National Foreign Trade Council President Jake Colvin, who succeeded Rufus Yerxa last October, is not thinking about trade policy in traditional ways at the start of 2022. He has inclusivity, and workers, on his mind. “I’m focused this year on thinking about how trade policy can advance local commerce for good,” he said in an interview with Inside U.S. Trade, “and so how do you engage on trade policy in a way that advances shared priorities and common goal of creating a more inclusive global economy?”
Trade policy at its best, according to Colvin, is inherently worker-centric -- a calculus that fits his organization's vision of trade with the stated goals of President Biden and U.S. Trade Representative Katherine Tai. “I think there is a real opportunity to elevate the role of trade policy and trade promotion programs in creating a more inclusive economy,” he said.
The business community has long held that businesses that export do better than businesses that don’t, and Colvin put that belief in the context of the greater focus the administration has put on inclusive economics. “Women-owned and minority-owned businesses that export do better than businesses that don’t export,” Colvin said.
Colvin is in his fourth month on the job, having taken over for Yerxa last October. But “nobody else knows [NFTC’s] mission better,” Yerxa said when Colvin was announced as his successor. Colvin has been with NFTC for nearly 17 years, serving first as the director of its USA*Engage coalition and then as its vice president for global trade and innovation since 2008.
As it fleshes out its worker-centric trade policy in its second year, the Biden administration should shift “from dialogue with the business community toward pursuing concrete deliverables,” Colvin said. NFTC will press the administration for those deliverables, he added, naming new market-access opportunities as a priority. He cited stalled trade negotiations with the United Kingdom and Kenya as well as the Indo-Pacific Economic Framework the administration said late last year it would pursue.
“Additional market access and additional transparency and creating level playing fields abroad is fundamentally worker-centric,” he said. “One of the things we will continue to emphasize is the need for the United States to create new market access opportunities abroad, including in Europe, the Asia-Pacific, in Africa and Latin America as well.”
The U.S. could use the Indo-Pacific Economic Framework the Biden administration has begun to develop to push best practices in trade promotion and support the digital transformation of small businesses, he offered. The agreement might also lead to the creation of networks or mechanisms that support women- and minority-owned businesses, Colvin said. “I would hope this is an opportunity not just for dialogue but for an initiative that enhances economic cooperation,” he said.
The administration has yet to reveal many details about the nascent framework, which it has said it will begin to forge in earnest early this year.
The NFTC, which includes more than 100 member companies and is focused strictly on international commerce, wants the proposed Indo-Pacific Economic Framework to focus on digital standards and to establish regulatory dialogues in emerging technology areas, Colvin said. The initiative is a chance to “contemplate what a next-generation agreement would look like,” he said. “As part of that we would absolutely like to see commitments on trade facilitation and digital trade, but I think you could also use the process as an avenue to explore regulatory dialogues and sandboxes on emerging and foundation technologies,” specifically artificial intelligence, blockchain and virtual reality technology.
Tai has likened the Indo-Pacific Economic Framework to the U.S.-European Union Trade and Technology Council, saying the two are similar in scope and intent. According to Colvin, the TTC presents another opportunity for the administration to deliver outcomes. The NFTC has encouraged the administration to use the dialogue -- which was established last June and held its first meeting in September -- for outcomes that ensure U.S. and EU businesses don’t face discrimination in the others’ jurisdiction, especially in the digital space.
The TTC also can be used to help establish global standards, Colvin said, specifically for export controls. The two sides, for instance, could harmonize license exceptions for dual-use control items, he said, and hold consultations to establish the basis for plurilateral controls that fall outside existing export control arrangements.
The U.S.-China relationship will be a “huge priority” for NFTC this year, Colvin said. “Increasingly we are faced with having to navigate complex rules and restrictions imposed by the two governments,” he added.
Colvin called for the U.S. to strategically recouple with China. “I think what we’re looking for is to continue to confront China’s trade-distorting practices, but also finding new policy flexibility to create a new normal that benefits American benefits and workers,” he said.
That includes “a much more robust” Section 301 product-exclusion process and a “top-to-bottom assessment of tariffs on American businesses and workers,” he said. The U.S. Innovation and Competitiveness Act, which passed the Senate last June, includes a trade bill that would direct the Office of the U.S. Trade Representative to restart a robust Section 301 exclusion process. Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) agreed in November to send the bill to a conference committee, but the conferees have not yet been named.
