Letter to USTR on Chile and Singapore Free Trade Agreements
March 27, 2003
The Honorable Robert B. Zoellick
United States Trade Representative
Office of the U.S. Trade Representative
600 17th Street, N.W.
Washington, DC 20508
Dear Ambassador Zoellick,
On behalf of the Electronic Industries Alliance (EIA), we would like to congratulate you and your staff on the recently completed negotiations to enter into free trade agreements (FTAs) with Singapore and Chile. EIA appreciates your releasing for public review the U.S.- Singapore FTA text and looks forward to the similar release of the U.S.-Chile FTA text, which we hope will be in the very near future. We appreciate your hard work and offer our support in your efforts to gain congressional approval of these FTAs.
EIA is an alliance of high-tech associations and approximately 2,500 member companies whose products range from the smallest electronic components to the most complex systems used by government and industry, including the full range of consumer electronic products. U.S. electronics is a $430 billion industry that provides 1.8 million jobs for U.S. workers. In 2001, about 40% of U.S. produced electronics – more than $170 billion in goods – was exported overseas.
Based on the texts and summaries released by your office, the U.S.-Singapore and U.S.-Chile FTAs embody a broad range of market-liberalization commitments that will facilitate international trade and investment with these countries and are necessary to promote long-term economic growth. Both FTAs will benefit the electronics industry as a whole and are noteworthy for the following commitments:
Tariff Elimination: Singapore's commitment to immediate duty-free treatment for U.S. exports to Singapore and Chile's commitment to eliminate tariffs immediately on 85% of imports – in key sectors such as computers and other information technology – provide immediate benefits to U.S. manufacturers. It is noteworthy that the FTA with Chile marks the first time that a major South American country has embraced the duty reduction commitments reflected in the 1996 Information Technology Agreement (ITA). In future FTAs, EIA suggests that for certain sensitive product areas USTR consider flexible mechanisms for reducing tariffs, such as the ITA that reduces tariffs equally in staged reductions.
E-Commerce Liberalization: Both agreements contain commitments in this area that are more advanced than any negotiated under the World Trade Organization. The FTAs provide non-discriminatory treatment to products delivered electronically, which will benefit U.S. firms that sell digital products over the Internet. Parties to the agreements also agreed to prohibit customs duties charged on these electronically delivered products.
Intellectual Property Protection: We appreciate the strong protection for copyrighted works that permits the growth of digital technologies and products while still protecting the legitimate rights of copyright owners, reflecting the balance struck in the U.S. Digital Millennium Copyright Act. Moreover, strong enforcement provisions criminalize end-user piracy and commit both Singapore and Chile to seize, forfeit and destroy counterfeit and pirated goods and the equipment used to produce them. These protections will apply to goods-in-transit and mandate both statutory and actual damages under Chilean and Singaporean law for IPR violations.
Telecommunications Market Access: Both agreements provide for open markets and non-discriminatory access to telecommunications networks. We are particularly pleased that specific provisions in the Singapore agreement have been included to ensure national treatment among service providers, protection against anti-competitive behavior, transparent procedures for access to unbundled network elements and transparency in licensing procedures. Moreover, we strongly support the affirmation of the principle of technology choice by public telecommunications service providers. These and other provisions will contribute to open and transparent telecommunications markets for both service providers and equipment suppliers.
While we are pleased with most aspects of the Chile and Singapore FTAs and with the potential that both offer for economic growth and improved trade relations, we do have two areas of concern:
Rules of Origin: There is a general consensus that the NAFTA rules of origin are highly complex and that rules of origin for future FTAs need to be much simpler. Complex rules of origin impose unnecessary administrative burdens on companies and raise the cost of doing international business. Moreover, we understand that the rules of origin for the U.S.-Chile FTA may serve as the model for future agreements. Accordingly, we recommend that the rules of origin for the U.S.-Chile and U.S.-Singapore FTAs be simplified so that companies that are entitled to the benefits will not be deterred from capitalizing on them because of prohibitively high administrative costs. This simplification can be accomplished through a straight tariff shift-only approach, whereby an item moves from being one good to another in the course of manufacturing. We would note that a straight tariff shift-only approach might include a minimum regional value content (RVC) requirement.
Duty Drawback: The duty drawback program, administered by the U.S. Customs Service, is one of the last remaining export promotion programs to help U.S. companies compete in the global market place against trading partners that have significantly lower costs of production. We understand from the U.S.-Chile FTA summary released by your office that drawback will be phased out over a 12-year period. We believe that by phasing out drawback in each FTA, the elimination of this program is being accelerated as it relates to tariff elimination worldwide, since we do not know when, or if, tariffs will truly be eliminated. At the very least, the European Union-Chile FTA language would be preferable as it has an opt-out provision allowing exporters and importers to choose between drawback and a duty preference. By eliminating drawback in the U.S.-Chile FTA, the U.S. will be placed at a competitive disadvantage against our E.U. trading partners that have more preferable drawback language in the E.U.-Chile FTA.
FTAs such as those negotiated with Singapore and Chile ensure that U.S. manufacturers and exporters remain competitive in the global marketplace and enhance the prospects for successful multilateral trade talks, including the Free Trade Area of the Americas and the Doha round of WTO negotiations. We look forward to supporting your efforts in securing similar agreements with other important U.S. trading partners.
In light of these future negotiations, we would like to note one final concern. Although it is not addressed in either the Chile or Singapore FTA, we feel the issue of foreign levies on digital products is one that must be raised now because of the potential for these agreements to be used as models for future negotiations. The propagation of levies on digital products – including PCs, audio/visual products and other electronics – is emerging as a worrisome trade barrier. These levies are being imposed by E.U. countries, Canada, Mexico and others and are a threat to U.S. manufacturers' ability to offer products at lower prices. With this concern in mind, we urge you to include the prohibition of levies on digital products in future U.S. trade negotiations.
Again, we commend you on your successful completion of two highly significant free trade agreements.
Respectfully submitted,
Dave McCurdy
President
Electronic Industries Alliance
cc: Charles E. Grassley, Chairman, Senate Finance Committee
Max Baucus, Ranking Member, Senate Finance Committee
William M. Thomas, Chairman, House Ways & Means Committee
Charles B. Rangel, Ranking Member, House Ways & Means Committee
Regina K. Vargo, Assistant U.S. Trade Representative for the Americas, USTR
Ralph Ives, Assistant U.S. Trade Representative for Asia-Pacific and APEC Affairs, USTR
Chris Padilla, Assistant U.S. Trade Representative for Intergovernmental Affairs and Business Liaison, USTR
Robert C. Bonner, Commissioner of Customs, Bureau of Customs and Border Protection
John Taylor, Undersecretary for International Affairs, U.S. Treasury Department
