The U.S. Trade Representative’s office recently released the twentieth annual National Trade Estimate Report on Foreign Trade Barriers (NTE), a congressionally mandated inventory of the most important foreign trade barriers. The 672 page report covers 56 nations, the EU, Taiwan, Hong Kong, the Southern African Customs Union and the Arab League.
The report notes that “Trade barriers elude fixed definitions, but may be broadly defined as government laws, regulations, policies, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products.” Some of these are easy to see like import tariffs and quantitative restrictions. Agricultural exporters have learned first hand the importance of standards, testing, certification and sanitary and phytosanitary barriers to trade. Export subsidies that displace U.S. exports in third country markets are also considered trade barriers.
The NTE addresses all significant trade barriers including those that are consistent with international trade rules. That is were the Doha round of WTO negotiations play an important role. Just because a high tariff rate, an import quota or health regulation is consistent with current commitments under the WTO does not mean that it doesn’t impact U.S. exporters or that it should not be changed. If the WTO process is to truly lead to freer trade, then all barriers to trade need to be on the table.
As would be expected, the EU has a prominent place in the report, 48 out of 672 pages. While import tariffs and export subsidies are critical issues, the EU section is dominated by standards, testing and sanitary and phyto sanitary issues. Biotechnology and beef hormones continue to get attention. Wine imports are also on the list because of the complex set of regulations associated with processing and labeling. The EU has the additional problem of getting all 25 members to follow a common set of rules.
Japan came in close to the EU with 45 pages of comments. The report notes that Japan has made strides under its Regulatory Reform Initiative and that a continuing commitment is necessary. The adoption of international health standards for plant pest risks is being addressed under the regulatory initiative, which could have a major impact on U.S. fruit and vegetable. Japan continues to use quotas and tariffs to limit rice imports and uses other complex regulations to encourage consumption of domestically produced agricultural products when imported products would be much cheaper.
The report addresses trade relations with the six CAFTA-DR countries. While trade barriers are fewer than for more developed markets, the seeds have already been sown for many of the same problems that now exist with the EU and Japan. CAFTA-DR has the potential to prevent some of the trade barriers that now weigh on more developed markets.
After reviewing a 672 page report on trade barriers of other countries, it would be easy to conclude that this is all a hopeless mess and the U.S. is getting short changed in international trade policy. Before the eyes glaze over, keep a few points in mind.
First, many of the countries reviewed in the NTE report have there own reports outlining U.S. trade barriers. In December of 2004, the European Commission released “Report on United States Barriers to Trade and Investment.” It is the twentieth annual report and is 91 pages. About 30 pages deal with non-tariff barriers like sanitary and phytosanitary issues.
Second, other countries see explicit and implicit trade barriers in many U.S. government programs. Part of the WTO Brazilian cotton case ruling hinged on the fact that farm program provisions protect fruit and vegetables producers from production on land that receives farm program payments. The provision seems reasonable to us, but not to others.
Third, trade rules cannot be written in advance to deal with all the potential trading relationships that free minds can develop. Biotechnology was not an issue 15 years ago. When reforms of the textile trade rules began 10 years ago, China was a minor player in textile trade and not a member of the WTO. Five years from now there will be other new issues. Trade and trade policy are always moving targets driven by consumers and producers.
All of this takes us back to three fundamental trade policy choices. First, we can ignore the economic benefits of freer trade by not pursuing international agreements that lead to more trade. Everyone would be poorer because of it, but we wouldn’t have to worry about 672 page reports.
Second, we can give up on the negotiated trail to freer trade. All quantitative and tariff barriers (both agricultural and non-agricultural) could be removed unilaterally and science-based international food safety standards could be adopted. That would be a shock to our economic system in the short-run, but an economic boon over the long run. And, we wouldn’t to have to read 672 page reports on trade barriers.
If neither of the first two is acceptable, then it is back to the negotiating process. Our domestic programs need to meet the requirements that we use to judge other countries’ programs. Trade rules and procedures must be flexible so they can deal with an uncertain future. And, speed reading is essential. The one piece of good news is that most 672 page reports are on websites rather than cluttering up our desks.