I Swear, I Had Nothing To Do With This...

On Monday night, I recommended that, given President Obama's depressing timidity on US trade policy, WTO Members should "formulate appropriate contingency plans, such as putting the [Doha] Round on ice until, oh I don't know, 2013 when the White House will (hopefully) be occupied by someone more amenable to free trade."  Well, less than a day later, it became crystal clear that pretty much everyone in Geneva, except the Obama administration of course, agrees with me (emphasis mine):

The likelihood of the Doha round of world trade talks being declared dead this year rose on Tuesday when it became clear that even a partial deal would not be possible.  The talks, named after the Qatari capital in which they were launched in 2001, have drifted further towards oblivion in advance of a twice-yearly meeting of ministers this December.

Pascal Lamy, the World Trade Organisation’s director-general, told negotiators in Geneva on Tuesday that the WTO’s negotiating function was “in paralysis”. He urged member countries to use the December meeting to have a broad conversation about the future of Doha rather than try to make concrete progress.

Negotiators have tried to rescue a minuscule part of the talks by proposing a stand-alone “early harvest” package to be agreed in December which would extend market access to some of the world’s poorest countries and reduce cotton subsidies – a subject of particular interest to a group of west African nations.

But the US said on Tuesday that such an agreement would not be possible because of the refusal of other governments to accept other elements in the package....

Michael Punke, the US ambassador to the WTO, said on Tuesday that the stand-alone deal was impossible. “It has become clear to us and to many others that a so-called early harvest package is not happening and is not going to happen,” he said. “As we feared, participants have proven much more comfortable in talking about what others can give than in talking about what they can contribute themselves.”

A deal to give the least-developed countries (LDCs) completely free access to rich nations’ markets and reduce cotton subsidies would require difficult commitments by Washington. The US has already failed to reform its generous payments to politically powerful cotton farmers, despite having had them declared illegal by the WTO, and a deal for the LDCs would cut across the existing US scheme to give preferential access to all African countries.

Yi Xiaozhun, the Chinese ambassador, took implied aim at the US, saying that the insistence on bringing in new issues was crippling discussions. “The intention of various members to put on their own demands . . . would finally kill the core package that the LDCs really need,” said Mr Yi.

The Doha round has made no significant progress since a ministerial meeting collapsed in mid-2008 in Geneva. An increasing number of officials admit privately that the round will never conclude, but as yet no government has publicly declared it over.

We all see what's going on here, right?  Any deal on cotton and LDCs - relatively minor issues that almost all WTO Members support - would require legislative changes to US laws and, of course, the expense of political capital by the already-campaigning White House to get that done.  As I said on Monday, the President's unwillingness to spend such capital on trade issues is well-documented at this point.  Indeed, when it comes to our WTO-illegal cotton subsidies, the Obama administration is so utterly unwilling to take some political lumps and pursue necessary reforms that it's resorted to bribing Brazilian cotton farmers (with taxpayer dollars, of course) instead of modifying the offending programs.

And let's please not kid ourselves here and blame Congress for the Administration's political pusillanimity on these trade issues - the House voted to terminate the Brazilian payoffs just last month, and both the Republican-controlled House and Democrat-controlled Senate recently showed a willingness to address US preference programs by attaching them (rightly or not) to the US-Colombia FTA implementing legislation.  So if the White House really wanted to get a cotton/LDC package through Congress, it could very likely do so.

But that would require, you know, political courage and effort - something sorely lacking these days over at 1600 Pennsylvania Avenue (and not just on trade).

So, given these sad facts, what does USTR do in Geneva?  They submarine the December deal by making other demands that many nations adamantly oppose.  Who knows whether they did this to try to buy off domestic opposition to the cotton/LDC package or to just kill the chances of a final deal, but the result of their demands was the same in either case: inevitable failure.

Again.

Yes, other Members like the EU also have made additional demands, but do you really think that they would maintain their positions if the United States expressed robust support for the basic LDC/cotton package?  I sure don't.  Indeed, as Phil Levy and I argued last December, bold US leadership could have realistically secured a robust Doha package in 2011.  Certainly it could get this feeble package across the finish line.

And yet, here we are.  Sigh.

So, once again, American political cowardice has helped scuttle an important trade liberalization initiative.  And, once again, supporters of robust American free trade policy are reminded that we, like the WTO negotiators in Geneva, should just pack it all in until 2013 (hopefully).

Any optimism before that time would just be foolish.

Sunday Quick Hits

Here's a whole lot of links to get your week started off right:

• The Economist asks whether we're seeing the end of China's dominance as the world's low-cost manufacturer of first resort.

• J.E. Dyer absolutely dismantles labor lawyer Thomas Goeghegan's lame defense of NLRB's indefensible attempt to stop Boeing from opening a new manufacturing facility in South Carolina.

• GMU's Russ Roberts beautifully explains why President Obama's silly comments about ATMs taking American jobs are so darn silly.  (And Cato's Andrew Coulson piles on.)

• The AFL-CIO's use of a 13-year old photo in its latest anti-Colombia FTA smear campaign is the perfect metaphor for its trade policy more broadly - stuck in the past.  Meanwhile, Colombia hits yet another labor benchmark that was supposed to ensure passage of its FTA with the United States.  Key words: supposed to.

• AEI's Phil Levy provides a great roadmap showing how we got into the current mess re: Trade Adjustment Assistance and how we can get out of it.

• And while TAA gums up passage of pending US FTAs, our potential FTA partners in South Korea and Colombia are lining up another, rather conspicuous suitor - China.  Awesome.

• And the TAA/FTA impasse also has infected [$] ongoing US trade negotiations under the Trans-Pacific Partnership.  Double-awesome.

• AEI's Mark Perry highlights the amazing gains in US worker productivity in our allegedly struggling manufacturing sector.

• Cato's Dan Griswold shows how IBM's remarkable evolution is a perfect metaphor for the US economy.

• Is America's stupid ethanol policy on the way out the door?  If this recent Senate vote is any indication (and it might not be), yes.

• Cafe Hayek's Don Boudreuax provides some great commentary on the House's vote to cut off those embarrassing US bribes to Brazilian cotton farmers.  John Stossel has more.  (And Brazil unsurprisingly grumbles about it all.)

• Can we please, PLEASE stop labeling free traders who support practical limits on US foreign policy adventurism "isolationists"?

• Mark Perry and Dan Griswold team up to explain how people's blinkered obsession with the US trade deficit misses the other, inevitable side of the coin, our massive foreign investment surplus:

If these don't leave you sufficiently depressed about US trade policy, then nothing will. 

Caterpillar CEO on Trade and How to (Really) Win The Future

President Obama and his underlings just love to talk about improving American competitiveness in order to Win the Future.  But what does the US business community - well, those not on the milky-end of the government teet - think about the current state of American policy and its impact on our companies' future global competitiveness?  Courtesy of HotAir comes a fantastic CNBC interview with the CEO of Caterpillar - one the shining stars of America's thriving manufacturing sector - on just those issues.  It's well worth your 15 minutes:



In short, Mr. Oberhelman sees the global economy not as a threat, but as a great business opportunity.  He's smartly positioned Caterpillar to take full advantage of both foreign and domestic market conditions - through things like advocating robust trade liberalization, currency hedging and maintaining near-total control over business operations in interventionist foreign markets - and he sees competitiveness-killing US government policies, not free trade or low-cost competitors in China or Brazil, as the greatest threat to his company's viability and the future of the American economy.

