Last week marked the fourth annual global review of the World Trade Organization’s (WTO’s) Aid for Trade (AfT) Initiative. Created in 2005 by the Sixth Ministerial Conference of the Doha Development Round, Aft targets “behind the border” constraints to trade in least developed countries (LDCs) as well as strengthens their capacity to negotiate beneficial trade agreements. Essentially, Aft focuses on trade facilitation.
The AfT Initiative shines a light on the idea that the best possible “aid” we can give LDCs is free trade. Evidenced by its theme, “Connecting to Value Chains,” the fourth annual review called for “connecting the least connected countries.” More broadly, the value chain world we live in offers many entry points for firms to connect to the global trade web. And countries don’t need to produce final goods to be a part of that global trade web—increasingly we are a world focused on trade in services and tasks. Sixty percent of global trade is now in parts and components.
Production networks stretch worldwide—Senegal assembles Indian cars, Ford has facilities in Vietnam, and Samoa produces automotive harnesses. As WTO Director-General Pascal Lamy puts it, “you do not … Read the rest
On Monday, July 8, the Indian Prime Minister’s office, after consultations with India’s Department of Telecommunications and Department of Electronics, announced it would conduct a four-week review and reevaluation of the country’s controversial Preferential Market Access (PMA) mandate. The mandate imposed local content requirements on procurement of electronic products with “security implications for the country” by government and private sector entities. If the PMA had been implemented as originally envisioned, a specified share of each electronic product’s market—anywhere from 30 percent, rising possibly up to 100 percent by 2020—would have to be filled by India-based manufacturers, a requirement that could have eventually affected as much as half of the $50 billion spent annually on information and communications technology (ICT) products and services in India. In announcing the policy review, the Indian Prime Minister’s office acknowledged that, “Concerns have been raised in many quarters on different aspects of the PMA Policy, particularly relating to procurement by the private sector for electronic products with security implications.”
India conceived its PMA rules in an attempt to bolster domestic manufacturing of electronic products in India, a goal India has sought both to boost employment … Read the rest
The Patient Protection and Affordable Care Act (ACA) is in the news again, with the announcement that the White House has delayed until 2015 the employer mandate, which requires that all employers with more than 50 employees provide health coverage to their workers. While most of the attention toward the ACA has centered around debate regarding the individual and employer mandates, what’s often missed is that certain provisions in the Affordable Act Care threaten to damage two of America’s most important innovative life sciences industries: medical devices and biopharmaceuticals.
Regarding medical devices, as of January 2013 the Affordable Care Act began to impose a 2.3 percent excise tax on the sales of medical devices, in order to offset a portion of the $1 trillion cost of the Act. (Specifically, the Joint Committee on Taxation estimates the tax will collect $29 billion over the 2013-2022 period.) Beyond the fact that raising costs is not the way to control them, the provision has had a deleterious impact on the competitiveness of U.S. medical device firms and threatened employment in the U.S. medical device industry. Some, including former chief Labor Department economist Diana … Read the rest
On Friday, 35 of the 36 freshmen House Republicans signed a letter to new USTR Michael Froman indicating their strong support for President Obama’s free and fair trade agenda. Stating, “We write to you as new members of the House of Representatives who strongly believe that expanding trade will increase economic growth and expand jobs across the United States,” the letter went on to describe their readiness to work on negotiations for the Transatlantic Trade and Investment Partnership (T-TIP), the Transpacific Partnership (TPP) and the Trade in Services Agreement (TISA).
The Republican letter comes at a crucial time during trade negotiations for the United States. With the first round of T-TIP negotiations set to begin next week, and the 18th round of the TPP negotiations the week after, Congressional support is key to moving forward. However, the 2007 expiration of Trade Promotion Authority (TPA) threatens to erode much of the potential for forward movement. TPA, which allows the President to “fast-track” trade agreements for approval or disapproval by Congress by removing the option for filibuster, is currently being considered for renewal. Essentially, the TPA forces the House and Senate … Read the rest
Yesterday, President Obama announced the suspension of Generalized System of Preferences (GSP) benefits for Bangladesh. The suspension comes on the heels of outrage regarding labor conditions after an April factory collapse in the South-Asian nation killed more than 1,200 people. According to Obama, Bangladesh was not taking steps to protect internationally recognized standards of workers’ rights to its employees.
This removal of tariff breaks by United States makes a compelling statement, not only to Bangladesh, but also the rest of the world, about the importance of embracing accepted global standards to drive innovation and economic growth. As Bangladesh’s biggest trading partner after the European Union, the United States is well-positioned to leverage its trade policy in order to exert significant pressure on the Bengali government to reform its labor practices. As USTR Michael Froman stated, “The Obama Administration is committed to reflecting American values in our trade policy, including with regard to the rights of workers worldwide.”
