US CHINA TRADE WAR JULY 2015 TPA, TPP, TRADE POLICY, TRADE AND CUSTOMS

US Capitol North Side Construction Night Washington DC ReflectioTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR JULY 15, 2015

 

Dear Friends,

Because of the substantial activity in May, June and July with the passage of Trade Promotion Authority (“TPA”) and the ongoing Trans Pacific Partnership (“TPP”) negotiations, this blog post is being split into two parts.  The first part will cover trade policy, trade and Customs.  The second part will cover products liability, Patent/IP, antitrust and securities.

In May and June, Congress, both the House of Representatives and Senate,  twisted and turned itself into knots to pass TPA for the President and to keep the trade negotiations on track.

But TPA is not the end of the story.  In passing TPA through the Senate and House, Congress laid down a number of stiff negotiating objectives.  Essentially, it raised the bar for the negotiations for the Trans Pacific Partnership (“TPP”) and European negotiations of the Transatlantic Trade and Investment Partnership (“TTIP”).  Congressmen and Senators indicated that they intend to be very involved personally in the negotiations so to assume that TPP negotiations will be finished in a month, as predicted by the Austrian Trade Minister and even the United States Trade Representative (“USTR”), is simply wishful thinking.

On July 9th, however, Chairman Paul Ryan stated that an agreement could be finalized by late fall.  USTR also recently announced that there will be a major TPP negotiating round between July 24-30th in Hawaii.

Now the heavy lift begins.  Now is the time for any US company that is having export problems with exports to the 12 Trans Pacific Partnership countries, specifically Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore or Vietnam, to bring these problems to the attention of US negotiators and also their Congressional representatives so the issue can be included in the ongoing negotiations.

As Senators Hatch and Wyden stated on June 24th on the Senate Floor and below and Representatives Ryan, Levin and Sessions stated on the House floor on June 25th, this is just the beginning of the process and this process has a very long way to go.

The first half of this blog post will set out the twists and turns of the TPA negotiations in the House and the Senate, along with developments in the TPP negotiations and also developments in trade and Customs law.  The second half of the blog post will cover products liability, IP/Patent, China antidumping cases, antitrust and securities.

Best regards,

Bill Perry

TRADE POLICY

TPP NEGOTIATIONS FORGE AHEAD BUT CANADA IS A STICKING POINT

On July 7th and 9th, it was reported that TPP negotiations are into their final round, but other commentators have stated that there is still a ways to go.  On July 9th in a Politico Morning Money speech, which can be found here http://www.c-span.org/video/?327014-1/politico-conversation-trade-representative-paul-ryan-rwi, Paul Ryan, House Ways and Means Chairman, stated that there could be a final TPP Agreement by late Fall.  There appears to be a very strong push to conclude the TPP Agreement by the end of Year so it does not bleed into 2016, an election year.  If TPP becomes an election issue, it could pose a very difficult political issue, especially for the Democrats and Hilary Clinton, in particular, because much of the Democratic base, such as the Unions, strongly oppose the Trade Agreements.

On July 1st, at a Politico Playbook Discussion, USTR Michael Froman stated that they hope to complete the TPP “as soon as we possibly can,” and deliver it to Congress by the end of the year.  Froman further stated:

We’re in the final stages of negotiating the Trans-Pacific Partnership.  We’re down to a reasonable number of outstanding issues, but by definition, those issues tend to be the most difficult, whether it’s on market access or on rules like intellectual property.

Froman also stated that with Japan good progress had been made on agriculture and automobiles, and “I don’t really see that as an obstacle to other progress at the moment.”  He went on to state that other issues include access to the Canadian agricultural markets and rules on intellectual property rights, investment and state-owned enterprises.

More importantly, Froman stated that the major achievement of the TPP is that there are no product-area exemptions—all product areas will be covered.  He stated that the negotiators were committed “to ensure that our exporters have commercially meaningful market access to foreign markets.”

On July 7th USTR announced that the chief negotiators and ministers of the 12 countries engaged in the TPP trade talks will meet in Maui, Hawaii at the Westin Maui Resort and Spa, with the chief negotiators meeting July 24-27 and the ministers meeting July 28-31. USTR stated that “The upcoming ministerial provides an important opportunity to build on this progress as we work to conclude the negotiation.”

With U.S. trade promotion authority (TPA) now in place, the stage is set for the U.S. and Japan to finalize their talks on nontariff barriers to U.S. autos, which includes an auto-specific dispute settlement mechanism, and for the U.S. and Canada to begin negotiating in earnest on the roughly 100 Canadian tariff lines containing dairy, poultry and eggs—items administered by a supply management system that restricts imports to protect the domestic industry.

Japanese and Canadian government officials were waiting for TPA to pass before making final offers.

One Commentator stated, however, that she does not believe that the Maui meeting will be the final TPP negotiating round.  Lori Wallach of Public Citizen stated

“There have been seven rounds since the ‘final’ TPP negotiating round and at least three ‘final’ TPP ministerials and there are many outstanding sensitive issues and now it’s clear to the other countries just how split Congress is on TPP, so whether this really is it remains to be seen.”

Wide chasms remain within several sectors potentially impacted in the 31 negotiation areas. For example, the U.S. is demanding the quota for Japan’s food-use rice imports be increased to about 175,000 tons while Japan is insisting 50,000 tons. Japan is demanding that the U.S. eliminate tariffs on Japanese auto parts manufactured in the Southeast Asian countries with which Tokyo has an economic partnership agreement. The two countries also have yet to agree on Japanese beef and pork import tariffs, though the issue is almost settled. There are still wide gaps between the 12 countries on intellectual property rights protection of pharmaceuticals data and dispute settlement on cross-border trade and investment.

In a July 14th trade publication, former USTR general counsel Warren Maruyama reinforced the skepticism about the potential conclusion of the TPP in Hawaii, stating:

I think it’s a bit of a stretch; my understanding is there are a lot of brackets.  There’s a whole bunch of difficult things.”

Moreover, a swift conclusion of the TPP would not go well with Congress.  As Maruyama further stated:

One of the expectations coming out of TPA is there’s going to be a much better process of consultations, and it’s not necessarily going to go over well if there’s some sort of a rush to agreement without adequate consultation with the Congress, particularly when you get into these sensitive sectors.

On July 7th, at the time of the announcement of the Hawaii TPA meeting, President Obama was meeting Nguyen Phu Trong, the general secretary of Vietnam, another TPP country.   President Obama noted that the TPP talks “was an excellent opportunity for us to deepen our discussion” and the trade deal has “enormous potential” for economic growth for both countries. Trong stated that U.S. and Vietnam have been able to “rise above the past.” “What is of utmost importance is we have transformed from former enemies to friends.”

Meanwhile, the New York Times reported on July 7th:

Outstanding controversies include access to Canada’s agriculture market, Australian concerns over American pharmaceutical patent rules, Peru’s rain forest management, Chinese components in Vietnamese textile exports and labor organizing rights in Vietnam and Mexico. The dispute over access to Canada’s protected dairy and poultry markets is so fierce that some participants say they believe Canada could drop out of the talks. . . .

United States officials feel confident enough a deal is at hand that they have scheduled a meeting among the chief negotiators at the Westin Maui Resort & Spa in Hawaii during the last four days in July and have notified Congress that they expect this to be the last one.

But on July 7th, the Canadian government restated its support for the TPP deal, with Finance Minister Joe Oliver saying increased trade and investment will benefit the economy.  Oliver further stated that Canada has “come a long way from the free trade bogeyman” era of the 1980s, when the North American Free Trade Agreement was negotiated.”  The TPP deal “will unlock the Pacific powerhouse” and create jobs in Canada.  Canada is under pressure to open up its dairy and poultry sectors, where production is controlled through quotas and imports are restricted with high tariffs. Dismantling that system, known as supply management, may become an election issue in rural districts for Conservatives in the hard fought fall election.

Oliver further stated, “Free trade is at the heart of the Canadian advantage. It is the heart of Canada’s future.  Canada must build on the free trade empire we have forged.”

But on July 13th the Huffington Post reported that US Congressmen and Senators are pressuring the Administration to push Canada out of the TPP if it does not agree to deregulate its dairy and poultry industries and open them up to import competition.  This point, however, is not new.  Several months ago while discussing the TPP negotiations with Congressional trade staff on Capitol Hill, they made the same point.  If Canada does not give in on dairy and poultry, they will be dropped from the negotiations.

To stay in the TPP, the Canadian government must agree to dismantle the supply management system that protects Canada’s dairy and poultry industry.  In addition to the US, Australia and probably New Zealand are pushing Canada to open up.  In the past the Canadian government has broken up supply management system for certain products, dismantling the Canadian Wheat Board in 2011.  But it is reluctant to do so with the dairy industry because of the upcoming Canadian elections.

In addition to dairy and poultry, lumber is also a target.  Another target should be the Canadian Provincial restrictions on wine imports.  British Columbia, for example, levies an 89% tariff, higher than China, on US wine imports.

But Canada’s National elections are also an issue.  They take place on October 19, 2015 so the present Canadian government may want to wait to make major concessions until after the National election in Canada.

Because of these problems, many Trade Commentators, including John Brinkley of Forbes, believe that TPP still have a long way to go.  As John Brinkley stated in his column on July 7th:

Negotiations over the TPP among and between the 12 parties to it are not as close to completion as Obama and U.S. Trade Representative Michael Froman would like you to believe. There are enough unresolved issues in the text to keep the negotiators at the table for a long time.

To be fair, the 11 other TPP parties know they need to finish it and get it to the U.S. Congress for a vote by the end of the year. If it drags into the 2016 election year, all bets are off. That fact, along with Congress having given Obama fast-track authority, may soften their negotiating positions on some issues.

For the full article, see http://www.forbes.com/sites/johnbrinkley/2015/07/07/tpp-still-has-a-long-way-to-go/.

TPP NEGOTIATIONS BECOME MORE TRANSPARENT

As promised on the House and Senate floors the passage of TPA has led to more transparency. On July 9, 2015, the United States Trade Representative’s office (“USTR”) announced that members of its various advisory committees, including labor unions, industry experts and environmental groups, can now see the negotiating text of the TPP.

USTR specifically stated:

This week, a diverse group of trade advisers — including labor unions, industry experts, environmental groups and public advocates — will begin viewing draft TPP negotiating text as part of the congressionally established trade advisory process.  These advisors will receive full and equal access to the draft negotiation text in an effort to ensure that they can adequately prepare congressionally mandated reports on TPP.

The Obama administration firmly believes that the input of a wide array of voices is integral to trade negotiations, which is why we have grown the size and membership of our trade advisory committees.

TPA AND TAA NOW LAW—THE HEAVY LIFTING NOW BEGINS AS NEGOTIATIONS CONTINUE ON TPP

On June 25, 2015, the House of Representatives passed the African Growth and Opportunity Act (“AGO”) by a vote of 286 to 138, which includes Trade Adjustment Assistance (“TAA”), and the bill, was sent to President Obama.  See House Debate on TPA at http://www.c-span.org/video/?326582-4/house-debate-trade-promotion-authority.  On June 24, 2015 the US Senate passed the Trade Promotion Authority (“TPA”) bill by a vote of 60 to 38 for President Obama’s signature.  See the Senate debates at http://www.c-span.org/video/?326681-5/senate-debate-trade-promotion-authority.  As the Senate and House leadership promised, both TPA and TAA were on President’s Obama’s desk at the same time.  To see President Obama sign the Trade Bills, watch CSPAN at http://www.c-span.org/video/?326821-2/president-obama-bill-signing-ceremony.

Now the heavy lift begins.  On June 23, 2015, Prime Minister Shinzo Abe of Japan predicted that with the TPA vote TPP could be finalized in a month.  That simply is not going to happen. With all the negotiating objectives in the TPA bill, including currency manipulation, I firmly believe that TPP negotiations will go on until at least the end of the year and possibly into 2016, an election year.

In light of numerous Congressional negotiating objectives, the TPP negotiations are going to take time and will not be an easy lift.  Congress will be involved in the negotiations every step of the way so this will not be simple.

As Paul Ryan, Chairman of the House Ways and Means, stated on President Obama’s signature of TPA:

“With TPA in place, our attention shifts to the trade agreements currently being negotiated with our friends in the Asia-Pacific region and Europe. Just as TPA allows greater oversight of the process, it requires the administration to follow Congress’s priorities and achieve high-standard agreements. We have a great opportunity ahead of us, and Congress and the administration both must do their parts to seize it.”

Anyone who thinks TPP negotiations will be finished in a month is simply wishful thinking.  This will be a difficult set of negotiations.  As the Wall Street Journal stated on its June 25th front page:

The White House and Republican leaders notched a significant victory Wednesday with the Senate’s passage of divisive trade legislation, but the win kicks off a grueling, months long process to complete a Pacific trade pact that still faces domestic opposition and must win final congressional approval.

As Democratic Congressman Sander Levin, ranking Democratic member of House Ways and Means, stated on June 25th on the House Floor, the battle now switches from TPA to the actual negotiations and words in the TPP itself:

The debate these last weeks and months has been about how do we get a strong and effective trade policy and trade agreement. That debate only intensifies now.  . . . The argument about the process of T.P.A. is now behind us. And the challenge of the substance of T.P.P. smack in front of us. Automatic embrace of centuries’ old doctrines does not meet the challenges of intensifying globalization. So we will continue to shine a bright light on the critical issues like market access, state-owned enterprises, intellectual property and access to medicines, worker rights, environment, currency manipulation and investment provisions that could put at risk domestic regulations.

Our calls for improvements to the negotiations will only grow louder. In order for T.P.P. to gain the support of the American people, it will need to gain the votes of a much broader coalition of members of Congress than voted for T.P.A. the issue is not pro-trade versus anti-trade, but whether we shape trade agreements to spread the benefits broadly, including the middle class of Americans.  . . .

As Republican Congressman Pete Sessions stated on June 25th on the House Floor, Congressional Representatives will have their chance and these negotiations are going to take time:

But I would respond and say to the gentleman, you’re going to have an opportunity and I can’t wait to get you invited to every single round of these and have you find time to go do exactly what you think members of Congress ought to be doing. Because in fact that’s the way the T.P.A. is written.  . . . But this whole process — as soon as that takes place, the gentleman will have all the opportunity he wants to go and take part of every round of the discussions. . . . As soon as it’s signed by the President, he can go at it.  . . . he will have that opportunity and every member of this body will have that same chance. He and every member will have a chance to go and negotiate, be in the room, be a part of the discussion . . . but he will be allowed as a member of Congress.

