WASHINGTON, D.C. – At a Ways and Means Trade Subcommittee hearing, Republican and Democrat members made clear that the Biden Administration must stand up for American interests at the World Trade Organization’s (WTO) upcoming 13th Ministerial Conference. Witnesses urged the Administration to continue to press forcefully for critical dispute settlement reforms to ensure China and other nations play by the same set of rules as American producers, advocate for strong provisions to address forced labor in fishery subsidy negotiations, and protect American farmers from unfair and protectionist trade barriers imposed by other nations.
The hearing was spurred by the Biden Administration’s repeated failures to stand up for the interests of American workers, families, farmers, and small businesses at the WTO. The Biden Administration has backed a waiver for U.S. vaccine intellectual property, needlessly allowing American innovation to be potentially abused by foreign countries, especially China. Last November, the Biden Administration again failed to advocate for American interests when it jettisoned bipartisan digital trade provisions held by multiple U.S. administrations of both parties that protect America’s global technology leadership. This move has created bipartisan concern about whether the Biden Administration will succeed in extending another decades-long bipartisan position, U.S. support of a global moratorium on e-commerce customs duties.
E-Commerce Moratorium: So “Bad” That Communist China Doesn’t Support It
For the past 26 years, the WTO has banned levying tariffs on data. American companies, both large and small, rely on this moratorium to transmit data and sell their products globally. A handful of the 164 WTO members have proposed lifting the moratorium, which would hurt America’s global competitiveness, especially in the tech sector. Trade Subcommittee Chairman Adrian Smith (NE-03) noted that keeping the e-commerce moratorium in place, along with not expanding a waiver for U.S. vaccine intellectual property to COVID-19 diagnostics and therapeutics, should be critical goals of the Biden Administration at the WTO.
Rep. Adrian Smith: “Our tech firms, farmers, manufacturers and service providers all rely on the free flow of data to be successful. In addition to the critical importance to the U.S., I’m convinced that developing countries actually benefit greatly from this moratorium as they seek to advance their own industries in the modern economy. What I think is less appreciated, however, is the strategic threat posed by a failure to renew this moratorium. Can you explain to the Committee how failure to renew the moratorium actually helps China at the expense of U.S. competitiveness?”
Kelly Ann Shaw, former U.S. representative at the WTO: “Just to be clear, China currently is not supporting India, Indonesia, and South Africa, in this crusade at the WTO, which should be pretty shocking because this is even a bridge too far for China. That’s how bad this policy is. When you look at the possibility of losing the e-commerce moratorium – coupled with the administration’s decision to support the TRIPS waiver and the possibility of expanding that waiver to cover diagnostics and therapeutics – as well as the October decision to withdraw from long-standing bipartisan U.S. views on the importance of the free flow of digital trade, it paints a very alarming picture not just for commercial reasons as you point out, but also for our national security objectives and broader values.”
“It’s a Job Killer”: Unfair Foreign Subsidies Put Rice Growers Out of Business
American farmers face unfair trade practices that make domestic products uncompetitive. One such practice is the Indian government far exceeding the subsidy levels it has agreed to at the WTO and buying rice from its growers at a high price and selling it abroad at low prices, undercutting foreign producers, particularly American rice growers. Ways and Means Committee Chairman Jason Smith (MO-08) asked what impact India’s unfair practices have on U.S. farmers and industry.
Chairman Smith: “Mr. Hanks, as you know, Southeast Missouri, is home to 187,000 acres of planted rice, making the state fourth in production in the entire country and all that production is only in our congressional district. It generates over $150 million for the local economy. I regularly meet with Missouri rice producers, who have consistently told me that they face a very unlevel playing field abroad. U.S. export opportunities are being diminished by foreign competitors and flout WTO rules and unfairly, unfairly subsidize rice production. India has been the most egregious violator flouting both the letter and spirit of WTO rules. That is why this week I requested the United States International Trade Commission conduct an investigation into the global competitiveness of the U.S. rice industry. This report will include analysis of India’s distortive public stockholding policies and other subsidies. Mr. Hanks, can you speak to the impact that these policies have on U.S. workers and the importance of USTR pushing back on India’s efforts to further weaken WTO rules in their favor?”
Bobby Hanks, Louisiana rice producer: “I think the answer is it’s a job killer. It is an investment killer. It is making our U.S. rice farmers unprofitable.”
