Emergency Committee For American Trade - Publications

ECAT 2008 AGENDA

SECTION III.10: ADDRESSING CONCERNS ABOUT TRADE AND INVESTMENT LIBERALIZATION

Notwithstanding the very substantial and widely documented benefits resulting from trade and investment liberalization, it is recognized that globalization and U.S. participation in the international economy can have adverse effects, including worker and firm dislocations, on certain portions of the U.S. economy.

U.S. participation in the international economy is not a question or choice. It is a fact. The United States cannot isolate itself from the international economy. Rather, the United States must continue to compete and win in the international economy and make the benefits of its participation fair and inclusive. International trade and investment policies are among the key policies to meet the challenge of globalization and ensure that America benefits from its international participation. U.S. exports, imports and investment promote growth and new economic opportunities. Trade agreements, as discussed in sections I.1, II.1 and II.2, level the playing field and promote greater U.S. success in the global economy.

Trade and investment policy standing alone, however, is insufficient to ensure U.S. international success and the broad enjoyment of globalization’s benefits. To enhance U.S. competitiveness more broadly, it is necessary to lay the foundation domestically through policies and programs that promote a competitive workforce, competitive cost structures, innovation and leadership.

This section reviews the facts as well as the policies in several of these key areas, including global outsourcing, temporary entry, labor and environment (including climate change), food trade, product safety and health policy. This section also includes a discussion of the ongoing efforts to reform and modernize further the longstanding Trade Adjustment Assistance programs.

Global Outsourcing

Global outsourcing has become an increasingly controversial issue in the political debate involving trade and investment liberalization. Critics argue that global outsourcing – the subcontracting or movement of business functions to offshore suppliers – has and will continue to cost a significant number of jobs in the United States. Proposals have been made at the federal and state level to deny tax benefits or government contracts to companies that engage in outsourcing.

The upsurge in criticism ignores a number of fundamental facts, including that:

Global outsourcing supports the growth of the U.S. economy, the competitiveness of U.S. companies and improved 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 communication 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 high-paying jobs 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 5.1 million U.S. workers, accounting for 4.4 percent of total U.S. employment in private industries.
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

Over 30 years ago, the Emergency Committee for American Trade (ECAT) recognized the need to encourage greater awareness of the importance of the global activities of U.S. companies to the U.S. economy. At the time, American companies with global operations were under attack. Critics charged that U.S. foreign direct investment exported American jobs and promoted increased imports from foreign affiliates. Some political leaders advocated changing U.S. trade and tax laws to keep capital and production in the United States.

Starting in 1972, ECAT commissioned its first major study on the role of global activity on the domestic economy: The Multinational Corporation: American Mainstay in the World Economy. The report demonstrated that overseas investments by American companies contributed to increased U.S. exports and increased investments at home and became the first study in ECAT’s Mainstay series. In 1993, ECAT published its second Mainstay study: Mainstay II: A New Account of the Critical Role of U.S. Multinational Companies in the U.S. Economy. By using more extensive data covering the entire U.S. manufacturing sector during the decade of the 1980s, Mainstay II explored the effect of American companies operating overseas on the U.S. economy. The report concluded that to remain competitive and to participate successfully in global trade and investment, American companies must have a “global reach.”

More recently, ECAT has published two major studies as part of its Mainstay series that directly relate to much of the current debate about the domestic impact of the global activities of U.S. companies: Mainstay III: Global Investments, American Returns (1998 and 1999 Update) and Mainstay IV: Technology, Trade and Investment: The Public Opinion Disconnect (2003). These studies are summarized in sections I.1 and III.1.

ECAT will actively continue its work to ensure that the public debate on these issues focuses on the facts of global sourcing and produces policies that will promote economic opportunities for Americans, not destroy them.

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 improved 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 support better, high-paying jobs in the United States. Much more important to enhance U.S. competitiveness globally are policies that will help educate America’s youth, train and retrain its workers and provide adjustment assistance.

Reform of Trade Adjustment Assistance and Worker Retraining Programs

The original Trade Adjustment Assistance (TAA) programs for workers and for firms were enacted as part of the Trade Expansion Act of 1962. These programs were premised on the recognition that while trade liberalization supports economic growth and prosperity for the United States as a whole, certain workers and companies may be adversely affected by the adjustment to trade liberalization. The TAA for Workers and the TAA for Firms programs enacted in 1962 were modified in the Trade Act of 1974. The third TAA program, NAFTA-TAA for Workers, was enacted as part of the NAFTA Implementation Act in 1993 and is focused on workers adversely impacted by trade with Canada and/or Mexico. Both the general TAA and the NAFTA-TAA programs have provided direct assistance and training to workers who are laid off in trade-impacted industries. Approximately 163,000 workers per year have used the programs, which cost $457 million annually. The main beneficiaries have been apparel/textile, oil and gas, electronics, and the metal/machinery industries. The NAFTA Implementation Act also established a fourth program, the Community Adjustment and Investment Program (CAIP), to provide funds for community adjustment and investment.

In 2002, Congress approved a substantial modernization and reform of the TAA programs as part of the Trade Act of 2002. This legislation was based on legislation authored by Senator Bingaman (D-NM) and cosponsored by Senator Baucus (D-MT) and former Minority Leader Daschle (D-SD).

Congress passed a short-term extension of the TAA program through December 2007. Several pieces of legislation have already been introduced to extend and modify the TAA program.

Major Provisions of TAA as Reformed by the Trade Act of 2002

The Trade Act of 2002 made the first major reforms of the TAA programs since 1974 and extended the programs through September 30, 2007. The major provisions include:

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 has 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 childcare 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.