So, Mr. Speaker, the things which are being talked about most as negative points about this bill, there’s already an answer to it. That’s what Republicans did. This is a Republican bill. This is about the authority of the House of Representatives, the United States Congress, to make sure we are involved. That has never been allowed before. Fast track is what we used to have. That’s what we did have. We now have a bill before us today which will help us complete the entire process, to make sure members of Congress are involved, not just the United States negotiators, but all the world will know . . . the parts about how we’re going to negotiate the trade deal and if it doesn’t come back that way, we’ll vote it down. Do we need to second guess them now today? I don’t think so. But if any member wants to be involved in this, they can just get on their plane and go wherever they want and get it done. And by law they’ll be allowed that opportunity.

All those pundits that say the TPP negotiations will be concluded in a month simply have not listened to the arguments on the House and Senate Floor.  To get a TPP, which will pass Congress, will require much more negotiation and a much longer time.  The TPP negotiations will not conclude until the end of the year at the earliest and possibly 2016, an election year.

HOUSE VOTES TO PASS AGOA AND TAA ON JUNE 25, 2015 AND BILL GOES TO THE PRESIDENT

On June 25, 2015 the African Growth and Opportunity Act (“AGOA”) with Trade Adjustment Assistance (“TAA”) passed the House by a 286 to 138 vote and went to President Obama for signature.   As promised by House Speaker John Boehner and House Ways and Means Chairman Paul Ryan, TAA was brought to the floor of the House and passed.  As Republican Congressman Dave Reichert, a co-sponsor of the TAA bill, stated on the House Floor:

Also included in this legislation is a renewal of trade adjustment assistance and I’m proud as Mr. Ryan said, to sponsor the House legislation to renew it because there is a need for this program. I believe increased trade is good for all Americans and it creates jobs. It makes America stronger. But I also understand that among and along the way, as we create jobs and trade and our jobs change over the next few years, along the way, some workers may need extra assistance and additional training. That’s why T.A.A. is so important. We’ve made great strides this past week by sending T.P.A. to the President’s desk . . . So now, Mr. Speaker, we must move forward, pass T.A.A. and AGOA today.

As Democratic Congressman Earl Blumenauer on the House Floor stated today, the Republican leaders kept their promise on TPA and TAA:

It’s at times trust is in short supply in this institution for a whole host of reasons but we were given ironclad assurances from the Speaker, from the President, from the Chairman, from Senator Wyden, Senator Hatch, Leader McConnell that T.A.A. would come back to this floor to be voted on. And I think it’s important that that has in fact occurred. Because to adapt, respond and grow a 21st century work force we need trade adjustment assistance. And what we have before us is an improvement over current law. It’s not as good as what we had in 2009, and I hope that we will be able to build on this and move forward, but this program has helped more than 100,000 Americans, including 3,000 of my fellow Oregonians who received job training and financial support. And there will continue to be winners and losers in the global economy. Whether we have trade agreements with countries or not like with pressures from China, it’s important that we provide this for our workers. With our vote today we do so.

The funding for TAA for companies, however, remains very low.  As one TAAC director told me:

Due to the Appropriations error of funding the program at $12.5M, our TAAC will have a budget of less than $3,000.00 per company this next year.   Obviously, we can’t provide much serious technical assistance for $3,000 per company, and worse, it disrupts the momentum we’ve established for facilitating their recovery.   Worse yet, this happens at a time when we should be building the program in anticipation of TPP and TTIP!

 It’s frustrating to know that the TAA for Worker’s program net cost annually per individual worker is $53,802.00* – just think what we could do if we had that kind of budget annually for companies!

* A 2012 cost-benefit evaluation commissioned by the Department of Labor found a net cost to society of $53,802 for each person who enrolled in the program between November 2005 and October 2006.

At that rate, if the TAA for Firms program prevented just 300 workers per year from enrolling in TAA for Workers because we saved their jobs instead (what a concept!), we would have generated more than enough cost savings to fund the TAAF program’s national annual budget of $16M (300 workers x $53,802 = $16,140,600).   That’s an incredibly low bar to meet on a national basis – it’s one that each of the 11 regional TAAF Centers could meet quite easily, resulting in net cost savings of more than $175M!

 When you look at it from that perspective, it shows the kind of  “no brainer” decision it is to fund the TAA for Companies program.  It’s really hard to understand why we can’t gain some traction with that elementary logic.

SENATE PASSES TPA AND THE BILL GOES TO PRESIDENT OBAMA’S DESK FOR SIGNATURE—THE INS AND OUTS OF THE NEGOTIATIONS

After jumping over a major procedural hurdle on June 23rd, on June 24th the Senate passed the Trade Promotion Authority (“TPA”) bill by a vote of 60 to 38 and the House sent the bill to President Obama for his signature. Set forth below are some of the major statements by the proponents and one opponent of the bill. To see the entire debate, watch CSPAN.org at http://www.c-span.org/video/?326775-1/us-senate-advances-taa-passes-tpa&live.

Trade Adjustment Assistance (“TAA”) also passed the Senate by an overwhelming vote of 77 to 23 votes, which then went to the House for final passage on June 25th.

To recap, after passing the Senate on May 22nd, the linked TPA and Trade Adjustment Assistance (“TAA”) bills went to the House of Representatives. Despite Herculean efforts by House Ways and Means Chairman Paul Ryan, on June 12th progressive Democrats and tea party protectionist conservative Republicans joined together to defeat Trade Adjustment Assistance and pursuant to the procedural rules kill TPA. But pro-trade Republicans and Democrats in the Senate and the House worked with President Obama over the weekend to come up with an alternative strategy and delink TAA from TPA.

On June 18th, the House passed the TPA as a stand-alone bill. See Paul Ryan’s statement on the House Floor at http://waysandmeans.house.gov/.

On June 23, 2015, in a key procedural vote in the Senate, which required a minimum of 60 votes to pass, the Senate passed cloture 60-37 for Trade Promotion Authority (“TPA”) and essentially agreed to move forward with the stand alone House TPA Bill, which had passed on June 18th.  One can see the Senate vote and the entire speeches up to and after the vote on Cspan at http://www.c-span.org/video/?326681-1/us-senate-debate-trade-promotion-authority.

All the Senators emphasized during the final TPA debate the importance of the Customs and Trade Enforcement bill going through Congress. This bill will crack down on US importers that attempt to evade antidumping and countervailing duty laws by importing transshipped merchandise. This Customs and Trade Enforcement Bill is directed straight at the problem of transshipment by certain Chinese companies around US antidumping and countervailing duty orders. That bill has now gone to conference where representatives of the House of Representatives and Senate will reconcile differences between the House and Senate bills.

Before the TPA final vote on June 24th, Senate Majority leader Mitch McConnell stated:

Yesterday’s T.P.A. [procedural] vote [was a] long overdue victory for the American worker and the American middle class. It wasn’t easy. Many thought it would never happen. We even saw corks pop in the facts optional lobby a few weeks ago, but that proved to be premature because here’s what we’ve always known about the legislation we’ll vote to send to the President today. It’s underpinned by a simple but powerful idea, for American workers to have a fair shot in the 21st century economy, it just makes sense to remove the unfair barriers that discriminate against them and the products that they make. Some may disagree. They certainly weren’t quiet in voicing their opinions. It’s okay if they don’t share our passion for ending this unfair discrimination against American workers. It’s okay if they would rather rail against tomorrow.

But a bipartisan coalition in the House and the Senate thought it was time for forward progress instead. We were really pleased to see President Obama pursue an idea we’ve long believed in. We thank him for his efforts to help us advance this measure. We thank all of our friends across the aisle for their efforts too. Senator Wyden, most of all. Over in the house, I commend Speaker Boehner and Chairman Ryan for everything they’ve done. It hasn’t been easy, and without them it wouldn’t have been possible. And of course let me thank Chairman Orrin Hatch for demonstrating such patience, persistence and determination throughout this process. He never lost sight of the goal, never gave up. The people of Utah are lucky to have him.

The Senate’s work on trade doesn’t end today. I said the Senate would finish pursuing the rest of the full trade package, and it will. . . That process continues. But the key victory for American workers and products stamped “Made in the U.S.A.” comes today. The bill we’re about to pass will assert Congress’s authority throughout the trade negotiation process. It will ensure we have the tools we need to properly scrutinize whatever trade agreements are ultimately negotiated and it will make clear that the final say rests with us. We had plenty of bumps along the road. Frankly, a few big potholes too. But we worked across the aisle to get through all of them. That’s an example of how a new Congress is back to work for the American people. I thank everyone who helped us get where we are. Now let’s vote again to support the American worker and American middle class by approving the bipartisan T.P.A. bill.

Before the final TPA vote, ranking Democratic Senator Ron Wyden of the Senate Finance Committee emphasized that the TPA bill would go through along with a Customs and Trade Enforcement bill, which includes major changes to the US Customs and Trade laws, including a sharp crack down on transshipment around US antidumping and countervailing duty laws. As I have stated many times on this blog, the transshipment issue is a burning issue in Washington DC and now it has resulted in legislation, which has gone to Conference Committee with the House of Representatives. Senator Wyden stated today on the Floor:

Mr. President, today the Senate is taking major steps towards a new, more progressive trade policy that will shut the door on the 1990’s North American Free Trade Agreement once and for all. One of the major ways this overall package accomplishes this goal is by kicking in place a tough new regime of enforcing our trade laws. . . . And it has long been my view, Mr. President, that vigorous enforcement of our trade laws must be at the forefront of any modern approach to trade at this unique time in history. One of the first questions many citizens ask is, I hear there’s talk in Washington, D.C. about passing a new trade law. How about first enforcing the laws that are on the books? And this has been an area that I long have sought to change, and we’re beginning to do this with this legislation, and I want to describe it. And for me, Mr. President, this goes back to the days when I chaired the Senate Finance Subcommittee on International Trade and Competitiveness, and we saw such widespread cheating, such widespread flouting of our trade laws, my staff and I set up a sting operation. We set up a sting operation to catch the cheats. In effect, almost inviting these people to try to use a web site to evade the laws. And they came out of nowhere because they said cheating has gotten pretty easy, let’s sign up. And we caught a lot of people. So we said from that point on that we were going to make sure that any new trade legislation took right at the center an approach that would protect hardworking Americans from the misdeeds of trade cheats.

And in fact, the core of the bipartisan legislation that heads into conference is a jobs bill, a jobs bill that will protect American workers and our exporters from those kind of rip-offs by those who would flout the trade laws. And the fact is, Mr. President, when you finally get tough enforcement of our trade laws, it is a jobs bill. A true jobs bill, because you are doing a better job of enforcing the laws that protect the jobs, the good-paying jobs of American workers. And I guess some people think that you’re going to get that tougher enforcement by osmosis. We’re going to get it because we’re going to pass a law starting today with the Conference Agreement that’s going to have real teeth in it. Real teeth in it to enforce our trade laws. Foreign companies and nations employ a whole host of complicated schemes and shadowy tactics to break the trade rules. And they bully American businesses and undercut our workers.

So what we said in the Finance Committee on a bipartisan basis, that the name of the game would be to stay out in front of these unfair trade practices that cost our workers good-paying jobs. My colleagues and I believe that the Senate has offered now the right plan to fight back against the trade cheats and protect American jobs and protect our companies from abuse. It really starts with what’s called the Enforce Act, which is a proposal I first offered years ago that will give our customs agency more tools to crack down on the cheaters. Then we have a bipartisan, bicameral agreement on the need for an unfair trade alert.  . . .

And it’s been too hard, too hard in the past for our businesses, particularly our small businesses, to get the enforcement that matters, the enforcement with teeth, the enforcement that serves as a real deterrent to cheating. So this legislation is our chance to demonstrate that strengthening trade enforcement, enforcement of the trade laws, will now be an integral part of a new modern approach to trade, an approach that says, we’re not part of the 1990’s on trade where nobody had web sites and iPhones and the like; we’ve got a modern trade policy with the centerpiece enforcing our trade laws. Our policies are going to give America’s trade enforcers the tools they need to fight on behalf of American jobs and American workers and stop the trade cheats who seek to undercut them. I strongly urge my colleagues to vote “yes” later today on the motion to send the enforcement bill to conference and work on a bipartisan basis, as we did in the Finance Committee, to put strong trade enforcement legislation on the President’s desk. . . .

The three programs — the trade adjustment assistance program, the health coverage tax credit, Senator Brown’s leveling the playing field act — are now moving through the Senate alongside legislation that creates new economic opportunities for impoverished countries in Africa and other places around the world. . . . I urge all of my colleagues to vote yes to support these important programs when we vote later today.

Senator Sherrod Brown of Ohio speaking against the final TPA vote pounded on the enforcement bill:

Its authority to amend trade agreements, should not pave the way for a trade deal that looks like it’s going to be more of the same. Corporate handouts, worker sellouts. We’ve seen it with NAFTA. We saw a similar kind of move on PNTR with China where the trade deficit, our bilateral trade deficit has almost literally exploded since 2000, when this body and the other body moved forward on PNTR. . . . . We also have a responsibility to look out for the American worker who we know will be hurt by this deal. . . . Last, Mr. President, we have an opportunity in this bill today to once again support the level the playing field act to make sure it gets to the President’s desk. This will be the vote after this — after the T.P.A. vote. This vote is essential to protecting our manufacturers from illegal foreign competition. We can’t have trade promotion without trade enforcement. It shouldn’t be bipartisan, regardless of how you vote on T.A.A. we need to make sure our deals are enforced. Level the playing field to against unfair trade practices, it’s critical for our businesses, our workers who drown in the flood of illegally subsidized import. It has the full support of business and workers, Republicans and Democrats. . . . No matter where you stand on T.P.A. we should be able to come together to have enforce — enforceable laws. We have trade. We know these agreements cause wages to stagnate, we know these agreements cause factories to close . . . This is a terrible mistake we will make which we’ve made over and over and over and over if we pass this today. If we pass T.P.A. it’s the same mistake we made with NAFTA. Big promises, job increases, wages going up, bad results. We did it when we passed PNTR, when we passed CAFTA, the Central American Free Trade Agreement, with the Korean Free Trade Agreement, we’re about to do it again, shame on us. At least take care of workers if we’re going to pass this legislation.

