Category: Press Releases and Statements

NFTC and Other Members of Visa Policy Coalition Press Congress for National-Interest-Based Reform

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Reinsch Says Current Visa Policy Hurts U.S. Competitiveness

Washington, DC ­ National Foreign Trade Council (NFTC) President Bill Reinsch today participated in a joint policy briefing on Capitol Hill to urge Members of Congress to reform current U.S. visa policy to establish a national-interest-based system, which welcomes international business and academic visitors, and helps to bolster U.S. competitiveness. The briefing was hosted by a newly formed, broad-based coalition of trade associations concerned about the current state of U.S. visa policy, including NAFSA: Association of International Educators, the NFTC, the Coalition for Employment Through Exports, the Heritage Foundation and the Alliance for International Educational and Cultural Exchange.

“ America has become the world’s leader in significant part because for more than 200 years, we have taken in smart, hard-working people from all over the world,” said Reinsch. “They have stayed here, become inventors, artists, researchers, and the backbone of our industrial base, contributing immeasurably to our GDP and to our culture.”

However, citing numerous examples of how current U.S. visa policy is unwelcoming to international business and other visitors, Reinsch warned, “We are in the process now of throwing that away and telling a generation of foreigners they are not welcome here – as businessmen, as employees, as students, as tourists. And we are doing this at precisely the time when competition for talent is the most intense globally.”

In late January, the coalition of academic, exchange and trade groups released new visa policy recommendations, titled “Realizing the Rice-Chertoff Vision: A National-Interest-Based Visa Policy for the United States.” The recommendations call on Congress and the Administration to take a clear set of actions to reform U.S. visa policy.

“Realizing the Rice-Chertoff Vision” recommends that Congress:

  • Restore to the Secretary of State the authority to grant U.S. consulates discretion to waive the personal interview requirement based on risk assessment;
  • Strengthen and expand the Visa Waiver Program; and
  • Exercise vigorous oversight of Executive Branch implementation of the Rice-Chertoff vision, especially those that pertain to the coalition’s recommendations regarding the Executive Branch.

The coalition further recommends that the Executive Branch:

  • Articulate a clear, operational visa policy that fully realizes the Rice-Chertoff vision; and
  • Improve efficiency, transparency, and reliability in the visa process.

“We support national security but think the balance needs to be readjusted in light of the damage our policy is causing,” said Reinsch. “We are committed to working with Congress and the Administration to develop a visa policy that is truly a win-win for both the United States and our friends across the globe.”

Click here for a copy of the coalition’s recommendations.

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Advancing Global Commerce for Over 90 Years

The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.

U.S. Export Controls and Economic Sanctions for the Oil and Gas Industry

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 William A. Reinsch
President, National Foreign Trade Council
March 8, 2007 

The issue of export controls is becoming hot once more – unfortunately in the worst possible way under the worst possible circumstances – the conjunction of fear of terrorism and paranoia about China.   

The result is a wave of xenophobia, which has manifested itself not only on export controls, but also in episodes like the Dubai Ports World acquisition case and our continuing disastrous visa policies.  Perhaps we should consider ourselves lucky that we had four years of benign neglect, but that changed in 2005, and now we have to deal with the consequences.   

·        Two years ago the Commerce Department published a Federal Register notice soliciting comments on what would have been significant expansion of the deemed export rule.  That followed its proposal in 2004 to change the definition of “knowledge” in a way that many believed would have lowered the bar to prosecutions. 

·        Both of those were subsequently withdrawn, although deemed exports will surely return. 

·        Last July the Commerce Department published a proposed regulation expanding the scope of controls on exports to China.   

These proposals are a misguided approach to the right problem.  They continue the movement we began toward controlling items based on the end use and end user rather than the blanket approach of the Cold War and on controlling technology more than items.  The reality of globalization is that everything is made everywhere.  A system that only controls things across the board is ineffective because of alternative sources of supply that do not adhere to our restraints and because technology is no longer contained in a convenient black box that we can simply hold onto.  Focusing on specific end uses and end users forces us to learn more about the items we are controlling and more about our adversaries’ efforts to use those items, both of which improve the system’s efficiency. 

Trying to do that through deemed exports and through the proposed China regulation is the wrong approach.  The Commerce Department processes about 1000 deemed export license applications each year and currently rejects about 1% of them.  This is not a very efficient use of limited resources.  In fact, in this area, which is about spying and not about terrorism, the talent and knowledge we are losing by keeping people out far exceeds the losses we incur by letting them in. 

Last year the NFTC led a coalition of companies and associations that opposed the deemed export proposal, and we were pleased to see Commerce throw in the towel on it.  Instead it has turned the problem over to a committee of experts, and we will simply have to wait and see what they come up with.  The appointment of the committee’s chair, Bob Gates, as Secretary of Defense will probably slow down the committee process, but on the other hand it puts someone in DOD who clearly understands this issue. 

The entire proposal, of course, demonstrated the extent to which we have lost touch with what is actually happening in the marketplace. 

Bill Perry was the first to really understand that with respect to defense technology.  Because of rapid technological change, the military has been shifting to commercial products and away from specially designed items.  That puts them in the position of relying on civilian producers whose major markets are civilian and export.  Those producers win the competitiveness race by staying ahead of their competition, and they do that by plowing their profits back into R&D on next generation products.  America’s future lies in our ability to keep on winning that race. 

