ECAT POSITION: ECAT supports efforts by the Administration, Congress, and the private sector to rebuild the consensus on the importance of trade and investment liberalization.

Congressional Approval of the U.S.-Australia and U.S.-Morocco FTAs

U.S.-Australia Free Trade Agreement

Major Provisions

• Agriculture: Provides that all U.S. agricultural exports to Australia will be duty-free immediately upon entry into force of the FTA. Such exports currently total more than $400 million. The United States and Australia also agreed to work to address sanitary and phytosanitary concerns through a new bilateral mechanism for scientific cooperation. Australia also agreed to work with the United States in the WTO negotiations to develop export competition disciplines to address concerns about Australia’s state trading enterprises.
• Manufactured Goods: Provides that immediately upon entry into force of the FTA, more than 99 percent of U.S. manufactured goods will be duty-free, which manufacturers estimate could result in an additional $2 billion in exports to Australia each year. Tariffs on qualifying textile and apparel goods will phase out over 10 years.
• Services: Expands access to Australia’s services markets, including in such key areas as telecommunications, distribution, express delivery, computer and related services, audiovisual and entertainment and construction.
• Investment: Exempts new investments in Australia from Australia’s investment screening mechanism and increases the threshold for review with respect to acquisitions of existing investments to A$800 million. While expanding opportunities and access for investment in Australia, the FTA does not include an investor-state dispute settlement mechanism, as discussed further below.
• Intellectual Property Rights: Includes state-of-art protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity.
• Information Technology: Includes commitments to non-discrimination and national treatment of digital products, and no imposition of customs duties on products delivered electronically.
• Government Procurement: Expands the ability of U.S. companies to bid on Australian government contracts, covering 80 percent of purchases by Australia’s central government. Also requires transparent, predictable and fair tendering procedures.
• Transparency: Includes state-of-the-art transparency standards, including with respect to regulatory and customs matters.
• Labor and environment: Requires Australia to enforce effectively its domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Opportunities Created

Differences from Other FTAs

ECAT POSITION: ECAT strongly supports the market-opening opportunities presented by the U.S.-Australia FTA, but remains concerned by its deviation from other recently concluded FTAs in certain key areas.

U.S.-Morocco Free Trade Agreement

Major Provisions

Among the primary provisions of the U.S.-Morocco FTA are the following:

• Agriculture: Provides expanded access through tariff reduction, tariff elimination and an expansion of tariff rate quotas. U.S. exports of pistachios, cranberries, pecans, whey products, processed poultry products, and pizza cheese will immediately receive duty-free treatment upon entry into force. Tariffs on other products will be phased out in five years, including on walnuts, grapes, pears, and cherries. The Agreement covers all agricultural products. Key U.S. agricultural exports that will also have expanded opportunities include sorghum, corn, soybeans, pork and beef.
• Manufactured Goods: Provides that more than 95 percent of consumer and manufactured exports will be duty-free upon entry into force of the agreement. All remaining tariffs will be removed within 9 years.
• Textiles and Apparel: Provides duty-free treatment for qualifying textiles and apparel (based on a yarn forward rule), with an additional 30 million square meter equivalent allowance for Moroccan exports containing third-country fabric.
• Services: Liberalizes services trade and investment in Morocco through a negative list approach with relatively few exceptions and includes strong disciplines on transparency.
• Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.
• Intellectual Property Rights: Includes state-of-art protections for trademarks, patents, copyrights, and trade secrets, including strong penalties, patent term restoration and data exclusivity.
• Information Technology: All parties committed to non-discrimination and national treatment of digital products, and they will not impose customs duties on products delivered electronically.
• Government procurement: Includes important new anti-corruption and transparency rules for government contracting.
• Transparency: Includes state-of-the-art transparency standards, including in such important areas as customs and regulatory rulemaking.
• Labor and environment: Includes commitments to enforce effectively domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Opportunities Created

ECAT POSITION: ECAT supported Congress’ implementation of the U.S.-Morocco FTA and supports its full implementation once it enters into force.

