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Regaining the Initiative: A Blueprint for U.S. Trade and Investment - Key Findings

RESISTING PROTECTIONIST AND ISOLATIONIST POLICIES

  1. Reaffirm the G-20 “Standstill.” The G-20 must reaffirm its November 2008 and April 2009 commitments to reject protectionist and isolationist policies.
  2. Implementing the G-20 “Standstill.” The G-20 must “back-up” the World Trade Organization (WTO) and the International Monetary Fund (IMF), working in cooperation with the World Bank and regional development banks, in their ongoing efforts to identify and make public the imposition of new trade, investment and financial restrictions, and to help them use their authority and influence to roll back those policies.

MAKING TRADE AGREEMENTS WORK BETTER FOR THE UNITED STATES

  1. Ensuring the Delivery of Benefits. The new Administration and Congress must overcome the dynamic that emphasizes negotiations over the implementation of existing agreements, and ensure that existing trade and investment agreements continue to deliver maximum benefits.
  2. Guidelines for Using Existing Agreements Effectively.

    • Effective enforcement of existing agreements and U.S. trade laws is critical.
    • Trade agreements are not static; they should be reviewed on a regular basis to evaluate how they might be modernized to provide greater benefits to American companies and workers.
    • Reviews should not be used to roll back progress in open trade and investment.
    • Unilateral modifications will not work.
    • Other parties to an agreement may have their own agenda for change that might not be acceptable, leading to a stalemate.
    • Reviews of trade agreements and their enforcement should not become a reason for avoiding new negotiations to open markets and ensure fair trade for American workers, companies and farmers.
  3. Create Networks of Open Trade and Investment: Making FTAs Work Better for the United States.

    • Integrate, expand and modernize our existing free trade agreements, or FTAs.

      • Solving the Hodgepodge Problem. Integration of FTAs will better serve U.S. trade and commercial interests, as well as those of our trade partners. The proliferation of inconsistent bilateral arrangements creates a problem – transaction costs, for example – because each FTA has its own rules to determine whether goods qualify for duty-free treatment under the agreement. Known as “rules of origin,” they are not uniform across agreements, creating serious practical problems for U.S. businesses – at times making it difficult to take advantage of the agreed-upon market liberalization.
      • Achieving Integration - A Staged Approach. Achieving integration among U.S. FTAs is a long-term project and will need to proceed in stages.

        • First, establish institutional mechanisms for pursuing integration in each region.
        • Second, harmonize rules of origin and allow for cumulation among FTA partners on a regional or global basis.
        • Third, integrate agreements in other respects, such as services market access or institutional arrangements, on a regional basis.
    • Completing the Regions. While working to integrate existing agreements, the United States should define a strategic framework and vision for commercial relations in each region, and then on that basis, complete FTA negotiations in the regions. The Trans-Pacific Partnership (TPP) is a constructive model for achieving these objectives and an essential building block to avoid U.S. isolation in a critically important region that is moving on its own to form regional free trade areas.
    • Modernizing FTAs. FTAs should be reviewed, especially as they age, to ensure they are keeping pace with rapidly changing economic and regulatory conditions. For example, recent FTAs have more comprehensive labor and environment provisions than earlier FTAs, and the older FTAs would benefit from these more up-to-date approaches.
    • Free Trade Agreements with Our Major Markets. FTA negotiations with our major markets should be a priority.

      • Limited Scope Option. In the event a full FTA covering agriculture is not achievable with the EU and Japan, for example, the United States should consider, as other countries have, agreements that cover manufacturing and services more comprehensively than agriculture.
      • Services Only Option. Another option that the United States should consider with key markets is an agreement covering services only, where progress on goods trade is too difficult or on a different track.
  4. Move Forward Pending FTAs. The new Congress and Administration should complete the work of U.S. trade negotiators and implement the pending FTAs with Colombia, Panama and Korea.
  5. Reinforcing American Rights – Improved Enforcement. Effective enforcement of existing agreements and U.S. trade laws is critical – to ensure that American workers, farmers, businesses and consumers obtain maximum benefits from our trade and investment agreements.

    • Enforcement efforts can include a range of options – dispute settlement under the WTO or FTAs, negotiations, actions under U.S. trade laws, and diplomatic initiatives, among others.
    • All options should be considered – with recognition that what may be effective solving one problem may not be for another.
  6. Reestablishing Confidence in the Trade Adjustment Process. To promote more effective adjustment and training programs, the new Congress and President should review Section 201 and Section 421. They should also consider requiring the President to provide, in those cases in which the International Trade Commission finds for the U.S. industry, temporary import relief and/or an appropriate package of trade adjustment assistance, depending on the industry’s circumstances. The President would retain full discretion to decide whether to impose import relief, including its type, scope and duration, and to formulate an adjustment assistance package.
  7. A Constructive Role for the Global Adjustment Process.

