Trade and Politics Blog

The U.S. Department of Commerce may have to can the “Dolphin Safe” tuna labeling program. Currently, for tuna sold in the United States be considered “dolphin safe,” fishermen cannot use certain nets and methods to catch the fish. On Wednesday, however, a WTO appeals panel held that the rules are discriminatory toward Mexican tuna producers, reversing an earlier decision.

An original WTO decision held that U.S. labeling standards were overly restrictive, but not discriminatory. On appeal, however, the WTO reversed—holding instead that the labeling standards are not overly restrictive, but do in fact discriminate against Mexican producers. The panel was unconvinced that the forbidden method of encircling tuna with large “purse seine” nets was actually more dangerous to dolphins than methods employed in the United States. The appeals body balanced the interests of the Mexican fishing industry against the United States’ interests in protecting dolphins. The report concludes that the labeling standards benefit dolphins less than they harm Mexican fishermen. As a result, Mexico can impose commercial sanctions if the U.S. does not change the rules to comply with the WTO report.

The Office of the United States Trade Representative was disappointed in the outcome. A spokesperson for the USTR bemoaned the effect the ruling would have on consumers’ ability to make informed decision about the food they purchase. USTR has not addressed how or if the U.S. plans to comply with the ruling.

The Economic Ministry of Mexico celebrated the potential positive effects that the ruling will have on the Mexican fishing industry. Mexican officials also noted that sanctions would likely follow if the U.S. did not implement the recommendations made in the report.

Earthquake tremors are being felt as earlier this week, President Obama announced that the U.S.,  Japan and the E.U., are bringing a WTO case against China for its export quotas and other restrictions on the export of rare earth minerals covering about 100 tariff lines (tungsten, molybdenum and other intermediate products produced from these raw materials.)  Rare earth minerals are an indispensable ingredient in many technology products, such as computers, and China produces more than 95% of these minerals.  The quotas have led to dramatic increases in prices in these products over the last couple of years. 

According to the U.S. Trade Representative, China quotas and restrictions violate Article XI:1 of the General Agreement on Tariffs and Trade 1994 which generally prohibits restrictions on exports other than taxes, duties, and charges.  USTR is also citing commitments under China’s WTO Accession Protocol to avoid restrictions on exports.

In an also ”rare” show of unity in Congress and with the White House, leading Members of Congress applauded the action and called on the White House to do even more, signaling a strong shift in Congress in support of a tougher trade enforcement policy against China.

Ways and Means Chairman Camp stated:

“I strongly support the Administration’s latest enforcement effort to address China’s unfair trade practices that cost U.S. jobs…Today’s announcement…addresses additional Chinese barriers that distort the market.  The United States should not hesitate to enforce its rights at the WTO, and I hope the Administration will bring additional cases to address China’s barriers.  I look forward to consulting closely as this – and other WTO cases – move forward.”

Ways and Means Trade Subcommittee Chairman Brady added:

“China’s export restraints distort the free market, and I commend Ambassador Kirk and his team for filing this case.  WTO cases like this are important to ensuring economic freedom and enforcing our rights when China violates the WTO.  The United States must aggressively pursue its rights whenever we believe China has violated its WTO obligations.” 

Senator Schumer went even further:

“This is a worthwhile step, but more must be done to stop China’s hoarding of rare earth minerals. There are faster ways to assert leverage on China than relying on the WTO, which could take years to resolve the case.  Secretary Geithner should immediately urge the World Bank to block financing for Chinese mining projects, and the Interior Department should block Chinese-funded mining projects in the United States.  These two steps would get China’s attention right away and force them to reconsider their unfair practices.”

China’s Minister of Industry and Information responded that China is prepared to defend the export restrictions citing WTO rules allowing for exceptions to the ban on export quotas in the interest of environmental preservation and resource sustainability.   China’s state-run Xinhua news agency went even further stating “past experiences have shown that policy makers in Washington should treat such issues with more prudence, because maintaining sound China-U.S. trade relations is in the fundamental interests of both sides.”

With a difficult economy coupled with presidential and congressional elections in the United States and a transition of power in China this year, we could see significant strain in trade tensions as the U.S. Congress ratchets up pressure in response to a growing trade deficit with China and the Chinese government responding with measures of its own.  We could see a potential trade spat explode into something more grave.  

Congress is expected to act soon on hundreds of duty suspension provisions which are scheduled to expire at the end of the year under the Miscellaneous Tariff Bill process.  Under the MTB process, certain products can receive a complete duty suspension or partial duty reduction for three years.  The process will begin in the House of Representatives where the Ways and Means Committee will provide guidance in the upcoming weeks for Members to introduce duty suspension bills. These bills will then be transmitted to different agencies in the Administration including the International Trade Commission, the Department of Commerce, the US Trade Representative and Customs and Border Protection.  These agencies will review the bills to ensure they are “non-controversial” and “revenue neutral”. 

ST&R will be presenting a free 30-minute webinar for companies and individuals interested in participating in the MTB process. The webinar will help you understand which products may qualify for a duty suspension or reduction, how to present your requests to Congress, and the process used by the U.S. government to approve MTB requests.   You may register for this free webinar by clicking here

It will take Congress and the Administration several months to introduce stand-alone bills, review them, package them and then proceed with a vote before December 31^st, 2012 when some of the provisions expire. The MTB vote has historically been bipartisan, although questions remain as to how Congress plans to address the problems that surfaced during the last MTB in 2010.  Nevertheless, these issues should be resolved in the next few weeks.  That’s when the Ways and Means Committee announces the rules for the start of the MTB process. We will be updating this blog when the official announcement is published, but we encourage you to start preparing now for an MTB.

For more information, please contact David Olave at dolave@strtrade.com

A great friend of Africa and the Caribbean, Congressman Donald M. Payne [NJ-10], passed away on March 6, 2012 from complications caused by colon cancer. Rep. Payne, the first African-American Congressman to represent New Jersey, spent over two decades in the U.S. House of Representatives most notably serving in the House Foreign Affairs Subcommittee on Africa, Global Health, and Human Rights, Subcommittee on Western Hemisphere, and Subcommittee on International Organizations, Human Rights and Oversight. In addition, he was a member of the Education and the Workforce Committee. Rep. Payne is a past Chairman of the Congressional Black Caucus, and was most recently Chairman of the Congressional Black Caucus Foundation, Inc.          

Rep. Payne tirelessly fought for human rights and democracy worldwide with a special focus on Africa, and was deeply passionate about education reform. From his role as Chairman of the House Subcommittee on Africa and Global Health, Congressman Payne worked to improve economic growth, boost development and attain a better quality of life for people around the world. Alongside, he strongly advocated for more focus to be placed on Caribbean and Latin American nations.          

The Congressman’s commitment was highlighted by his voting record on the issues about which he was deeply passionate. He voted in support for the Haitian Hemispheric Opportunity through Partnership Act II (HOPE II), as well as the African Growth and Opportunity Act. In addition, to boost economic development in the Caribbean region, Rep. Payne introduced legislation that would continue preferential access for ethanol from the Caribbean. While Africa and Latin America have  lost a champion and committed advocate, Congressman Payne’s legacy will  live on in the benefits the legislation he helped enact brought to  people in need worldwide.  We extend our condolences to the Payne family and his staff.