2005 Legislative Trade Policy Proposals

• A proposed amendment to force China to modify its currency practices or be subject to WTO-violative 27.5 percent tariffs on all Chinese exports to the United States; and
• Proposed legislation to seek greater trade and investment liberalization may be actively considered by the U.S. Congress before the end of the year.

Legislation to Force Changes in China’s Currency or Impose WTO-Violative Tariffs on Imports from China

ECAT POSITION: ECAT strongly opposes S. 295 and similar legislation that seeks to force a precipitate change in China’s currency policy and would authorize WTO-violative unilateral tariff measures that will undermine the U.S.-China relationship and potentially impose billions of dollars on U.S. exports to China on an annual basis.

Legislation Expanding Trade Preferences for Haiti

• In 2003, S. 489 was introduced in the Senate by Senators DeWine (R-OH), Lugar (R-IN), Durbin (D-IL), Chafee (R-RI) and Nelson (D-FL), and former Senator Graham (D-FL) and H.R. 1031 was introduced in the House by Representatives Shaw (R-FL), Conyers (D-MI), Rangel (D-NY), and former Representative Crane (R-IL) and others. This legislation would amend the Caribbean Basin Economic Recovery Act to provide duty-free treatment to certain articles from Haiti, including articles wholly assembled or knit-to-shape in Haiti using inputs from Haiti, the United States, an FTA partner with the United States or a beneficiary country, or where certain fabric or yarns are not commercially available in the United States. To qualify for these benefits, the President would have to review and certify that Haiti is meeting certain eligibility requirements.

• In 2003, the original cosponsors of S. 489, joined by Senators Voinovich (R-OH) and Sununu (R-NH), introduced S. 2261 to expand the benefits that would be provided to Haiti to make them more effective at achieving their objectives. In particular, this legislation would accord duty-free treatment for seven years to certain products of Haiti if the President certifies that Haiti has met the eligibility criteria. Apparel that would receive such treatment includes articles that are wholly assembled or knit-to-shape in Haiti from any combination of fabrics, fabric components, components knit-to-shape and yarns without regard to the country of origin of the fabrics, components, or yarns.

From a commercial perspective, it is extremely important that the benefits provided to Haiti at this critical time provide effective commercial benefits and do not unduly restrict commercial activities from resuming fully in Haiti. To that end, providing the flexibility contained in S. 2261 is very important. While this flexibility is important, it is also critical that provisions are included to ensure greater predictability of benefits for those producers which have a long-term and productive relationship in Haiti. Therefore, ECAT strongly supports including a “qualified industrial producer” (QIP) provision, based on relevant criteria that would permit duty-free entry for all qualifying imports from QIPs in Haiti. As well, ECAT strongly supports incorporating for Haiti the single transformation rules adopted in the U.S.-Central America-Dominican Republic FTA.

Legislation Expanding Trade Preferences with Least Developed Countries

ECAT POSITION: ECAT welcomes legislation to expand trade and investment opportunities for U.S. farmers, manufacturers, service providers and their workers throughout the world and that will help promote economic development in the developing world.

Addressing Concerns about Trade and Investment Liberalization

Global Outsourcing

• Global outsourcing supports the growth of the U.S. economy, the competitiveness of U.S. companies and high living standards for Americans. Study-after-study has demonstrated that global activity by U.S. companies is not a zero-sum game that, as critics claim, results in losses for the U.S. economy or U.S. workers. Rather, the global activities of U.S. companies promote growth and opportunities at home:

Contributions of Global Engagement to the U.S. Economy and U.S. Workers

For the last 20 years, American companies with global operations:

Accounted for over half of all U.S. research and development, capital investments and exports; Purchased more than 90 percent of their supplies (or intermediate inputs) from U.S.-based, not foreign suppliers, thereby supporting American producers and American jobs; and Paid higher wages to American workers than companies with purely domestic operations.

Source: Global Investments, American Returns (1998) and 1999 Update, by    Dr. Matthew Slaughter, published by the Emergency Committee for American    Trade

Global activities of U.S. companies are also a primary driving force in the competitiveness and innovation of America’s information and communications technology sector, as documented in ECAT’s Mainstay IV: Technology, Trade and Investment: The Public Opinion Disconnect (2002). In short, American companies are stronger today and more competitive, supporting a high level of employment here at home, because of their global activities. Without such activity, the United States would likely have many fewer good, high-paying jobs than it does today.

