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Grassley Talks Trade Changes, Enforcing Rules With China

“The world certainly has come a long way on trade policy in the last century,” Senator Charles Grassley of Iowa said in his opening remarks before the Senate on Tuesday. The occasion was an appearance of U.S. Trade Representative Robert Lighthizer to discuss proposed changes to the World Trade Organization (WTO). Grassley serves as chairman of the Senate Finance Committee.

“It (WTO) is certainly better than its predecessor, the General Agreement on Tariffs and Trade (GATT),” Grassley told reporters on Monday in his weekly Capitol Hill Report, in anticipation of the Senate session. “But we need to make sure we aren’t operating under 20-year-old rules that no longer apply.”

GATT was formed in 1947, just after WWII, and replaced by the WTO in 1995. The U.S. was one of 81 charter WTO members, supporting groundbreaking new rules on services, intellectual property, and trade in goods, with a focus on rules-based dispute settlement. The WTO describes its main function as ensuring "that trade flows as smoothly, predictably, and freely as possible.”

Since 1995, international trade volumes have increased by 250%, and the WTO now represents 98% of global merchandise trade.

Grassley said presidents on both sides of the aisle have raised concerns for many years and “We need to speed up dispute resolution to get answers faster and make sure dispute resolutions are enforced.”

Cracking down on China

Countries such as Japan and the European Union, currently involved in trilateral talks with the U.S. on WTO issues, would also like to see reforms, particularly in the areas of industrial subsidies and forced technology transfers, sticking points in the ongoing U.S. trade dispute with China.

“Partnerships such as this one are critical to showing China that the U.S. is not the only country complaining,” said Grassley. “The fact of the matter is that China simply has not lived up to the commitments it made when it joined the WTO. We have seen over the last decade or so that WTO rules have not effectively constrained China's mercantilist policies and their distortion of global markets.”

Grassley does not see erecting new market barriers such as tariffs as a long-term solution but is willing to add WTO reforms to the U.S. toolbox in dealing with what is deemed unfair trade practices used by China to gain world economic advantage.

“The situation with China has had a huge impact on agriculture,” Grassley told Capitol Hill Report reporters. Under the trade dispute, U.S. farm exports to China are expected to fall by $1.9 billion this year, according to the USDA, and soybean exports alone have declined more than 90%, or 22 million metric tons.

In February, China committed to purchasing an additional 10 million metric tons of U.S. soybeans just as the latest round of negotiations were about to begin.

“Buying more soybeans is good, but structural change is the real goal,” explained Grassley. That structural change includes containing the theft of intellectual property, demanding trade secrets for companies to do business, and manipulating currency.

Enforcing the rules

But changes in and of themselves are not enough. Grassley said the U.S. must be assured agreements would be enforced, a significant problem in the past. “We’ve learned previously China is prone to making agreements and not living up to them,” he said.

Grassley would also like to see the WTO address treatment of state-owned enterprises (SOE), a growing concern in the global economy, and particularly related to China and its use of SOEs to buy private companies around the world and subsidize its industries.

He is also concerned about the ability of WTO members to self-certify as a "developing country."

“When my constituents ask me why China, the world's second largest economy, gets to self-certify as 'developing,' I can't explain it,” says Grassley.

Foreign food safety

Grassley also addressed changes proposed by the FDA that would shift the burden for verification of imported food safety to a voluntary qualified importer program designed to expedite review and entry based on safety assurances from certification program audits.

In a missive from the University of Minnesota Center for Infectious Disease Research and Policy, the FDA stated it is “taking new steps to ensure that imported food meets the same standards as domestically produced food. And onsite inspections – valuable but resource-intensive – will shift to a more modern focus, featuring tools for risk-based prioritization of firms for inspection, weaving in more data and input from other oversight activities and partners.”

FDA's new strategy recognizes certain countries have food safety systems and oversight that provide public health protection comparable to the U.S.

But Grassley has reservations. “If the justification for this is more inspection, then this could be a good replacement for the current system,” said Grassley. “But if it means less scrutiny, then I certainly wouldn’t consider it a good thing.”

The U.S. currently imports about 15% of its food supply from more than 200 countries or territories across the globe.

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