And what kind of US government policies are undermining our global competitiveness and thus jepoardizing our companies and jobs?  I'll let Oberhelman explain:



My favorite quote:

We've announced three or four arguably brand-new facilities [in the United States] bringing work in from outside. And frankly we weigh all of these things in which state is the most business friendly. It's not a question of labor cost or who's cheaper. If you chase cheap labor around the world, you're never going to win. It's a lot more than that. The state's got to be competitive.  The country's got to be competitive....  You see states going the other way [from Illinois], where they're very pro-business and reducing taxes, and guess where we land our plants that are very competitive.... The latest and greatest is in Texas.  We brought a plant that in the past has assembled hydraulic excavators in Japan for shipment to the U.S.... we've moved that plant to south Texas... 5,000 to 6,000 units a year, 600 to 700 high-paying assembly jobs.

Nice.  And how exactly does Mr. Oberhelman think the current administration is doing to keep American companies strong and competitive?  Well, the answer to that is in the second video, but I'll let HotAir spell it out for you.

(Hint: it's not good.)

America's Cotton Problem

A little heralded congressional vote last week shows just how hard it will be to reform America's bloated, trade-distorting farm subsidy programs and, more generally, get the US government's insanely profligate spending problem in check.  On Friday, the US House of Representatives overwhelmingly rejected a bi-partisan amendment to the 2010 continuing budget resolution that would have ended $140 million in annual bribespayments to Brazilian - yes, Brazilian - cotton farmers.  The payoffs, which I've repeatedly blogged on, resulted from a ludicrous deal between the Obama administration and the Brazilian government to stave off Brazil's imposition of retaliatory tariffs on US exports due to the United States' refusal to amend its cotton subsidy programs so that they complied with WTO rules (the cotton subsidies had been repeatedly ruled WTO-inconsistent in dispute settlement proceedings).

Cato's Sallie James provides some good analysis (and much-needed hostility) on the amendment's failure:

Republicans -- those stalwart fiscal conservatives! -- voted 75 in favor and 164 against. The Democrats showed more courage and voted in favor of the amendment 108 to 82. (These numbers are according to C-SPAN; I will post an update if they prove to be incorrect)....

The Hill article (linked to in the first paragraph of this post) points out that some members (presumably the Republicans who voted against the amendment) were concerned that "the move [to cease the payments to Brazil] could create a trade war if Brazil decided to retaliate."  It doesn't seem to occur to those concerned members that one way to avoid a trade war would be to abide by international obligations and cease subsidizing U.S. cotton farmers. It would also shave a few million from that huge deficit about which they profess to be concerned.

Sallie's point is exactly right.  If House members are truly concerned about a trade war with Brazil, then the sane, fiscally-conservative approach is not to continue paying $140 million in Brazilian hush money but instead to eliminate the offending cotton programs (and other US farm programs that are either unnecessary or WTO-inconsistent).  That this very sensible thought didn't even register in the US Congress is a testament to just how entrenched agriculture interests are on Capitol Hill.

And unfortunately, it gets worse.

Congress' latest vote on, and apparent support for, cotton subsidies is particularly egregious given the fact that the current environment for reform is pretty much perfect.  First and most obviously, the US government is flat broke, and the new Congress has a massive new contingent of Tea Party-driven budget cutters who - one would think! - would be open to ending the Brazilian bribes and embracing significant and immediate cuts to WTO-illegal US farm subsidy programs.  Second, those bribes and the US cotton program are taking place during a period of record cotton prices and unprecedented investment in American cotton production:

[Cotton] prices hit a 150-year-high last week, more than double what it was a year ago. (What happened 150 years ago? The Civil War began, and cotton jumped to $1.89 a pound. What do you think Rhett Butler was trying to smuggle past those Union gunships?)

Also having an effect: droughts and flooding in China, Pakistan and Australia, plus restrictions on exports from India. Plus, the world’s economy looks a little better than it has in the recent past. People can afford clothes.

At the same time, the Virginia Department of Agriculture and Consumer Services announced today that cotton acreage in the state is expected to increase by nearly 27 percent, from 82,250 acres in 2010 to an estimated 105,000 acres this year. In 2007, Virginia farmers planted only 58,000 acres. The last time the state topped 100,000 acres was 2006. Part of this is smarter agriculture and innovative research. Part of it is supply and demand.

Third, the WTO's Doha Round negotiations will probably die if not completed by the end of 2011, and as Phil Levy and I wrote in December, a bold US commitment on farm subsidy cuts and cotton reforms will be essential to completing a final deal.

Given these facts, there might never be a better time than right now for cotton subsidy cuts, and yet the House - and all those new fiscal conservatives - have once again refused to address the broader cotton issue and instead prefer to continue embarrassingly paying off Brazilian cotton farmers.  Awful.

Moreover, the House's latest cotton episode reveals a far more serious problem with the future of America's inefficient, outdated farm policies and US budget-cutting efforts more generally.  If the US House of Representatives can't make some basic cuts to American cotton subsidies amidst serious budget shortfalls, a wave of new budget-conscious GOP freshmen, record high cotton prices, unprecedented private investment in American cotton, and a Doha Round on life support, then what hope is there for a serious US farm subsidy reform proposal as part of Doha or otherwise?  And if (allegedly) fiscally conservative House Republicans can't defund the WTO-illegal US cotton programs or, at the very least, stop the insanity of sending 140 million in taxpayer dollars to Brazil's farmers every year, then why should we think that they'll have the courage to tackle the much more politically-sensitive and important budget reforms that will be absolutely essential to getting our crippling budget deficit in check?

After last Friday's vote on the cotton bribes, the answers to these bigger questions don't look too promising.

My (and Your) Tax Dollars to Subsidize Brazilian Cotton Farmers Indefinitely

Great* news!  Because of an agreement reached last week between the United States and Brazil, American citizens will continue to be forced to provide hundreds of millions of tax dollars in hush money"technical assistance" to Brazilian cotton farmers!  Granted, the new agreement also delays the imposition of about $1 billion in Brazilian retaliatory sanctions against American exports due to US refusal to implement multiple adverse WTO rulings against the US cotton subsidy program.  But considering the undeniable fact that such a move was in both country's commercial interests (the sanctions would punish Brazilian consumers and American exporters alike), the big news here is the embarrassing fact that the agreement continues the aforementioned Brazilian briberycompensation.  Cato's Sallie James does a good job summing up this debacle as follows:

Notwithstanding the efforts of four brave congressmen, the belated concession to reality by House Agriculture Committee Chairman Collin Peterson, and the misgivings of trade analysts including myself, it appears that the “temporary” deal struck by Brazil and the United States in April to ward off Brazil’s retaliation for WTO-illegal U.S. cotton supports is here to stay....

You will recall that the deal includes about $147 million worth of taxpayers’ money given to Brazilian cotton farmers in the form of “technical assistance,” just so we can continue our own insane cotton support programs without fear of U.S. exporters (including holders of patents and copyrights) being hit by retaliatory trade barriers and unpunished piracy.