That only works if they have profits, which requires exports.  Thus, Perry concluded that exporting was a key element of our ability to make advanced defense technologies and the Pentagon’s ability to buy them. 

 This was a sea change in thinking that informed the Clinton Administration’s export control policies.  Recent thinking on the subject suggests that while this is still true in the electronics sector generally, there are some circumstances where the Pentagon’s needs are so specialized and sophisticated that a return to “milspec” is necessary.  In those cases, however, I suspect the policy result will be subsidies to military contractors, or even the creation of dedicated, secure, production facilities rather than expanded export controls. 

Unfortunately, this Administration has abandoned Perry’s approach and is going down a road that threatens to harm our security rather than enhance it. 

  • Expanding the deemed export program will drive smart people away – the same smart people that have been the key to our economic success for the past 200 years.
     
  • This is also true of our visa policy for students and others, which is doing exactly the same thing.
     
  • Companies will respond by putting their research labs and other facilities off shore, creating a brain drain away from the US and ultimately not only transferring more technology offshore but setting up conditions to create the next generation offshore.
     
  • This is magnified by episodes like DP World.  If we let xenophobia get the best of us, there will be a chilling effect on inward investment that will retard innovation here without affecting the outward investment that will facilitate it offshore.     

The threat is similar in the case of the proposed China regulation.  Ostensibly developed to fulfill a Wassenaar Arrangement requirement – even though our other major Wassenaar partners are not implementing it with respect to China – the regulation would require exporters to seek a license if they “know” their item was being exported to a “military end use” in China.  That creates several serious problems: 

  1. The definition of knowledge goes beyond actual knowledge and, in conjunction with the other provisions, creates a far-reaching liability chain.
     
  2. The definition of “military end use” is likewise extensive and ambiguous and requires companies to make a very sophisticated judgment about military use that they are not prepared to make and which should properly be the government’s, not theirs.  
     
  3. The proposed regulation’s application to reexports multiplies the compliance burden and effectively means that exporters of components will have to determine whether their customer’s product is going to a military end use.  The reexport provision will reinforce the perception of American firms as unreliable suppliers and further encourage foreign customers to design-out U.S. components.  If you have any doubts about that check out the EADS Space Transportation website.    
     
  4. Finally, of the 47 new items listed, none of which had been previously controlled for national security purposes, it appears that a good number of them are not only produced elsewhere in the world, but are produced in China itself. 

None of this is good news.  Despite having begun in 2001 with a set of promises to the high tech community and a constructive effort that same year on the EAA, 9/11 and the paranoia it has created dominate the political landscape – a wave the anti-China team is cheerfully riding. 

So, what should we do instead?  For 50 years no one has disagreed with the premise that we do not want critical technology to fall into the hands of our adversaries.  The argument has been over precisely what technology we care about.  Even today most of the key actors in this play give the same speech – we want higher fences around a smaller number of items; by trying to control everything, we end up controlling nothing.  I’m sure you’ve all heard this speech.  I gave it myself many times. 

It is still true, but there are several problems with it, the main one being that once you get past nuclear weapons components and stealth technology, there is no agreement on what else should be inside the fence.  

To attempt to deal with that, a group of associations, including the NFTC, have formed the Coalition for Security and Competitiveness and announced two days ago a program of administrative reforms that will bring some sense to both the dual use and weapons control programs.  Among the dual use proposals are: 

  • Create a license exception for the transfer of controlled items within companies
  • Certify foreign end-users with strong compliance programs for favorable treatment
  • Enhance procedural transparency in the licensing process to help companies comply
  • Enhance the Commerce Department’s role in the “commodity jurisdiction” process for determining whether dual-use products should be subject to State Department licensing
  • Ensure timely updates of the Commerce Control List to reflect market availability
  • Expand factors used to determine “foreign availability” of controlled items
  • Revise the “re-export” controls to level the playing field for U.S. companies.

The beauty of these proposals is that they don’t require legislation.  They are all things the government can do on its own, and we intend to spend the next several months persuading them to do it. 

Now let me say a few words about sanctions.  My organization believes unilateral sanctions have proven ineffective in virtually every instance in which they have been implemented.  Put simply, they do not work and often do more harm than good. 

  • US sanctions caused a reduction in US exports by nearly $20 billion annually in the mid-90s, contributing to the loss of over 200,000 American jobs in the export sector and nearly $1 billion in lost wages. (Hufbauer/Elliot, IIE – 1997 Paper)
  • According to IIE, unilateral sanctions in the 90s achieved the desired results in less than 1 in 10 cases when implemented. (2006 Elliot speech)

History shows us that sanctions rarely work to change behavior.  Instead they foster anti-American sentiment, prevent access to vital export markets, and strengthen backing for regimes hostile to the United States while harming ordinary people in the process. 

In the face of new threats, unilateral sanctions are reemerging as a way for legislator to signal that they are “doing something” to address important problems in our world.  We call this chicken soup diplomacy.  It makes you feel better but doesn’t really cure anything. 


Let me cite some examples. 