• Insourcing and investment by foreign companies in the United States have a greater positive impact than the worst-case scenarios of outsourcing: Outsourcing criticism has largely ignored the impact of so-called insourcing, where foreign-owned companies invest and subcontract activities in the United States. Based on the most recent data from the Bureau of Economic Analysis, majority-owned U.S. affiliates of foreign companies with operations in the United States employed 5.4 million U.S. workers in 2002, accounting for 5 percent of total U.S. employment in private industries. The Organization for International Investment reports that 6.4 million U.S. workers are employed by U.S. subsidiaries of foreign companies. Of course, you can’t have insourcing and seek to block outsourcing at the same time. Other countries’ willingness to allow their companies to invest here in the United States simply will not continue if the legislative and other proposals being considered are adopted. In short, seeking to end outsourcing represents a very real threat to the 6.4 million U.S. workers who are employed by foreign companies.
• Outsourcing will have at most a small impact on U.S. jobs: Predictions of the severity of outsourcing ignore the fact that approximately 90 percent of U.S. jobs require goods and services to be provided locally. Efforts to connect outsourcing with the decline in manufacturing jobs in recent years have failed. In fact, most of the jobs lost in the U.S. economy in recent years have more to do with technological innovation than outsourcing or other trade- or investment-related developments. Even the most dire projections of lost jobs are actually negligible compared to the size of the overall economy and the 130 million existing jobs. The Forrester prediction of 3.3 million jobs lost over 15 years, for example, equals less than 2.5 percent of employed Americans. Obviously, the impact on these workers is very real and must be addressed – but through adjustment assistance, training and education.
• Legislative proposals that seek to limit outsourcing through the denial of tax benefits, government contracts and other provisions would undermine, rather than support, U.S. competitiveness and job growth. These proposals will make it more difficult for U.S. companies to compete in the global economy and will result in a loss of opportunities not only for U.S. companies in a wide range of sectors, but for U.S. workers as well.
• Legislation that will help educate America’s youth and help train and retrain its workers and provide adjustment assistance will do more to create the labor force that the United States needs to compete globally. While the United States cannot stop the global forces of innovation and the development of new technologies, it can do a better job of preparing U.S. workers to participate productively in the global economy. This requires full educational opportunities and preparation from early childhood onward through post-graduate work and into the workplace. There are roles for Federal, state and local government, institutions of learning, and the private sector in educating U.S. workers for success.

ECAT Studies

ECAT Position: With economic justification in study-after-study, ECAT strongly supports the global engagement of U.S. companies as a critical component to promoting economic growth and high living standards at home. Legislative proposals at the state or Federal level to restrict global engagement will undermine the strength of U.S. companies and the capacity of the U.S. economy to produce better, high-paying jobs in the United States. Legislation that will help educate America’s youth, help train and retrain its workers and provide adjustment assistance will do more to create the labor force that the United States needs to compete globally.

Temporary Entry Issues

Snapshot on the Importance of Temporary Entry for the U.S. Services Industry

The effective moratorium on the negotiation of temporary entry issues in trade agreements has an enormously negative effect on the U.S. services industry, which accounts for approximately 65 percent of the U.S. economy. While currently the most competitive services industry in the world, the U.S. services industry faces enormous challenges:

Impediment to Growth and Competitiveness of U.S. Service Suppliers. Close to a third of the U.S. services surplus results from services that require U.S. business people to travel abroad to begin or perform services contracts. Without the ability to negotiate improved temporary entry provisions with trading partners in new FTAs, let alone BITs, the entry of Americans traveling abroad is oftentimes restricted or unduly delayed in a manner that undermines the competitiveness of one of America’s strongest industries. Impediment to the Elimination of Foreign Service Barriers. Nowhere is the stalemate on temporary entry more critical than the services negotiations in the WTO Doha Development Agenda, where foreign countries increasingly are seeking clearer, more efficient and expansive temporary entry provisions in exchange for the dismantling of their much more extensive services barriers.