GSP benefits are a privilege and should only extend to those countries that put into place policies that spur innovation and economic development. In other words, preferences need to go to countries that … Read the rest
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Recently, it seems like no trade topic inspires as much tension, confusion and passion as the subject of compulsory licensing in the World Trade Organization’s (WTO) Trade Related Aspects of Intellectual Property Rights Agreement (TRIPS). Everyone has an opinion, whether it’s based on deep loyalty to the pharmaceutical research and development process, a strong desire to eradicate infectious diseases in less developed parts of the globe or merely the belief that multinational organizations like the WTO have the international community’s best interests at heart. Unfortunately, many of these opinions are based on a gross misunderstanding of the compulsory license (CL) process as well as an inability to acknowledge the deficiencies inherent therein.
So what exactly is a CL? Essentially, a CL is when a government allows someone else to produce a patented product or process without the consent of the patent owner. This most often, but not exclusively, applies to pharmaceutical products. The original idea behind the concept of CLs was to enable governments to produce a generic drug for its domestic market, and not for export. Those … Read the rest
Ever since former Secretary Clinton announced the New Silk Road Initiative in September 2011, the regional economic integration of the South-Central Asian region has been a priority of the U.S. State Department. Key to its implementation, however, is the participation of the private sector in spurring growth and creating jobs. As Secretary Clinton stated at the time, “We also know that governments alone cannot possibly solve Afghanistan’s economic problems, so we have to work to create an environment that attracts private sector investment.”
Facilitating such an environment is no easy task. Primarily, it requires the removal of impediments to the flow of goods and services. Recent progress on this initiative is encouraging; the region is becoming more integrated through trade liberalization. The reduction of non-tariff trade barriers, improved regulatory regimes, transparent and efficient border clearance procedures, and coordinated policies all accelerate the flow of goods, services, and people throughout the region. More importantly, the efforts of the South-Central Asian region to join the WTO–Kyrgyzstan and Tajikistan are the most recent ascensions–will also open markets and increase economic opportunity for the people of the region. Azerbaijan, Kazakhstan and Afghanistan are … Read the rest
Free trade is only successful if all sides are operating on a relatively level, market-based playing field. Unfortunately, in the last few years many nations, particularly developing ones, have dramatically ramped up their mercantilist policies designed to unfairly gain advantages in global trade. The use of these mercantilist policies hurts not only the aggrieved nations, but also, in certain cases, the aggressor. One tool in the mercantilist tool box is “dumping”: the practice of selling exports below the cost of production, often by relying on steep government subsidies. However, to date the system of addressing dumping claims has not been as effective as it should be. All too often by the time cases are brought to and adjudicated by the World Trade Organization (WTO) the damage has been done and many domestic firms put out of business.
We see this with the current conflict between the European Union (EU) and the United States with China over unfair Chinese trade policies in the solar industry. The chief issue for U.S. and EU policymakers concerns China’s use of mercantilist practices, especially selling below cost through large government subsidies, to promote Chinese solar … Read the rest
On Monday at the G8 Summit, President Obama, U.K. Prime Minister Cameron, European Commission President Barroso, and European Council President Van Rompuy announced plans to launch negotiations for an ambitious trade deal between the European Union and the United States. The Transatlantic Trade and Investment Partnership (T-TIP) is an ambitious, comprehensive, and high-standard trade and investment agreement that promises to boost worldwide economic growth. During the negotiation announcement, Prime Minister Cameron said a successful deal could add £100 billion ($157 billion) to the EU economy, £80 billion ($125 billion) to the U.S. economy, and as much as £85 billion ($133 billion) to the rest of the world. While these numbers are impressive, as ITIF’s March 2013 report, Estimating the Benefits of a Transatlantic Trade Partnership found, citing data from the U.S. Chamber of Commerce, gains could be as high as $450 billion for the United States and $495 billion for the Europe Union, boosting both EU and US GDP by 3 percent. “We’re talking about what could be the biggest bilateral trade deal in history; a deal that will have a greater impact than all the other trade deals on … Read the rest
With America’s economy continuing to plod along in a sluggish recovery, policymakers are searching for ways to spur U.S. economic growth. With the U.S. running massive trade deficits, we’ve realized in recent years that in order to grow America needs to increase its exports (hence the Obama Administration’s National Export Initiative, which seeks to double U.S. exports from 2010 levels by 2015), in part by encouraging the opening of markets throughout the world to freer trade. Having real access to foreign markets is crucial—it may mean the difference between a decade of stagnation or robust growth. Right now we are poised to make this essential leap forward with the Trans-Pacific Partnership (TPP), a 12-nation trade agreement that includes Australia, Canada, Japan, and Mexico as some of the major players. If enacted, the agreement would tie nations together that comprise 40 percent of the world’s gross domestic product. But before policymakers approve the TPP, the United States needs to make sure certain critical provisions are addressed. Some of the most important issues involve intellectual property (IP) protection.
IP is fundamental to America’s economy. With 40 million workers, or 30 percent … Read the rest