Brazil in some senses has the right idea, of course. They recognize, correctly, that retaliation in the form of increased tariffs on American imports only hurts their own consumers, hence their stated desire for “negotiation and reform” instead of sanctions.  But they sure do have a lot of faith in the willingness of Congress to enact reform without serious pressure from, among others, aggrieved trade partners.

I hope their faith and saint-like patience is rewarded. In the meantime, we have (at least) two more years of subsidizing Brazilan farmers in addition to our own.

What a mess.  But I would disagree with Sallie on one thing: I don't think that the trade-savvy Brazilians have any delusions about the "willingness" of Congress to enact ag subsidy reforms, with or without foreign pressure.  Instead, I think the Brazilians realize perfectly well that (a) this Congress certainly isn't going to do anything about the US cotton program, (b) a billion dollars in trade sanctions will do nothing but harm their struggling economy; and (c) their threat of sanctions loses value the longer it's dangled out there (and it's been dangling for a while now).  So they're going to keep their (remaining) powder dry until (a) the global economy improves and (b) a new Congress takes over in 2011 that will probably be more, umm, "budget-conscious" and will very, very likely be without one of "King Cotton's" biggest champions - Senate Agriculture Committee Chair Blanche Lincoln (D-AR), whose chances of getting re-elected in 2010 are currently hovering between slim and none.  So the Brazilians' move last week might not reflect pie-in-the-sky idealism, but instead some good ol' fashioned DC cynicism.

But regardless of Brazil's motivations, one thing is very clear here: the US government's unwillingness to reform its insane, illegal agricultural subsidy programs means that, for the foreseeable future, American taxpayers will be forced to not only throw billions of their hard-earned dollars at American agribusiness, but also dish out millions in bribes to Brazil's cotton farmers.

Is it any wonder why a clear majority of the American people have finally had enough?


* "Great" may or may not actually mean "crappy."

Brave Reps Fight the Congressional Ag Subsidy Machine; Machine Yawns

A couple weeks ago, I wrote about the valiant bi-partisan effort in the US House of Representatives to repeal American cotton subsidies that have been repeatedly ruled illegal under WTO rules and have caused the Obama administration to insanely subsidize Brazilian cotton farmers to the tune of $150 million in order to delay Brazil's imposition of $1 billion in sanctions on US exports pursuant to those WTO rulings.  Back then, Reps. Jeff Flake (R-AZ), Ron Kind (D-WI), Paul Ryan (R-WI), and Barney Frank (D-MA) sent a great letter to President Obama pointing out the insanity of our current farm policy and asking that the White House lead the repeal effort - a letter that apparently went straight from Capitol Hill to the Oval Office trashcan.  (Shocking, I know.)

Undaunted, these brave and lonely Congressmen gained two more colleagues, Dave Reichert (R-WA) and Earl Blumenauer (D-OR), and issued on May 4 another sternly-worded letter on the absurd American cotton subsidies and the embarrassing US-Brazil dispute.  This time, the letter went to an equally unreceptive audience, if not moreso - the Chairs and ranking members of the Senate and House Agriculture committees: Sens. Blanche Lincoln (D-AR) and Saxby Chambliss (R-GA), and Reps. Collin Peterson (D-MN) and Rep. Frank Lucas (R-OK).  The full text of the letter is printed below, and you've gotta admire the signatories' efforts - there's simply no doubt that they have a very strong argument that the current US cotton subsidy situation is obscene. 

However, you've also gotta chuckle at the idea of this letter landing on the desks of proven cotton-benefactors Lincoln and Chambliss, of "Wheat Leader" Peterson, and of farm subsidy "champion" Lucas (whose district, by the way, has received almost 3.4 billion in farm subsidies since he took office).  Yeah, I'm sure that these subsidy-loving pols are going to get right on this matter.  You know, right after they finish keynoting the next annual meeting of the National Cotton Council.

But hey, at least these guys are trying.  That's a helluva a lot more than we can say about Lincoln, Chambliss, Peterson or Lucas.  Or President Obama for that matter.

------

The Honorable Blanche Lincoln
Chairman
Senate Committee on Agriculture, Forestry and Nutrition
328 Russell Senate Office Building
Washington, DC 20510-6200

The Honorable Collin Peterson
Chairman
House Committee on Agriculture
1301 Longworth House Office Building
Washington, DC 20515

The Honorable Saxby Chambliss
Ranking Member
Senate Committee on Agriculture, Forestry and Nutrition
416 Russell Senate Office Building
Washington, DC 20510-6200

The Honorable Frank Lucas
Ranking Member
House Committee on Agriculture
1305 Longworth House Office Building Washington, DC 20515


Dear Senators Lincoln and Chambliss and Congressmen Peterson and Lucas,

With the April 6, 2010 announcement by U.S. Trade Representative Kirk and Secretary of Agriculture Vilsack of an agreement between the U.S. and Brazil over the cotton dispute, the need to overhaul our domestic commodity support programs is more apparent than ever. Among other commitments, the Administration has agreed to begin paying Brazil $147.3 million annually for “technical assistance and capacity building” to head off the threat of retaliatory tariffs on exports costing U.S. industry $560 million and unprecedented sanctions against U.S. intellectual property rights costing $260 million. We will subsidize both U.S. cotton farmers as well as Brazilian agribusiness until the issue is resolved or until the passage of the next farm bill, while Brazil retains its right to move forward with its countermeasures.

It is clear that the necessary authority to resolve this issue rests with Congress and we write to respectfully inquire about respective committee plans moving forward. Between the threat to American innovation from cross retaliation against intellectual property rights of U.S. companies and budgetary pressures that make the payments to Brazil all the more disconcerting, there is a growing need to make fundamental changes in the U.S. farm policy. Passage of the next farm bill is years away at best and at worst there is no guarantee that it will include sufficient reforms to prevent Brazil from putting into place the tariffs and sanctions they have deferred for now. We believe it is imperative that the Committees address this issue and request that your Committees consider legislation that would resolve the cotton issue in advance of the coming farm bill reauthorization. Alternatively, if the farm bill is deemed to be the appropriate process to address this issue, we urge the Committees to rank the cotton issue among your top farm bill priorities and ask that you commit to ensuring the inclusion of sufficient legislative reforms to put this matter to rest.

While the U.S. cotton program has undergone revision by both Congress and the Administration, these changes were insufficient to resolve the cotton issue. Now the stakes have been raised with a wide array of American businesses being used as a lever against the U.S. in Brazil’s authorized retaliation. It is clear that our agricultural subsidies are outdated and are quickly becoming a liability for future trade growth. We understand these matters are complex. However, without such a commitment or plans to deal with the issue in advance of the farm bill, it would unfortunately appear that the Administration’s actions will have only delayed the inevitable retaliation against American businesses and workers at the cost of $143.7 million per year.

We look forward to working with you to address the pressing need to reform the agricultural subsidy programs, and in particular the cotton programs, so that they will help rather than hinder international trade.


