[CTC] Business fears USTR forced labor strategy could mean more tariffs

Fri Sep 23 08:14:11 PDT 2022

Business fears USTR forced labor strategy could mean more tariffs
Labor and advocacy groups want the administration to leverage the most powerful U.S. legal trade tools to help stop the practice.
By Doug Palmer
Politico Pro, 9/22/22

Business groups want U.S. Trade Representative Katherine Tai to tread carefully as her agency formulates its first-ever strategy to combat forced labor, a brutal and dehumanizing existence suffered by an estimated 28 million people around the world.
While many proponents of a tougher U.S. approach advocate increased use of trade actions against products made with forced labor, business groups such as the U.S. Chamber of Commerce argue the administration should put less emphasis on that.

“Relevant government agencies should prioritize diplomatic tools and collaboration with industry and partner governments to ensure the absence of forced labor in supply chains,” John Murphy, senior vice president for international policy, said in comments filed with USTR. “Import restrictions, whether via a USTR-led trade agreement or CBP enforcement actions, should be a last resort, not the primary tool.”
The comment is among dozens that hope to shape the Biden administration's forthcoming strategy. While business groups urge caution to avoid unintended consequences for legitimate commerce, labor and advocacy groups want the administration to leverage some the most powerful U.S. legal trade tools, including tariffs, in order to stop the practice. A public comment period ended in August, with no firm indication of when USTR would unveil its new approach.
Blunt measures won't work: The National Foreign Trade Council similarly questioned USTR’s decision to characterize forced labor as “an unfair trade practice,” rather than as a human rights concern, since the former approach could lead to tariffs or other trade restrictions.
“Increasing tariffs is a blunt, punitive measure that is not constructive for improving the conditions and practices that give rise to forced labor or improving conditions for workers,” the business group wrote. “Moreover, tariffs and import restrictions are imposed on the importer, who may not have sufficient visibility into the product supply chain to satisfy the U.S. government.”
Both the Chamber and NFTC emphasized their opposition to forced labor and their desire to work with the Biden administration to end the practice. Now they are waiting along with many others to see final details. Tai announced plans to develop USTR's new strategy <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2022/january/ustr-announces-development-focused-trade-strategy-combat-forced-labor> nearly eight months ago.
“USTR is currently reviewing comments submitted as we work to develop a strategy to combat forced labor,” USTR spokesperson Sam Michael said. “We are also in touch with relevant stakeholders and interested parties to ensure our strategy can tackle this malicious practice.”
Rebuttable presumption: In the mean time, the Biden administration has begun enforcing the Uyghur Forced Labor Prevention Act, which effectively bans the importation of any goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region in China, based on the presumption they were made with forced labor unless proved otherwise.
Rethink Trade, the advocacy and analysis group led by longtime trade campaigner Lori Wallach, argues the same "rebuttable presumption" should be applied to goods from all "Tier 3" countries in the State Department’s annual Trafficking in Persons report <https://www.state.gov/reports/2022-trafficking-in-persons-report/>. That is the most serious designation, reserved for countries whose governments do not fully meet minimum U.S. standards for eliminating human trafficking “and are not making significant efforts to do so,” according to State.
Banning imports of a particular product "until commercial interests can show a clean supply chain is an extremely effective enforcement tool that should be widely adopted," the group wrote.
IPEF negotiations: USTR is finalizing its forced labor strategy at the same time that it has begun trade negotiations with three nations – Brunei, Malaysia and Vietnam – that are designated as Tier 3 countries.
Brunei, Malaysia and Vietnam are part of the U.S.-led talks on the 14-nation Indo-Pacific Economic Framework, along with Indonesia which is on the State Department’s Tier 2 Watch List, the report’s second most serious designation.
