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<b><span style="font-size:9.0pt;font-family:"Arial","sans-serif";color:#cc0000">Inside U.S. Trade - 04/04/2014</span></b></p>
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<b><span style="font-size:15.0pt;font-family:"Arial","sans-serif"">Ways And Means Members Press Froman On TPP Issues, Including Vietnam</span></b></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Posted: April 3, 2014</span></p><p class="MsoNormal" style="line-height:13.2pt"><span style="font-size:9.0pt;font-family:"Arial","sans-serif""><br>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Members of the House Ways and Means Committee yesterday (April 3) pressed U.S. Trade Representative Michael Froman on a number of outstanding issues related to the Trans-Pacific Partnership (TPP)
negotiations, including how Vietnam can be expected to live up to the deal's labor obligations and how strongly he will fight Japan's efforts to protect its sensitive agriculture products from more import competition.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">In addition, members pressed Froman to seek disciplines in TPP against currency manipulation, though he offered little more than his longstanding general response that fighting currency manipulation
is a priority for the Obama administration.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">On Japan, Ways and Means Chairman Dave Camp (R-MI) acknowledged that Japan has sided with the U.S. on a number of rules issues, but has created a serious impediment in market access negotiations
by insisting on excluding or limiting a "significant number of important agricultural products from the scope of TPP."</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Camp said that, in his view, the U.S. should leave behind countries such as Japan not willing to make the necessary commitments for a high-standard deal. After the hearing, Camp said he is confident
that if Japan wants to stay in TPP, it will have to move off its current position.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">But Froman did not respond to Camp's statement about leaving Japan behind, saying instead that the U.S. is very much focused on bridging the remaining gaps on agriculture and automotive issues with
Japan.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">He stressed that the U.S. and other TPP countries are looking for Japan to offer comprehensive market access, both in agriculture and other areas. Froman said that the U.S. is aware of the political
sensitivities that Japan is facing and that the U.S. is "plenty creative" in trying to come up with ways of ensuring that Japan can provide comprehensive market access while also addressing these political sensitivities.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">The trade representative also noted that all TPP countries have sensitivities, and that countries are still working toward an ambitious TPP deal in that context.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman stopped well short of saying that Japan must phase out all the tariffs on sensitive items or completely open its market. He said that the U.S. is seeking "meaningful additional market access
that is consistent with our stakeholders' objectives as part of this ambitious agreement."</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Ways and Means Ranking Member Sander Levin (D-MI) noted that Japan's size of its economy as well as its historically export-dependent and closed market poses particular challenges to completing
a TPP deal. "The Korea agreement was hard -- and remains hard with a number of disturbing implementation issues outstanding, and in some cases growing. Japan will be harder. Important markets in Japan are even more closed and its economy is bigger," he said.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman said that, once the Japan market access issue has been settled, the challenge will then be bringing Canada to the table. According to Froman, Canada has not yet made an agriculture offer
to the U.S. since it appears to be waiting on what will happen with Japan.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Camp signaled after the hearing that the TPP negotiations need to move at a faster pace. "We will have to move to really start making progress on some of the remaining issues" that were identified
at the hearing, he said. Camp added that he remains committed to pushing the administration to conclude a viable TPP agreement this year.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">For his part, Froman said he still hopes to conclude the TPP deal this year, though the feasibility of that was questioned by Rep. Jim McDermott (D-WA). He said after the hearing that the chances
of concluding TPP this year are "not better than 50-50."</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">The hearing addressed a range of other issues such as trade barriers in China and India, as well as the potential conclusion of the negotiations for expanding the Information Technology Agreement
(ITA), which China has been holding up with its demands for protecting sensitive items.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">On ITA, Froman testified that the U.S. and others have made "proposals to China to try and get them back to the table with what we think is a reasonable path forward." But he acknowledged that China
has not yet responded positively and that the U.S. is continuing to raise this at every one of its high-level meetings with China, including at the Joint Committee on Commerce and Trade meeting last December. "And we will continue to press that and try and
get them back to the table so that we can complete that agreement." Froman testified.</span></p>
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<b><span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman said that once the market access issues of TPP are resolved, it will allow negotiators to make a</span></b><span style="font-size:9.0pt;font-family:"Arial","sans-serif"">deal on the outstanding
rules issues. These include the data exclusivity term for biologic drugs, an issue he said was one of the most challenging in the negotiations given countries' widely different levels of protection for such drugs.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">He cited as other outstanding rules issues the disciplines on state-owned enterprises (SOEs), the scope of the investor-state dispute settlement mechanism, and the dispute settlement rules for sanitary
and phytosanitary (SPS) obligations.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">He insisted that there are "a reasonable number" of outstanding rules issues and "some critical outstanding issues on market access" that need to be solved, but said that TPP was in the "end game."
