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U.S. Chamber Newsletter-International Policy Update (4/15)

19 April 2022 Tuesday

 U.S. Chamber of Commerce

International Policy Update

April 15, 2022

Chamber Outlines Goals for Indo-Pacific Economic Framework

Businesses Wrestle with Fallout of Russia’s Invasion of Ukraine

Chamber Supports Bills to Block TRIPS Waiver

Coalition Urges Ratification of U.S.-Chile Tax Treaty

From the Home Front

Chamber Urges Focus on Easing Regulations to Combat Historic Inflation

Commentary

Russia-Ukraine conflict puts fragile global trade recovery at risk

Trade Imperatives for American Manufacturers

 

Chamber Outlines Goals for Indo-Pacific Economic Framework

 

On April 11, the U.S. Chamber of Commerce submitted comments on the administration’s efforts to develop an Indo-Pacific Economic Framework (IPEF). The Chamber’s submission was filed in response to the Office of the U.S. Trade Representative’s (USTR) request for comments on the IPEF”s “fair and resilient trade” pillar and the Department of Commerce’s request for comments on the three pillars it will lead: 1) supply chain resilience; 2) infrastructure, clean energy, and decarbonization; and 3) tax and anti-corruption.

 

The comments applaud the administration’s recognition of “the strategic importance of the Indo-Pacific to America’s global leadership and security” but argue a more meaningful option would be to rejoin the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which has entered into force and is attracting new applicants despite the U.S. withdrawal in 2017.

 

Even so, the Chamber encourages the administration to act quickly on IPEF, draw on trade disciplines the U.S. has developed in other contexts, take advantage of IPEF’s flexible framework to achieve desired outcomes, and engage with public and private stakeholders.

 

The Chamber outlines important elements that could be achieved through IPEF and highlights the following as points for inclusion in the new framework:

  • Digital trade—To counter foreign trade barriers, IPEF should include an enforceable digital trade agreement that builds upon the high standards the U.S. has already negotiated in its agreements with Japan and in the U.S.-Mexico-Canada Agreement (USMCA);
  • Customs administration and trade facilitation—The IPEF should expand on the WTO Trade Facilitation Agreement (TFA) and customs measures in U.S. FTAs, such as the USMCA, to streamline procedures and ease logistical impediments to the free flow of goods and services;
  • Good regulatory practices—The IPEF should explore opportunities for regulatory cooperation by incorporating and building upon provisions from the Good Regulatory Practices and Technical Barriers to Trade sections in USMCA and the recently concluded WTO Reference Paper on Services Domestic Regulation;
  • Anticorruption—The IPEF should include measures to prevent and combat bribery and corruption, such as those found in the U.S. trade protocols with Brazil and Ecuador;
  • Government procurement—The IPEF should include commitments on government procurement procedures, such as those in the USMCA, and increase funding for IPEF partners under the U.S. Trade and Development Agency’s Global Procurement Initiative;
  • Health systems—The IPEF should include a health track for dialogue to strengthen health systems;
  • Medical products—The IPEF should support tariff elimination on health products, reiterate commitments to refrain from export restrictions, and strengthen regulatory cooperation and capacity building;
  • Infrastructure—The IPEF should include U.S. commitments to infrastructure development in the region, including the development and deployment of 5G. It should also include active coordination of research activities and dialogues to support supply chain diversification and domestic production capabilities;
  • Sustainability—The IPEF should include near-term initiatives that support resource efficiency, low carbon energy projects, supply chain resiliency, and other sustainability goals;
  • Energy transition and climate change mitigation—The IPEF should include regulatory alignment on clean energy technologies and other decarbonization efforts, cooperation on strategic minerals, and tariff elimination on a list of environmental goods;
  • Intellectual property capacity building—The IPEF should incentivize global participation in ecosystems for innovation through IP capacity building;
  • Technology standards—The IPEF should preserve a market-based approach to technology standards and establish common standards for procurement-based innovation; and
  • Export controls—The IPEF should contain an agreed framework for member countries to consult on an ongoing basis on the commercial implications of the evolving export control regime for sensitive technologies.

