Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Doubling Exports In Five Years - How Are We Doing?

Originally published by the Journal of Commerce in July 2011.

In his January 2010 State of the Union address, President Obama announced the goal of doubling U.S. exports in five (5) years. In September 2010, then Commerce Secretary Locke issued a "Report to the President on the National Export Initiative: The Export Promotion Cabinet’s Plan for Doubling U.S. Exports in Five Years". There is little doubt that economic development is sorely needed in the U.S. and in the rest of the world. Polls consistently find that until there is significant job growth, Americans are not going to feel any easier about the state of the American economy. As a result, we, as a nation, are saving more and spending less. This column is being published in July 2011. That means, we are some 16 months from the next national election, but when you read the headlines in newspapers and on websites, all the talk in D.C. is about how to frame deficit reduction, whether taxes should be cut, whether the Trade Adjustment Assistance program does its job, should "sacred cow" programs be revised, and all of that combined with other distractions has stymied passage of the pending free trade agreements with Korea, Panama and Colombia. It’s all about politics! Perhaps a more correct statement is – it’s all about the money – where do the two parties get their campaign funds and what special interests are they serving? If it was truly about the economic good of the country, all three FTAs would have long ago been approved. www.export.gov, an exporter is able to find consolidated together in one place all the lists of designated individuals/entities with the result that only one search needs to be conducted per name. Nonetheless, parties must bear in mind these lists are for export license purposes only. Traders must still separately address the economic sanctions administered by Treasury’s Office of Foreign Assets Control. http://export.gov/FTA/ftatarifftool/index.asp. While electronic tools that help traders identify their products are always going to be welcome, figuring out how to qualify your product under an FTA is still the lawyer/consultant full employment act! There are so many general rules, exceptions and complications that it is just plain folly to think you can solve the information hurdle regarding FTAs with such a program.

Does the National Export Initiative (NEI) have any relevance in solving the economic dilemma? The answer clearly is yes. While Republicans and Democrats continue to argue about who is doing a "better" job for America, study after study shows jobs tied to international trade pay higher wages than other jobs. The September Locke report states the difference is 15% higher wages for those who work for companies that export, over those whose companies do not. So, where do we stand with the NEI?

Secretary Locke’s September report acknowledges there are many hurdles to exporting successfully. Some are domestic in nature, while others are not. On the domestic side, there is, for example, the lack of readily available information about exporting and market research, limited export financing, and strong competition from foreign companies, but also from foreign governments. One need look no further than the recently announced World Trade Organization decision against the manner in which China was regulating the export of its rare mineral natural resources (such as bauxite, coke, magnesium, cerium and yttrium) for evidence of significant government intrusion into commerce, but it’s not just government. All countries have vested interests. We saw an example in Korea with local farmers hostile to the proposed FTA over concerns about U.S. beef exports. American labor unions have objected to the same KORUS FTA complaining the Koreans have not granted enough concessions in opening their automobile market up to competition.

The NEI offers a coordinated effort by the U.S. government to identify and overcome trade barriers. However, what the typical exporter means in overcoming trade barriers is often quite different than what the government means when using that term. When the government uses the term "trade barriers", it typically means unfair trade practices, and there are plenty of those. When the private sector uses the term "barriers to trade", it typically means, I can’t figure out where to sell my products, how to insure I am dealing with honest parties and how I get paid. To the credit of the government officials overseeing the program, the NEI has come to adopt the trade’s definition of barriers to trade by acknowledging the information gap needs to be overcome and there are times when the government is the best vehicle to accomplish that end.

There are five (5) components to the NEI: 1) advocacy and trade promotion; 2) export financing; 3) removal of barriers to trade; 4) enforcement of trade rules; and 5) promotion of strong, sustainable and balanced growth. There are increased trade missions, the Small Business Administration (SBA) and the Export-Import Bank have begun more aggressive outreaches and the U.S. has certainly made its presence felt in the international arena as many countries have coordinated their actions seeking to keep the world from sliding into a financial depression. At the same time, the U.S. has in many ways led the world’s efforts regarding United Nations activities relative to North Korea, Iran, Syria and Libya. The newly announced country of South Sudan is also, at least in part, the result of American efforts.

