Schwab calls on services industry to increase trade lobbying efforts

U.S. Trade Representative Susan Schwab this week told members of the services industry that they are leaving too much of the lobbying for approval of trade agreements to agriculture groups, which are taking on that effort to an extent that is disproportionate to the importance of agriculture for the U.S. economy.

She pointed out that Federal Express in Tennessee and the Principal Financial Group in Iowa have more employees in those two states than there are farmers, but said the relative importance of services jobs to the U.S. economy is not reflected in services industry lobbying. She implied the service industry's efforts in Congress regarding trade liberalization lagged compared to its work on tax issues relevant to the industry.

"When you look at the relative proportion of agriculture versus industry versus services in this economy, you all have a ways to go [in terms of lobbying for trade liberalization]," she said in an Oct. 4 speech to the Coalition of Services Industries.

She urged the services industry collectively and on the individual company level to intensify their lobbying and outreach efforts for trade liberalization. She said this effort needed to be made particularly with state and local officials, but also members of Congress and international industry representatives.

"Future liberalization initiatives will be in peril if we do not pay attention to what is going on in states and localities" in terms of trade, Schwab said. She charged that there are "outlandish claims" on the state and local level about how trade initiatives curtail the ability of state and local officials to regulate domestic public health and safety.

"There needs to be a reality check" on these issues, and services companies are in a much better position to provide it on the local and state level than USTR will ever be, she said.

Local officials and state legislators need to understand that the General Agreement on Trade in Services does not overrule their ability to regulate and that signing on to an obligation in trade agreements to refrain from discriminating against foreign suppliers is not the same as requiring deregulation or privatization, she said.

She announced that USTR plans to strengthen its outreach effort to states, which have long complained that USTR negotiates services and government procurement obligations both multilaterally and bilaterally without adequate consultation. The new outreach effort will focus on providing states with more information, according to a USTR spokesman.

The Intergovernmental Policy Advisory Committee (IGPAC) has repeatedly criticized USTR for negotiating international obligations on investment, services and government procurement without sufficient consultation with states. Most recently, that criticism was expressed in its formal assessment of the U.S.-Colombia FTA released by USTR last week.

IGPAC has also had reservations about USTR's reciprocity policy on government procurement, which was applied for the first time in the Peru FTA (Inside U.S. Trade, March 3). The policy, designed as an incentive to encourage states to participate in the procurement provisions of FTAs, offers reciprocal sub-federal market access in other countries for only those businesses located in states which acceded to the procurement provisions in a given FTA.

IGPAC advised USTR in an August 2004 memo that this policy "may seem punitive rather than constructive" and that a better way to encourage states to sign on to procurement provisions in FTAs would have been to improve information-sharing procedures with state-level decision makers.

Schwab charged that state-level activities on government procurement and trade leads one to conclude that these officials do not realize the fact that slightly more than half of foreign direct investment in the United States was in services in 2004, and that this investment supports 3.5 million jobs, with the largest number in California.

In other areas, Schwab defended the Bush Administration's push for bilateral FTAs in addition to working on the Doha round by emphasizing that these bilaterals set standards and precedents for the treatment of investment, services and intellectual property protection that she wants to move into the World Trade Organization.

She said that both the Doha round and the FTAs are fully consistent with efforts to help developing countries and said the single most trade-generating step a developing country could take would be to unilaterally open its services market. This would create the infrastructure for foreign investment and for local entrepreneurs, according to Schwab. She cited India as an example, where economic growth has been most pronounced since 1994 in areas where the country has opened its market, such as information technology and telecommunications.