Prior to the final TPA vote, Senator Orrin Hatch, Chairman of the Senate Finance Committee, called the TPA bill and accompanying trade legislation the most important bill to pass in the Senate this year. Senator Hatch stated:

This is a critical day for our country. In fact I’d call it an historic day. It’s taken us awhile to get there, longer than many of us would have liked but we all know anything worth having takes effort and this bill is worth the effort. This is perhaps the most important bill we’ll pass in the Senate this year. It will help reassert Congress’s role over U.S. trade negotiations and reestablish the United States as a strong player in international trade.

Renewing T.P.A. has been a top priority for me for many years and as Chairman of the Senate Finance Committee, I am pleased that with the help of ranking member Wyden, we’ve been able to deliver a robust and bipartisan bill. It’s also been a high priority for the Senate Majority Leader. And thanks to his strong support and leadership, we’re one step away from completing this important task. This bill will help farmers, ranchers, manufacturers and entrepreneurs throughout our country get better access to foreign markets and allow them to compete on a level playing field. This bill will help give these job creators and the workers they employ greater opportunities to grow their businesses which will help create a healthier American economy. The business and agricultural communities understand the importance of strong trade agreements. That is why they came together in strong support of this important legislation. We’ve heard from all of them throughout this debate, and I appreciate their enthusiasm and support.

This has from the outset been a bipartisan effort, and I’m glad it remained that way.  . . .

But let’s be clear, passing T.P.A. is not the end of the story. It’s just the beginning. As Chairman of the Finance Committee, I intend to remain vigilant in our oversight as the administration pursues the negotiating objectives that Congress has set with this legislation. And if they fall short, I will be among the first to hold them accountable. But that is for another day. Today I urge my colleagues to help us finalize this historic achievement and join me in voting in favor of this bipartisan T.P.A. bill. If the vote goes the way I think it will today, today will be remembered as a good day for the Senate, the President, and the American people.

Finally, also included in this bill is an extension of the Trade Adjustment Assistance, or T.A.A. program. I think I’ve said enough about my opposition to this program here on the floor over the past several weeks. . . . However, I do understand that for many of my colleagues who want to support T.P.A. and free trade, passage of T.A.A. is a prerequisite. From the outset of this debate over trade promotion authority, I’ve committed to my colleagues to working to ensure that both T.A.A. and T.P.A. move on parallel tracks. I plan to make good on this commitment and today will show that. That is why despite my misgivings about T.A.A. and with the entire picture in view, I plan to vote for this latest version of the trade preferences bill.

WILL CONGRESS FOLLOW THE SIREN CALL OF PROTECTIONISM AND TAKE THE US BACKWARDS OR MOVE FORWARD WITH TPP TO RESUME ITS FREE TRADE LEADERSHIP

In light of the Congressional votes for TPA, one hopes that the Congress is moving away from the protectionist brink, but with a 60-37 procedural vote in the Senate on June 23rd, when 60 votes were required, nothing can be taken for granted. Listening to the anti-trade rhetoric in the US Senate and House of Representatives one is reminded of the original Greek tale in which Ulysses on his way back home had to pass the Siren rocks. The Greek Sirens would cry so sweetly they lured sailors and ships to their doom.

Many Democrats and some Republicans are now listening to the Sirens of protectionism from the labor unions and other activists that the US should move inward, put America first and protect workers and US factories at all costs from import competition created by free trade agreements. Although trade pundits acknowledge that TPA has passed, they argue that the Agreements, the TPP and TTIP Agreement with the EC, will die because the United States simply cannot withstand the protectionist attacks. If that is true, the US will give up trade leadership and could well return back to the 1930s. See the statement by Senator Bernie Sanders on June 23rd on the floor of the US Senate at http://www.c-span.org/video/?326681-1/us-senate-debate-trade-promotion-authority&live.

As John Brinkley, a Forbes commentator, stated on June 22, 2015, the day before the vote in the Senate on TPA:

Whether the Trans-Pacific Partnership lives or dies, it will probably be America’s last free trade agreement for a very long time.

No future Congress will want to walk into a war zone like the one now extant to pass a trade deal based on nebulous benefits. You may have noticed that the Obama administration has offered no estimate of how many jobs the TPP would create. Rather, its strategy has been to say that ratifying the TPP would empower the United States to write the rules of global trade and not ratifying it would cede that power to China. . . .

If the administration and Congress can’t convince people that free trade will facilitate those things – and they can’t – why should people care?

The next free trade agreement in the queue is the Trans-Atlantic Trade and Investment Partnership, or TTIP, which would connect the economies of the United States and the European Union. Given the amount of combat that’s been waged over the TPP, you wouldn’t want to bet on ratification of the TTIP.

Congressional leaders don’t want to put their members through another grueling trade fight like they one they’re in now, and they have no doubt made that clear to Obama. If the next president is a Democrat, he or she won’t touch the TTIP with a ten foot pole. A Republican president might ignore the opposition and try to get it done, but he’d probably lose. . . .

The TPP’s detractors have been louder and more prolific in attacking it than its proponents have been in defending it. And most of what they’ve been saying is exaggerated or wrong. They’ll probably fail to derail the TPP. But they’ve probably already succeeded in killing the TTIP and any future trade agreement that the next president or two might envision.

For Mr. Brinkley’s entire article see http://www.forbes.com/sites/johnbrinkley/2015/06/22/farewell-free-trade.

Another commentator predicted that the real impact of the Trade fight will be on the Democratic Party stating:

Just as the tea party wing of the Republican Party has pulled the entire GOP to the right and hampered attempts at compromise on Capitol Hill, some now fear a similar dynamic is taking shape on the left. . . .

The revival of the trade package inflamed labor unions and liberal groups that had fought ferociously to block it, including by running ads against otherwise friendly House Democrats and threatening to mount primary campaigns against them. Unions say past trade deals bled American jobs and tanked wages. They argue that granting Obama the power to finalize trade deals that Congress can accept or reject, but not amend, would lead to more of the same, including the 12-nation Trans-Pacific Partnership the White House has worked on for years.

“Democrats who allowed the passage of fast-track authority for the job-killing TPP, should know that we will not lift a finger or raise a penny to protect you when you’re attacked in 2016, we will encourage our progressive allies to join us in leaving you to rot, and we will actively search for opportunities to primary you with a real Democrat,” Jim Dean, head of Democracy for America, said in a statement following Thursday’s House vote. . . .

http://apnews.myway.com/article/20150620/us–congress-democrats-ad8fbb804c.html or http://tiny.iavian.net/5mkd.

To illustrate the pressure on Congressional lawmakers, in discussing the situation with knowledgeable trade professionals, they mentioned that a Union sent demonstrators to the school where one Democratic Congressman placed his kids.

Why is the protectionist America first trade policy wrong policy? Because all of “international/WTO” trade law is based on reciprocity. What the United States can do to other countries, those countries can do back to the United States. In effect, the United States can be hoisted by its own petard, killed by its own knife.

That is the reason Senator Orrin Hatch, Chairman of the Senate Finance Committee, and Congressman Paul Ryan, Chairman of the House Ways and Means Committee, are so concerned about currency manipulation. Yes, currency manipulation is now a negotiating objective as set forth in the TPA. But enforcing currency manipulation is a problem because there is no internationally accepted definition of currency manipulation. When the US Federal Reserve used quantitative easing in the last financial crisis, was that currency manipulation? Could other countries retaliate against the US for using quantitative easing? That is the fear of free traders. In international trade what goes around comes around.

The Siren Call of protectionism of putting America first by protecting companies and worker job from imports, the vast majority of which “must be unfairly traded”, however, has echoed throughout American history. Many politicians apparently have not learned the lessons of history. In the 1930s, President Hubert Hoover promised to help the United States dig out of the recession by raising tariff walls against imports and Congress passed the Smoot-Hawley Tariff of 1930. Countries around the World retaliated by raising barriers to imports from the United States. Exports and imports stopped and the World was plunged in the depression, which, in turn, was one of reasons for the rise of Adolf Hitler and the cause of the Second World War.

As one article on Capitalism states:

What was the end-result of the Smoot-Hawley Tariff Act? As other countries placed tariffs on American exports in retaliation, these tariffs actually led to the reduction of American exports and thus jobs: With the reduction of American exports came also the destruction of American jobs, as unemployment levels which were 6.3% (June 1930) jumped to 11.6% a few months later (November 1930). As farmers were unable to pay back their loans to banks, their loan defaults led to increasing bank crashes, particularly in the West and Mid-West.

See http://capitalism.org/free-trade/what-was-the-end-result-of-the-smoot-hawley-tariff-act/

The State Department itself states on its website:

The Smoot-Hawley Tariff Act of June 1930 raised U.S. tariffs to historically high levels. The original intention behind the legislation was to increase the protection afforded domestic farmers against foreign agricultural imports. . . . During the 1928 election campaign, Republican presidential candidate Herbert Hoover pledged to help the beleaguered farmer by, among other things, raising tariff levels on agricultural products. But once the tariff schedule revision process got started, it proved impossible to stop. Calls for increased protection flooded in from industrial sector special interest groups, and soon a bill meant to provide relief for farmers became a means to raise tariffs in all sectors of the economy. When the dust had settled, Congress had agreed to tariff levels that exceeded the already high rates established by the 1922 Fordney-McCumber Act and represented among the most protectionist tariffs in U.S. history.

The Smoot-Hawley Tariff was more a consequence of the onset of the Great Depression than an initial cause. But while the tariff might not have caused the Depression, it certainly did not make it any better. It provoked a storm of foreign retaliatory measures and came to stand as a symbol of the “beggar-thy neighbor” policies (policies designed to improve one’s own lot at the expense of that of others) of the 1930s. Such policies contributed to a drastic decline in international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. More generally, Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations.

The Smoot-Hawley tariff represents the high-water mark of U.S. protectionism in the 20th century. Thereafter, beginning with the 1934 Reciprocal Trade Agreements Act, American commercial policy generally emphasized trade liberalization over protectionism. The United States generally assumed the mantle of champion of freer international trade . . . .

See http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html.  It should be noted that the US antidumping and countervailing duty laws are in the Tariff Act of 1930 today.

In fact, it is the political impact and the security implications of the trade agreements, that has caused Secretary of Defense Carter and on May 8th, a bipartisan collection of 7 former US defense secretaries, including Harold Brown, William S. Cohen, Robert M. Gates, Chuck Hagel, Leon E. Panetta, William J. Perry, and Donald H. Rumsfeld along with well-known Generals, such as General David H. Petraeus and General Colin Powell, to call for the passage of TPA, stating:

By binding us closer together with Japan, Vietnam, Malaysia and Australia, among others, TPP would strengthen existing and emerging security relationships in the Asia-Pacific, and reassure the region of America’s long-term staying power. In Europe, TTIP would reinvigorate the transatlantic partnership and send an equally strong signal about the commitment of the United States to our European allies.

The successful conclusion of TPP and TTIP would also draw in other nations and encourage them to undertake political and economic reforms. The result will be deeper regional economic integration, increased political cooperation, and ultimately greater stability in the two regions of the world that will have the greatest long-term impact on U.S. prosperity and security.

Indeed, TPP in particular will shape an economic dynamic over the next several decades that will link the United States with one of the world’s most vibrant and dynamic regions. If, however, we fail to move forward with TPP, Asian economies will almost certainly develop along a China-centric model. In fact, China is already pursuing an alternative regional free trade initiative. TPP, combined with T-TIP, would allow the United States and our closest allies to help shape the rules and standards for global trade.

The stakes are clear. There are tremendous strategic benefits to TPP and TTIP, and there would be harmful strategic consequences if we fail to secure these agreements.

In a June 28, 1986 speech President Ronald Reagan indicated that he had learned the Smoot Hawley lesson stating:

Now, I know that if I were to ask most of you how you like to spend your Saturdays in the summertime, sitting down for a nice, long discussion of international trade wouldn’t be at the top of the list. But believe me, none of us can or should be bored with this issue. Our nation’s economic health, your well-being and that of your family’s really is at stake. That’s because international trade is one of those issues that politicians find an unending source of temptation. Like a 5-cent cigar or a chicken in every pot, demanding high tariffs or import restrictions is a familiar bit of flimflammery in American politics. But cliches and demagoguery aside, the truth is these trade restrictions badly hurt economic growth.

You see, trade barriers and protectionism only put off the inevitable. Sooner or later, economic reality intrudes, and industries protected by the Government face a new and unexpected form of competition. It may be a better product, a more efficient manufacturing technique, or a new foreign or domestic competitor.

By this time, of course, the protected industry is so listless and its competitive instincts so atrophied that it can’t stand up to the competition. And that, my friends, is when the factories shut down and the unemployment lines start. We had an excellent example of this in our own history during the Great Depression. Most of you are too young to remember this, but not long after the stock market crash of 1929, the Congress passed something called the Smoot-Hawley tariff. Many economists believe it was one of the worst blows ever to our economy. By crippling free and fair trade with other nations, it internationalized the Depression. It also helped shut off America’s export market, eliminating many jobs here at home and driving the Depression even deeper.

Well, since World War II, the nations of the world showed they learned at least part of their lesson. . . .

As many famous statesmen have stated in the past, those who do not learn from history are doomed to repeat it.

With the extreme rhetoric in the international trade area, however, the question is whether the United States truly has learned its lesson or whether it will raise the protectionist walls, and give up on free trade. So the question is does the United States give up on Free Trade and ignore the historical lesson or does it move forward with these free trade agreements, open up markets around the World, and retake its leadership position in international trade?.

WASHINGTON CONGRESSIONAL DELEGATION SPLITS ON TPA BILL

To see the powerful impact of Union and protectionist arguments on Congress, one need look no further than my state of Washington where the Washington Congressional delegation was split.  Although Senators Patty Murray and Maria Cantwell voted for TPA, along with Republicans in the House, the Washington State Democrats in the House were split.

Congressmen Rick Larson and Derek Kilmer along with Congresswoman Susan delBene voted in favor of TPA,  but Democratic Congressmen Adam Smith, Denny Heck and Jim McDermott wilted under substantial pressure from the Unions and voted against TPA.

In voting for TPA, in the attached statement, Larsen_ TPA Is Right For Pacific Northwest Economy _ Congressman Rick Larsen, Congressman Rick Larson sets forth his arguments in favor of TPA, stating in part:

I understand many people want the content of trade negotiations to be public. But opening up negotiations would give other countries a clear view of U.S. positions and lessen our ability to push for the best deal for our workers, environment and economy. I think the transparency provisions in the TPA bill will enable the public to have more and better information about the content of trade agreements. . . .

