. 27 by Rep. Pascrell; referred to the House Ways and Means Committee)

H.R. 872 – to lift the trade embargo on Cuba (introduced Feb. 27 by Rep. Rangel; referred to the House committees on Foreign Affairs, Ways and Means, Energy and Commerce, the Judiciary, Financial Services, Oversight and Government Reform, and Agriculture)

H.R. 873 – to facilitate the export of U.S. agricultural products to Cuba, remove impediments to the export to Cuba of medical devices and medicines, allow travel to Cuba by U.S. legal residents, and establish an agricultural export promotion program with respect to Cuba (introduced Feb. 27 by Rep. Rangel; referred to the House committees on Foreign Affairs, Ways and Means, the Judiciary, Agriculture, and Financial Services)

S. 428 – to expedite the development of Arctic deepwater ports (introduced Feb. 28 by Sen. Begich; referred to the Senate Committee on Environment and Public Works)

S. 431 – to authorize duty-free status for imports of a specific amount of garments from Nepal for seven years (introduced Feb. 28 by Sen. Feinstein; referred to the Senate Committee on Finance)

S. 432 – to provide to 13 least-developed countries in Asia and the South Pacific (Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Maldives, Nepal, Samoa, Solomon Islands, East Timor, Tuvalu and Vanuatu) duty-free and quota-free benefits for garments and other products similar to those afforded to beneficiary countries under the African Growth and Opportunity Act (introduced Feb. 28 by Sen. Feinstein; referred to the Senate Committee on Finance)

H.R. 887 – to terminate the Economic Development Administration (introduced Feb. 28 by Rep. Pompeo; referred to the House committees on Transportation and Infrastructure and Financial Services)

H.R. 889 – to create a task force that identifies, prioritizes and develops a response to policies and practices of the U.S. government, foreign governments or international bodies that deny fair market access to Internet-related goods and services or that threaten the technical operation, security and free flow of global Internet communications (introduced Feb. 28 by Rep. Lofgren; referred to the House committees on Ways and Means, Foreign Affairs, the Judiciary, and Energy and Commerce)

S. 435 – to ban the exportation of crude oil or refined petroleum products derived from federal land (introduced March 4 by Sen. Menendez; referred to the Senate Committee on Banking, Housing and Urban Affairs)

H.R. 937 – to create a new $5 million competitive grant program for high-tech textile research and development projects (introduced March 4 by Rep. Price; referred to the House committees on Science, Space and Technology, Ways and Means, and Foreign Affairs)

H.R. 949 – to ensure that transportation and infrastructure projects carried out using federal financial assistance are constructed with steel, iron and manufactured goods produced in the United States (introduced March 5 by Rep. Rahall; referred to the House committees on Transportation and Infrastructure and Financial Services)

H.R. 974 – to strengthen freight-related infrastructure by expanding the definition of the national freight network to include rail, navigable waterways, inland ports, seaports, freight intermodal connectors, airports and aerotropolis transportation systems and by creating a National Freight Infrastructure Investment Grants program (introduced March 5 by Rep. Sires; referred to the House Committee on Transportation and Infrastructure)

H.R. 996 – to establish an improved regulatory process to prevent the introduction and establishment in the United States of non-native wildlife and wild animal pathogens and parasites that are likely to cause harm (introduced March 6 by Rep. Slaughter; referred to the House committees on Natural Resources, the Judiciary, Ways and Means, and the Budget)

H.R. 1012 – to strengthen federal consumer protection and product traceability with respect to commercially marketed seafood by, among other things, ensuring that inspections conducted to determine seafood safety also look for seafood fraud, requiring the development of a publicly available list of foreign exporters who violate federal food safety laws, and allowing the refusal of shipments of fraudulent seafood from foreign exporters (introduced March 6 by Rep. Markey; referred to the House committees on Energy and Commerce, Agriculture, Natural Resources, and Ways and Means)

H.R. 1020 – to increase and adjust for inflation the maximum value of articles that may be imported duty-free by one person on one day (introduced March 6 by Rep. Schock; referred to the House Committee on Ways and Means)

S. 489 – to increase and adjust for inflation the maximum value of articles that may be imported duty-free by one person on one day (introduced March 7 by Sen. Thune; referred to the Senate Committee on Finance) 

CPSC to Hold April 25 Meeting on Upholstered Furniture Fire Safety Technology

The Consumer Product Safety Commission is planning to hold an open meeting April 25 in Rockville, Md., on upholstered furniture fire safety technologies. The CPSC is also inviting public comments through July 1 on a possible change in regulatory approach.

In March 2008 the CPSC proposed a standard for the flammability of residential upholstered furniture. Under this proposed rule upholstered furniture could meet the standard by having either (1) cover material that complies with the prescribed smoldering ignition resistance test or (2) an interior fire barrier that complies with specified smoldering and open-flame ignition resistance tests. Further testing has indicated significant promise for barriers as a means to address the flammability risk posed by upholstered furniture.

