Rules Could Allow Countries like China to Flood Market With Its Products Even If Trade Laws Technically Prevent It
Weak Standards Harm PA Auto Parts Manufacturers
Washington DC- Today, U.S. Senator Bob Casey (D-PA) has announced that he has written a letter to the Acting United State Trade Representative (USTR) urging the Administration to get tough on cheap foreign parts as it negotiates an international trade agreement the Trans-Pacific Partnership (TPP). Without tough provisions, countries like China, can flood the U.S. with their cheap parts by including them as components in products assembled in a country that has an existing trade relationship with the U.S. Without a tough standard products can enter the U.S. market with the beneficial treatment received by a trading partner even though nearly half of it was made in China. In Casey’s letter he has asks that the U.S. seek a 62.5% origin standard which has been used in other U.S. trade agreements.
“The upcoming TPP negotiations presents an opportunity for the Administration to confront China’s cheating and I’m pushing them to take this opportunity to protect Pennsylvania’s auto suppliers,” Casey said. “When countries like China bend the rules it harms jobs and negatively impacts the Commonwealth’s economy. The current situation is not working for families across Pennsylvania and should be changed.”
The full text of Senator Casey’s letter can be seen below:
March 15, 2013
The Honorable Demetrios Marantis
Acting United States Trade Representative
Dear Ambassador Marantis:
We are writing to you regarding the treatment of rules of origin in the ongoing Trans-Pacific Partnership (TPP) negotiations. This issue is one of the most important in the agreement. A set of rules of origin, correctly developed and implemented, can enhance production and employment opportunities among the TPP signatory nations or, if structured poorly, can undermine our nation's goals and jeopardize jobs and production here at home.
Rules of origin can be exceedingly complex. In essence, as you know, they define the amount of content and transformation of a product that must originate or occur within the TPP for a product to reap the benefits of the agreement. In the past decade, we have seen significant offshoring and outsourcing of production: a well-crafted set of rules can impact upon this trend in ways that benefit the U.S. and other signatory nations. On the other hand, a poorly crafted set of rules can result in the acceleration of globalized supply chains and diminish the benefits, or eliminate them almost entirely, from the TPP.
One of the most important sectors affected by rules of origin is the auto sector. The complexity of production, the dispersion of supply chains and, most importantly, the economic importance of the sector, all demand critical attention. The integration of the North American automotive market and the existing framework provide an opportunity to maximize sourcing and assembly among the TPP countries. The North American Free Trade Agreement's rule of origin in autos of 62.5 percent should be applied and its original approach of an increasingly ambitious rule should be included as well. We know that you have received a specific proposal from the unions representing workers in the automotive sector that we believe should be adopted as the U.S. negotiating position.
Beyond the auto industry, these rules impact a variety of sectors. From glassware to bearings to iron ductile products to many others, there are established rules that set the standard for what constitutes substantial transformation so that the resulting product can be covered by an agreement's rules and preferential treatment. These rules need to be crafted in such a way so as to minimize the utilization of non-TPP country product and maximize the amount of content and labor originating in the TPP countries. Such rules need to be strictly enforced and adequate resources must be provided to ensure that "leakage" of the benefits to non-TPP countries is minimized. Customs and Border Protection must increase its attention to these vital issues and recognize that lax enforcement adversely affects production and job creation.
Poorly crafted, the TPP could result in lost production and employment, higher trade deficits, and decreased tax revenues as economic activity relocates outside the U.S. Rules of origin are only one of a vast array of issues that must be appropriately addressed in the negotiations. Nevertheless, they are one of the most vital issues in this agreement. We urge you to use this opportunity to maintain and, indeed, reclaim lost production and jobs through reclaiming control over supply chains.
We look forward to working with you in the coming days on this important issue.
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