IRAN

Our most important and visible unilateral sanctions regime affects Iran.  In addition to the domestic sanctions, the Iran-Libya Sanctions Act was amended last year and will likely be the subject of further amendments this year.  All this just as we are involved in a sensitive negotiation with the Iranians on their nuclear program.   

  • Current law calls for sanctions on foreign firms investing in the oil and gas sectors of Iran or exporting certain items that could help them develop weapons of mass destruction.
     
    A bill that would have significantly toughened the sanctions passed the House last year, but thanks to the leadership of Senators Warner, Biden, Hagel and Levin, and to Secretary Rice and the Administration what was ultimately sent to the President only extended the sanctions for 5 years, codified the executive orders already in place and provided for new penalties related to entities contributing to wmd proliferation.  The Administration retained flexibility to conduct investigations and waive sanctions.  
  • This year, the more extreme sanctions, which would expand the law to cover banks and other institutions that finance or facilitate the investments or exports and which would broaden the degree corporate parents would be liable for their subsidiaries’ actions – fondly known in Washington as the Halliburton Amendment – will be back, as will proposals for divestment legislation against Iran as well as the provisions from last year’s bill that were dropped.  Congressman Lantos recently introduced this legislation as H.R. 1400.

USA*Engage has serious concerns about this kind of legislation.

  • The timing is poor; toughening sanctions would poison the ongoing delicate efforts by the United States and its allies to dissuade Iran from embarking on a nuclear program.
     
  • It would take attention away from the behavior of the Iranians and refocus it on the actions of European and Asian companies in Iran, thereby creating divisions between the United States and our allies at the time we need them the most. 
     
  • The bills would make the United States more vulnerable to international commercial complaints by expanding the entities subject to sanctions to include insurers, creditors and foreign subsidiaries.   The United States would undoubtedly face complaints and lawsuits from our trading partners questioning their legality.    
     
  •  The bills would limit the ability of the President to conduct foreign policy.  By putting a time limit on investigations, they would require sanctions to be imposed or waived.  If they’re imposed, we would find ourselves in a difficult situation with our trading partners.  If they’re waived, Congress would complain and toughen the law further.  This is a  sledgehammer approach when a scalpel is called for. 
     

SUDAN
 
Finally, let me say a few words about state sanctions, which are rearing their ugly head just a few years after we thought we had killed them off at the Supreme Court.  

  • Seven states have enacted laws regarding public pension fund divestment from companies doing business with Sudan.  
  • This type of legislation has created a compliance nightmare for pension fund managers and investment banks, while catching a broad swath of U.S. and foreign companies with very tenuous ties to Sudan.  
  • Indeed, some legislation has identified U.S. firms who are operating legally under U.S. federal licenses as forbidden entities.  For example, the Illinois statute would punish US business involvement in southern Sudan and in Darfur, areas where our government has welcomed US investment.
  • The situation in Darfur is tragic by any measure.  The Sudanese people deserve the attention and help of the people of the United States and our leaders.  But actions by individual states are highly unlikely to benefit the people of Sudan.  
  • Both Congress and the President have spoken on the issue of Sudan.  As a result, we believe that state legislative sanctions are unconstitutional.  The Supreme Court agreed with us, in NFTC vs. Crosby in 2000 regarding Burma, that where the federal government has acted on an issue of foreign policy, states are preempted.  Just two weeks ago federal district court in Illinois also agreed with us and struck down the Illinois statute, using many of the same arguments.
  • Simply put, having 50 different foreign policies would severely limit our country’s ability deal with global issues in a constructive and efficient manner.  
  • The things that will benefit the situation there – such as increased aid or a new peacekeeping force – are hard to achieve.  Ultimately, however, they are the only policies worth pursuing – and can only be pursued at the federal level.  States cannot let their desire to do good blind them against doing what is right.

Remarks to the National Foreign Trade Council International Human Resources Management Conference, Houston, Texas, March 7, 2007

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CHINA AND U.S. NATIONAL SECURITY

 

Remarks to the National Foreign Trade Council International Human Resources Management Conference, Houston, Texas, March 7, 2007

 

I’d like to begin with some short comments on China’s recent economic trajectory and then try to relate that to some current issues.

 

  • What is China doing?  It is growing – fast.  It is improving its agricultural capabilities, working on its infrastructure, and expanding its manufacturing, moving up the value-added chain as fast as it can.  
     
    • Average annual GDP growth of 14.8% since 1988.  Still hovering around 10% per year, despite efforts to contain it. 
    • Global trade has grown from $20.6B in 1978 to $474.3B in 2000 to $1.7T last year.
    • After a long period of fairly balanced trade, they are starting to post large surpluses — $177 billion in 2006.
    • Total trade makes them 3rd or 4th in the world.
    • Total foreign investment grows from essentially zero to over $½ trillion.
    • Foreign exchange reserves grow from $20.6B in 1992 to over $1 trillion, largest in the world..
    • We estimate $700B of that is in US paper.
       
  • In fact, China is doing what Japan did in the 50s and 60s, what Korea and Taiwan did subsequently, and what Malaysia, the Philippines, Indonesia, Thailand, and a host of others are trying to do right now. 
     
  • In many respects we are mirror images.  We buy their products; they depend on our market to grow.  They save 40% of their income while we save virtually nothing.  We are the world’s largest debtor ($3 trillion plus), while their reserves reach new records.  
     