Renewal and Reform of TAA

Several recent legislative proposals have been made to extend and reform the TAA program, including:

H.R. 3920, Trade and Globalization Assistance Act of 2007. Introduced by Ways and Means Chairman Rangel on October 22, 2007, this legislation was approved by the Ways and Means Committee on October 29, 2007, and approved by the House by a vote of 264-to-157. This legislation would make the following key changes to the TAA program:
Allows the Secretary of Labor to self-initiate the petition process.
Modifies eligibility requirements to cover: (1) shift by workers’ firm in production of articles or provisions of services to a foreign country; or (2) instances where the workers’ firm is likely to obtain such articles or services from a foreign country.
Provides for TAA certification of adversely affected workers in a public agency or domestic industry and adversely affected secondary workers in a service sector.
Authorizes workers certified in an industry-wide determination to start training before they are laid off.
Prohibits TAA benefits for alien workers unless such workers are lawful permanent residents.
Increases: (1) the amount of payments for training of adversely affected workers; and (2) the maximum allowance to cover costs of such workers for job-search expenses and relocation expenses.
Increases the credit for health-insurance costs of certain TAA and Pension Benefit Guaranty Corporation (PBGC) pension recipients and prevents a lapse of health care coverage for TAA workers and their families.
Establishes eligibility requirements for reemployment TAA for adversely affected older workers.
Establishes Office of Trade Adjustment Assistance.
Extends TAA program for workers and farmers through fiscal year 2012.
Provides for self-initiation of petition process by Secretary of Commerce for service-sector firms and extends TAA program for firms through fiscal year 2012.
Requires Secretary of Labor to make unemployment compensation modernization incentive payments through fiscal year 2012.
S. 1848, Trade and Globalization Adjustment Assistance Act of 2007. Introduced by Finance Committee Chairman Baucus (D-MT) and Senators Snowe (R-ME), Wyden (D-OR), Coleman (R-MN), Stabenow (D-MI), Cantwell (D-WA), Salazar (R-CO), Murray (D-WA), Bingaman (D-NM), Klobuchar (D-MN), Levin (D-MI), S. 1848 would expand and expand TAA as follows:
Allows the Secretary of Labor to self-initiate the petition process for adversely affected workers in a service-sector firm or a public agency.
Modifies eligibility requirements to cover: (1) shift by workers’ firm in production of articles or provision of services to a foreign country, including services provided by a public agency; or (2) instances where the workers’ firm is likely to obtain such articles or services from a foreign country.
Provides for industry-wide certifications of adversely affected workers.
Increases amount of payments for training and maximum allowance to cover job-search and relocation expenses.
Increases the tax credit for health-insurance costs.
Provides wage-insurance benefits for older workers who have received industry-wide certifications.
Establishes Office of the Trade Adjustment Assistance Ombudsman.
Extends TAA for workers through December 2012.
Modifies TAA program for communities and establishes a program to coordinate the federal responses.
Allows self-initiation of petition process for TAA by service-sector firms.
Revises TAA group eligibility requirement for certain agricultural commodity producers and makes fishermen and aquaculture producers eligible for TAA.
Extends TAA for farmers through fiscal year 2012.

ECAT strongly supports efforts to extend, expand and modernize the TAA program in ways that address dislocation and prepare workers, including dislocated service workers, for new opportunities. ECAT supports Congressional and Administration efforts to develop jointly a bipartisan agreement to extend and modernize TAA this year.

Recognizing that trade represents a small fraction of U.S. job loss, it is important that “trade” adjustment assistance not be overly broad and essentially attribute to trade job losses arising from other causes. The desire to expand such TAA benefits to non-trade dislocated workers is best addressed directly, rather than expanding eligibility of TAA to non-trade-affected workers.

Private Sector Retraining Efforts

Many companies, including ECAT members, have developed their own worker retraining programs to help address the concerns about dislocations caused by technological developments, trade, and other forces. These companies have focused on continued education and intensive retraining through the use of community colleges, the Internet, and other education resources. These programs, in conjunction with government efforts, represent an important facet of worker readjustment 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 strongly supports efforts to extend and modernize the TAA program to provide the coverage, job training and other assistance needed for U.S. workers, including displaced service workers, and communities to meet the challenges of the 21st century.

Temporary-Entry Issues

Provisions have been included in U.S. trade and investment agreements since the 18th century to provide for the temporary entry of persons involved in trade and investment activities. From the United States’ original Treaties of Friendship, Commerce and Navigation and the 38 U.S. bilateral investment treaties (BITs) now in force to the North American Free Trade Agreement (NAFTA), the WTO’s General Agreement on Trade in Services (GATS) and the U.S.-Chile and U.S.-Singapore FTAs, U.S. negotiators and the U.S. Congress have long recognized the intersection between trade and investment on the one hand and the need to provide temporary access of company representatives and investors involved in trade and investment activities on the other. Such provisions, which have no impact on overall immigration policy – since they provide only temporary entry – promote economic activity in the United States by helping U.S. companies to expand their markets overseas.

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

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

Impediment to Growth and Competitiveness of U.S. Service Suppliers. Close to a third of the U.S. service surplus results from services that require U.S. business people to travel abroad to begin or perform service 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 service 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 service barriers.

Following negotiation and Congressional implementation of the U.S.-Chile and U.S.-Singapore FTAs, however, concerns were expressed by some Members of Congress on future efforts to negotiate such provisions as part of trade and/or investment agreements. As a result, there has been an effective moratorium on the Administration’s ability to negotiate even minimal temporary-entry provisions for investors, such as E visas already authorized by U.S. immigration law for BIT investors, or moderate expansions of the H1-B visa provisions for FTA partners, let alone the so-called Mode 4 commitments (temporary entry) that are critical to the ongoing WTO Doha Development Agenda negotiations on services.

Efforts to increase U.S. security in recent years have also resulted in new restrictions on business, as well as student, visas, including more limited time periods for visitors to stay in the United States and additional requirements for the issuance of visas.

While security concerns are obviously critical, it is also extremely important that U.S. temporary-entry policies reflect U.S. economic interests, which include the need for U.S. companies to send their personnel on a temporary basis abroad and to bring their foreign employees on a temporary basis into the United States. Ongoing delays in the U.S. visa process and significant restrictions in the number of H1-B visas permitted each year, as well as foreign barriers to Americans’ temporary entry abroad, represent a growing problem for the ability of U.S. companies to expand and efficiently run their operations in a manner that promotes economic growth here in the United States. It has become a major impediment to progress in the WTO Doha Development Agenda negotiations as well, and continues to limit U.S. negotiators in FTA and BIT negotiations.

