US strengthens its trade enforcement apparatus, atleast on paper

The United States created an Interagency Trade Enforcement Center by a Presidential order on 28th February 2012 which essentially had this mandate:

"Sec. 3. Mission and Functions. The Center shall:

(a) serve as the primary forum within the Federal Government for USTR and other agencies to coordinate enforcement of U.S. trade rights under international trade agreements and enforcement of domestic trade laws;

(b) coordinate among USTR, other agencies with trade related responsibilities, and the U.S. Intelligence Community the exchange of information related to potential violations of international trade agreements by our foreign trade partners; and

(c) conduct outreach to U.S. workers, businesses, and other interested persons to foster greater participation in the identification and reduction or elimination of foreign trade barriers and unfair foreign trade practices."

The underlying rationale of the new Authority was clearly stated,

" Robust monitoring and enforcement of U.S. rights under international trade agreements, and enforcement of domestic trade laws, are crucial to expanding exports and ensuring U.S. workers, businesses, ranchers, and farmers are able to compete on a level playing field with foreign trade partners. To strengthen our capacity to monitor and enforce U.S. trade rights and domestic trade laws, and thereby enhance market access for U.S. exporters, executive departments and agencies (agencies) must coordinate and augment their efforts to identify and reduce or eliminate foreign trade barriers and unfair foreign trade practices to ensure that U.S. workers, businesses, ranchers, and farmers receive the maximum benefit from our international trade agreements and under domestic trade laws."

USTR Ambassador Kirk justified the creation of the new agency thus:

“This new trade enforcement unit will better enable USTR and the Department of Commerce to join forces - with the support and collaboration of partner agencies like Agriculture, Homeland Security, Justice, State, Treasury and the Intelligence Community - to ensure that America’s trading partners play by the rules. It will help American workers and businesses compete and win on a fair global playing field.”

Prestowitz in this piece in the Foreign Policy while analysing the new Authority's mandate was doubtful if this was the right policy to pursue since he felt that the US needed a Competitiveness strategy to enhance US competitiveness rather than an enforcement strategy.

"But the question at this point has become whether the laws and the deals really can be enforced in any meaningful way. Of course, anti-dumping investigations can be undertaken and duties imposed and subsidies can be countervailed if proven to be doing damage. But these kinds of actions have a very narrow focus, proceed at the pace of molasses in winter, take enormous time and energy, and always occur after most of the damage has already been done. This kind of enforcement is not useless, but it is not likely to change behavior or the nature of the economic interaction. Broader cases against industrial and other policies that effectively nullify the concessions and undertakings of trade agreements can be filed in the WTO and probably should be. But the WTO rules are not always clear cut and in any case are not well tested in many areas, nullification and impairment being one of them. Moreover, a flood of actions in the WTO against a country like China will be seen as a hostile action and is likely to engender tensions with Beijing that could be quite uncomfortable. This will make the US. and other Governments hesitate to act decisively. Most importantly, the rules are often vague and subject to interpretation. Many of the most powerful policies and practices that hinder market access or that distort markets, such things as implicit investment guarantees in key industries or control of distributors by major producers are not clearly illegal and, in any case, are tools that are being used by various U.S. states or that the United States might want to use in the future."

Housed at USTR, the center will include trade lawyers, researchers, economic analysts and foreign-based personnel.This is seen as a major attempt by the United States to address trade agreement violations, especially in the context of China. The establishment of the center is closely linked to the US policy of driving exports, protecting domestic industry interests as well as ensuring reduction of trade barriers to US industry outside. This is a classic case where the "State" is taking a proactive step in protecting its domestic industry interests within and outside. Will the creation of this Center lead to an increase in WTO cases filed by the US against its trading partners? The creation of the Center is a lesson for other countries to put domestic interests in the forefront while engaging with the outside world in international trade. Pursuing domestic interests, within the context of international trade rules, need not necessarily be viewed as "protectionist". The only caveat to that is that the standards one applies to the outside world should be also followed in letter and spirit.Credibility in actions is as important as protecting one's interests.

Trade, Security and a National Strategy

As reported here, the United States released a paper called the National Strategy for Global Supply Chain Security which highlights the importance of the international supply chain in the context of international trade today. Weaving national security, international trade, global supply chains and domestic policy interests into one continuum, this Strategy does not view national security and increasing economic growth and economic efficiency as necessarily contradictory.