Asia and the Pacific account for more than half of the world’s victims of forced labor, or 15.1 million, according to the International Labour Organization’s latest tally, <https://www.ilo.org/wcmsp5/groups/public/@ed_norm/@ipec/documents/publication/wcms_854733.pdf> which does not list totals for individual countries.
In one sign of the sensitivity of the issue to countries in the region, the recently agreed negotiating objectives for the IPEF agreement <https://ustr.gov/sites/default/files/2022-09/IPEF%20Pillar%201%20Ministerial%20Text%20(Trade%20Pillar)_FOR%20PUBLIC%20RELEASE%20(1).pdf> do not specifically call for “the elimination of forced labor,” unlike the negotiating objectives for a parallel set of talks with Taiwan <https://ustr.gov/sites/default/files/2022-08/US-Taiwan%20Negotiating%20Mandate%20(Final).pdf>.
However, USTR downplayed that difference, noting the IPEF objectives refer to participants adopting, maintaining and enforcing national laws based on internationally-recognized labor rights, as contained in the ILO Declaration on Fundamental Principles and Rights at Work. <https://www.ilo.org/declaration/lang--en/index.htm>
That “includes the elimination of all forms of forced labor,” Michael said. “While the issue of forced labor was not specifically mentioned in the ministerial statement, we are not excluding this issue from the negotiation.”
Lots of ideas: More than 40 groups and individuals filed comments with USTR, answering a series of questions posed by the agency. The numerous suggestions ranged from working with allies to other more unilateral approaches by the United States.
Here is a sampling:
Launch 301 investigations: The AFL-CIO, in its comments, called on USTR to use its investigative powers under Section 301 of the 1974 Trade Act to fight forced labor. That particular authority allows the U.S. government to unilaterally impose tariffs on foreign goods and was used by former President Donald Trump to go after China on intellectual property concerns.
Toughen program requirements: USTR should work with Congress to incorporate tougher labor eligibility criteria into major U.S. tariff-waiver programs like the Generalized System of Preferences, the African Growth and Opportunity Act and the Caribbean Basin Initiative, the AFL-CIO said. The current requirement that countries only "take steps to afford" internationally-recognized workers’ rights "is much too weak, allowing countries with abysmal labor rights records to retain benefits,” Cathy Feingold, the group’s international director, wrote.
Pursue civil and criminal penalties: The labor federation also called for the administration to pursue civil and criminal penalties against companies that “knew or should have known about forced labor in their supply chains.”
Impose countervailing duties: The trade remedy team at the law firm of Wiley Rein recommended USTR launch a Section 301 forced labor investigation against China, and also urged the Commerce Department to begin treating forced labor as a “countervailable subsidy.”
The latter recommendation would allow the department to impose countervailing duties on a case-by-case basis where petitioners can prove the cost of producing an imported good has been reduced due to forced labor.
Rethink Trade picked up on that point, calling it “critical that forced labor be treated as a countervailable subsidy in U.S. trade law.”
Use a TIP litmus test: The Alliance to End Slavery and Trafficking, a U.S.-based coalition of human rights and similarly-minded groups, called for greater congressional scrutiny of trade agreements with any countries listed in the Tier 2 Watch List of the Trafficking in Persons report.
Congress passed legislation in 2015 barring the expedited congressional approval of trade deals with any Tier 3 country under a procedure known as “fast track.” ATEST urged Tier 2 Watch List countries to be treated the same way.
However, that issue may not impact the IPEF negotiations, since the Biden administration does not plan to submit the finished agreement to Congress for approval.
Duplicate USMCA’s Rapid Response Mechanism: The AFL-CIO said all U.S. trade agreements should require trade partners to enact and effectively enforce import prohibitions against goods made using forced labor.
It also called for USTR to insist on including the U.S-Mexico-Canada Agreement’s "rapid response" labor enforcement mechanism in future deals to ensure individual companies protect fundamental labor rights, including a prohibition on forced labor.
"Ending forced labor is not only a moral imperative, but a necessary step to ending a form of unfair competition that drags down wages and standards for workers everywhere," Feingold wrote.

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

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