    • Trade Adjustment Assistance. The recent renewal and reform of Trade Adjustment Assistance is an important first step in creating a 21st century national retraining and adjustment systems. In the longer term, the United States needs a more comprehensive program to help workers adjust to dislocations regardless of the cause and to provide them with 21st century skills.
    • America 21. America 21 is a Business Roundtable initiative for lifelong learning for workers, as well as for assistance for job dislocation when livelihoods are threatened for whatever reason. The America 21 approach is explained in the Business Roundtable’s 2008 report Prospering Together: America’s Citizens, Communities and Companies.
  8. Promote U.S. Exports: Identify Incentives and Disincentives to Trade and Investment. To ensure that American companies and workers have adequate government support to take full advantage of international trade and investment agreements and that U.S. laws and regulations do not undermine their ability to do so, the Administration should catalogue U.S. export incentives and disincentives (such as outdated and ineffective export financing and export controls). The report should be used to develop and implement comprehensive corrective administrative and legislative proposals to make sure our policies support rather than hinder American exports.
  9. Integrate Tariff and Competitiveness Policies. American companies and workers often rely on imports of goods no longer produced in the United States in their domestic manufacturing operations. In the past, Congress has, on a regular basis, enacted legislation that temporarily reduces or eliminates these tariffs. Because the 110th Congress was unable to pass a Miscellaneous Tariff Bill (MTB), the new Congress should move an MTB forward quickly. In addition, the Congress and new Administration should work together to develop a process to provide more certainty and speed in dealing with this important competitiveness issue.

PATHS TO EXPAND GLOBAL TRADE AND INVESTMENT: MAXIMIZING THE EFFECTIVENESS OF INTERNATIONAL NEGOTIATIONS

  1. Maximizing the WTO’s Effectiveness.

    • Reform the WTO. The WTO should play a central role in advancing U.S. competitiveness. However, to fill this role effectively, the WTO needs reform.
    • Successfully Conclude the WTO Doha Round. Having missed every major deadline since January 2005, the negotiations must be quickly assessed by the new Congress and Administration as to whether they can be successfully concluded within a reasonable period of time and with substantially improved agriculture, non-agricultural market access (NAMA) and services commitments by our trading partners.
    • Improving the WTO Negotiating Structure.

      • Rolling Negotiations. The United States should seriously consider alternatives to the “single undertaking” approach, such as “rolling negotiations,” which would allow progress to build by solving one problem at a time.
      • Plurilateral Negotiations. The United States should also seriously consider launching plurilateral negotiations for goods and services among open like-minded members.
      • Rethinking MFN. In structuring plurilateral negotiations, conditional most favored nation (MFN) options should be considered.
      • Non-binding Options. The United States should consider other innovative means to improve the effectiveness of the WTO and to facilitate bilateral and regional FTA negotiations, such as non-binding commitments as a “best practices” stepping-stone to binding agreements, and capacity building and technical assistance agreements.
  2. Preserving Competitive Options to the WTO.

    • FTAs Play a Constructive Role. One way to push the WTO system forward is to continue to negotiate bilateral and regional FTAs, which support the multilateral system – by providing experience with liberalized trade and investment – and prod the system, by offering additional paths toward fair trade and investment.

A PROACTIVE APPROACH TO DISCRIMINATORY FOREIGN REGULATORY BARRIERS

  1. Addressing the New Danger to Fair Trade – Discriminatory Regulatory Barriers. Discriminatory regulatory barriers are now a critical issue for U.S. international economic policy. As tariffs and other border measures are reduced and eliminated, key developed and emerging markets are replacing them with regulatory barriers to give their own companies and workers a competitive advantage. These are issues primarily of fairness rather than deregulation, and the U.S. government should integrate regulatory issues more effectively into international economic policymaking and implementation.

    • Promoting U.S. and Multilateral Standards. The U.S. government, with substantial private sector input, should devise and execute a comprehensive strategy to promote fair standards and non-discriminatory treatment abroad, including the adoption of U.S. or international product standards and harmonization of standards.
    • Mutual Recognition Agreements. The United States should, to the maximum extent feasible, negotiate mutual recognition agreements.
    • Integrate Regulatory Issues into the Core of U.S. International Economic Policy. For example, the United States needs focused, high-level attention to help accelerate Chinese regulatory reform and ensure that China adopts non-discriminatory regulatory regimes based on harmonized U.S.-China or international approaches. The United States should also use existing FTAs to build greater regulatory cooperation and harmonization. President Obama has said that the United States, Canada and Mexico should “identify ways in which NAFTA could be improved.” Formal discussions on regulatory cooperation and harmonization under the NAFTA umbrella would be an excellent starting point.
 

