A number of bills introduced over the last few months as part of a process to formulate the next miscellaneous tariff bill (MTB) may interfere with the interests of the United States as it pursues negotiations toward a Trans-Pacific Partnership (TPP), and therefore may fail to be included in final MTB legislation.

Many of these bills seek to suspend duties on certain types of footwear, an area that is considered to be among the most sensitive in the TPP talks between the U.S. and Vietnam over market access. Another bill would create a new tariff rate quota (TRQ) system for milk protein concentrates, casein and casein derivatives – all major dairy products of New Zealand and Australia, which are also party to the TPP negotiations.

In the House and the Senate, a total of 78 bills were introduced to suspend or reduce duties on different types of footwear, and many of them drew opposition from the Rubber and Plastic Footwear Manufacturers Association and the U.S. footwear apparel company L.L. Bean. Supporting the bills were the American Apparel & Footwear Association and the Footwear Distributors and Retailers of America.

The plain fact that many of the footwear bills are controversial because they cover products made in the U.S. means that they are unlikely to be included in the final MTB under the criteria set forth by the congressional trade committees. The House Ways and Means and Senate Finance Committees have asked only for duty suspension and reduction proposals that cover goods where there is no domestic production and thus no impact on U.S. firms.

But even those that are not being opposed by domestic producers – and there are more than a few – may fail during the vetting process because the U.S. is unlikely to unilaterally give away tariff benefits that it views as holding potential for trade-offs. The administration vets all the proposals after they have been collected by the committees

In the market access negotiations with Vietnam, sources view the U.S. apparel and footwear tariffs as the most valuable areas that U.S. negotiators can use to pay for reciprocal market access concessions from Hanoi (Inside U.S. Trade, April 13). But so far the Obama administration has shown little flexibility in either area, and appears unlikely to do so prior to the November elections in order to avoid angering domestic constituencies.

The footwear talks have pitted shoemakers like Nike that manufacture shoes almost exclusively overseas, along with other big shoe and apparel importers, against those few U.S. companies that still have some domestic manufacturing like New Balance and L.L. Bean.

One footwear retail industry source, however, made the argument that including duty suspensions or reductions in the MTB would not necessarily conflict with the ability of the U.S. to offer reductions in tariffs to Vietnam, which paid roughly $248 million in footwear duties in the U.S. last year (Inside U.S. Trade, April 13).

This is because bills included as part of the MTB must not reduce tariff income by more than $500,000 annually and the suspensions and reductions are temporary in nature, as opposed to the permanent commitments that are made in a free trade agreement like the TPP

The administration's MTB vetting process involves Department of Commerce, U.S. Customs and Border Protection, the U.S. International Trade Commission, and  the Office of the U.S. Trade Representative. USTR reviews each bill for trade policy considerations, according to its website.

The bill that would create a new TRQ for milk protein concentrates and casein and caseinate was introduced in the House by Rep. Peter Welch (D-VT). In comments submitted in opposition to its inclusion in the MTB, a group representing Australian dairy producers said it would conflict with the U.S. goal of liberalizing trade in all goods.

Specifically, Dairy Australia said in its comments that the bill would send an “inappropriate legislative and policy signal” at a time when the TPP negotiations are proceeding. “The TPP negotiations are aimed at creating a high standard, genuinely trade liberalizing agreement across all goods (agricultural and industrial) sectors,” the group wrote.

The U.S.-Australia FTA did not completely open the United States to Australian dairy exports, and instituting a TRQ would add to the existing limitations.

The U.S. has said that it will not conduct market access negotiations with existing FTA partners like Australia with whom concessions from a previous trade deal are still be being phased in, although the Australian agricultural industry has pushed its government to engage the U.S. on access for dairy, beef and sugar (Inside U.S. Trade, March 15).