ECAT Position: ECAT strongly urges U.S. trade negotiators, Members of Congress and the broader 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

The relationship between trade liberalization and labor and environment is a complex one that goes far beyond the narrow debate about whether labor and environmental standards should be enforceable through trade sanctions. What is oftentimes lost in the discussion is the positive role that trade plays in raising living standards and, therefore, labor and environmental standards worldwide. As the World Bank and others have documented, increased economic growth and a growing middle class enable and increasingly motivate developing countries to improve labor and environmental standards. Since World War II, the liberalization of trade has produced a six-fold growth in the world economy and a tripling of per-capita income and enabled hundreds of millions of families to escape from poverty and enjoy higher living standards.

A study by Dartmouth College economists Eric Edmonds and Nina Pavnick, “Does Globalization Increase Child Labor: Evidence from Vietnam,” also documents this conclusion with regard to labor standards. This study found that the removal of some of Vietnam’s trade barriers – export quotas on rice – decreased child labor because parents were able to earn more money from their rice crops. They also expressed concern that the use of trade sanctions may have a counterproductive effect, increasing child labor, as a result of the lower prices exports could effectively command on the world market. As efforts continue to link trade and labor and environmental issues, it is critical that the positive relationship between trade liberalization and labor and environmental standards be recognized and incorporated into this policy debate. Proposals that would impede trade liberalization and economic growth must, therefore, be seriously questioned.

In many respects, labor and environmental issues may be best addressed directly through organizations and capacity-building efforts that are focused on the underlying roots of the problem and providing technical and other assistance to make needed improvements. Efforts in the International Labor Organization, the Commission for Environmental Cooperation and other organizations, for example, can be intensified. And, in those cases where complementarity between U.S. trade and U.S. labor and/or U.S. environmental objectives exists, efforts should be made to address these objectives jointly and in a cooperative manner.

Below is a review of the major trade-related labor and environmental efforts, except NAFTA-related labor issues, which are addressed in section IV.3.

2007 Congressional-Administration Trade Deal

After several months of negotiation, a bipartisan trade deal was announced on May 10th by U.S. Trade Representative Susan Schwab, House Speaker Nancy Pelosi, and Ways and Means Chairman Charlie Rangel and Ranking Member Jim McCrery. Under this deal, the Administration committed to modify labor, environment and other provisions, in pending trade agreements with Peru, Colombia, Panama and Korea, in exchange for Congress moving forward on these key trade agreements. The May 10th trade deal enabled, however, only one trade agreement – the U.S.-Peru Trade Promotion Agreement – to move forward in 2007.

The major parts of the trade deal are addressed in section II.2. On labor and environment, the following provisions were added to the pending trade agreements with Peru, Colombia, Panama and Korea:

Labor. As implemented, each trade agreement requires the parties to adopt and maintain as part of their laws the core International Labor Organization (ILO) rights on freedom of association, collective bargaining, the elimination of forced labor, the abolition of child labor, and the elimination of employment discrimination. Parties are also required to enforce their labor laws and not to derogate from these core rights. These obligations are subject to binding dispute settlement in the same manner as commercial disputes under the agreements.
Environment. As implemented, each trade agreement requires the parties to comply with multilateral environmental agreements that both parties have ratified. With respect to Peru, additional provisions were added regarding the preservation of tropical timber. These obligations are subject to binding dispute settlement in the same manner as commercial disputes under the agreements.

By incorporating obligations to international agreements, these provisions represent a major change from the framework set forth in the Bipartisan Trade Promotion Authority Act (TPA Act), enacted as part of the Trade Act of 2002. The 2002 framework and the agreements negotiated under it required each country to enforce its own labor and environmental laws subject to binding dispute settlement, but did not require adherence to ILO core labor rights or multilateral environmental agreements (which themselves generally lack enforcement or effective dispute settlement provisions). The 2002 framework itself was a major change from both the U.S.-Jordan FTA, which lacked binding dispute settlement subject to strict time limits, and the NAFTA, which has very limited dispute settlement for certain labor and environment obligations.

Concerns have been raised that trade agreements undermine worker rights and harm U.S. workers in the United States and/or the partner country. In fact:

U.S. trade agreements promote much-needed economic opportunities in developing countries that help raise living standards for workers in those countries.
U.S. trade agreements promote economic opportunities for U.S. industries and workers.
The negotiation of U.S. trade agreements has helped promote substantial improvement in many countries’ labor laws.
Capacity-building initiatives, such as those undertaken during the negotiation and approval of the Central America-Dominican Republic Free Trade Agreement, represent an important way to promote concrete improvements.

Other Trade-Related Labor Activities

WTO Activities

At the Fourth Ministerial Conference in Doha, Qatar, in November 2001, the WTO agreed to the following statement on labor issues:

“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.”

Efforts by the European Union (EU) and the United States to promote a more activist WTO role, either through the formation of a WTO Forum on labor or to “support” the work of the ILO, were rejected overwhelmingly by the developing countries on the grounds that linking labor issues to trade agreements could lead to disguised restrictions on trade and that the ILO is the appropriate forum to deal with labor issues.

International Labor Organization Activities

Over the past several years, there has been substantial progress in developing a greater consensus on labor standards in the International Labor Organization (ILO). Since 1998, the ILO began a major push for country ratifications of the core conventions. The eight core conventions are:

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.

In 1998, the ILO also adopted the Declaration on Fundamental Rights and Principles at Work to promote the observance of basic labor rights, with a follow-up mechanism to promote countries’ compliance with these labor principles. From 1999 onward, the ILO has published annual studies on countries’ overall compliance with the core ILO principles and conventions.