Sincerely,


JEFF FLAKE
RON KIND
PAUL RYAN
BARNEY FRANK
DAVID REICHERT
EARL BLUMENAUER

Bi-Partisan Opposition to US Cotton Subsidies

Easily the biggest roadblock to reforming America's bloated, irrational and (often) WTO-inconsistent farm subsidies is the overwhelming bi-partisan support for them.  Whether in Congress or the White House, Republican or Democrat, it doesn't matter - agribusiness gets some L-O-V-E from almost everyone in Washington.  For a simple example of this fact, one need only look to the awful legislation introduced this week by Sens. Chuck Grassley (R-IA) and Kent Conrad (D-ND) that would obtusely extend a bevvy of ridiculous ethanol subsidies and the 54-cent-per-gallon tariff on imported sugar ethanol.  Of course, these Senators aren't alone in their blind love for using Americans' tax dollars to line the pockets of US agribusiness; indeed, you can't fall down on the House or Senate floor without hitting at least two Congressmen/Senators who issue a near-Pavlovian "Aye" vote every time they hear the words "farm" and "support" used in the same sentence.

However, there have always been a few poor, ostracized souls in Congress who refuse to grab a ladle for the farm subsidy gravy train, but they're pretty darn rare, and they end up taking a lot of heat on Capitol Hill and the campaign trail.  (Indeed, when they run for President, they end up getting pummeled like longtime subsidy-hater John McCain did in the all-important Iowa caucus and elsewhere in the Midwest).   So when a group of Republicans and Democrats join together to scream a chorus of "STOP THE INSANITY" on US farm subsidies, they deserve kudos and support.  Thursday was one of those times, as Congressmen Jeff Flake (R-AZ), Ron Kind (D-WI), Paul Ryan (R-WI), and Barney Frank (D-MA) sent a letter to President Obama, asking him to finally resolve the US-Brazil dispute over WTO-illegal American cotton subsidies by reforming the offending farm programs (something I've been advocating for months now) rather than what the White House is currently doing - i.e., keeping the trade-distorting programs in tact, bribingsubsidizing Brazilian cotton farmers with about $150 million in hush money"technical assistance," and putting future reform in the hands of some of the biggest cotton-lovers in Congress.

The letter from the Congressmen - affectionately referred to by Cato's Sallie James as the "Four Congressmen of the Cotton Subsidy Apocalypse"- highlights the patent absurdity of the current US action in the cotton dispute.  Just how absurd you ask?  Well, absurd enough to get super-conservative Paul Ryan and ultra-liberal Barney Frank to team up to stop the policy.  The letter is available here in a PDF, and I've also pasted it below as an image because I think it deserves as much circulation as possible.  It also deserves ample public praise, so kudos, Congressmen.  Nice job.  And who knows, maybe the ridiculous US-Brazil dispute will end up being the breaking point for a few more your House and Senate colleagues, pushing them to finally wise up and call for a dramatic reform of America's truly stupid (and dirty!) agricultural policies.

(Although I'm not holding my breath.)

Wednesday Quick Hits

There's been a flurry of noteworthy activity over the last couple days, so let's get right to it:

• Spreading your and my wealth to the world's cotton farmers.  As I noted a week ago, the United States avoided about $830 million in Brazilian trade sanctions by giving Brazil's cotton farmers about $150 million in annual hush money"technical assistance," instead of just eliminating the WTO-illegal US cotton subsidy programs that caused the whole mess in the first place.  Well, apparently USTR wasn't content with bribingsubsidizing only Brazilian farmers because it announced today that this slush fund can also provide US taxpayer money to farmers in Africa, Haiti, and, well, everywhere else.  So instead of reforming our own bloated ($2.8 billion/year), trade-distorting and WTO-inconsistent farm subsidies, we've decided to just subsidize everyone on the planet.  Problem solved!  Final note: Inside US Trade reports that Brazilian retaliation levels will balloon to more than $1 billion later this year, based on 2009 US subsidy amounts and the standard WTO calculation methodology.  Oh, goody.

• And speaking of Brazil and awful American subsidies....  BNA reports (subscription) today that Sens. Chuck Grassley (R-IA) and Kent Conrad (D-ND) introduced new legislation (S. 3231) to extend through 2015 a whole host of ethanol subsidies (volumetric ethanol excise tax credit, or the blenders' credit; the small ethanol producers tax credit; the cellulosic producers tax credit) and the 54-cent-per-gallon tariff on imported ethanol.  NRO's Kevin Williamson sums up this awesome subsidy/tariff combo best: "Ethanol users are paying a tax penalty to provide a tax break to ethanol producers.  How does that make sense, if using ethanol is a good and worthwhile thing that we want to encourage?  It does not make sense.  Government logic: Ethanol is so important, so green, and so wonderfully job-creating, that we have to give it enormous tax subsidies to maximize the benefits of using it.  And it is so very important… that we have to use punitive import tariffs to keep Americans from maximizing the benefits of using it, if the profits are not captured by our political constituents."  Nice.  The only thing Kevin leaves out, however, is that Brazilian producers of low-cost, cleaner-burning sugar ethanol are howling mad at this development, and justifiably so.  First, as I mentioned a while ago, new US renewable energy standards had given sugar ethanol preferred status in the US biofuels market, something Brazilian producers were very excited about.  Second, Brazil earlier this month announced the elimination of its own tariff on imported ethanol as a good faith sign of support for free global trade in biofuels.  So in one fell swoop, the Grassley/Conrad tariff destroys the benefits of point 1 and spits in the face of point 2.  Classy.

• Senators Schumer and Graham were, unsurprisingly, unavailable for comment.  The US-China Business Council released today its annual report on US exports to China, broken down by state.  The USCBC press release notes that 19 states exported over a billion dollars in American products in 2009, and that "China is the third-largest US export market, after Canada and Mexico, with $69.6 billion in sales during 2009, down just 0.2 percent over 2008--by far the best record for a major US export market in 2009.  US exports to the rest of the world combined fell nearly 20 percent in 2009."  Cato's Dan Griswold adds, "The USCBC figures tend to undercut complaints that China’s currency policies have stymied U.S. exports to that country.  In fact... since 2005, U.S. exports to China have been growing three times faster than our exports to the rest of the world."  I'd only add that, according to the USCBC study, New York (home to Sen. Chuck Schumer) exported $2.44 billion to China in 2009, second highest ever, and South Carolina (home state of Sen. Lindsay Graham) exported $869 million in the same year, the most ever for that state.  No wonder these guys want to start a trade war with China!  Oh, wait....

• Great news!  US international labor negotiations will be run by long-time AFL-CIO director!  Wait, what?  The Hill reports (emphasis mine) that "Cathy Feingold has been named by the AFL-CIO as its new director of international affairs, beginning June 1.  She follows Barbara Shailor, who is headed to the State Department to serve as special representative for international labor affairs."  Some of Shailor's past work can be seen here and here.  As you can see, she'll be an unbiased American advocate for free trade, economic growth and global development.  Or not.  (More on the new American approach to trade and labor standards is available here.)

• And finally, a Cotton/Farm subsidy palette cleanser to make you feel a tiny bit better about America.   Just so you leave here tonight with the warm-fuzzy knowledge that not everyone on Capitol Hill is willing to disregard global trade rules because he/she's in the bag for American agribusiness, I give you this great video of Rep. Jeff Flake (R-AZ) (h/t Andy Roth):
  
  
  
  See?  They're not all bad... and Jeff Flake's definitely one of the good ones.