  • So, why are we worried about China and not about the others?
     
  • The easy answer is size.  Nobody is too worried about Malaysia’s progress up the technology value-added curve because there is a limit to their productive capacity.  With 1.3 billion people, there are potentially far fewer limits on China’s capacity.  In contrast to all the others, they will become a true economic rival.  They are not the proverbial 800-pound gorilla but the 800,000-pound gorilla.  
     
  • The other answer, of course, is politics.  While we had many of the same economic worries about Japan 20 years ago, at the end of the day they were still an ally and friend.  China is not, and we worry not only about the economic implications of rapid growth but the strategic implications of a potential struggle for predominance in the Pacific.
     
  • This is not a new condition.  It has characterized debate in Washington for 30 years.  Blue team, John Rood story.
     
  • The business community likewise maintains some ambivalence toward China.  On the one hand, they find it an enormously attractive market.
     
    • Size
    • Low labor costs
    • Work ethic
    • Of course, lemming effect 

On the other hand, it is enormously frustrating for them:

 

·        Forced technology transfer – creating competitors

·        Rule of law issues – theft of company

·        IP theft

·        Access difficulties if your product is not one they’re particularly interested in.  (selective capitalism) 

·        Exchange rate imbalances

 

·        In short, the Chinese don’t make the relationship easy, and the business community often finds itself in the awkward position of opposing Congressional attempts to “fix” the problems – like last year’s Schumer-Graham amendment – knowing that the concern Congress is trying to address is a legitimate one. 

 

B.  Integrating the domestic and the foreign

 

We are also not very good at understanding what is going on inside China and, more importantly, how that affects its growth and its relations with us.  My own colleagues on the China Commission, for example, tend to assume an invariable upward growth trajectory which ignores the very real internal contradictions the regime faces. 

 

C.  China’s future

 

  • In that regard and to oversimplify, there are two general theories on China’s economic future – and a new third one – that their economic policies will succeed and lead to –political liberalization as well; or their internal strains will become so great that they will implode.  Those strains include: 

o       A government with little legitimacy or inherent credibility maintaining itself by repression and on the strength of its economic growth policies, which will not last forever, no matter how successful they are right now.

 

o       The obligations China has undertaken to integrate itself into the WTO and the Western economic system, which will impose tremendous social, regional, and economic pressures.

 

o       The absence of a rule-of-law tradition and corruption-free bureaucracy, which are fundamental requirements for operating successfully in a globally integrated world, and which will ultimately drive people and money away, particularly in the face of new competition from India.  If there is no consistent, effective means of seeking redress, investors ultimately go elsewhere, probably India,  no matter how attractive the market.

 

o       A related concern is the growing view that corruption is systemic and not a problem that can be solved through the usual Chinese approach of a national campaign and a few arrests.  Party members retain status in their communities through a network of favors and interventions.  Take that away and you ultimately take away the reason why people tolerate the Party.

 

Jim Mann has recently propounded a third theory – that China will be able to continue its economic liberalization indefinitely without experiencing political change.  This is currently a topic of analysis and debate in Washington.

 

  • We may not know for years how this is going to turn out.  And, in fact, the truth is usually somewhere in the middle.  Their internal problems are serious and getting worse, and the government has not been consistently skillful in dealing with them.  At the same time, many Chinese believe in stability more than they believe in democracy.  That may change somewhat as the older generation dies off, but we cannot realistically expect any scenario that will lead to Western-style democracy. 
     
  • Even so, the United States can influence the outcome in a number of ways, though perhaps not in the way the current Administration thinks.  Demands for democracy, for example, will fall on deaf ears, and requests for cooperation with our goals in Iraq, Iran, North Korea, or elsewhere will be firmly subordinated to Chinese views about what is in their interest, not ours, although it is also true that their interests do sometimes coincide with ours.
     
  • What we can do, however, is help build rule-of-law, insist on WTO compliance, help with IP protection, and work, in the process, for the development of a more accountable government.  That is called engagement, and we do it in significant part via a U.S. business presence in China maintaining Western business practices and standards.  
     
  • It is also this Administration’s policy – so far – just as it was the last one’s.  That is important to the business community because it is losing patience with China on the trade front for the reasons I cited..  American companies were initially willing to forgive a lot in the interest of accessing an incredibly large market, and they showed considerable patience following WTO accession in waiting for the Chinese to fulfill their commitments.  However, those days are going.  Too many companies have experienced too many problems.  

·        While companies have not joined labor and others in supporting protectionist legislation – and will not – they are impatient for meaningful change and annoyed at the new problems they are encountering.

 

  • On the slightly better news front, there is evidence that our call for China to become a “responsible stakeholder” — based on the idea that their exposure to the West would give them a stake in global stability, promote their own growth and prosperity, and through that help them become a responsible actor on the international scene — has caught Chinese attention and precipitated debate there over what it means, particularly among those who are, at their end, trying to figure out what “Peaceful Rise” means.

 

 

The U.S. Response

 

  • Just as China has several paths, so do we.  On the one hand, we can overreact to current problems in ways that will make the long term situation worse.  The primary danger comes from the Congress, which has only blunt tools to work with.  Most of them do not want something stupid enacted, but they are unwilling politically to be perceived as not doing anything.  The proposals most likely to pass this year include making nonmarket economies eligible for countervailing duty complaints and making currency manipulation or imbalance a countervailable subsidy.