The North American Free Trade Agreement (NAFTA) is a 20-year-old agreement, and our country has learned a lot about trade agreements since then. The TPP negotiations are much stronger than NAFTA for several reasons. TPP includes strong requirements that other countries involved in the negotiations live up to high standards for workers, the environment and human rights. NAFTA did not. And TPP puts in place penalties, so if other countries involved in the agreement do not live up to these high standards, they will be sanctioned. NAFTA did not include sanctions for violating the terms of the agreement.

TPP is not yet finalized. I have been reviewing the sections on labor, the environment, and investor-state dispute settlement as negotiations have progressed, and I will continue to do so.

Another reason TPP is much stronger than NAFTA is that Congress is working to hold the President to higher standards for all trade agreements. The 2015 Trade Promotion Authority (TPA) bill that the House is set to vote on as soon as this week provides Congressional direction to the Administration for trade agreements the President is seeking to finalize. The 2015 TPA bill is much more stringent than its predecessor, which Congress passed in 2002. Let me explain why.

The 2015 TPA bill (which you can read here: http://1.usa.gov/1T1afiY) directs trading partners to adopt and maintain core international labor standards and multilateral environmental agreements, and calls for sanctions if they do not comply. The 2002 TPA law did not require compliance or provide enforcement tools with core international labor and environmental standards. The 2015 bill requires several levels of transparency for the public . . . The 2002 bill required no transparency. The 2015 bill makes clear that trade agreements cannot change U.S. law without Congressional approval. The 2002 law did not include this level of Congressional oversight.

In the attached letter, KILMER STATEMENT ON TPA, Congressman Derek Kilmer sets forth his arguments in favor of TPA, stating in part:

This is a particularly hot topic as the Administration continues negotiations of the Trans-Pacific Partnership, a 12-nation trade agreement that would involve 40% of the world’s economy.  Suffice it to say, it’s important that America gets this right.

Trade is an essential part of Washington state’s economy. Generally, our state does well when we’re able to sell our apples, our wood products, our airplanes, our software, and other products overseas. Exports from just Washington’s Sixth Congressional District, which I represent, totaled more than $2.2 billion in 2013, supporting more than 67,000 jobs.

With that in mind, I appreciate President Obama’s suggestion that trade agreements – if done right – could expand opportunities to export our goods to growing markets like those in Asia and benefit Washington state’s employers and workers.

In addition, it’s worth acknowledging that global trade is a reality. The United States makes up just 4% of the world population – so global trade is going to happen regardless of whether Congress passes trade legislation. In making his case to Congress, the President has asked a key question: do we want America to sit back as China negotiates trade agreements around the world and seeks to set the rules of trade (leading to a race to the bottom on worker standards, environmental standards, and consumer protections) or do we want the United States to be involved in setting the rules and establishing high standards?

It’s a reasonable concern.   Earlier this year, I spoke with a manufacturer in Tacoma whose company makes American products made by American workers. But when that company tries to sell goods to Asia, their products consistently face high tariffs. The owner explained to me that he’s been told numerous times that he could avoid tariffs if he would only move his jobs to China. If we can see more American products made by American workers have the opportunity to enter new markets without these barriers, it could lead to economic opportunities.

Trade agreements with adequate protections for American companies could help reduce those tariffs, and boost sales –enabling American companies like this to expand production or hire more workers. But only if they are done right.

With that in mind, I believe that we need better trade deals than the ones we’ve had in the past. I do not want –nor would I support – an agreement that I believe would lead to American jobs going overseas or that would put corporate profits above the rights of workers or the health of our environment.

It’s critically important that we have a trade policy that reflects our region’s priorities and values. Above all, it is important to me that any trade agreement that Congress considers must ensure that we are exporting our products – not exporting our jobs.

That also means that any trade agreement needs to meet high labor standards that must be enforced. . . .

Unlike NAFTA – which failed to include labor or environmental standards as a core, enforceable part of the agreement – future agreements must have high standards that must be enforced.

Sens. Orrin Hatch (Utah) and Ron Wyden (Ore.), along with Rep. Paul Ryan (Wis.) jointly introduced the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. This legislation would establish congressional trade negotiating objectives and enhanced consultation requirements for trade negotiations as well as allow for trade deals to be submitted to Congress for an up-or-down vote should they meet the United States’ objectives and Congress be sufficiently consulted.

This bill represents a departure from so-called “fast track” laws of the past. For example, it includes greater transparency, accountability, and Congressional oversight.   …This bill also includes stronger labor and environmental standards and unlike previous so-called “fast track” legislation, this bill demands that before countries can expand their trading relationship with the U.S., they have to maintain a core set of international labor and environmental standards.  . . .

Finally, it also would make clear that trade agreements cannot by themselves change U.S. law. Under the U.S. Constitution, Congress has to have a say regarding how our nation’s laws are changed, and I think it’s important that any legislation related to trade agreements makes that very clear. . . .

With or without trade agreements, global competition is a reality in today’s economy. And when companies and workers need to adapt to a changing marketplace, we need to make sure that they can get the resources that they need to get back to work and keep our economy growing. That’s why I support strong Trade Adjustment Assistance. I’m also pushing for Congress to reauthorize the Export-Import Bank, which helps finance U.S. exports of manufactured goods and services and create jobs through direct loans, loan guarantees, working capital finance, and export credit insurance.

While I will continue to fight to improve the Hatch-Wyden TPA bill as it moves through Congress, I support these bills because I believe that, together, they have the potential to expand jobs and economic opportunities here in America while at the same time fostering the development of higher environmental, worker safety, and consumer protection standards abroad. . . .

In the attached statement, DelBene Statement on Trade Promotion Authority _ Congresswoman Suzan DelBene, Congresswoman Suzan DelBene states why she is voting for TPA:

The reason to pass Trade Promotion Authority is to require negotiators to develop the strongest and most progressive trade deal possible. This TPA bill is the best Congress has ever had in terms of setting high and enforceable environmental and labor standards, as well as bringing more transparency to trade negotiations.  This bipartisan bill directs the administration to meet nearly 150 congressionally mandated negotiating objectives, including standards on labor protections, the environment, human rights, congressional consultation and transparency.

I’ve talked to large and small businesses, I’ve talked to labor and I’ve talked to environmentalists. It’s my job to weigh the concerns and needs on all sides and then do what’s best for Washington’s First District, which is why I supported the TPA legislation. I didn’t come to the decision lightly – Washington is the most trade dependent state in the nation and 40 percent of our jobs depend on trade. However, I will not hesitate to vote against a trade deal if it fails to meet the needs of our region and the high standards described in this TPA.

In voting against TPA, in the attached statement, ADAM SMITH NO TPA, Congressman Adam Smith sets forth his arguments against TPA, stating in part:

“Trade Promotion Authority (TPA) and the Trans Pacific Partnership (TPP), as they are currently being discussed, do not do enough to protect workers and the environment at home and abroad “The biggest problem facing our economy is a vanishing middle class. Corporations are incentivized to value customers, shareholders, and executives over their workers resulting in less take home pay and benefits. This is evidenced by the bottom 90 percent of Americans owning just 23 percent of total U.S. wealth. TPA and TPP are far from the only or even largest contributors, but they provide the wrong incentives allowing corporations to grow and benefit from undervaluing workers both here and abroad. . . .

“I often hear an argument in support of TPA and TPP that if we don’t set the rules in Asia and the Pacific, China will do so. Although clearly better than China’s, our record is not stellar either. . . .

“Currency manipulation is another problem that remains unaddressed. . . .

“These concerns aside, I would be more inclined to support a trade deal if I believed that American and global corporate culture was committed to paying workers fairly and ensuring their safety in the workplace. However, skyrocketing executive pay and huge stock buybacks at the expense of worker compensation convince me that there is an insufficient commitment to preserving the middle class. . . .

“Trade agreements should create sound incentives and reinforce business cultures that value workers, as they have the ability to help spread these practices worldwide. We must do more to support the companies in the 9th District and around the country that are doing so already.

Unfortunately, Wall Street and trade deals too often reward these companies’ competitors that improve their bottom line by shortchanging their employees–many of whom are not being adequately compensated for their work.

In voting against TPA, it is my hope the Administration will take a step back and better engage on strengthening compliance with worker and environmental protections through trade agreements. . . .

In the attached statement, Congressman Denny Heck announces decision on trade promotion authority _ Con, Congressman Denny Heck sets forth his argument opposing TPA:

Trade is a vital part of Washington’s economy. There is no doubt about that. Trade does not, however, exist in a vacuum, and for any agreement to be successful, we need to think bigger picture. Investing in our infrastructure, implementing comprehensive immigration reform, and reauthorizing the Export-Import Bank are some of the priorities that are being ignored during this debate. If we want to build an economy ready to compete with the rest of the world, we need to broaden this trade effort to include a commitment to actions that will bolster our economy back home.

“Accordingly, and after a great amount of input from constituents in the 10th District, I will vote no on trade promotion authority, known as fast track. I am open to trade legislation that enhances our ability to better compete in a global economy, but this approach is piecemeal and does not do enough to advance the interests and potential of the hard-working Americans I represent. We can do better.

FORMER DEMOCRATIC CONGRESSMAN DON BONKER’S ARTICLE ON THE TRADE DEBACLE IN THE HOUSE

On June 16, 2015, former Democratic Congressman Don Bonker described the initial trade defeat for President Obama on the TPA Bill in the House of Representatives in the China Daily:

Trade deal defeat, a form of Protectionism

By Don Bonker (China Daily)Updated: 2015-06-16 05:20

The scene in Washington, DC this week was not unlike a House of Cards episode that typically portrays high drama, political mischief and irony, involving the White House and Capitol Hill. The issue, the Trans-Pacific Partnership (TPP), is key to President Obama’s Asia strategy to strengthen economic relations and provide a shield from China’s growing influence in the region.

But like the House of Cards series, it’s more about politics than the merits of the issue. Here we saw President Obama’s usual adversaries, Republican and business leaders rallying support for his trade deal while his own party and traditional allies were fiercely opposing it.

Signs of this were played out at the annual Congressional baseball game, when the President was greeted by Democrats, chanting “O-ba-ma!, O-ba-ma!” then unexpectedly Republicans responded with “TPA, TPA!” that flipped what was intended to demonstrate unity.

The following day, President Obama met with his chief ally in Congress, Minority Leader Nancy Pelosi, who hinted that she would support the measure only to march onto the House floor and declare that “I will be voting to slow down fast-track,” a fatal setback for the president.

Most TV narratives are complex and full of suspense. Vote on June 12 in the House of Representatives was not a simple up or down vote but a bundling of related issues called TAA, TPA and TPP. One was voted down, a second narrowly passed and no action on the third. The result was a stunning defeat for President Obama, yet House Speaker John Boehner allows it will be taken up again.

Despite all the political rhetoric about saving American jobs or Obama’s weak leadership, what it comes down to is old fashion protectionism.  Protectionism is an attempt to prevent foreign imports from threatening US jobs, often by increasing tariffs and limiting market access in a variety of ways, including anti-dumping and countervailing duties even if they aren’t warranted.

Today the battleground is the Trans-Pacific Partnership (TPP), a trade pact involving 12 countries that has been enduring negotiations for two years. Bilateral and multi-lateral trade pacts have always prompted strong opposition, especially from Democrats given their close ties to labor unions. It is a populist issue that resonates at the grassroot level, therefore a difficult vote for most Congressmen.

As former US Trade Representative, Robert Zoellick, who presided over five bilateral trade agreements, once noted, these “trade agreements are more about politics than economics”. While his successors may put in a star performance as Chief Negotiators, they can only initial the final document since the US Constitution makes clear that Congress “regulates interstate and foreign commerce” and has the final say.

What gets lost in the debate is the greater significance of the issue, which is America’s leadership in today’s global economy. The Obama Administration earlier portrayed the TPP as a geopolitical strategy that would give the US a stronger presence in Asia and provide a protective shield for Asian countries feeling threatened by China’s enormous growth and influence in the region. Now this initiative and America’s leadership in achieving these goals, plus the mutual benefits that come with trade deals, are at risk not because of China or the lack of effective negotiations but the political forces in play on Capitol Hill.

America is also being challenged by China in today’s global economy. If Congress disapproves either the fast-track legislation or TPP, guess who will step in and become the mighty economic power in Southeast Asia? Another sign of America’s declining influence as it becomes preoccupied with the escalating conflicts and chaos in the Middle East.

Protectionism has consequences. In the 1928 presidential election, Herbert Hoover campaigned on advocating higher tariffs that set the stage for an eager Republican Congress to indulge as never before, triggering an unbridled frenzy of log-rolling — jockeying for maximum protection of commodity and industry producers leading to enactment of the Smoot-Hawley Tariff Act that hiked import fees up to 100 percent on over twenty thousand imported products.

After President Hoover signed the monumental tariff bill, within months America’s leading trade partners – Canada, France, Mexico, Italy, in all 26 countries – retaliated causing the world trade to plummet by more than half of the pre-1929 totals, one of several factors that precipitated the Great Depression.

Today the call for protectionism is not coming from the Chamber of Commerce and business advocates but the nation’s most powerful union leaders. The Democrats, abandoning their own president, are running for cover, fearful of losing support of union leaders who have made it clear that any Congressman who dares to vote for fast track (Trade Promotion Authority) legislation that “we will cut the spigot off on future donations to your campaign”.

As in any House of Cards program, the drama continues with no certainty about the outcome. Yet failure to approve the Trans-Pacific Partnerships puts in jeopardy the next trade agreement (Transatlantic Trade & Investment Partnership) and the upcoming US-China Bilateral Investment Treaty, as well as undermining America’s leadership internationally.

The author is former US congressman and chaired House Foreign Affairs Subcommittee on International Economy.

AUSTRALIA FTA WITH CHINA

On June 17, 2015, Australia and China signed a free trade agreement.  See https://www.austrade.gov.au/Export/Free-Trade-Agreements/chafta.  As Paul Ryan stated in the House, if the United States does not lead on trade, China will.

TRADE

SED TALKS

On June 23, 2015, the attached remarks, BIDEN REMARKS SED, were made by Vice President  Joe Biden and Vice Premier Liu Yandong in the U.S.-China Strategic & Economic Dialogue  in Washington DC.  

