Since the start of 2015, there have been several interesting developments on the trade front. Here are some highlights:
US-Cuba Relations: Previous posts on ILG have discussed the improved tenor of US-Cuba relations, including some limited opportunities to trade with Cuba and lifting of designation of Cuba as a state-sponsor of terrorism. These developments have been followed by news of plans to re-establish direct phone links, increased flights and launch of a ferry service between Florida and Cuba, and the arrival of Airbnb and of Netflix in Cuba. Nevertheless, the laws imposing the U.S. embargo against Cuba remain in place and are being enforced. This includes the repressive Helms-Burton Act which extends the U.S. embargo to non-U.S. actors. As a result, non-U.S. persons may still be penalized for taking actions in Cuba that some U.S. persons are now able to do. And, because of the embargo, while it will be possible to import goods and services from independent entrepreneurs in Cuba, goods will still be subject to higher tariffs than those placed on the goods of most U.S. trade partners. Legislation to normalize trade with Cuba has been introduced in the U.S. House and Senate (HR 403, HR 274, HR 735, S 491). However, Congress is now focused on issues more essential to the Obama Administration trade agenda.
US Trade Agenda: Legislation to provide Trade Promotion Authority (TPA) to President Obama has been introduced in Congress. TPA gives the U.S. President a mandate from the U.S. Congress to negotiate trade agreements that meet specified criteria. Also known as “fast-track”, TPA has been a key tool of U.S. trade policy since 1974 but lapsed in 2007. As we discussed in an earlier post, the Republican-led Congress provides President Obama with his best hope of getting TPA enacted in time to successfully conclude ongoing trade negotiations that face strong opposition within his own party. With the introduction of TPA legislation, a furious battle has begun to sway U.S. legislators to vote for or against. As always, it will be a close fight.
Trade Preferences, in the form of the Generalized System of Preferences (GSP), is another key tool in U.S. trade policy. GSP allows over 5,000 products from about 127 developing countries to enter the U.S. market duty-free. The program helps exports from developing countries to be competitive in the U.S. market. U.S. importers rely on the program to access lower-priced consumer goods and manufacturing inputs. The program has been lapsed since August 1, 2013, disrupting many small traders who rely on its benefits. Some members of Congress have been reluctant to renew GSP legislation without taking steps to exclude countries like Brazil and India which, they believe, are not compliant enough on issues of importance to the U.S. However, legislation to extend GSP for a short period has been introduced into Congress.
So too, has legislation to extend the Trade Adjustment Assistance (TAA) which provides federal funding to retrain workers who have lost their jobs as a result of a foreign trade. TAA is current but scheduled to lapse this year, unless extended. TAA is favored by many Democrats. According to reports, there are efforts to bundle these, and other, trade issues into one piece of legislation that will have something for everyone. Early results show the risk of this strategy, including the possible demise of all these issues.