 

  • The other danger of overreaction comes from an Administration which is showing growing signs of paranoia about China from a security perspective.  There are now pending 4 separate proposed regulatory changes – three from Commerce and one from Defense – which will have a serious adverse effect on high tech trade with China and on continuing use of Chinese employees in American companies, particularly defense contractors, and on Chinese students seeking to study in the Unite States.

 

  • That latter issue is particularly important.  We trade with China; we invest in China; we visit China.  And vice versa.  But the biggest “gift” we have given China is the education of thousands of its brightest students – over 60,000 are here right now — many of whom have returned to help their country grow, taking with them Western standards and values that may ultimately produce social and political change in China.  And, many of them stay here and contribute to our intellectual base.  I think this is win-win whether they stay or go, but that’s not a view shared by everyone. 

 

  • These regulations suggest a turning of the tide within the Administration in favor of those see security as our paramount consideration, many of whom regard military conflict with China inevitable.  It’s ironic, of course, that the Chinese have their own blue team.  Perhaps the goal of both our foreign policies should be to ensure that neither side’s blue team takes over.

 

  • The dilemma of the paranoid is that they can complain all they want about what’s happening, but they have precious few means of stopping it.  Are we going to stop trading with China?  Pull our investment out?  Evict their students from our universities and cause the schools a budget crisis in the process, not to mention the long term damage it would do to our ability to innovate?

 

  • These are unlikely steps.  China is, after all, the world’s largest market, and those who think the US can be the world’s greatest military power without simultaneously being the greatest economic power, need a refresher course in economics and globalization, so they understand why closing ourselves off cannot enhance our competitiveness and innovative capabilities.

 

  • Instead of paranoia, the real policy response should not be what to do to China but rather what to do in the United States.

 

  • Approaching the problem that way actually gives us some answers.  If you have an adversary, or a competitor – and we have defined China as one or the other – then the critical strategic issue is maximizing the military and technological gap between us – staying as far in front of them as we can.  You do that two ways –holding them back or running faster than they are.  Holding them back isn’t working too well and, in truth, cannot work very well.  It is far better to spend our time making sure we are running faster.  And that means looking more closely at our own declining competitiveness and developing policies to address it.   That means taking care of victims; incentives to stay here; running faster (high tech R&D support), but that’s another speech.

 

USA*Engage, NFTC and Other Leading Trade Associations Call for Congress to Reconsider New Iran Sanctions Bill

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Letter warns legislation undermines new U.S. diplomatic effort

 

Washington, D.C. – USA*Engage and the National Foreign Trade Council (NFTC) today called on Congress to oppose H.R. 957, a bill to impose new U.S. unilateral sanctions on a number of companies in Europe and Asia and that would expand the scope of the Iran Sanctions Act. In a letter to Members of Congress, USA*Engage and NFTC joined other business associations, including the Coalition for Employment Through Exports (CEE), the U.S. Council for International Business (USCIB) and the Organization for International Investment (OFII), to warn that the bill would compromise ongoing diplomatic efforts.

 

The groups highlighted the potential for legal headaches associated with this type of legislation, which would extend liability for conducting transactions with Iran that are prohibited under U.S. law to subsidiaries of U.S. companies.  The associations observed in the letter that “governments could implement blocking statutes and other measures to counteract the threat of U.S. penalties.”

 

“This type of legislation puts foreign companies between a rock and a hard place – forcing them to comply with often conflicting laws in the U.S. and the country in which they are incorporated,” said Bill Reinsch, President of the NFTC and USA*Engage Co-Chair.

 

The groups argued that the bill would “undercut – not support – ongoing diplomatic efforts to increase worldwide pressure on Iran.” In the letter, they suggested that, “Congress should ensure that the world’s focus remains on applying multilateral pressure on Iran and that the United States and our allies continue to present a united front.”

 

“If enacted, H.R. 957 would damage our relationship with our allies at a time when we need them to generate strong multilateral pressure on Iran,” continued Reinsch.  “By threatening new U.S. sanctions on numerous new European and Asian companies, this bill distracts from the real issue at hand – the behavior of the Iranian government.”

 

“The Administration’s intentions to participate in regional talks with Iran is a welcome sign and should be given every opportunity to succeed,” said Jake Colvin, Director of USA*Engage.  “Right now, engaging Iran diplomatically is more constructive than charging ahead with threats of new extraterritorial sanctions,” he concluded.

 

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USA*Engage (www.usaengage.org) is a coalition of small and large businesses, agriculture groups and trade associations working to seek alternatives to the proliferation of unilateral U.S. foreign policy sanctions and to promote the benefits of U.S. engagement abroad. Established in 1997 and organized under the National Foreign Trade Council (www.nftc.org), USA*Engage leads a campaign to inform policy-makers, opinion-leaders, and the public about the counterproductive nature of unilateral sanctions, the importance of exports and overseas investment for American competitiveness and jobs, and the role of American companies in promoting human rights and democracy world wide.

 

The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.