The two main goals of this strategy being promoting the efficient and secure movement of goods and fostering a resilient supply chain, the paper argues,

"International trade has been and continues to be a powerful engine of United States and global economic growth  In recent years, communications technology advances and trade barrier and production cost reductions have contributed to global capital market expansion and new economic opportunity The global supply chain system that supports this trade is essential to the United States’ economy and is a critical global asset,

 Through the National Strategy for Global Supply Chain Security (the Strategy), we articulate the United States Government’s policy to strengthen the global supply chain in order to protect the welfare and interests of the American people and secure our Nation’s economic prosperity  Our focus in this Strategy is the worldwide network of transportation, postal, and shipping pathways, assets, and infrastructures by which goods are moved from the point of manufacture until they reach an end consumer, as well as supporting communications infrastructure and systems."

 Laying down a detailed roadmap of how the strategy will be implemented across stakeholders, it concludes thus,

" The global supply chain system that we seek will support innovation and prosperity by expeditiously, securely, and reliably moving goods and services within our domestic borders and around the world  This Strategy stands as testimony to partners, as well as warning to adversaries, that our efforts to strengthen this vital system will continue  We will build upon the solid foundation of previous efforts but also look ahead to the future we are working to create  Our Strategy is therefore one of continuity and of change The threat of natural disasters remains, and the global supply chain and its components continue to be attractive targets for terrorist attacks and criminal exploitation  And while the security of our citizens and our nation is the paramount concern, we must work to promote America’s future economic growth and international competitiveness by remaining open for businesses to the world."

International supply chains in the globalised trade world are common. However, this is perhaps the first "national strategy" addressing it in the context of national security. It is rare to come across a document piloted by the Department of Homeland Security about international trade and supply chains. Strange bedfellows in the context of changing times? Will the implementation of this strategy have an impact on multilateral trade rules?

Will the USTR go away?

The President of the U.S. is seeking to bring in the Consolidation Authority Act which would give him the power to reorganise the federal government departments by merging and consolidating them. It is proposed to be used first in the field of trade and business.

This release from the office of the U.S. President summarises the proposal:

"The President will also lay out his first proposed use of that authority: consolidating six agencies into one more efficient department to promote competitiveness, exports and American business. The President knows this is a make or break moment for the middle class and those trying to reach it.  The President’s proposed reorganization would help small businesses grow and, in doing so, would help get more Americans back to work.

...

The President’s first focus under the Consolidation Authority Act would be to make it easier for America's small businesses – which are America’s job creators – to compete, export and grow.  

Currently, there are six major departments and agencies that focus primarily on business and trade in the federal government.  The six are: U.S. Department of Commerce’s core business and trade functions, the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency.  

This is redundant and inefficient. Small businesses often face a maze of agencies when looking for even the most basic answers to the most basic questions. There is a whole host of websites, toll-free numbers and customer service centers that at times offer them differing advice. The result is a system that is not working for our small businesses.  

The President is proposing to consolidate those six departments and agencies into one Department with one website, one phone number and one mission – helping American businesses succeed. 

One Department: there will be one Department where entrepreneurs can go from the day they come up with an idea and need a patent, to the day they start building a product and need a warehouse, to the day they are ready to export and need help breaking into new markets overseas. 

The new Department will lead the development and implementation of an integrated, strategic, government-wide trade effort and have a focused capacity to help businesses grow and thrive."

The proposed move has been criticised citing the efficiency of the functioning of the USTR presently. Will the USTR whither away? India has a similar model of a combined agency - the Ministry of Commerce which deals with all matter relating to trade policy and implementation, including multilateral negotiations.

An interesting aspect of the rationale for the merging of the different agencies is the emphasis on the role Government has to play in furthering the interests of trade and domestic business interests in the global world.It visualises a proactive Government promoting American industry to boost exports and facilitate breaking into new market oversees. It is another pointer that while the WTO multi-lateral trading system does lay down the framework for reduction fo trade barriers and a globalised world, it does not imply that Governments should not play an assertive and interventionist role to promote domestic industry to compete in the international market. This assertive and interventionist role is definitely limited by the country's WTO commitments. However, there would be enough scope to creatively utilise this space.