Not Just Silicon Valley: Protecting American Innovation Is a Main Street Issue
The United States would be uniquely affected by lifting the e-commerce moratorium, because we are home to the world’s leading technology companies that sell cutting-edge digital products abroad. Rep. Darin LaHood (IL-16), co-chair of the Digital Trade Caucus, pointed out that innovation doesn’t just happen in Silicon Valley, but small businesses across America who create cutting-edge digital products and export those abroad would be massively harmed should the WTO fail to renew the e-commerce moratorium.
Rep. LaHood: “As our witnesses today have highlighted, the e-commerce moratorium has been renewed at each WTO ministerial since 1998. However, countries like India and Indonesia are threatening to depart from this established understanding to impose tariffs and regulations that would disproportionately harm U.S. businesses. Ms. Shaw, can you expand on your written testimony on this issue and discuss how these efforts by countries like India and Indonesia can be viewed as a direct threat to small businesses and workers in the United States?”
Kelly Ann Shaw, former U.S. representative at the WTO: “Absolutely. I think loss of the e-commerce moratorium would be absolutely devastating. In particular for the United States, who has built the services and digital economy for the globe, but also in particular, for small- and medium-sized enterprises who rely on the Internet to buy and sell goods and to set up businesses. It wouldn’t just impact those individuals in the United States. It would also disproportionately impact women around the world who haven’t traditionally had access to the formal economy, but can use their phones to start a business and start a life for themselves and their family. I think that this policy is so absurd.”
WTO’s Dispute Settlement Is Broken and Biased Against the United States
WTO’s dispute settlement process has a history of bias against the United States, straying far from its mandate and delivering unfair rulings against the United States. Three consecutive presidential administrations have blocked appointments to the WTO’s Appellate Body in order to ensure fair treatment before the United States will agree to subject U.S. workers, farmers, and businesses to any appellate decisions at the WTO. Rep. Carol Miller (WV-01) highlighted the difference a functional dispute settlement process would make for American families.
Rep. Miller: “Ms. Shaw, you’ve worked extensively with the WTO, as well as USMCA dispute resolution mechanisms. From your experience and knowledge regarding trade disputes, what impact did these disputes have on long-term consumer prices and what mechanisms should the World Trade Organization implement to ensure effective and timely resolutions?”
Kelly Ann Shaw, former U.S. representative at the WTO: “Dispute settlement, whether it’s at the World Trade Organization, or under one of our FTAs [free trade agreements], like the USMCA agreement, is fundamentally our stick. It’s the tool that we have to hold our trading partners accountable for the discriminatory practices that they may adopt that disadvantage U.S. workers, businesses, farmers…Sometimes policies that are employed by certain nations result in increased consumer prices. That’s one of the reasons that we may bring a dispute at the WTO or under one of these other forums. The flip side that I’ll offer is fundamentally we’re trying to enforce the rules. The tool that we have to enforce the rules is tariffs. If we win a case at the WTO, or we win a case under USMCA, or any of our other FTAs, the reward that we get is the ability to impose retaliation until that country eventually complies. There are sometimes impacts on consumer prices, because tariffs are the tool that we use for that purpose. Fundamentally, the thinking about the effectiveness of dispute settlement should be are we getting a result? Are we putting pressure on the other party, and how quickly are we able to give relief to our producers? Those are the types of things that you think about when bringing a dispute.”
Democrats Join Republicans In Expressing Bipartisan Concern Over Key Trade Issues
On many issues, Committee Democrats joined Committee Republicans in calling on the Biden Administration to protect American interests at the upcoming ministerial conference. During the hearing, Democrats expressed support for maintaining the e-commerce customs duty moratorium and changing the WTO’s broken and biased dispute settlement process. Rep. Jimmy Panetta (CA-19) spoke up for American fishermen and the need to include forced labor provisions in the WTO’s fisheries agreement at the upcoming ministerial meeting.
Rep. Panetta: “Ambassador Shea, just briefly, if you could, one, give me your summary of why it’s important to continue to prioritize the inclusion of forced labor provisions in the fishery subsidies agreement; and two, why have countries been so reluctant to agree to higher standards, especially when it relates to forced labor and IUU [illegal, unreported, and unregulated] fishing and have they given any justifications for their opposition?”
Dennis Shea, former U.S. ambassador to the WTO: “Basic humanity is the first. We should be supporting people, helping people who are subject to these conditions. That’s number one. Number two, it does have a trade disruptive impact if producers use forced labor that makes their goods cheaper…It’s ridiculous that China is treated as a developing country, and it has the right automatically to say it’s exempt from certain rules. The problem with the fishery subsidies negotiations: a lot of major fish producers are developing countries at the WTO so they’re constantly seeking carve outs from the rules.”