Strategic Objective 1.2

Performance Outcome: Identify and resolve unfair trade practices (ITA)

Help build a rules-based trading system in which international trade is both free and fair for U.S. firms and workers.

U.S. industries are entitled to the benefits of trade agreements negotiated by the United States. They are also entitled to the aggressive investigation of unfair trade practices that undercut those agreements. Two program units in ITA, Market Access and Compliance (MAC) and IA work to ensure that the U.S. firms receive those benefits and obtain prompt relief from unfair trade practices.

ITA monitors industry access to overseas markets and works to remove costly barriers to product and service exports. According to a University of Michigan study, the average U.S. family of four still stands to gain an estimated $7,800 per year if there was total elimination of global barriers to trade in goods and services. The World Bank has reported that the elimination of global trade barriers could lift 300 to 500 million of the world’s poor out of poverty over the next 15 years.

Trade compliance with negotiated trade agreements and access to foreign markets are existing problems faced by U.S. businesses that choose to sell their products overseas. MAC seeks to obtain market access for U.S. firms and workers and to achieve full compliance by foreign nations with trade agreements they sign with the United States. MAC ensures market access for U.S. businesses; advances the rule of law internationally; and creates a fair, open, and predictable trading environment. MAC also conducts critical trade policy analysis and negotiation support for the Office of the U.S. Trade Representative (USTR) and represents the Department in trade related dealings with other U.S. government agencies.

MAC uses a range of techniques to advocate on behalf of U.S. businesses and intervene with other governments to ensure foreign compliance with existing trade agreements and to eliminate trade barriers. Trade agreement compliance and foreign trade barriers have been a continuous problem for U.S. exporting firms, large and small. Many companies, especially small and medium sized firms, do not have the resources, knowledge, or leverage to influence foreign governments, their laws, and regulatory regimes. Based on customer need, MAC has a sizeable caseload each year from U.S. firms that have encountered a trade barrier. In FY 2007, MAC initiated 187 cases from U.S. industries and concluded 158. For the past four years, ITA has consistently met or exceeded its targets for the number of cases initiated and the number of cases resolved. Concerning the latter measure, ITA has raised its target each year, from 30 to 40 in FY 2003 to 120 in FY 2007, reflecting better performance each year.

However, for “Percentage of market access and compliance cases initiated on behalf of small and medium-sized businesses,” ITA did not meet its target of 30 percent. This is a new measure that began in FY 2006 and thus a baseline is still uncertain. However, because 97 percent of all exporters are small and medium-sized businesses, ITA believes that supporting these businesses is important. ITA is still investigating why the actual for this measure dropped from 28 percent in FY 2006 to 22 percent in FY 2007 and will reinforce its efforts to achieve and measure progress in this area.

IA identifies and monitors import surges created by imports that are sold in the United States at less than fair market value, foreign government subsidy practices, and other harmful import trends. It defends U.S. industry against injurious trade practices by administering the antidumping (AD) and countervailing duty (CVD) laws of the United States. IA expedites investigations when warranted by import surges and foreign subsidy practices, defends unfair trade practices before the World Trade Organization (WTO), and coordinates the Department’s role in the Administration’s steel strategy. IA’s Unfair Trade Practices Team confronts unfair foreign competition by monitoring economic data from U.S. global competitors and vigorously investigates evidence of unfair subsidization and production distortions. IA’s China Compliance office devotes more resources to China cases and issues unique to non-market economies, such as IPR violations affecting the U.S. textile industry.

Since FY 2002, ITA has consistently met its target of completing 100 percent of AD/CVD cases within the statutory deadline. FY 2007 was no different. The percentage of AD/CVD cases completed on time reflects the vigilance of IA staff to complete its casework within the statutory timeframe. Domestic industry generates AD/CVD cases, and timeliness of case activity is a critical factor for delivering customer satisfaction. Timeliness of casework is also essential for upholding the integrity of the AD/CVD laws as a credible and fair legal mechanism to address unfair trade actions by foreign interests. The stated target reflects management’s prioritization of adherence to statutory requirements. ITA must always complete these cases within the limits set forth in law. Domestic products covered by these AD/CVD investigations and reviews are critical to U.S. industries. The timely completion of these cases may have a direct correlation with the ability of petitioning U.S. firms to remain viable when a firm may be subjected to unfair trading practices. Ensuring expedient completion of cases offers firms the best timeframe for determining if they are being injured by an unfair trading practice.