The Chamber is continuing to meet with administration officials engaged on this effort to convey these messages. For further information, please contact Senior Vice President for Asia Charles Freeman (cfreeman@uschamber.com).

 

Businesses Wrestle with Fallout of Russia’s Invasion of Ukraine

 

Fifty days have passed since Russia launched its invasion of Ukraine, and the United States and its allies have responded by providing military and humanitarian support to Ukraine and imposing punishing sanctions on Russia, as the Chamber has summarized in recent updates to members. Among the financial and economic consequences of the war and the sanctions are the following:

  • The World Bank projects Ukraine’s economy will shrink by 45% this year, though the severity will depend on the “duration and intensity” of the war; it also predicts Russia’s economy will contract by 11%;
  • Falling domestic and foreign demand for Russian oil is causing ripple effects across Russia’s energy supply chain; the International Energy Agency predicts a reduction from 12 million barrels a day in Russian oil production to 9 million, a larger drop than many analysts predicted;
  • The WTO lowered its projection for growth in merchandise trade this year to 3%, down from its previous projection of 4.7%, citing the war’s dampening effects on the global trade rebound from the pandemic;
  • The FAO’s Food Price Index, which monitors price fluctuations of the most-traded food commodities like wheat and sunflower oil, rose 12.6% from February to March; that increase was “driven by large rises in wheat and all coarse grain prices largely as a result of the war in Ukraine”; and
  • The 10 most downloaded apps in Russia are all VPN apps as Russian citizens scramble to escape growing state censorship of the internet.

On April 13, the White House announced the authorization of an additional $800 million in weapons, ammunition, and other security assistance to Ukraine, which includes heavier arms such as artillery, armored personnel carriers, and helicopters, as requested by the Ukrainian government. This additional assistance marks approximately $2.6 billion in security assistance to Ukraine since the invasion began and is intended to help Ukraine counter the renewed Russian offensive in the east that is expected in the coming days.

 

In remarks that same day, Secretary of the Treasury Yellen highlighted “the pivotal role of China” in Russia’s invasion of Ukraine and added: “Going forward, it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security. The world’s attitude towards China and its willingness to embrace further economic integration may well be affected by China’s reaction to our call for resolute action on Russia.”

 

European leaders are intensifying discussions of a possible oil ban on Russia, and reports indicate the bloc is drafting a ban that will take a phased approach to allow Germany and other countries heavily reliant on Russian energy to find alternative sources.

 

The Chamber will continue to monitor developments and engage with the administration and Congress as these policies are implemented. For further information, please contact Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com) or Director for International Policy Isabelle Icso (iicso@uschamber.com). On matters related to Ukraine’s humanitarian crisis, please contact U.S. Chamber of Commerce Foundation Senior Vice President Marc DeCourcey (mdecourcey@uschamber.com).

 

Chamber Supports Bills to Block TRIPS Waiver

 

On April 11, the U.S. Chamber sent a letter to the full Congress in support of the Senate’s “No Free TRIPS Act” and the House’s “Protecting American Innovation Act,” which would prohibit the administration from negotiating or concluding any modifications to the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property (TRIPS) agreement without the explicit authorization of Congress. The letter reads in part:

“International negotiations on IP, focused on undermining the WTO TRIPS agreement, are fundamentally misguided. Any agreement that undermines IP would limit the ability of innovative companies to develop the cure for the next pandemic or global health threat and bargain away US competitiveness. Instead, governments should focus on the overwhelming problem of vaccine distribution and the last-mile delivery.

 

“Intellectual property waiver proposals distract from the real issues preventing more shots in arms, such as logistical hurdles, supply chain bottlenecks, and vaccine hesitancy. Business is delivering on the promise to manufacture safe and effective COVID-19 vaccines for the whole world. Vaccine production is estimated to reach over 20 billion doses this year, enough for everyone. As of March 2022, over 65% of the global population has received at least one dose, and this number is growing every day. The dismantling of IP rights threatens the licensing arrangements that are enabling rapid global production and technology transfer.”

For further information, please contact Executive Director for International Affairs at the Global Innovation Policy Center Robert Grant (rgrant@uschamber.com).

