Inside US Trade | December 14, 2001
The House-passed fast-track bill and a companion bill reported by the Senate Finance Committee this week would create special consultation procedures regarding potential tariff reductions for more than 200 agriculture commodities, ranging from fresh tomatoes to soybean oil to ice cream. These products fall under the bills' identical technical definition of import sensitive products, for which they set up a number of steps that U.S. negotiators must take before agreeing to new tariff cuts.
The provisions originated in the House as an effort to win the support of Florida congressional members who sought protection for import-sensitive fruits and vegetables as well as sugar. But the bill's definition of the products covered by the special requirements captures a long list of products, including dairy, fresh fruits and fruit juice, vegetables, oilseeds, sugar and sugar syrups, chocolate, tobacco, wine and cotton, among others.
Specifically, the new requirements would apply to all products that were subject to the minimum 15 percent tariff reduction applied to sensitive agricultural products in the Uruguay Round agreements.
A House GOP source said this week that the bill language was meant to cover all import-sensitive products that were subject to the minimum 15 percent tariff cut over six years under the Uruguay Round agriculture agreement. There was "no desire" to limit the provision to fruits and vegetables that were the priority of the Florida delegation, the source said. In the leadup to the Dec. 6 House vote, several incomplete lists were circulated to illustrate what products would be affected by the provision.
The House bill was meant to cover sugar, but Sen. Kent Conrad (D-ND) was not convinced that that the bill's technical definition actually applied to it. As a result, he worked to include into the Senate Finance fast-track bill language that says the special consultation procedures on tariff cuts apply to all agriculture products now subject to a tariff rate quota.
The Senate bill also includes an amendment sponsored by Conrad that would add a new requirement for U.S. negotiators to consider in their deliberations in addition to the ones already established in the House bill. The Senate Finance bill would take into account a country's use of export subsidies and trade-distorting policies in the process of deciding whether to put import-sensitive products on the table in tariff negotiations.
The House provision drew public criticism this week from U.S. trading partners and U.S. business groups, who said the requirements would make it harder for the U.S. to complete trade agreements, including the Free Trade Area of the Americas and at the World Trade Organization.
Australian Agriculture Minister Warren Truss said on Dec. 11, "[Trade Promotion Authority] contains what the Administration has referred to as speed bumps [to tariff negotiations for sensitive products], but which are obviously serious compromises to the ability of the Administration to actually negotiate for freer and fairer trade arrangements." He charged that these requirements would make it close to impossible to negotiate better market access to the U.S. for citrus and sugar, two key Australian exports.
Brazil has also voiced objections about the language, and its impact on FTAA negotiations. According to a Dec. 7 statement released by the Brazilian foreign affairs ministry after House passage of the fast-track bill, "Without prejudging the final outcome of the legislative process, which is still underway, based on a preliminary analysis, the Brazilian government believes worthy of attention the limitations that the text approved by the House of Representatives establishes on the negotiations concerning certain products in which Brazil is widely recognized as being highly competitive."
Brazil's participation in the FTAA will be strongly influenced by the extent to which it believes it can gain U.S. market access for commodities such as orange juice, sugar, tobacco, and beef.
At issue are new procedures for consultation and analysis that the Office of the U.S. Trade Representative would need to undertake on import sensitive products before putting them on the table for negotiations. USTR would have to identify the products considered to be import sensitive, and then consult with the relevant committees -- Agriculture and Ways & Means in the House and Finance and Agriculture in the Senate -- regarding how the domestic industry would be affected by tariff cuts.
Under the House bill, negotiators take into account the impact of a potential tariff cut for an import-sensitive product on U.S. producers, and examine whether the product faces "unjustified sanitary and phytosanitary restrictions, including those not based on scientific principles in contravention of the Uruguay Round agreements." This wording suggests that barriers not in contravention of the Uruguay Round agreement on sanitary and phytosanitary measures could still be considered unjustified by the U.S.
USTR would also have to commission an assessment from the International Trade Commission on the impact of tariff cuts and finally, it must notify the congressional committees of the products for which it intends to seek tariff cuts.
The Senate Finance bill adds a new adds a new factor U.S. negotiators must consider when consulting on the appropriateness of tariff cuts for import-sensitive products -- namely, whether other nations producing a given product maintain "export subsidies or other programs, policies or practices that distort world trade in such products" as well as their impact on U.S. producers.
The Senate language also adds export subsidies as an additional factor in the ITC's assessment of the affect of tariff reductions on the U.S. industry and the U.S. economy as a whole.
With respect to the FTAA, the House language raises questions about whether the U.S. will be able to begin negotiations in May of next year according to the timetables agreed to by FTAA ministers in Buenos Aires, trade sources said. The House bill does not include any timeframes for the congressional consultations or the completion of the ITC report.
Negotiations on market access and on agriculture in the FTAA are scheduled to begin May 15, with an April 1 deadline for negotiators to reach final agreement on modalities for negotiation.
Deputy U.S. Trade Representative Peter Allgeier acknowledged that the provision would result in a higher level of consultation, but said this did not mean that agricultural products subject to it were off the table for negotiations. "What the House has put forward is a very intensified procedure for consultation between the Administration and the various offices of Congress who are concerned about agriculture. We'll go through that procedure," he told reporters Dec. 12.
The House bill defines import-sensitive agricultural products as those whose rate of duty was reduced on Jan. 1, 1995 by the minimum 2.5 percent annual reduction required by the Uruguay Round agriculture agreement.
This definition covers the import-sensitive products that were subject to the minimum 15 percent tariff reduction over the six years of the Uruguay Round agriculture agreement, sources said. Under the Uruguay Round agriculture agreement, countries were required to cut their tariffs by a simple average of 36 percent over the six-year agreement.
The language was inserted to gain the votes of Florida members like Dave Weldon (R), Cliff Stearns (R) and Jim Davis (D), though their fellow Floridians Adam Putnam (R) and Tom Foley (R) rejected the language as insufficient.
Stearns said this week that he was "encouraged" by the language on sensitive agricultural products, naming it as a factor in his decision to vote for fast track, in addition to a desire to support the President and spur economic growth. He said he had told President Bush days before the vote that he would support the bill if his vote were needed to pass it. During the floor vote, Stearns was among the final 20 members to cast a vote.
Conrad had questions of whether sugar was covered because of the technicalities in which the U.S. converted its sugar quota to a tariff-rate quota in the Uruguay Round, which actually slightly raised the above-quota tariff, a Senate aide said. Given that peculiarity, former U.S. negotiators expressed doubts whether sugar was covered by a definition that hinged on a 2.5 percent tariff reduction on Jan. 1, 1995, he said.
Conrad's objective was to cover sugar, but a number of other commodities that were governed by tariff-rate quotas after the Uruguay Round took effect would also be affected, he said.
At press time, it was unclear whether the language added by Conrad would expand the products covered by the new consultation process beyond what is already covered in the House bill.Inside US Trade:
