WALL STREET JOURNAL | November 16, 2001 | By ROBERT GUY MATTHEWS, TIMOTHY AEPPEL and JEFFREY BALL, Staff Reporters of THE WALL STREET JOURNAL
Although it will be years before a new round of world trade negotiations reach their conclusion, U.S. industrial leaders reacted swiftly, with some welcoming the chance for a more equal global playing field and others saying it will hurt domestic producers.
Steelmakers were outraged and textile makers were pleased but cautious following news that the 142 nations of the World Trade Organization finally agreed to a new round of trade talks, scheduled to wrap up in 2005. Pharmaceutical companies tried to put the best spin on the development, saying the short-term impact won't be significant, but worrying about major long-term consequences. Auto makers welcomed the opportunity to sell more goods abroad, as did the trade association representing major manufacturers.
The U.S. steel industry's greatest concern is an agreement to renegotiate antidumping laws, which have become the industry's strongest weapon in its continuing fight to keep out low-priced foreign steel, and say they will pressure Congress to prevent watering down those laws. "We are very concerned that [U.S. Trade Representative Robert] Zoellick has put our trade laws on the discussion block, particularly with all the support we have had in Congress on both the House and Senate side," said Daniel DiMicco, chief executive officer and chairman of Nucor Corp., the country's No. 2 steelmaker, behind USX-U.S. Steel Group. "Trade laws shouldn't be weakened." To help press the industry's case, Leo Gerard, president of the United Steelworkers of America union, is calling on support from auto workers, machinists and electricians unions, who he said risk job loss if existing antidumping laws are relaxed. "We will put together a grass-roots education program for members of Congress," he said.
Also concerning the industry is whether the administration's agreement to renegotiate antidumping laws signals less intent by the Bush administration to enact in January, as expected, a stringent law that would severely limit the number of imports entering the country. Some industry executives remain confident in the administration's efforts. "Ultimately for the industry's long-term success we are dependent on a healthy economy and we have to put some faith and trust in our officials to achieve a balancing act," says Robert S. Miller, newly appointed chief executive officer of Bethlehem Steel Corp., the third-largest steelmaker, which recently filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
While steelmakers opposed the trade agenda, steel importers and consumers applauded it. Dave Phelps, president of the American Institute for International Steel, a lobbying group that represents steel importers, said negotiating the laws would be beneficial in the long run by rewarding the best steelmakers, no matter which country makes the steel. Likewise, the U.S. auto industry, as major consumers of steel, said that any change in antidumping laws making foreign steel less expensive could help push down the price of domestic steel.
More important, the auto industry welcomes tariff reductions and more-open trade policies as a means to sell more cars abroad. "Ultimately, the outcome will be more-liberal trade," says Charles Uthus, vice president of the Automotive Trade Policy Council, a Washington-based group that represents General Motors Corp., Ford Motor Co. and DaimlerChrysler AG on international-trade issues.
U.S. auto makers are particularly interested in seeing reduced tariffs in China, a potentially huge market for cars and trucks from Detroit's producers. The U.S. auto industry is cheering China's inclusion in the WTO, but wants to see how China handles specific pressure to reduce its trade barriers as the talks progress. "That will be a challenge going forward," says William Kelly, director of international governmental affairs for Ford. In 2000, Ford sold about 6.5 million vehicles in developed countries world-wide, and about 800,000 in developing countries.
Many smaller developing nations also are on the U.S. auto industry's wish list. Malaysia, for instance, imposes tariffs on some imported vehicles of as much as three times the vehicle's price, and its government has set up a program to nurture the development of the Proton, a small car built by a Malaysian company.
"America's manufacturers still face some very high trade barriers overseas," says Frank Vargo, trade expert for the National Association of Manufacturers, a Washington-based industry group. He cites the example of "machinery," a vast trade category that includes everything from power turbines to printing machines. The official tariffs on U.S.-made machinery sold in South America and Southeast Asia average over 30%, although many developing countries actually assess lower tariffs, averaging about 15% to 20%.. "But that's still very much higher than ours," says Mr. Vargo. The corresponding U.S. tariffs on imports of such products is 1.2%.
The manufacturers group wants the U.S. to keep this in mind when it negotiates. One common method in past talks was to forge agreements calling for uniform percentage decreases, such as 50% cuts, in official tariffs. In the case of machinery, however, that might mean developing countries merely cutting their official tariffs to match the informal rate, while the U.S. tariffs are already so low that they are virtually nothing. The organization is pushing for a provision that would allow agreements to lower industrial tariffs to zero across the board in sectors, such as medical equipment, that broadly agree to do so.
U.S. textile interests were pleased but cautious about the agreement and plan to meet with U.S. negotiators to see what specific direction the talks will take. Carlos Moore, executive vice president of the American Textile Manufacturers Institute in Washington, said he wants clearer language on antidumping issues and what the term "special treatment" exactly means for developing countries.
On the service side, the insurance industry hopes in this new round to expand on the gains it made in a 1997 trade pact relating to banking, securities and insurance markets. "If they offered us 60% ownership before, we want to take it to 100%," said Brad Smith, managing director of international relations for the American Council of Life Insurers. "If they taxed us differently, we want it ironed out."
U.S. insurers see huge growth opportunities in Asia, especially China. "It's a market that eventually will be the largest in the world," said Alice Schroeder, an insurance analyst at Morgan Stanley. John Savercool, with the American Insurance Association, representing property-casualty insurers, said the demographics of certain "target countries," such as India with its emerging middle class, were particularly attractive to insurers looking to sell retirement products. But he said limits on foreign ownership and outdated regulatory bodies prevented U.S. firms from capitalizing on the growth of those markets. "In India, foreign ownership is capped at 26%," Mr. Savercool noted.
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Issues at Hand
The 10-page declaration adopted by ministers at the World Trade Organization meeting agrees to negotiations among the organization's 142 members. It sets a deadline of Jan. 1, 2005 for completing the talks covering the following issues:
Agriculture: Cuts in tariffs, reductions of export subsidies "with a view to phasing out" substantial reductions in trade-distorting domestic subsidies.
Services: Increasing access for banking, insurance and other companies and increasing opportunities for people to work in other countries.
Nonagricultural goods: Reducing and eliminating tariffs and other barriers, particularly on products that are important to developing countries.
WTO rules: Subsidies for goods like steel and textiles and when "anti-dumping" duties can be imposed on them, improvements to the system for settling disputes.
Environment: The relationship between WTO rules and international environmental treaties, reducing or eliminating tariffs on environmental goods and services, fisheries subsidies.
Other issues: Include investment, competition policy, transparency in government procurement and customs procedures, all of which could be subject to negotiations in two years, if all governments agree.
Source: Associated Press
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The other major industry disappointed with WTO talks, aside from steel, was pharmaceuticals, which opposed wording in the declaration that affirmed the rights of developing countries to buy less-expensive, generic versions of patented drugs when needed to address public-health problems.
Even so, drug executives and lobbyists argued that they hadn't lost much. The drug companies said that the declaration, a political statement, didn't change world trade agreements regarding patent rights.
-- Christopher Oster and Dan Morse contributed to this article.WALL STREET JOURNAL:
