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This Week In Trade

Shutdown, Farm Bill, Export Control Reform, ITA Talks, WTO Bali Package

Posted: October 15, 2013

Posted: October 15, 2013

Correction: An earlier version of this article incorrectly stated that the National Foreign Trade Council (NFTC) was holding a teleconference on Oct. 15 to discuss the impact of the farm bill delay and the government shutdown.

With the government shutdown entering its third week, there is little trade action in the United States this week with the notable exception of the farm bill inching forward in Congress. Meanwhile, work on trade policy is plowing ahead in the European Union and the World Trade Organization in Geneva.

President Obama was briefed yesterday (Oct. 14) by senior White House staff on the shutdown's impact on U.S. exports and trade, including its effects on the Commerce Department, Export-Import Bank and U.S. Department of Agriculture, according to a White House official.

The official noted that, due to the shutdown, the Commerce Department's Bureau of Industry and Security (BIS) cannot accept new applications for export licenses and pending requests have been put on hold, which has prevented some sellers of high-tech goods from exporting their products outside the U.S.

This freeze has put a damper on the Obama administration's export control reform initiative, which today (Oct. 15) saw a key milestone as the first two streamlined categories of the Commerce Control List (CCL) went into effect. The reform effort is moving items from the United States Munitions List (USML) to the less stringent controls of the CCL.

This Oct. 15 implementation date landed with a thud since nobody at BIS is available to issue new licenses for the aircraft and aircraft parts and gas turbine engines that have been moved to the CCL. Given the government shutdown, the already formidable challenge of implementing a new licensing regime will likely become even more complicated.

In addition to the category rewrite, the rules that went into effect today also establish how these items will be transitioned from one list to the next; creates the 600 series of Export Control Classification Numbers for the transferred items; and adopts a common definition for what parts and components are “specially designed” for military applications.

In contrast to BIS, the State Department's Directorate of Defense Controls, which administers the USML, is open for normal operations and will process licenses, although there may be some delays on settling issues related to disputed licenses, according to a notice on its website posted on Oct. 11.

Notwithstanding the shutdown, the House over the weekend voted to begin a conference with the Senate on the farm bill, and the conference is expected to begin shortly since House Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) immediately appointed conferees.

At the same time it approved moving to a conference on the farm bill, the House voted down a resolution that was meant to instruct the conferees to eliminate a provision from the 2008 farm bill’s sugar program stipulating that the Secretary of Agriculture must wait until April 1 of each year to expand an existing tariff-rate quota (TRQ) for sugar.

According to domestic sugar producers, this delay allows the secretary to have better information about how much sugar Mexico is providing to the U.S. market in a given year before expanding the TRQ. The April 1 date also gives U.S. sugar producers more time to sell their crop before additional imports are allowed into the U.S. market, since that date falls toward the end of the marketing year.

By voting down this non-binding resolution, the House dealt yet another blow to the corporate users of sugar, who opposed the provision in the 2008 bill on the grounds that it creates uncertainty about whether there is sufficient supply to fill their orders. Sugar users have mounted an extensive campaign to roll back elements of the U.S. sugar program in the context of the current farm bill debate, but have thus far been unsuccessful.

At the WTO, negotiators are making a final push for a modest package of trade concessions to be announced at theDecember ministerial conference in Bali, Indonesia. An Oct. 14 Trade Negotiations Committee launched a period of intense work in Geneva that will last through the end of this month, by which time WTO members are hoping they will have identified the compromises necessary to bring such a package together in time to be announced at Bali.

But WTO members are still facing an uphill battle, as progress over the past several weeks has been slower than needed and work on a trade facilitation agreement is particularly lagging, with over 400 brackets -- which indicate language that has not yet been agreed on -- still remaining in the text. The negotiating group on trade facilitation is slated to meet today (Oct. 15) in Geneva.

Also at the WTO, China and Thailand were slated this week to unveil their scaled-back lists of sensitive products for the expansion of the Information Technology Agreement in advance of next week’s negotiations. At a meeting with the U.S. held on the margins of the Asia-Pacific Economic Cooperation (APEC) forum earlier this month, China pledged to scale back its sensitive list by roughly one third, prompting participants in the ITA expansion effort to restart negotiations.

APEC leaders have urged negotiators to get a deal on ITA by Bali, but it remains to be seen if China and Thailand are willing to translate that political signal into their negotiating positions.

In the EU, member state trade ministers are slated to meet on Oct. 18 at a Foreign Affairs Council that willfocus on trade issues. At the meeting, trade ministers will take stock of the WTO Bali negotiations, and will be asked by the European Commission to approve a mandate for the EU-China negotiations for a bilateral investment treaty. The commission hopes to launch these negotiations at the EU-China summit next month.

Also on investment, the council will discuss a framework for managing “financial responsibility” linked to investor-state dispute settlement tribunals established by international agreements to which the EU is party, according to the meeting notice. Because the 2010 Lisbon Treaty transferred investment policy from the jurisdiction of the member states to the EU as a whole, the commission subsequently proposed a regulation that lays out who will hold financial responsibility in the event an EU or member state policy is faulted by an investor-state tribunal.

At the council, France is expected to request that the negotiating mandate for the Transatlantic Trade and Investment Partnership (TTIP) be made public in order to demonstrate the extent of the exemption that it obtained for audiovisual services, according to an EU source.

TTIP was also a focus yesterday (Oct. 14) at the International Trade Committee of the European Parliament, which held a hearing on the initiative with testimony from Ignacio Garcia Bercero, the commission's chief TTIP negotiator, and a number of business, civil society and labor stakeholders.

EU Trade Commissioner Karel De Gucht is participating in an Oct. 15-16 meeting in Seoul of the EU-South Korea Trade Committee, which governs the bilateral free trade agreement between the two economies. He will then participate in the Foreign Affairs Council on Oct. 18, according to his schedule.

TTIP is also on the agenda of a bilateral meeting tomorrow (Oct. 16) between President Obama and Italian Prime Minister Enrico Letta at the White House.