Ways and means chair says US should drop lagging FTA partners

House Ways and Means Committee Chairman Bill Thomas (R-CA) this week said the U.S. should drop partners in free trade agreement negotiations if talks on those agreements are not progressing. At a Feb. 15 hearing on the U.S. trade agenda, he said the resources of the Office of the U.S. Trade Representative would not be productively spent on "wooing" trading partners that refuse to agree to U.S. boiler-plate demands on FTAs.

Thomas mentioned rules on intellectual property rights and sanitary and phytosanitary barriers as examples of rules where some trading partners have refused to accept U.S. demands. Dropping partners from negotiations would create a sense of urgency in trading partners that would make it more likely that negotiations would be concluded, Thomas suggested.

He also suggested that talks that cannot be concluded after a certain amount of time should be dropped, and noted as an example that congressional bills must be reintroduced every two years if they are not acted on.

"We have to create a sense of timing if not urgency among some of our friends," Thomas said. He said this was also the case for ongoing and existing relationships.

After the hearing, Portman told reporters Thomas suggestion was interesting given that USTR does have limited resources and some FTA partners have been more willing than others to negotiate. "We want to do everything we can to reach these agreements that we have outstanding that I talked about today, but if at some point were not making progress, it might be better to devote our resources to efforts that are more productive," Portman said.

The U.S. is currently negotiating FTAs with Panama, Thailand, Colombia, Ecuador and the United Arab Emirates as well as with five countries under the Southern African Customs Union (SACU). Portman said he expected talks with Panama, Thailand, Colombia and the United Arab Emirates, which all began in 2004, to be concluded this year. Talks with SACU and Ecuador, as well as lagging talks on a Free Trade Area of the Americas, were listed by Portman as continuing in 2006.

The U.S. also recently announced it would begin talks on an FTA with Korea, which Portman hopes to conclude no later than next spring, before fast-track authority expires on July 1, 2007. He said he would like to be able to launch an FTA this year with Malaysia, but said "were not quite there yet."

Portman also said an FTA with Egypt remained a possibility. That FTA has been held up by political issues, including Egypts detention of a presidential candidate.

Talks with SACU in particular have been lagging, and Portman recently suggested USTR might reconsider those talks. Talks with Panama have also barely moved for more than a year, although Portman in recent weeks has suggested an agreement is close.

The Thailand talks are also seen as lagging although Portman at the hearing insisted the last round of negotiations in January was positive. He said the U.S. still had issues with Thailand on intellectual property rights, agriculture and financial services, and that as a result they are not at the point of talking about the 25 percent tariff the U.S. imposes on trucks.

In response to a question from Rep. Dave Camp (R-MI), Portman noted suggestions that Thailand could become a platform from which other foreign auto makers would send cars to the U.S. that would benefit from preferential treatment under an FTA. He called this a "legitimate concern" that USTR should focus on in the talks.

The main auto workers union has lobbied against lowering the 25 percent truck tariff, and last year 40 senators called on USTR to exclude it from a Thailand FTA with the argument that Japanese, Korean and other companies might ship trucks to the U.S. from Thailand. However, one private-sector source noted that the current tariff on cars from Thailand is about 2.5 percent, and that country exports few cars to the U.S. This source said foreign car makers would be more likely to set up operations in the U.S. or Mexico to increase sales in the U.S.

While suggesting that some FTAs should be dropped, Thomas endorsed a U.S. policy of aggressively pursuing bilateral FTAs in his opening statement. He said U.S. exports have gone up with FTA partners at twice the rate of exports to the rest of the world, and he also argued that this would spur progress in talks on the Doha round.

However, Thomas was skeptical that the WTO talks would be concluded as planned by the end of 2006, and asked Portman why countries that were unwilling to move at the December 2005 Hong Kong ministerial would be willing to move by an April 30 deadline to agree to specific negotiating formulas in agriculture and industrial market access, or by the end of 2006. He blamed the EU, Japan, Brazil and India for the lagging talks.

"Im concerned about how we deal with these dynamics of whether we dont think about creating a new dynamic," Thomas said. At the same time, he said the WTO remained the best opportunity for the U.S to liberalize trade.

Rep. Benjamin Cardin (D-MD) questioned whether plurilateral offers in the WTO services negotiations will be successful in moving those talks forward, as he said this could lead to a "race to the bottom instead of the top" with groups of countries only offering minimal commitments. Portman said he understood Cardins point, but said bilateral offers have not worked in the past and a plurilateral approach was successful in negotiating WTO commitments on telecommunications.

Portman said the U.S. would have a better idea on the effectiveness of the plurilateral approach by the end of the month, as offers are due on Feb. 28.

Portman also said he thinks there should be a "mini-ministerial" of WTO leaders specifically on services. He said EU Trade Commissioner Peter Mandelson had previously endorsed this concept, and that it was a good idea. A spokesman for Mandelson said the EU hoped such a meeting could be organized in April ahead of a meeting in Geneva at the end of April, when members face a deadline for agreeing to specific formulas in agriculture and industrial market access.

On other issues, Portman repeated that he expects to implement the Central American Free Trade Agreement with two of the six countries by March 1. Those countries are expected to be El Salvador and Nicaragua.

Under questioning from Ways and Means Ranking Member Charles Rangel (D-NY) and other committee Democrats, Portman pledged to aggressively pursue restrictions such as non-tariff barriers in the Korean negotiations that Democrats charge prevent U.S. automobile sales in that country.

Portman also reiterated that while the U.S. is open to negotiations to solve the dispute with the European Union on aircraft subsidies, such talks are not possible unless EU governments first renounce all forms of launch aid. He pledged to move forward aggressively with the case and said he did not believe new filings by the U.S. and EU would delay the litigation in the WTO.

Few if any of the exchanges between Portman and committee Democrats were combative, and Rangel and other Democrats on several occasions praised Portman, who served on Ways and Means before becoming USTR last spring. Cardin, the ranking member of the trade subcommittee, did say that the U.S. would be moving backward if it moved forward with FTAs that did not call on countries to have their laws reflect the standards of the International Labor Organization. Several Democrats also called on the USTR to ensure U.S. trade laws are not weakened by a WTO agreement.