That's all for tonight, folks.

US Bribes, Delays Its Way Out of Cotton Retaliation; American Taxpayers, African Farmers Foot the Bill

There was some big news earlier this week re: the US-Brazil dispute over WTO-illegal American cotton subsidies.  Let's have Reuters explain:

The United States on Tuesday headed off a move by Brazil to impose penalties on a wide range of U.S. goods by offering concessions on a export loan guarantee program and said it would try to negotiate an end to a long-standing trade spat over cotton.

The last-minute proposal came as Brazil was set to impose tariffs and lift protections on $829 million in U.S. goods, which would have been its right after a 2009 World Trade Organization ruling against U.S. cotton subsidies....

Under the plan, the United States pledged to make some short-term tweaks to its export credit guarantees and give Brazil about $147.3 million per year in damages for a "technical assistance" fund.

Brazil will give the U.S. Congress more time to figure out a longer-term solution to programs ruled illegal by the WTO.

The U.S. plan prompted Brazil to delay its planned moves, pending further bilateral talks, which Washington hopes will be complete by June....

Brazil recognized that it was impossible for the Obama administration to make major changes to farm programs without changes in legislation in Congress -- difficult to accomplish quickly in a sharply partisan environment, [former USTR official Jon] Huenemann said.

"The notion of breaking off something for just cotton outside of the Farm Bill process is an extremely tall order, and the Brazilians knew that," he said.

The plan buys Congress time to deal with cotton in its five-year Farm Bill law, due for renewal in 2012....

Blanche Lincoln, chairman of the Senate Agriculture Committee, and her Republican counterpart, Saxby Chambliss, said they were open to looking at changes for the Farm Bill.

"Ultimately, Congress, and the Senate and House Agriculture Committees in particular, are responsible for crafting changes to these programs," the senators noted.

The U.S. National Cotton Council, which represents farmers, also said it was pleased that the negotiations on long-term changes will be handled by Congress in the Farm Bill process.

The USDA announced on Tuesday it would cancel unused export credit guarantees by April 9, and would offer any remaining credits under new rates, with details still to be announced.

The news did not immediately affect cotton futures prices. One trader said the market would watch for further details.

USDA also said it would work to find ways to allow imports of fresh beef from Brazil.

So basically, the deal is as follows: Brazil won't impose almost $900m in retaliatory sanctions on US goods, and in return, the US will give Brazilian cotton almost $150m per year in "technical assistance" money, will slightly expand the US market to Brazilian beef, and will "tweak" its export credit guarantee program.  Meanwhile, US cotton subsidies - which the WTO has repeatedly found are illegal under WTO rules and distort global cotton markets to the detriment of Brazilian and poor African cotton producers - will remain untouched and the dispute will drag on.  And over time, Tom Vilsack, Blanche Lincoln (D-AR) and Saxby Chambliss (R-GA) will  help craft a long-term fix to US cotton subsidies through the 2012 Farm Bill.

What a total crock.

Now, don't get me wrong, the US-Brazil deal is not all bad.  Indeed, I see two good results: (1) it helps US exporters and Brazilian consumers by delaying the imposition of hundreds of millions of dollars in sanctions on US exports to Brazil; and (2) it helps solidify one of my 2010 trade predictions (i.e., "There will be no change to US farm... subsidy policies").

Of course "good" (and I obviously use that term loosely) thing number (2) leads us to the bad things about this deal, and boy are they bad.  First and foremost, the deal does nothing to end WTO-illegal US cotton subsidies that cost American taxpayers $2.8 billion dollars per year, distort global cotton markets, and harm poor cotton producers across the globe, especially in Africa.  Second, it puts US taxpayers on the hook for another $150 million in bribessubsidies - to Brazilian farmers!  Deus meu!  Third, it delays ultimate resolution of an onerous WTO dispute that's been tarnishing the United States' international reputation for years.  And fourth, the deal puts the cotton dispute's long-term fate in the hands of Tom "Subsidy Recipient" Vilsack and two of Congress' biggest cotton subsidizers - Sens. Blanche Lincoln and Saxby Chambliss.

No wonder that the National Cotton Council was "pleased that the negotiations on long-term changes will be handled by Congress in the Farm Bill process."  They're keeping all of their taxpayer cheese, and their top two wolves are guarding the Farm Bill hen house!

Unbelievable.

Oh, who am I kidding, this whole "deal" is totally believable.  Despite loud pleas from free market advocates and Republican leaders (which Huenemann forgot to mention to Reuters, by the way) to really resolve the US-Brazil cotton dispute by - crazy, I know - actually terminating the WTO-illegal, trade distorting American cotton subsidies, the Obama administration has taken the easy way out.  Of course, only this administration would think that $2.8 billion plus another $150 million in US taxpayer money (that we, of course, have to borrow because we're broke) would be "easy," but hey, that's how this White House rolls, baby.  I mean why tick off agribusiness and its big supporters on Capitol Hill (from both parties) during an election year when you can just stick it to US taxpayers and poor African farmers (or consumers or exporters or...)?

I don't know about you, but I just can't wait to see what June's big bilateral deal will be.  I mean, if this initial fix is any indication, taxpayers are really going to get screwed then.

But hey, at least US cotton farmers are happy.  Ugh.

Tuesday Quick Hits

A few quick things worth noting (and praising) today:

• Yesterday, Cato's Dan Griswold points out the absurdity of protectionists' claims that the US trade deficit somehow destroys American jobs (something I've also discussed at length).  He asks, "According to the Bureau of Economic Analysis, the U.S. current account deficit plunged from $706 billion in 2008 to $420 billion last year — the smallest deficit since 2001. I’ve been waiting for a few days now for the usual trade deficit hawks to hail this development as great news for millions of Americans looking for work."  My favorite part is that Dan's blog post then goes on to bag on the Economic Policy Institute's silly "trade deficit = jobs" models, and guess who released a new study based on those silly models?  Doh!

• A group of wise and diverse Republicans (Price, Kirk, Dent, Brady and Herger) have sent House Majority Leader Steny Hoyer a very good letter (PDF) asking Hoyer to urge President Obama to submit the implementing legislation required to implement pending US Free Trade Agreements with Panama, Colombia and South Korea.  My favorite part: the letter actually focuses on both the export and import benefits of free trade, as well as trade's important foreign policy implications.  In other words, it's not the usual mercantilist pabulum that the White House has been spewing for the last year or so.  Refreshing!

• Congressmen Jeff Flake (R-AZ) and Ron Kind (D-WI) issued on March 17 a "Dear Colleague" letter (unpublished) to their fellow members of Congress, asking them to support immediate reform of US farm subsidy programs in order to avoid about $850 million in Brazilian retaliation against American exports due to US non-compliance with adverse WTO rulings on American cotton subsidies.  And they plan to submit legislation reforming the offending programs in the coming days.  (Obviously, I enthusiastically approve.)  Best line: "Because of Congress’ inability to tackle the issues in the face of intense lobbying from the cotton industry and other commodity groups, a wide array of American businesses will face high penalties at a time when they can least afford it."  If only Wheat Leader Collin Peterson (chairman of the House Agriculture Committee) didn't stand squarely in the way of much-needed reforms.