 

Coalition Urges Ratification of U.S.-Chile Tax Treaty

 

On April 13, the U.S. Chamber joined a group of industries and organizations in a multi-association letter to Senate Majority Leader Chuck Schumer (D-NY) and Republican Leader Mitch McConnell (R-KY) urging the Senate to ratify the pending U.S.-Chile Bilateral Income Tax Treaty. The letter reads in part:

“The Treaty is vital to U.S. foreign direct investment in Chile, and the success of U.S. companies that invest in Chile. Without ratification, Chilean taxes on U.S. companies’ operations are due to reach a rate of up to 44% in 2027, when a special waiver issued by the Chilean government expires. By comparison, the Chilean operations of companies headquartered in China, Japan, Canada, Australia and the United Kingdom would be subject to a rate of 35%, putting U.S. companies at a significant financial disadvantage relative to their competitors. The Treaty would also address Chilean withholding taxes on interest, royalties, U.S. services, and fees for the use of equipment.”

Last month, the Senate Foreign Relations Committee reported out favorably the U.S.-Chile Tax Treaty at a business meeting. The U.S. Chamber sent a letter to the committee in support of the treaty and urged the committee to support its prompt approval. The Chamber intends to send a version of the letter to the full Senate when it returns from recess.

 

For further information, please contact Senior Vice President for the Americas Neil Herrington (nherrington@uschamber.com).

 

From the Home Front

 

Chamber Urges Focus on Easing Regulations to Combat Historic Inflation

 

On April 12, the Bureau of Labor Statistics released the Consumer Price Index (CPI), which measures the change over time in the price of consumer goods. The new numbers for March 2022 show a 1.2% rise in the cost of goods and services from February, up 8.5% in the last year, with energy and food being the largest contributors to rising prices.

 

Following the release of March's CPI data, Executive Vice President and Chief Policy Officer Neil Bradley released the following statement:

“New data out today shows what Americans already know: inflation continues to chip away at their buying power and impact the larger workforce. Rising costs in housing, food, and energy are making it difficult for American families and businesses to get ahead, and while monetary policy remains the best tool to fight inflation, policymakers should also be focusing on easing regulations, reducing tariffs, and increasing domestic energy production.

 

“Rising energy costs continue to impact consumers and businesses, and the administration’s lack of commitment to increased production is hampering our ability to lower costs and improve energy security. The energy industry needs assurances from the administration that increased investment now will not be met with efforts to decrease or end production in the years ahead. The administration must end its ban on leasing on federal lands, expeditiously begin processing permits, and finalize a new offshore leasing program. Additionally, the U.S. must focus on approving critical energy infrastructure projects. This all can, and must, be done with an emphasis on reducing emissions globally and transitioning to non-emitting energy sources, but policymakers must work with the industry now to ensure our energy security going forward.

 

“We also remain concerned that the administration and some policymakers continue to blame businesses for rising prices. Inflation is the result of supply and demand. Pandemic related shocks, a tight labor market, and loose monetary and fiscal policy have limited the supply of many goods and at the very same time boosted demand. This has created broad-based price increases. To shift the blame to businesses is misguided and only increases the likelihood that the real causes of inflation will not be addressed, prolonging and exacerbating higher prices for families and risking a recession.”

On March 29, MetLife and the Chamber released their 2022 Q1 Small Business Index Report. The report found that while small business owners are feeling good about the health of their businesses and expectations for the future, concern for inflation soared. The vast majority (85%) of small business owners are concerned about the impact of inflation, and 44% indicate they are very concerned, jumping 14 percentage points from 31% last quarter. More than two in three businesses (67%) report having to raise prices to cope with inflation. The survey was conducted between January 14 - January 26, 2022, in the wake of the Omicron variant. The survey found that while COVID-19 remains a persistent challenge for small businesses, inflation and supply chain issues are top of mind for most small businesses. Click here to read the report.

 

Commentary

 

Russia-Ukraine conflict puts fragile global trade recovery at risk

World Trade Organization (April 12)

 

Trade Imperatives for American Manufacturers

U.S. Chamber (April 6) by John Murphy

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