Vice President Joe Biden stated in part:

And there’s an urgent need to agree on a rule-based system for rapidly evolving areas ranging from cyber space to outer space – a new set of rules. Together, collaboratively, we have an obligation –China and the United States – to shape these rules. And let me be clear: The United States believes strongly that whenever possible, China needs to be at the table as these new rules are written.  Responsible competition, adhering to these common rules – both old and new – in my view will be the essential ingredient necessary to manage areas of disagreement, and to build the long-term sustainable U.S.-China relationship.

As President Xi has said, “There’s competition in cooperation.” Yet such competition is healthy, based on mutual learning and mutual reinforcement. It’s a fundamental sense. It is conducive to our common development.  . . .

Responsible competitors help to sustain the system where research and development are rewarded, where intellectual property is protected, and the rule of law is upheld, because nations that use cyber technology as an economic weapon or profits from the theft of intellectual property are sacrificing tomorrow’s gains for short-term gains today. They diminish the innovative drive and determination of their own people when they do not reward and protect intellectual property. . . .

And let me be crystal clear . . .: We do not fear China’s rise. We want to see China rise, to continue to rise in a responsible way that will benefit you most, China, because you have an important role to play. A rising China can be a significant asset for the region and the world, and selfishly, for the United States.

China, like all nations in Asia, benefits from stability and prosperity – a stability and prosperity that, quite frankly, has been maintained over – since the end of the World War II by the United States of America for 60 years. We’re going to continue to play a role for decades to come, but don’t misunderstand it: We are a Pacific nation. 7,632 miles of our shoreline breaks on the Pacific Ocean.

We are a Pacific nation. What happens anywhere in the Pacific affects the United States as much as – more than any other portion of the world. And now we are a Pacific power, and we’re going to continue to remain a Pacific power. To respond to the changing world, the Administration has set in motion an institutionalized rebalance policy of the Asian Pacific region, not to contain but to expand all of our opportunities.

We believe this is important because the Pacific and every nation along its shore from Chile to China will form the economic engine that drives the economies of the 21st century. That’s where the action will be. As part of that rebalanced strategy, we’ve strengthened and modernized our alliances and our partnerships throughout the region. As part of that strategy, we have deepened our support for important regional institutions like ASEAN, and we’re continuing to work on the Trans-Pacific Partnership, which I predict we will succeed in getting done – the most progressive trade agreement in American history, and history, period. It boosts economic growth at home and abroad.

And as part of that strategy, we’re working to build more constructive and productive ties with China. But we all know this relationship is complicated and consequential, to say the least. And we all know, like a good marriage, it requires an awful lot of hard, hard work, an awful lot of attention.  . . .

There will be intense competition. We will have intense disagreements. That’s the nature of international relations. But there are important issues where we don’t see eye to eye, but it doesn’t mean we should stop working hand in hand because we don’t see eye to eye.  . . . I believe that all politics, especially international politics, is personal. It’s all personal. And – because only by building a personal relationship – that’s the only vehicle by which you can build trust.

VICE PREMIER LIU: . . .

President Xi Jinping takes this S&ED and CPE very close to his heart . . . . He believes that the new model of major country relations featuring mutual benefits, win-win cooperation, non- confrontation is the priority of China’s foreign policy. Facing complicated and volatile international situation, China and the United States should work together. They can work together in a wide range of areas. The two sides should keep the bilateral ties on the right track. As long as our two countries adopt an overall perspective, respect and accommodate each other’s core interests and be committed to a constructive approach to reduce misunderstanding and miscalculations, we can manage our differences and maintain our common interests. . . .

VICE PREMIER WANG:

Today more than 10,000 Chinese and Americans travel across the Pacific every day, and the number keeps growing at a double-digit rate. Two-way trade has exceeded U.S. $550 billion, and China has become one of the fastest-growing export markets for the United States. U.S. exports to China have helped to create nearly 1 million jobs in the U.S. Accumulated mutual investment topped U.S. $120 billion. And Chinese businesses have so far made investment in 44 states of America, with total investment reaching U.S. $46 billion and creating 80,000 jobs for America, and the numbers are still growing. . . .

Some people believe that the Thucydides trap between major countries is insurmountable. Some even want China and the United States to confront each other. In any case, decision-makers of both countries must always remember that confrontation is a negative sum game in which both sides will pay heavy prices and the world will suffer too.

Talking to each other does not create win-win all the time, but both sides will lose in a case of confrontation. Our dialogue mechanism may not be perfect, but it is an indispensable platform for the two countries to increase mutual trust, deepen cooperation, and manage differences.

History teaches us that China and the United States must not follow the old path of confrontation and conflict between major countries. Building a new model of major country relations is an effort to explore a new path towards peaceful coexistence. This path may not be smooth and the journey could be bumpy, but as a great Chinese writer said: “Originally there is no path – but as people walk down the same track and again, a path appears.” I’m convinced that we are on the right track.

INTERNATIONAL MONETARY FUND (“IMF”)— THE CHINESE YUAN IS NOT UNDERVALUED

On May 26, 2015, in the attached report, IMF CHINA CURRENCY NOT UNDERVALUED, the International Monetary Fund (“IMF”) determined that China’s currency is no longer unvalued.  The IMF specifically stated:

“On the external side, China has made good progress in recent years in reducing the very large current account surplus and accumulation of foreign exchange reserves.

Nevertheless, staff projections for 2015 suggest that China’s external position is still moderately stronger than consistent with medium term fundamentals and desirable policies. There are several factors influencing a country’s external position, with the exchange rate being one of them. While undervaluation of the Renminbi was a major factor causing the large imbalances in the past, our assessment now is that the substantial real effective  appreciation over the past year has brought the exchange rate to a level that is no longer undervalued. However, the still too strong external position highlights the need for other policy reforms—which are indeed part of the authorities’ agenda—to reduce excess savings and achieve sustained external balance. This will also require that, going forward, the exchange rate adjusts with changes in fundamentals and, for example, appreciates in line with faster productivity growth in China (relative to its trading partners).

On the exchange rate system, we urge the authorities to make rapid progress toward greater exchange rate flexibility, a key requirement for a large economy like China’s that strives for market based pricing and is integrating rapidly in global financial markets.  Greater flexibility, with intervention limited to avoiding disorderly market conditions or excessive volatility, will also be key to prevent the exchange rate from moving away from equilibrium in the future. We believe that China should aim to achieve an effectively floating exchange rate within 2–3 years.

On June 10, 2015, Senators Charles Schumer (D-NY) and Lindsey Graham (R-SC) urged the IMF to not recognize the Chinese yuan as a global reserve currency.  They argued that the fact that Chinese hackers had gained access to the personal records of at least 4 million U.S. government workers, and months earlier that hackers in China had broken into the computer systems of two U.S. healthcare giants are:

just the latest in a litany of egregious actions, or inactions, that reflect the government’s lack of an ability to participate in an honest and transparent manner on the global stage. This behavior cannot be rewarded by the international community, but more importantly, the Chinese government cannot be trusted to uphold international market standards without demonstrated evidence of a commitment to reform.”

In addition to the cyber attacks, Schumer and Graham claim that Beijing continues to undervalue its currency and lacks the necessary regulatory protections that are necessary to:

ensure the security of global financial markets.  While we support China’s efforts to modernize its currency and agree that its efforts to be eligible for the SDR basket are in line with financial liberalization standards that prevent currency manipulation, we do not believe that China’s efforts have been substantial enough, nor do we believe that their commitment has been demonstrated in a way that can be counted on consistently, especially when market pressure for the yuan to be strengthened increases.

SOLAR CELLS—EC AGREEMENT GOES DOWN FOR THREE COMPANIES, COMMERCE ISSUED FINAL SOLAR CELLS AD AND CVD REVIEW DETERMINATIONS AND CANADA FINDS INJURY FROM DUMPED/SUBSIDIZED CHINESE SOLAR PANELS

EC ABROGATES AGREEMENT ON SOLAR CELLS FOR THREE CHINESE COMPANIES

On June 4, 2015, in the attached notice, EC WITHDRAWS UNDERTAKING GO TO DUTIES, the European Union (“EU”) announced that it was cancelling its agreement with China in the Solar Cells antidumping and countervailing duty case with regard to three Chinese exporting producers companies: Canadian Solar, ET Solar, and ReneSola.  In the notice, the EU stated:

COMMISSION IMPLEMENTING REGULATION (EU)  . . . of 4 June 2015 withdrawing the acceptance of the undertaking for three exporting producers under Implementing Decision . . . confirming the acceptance of an undertaking offered in connection with the anti-dumping and anti-subsidy proceedings concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from  . . . China . .  . .

Following the notification of an amended version of the price undertaking by a group of exporting producers (‘the exporting producers’) together with the CCCME, the Commission confirmed . . . (1) the acceptance of the price undertaking as amended (‘the undertaking’) for the period of application of definitive measures. The Annex to this Decision lists the exporting producers for whom the undertaking was accepted, including: (a) CSI Solar Power (China) Inc., Canadian Solar Manufacturing (Changshu) Inc., Canadian Solar Manufacturing (Luoyang) Inc., and CSI Cells Co. Ltd together with their related company in the European Union  . . .(‘Canadian Solar’); (b) ET Solar Industry Limited and ET Energy Co. Ltd together with their related companies in the European Union . . . (‘ET Solar’); and (c) Renesola Zhejiang Ltd and Renesola Jiangsu Ltd  . . .(‘ReneSola’). ….

The findings of breaches of the undertaking and its impracticability established for Canadian Solar, ET Solar, and ReneSola require the withdrawal of the acceptances of the undertaking for those three exporting producers  . . . In addition, the Commission analyzed the implications of actions by Canadian Solar, ET Solar, and ReneSola listed  . . . above on their relationships of trust established with the Commission at the acceptance of the undertaking. The Commission concluded that the combination of these actions harmed the relationship of trust with these three exporting producers. Therefore, this accumulation of breaches also justifies the withdrawal of acceptances of the undertaking for those three exporting producers . . . .

The undertaking stipulates that any breach by an individual exporting producer does not automatically lead to the withdrawal of the acceptance of the undertaking for all exporting producers.  In such a case, the Commission shall assess the impact of that particular breach on the practicability of the undertaking with the effect for all exporting producers and the CCCME.  . . . The Commission has accordingly assessed the impact of the breaches by Canadian Solar, ET Solar, and ReneSola on the practicability of the undertaking with the effect for all exporting producers and the CCCME.  . . . The responsibility for those breaches lies alone with the three exporting producers in question; the monitoring and the verifications have not revealed any systematic breaches by a major number of exporting producers or the CCCME.  . . . The Commission therefore concludes that the overall functioning of the undertaking is not affected and that there are no grounds for withdrawal of the acceptance of the undertaking for all exporting producers and the CCCME.

FINAL SOLAR CELLS REVIEW DETERMINATION BY COMMERCE

On July 7, 2015, in the attached Federal Register notices and decision memos, SOLAR CELLS FINAL DECISION MEMO SOLAR CELLS AD FINAL FED FINAL CVD FED REG SOLAR CELLS C-570-980 Final Results Notice 7-8-15 (3) Final CVD Decision Memo SOLAR CELLS 7-8-15, the Commerce Department issued final Solar Cells AD and CVD Review determinations in the May 25, 2012 to Nov 30, 2013 AD review period and the 2012 CVD Review period.  In the AD review determination, the AD rates ranged from 0.79% to 33.08% with the average separate rate being 9.67% and in the CVD review determination the CVD rates ranging from 15.43 to 23.28% and the non-reviewed companies receiving 20.94%.

CANADA FINDS INJURY IN ITS SOLAR CELLS CASE

ON July 7, 2014, in the attached statement, SOLAR CELLS CANADA, the Canadian International Trade Tribunal announced its final determination that imports of dumped and subsidized Chinese solar energy equipment exports are a threat of injury to Canadian producers.  AD and CVD orders will now be issued in Canada with AD rates ranging from 9.14 percent to 202.5 percent for the nine exporters who responded to its questionnaire and at 286.1 percent for all other Chinese exporters and an estimated subsidy amount of 84.1 percent.

TIRES FINAL DETERMINATION

COMMERCE DEPARTMENT FINAL DETERMINATION AND ITC FINAL THREAT OF MATERIAL INJURY DETERMINATION

On June 12, 2015, in the attached fact sheet, ITA FINAL FACT TIRES, and Federal Register notices, FINAL DOC FED REG CVD TIRES FINAL DOC FED REG AD TIRES, Commerce announced its affirmative final antidumping (AD) and countervailing duty (CVD) determinations regarding imports of certain passenger vehicle and light truck tires from the China.  The AD rates ranged from 14.35 to 87.99% and the CVD rates from 20.73% to 100.77%.

In response to the Commerce Department final determination, on June 17, 2015 in the attached statement, MOFCOM TIRES, the Chinese Ministry of Commerce (“MOFCOM”) stated:

The Head of the Trade Remedy and Investigation Bureau of the Ministry of Commerce said that the Department of Commerce of the United States launched the antidumping and anti-subsidy investigation against Chinese tire products,  adopted a lot of unfair and discriminatory practice during the investigation, especially refused to give Chinese state owned enterprises the separate rates, and deliberately raised the dumping and subsidy tax rates of Chinese products. Chinese government is paying close attention to it.

On July 14, 2015, in the attached announcement, Certain Passenger Vehicle and Light Truck Tires from China Injure U.S. Indus, the US International Trade Commission (“ITC”) reached an affirmative injury determination in a 3-3 tie vote in the Tires case.  The ITC reached a negative critical circumstances decision.  As a result of the ITC decision, antidumping and countervailing duty orders will be issued.

CAFC DISMISSES AN ACTIVATED CARBON APPEAL BECAUSE IMPORTER DID NOT PROTEST IN TIME

On June 26, 2015, in the attached Carbon Activated Carbon v. United States, CAFC ACTIVATED CARBON, the Court of Appeals for the Federal Circuit (“CAFC”) dismissed an antidumping appeal by importer because of failure to file protest in time.

CAFC AFFIRMS ITC INJURY DETERMINATION IN WOODFLOORING CASE

On July 15, 2015, in Swiff-Train Co. v. United States, in the attached decision, the CAFC affirmed the US International Trade Commission’s injury decision in the Wood Flooring from China antidumping and countervailing duty case.