ECAT Position: ECAT strongly urges U.S. trade negotiators, Members of Congress and the business community to expand their efforts to resolve the longstanding stalemate in the treatment of temporary entry in trade and investment negotiations. The existing moratorium on the inclusion of temporary entry provisions in trade and investment agreements undermines the competitiveness of U.S. companies and the ability of U.S. negotiators to secure the elimination of other countries’ barriers to services and investment

Labor and Environment Issues

Labor Issues

Trade Promotion Authority and Free Trade Agreements

• Overall negotiating objectives to:
  • foster economic growth, raise living standards, and promote full employment in the United States and to enhance the global economy;
  • promote respect for worker rights and the rights of children consistent with core labor standards of the International Labor Organization (as defined in section 2113(2)) and an understanding of the relationship between trade and worker rights; and
  • seek provisions in trade agreements under which parties to those agreements strive to ensure that they do not weaken or reduce the protections afforded in domestic environmental and labor laws as an encouragement for trade.
• Principal negotiating objectives to:
  • ensure that parties to any trade agreement do not fail to enforce effectively their labor laws through a sustained or recurring course of action or inaction, in a manner affecting trade;
  • strengthen the capacity of United States trading partners to promote respect for core labor standards (as defined in section 2113(2));
  • ensure that the labor, health, or safety policies and practices of the parties to trade agreements with the United States do not arbitrarily or unjustifiably discriminate against United States exports or serve as disguised barriers to trade;
  • prevent distortions in the conduct of international trade caused by the use of the worst forms of child labor, in whole or in part, in the production of goods for export in international commerce; and
  • redress unfair and illegitimate competition based upon the use of the worst forms of child labor, in whole or in part, in the production of goods for export in international commerce.
• Requirements for the Administration to:
  • promote greater cooperation between the WTO and ILO (Uruguay Round Act provides ongoing requirement for the Administration to seek a working group on trade and labor at the WTO);
  • seek to establish consultative mechanisms among parties to trade agreements to strengthen the capacity of United States trading partners to promote respect for core labor standards;
  • have the Secretary of Labor consult with any country seeking a trade agreement with the United States concerning that country's labor laws and provide technical assistance to that country if needed;
  • submit to the Ways and Means and Finance Committees a meaningful labor rights report of the country, or countries, with respect to which the President is negotiating;
  • review the impact of future trade agreements on U.S. employment, modeled after Executive Order 13141; and
  • report on child labor laws for each country with which the President seeks a negotiation.

WTO Activities

“We reaffirm our declaration made at the Singapore Ministerial Conference regarding internationally recognized core labour standards. We take note of work under way in the International Labour Organization (ILO) on the social dimension of globalization.”

International Labor Organization Activities

No. 29, Forced Labor, 1930;
No. 87, Freedom of Association and Protection of the Right to Organize, 1948;
No. 98, Right to Organize and Collective Bargaining, 1949;
No. 100, Equal Remuneration, 1951;
No. 105, Abolition of Forced Labor, 1957;
No. 111, Discrimination (Employment and Occupation), 1958;
No. 138, Minimum Age Convention, 1973; and
No. 182, Worst Forms of Child Labor (1999).

