February 27, 2020
What could stand in the way of increasing US exports? Rates
United States Trade Representative (USTR) Katherine Tai, in releasing the 2021 National Trade Estimate (NTE) Report, provided a detailed inventory of significant foreign barriers to U.S. exports of goods and services, investment and electronic commerce.
The 570-page report examines 65 trading partners and country groups, including the U.S.’ largest trading partners, all 20 U.S. free trade agreement (FTA) partners, and other economies and country groupings of interest such as the Arab League, the U.K. and the European Union (EU). Together, these economies account for 99 percent of U.S. goods trade and 87 percent of U.S. services trade.
The NTE Report covers significant trade barriers in 11 areas, including import policies such as tariffs, import licensing and customs barriers; technical barriers to trade; sanitary and phytosanitary measures; subsidies; government procurement; intellectual property protection; services barriers; barriers to digital trade and electronic commerce; investment barriers and competition.
“The President’s Trade Agenda released earlier this month outlined a clear vision for supporting America’s working families by promoting a fair international trading system that boosts inclusive economic growth,” Tai said. “The 2021 NTE Report identifies a range of important challenges and priorities to guide the Biden Administration’s effort to craft trade policy that reflects America’s values and builds back better.”
Taken as a whole, the NTE Report highlights significant barriers that present major policy challenges with implications for future U.S. growth opportunities, and the fairness of the global economy.
In areas effecting the fashion industry, the NTE report highlight that U.S. footwear and apparel companies have expressed concern about non-automatic import licensing and certificate of origin requirements for footwear, textiles and apparel from countries such as Brazil and Argentina. They also note additional monitoring, enhanced inspection and delayed release of certain goods, all of which negatively impact the ability to sell U.S.-made and U.S.-branded footwear, textiles and apparel in the Brazilian market.
USTR said India maintains several export-subsidy programs, including exemptions from taxes for certain export-oriented enterprises and for exporters in special economic zones. Numerous sectors, including textiles and apparel, receive various forms of subsidies, including exemptions from customs duties and internal taxes.
“India not only continues to offer subsidies to its textiles and apparel sector in order to promote exports, but has also extended or expanded such programs and even implemented new export subsidy programs,” the report said. “As a result, the Indian textiles sector remains a beneficiary of many export promotion measures.”
As for China, USTR said China’s trade policies and practices in several specific areas cause particular concern for the United States and U.S. stakeholders. In tariffs, the report noted that in April 2018, China imposed tariffs ranging from 15 percent to 25 percent on a range of agricultural, steel, and aluminum products imported from the United States in retaliation against the U.S. decision to adjust U.S. imports of steel and aluminum articles under Section 232 of the Trade Expansion Act of 1962, as amended.
In 2018, China also imposed a series of retaliatory tariffs following U.S. action under Section 301. Specifically in July and August 2018 it imposed tariffs of 25 percent on $34 billion and $16 billion, respectively, in U.S. imports, and, in September 2018, China imposed 5 percent to 10 percent tariffs on $60 billion in U.S. imports. Separately, in 2018, China announced a series of MFN, or most favored nation, tariff reductions. According to China’s Ministry of Finance, these steps reduced China’s average MFN applied tariff rate from 9.8 percent to 7.8 percent by the end of 2018.
“China’s state-led approach to the economy and trade makes it the world’s leading offender in creating non-economic capacity, as evidenced by the severe and persistent excess capacity situations in several industries, including steel, aluminum, and solar, among others,” the report said in regard to “excess capacity.”
“China also is well on its way to creating severe excess capacity in other industries through its pursuit of industrial plans such as Made in China 2025, pursuant to which the Chinese government is doling out hundreds of billions of dollars to support Chinese companies and requiring them to achieve preset targets for domestic market share–at the expense of imports–and global market share in several advanced manufacturing industries,” it added. “USTR will continue its bilateral and multilateral efforts to address these harmful trade practices.”
In the area of digital trade, the report details restrictive data policies in India, China, South Korea, Vietnam; local software pre-installation requirements in Russia; Indonesian tariffs on digital products; existing or proposed local content requirements for online streaming services in Australia, Brazil, Canada, China, the EU, Mexico, Ukraine, and Vietnam, and discriminatory tax measures in Austria, India, Italy, Spain, Turkey, and the UK.
USTR said it will continue to engage foreign governments on digital policies that threaten the regulatory landscape for U.S. exporters of digital products and services and undermine U.S. manufacturers’ and service suppliers’ ability to move data across borders.
In the area of “technical barriers to trade,” USTR said technical regulations or conformity assessment procedures that unnecessarily restrict trade or curb the movement of innovative products risk lost opportunities to capitalize on America’s leadership in science and high-tech manufacturing, services, and agriculture. The NTE Report’s many examples of this challenge range from non-transparent EU chemical regulations to Chinese information technology cybersecurity and encryption standards, to Indian and Brazilian testing and certification rules for telecommunications equipment.
“The United States is taking steps to address these issues, and encourage flexible regulatory approaches and transparent, open processes, with these and many other partners,” the report said. “Within APEC, for example, the United States is engaged in projects on cybersecurity and blockchain to identify key public policy issues, and has projects in development on aerial drones and 3D printing. Another key example is USTR’s bilateral and multilateral work on standards and regulations related to electric cars, to ensure that vehicles from different manufacturers can all be charged reliably.”
The NTE Report details thousands of individual barriers to specific manufactured goods, farm products and services. Each can reduce U.S. opportunities to export, invent, support jobs, and raise wages and incomes, USTR said.
These range from Brazil’s relatively high tariffs on imports across a wide range of sectors, including textiles and apparel; Argentina’s imposition of quota limits on imported books in September to India’s 38.8 percent average tariff on agricultural goods; the anomalous technical standards Saudi Arabia applies to shoes and electronic equipment; Ecuador’s mandatory and cumbersome process for allocating import licenses for agriculture products such as meats and dairy products; Indonesian local content requirements across a broad range of sectors and Russian bans on imported food.
USTR said it plans to release its annual Special 301 Report on the adequacy and effectiveness of trading partners’ protection of IP rights by April 30.