In 1999, the ILO adopted a new convention, No. 182, banning the worst forms of child labor. The United States became the second country to ratify this convention, which had 115 ratifications by February 2002. Congress also directed the Department of Labor to prepare a report on international child labor, including the feasibility of efforts to reduce by 50 percent the number of children engaged in the worst forms of child labor.

The United States has ratified only Convention No. 105 on forced labor and No. 182 on the worst forms of child labor; it has agreed to observe all of the core principles as part of the 1998 Declaration. The United States remains a significant donor to the ILO’s International Programme to Eliminate Child Labor (IPEC) (established in 1992), which seeks to take children out of unhealthy work environments and place them in schools. Under the IPEC program, thousands of children are being given educational opportunities and phased out of garment factories in Bangladesh, the soccer ball industry in Pakistan, and fireworks production in Guatemala. Since 1995, the United States has contributed over $202 million to support 120 projects in 61 countries.

Section 307 of the Tariff Act of 1930

The United States has stepped up U.S. Customs Service enforcement of section 307 of the Tariff Act of 1930, which bans the importation of goods, made from forced or indentured labor. On June 12, 1999, then President Clinton issued Executive Order 13126 ("Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor") to prevent federal agencies from buying products that have been made with forced or indentured child labor. Under procurement regulations implementing the Executive Order, federal contractors who supply products on a list published by the Department of Labor must certify that they have made a good faith effort to determine whether forced or indentured child labor was used to produce the items. On January 18, 2001, the Department of Labor, in consultation and cooperation with the Department of the Treasury and the Department of State, developed the list of products, identified by country of origin, which they believe might have been made with forced or indentured child labor. The list is updated periodically.

Other Trade-Related Environmental Activities

WTO Activities

The multilateral trading system recognizes the importance of environmental protection as reflected in the WTO Preamble which makes the promotion of sustainable development a key objective and in the numerous exceptions provided to WTO obligations allowing for the enforcement of environmental, health, and safety measures. In 1994, WTO member states agreed to establish the Committee on Trade and the Environment (CTE) to try to address many of the environment-trade issues that have arisen. In March 1999, the WTO held a high-level symposium to discuss such issues further. In November 1999, the WTO announced that it had entered into a cooperative agreement with the United Nations Environment Program (UNEP) to help build awareness of the important link between trade, environment, and sustainable development in developing countries.

At the 2001 Doha Ministerial, WTO members agreed to new negotiations on environmental issues as part of the Doha Development Agenda. In particular, the Doha Declaration provides for new negotiations on:

“(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 section II.2.

The WTO dispute-settlement process also has maintained a core respect for environmental protection and conservation. WTO challenges to U.S. environmental policies have been rare, arising to date in only two out of a total of 120-dispute settlement cases involving the United States. In each of these cases, the final WTO dispute settlement panel or Appellate Body report did not question the soundness of the U.S. laws being challenged or the right of the United States to enforce those laws.

In the first WTO case involving a U.S. environmental law, a WTO panel found that a part of the regulations implementing the Clean Air Act pertaining to foreign refineries was applied in a discriminatory manner. In response, the Environmental Protection Agency eliminated the discriminatory aspect of its regulations without undermining the enforcement of the Clean Air Act. Similarly, in the second case involving a U.S. environmental law, a WTO panel found that the application of U.S. law requiring turtle-excluder devices on nets used by shrimping boats to

Asian countries was discriminatory, but the panel did not question the validity of the law itself as an appropriate exception to WTO rules under Article XX of the 1994 GATT. The United States responded to this decision by expanding technical assistance to other countries to encourage compliance with the law and with increased efforts to resolve the issue through a multilateral agreement. In October 2000, Malaysia challenged the United States’ implementation of this matter, which the WTO Dispute Settlement Body referred to the original panel. In October 2001, the Appellate Body found that the United States’ implementation of this law was fully consistent with WTO rules and complied with the earlier Appellate Body recommendations. In a third important environmental case at the WTO, not involving the United States, a WTO panel upheld France’s ban on imports of asbestos as justified under GATT Article XX as necessary to protect human health or the environment. Canada appealed this decision to the Appellate Body, which upheld the panel’s finding in March 2001.

The United States is also promoting trade and environmental protection in mutually supportive ways by promoting trade liberalization objectives that will contribute to a cleaner environment. For example, the United States is seeking an agreement to eliminate barriers to trade in environmental goods and services in the Doha Development Agenda, end tariffs on energy equipment and scientific instruments, and eliminate fishery subsidies. These measures would both facilitate environmental protection abroad and create new U.S. export opportunities.

Climate Change

Under the 2002 Framework Convention on Climate Change, countries agreed to seek reductions in greenhouse gases that cause climate change, with reduction commitments by developed countries and the promotion of increased reporting and monitoring by all countries. While the Framework Convention and later instruments do not contain specific trade measures, the measures that countries or groups of countries may take to implement reductions raise trade and international competitiveness issues that are explored here.

The 1997 Kyoto Protocol, which the United States has signed, but not ratified, sets in place emissions caps for developed countries starting in 2008 and authorizes the use of market-oriented mechanisms to control emissions, most notably a cap-and-trade framework for a global carbon market that permits entities to buy and sell emissions credits. More recently in December 2007, parties to the Framework Convention, including the United States, met in Bali, Indonesia, and agreed to the Bali Action Plan that established a roadmap for further negotiations to achieve commitments by developed and developing countries to reduce emissions from 2013 onward (after the expiration of the Kyoto Protocol). These negotiations are to conclude in 2009.

The European Union (EU), which is a party to the Kyoto Protocol, has moved to establish the Emissions Trading System (ETS) to help it meet its Kyoto commitments to reduce greenhouse emissions by specified levels between 2008 and 2013. The ETS covers more than 11,500 facilities, emitting about 45 percent of the EU’s carbon-dioxide emissions. Under the Phase 1 directive, only legal persons within the EU are permitted to transfer carbon allowances. U.S. and other foreign businesses are prohibited from directly trading carbon allowances. Phase 2 of the ETS began in 2008.