• Cafe Hayek's Don Boudreaux teaches us all a quick lesson about free trade, protectionism, consumers and producers.  The whole thing is worth reading, especially for those who have enjoyed my recent discussions about the obvious immorality of the government's use of protectionism to forcibly steal from consumers to pay producers.  But the anecdote is priceless: "You fly to New York City. You get a cab at LaGuardia Airport and ask the driver to take you to Times Square in Manhattan – which is west of LaGuardia. Soon, though, you notice that your cab is headed east.
  
  'Where are you going?' you inquire.
  
  'To Times Square, but via Montauk,' the driver responds.
  
  'Montauk! That’s a hundred miles east of here, and Times Square is west of here! What the heck are doing?!'
  
  Your driver informs you that the taxicab business isn’t just for riders; its for drivers, too. Drivers need incomes, and his income of late has been too low to enable him to pay his bills. 'So,' your driver announces, 'by first going out to Montauk before heading to Times Square, I’ll make a lot more money off of you than I would if I drove you directly to Times Square. You’ll get there, but just not as quickly or as inexpensively as you would if I drove you there directly. Relax and enjoy the view.'
  
  The above little tale sounds nuts. No taxi driver would do such a thing and justify his actions in that way.
  
  But what the fictional driver in my little story does differs in no fundamental way from what producers everywhere do when they succeed in getting government to protect them from competition – for all such protection involves government preventing consumers from striking the best deals they can find."

Me: Fantastic.

Cotton: Brazil Announces Preliminary List of IP, Patent Retaliation Against US

Reuters reports that Brazil announced its preliminary list of patent and IP restrictions that it will impose against the United States unless the US complies with a WTO ruling against its cotton subsidy programs or reaches some sort of compromise with Brazil:

The new measures, which are still subject to public hearings, would suspend for a limited time U.S. patents on pharmaceuticals, chemicals and biotechnology.

They would allow Brazil to restrict copyrights in the music and audiovisual industry. The measures listed in an official publication would also allow the government to increase fees and tighten regulations on registration of intellectual property rights.

As I've previously discussed, Brazil is entitled under a WTO arbitration ruling to impose about $830 million in sanctions against the United States due to US refusal to bring its cotton subsidy programs into conformity with global trade rules.  Brazil announced its final list of goods tariffs last Monday, and its press release on the preliminary IP/patent list is available here (translated via Google).  Interested parties will have 20 days to comment on the preliminary list, which is available (untranslated) here.  Interestingly, today's release says that Brazil will only impose $238m in IP/patent sanctions (leaving $591m for goods tariffs), despite saying just last week that it would follow the $270m/$560m split.  The basis for the change from previous reports is unclear.

What is clear, however, is that time is running out for the United States to resolve the dispute before Brazil begins applying the tariffs next month.  So far, there's been no word on a US solution.  

More Brazil Cotton - Corrections

As noted in my recent backgrounder, the WTO last August authorized Brazil to impose a little under $300 million ($294.7m) in retaliatory sanctions against the United States as a result of US refusal to comply with the WTO's decisions in Upland Cotton.  Those numbers, however, were based on 2006 trade statistics, and the level of actual retaliation imposed by Brazil this year would be based on more recent statistics, as calculated using a formula sanctioned by WTO arbitrators. (Total retaliation is supposed to equal the amount of the injury that the U.S. subsidies currently impose on Brazil.)  Over the last few months, there have been multiple conflicting reports about just how big Brazil's actual sanctions will end up being, and there have been no public WTO source documents confirming an exact amount.  For this reason, the aforementioned backgrounder used the original WTO numbers (i.e., $294.7m).  However, lost (to me at least) in yesterday's announcement was the official release from the Brazilian Government (translated via Google) giving the number (based on 2008 trade data), and, well, it's a lot bigger than $300 million - almost three times bigger.  Here's the relevant excerpt from the translated release:

The extra charges levied on U.S. products included on the list should represent an additional cost to U.S. exporters $ 560 million, calculated based on the behavior of trade in 2008.

Brazil has set aside another $ 270 million for retaliation in intellectual property rights, which will have more time to implementation. Among the measures supporters within the government are "parallel importation" of products (purchase of products that are protected by U.S. patents in countries that do not pay the patent, such as India) and collection of taxes on royalty payments of audiovisual products like sitcoms and movies of American companies.

A final decision on retaliation in intellectual property, called "cross-retaliation" will depend on meeting the Board of Trade (Camex), which will choose the sectors to be affected and shall submit the decision to public consultation. The government acts with caution, since the right to apply to "cross-retaliation" has been granted so far only two cases of small countries that have chosen not to exercise their right for fear of reprisals.

With the publication of the list of goods subject to trade retaliation to the U.S., the government fixed within 30 days, after which the measures will enter into force. The Brazilian government has been authorized by the WTO to create additional barriers to American products as a result of dispute raised by Brazil against subsidies to cotton growers in the U.S.. At the end of the case, the WTO has estimated $ 830 million annual losses of Brazilian producers with the unfair advantage given to U.S. producers.

So that's a total of $830 million in total sanctions - $560m in tariffs on US goods (paid by American exporters, of course) and $270m in intellectual property infringements.  USTR's information sheet confirms these amounts too.  Yikes.

Second, international policy gadfly Chris Nelson issued a correction to last night's report about which agency in the Obama administration dropped the ball on the negotiations with Brazil:

[I]n last night's Report, we mistakenly placed the main burden for dealing with Congress and the Brazilians on Commerce...our misunderstanding, not our source's.

In fact, informed sources clarify, our basic story is unfortunately correct, that the Administration dropped the ball with Brazil.  But the ball was supposed to be carried by USTR.

Now in fairness, sources note, USTR has been engaged, both with the Brazilians and the US business community.

The mission today by Commerce Secretary Locke is for a long-standing regular meeting of the US-Brazil CEO forum.

However, what is driving everyone crazy is the authorized USG "line" that somehow "the ball is in Brazil's court"...total nonsense, alas.

It's the US that lost the case, finally and irrevocably, with the final WTO ruling last November after years, quite literally, of argument and negotiation.

So you don't need either a law degree or years of trade negotiating experience to grasp that responsibility for movement is entirely on the US side...at least to the extent that a counter-offer should be tabled before the US can complain about Brazil issuing its 30-day warning on tariffs.

So to recap: the White House still deserves heaps of blame, it's just a different part of the White House at fault.  Alrighty then.

Brazil Cotton, Ctd. (UPDATED)

[Updates at bottom, including Brazilian source documents.]

Well, looks like news reports from Friday that Brazil would again delay its retaliation against American exports as part of the bilateral cotton dispute at the WTO were wrong a little off.  According to numerous news outlets, the list of targeted US exports was released today.  Here's Bloomberg with the news:

Brazil has published a list of 102 U.S. products on which it will raise tariffs for 365 days in retaliation for American cotton subsidies as allowed by the World Trade Organization.

The list, published today in the Official Gazette, raises tariffs on American-made cars, boats and refrigerators among other industrial goods. Potatoes, raisins, cherries and pears are among the agricultural exports that will be sanctioned. The tariffs range from 14 percent to 100 percent.

Brazil may take additional measures, according to the statement published in the Gazette.

More on this news later.