 

NFTC Applauds District Court Ruling in Illinois Sudan Sanctions Case

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Washington, DC ­- The National Foreign Trade Council (NFTC) released the following statement in response to today’s ruling by the Federal District Court for the Northern District of Illinois to deem the Illinois “Act to End Terrorism and Atrocities in the Sudan” unconstitutional.

“We are very pleased that Judge Kennelly agreed with us that the Illinois Sudan Divestment Act is unconstitutional and has enjoined the state from enforcing it,” said NFTC President Bill Reinsch. “The judge has written a lengthy opinion, and we will have to study it carefully before commenting in detail.”

On August 7, 2006, the NFTC and eight boards of Illinois public employee pension funds filed a lawsuit (NFTC v. Topinka) in challenging the constitutionality of the Illinois Act.
NFTC retained law firm Winston & Strawn, LLP, to litigate the case.

The NFTC lawsuit followed the precedent set in the U.S. Supreme Court’s 2000 decision in Crosby v. NFTC, in which the Court struck down sanctions enacted by Massachusetts on Burma.  In that decision the Court ruled that if the federal government has enacted sanctions on a country, state and local governments are preempted from imposing sanctions of their own.

As Reinsch stated when the lawsuit was filed in August, “NFTC supports the efforts of the Bush Administration to bring peace to Sudan and to end the brutality that has been occurring in Darfur,” said Bill Reinsch, president of NFTC. “However, state sanctions, like those enacted by the state of Illinois, work at cross purposes with federal policy. That is why the Supreme Court ruled as it did in 2000 and why we brought suit under that precedent,” said Reinsch.

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Advancing Global Commerce for Over 90 Years

The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York

NFTC Lauds New U.S.-Mexico Cross Border Trucking Pilot Program

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Washington, DC – The National Foreign Trade Council (NFTC) today applauded the Administration’s announcement of a new U.S.-Mexico cross-border trucking pilot project. Under the one year pilot program, 100 U.S. and 100 Mexican trucking companies will be chosen to have access to an open border between the two countries.
 

“The cross-border trucking pilot program will encourage expansion of an already robust trading relationship with Mexico, and the NFTC welcomes today’s announcement,” stated Mary Irace, NFTC Vice President of Trade & Export Finance. “We are pleased with the Administration’s effort to continue following through on our NAFTA commitments.”

 

Currently open access is restricted to the commercial zones adjacent to the border. This program will allow access to all of both countries although it only covers international cargo and hazardous material will be prohibited. After one year, a review of the pilot program will occur, and barring no problems, both governments will go forward with full NAFTA implementation of cross border trucking.

 

“We believe that trade produces the best returns for the U.S. economy and American businesses and workers when both the United States and our trading partners uphold trade promises. Today’s announcement illustrates continued progress and underscores the United States‘ desire to further strengthen economic ties with Mexico,” Irace continued.


In 2006, Mexico was our second largest trading partner and has been among the fastest growing major export market for goods since 1993, with U.S. exports up 132 percent through 2003.

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Advancing Global Commerce for Over 90 Years

The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.

 

Summary of House Committee on Financial Services Hearing on H.R. 556

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On February 7th, the House Committee on Financial Services held a hearing on H.R. 556 “National Security Foreign Investment Reform and Strengthened Transparency Act of 2007” which proposes reforms to the Committee of Foreign Investment in the United States (CFIUS) investment review process. Those at the hearing included Chairman Barney Frank (D-MA), Rep. Carolyn Maloney (D-NY) and Rep. Adam Putnam (R-FL). The witnesses testifying before the Committee included Clay Lowery, Assistant Secretary of the Treasury, David Heyman, Director of the Homeland Security Program at the Center for Strategic International Studies, Michael O’ Hanlon, Senior Fellow at the Brookings Institution and Todd Malan, President and CEO of the Organization for International Investment (OFII).

The Committee agreed that after the Dubai Port World controversy, CFIUS needed to reform the review process of investment transactions and improve the means of communication between the different branches of government.  The U.S. needs to protect national security but at the same time maintain our open market for incoming foreign investment.  When reviewing cases, CFIUS focuses its attention on the country, type of investment, and the national security implications of the transaction.  Lowry told the Committee that using these criteria should not necessarily deter investments from countries that might raise national security concerns.

The consequences of not getting this right are significant.  Todd Malan indicated that the benefits of incoming investment include foreign subsidiary company employment of 5.1 Americans in all 50 states, 31 percent of the American workforce concentration in subsidiary companies within the manufacturing sector, and subsidiaries’ reinvestment of 59 billion dollars of profit into their U.S operations. He stated, “Global companies want to invest in the United States because of the size of our market, the quality of our workforce, and the certainty and predictability of our local regime.”  In order to retain investments and attract more in the future, CFIUS must reform its reviewing process.

The bill contains a number of provisions agreed upon by the Department of Treasury with Congress; including Congressional Committee briefings on cases that fall under the Exon-Florio amendment, notification to senior policy officials within CFIUS agencies to ensure accountability, efficient communication and reviewing process, and notifying parties involved in the transactions of all procedures. Secretary Lowery discussed the importance of foreign investment to the U.S economy and noted that the controversy over DP World “coupled with some troubling signs that other countries are pursuing trade barriers to foreign investment, and increasingly negative media coverage of the U.S. investment climate, underscore the need to improve and reform the CFIUS process.”