In the United States, the Kyoto Protocol was not sent to the Senate for ratification given Congressional opposition to the agreement because of its failure to place commitments on key developing countries that are increasingly major greenhouse emitters. Nevertheless, in recent years, Congress is considering several legislative proposals that seek to reduce U.S. emissions of greenhouse gases. The most prominent is S. 2191, America’s Climate Change Security Act, that would cap greenhouse-gas emissions from electrical generation, industrial and transportation sectors and authorize an allowance trading system to permit entities to buy and sell emissions credits. With regard to imports, S. 2191 authorizes the President to require certain carbon/energy intensive importers to purchase carbon-emissions allowances as a condition to their importation, unless the country from which the product is imported has taken comparable action to control greenhouse gases. This requirement does not take effect for eight years (allowing the United States to pursue international negotiations for an agreed multilateral framework) and allows exceptions for least-developed countries and countries emitting very low levels of emissions.

The trade implications of the EU ETS, U.S. legislative proposals and other national proposals to implement reductions in greenhouse emissions require serious consideration both from a trade and competitiveness perspective. To the extent that these systems limit or place barriers or costs on imports, it is important that they do so in a non-discriminatory way so that they do not undermine U.S. competitiveness internationally or violate WTO or other international commitments. (While, as discussed above, the WTO authorizes actions for environmental conservation that deviate from the basic commitments, such measures may not represent arbitrary or unjustifiable discrimination or a disguised restriction on international trade). At the same time, negotiations in the WTO to eliminate tariffs and other barriers on trade in environmental goods and services represents a complementary approach that can better help countries achieve international and domestic objectives of reducing greenhouse emissions.

Food Trade Issues

Unsubstantiated concerns about the safety of Genetically Modified Organisms and hormone-fed beef and implementation of the Biosafety Protocol will remain major issues this year.

Biotechnology and Genetically Modified Organisms

Fueled by food-safety scares over “mad cow” disease and other cases involving contamination of animal feed, public opposition to genetically modified organisms (GMOs) is widespread in Europe, has extended to Asian and African countries and to a much more limited extent in the United States. At the same time, the need for and use of GMO crops is spreading worldwide. Genetically engineered crops have higher yields and reduce farmers’ dependence on pesticides. By increasing productivity, bioengineered crops have the potential to ensure food security and to reduce hunger worldwide. Biotech crops have also been developed that reduce demands on scarce water resources, that provide additional nutritional benefits (i.e., golden rice which adds beta-carotene to rice), and that can lower labor demand.

Despite these benefits, some groups have argued that GMOs present potential ecological hazards, citing studies that suggest that genetically engineered crops may harm monarch butterflies and other beneficial insects. Subsequent studies have shown, however, that the effect of GMOs on monarch butterflies is no different than that of non-GMO agricultural practices.

Since 1998, producers have sought EU approvals on over 30 varieties of GMOs. The EU’s effective moratorium on granting approvals was lifted briefly in 2004, when it granted approval for two U.S. biotech varieties -- Bt11 sweet corn for human consumption and NK603 corn for uses as animal feed and processing. Remaining requests have been outstanding for approximately six years. Despite the EU’s approval of a few GMO varieties, several countries – Austria, France, Germany, Italy, Greece and Luxembourg – have established marketing bans.

On May 13, 2003, the United States filed a WTO consultation request with respect to the EU's moratorium on all new biotech approvals, and the bans that six EU member states (Austria, France, Germany, Greece, Italy and Luxembourg) have in place on certain biotech products previously approved by the EU. A panel was established on August 29, 2003. On April 8, 2004, the Panel rejected EU claims that the United States had failed to adequately state its claim against the EU. The panel report was circulated in September 2006 and found that the EU had in fact imposed a moratorium that violated its WTO obligations in several major respects. The EU has indicated that it will implement the panel report. The EU failed to implement the report by the November 2007 deadline for implementation agreed to by the EU and the United States or by the second deadline of January 2008. On January 17, 2008, the United States notified the WTO that it is seeking the right to retaliate against the EU as a result of its failure to implement its commitments. While the EU has claimed that it is actively lifting its moratorium, the EU Council failed to reach a majority to accept or reject five applications for GMO products. These applications will now be considered by the European Commission.

On July 25, 2001, the EU Commission issued directive 2001/18 on pre-marketing approvals of GMOs and their release into the environment, which sets up traceability and labeling requirements for food and feed. In November 2002, EU agriculture ministers reached a compromise on tolerance levels, allowing up to 0.9 percent of a product to be derived from approved genetically modified crops without facing mandatory labeling requirements. While the United States pushed for significant changes to the directive before its issuance, the changes made by the EU are insufficient and the final directive poses serious problems for U.S. agriculture producers and farmers. In particular, the food-labeling requirements are onerous and a serious trade barrier. While the regulation does not appear to require precise traceability for raw materials for food, feed and processing, it is unclear how this proposal will be implemented. As well, these proposals are of questionable compatibility with the WTO Agreements on Technical Barriers to Trade and Sanitary and Phytosanitary Measures and the underlying GATT agreement. The United States is currently evaluating these measures.

Beyond the EU, Japan and Korea have passed mandatory GMO labeling laws over the opposition of the United States, which has urged countries not to enact labeling laws on the grounds that they could be applied inconsistently and create major new trade barriers. Zambia and other Southern African countries have also refused U.S. food aid because it may contain GM) products. The United States has argued that GMO labeling issues should be dealt with under the WTO Agreement on SPS Measures, which permits SPS restrictions to be placed on imports only when enough scientific evidence exists to justify the restrictions. The EU and certain developing countries argue in response that the SPS Agreement allows the use of the so-called “precautionary principle,” permitting restriction of genetically modified foods in certain circumstances, based on environmental or health concerns, even if the science behind the concerns remained uncertain.