Free and fair trade is a two-way street that requires all parties to play by the rules. In FY 2007, ITA conducted the following activities to level the playing field by removing barriers that hinder U.S. exporters.

In FY 2007, ITA continued its efforts, in conjunction with specialized attorneys at the U.S. Patent and Trademark Office (USPTO) to manage an online complaint forum at Stopfakes.gov. These complaints were monitored by ITA’s trade compliance team who counsel businesses on how to protect their IPR and work with callers on how to best resolve problems. In FY 2007, the hotline received over 1,730 calls. ITA’s trade compliance team has received 180 formal inquiries from individuals or companies through the STOP! (Strategy Targeting Organized Piracy) Fakes Web site. The STOP! Fakes Web site (www.stopfakes.gov), its online complaint form, and brochures provide resources such as one-on-one consultations and further information and guidance to rightsholders on how to register and protect their IP in markets around the world. The Stopfakes.gov Web site had more than 44,000 visitors in calendar year 2007. ITA MAC program staff have also created downloadable “IP toolkits” to guide businesses through securing and enforcing their rights in key markets around the globe. These toolkits are available at the Stopfakes.gov Web site and cover key trading partners such as China, Russia, India, Mexico, Korea, Malaysia, and Taiwan.

On March 30, 2007 the Department announced its affirmative preliminary determination in the CVD (or anti-subsidy) investigation on imports of coated free sheet paper from China. Subsidies are financial assistance from foreign governments that benefit the production, manufacture, or exportation of goods. In this case, the Department has departed from its 23-year, bipartisan practice of not applying the CVD law to non-market economies such as China, which was upheld by the U.S. Court of Appeals for the Federal Circuit in its 1986 decision, Georgetown Steel. During this case, the Department explained that Georgetown Steel no longer applied to China of because of the vast differences between the characteristics of the non-market economies of the 1980s Soviet-bloc countries and China’s economy today.

“This Administration has aggressively enforced our antidumping laws to combat unfair Chinese trade,” said U.S. Secretary of Commerce Carlos M. Gutierrez. “China’s economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law. The China of today is not the China of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly. By acting on the petition filed last October, the United States today is demonstrating its continued commitment to leveling the playing field for American manufacturers, workers, and farmers.”

Performance Outcome: Maintain and strengthen an adaptable and effective U.S. export control and treaty compliance system (BIS)

The Department administers and enforces controls on exports of dual-use goods and technologies to counter proliferation of WMD, combat terrorism, and pursue other national security policy goals. The Department also serves as the lead agency for ensuring U.S. industry compliance with CWC.

The Department processes export license applications for controlled commodities of U.S. companies engaged in international trade in accordance with Export Administration Regulations (EAR). An integral part of BIS’s mission is to facilitate compliance with U.S. export controls by keeping U.S. firms informed of export control regulations through an extensive domestic and foreign outreach program.

In FY 2007, the Department successfully promulgated regulations that adapted export controls to the evolving national security and economic situation. Noteworthy regulations published include multilateral export control regime changes from 2006/2007 Plenary meetings and a revision to China licensing policy to restrict exports to Chinese military end-users while facilitating civilian trade with trusted end-users.

The Department processed export license applications and related requests in FY 2007. While this represented an increase over the amount processed in FY 2006, the Department continued to process these applications in a timely manner, thereby benefiting exporting companies and industries, while protecting national security and foreign policy interests.

The Department engages in activities to prevent violations before they occur and to investigate and prosecute violators to dismantle illicit proliferation networks. Preventive activities include screening license applications for enforcement concerns; conducting end-use checks abroad to confirm the bona fides of parties to export transactions, confirm compliance with license conditions, and uncover diversions to unauthorized end-users/uses; and reviewing Shippers Export Declarations and foreign visitors’ visa applications to identify potential export control issues. Outreach activities include educating U.S. businesses on export control requirements and identifying suspicious transactions leading to successful preventative and investigative actions. Investigation and prosecution activities involve Department Special Agents conducting cases focused on significant proliferation, terrorism and military end-use export violations, and the vigorous pursuit of criminal and administrative sanctions.

