Tuesday, July 26, 2011

Hillary Clinton Agrees with Me

Secretary of State Clinton was quoted in the New York Times today warning our Asia trading partners to avoid a multitude of inconsistent and complicated trade deals. Rather, she encouraged a broader regional approach to avoid creating difficulties for businesses. According to Mrs. Clinton:
"There is now a danger of creating a hodgepodge of inconsistent and partial bilateral agreements which may lower tariffs, but which also create new inefficiencies and dizzying complexities,” Mrs. Clinton said. “A small electronics shop, for example, in the Philippines might import alarm clocks from China under one free trade agreement, calculators from Malaysia under another, and so on — each with its own obscure rules and mountains of paperwork — until it no longer even makes sense to take advantage of the trade agreements at all. Instead, we should aim for true regional integration."
Think about that for a minute. 

Mrs. Clinton is so far into the pot calling the kettle black territory that she could star as Mrs. Potts in a remake of Beauty and the Beast.

Consider the plight of a company that seeks supplier certificates for purposes of its NAFTA certification. Later, one of its customers wants certification for the U.S.-Australia FTA. Oops, the rules of origin are different, so the company has to go back to the supplier for a new certificate. Of course, the supplier might not be familiar with the rules for Australia and assumes that since its product is NAFTA originating, it must qualify for the Australia agreement as well. Or maybe not, because in order to comply with NAFTA, its purchasing department was careful to find critical suppliers in Mexico. That effort, of course, hurts in the context of every other FTA. Now, multiply that set of problems for U.S. free trade agreements with Central America, Chile, Singapore, Jordan, Morocco, Israel, Bahrain, and soon Colombia, Panama, and South Korea. Each of these agreements (most of which were Bush-administration initiatives) is fundamentally at odds with the others.

The other effect of all these bilaterial and multilateral agreements is that many U.S. trading partners have better than most-favored-nation status. Today, if a country has MFN status, it is at a disadvantage to an FTA partner. So, one might wonder, why bother with finishing up the WTO talks (which Secretary Clinton would call larger integration)? It seems like the better approach is to seek an individual sweet deal.

But, as the Secretary of States seems to acknowledge, the proliferation of sweet deals makes it increasingly hard to comply with any of them. For that, I thank Mrs. Clinton, for pointing out the difficulty that U.S. trade policy has created at home.


Jim Dickeson said...

Perhaps what is needed is a WFTA.

Jim Dickeson
Import Export Geeks
Import Export Compliance Training

Anonymous said...

Larry -

I think Jim is on the right track. What is really needed is for US trade experts to draft a United States Free Trade Agreement using all the best elements of existing FTAs, adding what would improve them, removing the various hurdles that have popped up in the existing ones. Then the US should offer this USFTA to the world, and abrogate all current FTAs effective on a date certain.

This would be no easy undertaking, but, if done right, would take away the "it complies with A, but not with B" situations we run into today.

We'll probably both be faint memories before something so sensible ever happens.

Your faithful Customs Retiree.