At the same time, international traders have been pleased to see serious progress being made regarding export license reform. Yes, in the end, there are changes which require Congressional action, but the goals announced – the 4 – 1s – are being taken seriously by the regulators empowered to carry out the intended reforms, a pleasant change from the past. The concept behind the 4- 1s is there will be a single control list, a single primary enforcement agency, a single IT system, and a single licensing agency.

The concept of a single control list has made some strides. At

On the topic of a single licensing agency, there are on-going discussions between Commerce, State and Defense about realigning their lists. We have already seen positive signs, such as the Strategic Trade Authorization license exception finalized last month. Prior to that, in April, State redefined "defense services". One hopes this will be followed by State going the next logical step and confirming that "publicly available" as defined at 22 C.F.R. 120.11(a)(4) includes the Internet. Another logical reform is for Commerce, State and Defense to be more easily able to exchange data through their IT systems. Right now, State cannot see the data in Commerce’s system, and Commerce cannot see the data in State’s system, whereas both are doing data dumps to Defense which is then able to view it all. "Big Brother" certainly could be watching, but the reality of a single IT systems is certainly long overdue.

The goal of a single primary enforcement agency and a single licensing agency will definitely require Congressional action. For that reason, regulators are regularly briefing members of Congress as the various reforms are being considered and undertaken. Skirmishing within Congress will no doubt occur. After all, we are more than ten (10) years removed from 9/11, and still Congress has not reformed how it oversees homeland security!

Last month, in June, a report was submitted to Congress with an update re NEI. Its introduction contains some harsh truth for most Americans. "Over 95 percent of the world’s consumers live outside U.S. borders. A new middle class is emerging in once-developing nations, which will increase the consumption of goods and services worldwide. More than one billion new consumers worldwide will enter the middle class during the next 15 years." The report cites to an OECD (Organisation for Economic Cooperation and Development) study which states "global middle-class consumption is expected to rise from $21 trillion to $35 trillion by 2020, with over 80 percent of the growth…outside North America and Europe." So, what has the American government been doing lately? There are some positive, concrete steps. For example, the International Trade Administration (ITA) and SBA have refined their intake registration process so they are better able to figure out an applicant’s level of knowledge and needs. The ITA has also developed an online free trade agreement tool which allows a search for classification of a good. More details can be found at: export.gov/FTA/ftatarifftool/index.asp.  While electronic tools that help traders identify their products are always going to be welcome, figuring out how to qualify your product under an FTA is still the lawyer/consultant full employment act! There are so many general rules, exceptions and complications that it is just plain folly to think you can solve the information hurdle regarding FTAs with such a program.

On the other hand, to its credit, the NEI team recognizes the importance of services to the American economy and is trying to figure out how best to measure services and support their export.. Similarly, there is a recognition that certain advocacy issues should be dealt with at the highest levels and so there is a process to allow the most critical ones to be referred to the White House National Security Staff.

In the June 2011 report, the most noteworthy fact is the focus on infrastructure and intellectual property (IP) rights. Theft of IP has been a priority for several administrations, so perhaps one should have been surprised more wasn’t made of this topic earlier. It is the importance placed on American highways, railways, bridges, waterways, runways and ports that is the most welcome. Beside pointing out the shortage of empty containers (and the related Federal Maritime Commission investigation), the report proposes a top-down review of export infrastructure (how it differs from import infrastructure is not clarified), identification of weaknesses and chokepoints, identification of export infrastructure corridors, prioritization of projects, securing adequate funding and working with exporters to address long-term needs.

For you exporters out there, what do you need in order to allow you to expand your export markets? There is no telling what the landscape will look like after the 2012 election. Now is the time to speak up - what more needs to be done? Where do you need help?

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