In FY 2007, the Department exceeded its targets by completing 930 actions that resulted in a deterrence or prevention of a violation and cases which result in a criminal and/or administrative charge, as well as conducting 854 end-use checks. The Department also ensured that its investigation case load was targeted on the priority areas of WMDs, terrorism, and military diversion.

In addition to dual-use export controls, BIS enforces the antiboycott provisions of the EAR. The antiboycott regulations direct U.S. businesses not to participate in foreign boycotts that the United States does not sanction. As well as investigating criminal and administrative violations of the antiboycott regulations, the Department actively supports the Department of State’s efforts to dismantle Arab governments’ boycott of Israel. The Department provides guidance to the exporting community regarding the antiboycott regulations through public outreach and its telephone and e-mail advice line.

The Department can meet its responsibility for administering the dual-use export control system using current legal authorities. However, there would be benefits in securing comprehensive dual-use export control legislation. Thus, the Administration continues to work with Congress to pass a reauthorized Export Administration Act (EAA) with enhanced enforcement authorities.

The Department also develops and implements export control policies toward key countries such as China and India. In FY 2007, the Department published a final China policy update, engaged with China’s Ministry of Commerce in two meetings of the U.S.-China High Technology and Strategic Trade Working Group of the Joint Commission on Commerce and Trade (JCCT), and participated in the first two Treasury-led U.S.-China Strategic Economic Dialogues. The Department also supported President Bush’s Nuclear Initiative with India, including the strengthening of India’s export control system, and hosted a meeting of the U.S.-India High Technology Cooperation Group.

In March 2007, the Inspector General (IG) released a report on dual-use export controls to India. The report found that policies are not fully transparent, the end-use check program needs improvement, and compliance with license conditions needs to be strengthened. BIS has prepared and begun implementation of an action plan to address the report’s specific recommendations that it agrees with.

Performance Outcome: Integrate non-U.S. actors to create a more effective global export control and treaty compliance system (BIS)

The effectiveness of U.S. export controls is enhanced by strong controls in other nations that export or transship sensitive goods and technologies. BIS works to improve the participation and compliance of existing members of the multilateral export control regimes and cooperates with other countries to help them establish effective export control programs.

The Department helps improve the effectiveness of the multilateral export control regimes (Australia Group for chemical and biological weapons items, Missile Control Regime, Nuclear Suppliers Group, and Wassenaar Arrangement for dual-use technologies and conventional weapons) by participating in U.S. efforts to update and adapt their control lists to the threats facing the United States.

The Department works with other countries to encourage and support their development of effective export control systems consistent with obligations under United Nations Security Council Resolution 1540. In FY 2007, the Department continued its efforts with India and accelerated contacts with the United Arab Emirates. In addition, the Department assists in implementing its international activities by coordinating and managing BIS participation in the U.S. government’s Export Control and Related Border Security Assistance (EXBS) program, which provides technical assistance to strengthen the export and transit control systems of nations lacking effective export control systems.

Performance Outcome: Ensure continued U.S. technology leadership in industries that are essential to national security (BIS)

The Department works to ensure that the United States remains competitive in industry sectors and sub-sectors critical to national security. To this end, it analyzes the impact of export controls and trade policies—including deemed export policy—on strategic U.S. industries, studies the impact of defense trade offsets, advocates for U.S. defense companies competing for international sales opportunities, and evaluates the security impact of certain proposed foreign investments in U.S. companies. The Department also administers the federal government’s Defense Priorities and Allocations System (DPAS), which assures the timely availability of industrial resources to meet national defense and emergency preparedness program requirements and provides an operating system to support rapid industrial response in a national emergency.

In FY 2007, the Department announced the results of an important study of the U.S. imaging and sensors industry. In addition, the Department supported administratively the Secretary’s Deemed Export Advisory Committee, which is slated to provide in early FY 2008 its recommendations for policies that will continue to provide U.S. industry, academia, and research institutions with access to talented foreign researchers while ensuring that U.S. security requirements are met. The Department also issued its annual report on the impact of defense offsets on U.S. industry and actively participated in an interagency committee to develop and implement policies for mitigating the use of offsets by U.S. trading partners.

STRATEGIES AND FUTURE PLANS

D Bureau of Industry and Security FY 2007 Bilateral Technical Exchanges.

