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Info Service on WTO and Trade Issues (Feb25/04) Bangalore, 10 Feb (D. Ravi Kanth) — The Trump administration’s nominee for the United States Trade Representative (USTR), Mr Jamieson Greer, on 6 February suggested that Washington could escalate the use of its controversial domestic trade instrument, namely Section 301 of the US Trade Act of 1974, against countries that have apparently failed to address the issue of alleged illegal trade barriers against American goods. Mr Greer informed members of the Senate Finance Committee that the US would not hesitate to use Section 301 against countries that are allegedly denying market access to American goods and companies. He almost ignored the World Trade Organization either in resolving trade disputes or securing new market access through multilateral trade negotiations. Significantly, the previous Biden administration did not invoke dispute settlement proceedings against any country at the WTO. The Senate hearing came in the wake of the Trump administration’s proposed unilateral tariff of 25% on all goods originating from Canada and Mexico on grounds that they failed to stop the flow of illegal migrants and supplies of fentanyl into the US, as well as the implementation of a 10% tariff on all Chinese goods. During the three-hour confirmation hearing at the Senate Finance Committee, several members of the Committee grilled Mr Greer on a range of issues. For example, Mr Greer was asked how he would handle trade disputes with countries in the face of a dysfunctional Appellate Body at the World Trade Organization. He was also asked whether the imposition of tariffs across the board, as against China wherein Chinese goods have been subjected to an additional 10% tariff since 4 February, as well as the 25% tariff on goods from Mexico and Canada that are being paused for one month, will cause more price increases and inflation in the US market. The Senate Finance Committee members sought to know from Mr Greer how the market access commitments made by China to buy several American farm products during the Trump administration will be addressed in the next couple of months. The senators asked how the digital taxes imposed by several countries against American internet companies will be resolved. OPENING STATEMENT In his opening statement at the Senate Finance Committee, Mr Greer indicated that he would work on a “pragmatic” trade policy to ensure reciprocal market access from trading partners while building a robust domestic industrial manufacturing base. “If the United States does not have a robust manufacturing base and innovation economy, it will have little in the way of hard power to deter conflict and protect Americans,” Mr Greer said, while sharing President Donald Trump’s concerns about the US trade deficit. Earlier, Mr Greer had worked closely with the former USTR, Ambassador Robert Lighthizer, during the Trump administration’s first term. He seemed to echo his former boss’s position on the need to build a strong domestic manufacturing base. He said: “Trade policy can play an important role in ensuring that we have economic security that leads to national security. I am convinced that we have a relatively short window of time to restructure the international trading system to better serve US interests.” Mr Greer indicated that he expects “in short order” that the US will ask countries that currently have a huge trade surplus with the US to provide reciprocal market access if they want market access to the American market. He suggested Vietnam as an example to demand more market access for American goods. The “America First Trade Policy” memo issued on 20 January calls on the USTR to identify possible free trade agreements and sectoral trade agreements to pursue in the next four years. “The United States Trade Representative shall review existing United States trade agreements and sectoral trade agreements and recommend any revisions that may be necessary or appropriate to achieve or maintain the general level of reciprocal and mutually advantageous concessions with respect to free trade agreement partners.” The memo also calls on the USTR to “identify countries with which the United States can negotiate agreements on a bilateral or sector-specific basis to obtain export market access for American workers, farmers, ranchers, service providers, and other businesses and shall make recommendations regarding such potential agreements.” However, the memo does not pay any attention to either reforming the WTO or restoring the two-stage dispute settlement system. Mr Greer effectively conveyed the message that resolving the tariff-related trade disputes, wherein the US wants other countries to bring their tariffs to its current level of not more than 3%, will be piloted through Section 301 after making substantial investigations. He does not mention the WTO or how the US should pursue its concerns at the 166-member multilateral trade body. With the emphasis on bilateral and sectoral trade agreements, the US may not use the WTO, particularly for enforcing decisions, according to Mr Greer’s answers to the senators. VARIOUS