COMMERCE DEPARTMENT FINAL CVD AND AD REVIEW DETERMINATION IN WOOD FLOORING CASE

On July 6, 2015, in the attached final determination, CVD FINAL WOODFLOORING, Commerce announced a CVD rate of only 0.99% in the 2012 Countervailing Duty review investigation on Multilayered Wood Flooring From China.

On July 8, 2015, in the attached final determination, WOODFLOORING AD FED REG, Commerce  announced its final AD rate of 0 to 58.84, with the separate rate companies receiving 13.74% for the administrative review period December 1, 2012 to November 30, 2013.

FIRST STEEL TRADE CASE FILED

As mentioned in prior newsletters, Steel Trade cases are coming, and on June 3, 2015 the first Steel Antidumping and Countervailing Duty case was filed against Corrosion-Resistant (Galvanized) Steel Products from China, India, Italy, Korea and Taiwan.  The details of the filing are set forth below in the ITC Filing notice:

Docket Number DN 3069

Received: Wednesday, June 3, 2015

Commodity: Certain Corrosion-Resistant Steel Products from China, India, Italy, Korea and Taiwan

Investigation Number: 701-TA-534-538 and 731-TA-1274-1278

Filed By: Alan H. Price, Jeffrey D. Gerrish, Robert B. Schagrin, Paul C. Rosenthal and Joseph W. Dorn Firm/Organization: Wiley Rein LLP; Skadden, Arps, Slate, Meagher & Flom LLP; Schagrin Associates; Kelley Drye & Warren LLP and King & Spalding LLP

Behalf Of: United States Steel Corporation, Nucor Corporation, Steel Dynamics Inc., California Steel Industries, ArcelorMittal USA LLC and AK Steel Corporation

Country: China, Korea, India, Italy, and Taiwan

Description: Letter to Lisa R. Barton, Secretary, USITC; requesting the Commission to conduct an investigation under sections 701 and 731 of the Tariff Act of 1930 regarding the imposition of countervailing and anti-dumping duties on Certain Corrosion-Resistant Steel Products from China, India, Italy Korea and Taiwan.

NEW ANTIDUMPING CASE HYDROFLUROCARBONS FROM CHINA

On June 25th, a new antidumping petition was filed against hydrofluorocarbon blends from China.  The alleged antidumping rate is more than 200%.  See ITC Notice below:

Docket Number 3073

Received: Thursday, June 25, 2015

Commodity:  Hydrofluorocarbon Blends

Investigation Number: 731-TA-1279

Filed By: James R. Cannon, Jr.

Firm/Organization: Cassidy Levy Kent (USA) LLP

Behalf Of: The American HFC Coalition

Country: China

Description: Letter to Lisa R. Barton, Secretary, USITC; requesting the Commission to conduct an investigation under section 731 of the Tariff Act of 1930 regarding the Imposition of Antidumping Duties on Imports of Hydrofluorocarbon Blends and Components Thereof from the People’s Republic of China.

JULY ANTIDUMPING ADMINISTRATIVE REVIEWS

On July 1, 2015, Commerce published the attached Federal Register notice, REQUEST REVIEW JULY, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of July. The specific antidumping cases against China are: Carbon Steel Butt-Weld Pipe Fittings, Certain Potassium Phosphate Salts, Certain Steel Grating, Circular Welded Carbon Quality Steel Pipe, Persulfates, and Xanthan Gum.  The specific countervailing duty cases are: Certain Potassium Phosphate Salts, Certain Steel Grating, Circular Welded Carbon Quality Steel Pipe, and Prestressed Concrete Steel Wire Strand.

For those US import companies that imported Carbon Steel Butt-Weld Pipe Fittings, Potassium Phosphate Salts, Steel Grating, Circular Welded Carbon Quality Steel Pipe, Persulfates, and Xanthan Gum and the other products listed above from China during the antidumping period July 1, 2014-June 30, 2015 or during the countervailing duty review period of 2014 or if this is the First Review Investigation, for imports imported after the Commerce Department preliminary determinations in the initial investigation, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in Antidumping and Countervailing Duty cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the antidumping and countervailing duty case is over because the initial investigation is over.  Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.  In the Shrimp from China antidumping case, for example, almost 100 Chinese exporters were denied a separate antidumping rate.

TRANSFORMATIVE POWER OF TRADE ADJUSTMENT ASSISTANCE (“TAA”) FOR COMPANIES

A major part of the battle for Trade Promotion Authority (“TPA”) and the Trans Pacific Partnership (TPP) was the merits of Trade Adjustment Assistance (“TAA”). Many Republican Senators and Representatives oppose TAA. On the Senate Floor, Senate Finance Committee (“SFC”) Chairman Orrin Hatch stated that he was “generally opposed” to TAA, but realized that his Democratic colleagues, led by SFC Ranking member Senator Ron Wyden, needed TAA to support TPA.

In the House, however, many Republican Representatives opposed TAA because they see TAA as an entitlement. But in talking to Republican staff in the House, it soon becomes apparent that many Representatives do not understand that there are two TAA programs. The first TAA program is TAA for Workers (“TAAW”), which is a $450 million job retraining program for workers that have been displaced by international trade. That is the program, Democratic Senators and Representatives need to support, to help the Unions, their constituents.

The second TAA program, however, is TAA for Companies (also called TAA for Firms or TAAF).  In the Bill signed by the President into law  TAA for Companies is set at only $15 million.  TAA for Companies targets small and medium size business (SMEs) and helps them adjust to import competition. The irony is that SMEs are the Republican sweet spot. These companies are Republican constituents.

What are the Republican arguments against TAA for Companies? The first argument is that the program does not work. To the contrary, the Northwest Trade Adjustment Assistance Center (“NWTAAC”), which I have been working with, has an 80% survival rate since 1984. In other words, NWTAAC has saved 80% of the companies that got into the program since 1984..

The transformative power of TAA for Companies is illustrated by this video from the Mid-Atlantic TAA Center with statements from four small business owners on how TAA For Companies has saved their business– http://mataac.org/media. See also the video at https://www.youtube.com/watch?v=tCef23LqDVs&feature=youtu.be&a.  In that video, the director of MATAAC directly asks whether US companies are ready to give up on international trade victimhood.

If you save the company, you save the jobs that go with the company and all the tax revenue paid into the Federal, State and Local governments. This is the Transformative Power of TAA for Companies. TAA for Companies does not cost the government money. It makes money for the government.

In fact, I truly believe that President Ronald Reagan himself endorsed the TAA for Companies program. Why? Jim Munn. I started working with NWTAAC because Ronald Reagan himself asked Jim Munn to look into the program in the early 80’s. Who was Jim Munn? He was a Republican organizer, a criminal lawyer in Seattle who won every case that he handled, and yes a personal friend of Ronald Reagan.

What did Jim Munn find out when he investigated the program? Lo and behold the program works. Companies are saved, and Jim Munn stayed around as the NWTAAC board chairman for 22 years.

TAA for Companies will be a very important program that Congress can use to help their constituent businesses that will be hurt in the future by trade agreements. The Trans Pacific Partnership will create many winners, such as agriculture, but losers too, and those losing companies will need help adjusting to the trade tsunami of imports created by the TPP.

The other Republican argument against TAAF is that this program is another Solyndra and picks winners and losers. Nothing could be further from the truth. First, TAA for Companies does not provide money directly to companies. TAA provides matching funds to consultants to work with companies to help them create and implement strategic plans to compete effectively in a trade intensive environment.

Second, there is no picking winners and losers. Companies have to meet certain statutory criteria (including a decline in business). Company plans are then vetted by business experts at regional TAAF centers, which helps create a business recovery or adjustment plan. TAAF then provides a matching fund for outside expertise to help implement that adjustment plan. When companies are helped at the local level with an adjustment plan created specifically for that company, even companies facing severe import competition can survive and can prosper.

The only limitation on TAA for Companies is the low level of financial support in the Congress. Many companies wait for long periods of time to get into the program because there simply is no funding. In five states in the Pacific Northwest, for example, only about 10 companies begin the program each year, which is only a small fraction of the companies facing strong import competition.

Another argument made by Senator Hatch’s Legislative staff is that TAAF is duplicative of other Federal business programs. That again is not true. Helping companies that have been injured by imports is an entirely different objective from other business programs.

In the first place, Trade injured companies must change their business significantly to adapt to the new intensive trade environment in order to survive and grow. While there are other programs that offer business planning help, such as SBDC, they generally focus on very small business (often retail or services). TAAF specializes in helping larger trade injured companies, often manufacturers (as well as agricultural and some services companies).

Whereas other programs offer a fixed set of services or specific solutions (e.g. manufacturing technology or lean practices), a one size fits all, from a narrow pool of consultants, TAAF offers a highly flexible solution linking a consultant to a company to solve its specific import problem. Often the consultant hired by TAAF is one that the company already knows but simply does not have the resources to hire.

Today’s SMEs are lean operations, which rely on a network of project based specialists to keep them competitive. TAAF’s strength is the flexibility of linking a specific service provider with a specific skill, matched to the individual needs of the company facing immediate threat from import competition. TAAF does not compete with the private consulting industry, but facilitates access to it. This is the power of the market working to cure the disease and is perfectly in line with Republican principles.

The Transformative Power of TAA for Companies is illustrated by companies in Senator Hatch’s Utah saved by the program. Today there are 19 Utah companies active in TAAF, including a medical device, a precision metals, a furniture and an aluminum extrusions manufacturer. Because of TAAF, these 19 companies with a total of more $2 billion in sales have retained 1000s of high paid manufacturing jobs and added 1000s more jobs. Total cost to the US tax payer for these 19 companies – $1.2 million over a five year period. But saving those 19 companies and the jobs associated with them has resulted in substantial tax revenue at the Federal, state and local level. What TAAF has done in Utah, it has also done throughout the United States.

In addition to TAA for Companies, there are a number of other amendments to the trade laws going through the US Congress with TPA, including changes to the US antidumping law to make it easier to bring trade cases. As stated in past newsletters and as Ronald Reagan predicted in the attached 1986 speech, the problem with antidumping and countervailing duty cases is that they do not work. The Steel Industry has had protection from steel imports under US antidumping and countervailing duty laws for 40 years. Have the cases worked? Is the US Steel Industry prospering today?

All US antidumping and other trade cases can do is slow the decline in an industry. The only program that cures the disease is the TAA for Companies program and with the trade tsunami created by the TPP, this program will be needed to teach companies how to swim in the new competitive environment. That is why this program should be supported by both Republicans and Democrats in the upcoming votes in Congress. TAAF is better targeted and more effective than any other trade remedy available today.

IMPORT ALLIANCE FOR AMERICA

This is also why the Import Alliance for America is so important for US importers, US end user companies and also Chinese companies.  The real targets of antidumping and countervailing duty laws are not Chinese companies.  The real targets are US companies, which import products into the United States from China.

As mentioned in prior newsletters, we are working with APCO, a well-known lobbying/government relations firm in Washington DC, on establishing a US importers/end users lobbying coalition to lobby against the expansion of US China Trade War and the antidumping and countervailing duty laws against China for the benefit of US companies.

On September 18, 2013, ten US Importers agreed to form the Import Alliance for America.  The objective of the Coalition will be to educate the US Congress and Administration on the damaging effects of the US China trade war, especially US antidumping and countervailing duty laws, on US importers and US downstream industries.

See the Import Alliance website at http://www.importallianceforamerica.com.

We will be targeting two major issues—working for market economy treatment for China in 2016 as provided in the US China WTO Agreement for the benefit of importers and working against retroactive liability for US importers.  The United States is the only country that has retroactive liability for its importers in antidumping and countervailing duty cases.

We are now in the process of trying to gather importers to meet with various Congressional trade staff as soon as possible to discuss these issues.  If you are interested, please contact the Import Alliance through its website or myself directly.

RUSSIA—US SANCTIONS AS A RESULT OF UKRAINE CRISIS

On May 21, 2015, the Commerce Department filed changes to the export rules to allow unlicensed delivery of Internet technology to Crimea region of Ukraine, saying the change will allow the Crimean people to reclaim the narrative of daily life from their Russian occupants. Under a final rule, which will be attached to my blog, www.uschinatradewar.com, individuals and companies may deliver source code and technology for “instant messaging, chat and email, social networking” and other programs to the region without first retaining a license from the federal government, according to Commerce’s Bureau of Industry and Security.

Commerce stated:

“Facilitating such Internet-based communication with the people located in the Crimea region of Ukraine is in the United States’ national security and foreign policy interests because it helps the people of the Crimea region of Ukraine communicate with the outside world.”

On September 3, 2014, I spoke in Vancouver Canada on the US Sanctions against Russia, which are substantial, at an event sponsored by Deloitte Tax Law and the Canadian, Eurasian and Russian Business Association (“CERBA”). Attached to my blog are copies of the PowerPoint or the speech and a description of our Russian/Ukrainian/Latvian Trade Practice for US importers and exporters. In addition, the blog describes the various sanctions in effect against Russia.

Pursuant to the OFAC regulations, U.S. persons are prohibited from conducting transactions, dealings, or business with Specially Designated Nationals and Blocked Persons (SDNs). The blocked persons list can be found at http://sdnsearch.ofac.treas.gov/. See also: www.treasury.gov/resource-center/sanctions/programs/pages/ukraine.aspx . The list includes the Russian company, United Shipbuilding, and a number of Russian Banks, including Bank Rossiya, SMP Bank, Bank of Moscow, Gazprombank OAO, Russian Agricultural Bank, VEB, and VTB Bank. The “Sectoral Sanctions Identification List” (the “SSI List”) that identifies specific Russian persons and entities covered by these sectoral sanctions can be found at www.treasury.gov/resource-center/sanctions/SDN-List/pages/ssi_list.aspx.

The sanctions will eventually increase more with the Congressional passage of the Ukraine Freedom Support Act, which is attached to my blog, which President Obama signed into law on December 19, 2014.  Although the law provides for additional sanctions if warranted, at the time of the signing, the White House stated:

“At this time, the Administration does not intend to impose sanctions under this law, but the Act gives the Administration additional authorities that could be utilized, if circumstances warranted.”

The law provides additional military and economic assistance to Ukraine. According to the White House, instead of pursuing further sanctions under the law, the administration plans to continue collaborating with its allies to respond to developments in Ukraine and adjust its sanctions based on Russia’s actions. Apparently the Administration wants its sanctions to parallel those of the EU. As President Obama stated:

“We again call on Russia to end its occupation and attempted annexation of Crimea, cease support to separatists in eastern Ukraine, and implement the obligations it signed up to under the Minsk agreements.”