ITA will expand its analytical infrastructure to:

• support timely and accurate assessments of (1) the impact on U.S. industries of the growth of regional trade pacts, and (2) the impact of major competitors exporting their discriminatory technical regulations to third markets in the developing world;
• develop strategies to support bilateral and multilateral trade negotiations that prevent the adoption of discriminatory international standards and regulations against U.S. products;
• work closely with foreign governments and regulatory officials in the developing strategies that address regulatory barriers, head off potentially harmful regulations, and help shape good regulations and standards;
• monitor economic data from U.S. global competitors and vigorously investigate evidence of unfair subsidization and production distortions;
• identify legal remedies available to counter unfair trade practices and ensure that they are eliminated, rather than leave these small and medium-sized manufacturers in the United States with costly trade litigation;
• focus and sharpen expertise on China through the China Compliance office in IA. This effort devotes more resources and dedicated experts to China for compliance issues.

The Department continues to refine U.S. export controls in light of geopolitical and global market realities to ensure that they meet U.S. national security requirements. The Department also seeks to enhance the effectiveness of the EAR by educating exporters and other stakeholders in the export licensing process, thereby improving industry compliance with export control regulations. These efforts will increase the efficiency of the license processing system and thus enable exporters to be more competitive in the global economy while deterring transactions that threaten U.S. security interests.

The Department will also continue its efforts to strengthen multilateral cooperation on export controls to help strengthen U.S. security by extending controls over sensitive items beyond U.S. borders, and to help ensure a level playing field for U.S. exporters and otherwise permit them access to foreign markets. The Department will continue to develop and implement policy initiatives to integrate other key countries, such as China and India, more tightly into the global dual-use export system, thereby increasing U.S. security and facilitating the export of sensitive U.S. items to these markets.

Strong enforcement of U.S. export regulations is critical to protect U.S. national security interests. The Department will continue to focus on preventing, investigating, and prosecuting the most significant export violations involving proliferation, terrorism, and military end-uses. Focused partnerships with U.S. businesses will be maintained regarding specific goods and technologies sought for hostile acquisition, and the deemed export compliance program will be finalized and implemented.

The Department will also continue to strengthen its ability to promote U.S. competitiveness by improving deemed export policy, studying the impact of export controls and other factors on strategic industries, and evaluating the effects on national security of imports of certain items and foreign investments in U.S. companies.

CHALLENGES FOR THE FUTURE

Director of the Office of Strategic Industries and Economic Security, Dan Hill.

ITA faces new demands as the international trade environment changes from year to year: new barriers are erected, the role of international organizations and alliances is strengthened, and other foreign regulatory measures are implemented that have a negative impact on ITA exports. Market access cases frequently arise from these foreign regulatory measures. Complaints are received by ITA from U.S. companies experiencing overseas barriers to U.S. exports, which are not covered by trade agreements. Compliance cases rise from complaints received by ITA from U.S. companies regarding failures by foreign governments to implement trade agreements negotiated by the United States and through monitoring efforts by ITA compliance officers.

BIS faces the challenges of implementing an export control system that advances U.S. national security, foreign policy, and economic objectives in a dynamic technology and geopolitical environment. This includes strengthening the legal foundation of the dual-use export control system. The EAA lapsed on August 20, 2001. Executive Order 13222 of August 17, 2001 (3 C.F.R., 2001 Compo 783 (2002), which has been extended by successive Presidential Notices, the most recent being that of Notice of August 3, 2006 (71 FR 44551 (August 7, 2006)) continues the regulations in effect under the International Emergency Economic Powers Act (IEEPA). While the Department effectively exercises its authority under IEEPA, the legal foundation for the dual-use export control system can be strengthened. The Administration has vigorously advocated a streamlined and strengthened export control system that effectively promotes both U.S. national security and U.S. economic interests. To address this challenge, the Department continues to work with Congressional members and staff on export control reforms that enhance the Department’s ability to facilitate legitimate global trade while reducing illicit traffic in dual-use items and targeting export control resources on transactions of greatest risk.

This challenge also includes managing export controls to maximize security with minimum impact on U.S. competitiveness. Trade must rest on a firm foundation of security, yet controls on trade must not disadvantage U.S. exporters needlessly. To meet this challenge, the Department will use BIS’s Office of Technology Evaluation and other resources to understand better the impact of technology, markets, and geopolitical developments on U.S. security and competitiveness.