APCAC Washington Update - August 2006

Vietnam PNTR: Lawmakers and the Bush administration were hoping for quick Senate passage of a bill that would grant permanent normal trade relations to Vietnam. But despite broad bipartisan support, the measure (S 3495) will not advance until the fall because of a very tight congressional schedule and some concerns over religious freedom in Vietnam. Additionally, Senators Lindsey Graham (R-SC) and Elizabeth Dole (R-NC) have both placed a hold on the PNTR legislation because of concerns about the adverse impact of potential import surges on domestic textile firms. On July 27, the Senate Finance Committee considered the measure but did not report it out of committee because there was not a quorum present. The committee later approved the bill by a vote of 18-0 on July 31. House Ways and Means Chairman Bill Thomas (R-CA) has not made any moves to convene a mark-up of the legislation. Chairman Thomas has indicated a strong preference for considering trade agreements in the order that they are signed, which would mean that the House would have to first consider the U.S. - Peru Trade Promotion Agreement.

State Department Appropriations Bill: Foreign aid programs on the whole would receive 7 percent less than President Bush requested for FY 2007 under a draft spending bill approved June 28 by the Senate Appropriations Committee. The largest single reduction from President Bush’s request is for the Millennium Challenge Account. The program would receive $1.9 billion, about a third less than the president’s $3 billion request. Appropriators have expressed general support for the program but are concerned about the way that it is administered. Given the current focus on domestic priorities, the bill is not likely to come to the Senate floor anytime soon.

Export Import Bank Nominations: On July 26, the Senate confirmed Export Import Bank nominees James Lambright, Linda Conlin and Joe Grandmaison. On July 31, President Bush swore-in James Lambright as the 22nd chairman and president, board member Linda Conlin as first vice president, and J. Joseph Grandmaison, a former board member, as a member of the board. All three terms end on January 20, 2009.

Bolton Nomination: Senate Foreign Relations Chairman Richard Lugar (R-IN) held a new hearing July 27 on the nomination of John R. Bolton, the U.S. ambassador to the United Nations currently serving under a recess appointment that is set to expire at the end of this year. At the hearing, Senator Christopher Dodd (D-CT), a senior member of the Senate Foreign Relations Committee, took the action to delay a vote on Bolton’s nomination until after the August recess. Last year, Senator George Voinovich (R-OH) joined Democrats on the Foreign Relations Committee in voting against a positive recommendation for Bolton. Recently, Senator Voinovich authored an op-ed in the Washington Post stating that he would support Bolton’s appointment, which led Senator Lugar to schedule the new hearing. However, now two other moderate Republicans, Senator Chuck Hagel, (R-NE), and Senator Lincoln Chafee (R-RI), have indicated that they have not decided how they will vote on the nomination.

Export Import Bank Re-Authorization: On July 25, the House passed by voice vote legislation (HR 5068) reauthorizing the Export-Import Bank through fiscal 2011. The bank was last authorized in 2002 and its authorization is set to expire September 30. The authorization would expand the scope of the bank by establishing a permanent small-business division, and creating an office aimed at financing the efforts of socially and economically disadvantaged small businesses and smaller firms owned by women. Other provisions of the bill would require the bank to improve its efforts in sub-Saharan Africa, including advancing relationships with African regional financial institutions and ensuring closer cooperation with other U.S. agencies working in the region. The Senate, Banking, Housing and Urban Affairs Committee held a hearing June 20 on the reauthorization but has not scheduled a markup of a Senate measure.

Oman FTA: On July 20, the House approved legislation implementing the U.S.-Oman free trade agreement (H.R. 5684) by a vote of 221-205, after an extensive debate over the agreement’s labor and investment provisions. The vote was largely along party lines, with only 22 Democrats joining 199 Republicans to vote in favor of the bill, while 28 Republicans, 176 Democrats, and one Independent voted against it. The Senate approved its version of the bill (S. 3569) June 29.