Russia, however responded in defiance with President Putin blasting the sanctions and a December 20th Russian ministry statement spoke of possible retaliation.

One day after signing this bill into law, the President issued an Executive Order “Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to the Crimea Region of Ukraine” (the “Crimea-related Executive Order”). President Obama described the new sanctions in a letter issued by the White House as blocking:

New investments by U.S. persons in the Crimea region of Ukraine

Importation of goods, services, or technology into the United States from the Crimea region of Ukraine

Exportation, re-exportation, sale, or supply of goods, services, or technology from the United States or by a U.S. person to the Crimea region of Ukraine

The facilitation of any such transactions.

The Crimea-related Executive Order also contains a complicated asset-blocking feature. Pursuant to this order, property and interests in property of any person may be blocked if determined by the Secretary of the Treasury, in consultation with the Secretary of State, that the person is operating in Crimea or involved in other activity in Crimea.

The EU has also issued sanctions prohibiting imports of goods originating in Crimea or Sevastopol, and providing financing or financial assistance, as well as insurance and reinsurance related to the import of such goods. In addition, the EU is blocking all foreign investment in Crimea or Sevastopol.

Thus any US, Canadian or EU party involved in commercial dealings with parties in Crimea or Sevastopol must undertake substantial due diligence to make sure that no regulations in the US or EU are being violated.

CUSTOMS

CUSTOMS CRACKS DOWN ON CHINESE HONG KONG SMUGGLING RING

On July 7, 2015, US Customs and Border Protection announced that four persons have been indicted for criminal violations in smuggling thousands of counterfeit Sony Corp. and Apple Inc. products, including iPhones and iPads, into the U.S. from China.  U.S. Immigration and Customs Enforcement stated that Andreina Beccerra of Venezuela, Roberto Volpe of Italy, Jianhua Li of China and Rosario La Marca, also of Italy, stand accused of a nearly five-year conspiracy to smuggle more than 40,000 phony electronic gadgets past U.S. customs officials, with most of the devices marked with false Apple and Sony trademarks. Most of the counterfeit products were made by Hong Kong-based Dream Digitals Technology (HK) Co. Ltd., where Li served as a sales manager.

CUSTOMS AND TRADE ENFORCEMENT BILL

There are significant changes to Customs law in the Customs and Trade Enforcement Bill, formerly The Trade Facilitation and Trade Enforcement Act of 2015 (“TFTEA”),  which passed the Senate on May 11, 2015 and the House and have now gone to Conference Committee to smooth out differences between the Senate and House bills.  Some of those provisions include tough enforcement provisions for evasion of US antidumping and countervailing duty laws.

US CHINA TRADE WAR–DEVELOPMENTS TRADE, CUSTOMS, PATENTS, US/CHINA ANTITRUST AND SECURITIES

Suzhou Garden of the Humble Administrator ChinaNovember 29, 2013

ANNOUNCEMENT

On December 3, 2013, former Congressman Don Bonker of APCO and I will be speaking in Vancouver, Canada at a breakfast conference held by the American Chamber of Commerce on “The Trans-Pacific Partnership Demystified: A Discussion of Trade Opportunities for American and Canadian Businesses”.

Attached is a copy of the Speech announcement. Hope to see some of you in Vancouver, Canada.  AMCHAM – Dec 3 TPP Event – INVITE (2)

“TRADE IS A TWO WAY STREET”

NEWSLETTER

Dear Friends,

There have been some major developments in the trade, Customs fraud, patents, US/Chinese antitrust, and securities areas.

I have just returned from a trip of more than 2 weeks in China.  While in China, we discussed US and Chinese antidumping and antitrust cases and other US Litigation against Chinese companies along with the US Importers Lobbying Coalition.  In addition, we circulated the attached PowerPoint description in English and Chinese of Dorsey’s Trade and Litigation Team.  FINAL CHINA TRADE LITIGATION POWERPOINT NOV 2013 Final CHINESE China Trade Litigation PowerPoint Nov 2013

TRADE

SOLAR CELLS ANTIDUMPING AND COUNTERVAILNG DUTY CASE—SETTLEMENT AND THIRD COUNTRY CELLS LOOPHOLE

Apparently, negotiations between the US and China in the Solar Cells case have slowed down because there have been no further developments that have been announced publicly.

Meanwhile, however, the U.S. Department of Commerce and Customs are continuing to press Chinese exporters and US importers of solar panels to demonstrate that their imports of Chinese modules and panels fall outside of existing antidumping (AD) and countervailing duty (CVD) orders by proving that they contain solar cells in the Chinese panels and modules that are produced in third countries.

Solar cells produced in countries, such as Taiwan and Malaysia, fall outside the scope of the trade remedy orders imposed by Commerce, even if they are assembled into modules and panels and shipped by companies in China. Many Chinese companies – even those that manufacture cells – have thus begun incorporating cells made in third countries in order to make sure those products shipped to the U.S. are not affected.

As mentioned in my last post, the Commerce Department continues to investigate, but has not launched a formal circumvention inquiry yet.  In addition to Commerce, Customs is requiring similar documents to prove that the solar cells were actually produced outside of China.  On November 16, 2013, USTR Michael Froman said that a close partnership between USTR and U.S. Customs and Border Protection (“CBP”) was the key to enforcing trade duty orders against Chinese solar panels.

After touring the Los Angeles port the USTR said in a statement that the U.S. takes a “whole-of-government” approach to trade enforcement. As one example, the USTR explained that his office and Customs had partnered to protect the U.S. solar industry by challenging unfair trade practices on the part of China through disputes at the World Trade Organization and enforcement of U.S. trade remedy laws.

“When it comes to solar, the Obama administration is enforcing U.S. trade remedy laws and U.S. rights under WTO agreements,” Froman said. “At the same time, [Customs] is stepping up reviews of imports of solar panels from China to determine whether they are improperly evading payment of antidumping and countervailing duties.”

USTR also pointed to the coming WTO multilateral negotiations in Bali on trade facilitation measures, which would  streamline customs procedures, and is “poised to close” the proposed Trans-Pacific Partnership with 11 other Pacific Rim countries.

Unfortunately, the November 27, 2013 reports are that the WTO multilateral negotiations in Bali have broken down, in part over the Trade Facilitation report, which means the Trans Pacific Partnership and other negotiations will become even more important.

ATTACK ON SUNTECH

On November 6, 2013, Solar World launched an attack in the Solar Cells case arguing that Commerce should raise Suntech’s antidumping cash deposit rate from 29.14 to 250% because it is now owned by a new company.  SOLAR SHUNFENG  In the attached submission, Solar World argues:

“On behalf of SolarWorld Industries America Inc. (“SolarWorld”), Petitioner in the above-captioned investigations, we respectfully request the U.S. Department of Commerce (“the Department”) to instruct U.S. Customs and Border Protection (“CBP”) to assess antidumping and countervailing duties on all entries of crystalline silicon photovoltaic cells, whether or not assembled into modules (“solar cells and modules”), imported into the United States by Shunfeng Photovoltaic International Ltd. (“Shunfeng”) or related entities at the PRC-wide rate of 249.96 percent and the All Others rate of 15.24 percent. . . .”

“Publicly available information now indicates that Suntech has ceased to exist as an independent entity and is thus no longer entitled to these separate rates. In March of this year, Suntech was forced into bankruptcy proceedings after defaulting on U.S. bond payments.  This month, Shunfeng, a mid-size solar manufacturer in China, announced that it won a bid to purchase the main unit of Suntech’s assets, i.e., Wuxi Suntech Power Co.  Reports indicate that Shunfeng has paid a deposit of CNY500 million ($82 million) to acquire Suntech, and is expected to pay an additional CNY2.5 billion (or $410 million).”

“In light of this acquisition, solar cells and modules produced by the former Suntech entity will now be imported into the United States by Shunfeng. While Shunfeng participated in the original investigation, it did not submit an application for a separate rate. Antidumping duties on imports of Chinese solar cells and modules from Shunfeng, therefore, are assessed at the PRC-wide rate of 249.96 percent, while countervailing duties are assessed at the All Others rate of 15.24 percent.”

“Given the recent asset acquisition, the PRC-wide and All Others rates now also apply to solar cells and modules manufactured by the former Suntech entity and imported by Shunfeng. Shunfeng is not entitled to Suntech’s separate rates absent a request for a changed circumstances review, a full investigation, and a final determination by the Department.  Indeed, based on publicly available information about the nature and structure of the transaction, in particular that Suntech’s assets were purchased out of bankruptcy, it is unlikely that Shunfeng would be entitled to Suntech’s separate rates.”

HARDWOOD PLYWOOD—NEGATIVE ITC INJURY DETERMINATION

On November 5, 2013, in a very surprising decision, the US International Trade Commission (“ITC”) reached a negative, no injury, no threat of material injury determination in the antidumping and countervailing duty case on hardwood plywood from China.  All five voting Commissioners reached a negative determination.

In its opinion, the Commission found that although subject import volume increased from 2010 to 2012, it did so solely at the expense of nonsubject imports and that there was no “significant correlation between subject import prices and the domestic industry’s prices or shipment volumes. Prices for the subject imports trended upward throughout the period of investigation for all six of the products.”

The ITC also determined that “the underselling did not cause a shift in volume from the domestic like product to the subject imports. To the contrary, for most of the pricing products, quarterly shipments of domestically produced hardwood plywood were greater in 2012 when total subject import volume was at its peak, than in 2010.  We also note that despite the prevalent underselling over the period of investigation, the domestic industry did not lose market share.  Rather, as discussed above, the domestic industry’s share of apparent U.S. consumption increased steadily throughout the period of investigation while lower‐priced subject imports also gained market share.  To the extent that subject imports gained market share, they did so at the expense of nonsubject imports and without depressing domestic prices. . . .”

“Most of the industry’s trade and employment indicators improved during the period of investigation, including in interim 2013 as the industry continued to recover from the recession. The domestic industry’s U.S. shipments increased steadily from 2010 to 2012 and were higher in interim 2013 than in interim 2012.”

Two factors that may have had an indirect impact on the case were the Commerce decision and the impact on downstream industries.

As mentioned in the last newsletter and blog, the Commerce Department used Bulgaria as the surrogate country to find dumping by Chinese hardwood plywood companies.

In addition, as indicated in past newsletters and blog posts, US downstream producers of kitchen cabinets, doors and windows have been very vocal in their opposition to these cases because of the very damaging effect any antidumping and countervailing duty orders on Chinese hardwood plywood could have on US downstream industries.

Although the ITC cannot take these two factors into direct account in their determination because they are not statutory factors to be considered, they could have an indirect effect and may have made certain ITC Commissioners more predisposed to reach a negative injury determination if there was a way to do so.

WOOD FLOORING — COMMERCE DEPARTMENT ANTIDUMPING REVIEW INVESTIGATION

Meanwhile, the Commerce Department has issued a preliminary determination in the first antidumping review investigation in the Wood Flooring from China case raising the antidumping rate slightly from 3.88% to 4.77%.  See the attached preliminary determination.  Wood_Flooring_AD Prelim_FR_signed_pub[2]

This decision will not have any actual impact on the US market, however, because it is only Commerce Department final determinations in review investigations that set new cash deposit and assessment rates for imports of wood flooring from China.

COMMERCE NEW SAMPLING METHODOLOGY

On November 4, 2013, the Commerce Department issued the attached Federal Register notice announcing that it was changing its respondent selection methodology in antidumping review investigations to include sampling. SAMPLYING NME METHODOLOGY COMMERCE  As it stands now, in choosing the “mandatory” respondents in antidumping review investigations, Commerce generally creates a list of the Chinese exporters during the relevant review period and picks the two or three largest exporters of the products under investigation during that period.

As mandatory respondents in antidumping review investigations, Chinese export companies must respond to the entire 100 page Commerce Department questionnaire and numerous supplemental questionnaires and be subject to Commerce Department verifications.   Because of the substantial added work, mandatory respondent companies can often pay more than $100,000 in legal fees.  Such high legal fees can cause smaller Chinese export companies simply to give up, which, in turn, can create enormous liability for US importers because of retroactive liability.

As the Department states in the attached Federal Register notice:

“As explained in the Proposed Methodology, when the number of producers/exporters (“companies”) involved in an AD investigation or review is so large that the Department finds it impracticable to examine each company individually, the Department has the statutory authority to limit its examination to: (1) A sample of exporters, producers, or types of products that is statistically valid  based on the information available to the administering authority at the time of selection, or (2) exporters and producers accounting for the largest volume of subject merchandise from the exporting country that can reasonably be examined.  The Department has, to date, generally used the second option in proceedings in which limited examination has been necessary. One consequence of this is that companies under investigation or review with relatively small import volumes have effectively been excluded from individual examination.”

“Over time, this creates a potential enforcement concern in AD administrative reviews because, as exporters accounting for smaller volumes of subject merchandise become aware that they are effectively excluded from individual examination by the Department’s respondent selection methodology, they may decide to lower their prices as they recognize that their pricing behavior will not affect the AD rates assigned to them.  Sampling such companies under section 777A(c)(2)(A) of the Tariff Act of 1930, as amended (the “Act”), is one way to address this enforcement concern. . . .”

“The statute requires that the sample be “statistically valid.”  The Department has interpreted this as referring to the manner in which the Department selects respondents.  Therefore, to ensure the statistical validity of samples, in the Proposed Methodology, the Department proposed employing a sampling technique that: (1) is random; (2) is stratified; and (3) uses probability-proportional-to-size (“PPS”) samples. Random selection ensures that every company has a chance of being selected as a respondent and captures potential variability across the population.  Stratification by import volume ensures the participation of companies with different ranges of import volumes in the review, which is key to addressing the enforcement concern identified above. Finally, PPS samples ensure that the probability of a company being chosen as a respondent is proportional to its share of imports in the respective stratum.”

“In general, the Department will normally rely on sampling for respondent selection purposes in AD administrative reviews when the following conditions are met: (1) There is a request by an interested  party for the use of sampling to select respondents; (2) the Department has the resources to examine individually at least three companies for the segment; (3) the largest three companies (or more if the Department intends to select more than three respondents) by import volume of the subject merchandise under review account for normally no more than 50 percent of total volume; and (4) information obtained by or provided to the Department provides a reasonable basis to believe or suspect that the average export prices and/or dumping margins for the largest exporters differ from such information that would be associated with the remaining exporters.”

