Trade Compliance

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USTR Releases 2017 National Trade Estimate Report

Posted March 31, 2017

Coinciding with an announcement concerning President Donald Trump’s signing today of two trade-related executive orders, the U.S. Trade Representative has released its 2017 National Trade Estimate Report detailing significant foreign trade barriers to American exports.

Stating that the 500-page document “underscores the importance of enforcing U.S. trade laws, a top priority in the administration’s ‘America First’ trade agenda,” the report is, understandably, for the most part a direct carry over of familiar grievances highlighted by the previous administration (such as Canada’s agricultural supply management system, for example), along with a summary of various government initiatives undertaken during the past year seeking to address some of them.   

A new addition to the congressionally mandated report is a section describing Key Barriers to Digital Trade (formerly classified by the USTR in previous NTEs as “e-commerce”), a burgeoning sector of the economy that the document contends has been hampered by many governments around the world seeking to control it “in blunt and disruptive ways.”

The NTE organizes its digital trade barriers for various countries into four categories:

  • Data Localization Barriers: Including unnecessary requirements to store data within a particular jurisdiction or locate computing facilities locally, as well as outright bans on cross-border data flows.
  • Technology Barriers: Including requirements to meet onerous and unnecessary security standards and requirements to disclose encryption algorithms or other proprietary source code.
  • Barriers to Internet Services: Including inappropriate application of old regulatory regimes to new business models and unreasonable burdens on Internet platforms for non-IP-related liability for user-generated content and activity.
  • Other Barriers: Including issues surrounding electronic authentication and signatures, internet domain names, digital products, electronic payment platforms, and other discriminatory practices.

Among the most notable trade barriers highlighted by the report are seven areas of concern in China: excess steel and aluminum production capacity; an overly restrictive cybersecurity regime; forced technology transfers; online piracy; delays in approval of agricultural biotechnology products; a continuing ban on U.S. beef imports; and persistent obstacles facing U.S. providers of electronic payment services despite a prior WTO ruling in favour of the U.S.

The report also takes aim at Beijing’s state-directed “Made in China 2025” plan for seeking to provide domestic companies with competitive advantages over foreign ones. Announced in 2015, the initiative aims to upgrade Chinese manufacturing in a series of sectors, including high-tech ones. It also includes a goal to raise the domestic content of core manufacturing components and materials to 40% by 2020 and 70% by 2025.

“According to industry experts, Made in China 2025 represents a modest improvement over SEI development plans and indigenous innovation initiatives rolled out over the past decade,” the report states, referencing previous Chinese plans to develop so-called “strategic emerging industries” via home-grown innovation policies and other state measures to support Chinese firms. “However, Made in China 2025 includes many holdovers from these prior state-driven plans and initiatives, as it, for example, sets targets for indigenous production or control of up to 40 percent of certain critical components in the aerospace, power and construction sectors, among other sectors, by 2020, while aiming to achieve substantial productivity gains in these sectors.

“Industry experts are skeptical that China will be able to reach its Made in China 2025 goals due to other policies that hold back competition, limit market access and over-regulate new technologies and cross-border data flows,” the document says.

With respect to Canada, the report notes positively that the threshold for review for foreign investment will be raised to C$1 billion in 2017, two years sooner than originally planned, but also draws attention to the WTO complaint initiated in January regarding the sale of wine in B.C. grocery stores. “These measures allow only British Columbia wines to be sold on grocery store shelves and appear to breach Canada’s WTO national treatment commitments,” the report states.

Click here to download the full report.