The upcoming meeting will therefore seek to gather additional information about the current and anticipated progress in fire barrier technologies and their application to upholstered furniture. Another purpose is to discuss other technologies and options to reduce the fire hazard posed by residential furniture.

The CPSC is also requesting comments on the possibility of moving from a regulatory approach that primarily addresses fire deaths caused by smoldering ignition sources using bench scale models to one that relies on the use of fire barriers to address fires started by multiple types of ignition sources (including smoking materials) by limiting fire growth. Issues of interest include the use of fire retardant chemicals to achieve improved fire performance and any risks of human exposure to such chemicals as well as the potential changes to furniture manufacturing and assembly from using fire barriers. 

$18.9 Million More in Fines for Price Fixing in Air Cargo Industry

The Department of Justice announced March 8 that two Japanese air freight forwarding companies have agreed to plead guilty and pay criminal fines totaling $18.9 million for their roles in a conspiracy to fix certain fees in connection with the provision of air freight forwarding services for air cargo shipments from Japan to the U.S. Including these charges, the DOJ’s investigation has resulted in 16 companies having either pleaded guilty or agreed to plead guilty and having agreed to pay criminal fines totaling more than $120 million.

Trade Missions on Autos, Medical Equipment, Infrastructure, Safety and Security

The International Trade Administration is inviting applications to participate in the following upcoming trade missions.

Auto Supply Chain/Mexico – This mission will be held Sept. 23-26 and is intended to focus on suppliers of spare parts, original equipment manufacturer parts and components, hybrid vehicle components, precision assembly devices and systems that enhance efficiency in the OEM manufacturing process. A minimum of 15 and a maximum of 20 companies will be selected to participate and applications are due no later than July 12.

Colombia – This multi-state, multi-sector mission will be held Sept. 9-12 and is open to U.S. companies from a cross-section of industries with growing potential in Colombia, including safety and security equipment and services, medical equipment, cosmetics, agricultural machinery, and information technology. A minimum of 15 and a maximum of 30 U.S. companies will be selected to participate and applications are due no later than June 7.

Infrastructure/Latin America – This mission will visit Brazil, Colombia and Panama from May 12-18 and will focus on export-ready U.S. firms in a broad range of leading U.S. infrastructure industrial sectors, with an emphasis on project management and engineering services (including construction, architecture and design), transportation (including road/highways, rail, airports and intelligent transportation systems), energy (including distribution, transmission and smart grid) and safety and security. The delegation will be composed of 20-25 U.S. firms representing the mission’s target sectors and applications are due no later than March 22.

Central America – This mission will be held July 15-19 in conjunction with the Trade Americas - Opportunities in Central America Conference in San Jose, Costa Rica. It is open to U.S. companies from a cross-section of industries with growing potential in Central America but is focused on best prospects such as construction equipment/road building machinery, medical equipment and devices/laboratory scientific instruments, and safety and security equipment. A minimum of 20 and a maximum of 30 companies will be selected to participate and applications are due no later than May 17.

Nuclear Trade/Vietnam and China – This mission will be held May 16-23 and targets subsectors holding high potential for U.S civil nuclear exporters, including legal and advisory services; engineering, procurement and construction; operators and maintenance providers; component manufacturers; and fuel, including mining, enrichment, fuel fabrication, transport and storage. A minimum of 15 and maximum of 20 companies and/or trade associations will be selected to participate and applications are due no later than April 15. 

Foreign Regulatory Changes Could Affect Exports of Rubber, Foods, Appliances

According to the National Institute of Standards and Technology, the World Trade Organization has been notified of regulatory changes that may affect exports of specific products to the following countries. For information on how these restrictions may affect your business, contact ST&R.

Philippines – draft national standards on classification and grading of natural raw rubber sheets and centrifuged natural rubber sheets (comments due by April 29)

Qatar – draft technical regulations for general requirements for bakery products, date syrup, dehydrated shrimp, parsley oil, frozen liver, and frozen prawns coated with bread crumbs (comments due by May 4)

Saudi Arabia – regulations on electrical appliances, cream analog, instant pudding powder, parsley oil, frozen prawns coated with bread crumbs, basil oil, frozen dough, oil of cinnamon leaves, onion oil, edible wheat germ oil and cappuccino powder (comments due by May 1) 

AD/CV Duty Orders on Corrosion-Resistant Steel to be Terminated

In its sunset reviews of the antidumping and/or countervailing duty orders on corrosion-resistant carbon steel flat products from Germany and Korea, the International Trade Commission has determined that revocation of these orders would not be likely to lead to continuation or recurrence of material injury to an industry in the United States within a reasonably foreseeable time. As a result, these orders will soon be terminated.

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