US Commerce Dept. used as black mail tool by US companies, esp. towards Chinese.
The role of the USTR and Special 301 in pushing TRIPS ahead by picking off opposing countries and denying them GSP tarriff preferences.
Author: on March 25, 2011 at Crooked Timber.
Via Alex Tabarrok, this Wall Street Journal article is very interesting.
Some U.S. furniture makers and their lawyers have found a reliable way to extract cash from Chinese competitors deemed by U.S. officials to have “dumped” their products in the U.S., selling them at unfairly low prices. Each year since 2006, they have asked the Commerce Department to review the U.S. duties paid by Chinese manufacturers on imports of wooden bedroom furniture. Many Chinese firms, fearing a steep rise in duties, agreed within months each time to pay cash to their U.S. competitors in return for being removed from the review list. “Everybody in the industry in the U.S. and China understands that these payments are clever shakedowns,” said William Silverman, a lawyer representing U.S. furniture retailers, big importers of Chinese products, at an October hearing of the U.S. International Trade Commission. … About $13 million was paid to a group of 20 U.S. furniture makers from 2006 through 2009, according to a November ITC report. The U.S. firms told the ITC that a much larger, but unspecified, amount of money went to pay the U.S. firms’ lawyers.
Not many people realize how much of US trade policy is effectively set by private industry groups, whose interest in free trade, for better or worse, is largely opportunistic. This is especially obvious in the area of property rights. I recently finished reading an excellent report edited by Joe Karaganis on the politics of the piracy debate, which has a good chapter on just this topic by Sean Flynn and Karaganis.
The so-called “Special 301” process, under which the US identifies purported offenders against US-preferred intellectual property standards, is especially open to abuse.
US copyright industries and the USTR have, in key respects, a symbiotic relationship. The IIPA was instrumental in the creation of the Special 301 process, and annual IIPA country submissions furnish the primary and often only evidence on copyright issues cited in the Special 301 reports. In all but a few cases in any given year, the USTR closely follows IIPA recommendations in assigning countries to the watch lists. In 2008, the USTR accepted forty-six of the IIPA’s fifty-four recommendations (84%). In 2010, it accepted all the Priority Watch List recommendations and twenty-one of twenty-four for the Watch List (an acceptance rate of 91%). For the most part, IIPA findings and recommendations simply pass through into USTR reporting.
This close relationship is not an accident. The USTR was created in 1974 to explicitly strengthen the ties between industry and government in trade negotiations. Its mandate was revised repeatedly in the 1970s and 1980s to make the USTR more responsive to business needs and revised further to ensure that it would not be limited or constrained by the provisions of existing trade agreements, such as the GATT and later the WTO. … The 1985 case against Korea, also primarily on pharmaceutical patents, established what one negotiator described as a “blueprint” for the resolution of Special 301 disputes: bilateral treaties, or side agreements, that committed the targeted country to higher levels of patent and copyright protection …
The strategic dimension of these actions grew more explicit in the late 1980s as the Uruguay Round of GATT negotiations neared its conclusion and set the stage for a new international trade agreement—the eventual WTO. Developing countries, led by India and Brazil, supported the strengthening of existing provisions on counterfeiting but opposed the inclusion of broader IP rules in the form of TRIPS. … The United States placed five of the ten “hard-liners” opposing TRIPS in the first Special 301 Report in 1989—Brazil, India, Argentina, Yugoslavia, and Egypt. Two years later, India, China, and Thailand became the first Priority Foreign Countries, triggering Section 301 investigations. Brazil lost its GSP benefits in 1988, Thailand in 1989, and India in 1992—all on matters related to pharmaceutical patents. US pressure, combined with assurances that TRIPS would end such unilateral action, eventually broke the anti-TRIPS coalition. … Congress [then] amended the trade statute in 1994 to specify that even countries fully compliant with TRIPS might lack “adequate and effective” IP protection. The amended statute authorized the use of Special 301 to promote IP and enforcement policy beyond what was required by TRIPS.
The USTR has direct ties to industry through various advisory committees. … long-standing revolving door between the USTR and its industry clients, which creates a reward system for USTR officials who cater to industry requests …
Flynn and Karaganis suggest that the process has become slightly more open in the last couple of years – countries which are targeted now have a little time to present their counter-arguments. But it is hard to escape the conclusion that the USTR is effectively an instrument through which US businesses can use government processes to threaten harsh retaliation against countries which do not conform to a very specific and narrow set of intellectual property standards, that favor US producers, but are not at all in the interests of these countries themselves.
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