Section 307 of the Tariff Act of 1930

Generalized System of Preferences and Other Preference Programs

U.S.-Cambodia Bilateral Textile Agreement

Environmental Issues

Trade Promotion Authority and Free Trade Agreements

• Overall negotiating objectives to:
  • ensure that trade and environmental policies are mutually supportive and to seek to protect and preserve the environment and enhance the international means of doing so, while optimizing the use of the world's resources; and
  • seek provisions in trade agreements under which parties to those agreements strive to ensure that they do not weaken or reduce the protections afforded in domestic environmental laws as an encouragement for trade.
• Principal negotiating objectives to:
  • ensure that a party to a trade agreement with the United States does not fail to effectively enforce its environmental laws, through a sustained or recurring course of action or inaction, in a manner affecting trade;
  • strengthen the capacity of United States trading partners to protect the environment through the promotion of sustainable development;
  • reduce or eliminate government practices or policies that unduly threaten sustainable development;
  • seek market access, through the elimination of tariffs and nontariff barriers, for United States environmental technologies, goods, and services; and
  • ensure that environmental, health, or safety policies and practices of the parties to trade agreements with the United States do not arbitrarily or unjustifiably discriminate against United States exports or serve as disguised barriers to trade.
• Requirements for the Administration to:
  • seek to establish consultative mechanisms among parties to trade agreements to strengthen the capacity of United States trading partners to develop and implement standards for the protection of the environment and human health based on sound science;
  • conduct environmental reviews of future trade and investment agreements, consistent with Executive Order 13141; and
  • continue to promote consideration of multilateral environmental agreements and consult with parties to such agreements regarding the consistency of any such agreement that includes trade measures with existing environmental exceptions under Article XX of the GATT 1994.

WTO Activities

“(i) the relationship between existing WTO rules and specific trade obligations set out in multilateral environmental agreements (MEAs). The negotiations shall be limited in scope to the applicability of such existing WTO rules as among parties to the MEA in question. The negotiations shall not prejudice the WTO rights of any Member that is not a party to the MEA in question;

(ii) procedures for regular information exchange between MEA Secretariats and the relevant WTO committees, and the criteria for the granting of observer status; and

(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.”

In addition, the Declaration directed the Committee on Trade and Environment to focus particular attention on the following issues, with an instruction to identify whether there needs to be any clarification of WTO rules or new negotiations at the Fifth Ministerial Conference:

(i) the effect of environmental measures on market access, especially in relation to developing countries, in particular the least-developed among them, and those situations in which the elimination or reduction of trade restrictions and distortions would benefit trade, the environment and development;

(ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights; and

(iii) labeling requirements for environmental purposes.

The Declaration also recognized the importance of technical assistance and capacity building and encourages information sharing with respect to environmental reviews at the national level. WTO work on these issues is discussed in more depth in sections 2 and 6.

Environmental Reviews of Trade Agreements

Foreign Assistance

Food Trade Issues

Biotechnology and Genetically Modified Organisms

Biosafety Protocol

EU Beef-Hormone Case

ECAT’s Food Chain Coalition Proposal

Health Policy and Intellectual Property Rights Protection

“We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.”

The declaration also clarifies that countries have the right to use compulsory licensing and to define what is a national health emergency. As well, the declaration instructs the TRIPS Council to examine the issue of compulsory licensing in countries with insufficient pharmaceutical manufacturing capabilities and to report to the General Council at the end of 2002. Efforts to reach consensus language on the scope of permissible compulsory licensing by that deadline resulted in deadlock, as developing countries sought an open-ended definition of diseases that could give rise to compulsory licensing and the United States sought to use a more limited definition -- HIV/AIDS, malaria or tuberculosis or other infectious epidemics of comparable scale and gravity. In late December 2002, the United States indicated that it would unilaterally impose a moratorium on proceeding with WTO dispute settlement in certain cases involving compulsory licensing.

Transparency

ECAT POSITION: Continued global trade expansion is the bedrock of progress in achieving greater international observance of high labor and environmental standards and in promoting better access to food and health care. Progress on the human side of trade requires that the United States continue its leadership in the multilateral trading system promoting a strong set of WTO rules based on the right of member countries to set and enforce high environmental, labor, or other domestic standards. Before rushing to adopt trade-oriented solutions that may not be effective, it is critical that policymakers first work to define the United States’ objectives in each of these areas, and then determine how those objectives can best be achieved. Many of these issues may be better addressed directly through separate agendas in organizations with technical expertise, rather than as add-ons to the trade agenda. And, in those cases where complementarity between U.S. trade and other U.S. objectives exists, efforts should be made to address these objectives jointly and in a cooperative manner.