The United States is also concerned about GMO regulations introduced by China’s Ministry of Agriculture and State Administration for Quality Supervision, Inspection and Quarantine. They address the requirement for obtaining permanent safety certificates for GMO products such as soybeans, corn and canola under China’s biotechnology regulations and the more recent requirement to obtain import permits for these commodity shipments into China. While industry is currently operating under temporary or “interim” safety certificates and applying for necessary import permits on the basis of these certificates, the approval process for import permits is slow and permanent safety certificates have yet to be issued by the Chinese government. In addition, the United States is also concerned about Chinese testing of GMO products before their approval. The United States is in consultations with China to ensure that these regulations do not disrupt trade in GMOs, particularly soybeans, which represent the predominate U.S. exports of GMO crops to China.

In February 2008, Korea agreed to import GMO corn for food use from the United States as a way to alleviate rising corn prices.

Biosafety Protocol

In January 2000, the Cartagena Protocol on Biosafety was negotiated under the framework of the 1992 United Nations Convention on Biological Diversity (CBD), to which the United States is not a party. This represents the first international agreement regulating trade in GMOs. The Protocol was signed in May 2000 and will only go into effect after 50 countries have ratified it. Because the United States has not ratified the CBD, the United States only had “observer” status at the negotiations and worked through the so-called “Miami group” of agricultural allies (e.g., Canada, Australia, and Argentina). The United States must adhere to trade rules imposed by countries signing the Protocol, but as a non-CBD ratifier, does not have to implement the Protocol.

The Protocol requires exporters to obtain advance approval from the importing country, in the form of advance informed agreements (AIA), for initial shipments of GMOs intended for release into the environment (i.e., seeds, microbes, or fish to be put in a river) and requires the labeling of GMOs that are intended for use as food or animal feed, or for processing. The agreement does not apply to agricultural commodities to be used for food, feed, or processing. It requires that risk assessments of GMOs be carried out in a scientifically sound manner. The protocol notes that “trade and environment agreements should be mutually supportive with a view to achieving sustainable development.” It also contains a savings clause to preserve countries’ existing rights and obligations under other international agreements such as the WTO; in other words, the Protocol is not to be interpreted as changing any rights. The Protocol will be reviewed five years after its entry into force, and at least every five years thereafter.

The exact impact of the Protocol upon international trade is unknown and will depend upon how the Protocol is interpreted and implemented by each ratifying country. While rules must adequately address the preservation of global biodiversity, it is also important that they not impose unnecessary costs or barriers that would undermine the efficient and low-cost bulk handling system that is needed to transport the world’s commodities.

EU Beef-Hormone Case

In July 1999, the United States imposed 100-percent retaliatory tariffs on roughly $117 million worth of U.S. imports from the EU in response to the EU’s failure to comply with a WTO dispute-panel ruling requiring the removal of its ban on imports of hormone-fed beef from the United States. The WTO panel ruled that the EU has failed to demonstrate that U.S. hormone-fed beef causes health risks. In November 2004, the EU requested consultations over the U.S. retaliation, alleging that it had taken action to come into compliance with the WTO ruling. A panel in this case was established in February 2005 and was expected to issue its decision in Spring 2007. No decision has yet been issued.

ECAT’s Food Chain Coalition Proposal

One of the ways ECAT is supporting efforts to address the human side of trade liberalization is through its Food Chain Coalition proposal that was presented to WTO member countries during the Seattle WTO ministerial. The Food Chain proposal is intended to (1) provide a framework for trade liberalization in terms of meeting human needs; and (2) create greater leverage in pursuing market access and other trade liberalization goals by creating a cross-sectoral alliance of interests organized around eliminating barriers to food trade.

Removal of barriers to food trade provides one of the clearest examples of the importance of trade liberalization in meeting basic human needs. Population increases, rising standards of living, and growing urbanization around the world are producing dramatic increases in the demand for food. This rising demand for food presents tremendous global market opportunities in the broad array of sectors involved in producing and handling food on its journey from the farm to the table. In addition to farmers, seed companies, agro-chemical firms, grain handlers and processors, manufacturers of farm machinery, food manufacturers, retailers, financial services companies, insurers, and transportation firms benefit directly from a global increase in food demand. Indirectly, all businesses gain because meeting food demand at lower costs allows a greater amount of discretionary income to be spent on other goods and services.

The Food Chain proposal can provide a new approach to gaining enhanced leverage in negotiations on agriculture, services, and other areas by using the elimination of barriers at all levels of the food chain as an organizing principle. Based on this principle, the Coalition seeks to create cross-sectoral alliances in support of common negotiating priorities such as tariff liberalization, elimination of restrictions on investment and distribution, customs facilitation, and prohibitions on the use of unilateral food sanctions. Placing these issues in the context of the food chain can also create the means to avoid existing roadblocks between developed and developing member countries, as well as between the United States and the EU, particularly as WTO efforts continue on the negotiations on agriculture and services.

ECAT’s Food Chain proposal is not intended as a substitute for discrete negotiating groups on agriculture, services, and other areas. Instead, it is intended as a way to enhance the chances for overall liberalization by establishing the elimination of barriers to food trade, at all levels from production to distribution, as an overall negotiating objective and calling for the adoption of a review mechanism to monitor achievement of this objective.

Product Safety

ECAT strongly supports work by the government and industry to promote the safety of all goods, including the safety of human and animal food products and consumer and other goods. While much of the attention has been on the safety of imports and the increasing imports into the U.S. market, efforts must also protect the many more domestically produced products, which are present in the U.S. market place in much higher overall levels than imports. Overall product standards must be the same, although there will be differences in ensuring the safety of imports, given the need to involve foreign governments and overseas manufacturing locales.

It is important to note that the United States has ensured that it retains the right under all of its international trade agreements (from the WTO to our bilateral and sub-regional trade agreements) to set the level of protection for every product sold in the United States based on a scientific risk assessment and to impose appropriate health and safety measures. The only limitation that is presented in our international agreements is that the United States and its trading partners may not arbitrarily discriminate against imported products. This is an important rule, particularly to ensure that other countries do not use product-safety claims as a pretext to erect unfair barriers against U.S. food and product exports, as discussed above.