UPDATE: Reuters reports that the new list won't go into effect for 30 days, so it looks like last week's story about the 30-day delay and continuing US-Brazil consulations wasn't entirely "wrong," just off about the list being delayed.  And my analysis from Saturday remains valid.

UPDATE2: The pages of Brazil's official gazette listing the targeted US exports are below (click to enlarge), and the AP has more details here.  The table in the bottom left/top right of the first/second image is the list.  If you're like me and don't speak Portuguese, you can still figure out all of the products listed because the tariff codes on the left are universal under the Harmonized System.

UPDATE3:  Chris Nelson of the Nelson Report has some of the juicy details behind today's retaliation announcement and Sec. Clinton's visit to Brazil last week, and it's not pretty for the United States [see 3/9 correction here]:

Commerce Secretary Locke is due in Brazil tomorrow (3/9) with a US counter-proposal of some kind.

However, informed sources say that unless there was a "miracle" of staffwork since Friday, "he will not have a fully prepared counter-offer to present, as there was NONE ready last week, even though we've known about this day of reckoning for years."

And to produce one properly "means it's highly unlikely Locke will have anything resembling a complete offer, since to get one is a vastly complex matter, dealing with many, many players and variables in Congress and elsewhere."

Specifically, the WTO decision rules against US subsidies to cotton farmers, and our export credit guarantees... meaning any substantive changes would have to be approved through the legislative process....

[T]he Brazilians were expecting Secretary of State Clinton to raise the case during her visit last week, indeed, they had been led to believe she would at least discuss the US counter-proposal allegedly being delivered by Locke...

Instead, sources say not only did Hillary NOT deliver any of the prepared talking points on the cotton case, but as of Friday, as noted above, there was NO US counter-proposal for Locke to bring with him.

So if any delay is to be negotiated, it seems likely to be based on a promise of some distant, future legislative remedy, not on the facts.

On Clinton's meetings last week, sources here say she didn't relay any of the prepared comments in her briefing book: "Whether she simply forgot, or decided she couldn't, because of the situation back here, I don't know", the source adds....

For what it's worth, observers say that the fault here is NOT USTR's, as responsibility for brokering a compromise proposal rests with Commerce, and to a certain extent the State Department's econ bureau.

[A] former senior US trade official "who rarely sides with the Brazilians on anything!" comments, on background, "the US has had years to work on something for this case. So we really are remiss on this. If we want our trading partners to meet their obligations to us, then we have to live up to our obligations, too...."

What a complete and utter mess.  Unmentioned in the reports above is the fact that Brazil still hasn't released its "cross-retaliation" plan for this same case.  As you'll recall from my recent (co-authored) Heritage Foundation backgrounder, the WTO has authorized Brazil to assess both (i) basic retaliatory tariffs against US goods (based on the list posted above) and (ii) certain sanctions on US intellectual property rights in Brazil.  As stated in the brief, "The IP sanctions will include suspensions or limitations on $270 million worth of U.S. imports' patents, copyrights, and trademarks and temporary bans on royalty remittances."  And according to the AP, Brazil is expected to list its final list of IP sanctions on March 23rd.  Faaaantastic.

Now, despite what appear to be the United States' finest attempts to totally botch this case and stupidly hurt its own exporters, there's still a very reasonable chance that (i) the US and Brazil will broker some sort of fix before the retaliation begins in 30 days, or (ii) Brazil will again delay the retaliation in order to keep trying on a compromise deal.  As I said last week, it's pretty obvious that Brazil doesn't want to impose these sanctions and would take some sort of compensatory deal unrelated to the US cotton program (something Brazilian officials expressly admitted today).  So maybe these tariffs won't ever see the light of day.

Nevertheless, the Obama administration's trade incompetence is on full display here, and we're definitely one big step closer to full-on retaliation by Brazil due to that incompetence and (of course) several years of good ol' fashioned political refusal to comply with the underlying WTO rulings against US farm subsidies.

Finally, and as I said on Saturday, even if Brazil and the United States reach some sort of "deal," it's quite likely that the illegal US farm programs will remain in place, that US credibility at the WTO (and in the global trading system more generally) will take another hit, and that the efficacy of the WTO itself will be further called into question.

More to come...

Brazil Determined to Make My New Briefer on Cotton Dispute Half as Important

[UPDATED HERE]

BNA is reporting (subscription) that Brazil will - for the third time in less than a month - delay its announcement of a final list of US exports that will face about $300 million in retaliatory tariffs due to US refusal to comply with multiple WTO rulings against American cotton subsidies.  Brazil is delaying the list - originally due in mid-February, then March 1st, then March 8th - because Secretary of State Clinton has promised that the US will work things out:

During a one-day visit to Brazil, Secretary of State Hillary Clinton announced March 3 that in the coming week the United States would send two high-level government officials to Brazil to present compensation proposals to resolve the dispute over U.S. cotton subsidies.

Brazil has threatened to apply sanctions if the United States does not remove its cotton subsidies. The World Trade Organization last year ruled in favor of Brazil in the country's challenge of American compliance with a WTO ruling on cotton subsidies and granted Brazil the right to apply sanctions against U.S. products of up to $294.7 million, although the total could increase....

Prior to Clinton's comments, Brazil's Foreign Minister Celso Amorim told the press conference that on March 8, Brazil will release a list of between 100 and 120 products imported from the United States that could be subject to sanctions. After this, he said that Brazil will wait 30 days before making its final decision....

The Brazilian government's position from the beginning has been that the U.S. cotton subsidies must be removed as part of any negotiated agreement. Government officials have said they favor negotiations over sanctions and would consider compensation offers but are waiting for a proposal from Washington to resolve the dispute. Thus far, they say, no acceptable proposal has been received.

The Heritage Foundation's Daniella Markheim and I recently wrote a web memo on the dispute and its implications for US exporters and US trade policy more broadly.  This latest news makes it increasingly clear that (a) Brazil really isn't keen to retaliate against the US (and you can't really blame them, since such tariffs would hurt Brazilian consumers as much as the targeted US exporters); and (b) the United States and Brazil might "resolve the dispute" without actually ending the illegal US cotton subsidies at issue.  On the latter point, some have floated the idea that a reduction in the steep US tariff on Brazilian sugar ethanol might do the trick - especially after new US renewable energy standards give the product preferred status in the US biofuels market.

So if Brazil doesn't retaliate, problem solved, right?  Well, not exactly.  First, the market distorting subsidies would still be in place and thus continue to harm Brazilian and other global producers, particularly those in poor African countries like Benin and Chad.  Second, and as Daniella and I argue in our brief:

The U.S. has brought 94 trade disputes to the WTO in the trade body's 15-year history.  When the WTO has ruled in America's favor, the U.S. government is quick to laud the decision and demand that the offending party immediately comply. Yet when the WTO rules against the U.S., as it did in Upland Cotton, American officials denounce the ruling, question the WTO's authority, and make every effort to delay or skirt required reforms.

Such hypocrisy undermines U.S. credibility and the WTO's efficacy. The Administration has announced its intention to root out the unfair trade practices of other nations, but such enforcement efforts will fall flat until America cleans up its own approach to trade. Why would other nations comply with WTO rulings when the U.S. so brazenly ignores them?