COMMERCE NAME CHANGE—NOW ENFORCEMENT AND COMPLIANCE

On October 22, 2013, the Commerce Department changed the name of the organizational unit assigned to administer and calculate antidumping and countervailing duty rates from “Import Administration” to “Enforcement and Compliance.”  In the attached Federal Register notice, COMMERCE NAME CHANGE Commerce states that “The revision more accurately reflects the breadth of the agency’s activities with respect to the enforcement of, and compliance with U.S. trade laws and agreements.”

IMPORT ALLIANCE FOR AMERICA/IMPORTERS’ LOBBYING COALITION

As mentioned in prior newsletters, we are working with APCO, a well-known lobbying/government relations firm in Washington DC, on establishing a US importers/end users lobbying coalition to lobby against the expansion of the antidumping and countervailing duty laws against China.

On September 18, 2013, ten US Importers agreed to form the Import Alliance for America. The objective of the Coalition will be to educate the US Congress and Administration on the damaging effects of the US China trade war, especially US antidumping and countervailing duty laws, on US importers and US downstream industries.

We will be targeting two major issues—Working for market economy treatment for China in 2016 and working against retroactive liability for US importers. The key point of our arguments is that these changes in the US antidumping and countervailing duty laws are to help US companies, especially US importers and downstream industries. We will also be advocating for a public interest test in antidumping and countervailing duty cases and standing for US end user companies.

We are now contacting many US importers and also Chinese companies to ask them to contact their US import companies to see if they interested in participating in the Alliance.  Changes to the US antidumping and countervailing duty law against China can only happen because of a push by US importers and end user companies.  In US politics, only squeaky wheels get the grease.

CUSTOMS

HONEYGATE GOES ON

On November 15, 2013, the Justice Department announced that a Federal judge in Illinois sentenced Jun Yang, a U.S.-based honey broker, to three years in federal prison for his role in a scheme to evade nearly $38 million in antidumping duties on imports of Chinese honey into the U.S.  In March Jun Yang pled guilty to mislabeling Chinese honey and declaring falsely to Customs that the honey originated from India or Malaysia to avoid the antidumping duties on Chinese honey.  Yang has already paid $2.89 million in penalties to the US government.

According to Gary Hartwig, an agent with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations unit “This is a significant sentence against a perpetrator of one of the largest food fraud schemes uncovered in U.S. history.  Together with our partners at Customs and Border Protection, we will continue to protect American industries from deceptive import practices, while facilitating the lawful flow of goods across our borders that is so critical to the U.S. economy.”

DOJ said that an undercover HSI agent helped uncover the scheme. Court filings show that Yang delivered 778 container loads of honey to processors and distributors that were falsely declared as Malaysian or Indian imports while knowing that all or some of the honey had originated in China.

Yang’s arrest was part of an ongoing government probe of Chinese honey smuggling operations that allegedly evaded a total of $180 million in antidumping duties.

NEW PATENT AND TRADEMARK CASES AGAINST CHINESE COMPANIES, INCLUDING HUAWEI, ZTE, AND OTHER COMPANIES

On October 31, 2013, Rockstar Consortium filed a patent case against Huawei.  ROCKSTAR HUAWEI

On November 7, 2013, Mobile Telecommunications Technologies filed a patent case against ZTE. ZTE CASE

On November 8, 2013, Secure Nova LLC filed a patent case against ZTE. SECURE ZTE CASE

On November 15, 2013, Bendpak filed a trademark, trade secrets, unfair competition case against Qingdao Lianhai Hydraulic Machinery Co. QINGDAOTMK

On November 26, 2013, Long Corner Consumer Electronics filed a patent case against Huawei. LONGCORNER HUAWEI

On November 26, 2013, Crossroads Systems Inc. filed a patent case against Huawei. CROSSROADS HUAWEI

On November 26, 2013, Memory Integrity filed a patent case against Hisense. HISENSE

ANTITRUST

VITAMIN C CASE

The Vitamin C case is wrapping up at the District Court level.

As mentioned in my last post, the October 16, 2013 proposed settlement agreement with China Pharmaceutical Group Ltd. and Weisheng Pharmaceutical Group Co., Ltd. provided for the payment of Plaintiffs’ legal fees of $7.8 million plus $1.5 million in expenses by the Chinese companies.  In other words, the Chinese respondent companies pay the legal fees of the US lawyers bringing the case.

On November 26, 2013, in the attached memorandum order and decision, VITAMIN C JUDGMENT the Federal Court rejected arguments by Hebei Welcome Pharmaceutical Co., Ltd. (“Hebei”) and North China Pharmaceutical Group Corp. (“NCPGC”) that as a matter of law they should not be found guilty under Section 1 of the Sherman Act for price fixing.  The effect of the Court’s decision is to leave in place a judgment of $153 million damages award against the two companies.

The most important part of the decision is the response to Hebei and NCPGC’s arguments that the Act of State, Foreign Sovereign Compulsion, and International Comity doctrines bar the jury’s verdict as a matter of law under the US antitrust law.  As the Court states in the attached decision on pages 1-3:

“First, defendants argue that the jury’s verdict against them is barred as a matter of law by the doctrines of act of state, foreign sovereign compulsion, and international comity.  In essence, defendants contend that the Court’s prior rulings that Chinese law did not compel defendants’ actions were erroneous and that plaintiffs’ claims never should have been brought before a jury.  . . . The Court stands by and reaffirms its prior rulings that Chinese law did not compel defendants to engage in antitrust violations, that the doctrines of act of state and international comity do not bar plaintiffs’ suit, and that it was inappropriate to present evidence about the meaning of Chinese laws to the jury. Nothing has changed from these pretrial rulings and defendants have stated no additional grounds to revisit them.”

“Moreover, defendants ignore that one purpose of the trial in this matter was to determine whether, regardless of what Chinese law authorized, defendants’ conduct was actually compelled by the Chinese government as a matter of a fact. Therefore, the Court instructed the jury that it was required to return a defense verdict if defendants proved, by a preponderance of the evidence, that the Chinese government actually compelled them to fix the price or limit the supply of vitamin C and defendants have not challenged this instruction.”

“There was ample evidence presented at trial from which the jury could have found that the Chinese government did not actually compel defendants’ decisions to fix the price and limit the supply of vitamin C – including evidence suggesting that the “verification and chop” mechanism did not actually compel defendants to enter into anticompetitive agreements and that the Vitamin C Subcommittee of the Chamber of Commerce of Medicines and Health Products Importers and Exporters (the “Chamber”) was a voluntary trade association. Moreover, in rejecting the compulsion defense, the jury necessarily assessed the credibility of witnesses’ testimony and, on a Rule 50(b) motion, the Court may not second-guess those determinations. . . .”

“Nor, despite defendants’ suggestion, was it error for the Court to exclude from the jury copies of Chinese laws and regulations and witness testimony about the meaning and content of those laws. Pursuant to Fed. R. Civ. P. 44.1, the determination of foreign law is a question of law. It is for the Court, not for the jury, to decide questions of law and the Court did so when it ruled that, as a matter of law, Chinese law did not compel defendants’ conduct. Accordingly, defendants’ renewed motion for judgment as a matter of law based on the act of state, foreign sovereign compulsion, and international comity doctrines is denied.”

The Court rejected the arguments of the two Chinese companies and in addition issued an injunction enjoining the Chinese companies from fixing prices in the future.

During my recent trip to China, many Chinese companies and the Chambers of Commerce simply did not realize that US judgments against Chinese companies can be enforced through Chinese bank branches in New York City.  We are presently representing a major Chinese bank in litigation in New York City in which the US lawyer, David Boies, is attempting to get money damages from the Chinese bank in China through its bank branch in New York city.  This same lawyer, David Boies, is a Plaintiff attorney in the Vitamin C case.

The times they are a changing and the Chinese companies should understand that they are now vulnerable to attacks from US litigation.

JAPANESE AUTO PARTS ANTITRUST CASES

On November 26 and 27, 2013, the Justice Department issued two announcements that Toyo Tire and Rubber TOYO GUILTY and Stanley Electric STANLEY ELECTRIC had agreed to plead guilty to price fixing on automobile parts installed in US cars.  Although these Auto Parts antitrust cases are against Japanese and Taiwan companies, they should be of interest to Chinese auto parts and other companies and US importers.

With regards to the plea by Toyo, the Justice Department issued the attached announcement stating:

“Japan-based Toyo Tire & Rubber Co. Ltd. has agreed to plead guilty and to pay a $120 million criminal fine for its role in two separate conspiracies to fix the prices of automotive components involving anti-vibration rubber and driveshaft parts installed in cars sold in the United States and elsewhere, the Department of Justice announced today.”

“According to a two-count felony charge filed today in U.S. District Court for the Northern District of Ohio in Toledo, Toyo engaged in a conspiracy to allocate sales of, to rig bids for, and to fix the prices of automotive antivibration rubber parts it sold to Toyota Motor Corp., Nissan Motor Corp., Fuji Heavy Industries Ltd. – more commonly known by its brand name, Subaru – and certain of their subsidiaries, affiliates and suppliers, in the United States and elsewhere.  . . .”

“In addition, according to the charge, Toyo engaged in a separate conspiracy to allocate sales of, and to fix, raise and maintain the prices of automotive constant-velocity-joint boots it sold to U.S. subsidiaries of GKN plc, a British automotive parts supplier. . . .”

“Today’s charge is the latest step in the Antitrust Division’s effort to hold automobile part suppliers accountable for their illegal and collusive conduct,” said Renata B. Hesse, Deputy Assistant Attorney General for the Department of Justice’s Antitrust Division. “The division continues to vigorously prosecute companies and individuals that seek to maximize their profits through illegal and anticompetitive means.”

“The department said the company and its co-conspirators carried out the conspiracies through meetings and conversations, discussed and agreed upon bids, price quotations and price adjustments, and agreed to allocate among the companies certain sales of the anti-vibration rubber and constant-velocity-joint boots parts sold to automobile and component manufacturers.”

“Including Toyo, 22 companies and 26 executives have been charged in the Justice Department’s ongoing investigation into the automotive parts industry. All 22 companies have either pleaded guilty or have agreed to plead guilty and have agreed to pay more than $1.8 billion in criminal fines. Of the 26 executives, 20 have been sentenced to serve time in U.S. prisons or have entered into plea agreements calling for significant prison sentences. . . .”

“The charges are the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by each of the Antitrust Division’s criminal enforcement sections and the FBI.”

CHINA ANTITRUST CASES

On November 25, 2013, the Wall Street Journal reported that Qualcomm is subject to an antitrust investigation in China and Cisco is facing retaliation because of the actions of the US Congress against Huawei.  The investigation by the NDRC in China is regarding Qualcomm’s patent royalties on chips used for handsets.

Qualcomm’s chief executive acknowledged the investigation and indicated that the investigation is in response to U.S. restrictions on Chinese companies and revelations about surveillance by the National Security Agency.

Qualcomm, however, is the largest maker of processors and communications chips for mobile phone and has a dominant position in the high-speed technology called LTE that Chinese carriers are moving to adopt.

Qualcomm charges for patent royalties to mobile phone makers for use of its chips have resulted in South Korean and Japanese antitrust cases. Qualcomm is appealing adverse rulings in both countries.

In an interview with the Wall Street Journal, Qualcomm Chief Executive Paul Jacobs said the de facto U.S. ban on telecom gear maker Huawei Technologies and revelations about NSA spying were affecting Qualcomm’s business in China.  Executives of Cisco Systems also recently suggested that Chinese customers are cutting purchases of US tech gear because of the reaction to the US ban.

What goes around, comes around.

SECURITIES

COMPLAINTS

A number of new securities complaints cases have been filed against Chinese companies.

On October 29, 2013, Pang filed a class action securities case against NQ Mobile and various Chinese individuals. PANGNQ

On October 30, 2013 Hiller filed a class action securities action against NQ Mobile and various Chinese individuals. HILLER NQ

On November 5, 2013 Gangaramai filed a class action securities action against NQ Mobile and various Chinese individuals. GANGNQMOBILE

On November 14, 2013 Martin filed a class action securities action against NQ Mobile and various Chinese individuals. MARTINNQMOBILE

In talking with insurance brokers in China, it is now clear that the reason that the Chinese individuals are named in Class Action Securities cases is that insurance companies often insure the individuals that are in management or on the Board of Directors, but not the companies themselves

FOREIGN CORRUPT PRACTICES ACT

In November 2013, three Dorsey partners, Tom Gorman, who was formerly with the enforcement division of the US Securities and Exchange Commission, Nick Akerman, Nike Burkill and Aidan Colclough published the attached Anti-Corruption Digest regarding the Foreign Corrupt Practices Act and other UK Legal Actions against bribery. FCPA DIGEST

With regards to China the Dorsey partners state:

“FCPA Compliance in China “

“The US China Business Council (the “USCBC”) has published a report which provides an insight into practices which can assist companies doing business in the higher risk environment of the PRC. The report, entitled Best Practices for Managing Compliance in China, is based on a survey of 30 companies doing business in China, spanning a variety of industry sectors.”

“The survey highlights compliance practices currently being utilized by companies doing business in China. These include:

— Entertainment. One of the key risks faced by companies stems from commercial and government entertainment. 94% of the firms responding in the survey reported using mandatory monetary thresholds or limits on the amount that can be spent on entertainment and gift giving. 44% of those companies use global company wide limits in U.S. dollars while 56% keep the thresholds in local currency. The average threshold for entertainment expenses in China is about $72 per event.

–Gifts. Gift giving is a key issue because it is a customary practice in China. Most companies reported that they discourage gifts. When they are unavoidable, typically firms favor giving gifts of minimal monetary value with corporate logos such as flash drives, calendars, notebooks and small toys directly related to the business of the company. Most companies also maintain a threshold for gifts. The average amount for those in the survey was $57.

–Whistleblowers. Nearly all of the companies in the survey offer hotlines for staff to anonymously report compliance concerns. The most successful are those with multi-lingual support and local call-in numbers.

–Joint ventures. Given the local laws restricting the modes of foreign investment in China, these present one of the most challenging issues. Companies in the survey stated the importance of continually discussing compliance to ensure that it is considered a priority in the partnership. Given that a foreign partner may not always have direct input with regards to the joint venture’s day-to-day operations, the respondents noted that it is vital to ensure that senior leaders at the joint venture company continually reinforce the compliance message.”

If you have any questions about these cases or about the US trade, customs, false claims act, 337, patent, antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

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