Last year, the number of CFIUS filings increased by 73 percent, investigations increased by 350 percent, and company filing withdrawals from CFIUS by 250 percent. Mitigation agreements, conditions imposed on companies, tripled last year, led by the Department of Homeland Security which conducted “an average of 4.5 mitigation agreements per year between 2003 and 2005” and fifteen in 2006.  The heightened interest in the CFIUS process was a response to the Dubai Port World controversy and the criticism expressed by the public and elected officials over initial CFIUS approval of that transaction.  As O’Hanlon pointed out, the UAE “recognized the Taliban government of Afghanistan, [that it was] the country of origin for two 9/11 hijackers and a nexus for much of the funding needed to organize that plot. […] these concerns were at least partially counterbalanced by the fact that the UAE has become a responsible player in port security…” Because of these concerns, many members of the House and Senate were uneasy about foreign ownership of US port facilities and focused on means of improving the CFIUS process so similar cases would be less likely to recur.

The Department of Treasury, the Bush Administration and Congress view foreign investment as essential to economic growth and job creation; conversely, protecting U.S. national interests may conflict with foreign investment as did Dubai Port World. David Heyman argued that the importance of H.R. 556 rests on being able to attract foreign investment without at the same time not creating lengthy and problematic CFIUS procedures that many investors would view as a deterrent to such investment.

NFTC Joins New Campaign to Urge Congress to Renew Trade Promotion Authority

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Calls For Timely Renewal of TPA to Advance Trade Negotiations to Open Markets and Boost Economic Growth

Washington DC – The National Foreign Trade Council (NFTC) today joined several other leading U.S. business groups and companies in launching Trade for America, a campaign dedicated to supporting the timely renewal of U.S. trade negotiating authority, also referred to as Trade Promotion Authority (TPA).  During a press conference at the National Press Club with U.S. Trade Representative, Ambassador Susan Schwab, Trade for America underscored the importance of renewing U.S. trade negotiating authority before it expires on June 30, 2007.

“Timely renewal of TPA is vital to U.S. trade leadership in expanding and opening markets to American firms, workers and farmers. The United States is the world’s largest trader and most open market, but 95% of the world’s population is outside the United States,” said NFTC President Bill Reinsch. “We must, as a nation, and with a united voice, continue to negotiate market-opening trade agreements to advance continued US economic growth and opportunity.  Above all, we need to conclude as soon as possible a successful and ambitious Doha Round to open markets on a multilateral basis, which will generate the most good for the most people.”
 
“We cannot afford to be sidelined on trade.  The world is not waiting to negotiate market-opening trade agreements, many of which exclude the United States.  According to the WTO, between January 2004 and February 2005, over 45 preferential trade agreements were negotiated.  There are well over 200 of them today,” said Mary Irace, NFTC Vice President of Trade & Export Finance. “Without U.S. trade negotiating authority, other countries will be unwilling to negotiate with the United States for fear that U.S. commitments and concessions would not hold weight.  In particular, they would be unwilling to put important politically sensitive concessions on the table.”
 
Today’s launch of Trade for America is comprised of a wide range of companies and trade associations representing key sectors of the U.S. economy.  All of the groups involved, including the NFTC, believe that trade negotiating authority is a fundamental part of U.S. global economic leadership.
 
According to Irace, “We are hopeful that there will be a breakthrough on the Doha Round in the next month or two.  Timely renewal of U.S. trade negotiating authority will demonstrate that the United States remains committed to leading the trade talks to a successful conclusion. At a minimum, a short-term, one-year extension of TPA should be enacted as soon as possible to ensure that the Round is completed within a year.”
 
“We’re in support of the Administration’s push to renew this legislation with all deliberate speed and will work with Congress over the course of the next few months in support of legislation to extend the negotiating authority,” concluded Irace.

 Advancing Global Commerce for Over 90 Years

The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices inWashington and New York.

Summary of Joint Economic Committee Hearing on Challenges Facing the Middle Class

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The Joint Economic Committee of the 110th Congress held a hearing on January 31 to consider the growing challenges facing the middle class. Members present included the chairman, Senator Schumer (D-NY), Senators Bennett, Klobuchar, Webb, and Casey, and Representative Saxton.

 Four witnesses testified: former Treasury Secretaries Robert Rubin and Lawrence Summers, Alan S. Blinder, Professor of Economics at Princeton University and Richard Vedder, Professor of Economics at Ohio University. The focus of the hearing was on the changes occurring as a result of the dramatic advances in technology as well as the effects of globalization on the domestic economy and the middle class. The committee and three of the four witnesses believed economic inequality has eroded the middle class. Technology proliferation has given advantages to other countries, leaving middle class Americans to search for jobs outside of their technology fields. Some witnesses felt that technology advances have had more of an effect over the middle class than international trade. In addition, another large contributing factor to the economic challenges of the middle class has been the lack of educational resources and opportunities to train younger generations in other professional positions.
 
