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This Week In Trade

WTO's Boeing Ruling, Russia MFN And Korea FTA Dominate The Week

Posted: March 12, 2012

The week in U.S. trade policy news gets a big start today (March 12) with the release of the World Trade Organization's Appellate Body ruling on U.S. subsidies given to plane-maker Boeing.

Also drawing a major focus later this week will be the start of the Senate Finance Committee's efforts to examine granting Russia permanent most-favored nation (MFN) status as it prepares to accede to the WTO this summer, and the entry into force of the U.S.-Korea free trade agreement.

In the WTO ruling on Boeing subsidies, the Appellate Body found the U.S. government provided more subsidies to Boeing than the panel had found because it considered the panel's methodology for assessing them faulty. But the Appellate Body significantly reduced the panel's assessment of the damages that Airbus suffered as a result of these subsidies.

USTR in a release outlined some of the main points of the Appellate Body's ruling, and in a March 12 briefing, USTR General Counsel Tim Reif sought to drive home the point that U.S. subsidies to Boeing are a fraction of what the European Union has provided to Airbus. He also strongly suggested that the U.S. is on the verge of asking the WTO to rule on whether the EU has complied with the adverse Appellate Body finding on subsidies provided to Airbus, as it claimed to have done by the Dec. 1, 2011, deadline.

Most observers believe the dispute will ultimately have to be negotiated between the U.S. and EU, rather than settled by directly implementing these two WTO rulings. So far the U.S. government has been unwilling to meet the EU demand that the only way a settlement can be negotiated is if the U.S. drops its condition that all EU member states terminate support for the large civil aircraft industry.

On Tuesday (March 13), U.S. and Brazilian trade officials plan to meet in Washington to discuss, among other issues, longstanding U.S. restrictions on imports of fresh Brazilian beef and new Brazilian barriers to U.S ethanol exports. The meeting is the first under the U.S.-Brazil Agreement on Trade and Economic Cooperation (ATEC) signed last year, and will be chaired by Deputy U.S. Trade Representative Miriam Sapiro.

Another item looming in U.S.- Brazil trade relations is the expiration later this year of a bilateral framework under which Brazil agreed to hold of retaliation in a dispute over cotton subsidies and the U.S. in return agreed to pay it $147.3 million annually.  The future of U.S. cotton subsidies are among many items that are expected to be addressed in the next farm bill, the debate around is continuing at a Senate Agriculture Committee hearing on Wednesday.

Both the House and Senate agriculture committees have come under strong pressure from farm groups to get the five-year legislation finished this year – rather than pass an extension of current law – in order to give farmers greater certainty. But with Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) up for re-election and House elections also looming, it is unclear whether they will be able to do so.

The debate around Russia will start Monday afternoon with remarks by the new U.S. ambassador to Moscow, Michael McFaul, at the Petersen Institute for International Economics in Washington. According to informed sources, McFaul is expected to speak at length about the need to extend MFN to Russia, which will allow the United States to take full advantage of its concessions as a new WTO member.

The dialogue will continue on Thursday the 15th with a Senate Finance Committee hearing on granting Russia permanent MFN. It was clear from last week’s Finance hearing that Chairman Max Baucus (D-MT) wants to move forward on the issue in his committee and in the full Senate to force the hand of the House, where the leadership seems less interested in granting Obama what they see as a foreign policy victory of resetting the U.S.-Russia relationship.

The key question still to be answered is to what extent the administration will be prepared to swallow legislation that would force a public visa ban list of Russian officials implicated in human rights abuses, given that Russia has threatened to cut off the U.S. supply route to Afghanistan if such a measure passes.

Also Thursday, the U.S. and South Korea will announce the entry into force of the U.S.-Korea FTA, which was signed in 2007. The announcement comes amid the objections of the U.S. brand-name drug industry over whether Korea is actually in compliance with a provision contained in the pharmaceutical chapter of that agreement.

The same day, the U.S. Chamber of Commerce will mark the launch of the pact with a reception welcoming new Korean Ambassador to the United States Choi Young-jin. He replaces Han Duk-soo, who served as ambassador to Washington for three years and returned to Seoul to become head of the Korean International Trade Association. The reception will also feature U.S. Trade Representative Ron Kirk.

Delving into the arena of technology trade, the Information Technology & Innovation Foundation on Thursday will release its wish list of what products should be included in an expanded Information Technology Agreement (ITA). But efforts to broaden the scope of that deal – signed through the WTO in 1996 – already risk faltering because the EU and the U.S. can't agree whether a new deal should also address non-tariff barriers.

At the launch of its report, the foundation will host Sapiro and former USTRs Charlene Barshefsky and Susan Schwab.