To be successful, ECAT believes that product-safety policies should:

Engage both governments (U.S. and other nations) and industry throughout the entire supply chain, from design to manufacture to sale, so that the most appropriate and effective actions can be taken.
Emphasize industry and government efforts at the design and manufacturing stage, where most product flaws occur.
Increase funding for and effectiveness of U.S. agencies tasked with ensuring product safety, including the Consumer Product Safety Commission (CPSC) and the FDA.
Enhance the ability of government agencies to focus on and target imports that pose the greatest risk. In this regard, developing a system whereby food and product importers determined to have a secure supply chain would receive expedited entry, would enable the U.S. Government to focus its limited resources on imports that could pose the greatest health or safety risk.
Promote capacity-building and commitment in foreign countries to enhance their ability to prevent and detect threats to food and product safety.
In July 2007, the Administration established the Interagency Working Group on Import Safety to conduct a comprehensive review of U.S. policies and practices and to make recommendations for improvements. In September 2007, the Working Group issued Protecting American Consumers Every Step of the Way: A Strategic Framework for Continual Improvement in Product Safety. The Strategic Framework emphasized the need to prevent harm in the first place, intervene when risks are identified and respond rapidly when harm has occurred. The Working Group released its Action Plan for Import Safety on November 6, 2007, presenting 14 recommendations and 50 action steps. The 14 major recommendations are:
Create new and strengthen existing safety standards.
Verify compliance of foreign producers with U.S. safety standards.
Promote good importers practices.
Strengthen penalties and take strong enforcement actions.
Make product safety a major principle in U.S. engagement abroad.
Harmonize procedures for processing imports.
Complete work to establish single-window interface to promote data exchange.
Create an interactive import-safety information network.
Expand laboratory-testing capacity and rapid testing.
Strengthen protection of intellectual property rights.
Maximize effectiveness of product recalls.
Maximize federal-state collaboration.
Expedite consumer notification of recalls.
Expand the use of electronic tracking and tracing technologies
The Food and Drug Administration (FDA) also announced its Food Protection Plan on November 6, 2007, to improve efforts to protect food supply in the United States from both domestic and foreign sources. Like the Strategic Framework, the plan focuses on prevention, intervention and response, emphasizing the need to:
Reduce risks over a product's life cycle from production to consumption.
Target resources to achieve maximum risk reduction.
Address both unintentional and deliberate contamination.
Use science and modern-technology systems.
Following up on agreements between the United States and China to improve food and product safety, the State Department approved FDA’s proposal for eight new FDA positions in China in March 2008 and is now awaiting Chinese government approval.
H.R. 4040, the Consumer Product Safety Modernization Act was introduced by Representatives Bobby Rush (D-IL), Cliff Stearns (R-FL), John Dingell (D-MI), Joe Barton (R-TX), and others in November 2007. It was amended by the House Committee on Energy and Commerce and approved by the House by a vote of 407-to-0 in December 2007. This legislation would:
Increase funding for Consumer Product Safety Commission (CPSC), including for capital improvements to its research, development and testing facility.
Modify procedures for CPSC action and for public disclosure.
Ban consumer products for children containing more than specified amounts of lead and allows the CPSC to revise those amounts to be more protective. Also requires CPSC to exclude products and materials from this rule and exempts components not accessible to children.
Lower the lead level at which paint is a banned hazardous product.
Require testing of consumer products for children under 12 by an independent third party or by a proprietary laboratory certified by the CPSC.
Provide for CPSC certification of third-party laboratories.
Place additional safety requirements on children’s products
Require manufacturers and their subcontractors, importers, retailers, or distributors of a product or substance to identify each other upon CPSC request.
Make mandatory CPSC authority to condition importation of a consumer product on the manufacturer's compliance with certain inspection and record-keeping requirements and to disclose various information.
Authorize the CPSC to prohibit the export of a product or substance that is not in conformity with applicable requirements unless the importing country informs the CPSC that it accepts importation.
Make it unlawful to sell, offer for sale, manufacture, distribute, or import any product or substance regulated under any Act enforced by the CPSC that is not in conformity with the applicable consumer product-safety standard.
Increase the maximum civil penalties and authorize forfeiture of assets for violations.
Allow state attorneys general to bring actions to enforce consumer product-safety rules and to obtain injunctive relief.
Authorize the CPSC to make information available to any federal, state, local, or foreign government agency, provided there is an agreement that the information will be maintained in confidence and used only for law enforcement or consumer protection.
Require the CPSC to notify states of voluntary recalls.
Expand CPSC's Inspector General’s reporting requirements.
Require the CPSC to study, determine, and report on a specific strategy to increase the effectiveness of the Commission's ability to stop unsafe products from entering the United States.
The Senate took up H.R. 4040 and, in March 2008, substituted the language of S. 2663, authored by Senator Mark Pryor (D-AR), Senate Commerce Committee Vice Chairman Ted Stevens (R-AK), Senate Commerce Committee Chairman Daniel K. Inouye (D-HI) and Senator Susan Collins (R-ME). The Senate passed the amended H.R. 4040 by a vote of 70-to-13. The amended legislation would:
Authorize increased funding for CPSC, including an upgrade to CPSC’s laboratories.
Allow the CPSC to conduct business with a two-member quorum and increase the Commission to five members to prevent further absences of a quorum.
Restrict the amount of lead in children’s products.
Require third-party safety certification of children’s products.
Make mandatory current toy-safety standards promulgated by ASTM International, an independent standard-setting organization, and require that toys be certified to the standards.
Establish a database to include any reports of injuries, illness, death or risk related to consumer products and allow CPSC to expedite the disclosure of industry-provided information in the interest of public health and safety.
Increase civil and criminal penalties, allow state Attorneys General to obtain injunctive relief on behalf of its residents to enforce product safety laws and provide whistleblower protections for employees.
Require manufacturers to label children’s products with tracking information to identify recalled products and make it unlawful for retailers to sell a recalled product.