But USICA could include elements of concern to the business community, most notably a bill pushed by Sens. Bob Casey (D-PA) and John Cornyn (R-TX) that would create an outbound investment review mechanism for transactions that offshore critical national capabilities. Four House members introduced a companion bill last month with the intent of including it in a USICA conference.
“The idea of creating a new bureaucracy to review every single outbound investment decision is a concern for the U.S. business community,” Colvin said. Congress rejected this type of mechanism in 2018, when the House and Senate were conferencing over the Foreign Investment Risk Review Modernization Act and the Export Control Reform Act
The NFTC also is concerned about a recent push to change U.S. de minimis policy, he said. Inside U.S. Trade reported last week that House Ways & Means trade subcommittee Chair Earl Blumenauer is hoping to include in USICA a bill that would restrict U.S. de minimis provisions from applying to non-market economies as well as goods subject to Section 301 tariffs. Blumenauer introduced the bill on Tuesday.
“Congress as recently as 2016 raised the de minimis threshold to a commercially meaningful level of $800,” Colvin said. “At this point, supply chain disruptions and waits at the border, it’s just not a good time to add to the red tape.”
The WTO’s importance
The role of the World Trade Organization will remain a top priority for NFTC in 2022, Colvin said, arguing that the embattled body has proven its value throughout the pandemic. “If you look at what the Committee on Trade Facilitation has done and what the Secretariat has done in terms of elevating best practices for touchless delivery during the pandemic; the Ottawa Group and the work that it’s produced on public health, elevating the role of digital tools through the [Joint Statement Initiatives], I think the WTO has actually shown its worth during the pandemic.”
The WTO’s pandemic accomplishments speak to how it must “evolve into a flexible forum for like-minded countries to pursue meaningful work,” he said.
Consensus decisions at the WTO, though, are “coming to an end,” he continued, leaving the business community to focus on “small groups of like-minded countries to pursue meaningful work on e-commerce, on trade and health, on sustainability and climate, on gender and inclusivity.”
Colvin also is hoping for progress on the Appellate Body, in which he says the business community sees “intrinsic value.” The U.S. has been blocking nominations to the panel since mid-2017, leaving it unable to hear new appeals since December 2019. Now, Colvin says, it’s time for the U.S. to show leadership in finding a solution.
“I think we’re at a point where the United States needs to exert leadership to find a resolution to the dispute settlement system and make sure it’s fully functioning,” he said. “Without U.S. leadership, it will continue to be unfinished business.”
Two key tax topics are on NFTC’s radar this year: Potential incentives for domestic electric vehicle manufacturers and the negotiations at the Organization for Economic Cooperation and Development. The Biden administration in its Build Back Better legislation is calling for tax credits that support domestic electric vehicle production. The legislation passed the House last year but faces an uncertain future as it does not have the support of a majority of senators. Mexico and Canada have both suggested the tax credits could run afoul of American obligations under the U.S.-Mexico-Canada Agreement.
The tax credit “has really been a thorn in the side of two of our biggest trading partners,” Colvin said. “We understand that industrial policy and Buy America initiatives are priorities of the Biden administration, but to the extent that the administration or Congress decide to pursue such policies I think it's really important that they are consistent with our trade obligations.”
If the tax incentives become law, the administration’s attempts to favor certain domestic companies could disadvantage other businesses because they are likely to face retaliatory tariffs from Canada and Mexico, Colvin contended. “On the one hand, the U.S. government is attempting to give a leg up to a certain set of businesses through Buy America or industrial policy, but on the other hand they are going to then disadvantage another set of U.S. interests by having to face retaliation,” he said.
NFTC also will continue to closely monitor the tax negotiations under the auspices of the OECD’s Inclusive Framework. Members of the inclusive framework last year announced they had agreed in principle on a deal that would obviate the need for digital services taxes by allowing countries to tax companies that do business in their jurisdictions even if those companies do not have physical presences within them. However, the details of that deal are still being worked out.
The announcement has not resulted in the complete abatement of digital services taxes, Colvin noted. The U.S. and six countries that have already imposed digital services taxes reached deals in late 2021 that keep those taxes to remain in place through 2023 without threat of U.S. retaliation. In return, U.S. companies will be credited any amount over what their tax would have been if the OECD deal were in place. Five of the deals took effect on Jan. 1 and are slated to last either until when the OECD deal is implemented or until Dec. 31, 2023, whichever is earlier. The U.S. deal with India takes effect on April 1 and lasts until either the OECD deal is implemented or March 31, 2024.
Colvin said he is concerned that digital services taxes have not receded to the extent the NFTC had hoped. -- Brett Fortnam (firstname.lastname@example.org)