Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

U.S. Outlines Foreign Trade Barriers

Posted April 06, 2018

The Office of the U.S. Trade Representative last week released its annual National Trade Estimate report, a mandated inventory of foreign trade barriers and trade-distorting practices in dozens of countries around the world, which it used to underscore the need to vigorously enforce the nation’s trade laws and hold America’s trading partners accountable.
Breaking Trade Barriers
In a statement, USTR Robert Lighthizer vowed the administration “will use every available tool to ensure Americans are treated fairly” and said the report’s findings “build upon the major pillars of President Trump’s 2018 Trade Policy Agenda to secure market access for American farmers, ranchers and exporters.”

To that end, the USTR highlighted a number of positive changes in a fact sheet breaking down major developments in this year’s review including South Korea’s recent commitments in a renegotiated KORUS free trade agreement to loosen restrictions on its imports of American-made automobiles and Japan’s steps to provide expanded market access for some U.S. potatoes. But it also outlines a series of new concerns, including China’s persistent industrial overcapacity and “unfair” use of forced technology transfers.

Unsurprisingly given the present trade tensions with China, the report harshly criticized Beijing for its pattern of agreeing to commitments without ever fulfilling them and skewered the World Trade Organization for its seeming inability to address what the administration views as the unique threat to the multilateral trading system posed by China’s trade practices.

“The United States should not have to seek the same promises over and over through multiple negotiations,” the report said in regards to numerous commitments China has made on its treatment of foreign intellectual property but has not fulfilled.

Now the focus of “Section 301” trade action that threatens to escalate into a full-blown trade war, the report also delves at length into Beijing’s implementation of the ‘Made in China 2025’ plan that it says is likely to “create or exacerbate market distortions and create severe excess capacity in many of the targeted industries.”

“Many of the policy tools being used by the Chinese government to achieve the goals of Made in China 2025 raise serious concerns,” the report says. “These tools are largely unprecedented, as other WTO Members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services. Indeed, even facially neutral measures can be applied in favor of domestic enterprises, as past experience has shown, especially at sub-central levels of government.”

With respect to Canada, the report catalogs a familiar list of perennial complaints about the country’s agricultural supply management system and a number of “technical barriers to trade” related to cheese compositional standards, front-of-package labeling on prepacked foods, and restrictions on U.S. seeds exports.

Other Canadian policies coming under fire in the report include: restrictions on certain U.S. grain exports; the country’s unreasonably low de minimus threshold (the amount below which no duty or tax is charged); restrictive provincial measures concerning the sale of wine and beer in grocery stores; domestic support measures for the aerospace industry (i.e., what it considers unfair subsidies to Bombardier); and perceived shortfalls in protection and enforcement of intellectual property rights, especially regarding the trasshipment of pirated and counterfeit goods.

One positive development mentioned by the USTR concerned the Supreme Court of Canada’s decision last year rejecting lower court rulings that if a patent promised more than it could provide, it could be invalidated for lack of utility. Canadian courts had used this “utility” or “promise doctrine” to invalidate a number of patents held by U.S. pharmaceutical companies. The SCC however struck down this doctrine as “unsound,” ruling that it was inconsistent with Canada’s Patent Act.