The U.S. is negotiating on market access with New Zealand, as it does not have a trade deal in place with that country. Fonterra, New Zealand's largest dairy cooperative, does not mention the TPP negotiations in its comments. Instead, it points out the bill's apparent inconsistency with the MTB criteria, which require that a bill be either a new temporary duty suspension or reduction, an extension of an existing one, or a technical correction.

It notes that while a “technical correction” is not defined, “in normal legislative parlance a 'technical correction' bill is one which is non-substantive, for example, correcting erroneous statutory references, nonstandard tabulations, grammatical problems, and misspellings,” it wrote in its comments.

“To the contrary, H.R. 2813 is clearly substantive, creating new provisions in the United States Tariff Schedules,” Fonterra adds, referring to the Welch bill by its number.

The comments in opposition to the MTB bills, which were filed in late June, come amidst a continuing controversy over whether the MTB itself violates the Republican caucus' self-imposed ban on earmarks and limited tariff benefits, both of which are defined as benefiting 10 or fewer parties under the current House rules.

The latest flare-up of the controversy came in the form of a June 25 letter sent by 57 House Republicans – including two members of the House Ways and Means Committee – that urged House Speaker John Boehner (R-OH) and Democratic Leader Nancy Pelosi (D-CA) to adhere to the earmark ban.

“As the House debates our annual spending bills to fund the federal government, we thank you for your commitment to enforcing the current House Rules regarding earmarks, and urge you to reject calls to allow for the return of earmarks in the House of Representatives,” the letter reads.

A spokeswoman for Rep. Sandy Adams (R-FL), who spearheaded the letter, said that Adams supports continuing to uphold the moratorium on earmarks as is now established by House rules – including MTBs. But she also acknowledged that not all members believe MTBs are earmarks.

“The Congresswoman cannot speak for other members,” the spokeswoman added in a e-mailed statement. At least some members, like Rep. David Schweikert (R-AZ), signed the letter expressly to convey their unease over the fact that the MTB process is going forward despite the earmark ban, according to another House aide.

That fact that there is a difference of views among the signatories to the letter is clear when looking through the names of the lawmakers who submitted bills for consideration for the MTB. Thirteen of the signatories submitted such bills. They are: Reps. Joseph Pitts (R-PA), Phil Roe (R-TN), Tim Huelskamp (R-KS), John Campbell (R-CA), Francisco Canseco (R-TX), Renee Ellmers (R-NC), Sue Myrick (R-NC), Tim Scott (R-SC), Mick Mulvaney (R-SC), Joe Wilson (R-SC), Paul Gosar (R-AZ), Todd Young (R-IN) and Lynn Jenkins (R-KS).

Jenkins and Diane Black (R-TN), who also signed the letter, both sit on Ways and Means.

The degree to which the letter and what it signals about sentiments in the House really presents a problem for Ways and Means Committee Chairman Dave Camp (R-MI), who has rejected the notion that the MTB is an earmark, is still unclear. Boehner thus far has said that he continues to support the bill, according the private-sector source, who noted that many House freshman also believe it does not conflict with the earmark ban (Inside U.S. Trade, June 15).

In the Senate, Sens. Rob Portman (R-OH), Jim DeMint (R-SC) and Claire McCaskill (D-MO) are insisting that legislation that would reform the MTB process so that duty suspension requests are submitted directly to the administration – as opposed to members of Congress, as they are under the current system – be included as part of this year's MTB bill.

But neither Senate Finance Committee Chairman Max Baucus (D-MT) nor Camp have shown any interest in attaching that legislation to the MTB. That could mean the legislation could have to move as part of another omnibus bill in the Senate instead of under unanimous consent, as has historically been the case, because Portman and the others would likely try to block such an effort, according to supporters of the MTB.

What that bill would be is also not clear. Supporters expect that the time-consuming process of vetting all the bills makes it unlikely that the final MTB package would be ready to go before the lame-duck session, when a number of other bills related to taxes and revenue are expected to be considered.

Source: insidetrade

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