Perhaps the most pressing issue is the decline in sustained economic growth which, as was mentioned by Sen. Klobuchar, causes financial instability for the middle class. Sustained economic growth is imperative for the middle class because it provides jobs with competitive wages that are needed to support the middle class. Fluctuations in the economy harm U.S. investments in foreign countries, and make foreign investors apprehensive about investing in the U.S. Former Treasury Secretary Lawrence Summers stated that the substantial trade deficit begs the question of “how long foreign investors will be prepared to lend us funds on such generous terms to support deficits of this magnitude.” The repercussions of a deteriorating relationship between foreign investors and the U.S. economy could lead to foreign investors seeking capital investments in other countries due to the current condition of the U.S economy, further weakening economic growth in the U.S.

Globalization has brought about a profound change in the American economy.  As former Treasury Secretary Rubin pointed out “the global economy is undergoing change of historic proportions, including technological development, globalization, effective productivity policies […], and, as a consequence of all this, the emergence of China and India as potentially large markets but more immediately, as powerful competitors.” Senator Webb agreed that the impact of globalization was affecting the American workforce, especially in blue and white collar professions. Rubin also argued for more effective use of trade adjustment assistance for workers who had been dislocated from their jobs as a result of outsourcing to other countries like China and India.

In the future, more jobs will be outsourced to Asian countries, leading to a scarcity of jobs in the manufacturing and high technology sectors in the United States. This will potentially affect wages and future job security, widening the gap of income inequality. Interfering with the markets will not stop the effects of globalization; as a matter of fact, erecting trade barriers may inflict more harm on the U.S. economy. Sustaining economic growth involves continuing to welcome foreign investment. Enacting policies that draw foreign investors into the U.S. creates more jobs for middle class Americans, most of which make up a majority of the manufacturing and technology sector. If the middle class benefits from these policies promoting international trade, they will be more receptive to foreign investments. If however, the middle class ends up supporting protectionist policies, there will be a loss of economic productivity, decline in imports, and U.S. exporters may face retaliatory measures. Free trade facilitates sustained economic growth, which provides a strong domestic market for U.S businesses, and in turn, provides a strong job market for American workers, especially those in the middle class.

Professor Blinder argued that income inequality is not rooted in globalization or outsourcing; it stems from wage inequality. Of the forty million jobs in the technology sector, fewer than a million have been outsourced, suggesting that another reason must explain the economic inequality within the middle class. Globalization, he argues, is not a struggle between higher and lesser skilled workers, nor is it between more or less educated workers but between different professions. Based on his research, Blinder predicts between 22 to 29 percent of current American jobs could potentially be outsourced in the future. To rectify the problem, governments must be willing to “repair and extend the social safety net” for dislocated workers, create employment insurance and trade adjustment assistance. The U.S labor force and businesses must be willing to maintain a supply and demand for jobs remaining in the U.S.

In contrast, Professor Vedder argued economic sustainability was in decline due to increased government expenditures; in the fiscal years from 2001-2006, government expenditures increased by 42.4 percent for national security and non-defense issues. The government needs to curb its spending habits in order to regain economic growth.

With regard to the middle class, he believes workers shared in the nation’s prosperity and are living better than they have in the past. Americans were consuming more than ever, and wage inequality and outsourcing were not the central challenge to the middle class. Excessive spending over consumer products was a central reason for the economic challenges faced by the middle class.

To the extent there was consensus, it was that policies that permitted free international trade would aid in regaining economic growth and alleviate the burdens felt by the middle class.

 

U.S. Exporters Endorse Ex-Im Bank Accounting Change

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Two leading organizations representing major U.S. exporters today endorsed a proposal by the Bush Administration to change the federal government’s accounting for the U.S. Export-Import Bank.  The proposal is contained in the President’s FY 2008 budget, which was delivered today to Capitol Hill.  Implementing the accounting change will require approval by Congress.

 

The two organizations are the Coalition for Employment Through Exports (CEE) and the National Foreign Trade Council (NFTC).  CEE represents some 30 U.S. exporters, banks and industrial associations and specializes in issues related to export finance.  NFTC represents 500 export companies, banks and others involved in global trade and investment.  It is the oldest U.S. international trade organization.

 

Under the President’s proposed accounting change, the Export-Import Bank for the first time will be allowed to directly utilize its revenues to cover all its operating expenses, without federal appropriations.   Under the current accounting system, the Bank may apply its revenues to its loan-loss reserve account, but cannot use its revenues to cover its operating expenses, which have required appropriations.  Instead, the Bank’s revenues that are not used for loan-loss reserve are credited to the U.S. Treasury as a “miscellaneous receipt”.

 

Each year, the Bank generated substantial revenues from its fees, premiums for guarantees and insurance, and interest charged on its direct loans.

 

“In essence, the President is proposing that Ex-Im Bank finally be recognized as a financially self-sufficient entity”, said Edmund Rice, CEE President.  “Ex-Im does not need taxpayer funds to operate, if Congress will agree to allow the use of the Bank’s own revenues”, Rice added.   “This proposal underscores that export finance can be done on a financially sustainable basis”, Rice said.

 

The proposed accounting change also addresses growing pressure in the World Trade Organization (WTO) to reduce direct government funding of exports.  “By making Ex-Im a truly self-sustaining agency, the U.S. government is bringing the Bank into line with the clear direction of global trade policy”, commented NFTC President William Reinsch.  “This change puts the U.S. ahead of the curve in the WTO”, Reinsch added.  “We believe this change is a ‘win-win’ for American exporters and the American taxpayer”, Reinsch added.