The House and Senate are expected to conference this legislation this year and address major differences. Other legislation may also be considered this year.

Health Policy and Intellectual Property Rights Protection

There have been increasing attempts in recent years to weaken the application of U.S. and multilateral intellectual-property rights provisions with respect to certain pharmaceutical products, particularly those used in the treatment of HIV-AIDS. In particular, some developing countries, private organizations and charities, and some Members of Congress have sharply criticized attempts by the United States to promote intellectual property rights protection involving pharmaceuticals used in the treatment of HIV-AIDS, arguing that health policy concerns justify the weakening of intellectual-property rights protections.

There is no question that the HIV-AIDS crisis has reached monumental proportions in sub-Saharan Africa and that the virus continues to spread in other regions. Over 34 million people living in sub-Saharan Africa have contracted HIV-AIDS and, of these, over 12 million people have died. HIV-AIDS-related deaths in sub-Saharan Africa represent 83 percent of worldwide HIV-AIDS-related deaths.

As with each of the issues discussed above, efforts must continue to identify the sources of and best solutions for addressing this crisis. It is important to understand, therefore, that drug prices are not the single or perhaps even most important issue in handling this crisis. Many reports have documented that problems of infrastructure (including the lack of medical health professionals and clinics), along with other social and governmental barriers, represent substantial problems in treating and preventing HIV-AIDS in developing countries.

In an effort to address concerns over the price of HIV-AIDS-related pharmaceuticals being sold in developing countries, several major U.S. and European pharmaceutical companies, particularly those that make anti-retroviral drugs, have developed initiatives to donate or provide at very low prices such products to developing countries. These companies are also involved in other efforts to support infrastructure development and treatment and prevention efforts in these countries.

In May, 2000, the Clinton Administration issued Executive Order No. 13155 providing that the United States “shall not seek, through negotiation or otherwise, the revocation or revision of any intellectual property law or policy of a beneficiary sub-Saharan African country, as determined by the President, that regulates HIV/AIDS pharmaceuticals or medical technologies” if the law or policy of the country promotes access to HIV/AIDS pharmaceuticals and provides adequate and effective intellectual-property protection consistent with the agreement. If found to be applicable, this provision appears to allow both compulsory licensing (where non-patent holders are licensed to manufacture a patented pharmaceutical) and parallel imports (where the country permits imports from entities other than those authorized by the original patent-holder). While technically applicable only to sub-Saharan African countries, the Clinton Administration indicated that they would consider requests for similar treatment from other countries on a case-by-case basis. In February 2001, Bush Administration officials indicated that they were prepared to maintain the Executive Order.

At the WTO Ministerial in Doha in November 2001, WTO countries agreed on a Declaration on the TRIPS Agreement and Public Health. In particular, the declaration reaffirmed countries’ commitment to implement the TRIPS Agreement, while emphasizing that interpretations of TRIPS should be supportive of measures meant to protect public health. In particular, the declaration states that:

“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.

On August 30, 2003, the WTO General Council approved the Decision on the “Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health” along with the text of a statement describing members “shared understanding” of how the Decision should be interpreted. The Decision provides for the waiver of TRIPS Article 31(f) to allow countries producing generic medicines under compulsory licenses to export the medicines to eligible countries. The accompanying statement makes clear that the provision should be used in good faith for health policy reasons, not commercial or industrial policy. This Decision is to remain operative until an amendment to the TRIPS is adopted.

As discussed in section IV.4, in May 2007, Congress and the Administration agreed to modify the IP protections contained in several trade agreements (Peru, Colombia, and Panama) to create an exception to IP protection for pharmaceutical products where a Party takes measures to protect public health in accordance with the Declaration on the TRIPS Agreement and Public Health, waivers of TRIPS granted by WTO members, and any amendment to TRIPS to implement the Public Health Declaration, once it has entered into force.

ECAT strongly supports efforts to promote effective solutions to address the HIV-AIDS and other disease emergencies in Africa and elsewhere. As discussed in section III.4, the TRIPS Agreement and the related WTO Decision on the Implementation of Paragraph 6 of the Doha Declaration provide needed flexibility for countries to address health emergencies. ECAT is concerned, however, that too much emphasis is being placed on weakening intellectual property-rights protections as the primary solution to a problem that is much more complicated, particularly when it is precisely intellectual property-rights protections that foster the development of the pharmaceuticals necessary to treat and, one day, cure and prevent these diseases.

A 2004 analysis, How Do Patents and Economic Policies Affect Access to Essential Medicines in Developing Countries, by Amir Attaran, Health Affairs, Vol. 23, No. 3, found that “[p]atents cannot cause essential medicines to be inaccessible in ‘many’ developing countries because they do not exist 98.6 percent of the time.” Rather, increased efforts are needed to promote infrastructure development and other solutions that will help stem this crisis. In particular, U.S. and other developed nations must increase foreign assistance, including debt relief, to developing countries so that they can finance much needed improvements in public health, education, and other social programs. ECAT believes U.S. businesses receive insufficient recognition for their efforts in helping developing countries to tackle these issues. ECAT supports efforts as well that will ensure that modifications to intellectual property-rights protection are only permitted for public-health emergencies and do not result in diversion.

ECAT is very concerned in particular over Thailand’s compulsory licensing of several patented medicines without consultations or a transparent mechanism and its proposed expansion of that compulsory licensing to a wide array of other pharmaceutical products. While countries have the right to take compulsory licensing actions to address public health emergencies as explained above and in section III.4, Thailand’s actions and its failure to consult with patent-holders go well beyond the purpose of that provision. ECAT urges the Administration to continue to work with the Thai government to seek a reversal of this policy.

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, as well as through creating economic opportunities and strong rules through bilateral and regional trade agreements. At the same time, it is imperative to recognize that trade and investment alone are insufficient to ensure U.S. competitiveness or address the many issues the United States faces internationally. Many other policies are important to promote a competitive workforce, competitive cost structures, and the innovation and leadership that are critical to the United States’ success in the global economy.