QUESTIONS Given the decisions at the WTO on commitments by other countries on agricultural subsidies, which are not enforced, one senator sought know how the USTR-nominee will resolve the disputes. “No, Senator, I think you’re exactly right and that’s part of the reason why I show skepticism sometimes about the WTO because we get to win a case, we get a result, and then it’s not fixed or it’s fixed on the surface,” Mr Greer said. Elaborating further on the mechanics of winning a trade dispute and its subsequent implementation by a country that was found to have impaired market access, Mr Greer said: “if you’re trying to get rid of a trade barrier, there are a few ways to do it, right? You can try to negotiate it, which is on its face not always successful if you don’t have the leverage behind it. If you have a case, you have some legitimate authority to go to them and say to change it. We also have domestic laws, like Section 301 and others, that can identify and detect unfair trading practices. Now, 301 and all those are kind of like economic necessity.” When asked whether the US should rely more on domestic trade instruments, Mr Greer said, “So I think we need to use any tools we have available to get relief so we can have the market.” However, the USTR-nominee also suggested that “if we can use the WTO effectively to negotiate rules or to get a good panel result, that’s fine.” “And at the end of the day, what that means is USTR has to go to the country and enforce the law,” Mr Greer said, adding that “sometimes that means imposing tariffs on them. We say trade enforcement, that means tariff law.” The issue of forced labour and how it is allegedly being used in various countries came up several times during the hearings. The USTR-nominee was specifically asked whether Section 301 would be used to address forced labour issues. “Well, there’s a process and you know Section 301 and other Statutes have a process behind them, if I prejudge them, I get in trouble in the Court, right?” Mr Greer said. On China allegedly not implementing environmental regulations, the USTR-nominee said that, “I think there’s an unlevelled playing field and I think that other countries take advantage of total lack of environmental regulation and we’ll differ obviously in our country on the appropriate level of environmental regulations but we’re cleaner than these other places in the way we manufacture and I think it would be interesting to explore with you and the rest of the committee how do we actually address that issue and I think we do have to think of creative notions on how to do it.” In this regard, in his memo on 20 January, the President has directed the Office of the USTR to conduct thorough investigations on China and other countries. As regards taxes imposed by several countries on digital trade in services, Mr Greer said that “we took action (during the first Trump administration) under Section 301 to combat discriminatory digital services taxes.” He said, “there are many jurisdictions in the world right now that are doing this and other measures to try to control the business models of our digital champions, and I want to make sure that if anybody’s regulating our digital company, it’s going to be us, and they can’t discriminate against it, and I think that we need to explore using Section 301 and other measures to make sure that we’re able to stay competitive globally.” TRADE WAR During the hearings, Senator Elizabeth Warren said, “tariffs are an important strategic economic tool but I am concerned that President Trump is stumbling into a trade war that won’t protect jobs, that won’t keep Americans safe, and that won’t bring down costs for American families.” More importantly, she said that “for too long US trade policy has been a race to the bottom with deal after deal that sold out American workers and helped multinational corporations offshore (in) critical industries.” Senator Warren said that problems in the US trade relationships, including with China, can be traced to “the political establishment, of both the Republican and Democratic parties, under the influence of multinational corporations and importers.” She asked whether Mr Greer agrees with Mr Lighthizer that “multinational corporations have just had too much power over US trade policy?” The USTR-nominee concurred with the remarks made by Senator Warren, saying that “I believe that trade policy in the past has been designed to help that sector and has ignored other sectors.” As regards the growing exemptions secured by corporations in the face of additional tariffs imposed by the US administration and “favouring foreign companies over American ones,” Mr Greer said that “I think that our trade policy needs to make sure that we have American businesses and American workers prioritized.” In short, the unilateral tariff hikes imposed by President Trump suggest that Washington could create more turmoil in the global trading system by attenuating international as well as domestic institutions, said Daron Acemoglu, the Nobel laureate in economics, in his signed article in the Financial Times on 10 February. +
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