CLOSING THE GAPS ON INVESTMENT PROTECTIONS

  1. New Bilateral Investment Treaties (BITs) Needed to Maintain U.S. Competitiveness. The United States should be working aggressively to close the gap in investment protection in order to match the commercial advantage our European and other competitors enjoy today.
  2. New Tax Treaties Needed to Maintain U.S. Competitiveness. The United States should continue to identify the key markets where U.S. businesses lack tax treaty protection and pursue a plan of action to negotiate modern tax treaties.

NARROWING THE CURRENT ACCOUNT DEFICIT

  1. Encourage Economic Growth Abroad. The current global economic crisis provides a new dynamic to encourage other countries to adopt more aggressive policies to increase their domestic consumption, in lieu of relying on export-driven growth.
  2. Open Markets for U.S. Goods and Services. New initiatives by our trading partners to increase domestic consumption need to be accompanied by new commitments to open their markets to U.S. exports.
  3. Energize Multilateral Efforts to Facilitate Global Currency Adjustments. International financial cooperation in the IMF and WTO is necessary to ensure that countries do not use policies to keep their currencies undervalued as a way to manipulate trade flows, and promote reforms to prevent destabilizing global imbalances.
  4. Promote American Savings. Increase savings in the U.S. by adopting policies to encourage individual savings, facilitate workplace retirement plans and enhance financial literacy.
  5. Reduce the Federal Budget Deficit. Reducing the federal budget deficit over the long term is key to creating an economic environment for sustained long-term growth and to reducing the current account deficit.
  6. Encourage Foreign Investment in the United States. The current economic crisis highlights clearly how important it is for the United States to be able to access foreign capital.

BRINGING THE BENEFITS OF TRADE AND INVESTMENT TO THE WORLD’S POOR

  1. Promoting Economic Growth in the Poorest Countries. Helping the poorest least developed countries (LDCs) participate more fully in the global economy makes good foreign policy, national security and economic sense.

    • Helping LDCs Develop the Tools to Succeed. LDCs often cannot reap the benefits of participating in the global economy because they lack the resources, capacity and infrastructure to take advantage of new opportunities beyond their borders.

      • Identify capacity building and technical assistance needs early.
      • Integrate technical assistance provisions into trade agreements.
      • Facilitate public-private technical assistance and capacity building coordination.
      • Promote trade facilitation and customs modernization initiatives.
      • Address infrastructure gaps.
  2. Improve the Integration of Trade and Development Assistance.

    • Expanding the Role of Development Banks. The United States and other donor countries should ensure that trade capacity building and technical assistance are better integrated into the programs carried out by the World Bank and the regional development banks.
    • Re-examine U.S. Trade Preference Programs. The United States should review its preference programs to ensure that they are providing real benefits to LDCs in terms of trade and development.

      • To ensure that preference programs like Generalized System of Preferences (GSP) deliver real benefits to our neediest trading partners, preference programs should distinguish between developing countries that already have robust, growing economies and those, such as most sub-Saharan African nations, that do not.
      • The United States should use GSP to help LDCs access the growing regional markets with nearby more advanced developing countries.
      • In determining GSP eligibility for advanced developing countries, the President should have discretion to consider the role the country has played in negotiations of multilateral trade liberalization.
      • Consider merging U.S. trade preference programs.

LAYING THE FOUNDATION FOR DOMESTIC COMPETITIVENESS

  1. U.S. Competitiveness Needs the Right Mix of Domestic and International Policies. The new Administration and Congress need to recognize the critical importance of getting the mix of international and domestic policies right. There is no “either/or” in today’s highly competitive global economy. U.S. companies and workers need international agreements to ensure fair trade and domestic policies that support new investment and innovation.
  2. Domestic Policies Demand Immediate Attention. Dealing with the urgent need to stabilize and stimulate the American economy and create new jobs is the first priority, but action to lay the foundation for long-term competitiveness and growth is also critical. The United States needs to move forward in building a competitive workforce, strengthening American leadership in research and development, meeting energy and environmental challenges, solving the health care challenge, restoring infrastructure and making U.S. international tax policies more competitive.