America's refusal to comply with WTO rulings also erodes U.S. credibility as a free trade champion and weakens America's influence in multilateral trade negotiations. It is time for America to live up to the same high standards it demands from the rest of the world and end trade-distorting support programs, including payouts to King Cotton.

By my quick count, the United States has refused to comply with multiple WTO rulings on its farm subsidies, its antidumping procedures (both "zeroing" and the "Byrd Amendment"), and its ban on internet gambling.  Now, the United States isn't alone it its blatant disregard for global trade rules - the EU and other nations also haven't complied with adverse WTO decisions.  So far, such noncompliance remains the exception at the WTO, but it's definitely been on the rise over the last few years, and it undoubtedly encourages other countries to do the same (especially with the US as one of the most frequent scofflaws).

If these trends continue and the noncompliance exception ever swallows the rule, the WTO is in big trouble.

Wednesday Quick Hits

A few interesting things worth noting before getting to spicier fare:

• Brazil delays... again.  According to BNA (subscription), Brazil announced Monday that it will delay a final list of US exports that will face retaliatory tariffs because of the United States refusal to reform its cotton subsidy programs in conformity with a long line of adverse WTO decisions.  This is the latest in a series of delays for the retaliation, and whether Brazil will ever finally impose the sanctions is uncertain.  The final list is now supposed to be released on March 8th.  We shall see.  For more information on the US-Brazil dispute and its implications, check out this recent piece that I co-authored with with Daniella Markheim of the Heritage Foundation.

• Protectionist rhetoric as email auto-reply. One of the constant themes of this blog is how attempts to "sell trade" through a mercantilist, exports-only trade policy will inevitably backfire because anti-trade groups will immediately respond by pointing out the US trade deficit (exports minus imports) as crystal clear evidence that America is "losing at trade."  Well, I noted Monday that the United States' 2010 Trade Policy Agenda took the mercantilist tack and then warned of "the deleterious effects on the American trade debate of an "exports-good-imports-bad" approach to trade policy."  And, like clockwork, the anti-trade group Global Trade Watch teed off on the White House's softball by - you guessed it - screaming about how the US trade agenda "continues to mimic the misrepresentations that the Bush administration borrowed from the U.S. Chamber of Commerce with respect to only considering the role of exports on U.S job creation, as if the U.S. did not have a massive job-killing trade deficit. An example is the hilarious statement about 10 million U.S. jobs being supported by exports in 2008 – a year we had a $696 billion deficit – without any reference to the net U.S. jobs effect of the flood of imports underlying that deficit."  How USTR Ron Kirk actually plans to "ensure broad support among the US public for new trade proposals" by using this misguided exports-only strategy is beyond me. 

• TPP under siege by the usual cast of characters.  Reuters reports that representatives of the US "dairy, sugar and textile sectors" are staking out their protectionist territory in advance of the first round of negotiations under the new Trans-Pacific Partnership framework.  I'm sure that you are just as shocked (shocked!) as I am at this development.

New Briefer re: Impending Brazilian Retaliation Against US Exports

As I recently mentioned here, Brazil is preparing to impose about $300 million in retaliatory sanctions on US exports because the US government refuses to comply with multiple WTO rulings against American cotton subsidies.  I've teamed with Daniella Markheim of the Heritage Foundation to write a web memo on the longstanding dispute and the implications of US recalcitrance at the WTO.  We outline the dispute and the repeated US attempts to shirk its WTO obligations, and conclude that, while $300 million in retaliation hurts American exports and White House efforts to boost them, US non-compliance in this case and others is very problematic even if Brazil ultimately decides not to impose the sanctions:

The U.S. has brought 94 trade disputes to the WTO in the trade body's 15-year history. When the WTO has ruled in America's favor, the U.S. government is quick to laud the decision and demand that the offending party immediately comply. Yet when the WTO rules against the U.S., as it did in Upland Cotton, American officials denounce the ruling, question the WTO's authority, and make every effort to delay or skirt required reforms.

Such hypocrisy undermines U.S. credibility and the WTO's efficacy.

To find out why, read the whole thing here.

Thursday Quick Hits

A little trade news street-plowing on this thank-god-it-finally-stopped-snowing Thursday night:

• US and Mexican officials have announced formal talks to bring the year-long US ban on Mexican trucks to a close.  As you'll recall, the ban resulted from some good ol' fashioned Teamster-love in the 2009 Omnibus Appropriations Act, and Mexico responded by lawfully imposing $2.4 billion in retaliatory tariffs against US exports.  Now Mexican officials are "optimistic" that the dispute will be resolved this year, and there is some reason for optimism: (i) the 2010 appropriations bill did not include the ban, and (ii) the Obama administration is really pushing exports these days, and $2.4 billion ain't chump change.  However, the plan has to be approved by Congress (yes, the same one that imposed the original ban), and the Obama administration has been sitting on a Transportation Department fix since last September out of fear of angering the Teamsters and thus jeopardizing ObamaCare.  Well, ObamaCare might be comatose (pun!), but we're quickly approaching the 2010 election cycle, so the near-term resolution of this boondoggle remains far from certain.

• Speaking of retaliation, Brazil is inching closer to retaliating against American exports as a result of US non-compliance with multiple WTO rulings against its Cotton subsidies.  The WTO has sanctioned several hundred million dollars in retaliation, and BusinessWeek reports today that Brazilian President Lula has enacted a change in domestic law that would allow Brazil to lawfully infringe upon US intellectual property rights (an alternative form of protection to traditional import tariffs).  Brazil also announced yesterday that it will announce on March 1 its final list of about 220 US products that will face over $500 million in tariffs because of the same WTO infractions.  Brazil has delayed this announcement a few times, and the US claims to still be trying to negotiate a settlement, but the Brazilians appear to be getting ready to finally and officially lay the retaliatory smack down.  Oh, goody.

• President Obama today gave a lengthy (and defensive!) interview with Bloomberg and hit on a few international trade matters.  He (fortunately) signaled a stern-yet-non-confrontational approach to China's currency ("his administration is 'going to have some very serious negotiations' with China that are 'going to be bumpy'"), and then stated that "he would press for passage this year of free-trade agreements with South Korea, Panama and Colombia, though he cautioned that 'different glitches' must first be negotiated with each country."  The China response sounds like good news, as it doesn't appear that direct antagonism (through, for example, the Treasury Department's semi-annual report on "currency manipulation") is in the cards.  The FTA statement will probably get a lot of free traders (as well as Colombians, Panamanians and South Koreans) excited, but please keep in mind: (i) his "glitch" condition means that the company line on FTAs ("unresolved issues!") still applies, and (ii) President Obama could easily "press for passage" of these FTAs by submitting their respective implementing legislation to Congress (which his party controls, by the way) and thus "starting the clock" for an up-or-down vote on each agreement, as required under Trade Promotion Authority (which applies to these FTAs because they were signed before TPA expired).   And yet.....

• The White House released the 2010 Economic Report of the President today.  The Report's discussion of international trade starts on page 274.  I'm going to blog on this over the weekend, but I didn't want you to have to wait for that.  However, if you decide to check out the ERP before I blog on it, I highly recommend that you (re)read this blog entry first just to get in the right frame of mind.

That's all for now, folks.