Trade Remedy Law Issues

WTO Dispute Settlement Cases Involving U.S. Trade Remedy Laws

Continued Dumping and Subsidy Offset Act (“Byrd Amendment”)

Zeroing Methodology

A panel was established on February 5, 2004 and several other countries have requested to join the consultations. Zeroing has also been raised with respect to antidumping duties imposed by the United States by the Canadian Government in the lumber case, the Brazilian Government in the silicon metal case and the Mexican Government in the cement and oil country tubular goods cases. In April 2004, the WTO panel in the lumber case ruled against the United States’ zeroing methodology. The WTO Appellate Body agreed with this ruling in its August 11, 2004 decision (similar to a prior March 2001 Appellate Body decision in Bed Linen from India). The United States and Canada agreed that a reasonable period of time for implementation would end on April 15, 2005.

Privatization Methodology under the U.S. Countervailing Duty Law

Safeguard Measures

Hot-Rolled Steel from Japan

Steel Plate from India

Corrosion-Resistant Steel from Germany

Other Trade Remedy Cases

ECAT POSITION: It is vitally important that both U.S. unfair trade laws and Section 201 maintain – in both the legal provisions and their application – a careful balance between the interests of the petitioning industry and the interests of other U.S. industries and consumers. It is critical that the Congress and the Administration oppose any efforts to impose import restraints or amend U.S. antidumping, countervailing duty, or safeguards laws in ways that would invite foreign retaliation, encourage restrictive foreign mirror legislation, and/or violate the United States’ international trade commitments.

Restructuring and Modernization of the U.S. Customs Service

Transfer to Department of Homeland Security

Automation Modernization

Customs Modernization

• Customs’ Compliance Assessment and its Trade Compliance Risk Management processes, including Customs’ reliance on audit-based evidentiary standards (relying on the Generally Accepted Government Audit Standards (GAGAS) rather than the reasonable care standard of the Generally Accepted Accounting Principles (GAAP)).

• Customs’ Compliance Measurement and its associated penalty processes (increased cargo inspections, etc.) which penalize otherwise compliant and unsuspecting importers for errors or omissions caused by licensed brokers and express couriers.

ECAT supports efforts to further modernize the Customs Service to promote greater trade facilitation and efficiency in a manner consistent with its mandate. In particular, ECAT believes that Customs could substantially improve its operations to better achieve border and economic security through adoption of the following proposals:

• Eliminate reconciliation for all entries that provide statistical updates only and have no impact on revenue;
• Simplify and reduce the Harmonized Tariff Schedule;
• Provide a total electronic interface for all required data to eliminate paper documents;
• Eliminate the release of confidential and trade sensitive date to non-governmental agencies;
• Operate ports 24 hours/7 days a week;
• Reduce the required data for exports and imports to a single set of data to satisfy both transactions as conceived under the ITDS model.

ECAT remains very concerned with Customs’ adoption of the “24-hour manifest rule,” which became effective in December 2002. Pursuant to Customs’ regulations, all carriers and non-vessel operating common carriers (NVOCCs) are required to file their cargo declarations 24 hours before their cargo is laden aboard a vessel at a foreign port. While ECAT recognizes and supports the U.S. Government’s interest in evaluating the contents of shipments for national security and other reasons, this rule does not substantially advance that goal. Rather, it will impede commercial shipments, which oftentimes do not have fully complete manifest information ready that far in advance of shipment. This regulation is overly restrictive and will impede the legitimate commercial flow of goods into the United States to the detriment of U.S. companies, workers and their families. At the same time, it will do little to deter those who seek to evade U.S. laws who can continue to file fraudulent manifests.

ECAT POSITION: ECAT is committed to working with the Customs Service, the Department of Homeland Security and the Department of the Treasury to help ensure that Customs’ restructuring progresses in a manner that fulfills our national security and enforcement goals, while also facilitating the flow of legitimate commercial trade that provides enormous economic benefits to the United States. ECAT strongly supports full funding of the Automated Commercial Environment (ACE) from general revenues. ECAT also strongly supports improvements in the operation of the Customs Service, including through full and improved implementation of the Customs Modernization Act and the Customs Procedural Reform and Simplification Act of 1978 in a manner that facilitates trade.

Reform of Trade Adjustment Assistance and Worker Retraining Programs

Major Provisions of Trade Adjustment Assistance as Reformed by the Trade Act of 2002

TAA for Workers and NAFTA-TAA Programs

• Merges the general TAA for Workers and NAFTA-TAA programs.