That point was clearly contradicted by Levin, who said that there is a "long list of fundamental issues" where the outcome remains uncertain. Levin characterized that status of TPP as being in the middle of its negotiations.</span></p>
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<span style="background-color:rgb(255,255,255)"><span style="font-size:9pt;font-family:"Arial","sans-serif";background-image:none;background-repeat:repeat">"The list of major outstanding issues in TPP</span></span><span style="font-size:9.0pt;font-family:"Arial","sans-serif""> is too long to recite or describe here, but includes currency
manipulation, environmental protections and labor standards, access to medicines, food safety rules, state-owned enterprises,<span style="background-color:rgb(255,255,255)">
<span style="background-image:none;background-repeat:repeat">tobacco controls</span></span>, cross-border data flows and privacy protections, and investment issues. I hope we can discuss those issues today," he said in his opening statement.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman said he anticipates that the TPP chapter on SPS will be subject to some form of dispute settlement, either in the World Trade Organization or the TPP itself. But he said the issue is not
fully resolved yet.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">The Obama administration has been reluctant to agree to industry demands for binding dispute settlement on SPS in TPP apparently due to the objections of U.S. regulators who feel that they may be
hampered in their rulemaking. But the U.S. is now saying it is willing to consider dispute settlement for the chapter depending on the ultimate outcome of the SPS negotiations (<i>Inside U.S. Trade</i>, March 7).</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman said negotiators are making progress in the SPS chapter in a way that would ensure U.S. regulators such as the Food and Drug Administration can protect U.S. food safety and implement the
Food Safety Modernization Act.</span></p>
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<b><span style="font-size:9.0pt;font-family:"Arial","sans-serif"">On Vietnam, Froman acknowledged that the country will be unable to take on the obligations of the�</span></b><span style="font-size:9.0pt;font-family:"Arial","sans-serif"">TPP immediately, and
that there must be a phase-in of its obligations, as well as follow-up monitoring arrangements. "We need to make sure that we've got mechanisms for assuring that they meet their obligations consistent with the standards of the agreement," he said.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">He acknowledged that Vietnam poses a particular challenge given its low level of development and its command economy, but insisted that engagement is the best option for promoting reforms there.
He also said that the Vietnamese government sees the TPP as a potential mechanism for carrying out its domestic reform agenda, for example, on SOEs.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Both Levin and Rep. John Lewis (D-GA) pressed Froman on Vietnam's poor labor rights record and its human rights violations.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Levin cited Vietnam's "poor record on labor rights and the rule of law" as an obstacle to a successful TPP agreement, saying the country represents an even bigger challenge than Colombia did. The
U.S. and Colombia negotiated a labor action plan that was politically linked to the passage of their bilateral free trade agreement, but Levin said Bogota has not fully complied with provisions of the action plan.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">"The Colombia agreement was hard -- and remains hard with a deeply troubling record of compliance with the Labor Action Plan," he said. "Vietnam will be harder. The fact that the communist government
believes it, and not independent labor unions chosen by the workers themselves, represents workers in the workplace creates a new threshold issue." He noted that Brunei, Malaysia, and Mexico will also face challenges in implementing TPP labor commitments.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman said that, in TPP, the U.S. is seeking a "meaningful" right to association and collective bargaining, as well as meaningful disciplines on forced labor, child labor and acceptable conditions
of work, consistent with International Labor Organization (ILO) standards.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Froman said the U.S. would develop action plans and work programs to ensure Vietnam will live up to the labor obligations. He said that effort will also require capacity building and technical assistance,
from either the ILO or the AFL-CIO's Solidarity Center, which serves as a conduit for U.S. foreign aid. In addition, Froman said, the administration is working with the State Department and the U.S. Agency for International Development to ensure that there
will be resources available for Vietnam to fully implement its obligations under TPP.</span></p>
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<span style="font-size:9.0pt;font-family:"Arial","sans-serif"">He said the U.S. is also pushing Vietnam to make progress on its human rights violations in order to create the environment in which there would be support for its participation in TPP. <br>
</span></p><p class="MsoNormal" style="line-height:11.25pt"><span style="font-size:9.0pt;font-family:"Arial","sans-serif""><i><br></i></span></p><p class="MsoNormal" style="line-height:11.25pt"><span style="font-size:9.0pt;font-family:"Arial","sans-serif""><i></i></span></p>
<div class="gmail_default" style="font-family:verdana,sans-serif;display:inline"><i>J</i></div><i>utta
Hennig and Victoria Guida</i><p></p>
<p class="MsoNormal"><i><span style="font-size:9.0pt;font-family:"Arial","sans-serif"">Inside U.S. Trade - 04/04/2014, Vol. 32, No. 14</span></i><span style="font-size:9.0pt;font-family:"Arial","sans-serif";background:white">�</span><span style="font-size:9.0pt;font-family:"Arial","sans-serif"">�</span><span class="HOEnZb"></span></p>
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