REVITALIZING THE CONGRESSIONAL-EXECUTIVE RELATIONSHIP ON INTERNATIONAL TRADE AND INVESTMENT NEGOTIATIONS

  1. The Importance of International Engagement. American economic stability and growth is now fully dependent on the ability of American workers, farmers and businesses to compete successfully in both our domestic market and in world markets.
  2. International Trade Agreements Ensure Fair Trade. In moving forward, the new Administration and Congress should recognize that one of the most important tools to ensure fair trade for American workers, farmers and businesses is the negotiation of bilateral, regional and multilateral trade and investment agreements. Strong enforcement of U.S. rights is dependent on the United States having strong agreements to enforce.
  3. Rebuilding Bipartisan Support. Rebuilding bipartisan support for international trade and investment negotiations and revitalizing the congressional-executive relationship will require new attitudes, initiatives and resources from both branches of government.
  4. New Negotiating Criteria and Objectives.

    • Establishing Priorities. Rebuilding bipartisan support for international economic initiatives has to rest on the foundation of shared negotiating criteria, objectives and strategies.
    • Coordinating Initiatives. The range of negotiating tools available to achieve U.S. international economic objectives is so diverse today, it is essential that initiatives are thoughtfully integrated to maximize U.S. leverage and prevent one initiative from undermining another. (Tools include, for example, bilateral, regional and multilateral negotiations, regulatory dialogue and targeted legislation like GSP, AGOA and ATPA.)
  5. New Ways to Promote Collaboration and Cooperation.

    • Working Together to Get Negotiations Off to a Good Start. More extensive consultations between the Congress and the executive branch are needed before a negotiation is launched, including a focused opportunity for the Congress to provide advice in the selection of negotiating partners and the scope of the negotiations and objectives.
    • Working Together During Negotiations. It is essential for the executive branch to conduct extensive substantive consultations during negotiations. It is equally important for the Congress to organize itself so it can more effectively monitor negotiations.

      • Congressional Trade Oversight Groups (CTOGs). To promote more effective cooperation on a sustained basis and to aid the Congress in monitoring multiple negotiations, the Congress should provide for the creation of a CTOG for each negotiation with adequate staff. (Multiple CTOGs will have the beneficial effect of expanding the number of members with a deeper understanding of a negotiation.)
      • CTOG Membership. CTOGs should be drawn from congressional committees with jurisdiction over the negotiation and from members with a strong interest in the negotiation.
      • CTOG Co-Chairs. The CTOG should have co-chairs drawn from the Senate Finance and House Ways and Means Committees.
      • CTOG Reports. A CTOG should be required to report on a regular basis to the congressional committees with legislative jurisdiction over the negotiations.
    • Working Together to Implement Agreements. The previous fast track/trade promotion authority provisions requiring the President to consult with the Congress before entering into any trade agreement should be retained and supplemented with improved procedures to provide a more focused opportunity for the Congress to review the proposed agreement, advise the President of remaining concerns, if any, and to explore jointly the feasibility of adjustments to the proposed agreement before the President formally enters into it.

      • Legislative Safeguards. The reverse fast track/trade promotion authority procedures for Congress to withdraw fast track/trade promotion authority treatment for an implementing bill should be retained and supplemented by a process in which the Senate Committee on Finance and the House Committee on Ways and Means would be required to review a proposed agreement and recommend to the Congress whether the implementing bill should be eligible or not for the special fast track/trade promotion authority legislative procedures.
      • Legislative Procedures. To protect congressional legislative prerogatives and to ensure close collaboration between the President and the committees of jurisdiction in both Houses of Congress in the drafting of implementing legislation and the statement of administrative action, new fast track/trade promotion authority should require the following congressional actions before implementing legislation is formally introduced: hearings, mark-up sessions and conferences between the House and Senate committees of jurisdiction.
  6. New Tailored Fast Track/Trade Promotion Authority

    • Fast Track/Trade Promotion Authority is Essential. Fast track/trade promotion authority is an essential tool for fair trade and economic growth.
    • Recognizing Differences in Trade Negotiations. The scope and political and economic dynamics of multilateral WTO negotiations and bilateral and regional FTA negotiations are different in many respects. Consideration should, as a result, be given to treating them differently, especially in light of the substantial reforms recommended for improving the congressional–executive relationship in promoting and pursuing international trade negotiations.

      • Permanent Authority for WTO Multilateral Negotiations. Given that multilateral negotiations in the WTO take so long to complete because more than 150 countries are involved, fast track/trade promotion authority should be permanent.
      • Permanent Authority for Defensive Bilateral and Regional Negotiations. In order to keep pace with our major foreign competitors and prevent them using their FTAs to discriminate against American companies and workers, fast track/trade promotion authority for defensive purposes should be permanent.
      • Renewable Authority for Strategic FTA Negotiations. Fast track/trade promotion authority in all other cases should be available on a renewable basis.