• Coordinates assistance with the Workforce Investment Act, including rapid response assistance.

• Modifies eligibility requirements to address the following issues:

  • Shifts in Production: Expands eligibility from workers affected by shifts in production to Canada and Mexico to workers affected by shifts in production to any country.

  • Secondary Workers: Expands eligibility to adversely affected secondary workers where (1) a significant proportion of workers have been separated; (2) the firm supplies or is a downstream producer (i.e., performing additional, value-added production processes to articles) to another firm that is eligible for TAA related to the product produced by the petitioning firm; and (3) the loss of business with that other firm contributed importantly to the workers’ separation or the relevant component parts produced by the firm account for at least 20 percent of the firm’s production or sales.

  • Waiver of Training Requirement: Provides that the Labor Secretary may waive the mandatory training requirement (which is a prerequisite to payments under the TAA program) in certain defined circumstances (e.g., the worker will shortly be recalled by his original firm, the worker already has marketable skills, the worker is within two years of meeting retirement entitlement, the worker’s health prevents him from participating in training; training is not available, etc.).

• Expansion of Benefits: In addition to wage insurance and the tax credit for COBRA payments discussed below, new TAA programs will:

  • Increase income maintenance payments to certified workers from 52 to 78 weeks;

  • Increase substantially funds for training from $70 million to $220 million;

  • Increase assistance for job relocation; and

  • Provide greater assistance to link TAA beneficiaries to other benefits, such as child care and health care.

• Demonstration Project for Older Workers: Not later than one year after enactment, the Secretary of Labor must establish a wage insurance program under which states shall use TAA funds to pay certain workers for up to two years. Eligible workers must be at least 50-years old working at least 30 hours a week and earning no more than $50,000 a year in wages. The wage insurance subsidy is to be equal to 50 percent of the difference between the wages received from reemployment and the wages received at the time of separation. In addition, workers will be eligible to receive, for a period not to exceed two years, a credit for health insurance. Total wage insurance per worker is capped at $10,000 over the two-year period.

• Tax Credit for COBRA Continuation: Provides a 65-percent advance, refundable tax credit for payment of COBRA premiums (to extend health insurance after separation) for two years for eligible TAA or Pension Benefit Guaranty Corporation recipients.

Trade Adjustment Assistance for Firms:

• Reauthorizes program through September 30, 2007.

• Expands eligibility criteria to allow firms affected by shifts in production to countries in addition to Canada or Mexico to claim benefits.

Agriculture Trade Adjustment Assistance

• Incorporates Conrad (D-ND)-Grassley (R-IA) provisions to establish a program through September 30, 2007 to provide cash payments to farmers (without training requirement, but training is available) as a result of declines in commodity prices. Does not base eligibility on job loss.

• Caps total per producer payments at $10,000 annually. Total payments under this program are capped at $90 million annually.

• Requires Secretary of Commerce to conduct a study on whether a TAA program is appropriate or feasible for fishermen.

Implementation and Continued Review of TAA Reforms

• H.R. 466, introduced by Representatives Graves (R-MO), McHugh (R-NY) and Scott (D-GA) to designate the Under Secretary of Commerce for International Trade to oversee the TAA programs.
• H.R. 614, NAFTA-Impacted Communities Relief Act, introduced by Representative McIntyre (D- NC).
• H.R. 1281, introduced by Representatives King (D-NY) and Christensen (D-VI) to extend TAA benefits to services workers.
• S. 14, Fair Wage, Competition and Investment Act of 2005, by Senator Stabenow (D-MI) and others, which includes a provision to extend TAA benefits to services workers.

Private Sector Retraining Efforts

ECAT POSITION: ECAT recognizes that while expanding U.S. international trade and investment raises the U.S. standard of living overall, dislocations occur and must be addressed through public and private worker retraining and assistance programs. ECAT supports efforts to implement the trade adjustment assistance provisions of the Trade Act of 2002 and to continue to review the effectiveness of these programs and other proposals in addressing the needs of today’s workers.

Copyright 1999-2002, the Emergency Committee for American Trade