US - Malaysia Free Trade Talks: The United States and Malaysia completed the first round of negotiations on a free trade agreement June 16. The two countries met in Penang to exchange information and proposed texts. Financial services liberalization and opening Malaysia’s automotive market are some of USTR’s main priorities in the talks. Malaysia is advocating for a reduction in U.S. textile and apparel duties. In the second round of talks that began this week in Washington, the two sides expect to consolidate the proposed texts into a working draft. Assistant U.S. Trade Representative Barbara Weisel reported that they are on track to finish the talks by the end of the year.

US - Korea Free Trade Talks: According to USTR, US- South Korea free trade negotiations are still on track to be completed by the end of the year, despite friction over recent changes in Korea’s pharmaceutical reimbursement policy that brought a premature conclusion to the second round of talks the week of July 10. US officials suspended the negotiations in the pharmaceutical working group after Korean officials informed the US negotiators that they planned to go forward with a change in their pharmaceutical program that the US opposed. The administration hopes to finish the talks by the end of the year so that Congress will be able to consider and approve the pact before the administration’s trade promotion authority expires on July 1, 2007.

US - Cambodia TIFA: Deputy U.S. Trade Representative Karan Bhatia and Cambodian Minister of Commerce Cham Prasidh signed a Trade and Investment Framework Agreement (TIFA) July 14 in Washington, D.C. TIFAs generally set up trade and investment councils consisting of officials from the two nations to discuss outstanding trade issues. Though they are minor agreements, TIFAs can often be precursors to free trade agreements. Cambodia’s TIFA is part of the Bush administration’s Enterprise for the Association of Southeast Asian Nations (ASEAN) Initiative, which seeks to boost trade ties between the US and the ten-member ASEAN. ASEAN members that are WTO members and have TIFAs with the United States can then be considered for an FTA.

Myanmar Sanctions Bill: The House easily adopted a resolution introduced by Tom Lantos (D-CA) on July 11 that would extend trade sanctions against Myanmar for another year. The measure (H J Res 86) would maintain the sanctions against the country through July 2007 to protest its anti-democratic military junta and human rights violations. In addition to banning imports from Myanmar, the measure would maintain a freeze on the assets of government officials of Myanmar held in U.S. financial institutions and authorize the president to assist democracy activists dedicated to non-violent opposition to the regime in Myanmar. In adopting the resolution, the House included language that would allow the one-year extensions to continue to be enacted through 2009. Under the original law, 2006 would have been the last year for renewal. The Senate cleared the joint measure by a voice vote on July 26.

Japan Beef Ban: Japan formally eased a nearly two-and-half year ban on U.S. beef July 27 after concluding its inspections of U.S. beef processing facilities. Japan informed U.S. officials it would begin accepting shipments of boneless beef from cattle under the age of 20 months. Lawmakers and industry officials estimate that about 30 percent of the previous $1.4 billion of annual U.S. beef shipments would be accepted under the 20 months-or-under requirement. Early in July, Senator Pat Roberts (R-KS) and Kent Conrad (D-ND) introduced a bill that would direct the Treasury Department to impose up to $3.1 billion in tariffs on Japanese products if Japan did not open its beef markets by the end of August.

Commerce Department China Rules: U.S. industry reacted negatively to the Commerce Department’s proposed rule on high-technology exports to China, which would tighten restrictions on exports of 47 categories of products in an attempt to limit Beijing’s acquisition of technology that could be used militarily. The rule would establish a formal authorization process to facilitate legitimate exports to civilian destinations in China that have a record of civilian end-use activity. Another provision in the rule would require companies to apply for a license to export any of the 47 categories of products to China if they “know” that the product might be used for military purposes. Industry representatives have voiced concern that this broad standard could lead to exporters misreading the intent of the importer in China thereby risking huge fines and possible imprisonment for in turn misleading licensing authorities. In addition to the potential liability burden, many companies feel the rule will be ineffectual since most of this technology is already available on the world market and the sanction would be unilaterally imposed by the US. The proposed rule will be open to public comment by the Commerce Department until November 3.