Vermont Commission on International Trade and State Sovereignty

1
Vermont Commission on International Trade and
State Sovereignty

• Overview of International Trade
• And Its Impact on Vermont
• Vermont Legislative Council
• October 30, 2007

2
What is International Trade and What Are
International Trade Agreements?

• International Trade is the exchange of goods and
  services across international boundaries or
  territories.
• International Trade between countries
  traditionally was conducted according to
  agreements between two countries. Such
  agreements are referred to as bilateral
  agreements.

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What is International Trade and What Are
International Trade Agreements?

• Beginning in 1944 at Bretton Woods, trade began
  to be considered in a global manner and global
  economic institutions were created to help
  regulate its conduct.
• Some of these organizations include
• The World Bank
• The International Monetary Fund (IMF), and
• The Global Agreement on Tariffs and Trade

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Evolution of the International Trading System

• In the U.S. --
• In 1974, fast-track authority was established,
  streamlining Congressional consideration of trade
  bills.
• In 1979, the Office of the U.S. Trade
  Representative (USTR) was created by Executive
  Order.

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Evolution of the International Trading System

• In the U.S. --
• The USTR is part of the Executive Office of
  President and is not subject to Freedom of
  Information Act requests.
• USTR formally consults with states through the
  Inter-Governmental Policy Advisory Committee
  (IGPAC) and State Points of Contact (SPOCs).

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Evolution of the International Trading System

• In 1994, the Uruguay Round global trade
  discussions were completed and the World Trade
  Organization (WTO) was created.
• The WTO now has 149 members.

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Evolution of the International Trading System

• WTO agreements include
• Goods
• Services
• Government procurement
• Agriculture
• Intellectual property rights
• A binding dispute resolution system
• More than a dozen separate agreements

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Evolution of the International Trading System

• Since the Uruguay Round
• North American Free Trade Agreement (NAFTA)
• U.S. Singapore Free Trade Agreement
• U.S. Chile Free Trade Agreement
• U.S. Australia Free Trade Agreement
• Central American Free Trade Agreement (CAFTA)

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Why Should Vermont Care About International
Trade?The Opportunities

• Vermont had 3.8 billion of exports in 2006.
• Vermonts exports of merchandise increased 51
  between 2002 and 2006.
• Vermont exported to 148 foreign destinations in
  2006.
• Vermonts largest market by far was NAFTA member
  Canada, which received 1.7 billion (44) of
  Vermonts merchandize export total.

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Why Should Vermont Care About International
Trade?The Opportunities

• Among manufactured products, the states leading
  export category is computers and electronic
  products, which accounted for 3.0 billion (78)
  of Vermonts total merchandise exports in 2006.
• Other top manufactured exports in 2006 were
  machinery manufactures (136 million),
  transportation equipment (126 million), and
  fabricated metal products.

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Why Should Vermont Care About International
Trade?The Opportunities

• Export-supported jobs linked to manufacturing
  account for an estimated 7.4 of Vermont's total
  private-sector employment.
• In 2003, over one-fifth (22.9) of all
  manufacturing workers in Vermont depended on
  exports for their jobs.
• 828 companies exported goods from Vermont
  locations in 2005. Of those, 712 (86) were
  small and medium sized enterprises with fewer
  than 500 employees.

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Why Should Vermont Care About International
Trade?The Opportunities

• Trade with the worldboth exports and imports of
  goods and servicescreates jobs in Vermont.
• According to the U.S. Business Roundtable, trade
  supports 77,886 jobs in Vermont.
• 18.7 of jobs in Vermont are supported by trade,
  up from 10.5 in 1992. Thus, trade supports
  nearly one-fifth of Vermont jobs.

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Why Should Vermont Care About International
Trade?The Opportunities

• Foreign-owned companies employ more than 10,800
  workers, nearly 4 of all Vermont employees.
• U.S.-Canada trade supports 12,000 jobs in
  Vermont.

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Why Should Vermont Care About International
Trade?The Opportunities

• Note Export-related employment data shown do not
  include manufacturing and non-manufacturing jobs
  involved in the export of non-manufactured goods,
  such as farm products, minerals, and services
  sold to foreign buyers. The complete 2003 export
  related employment series is available on the
  ITAs Export Related Jobs website. Additional
  information on methodology used in the 2003
  export-related employment series can be found in
  the U.S. Census Bureaus publication Exports from
  Manufacturing Establishments 2003.

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Why should Vermont care About International
Trade?The Opportunities

• International trade is a growing part of the
  economy
• States that track the U.S.s negotiating strategy
  may get the jump on new economic opportunities
• Jobs in export sectors are generally higher-wage
• Trade diplomacy is important for non-economic
  reasons

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Why should Vermont Care About International
Trade?The Concerns

• Foreign competition can negatively impact wages,
  and cost jobs at home.
• Labor Organizations argue that Vermont has lost
  close to 9,000 jobs due to trade and Free Trade
  Agreements.

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Why should Vermont Care About International
Trade?The Concerns

• The Vermont Department of Labor reports that
  1,600 people have received Trade Adjustment
  Assistance.
• Trade Adjustment Assistance is available to
  workers who lose their jobs to Free Trade
  Agreements between the United States and other
  countries.

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Why should Vermont Care About International
Trade?The Concerns

• International trade agreements can impact state
  legal authority
• The federal government can sue states to preempt
  state laws by citing international trade
  commitments
• Some agreements provide expanded legal protection
  for foreign investors

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Why should Vermont Care About International
Trade?The Concerns

• Provisions in several Free Trade Agreements may
• impact the ability of states to regulate
• Pharmaceuticals
• Gambling
• The Environment and Land Use
• Professional regulation and licensing
• Utilities
• Tobacco and
• Procurement standards.

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Why should Vermont Care About International
Trade?The Concerns

• Many Free Trade Agreements also include clauses,
  known as Investment Clauses, which allow
  countries or corporations within countries to
  bring expropriation claims (similar to a takings
  claim) against the United States based on state
  law.
• These expropriations claims and the limits that
  Free Trade Agreements may place on state
  sovereignty and state authority to regulate will
  be discussed at future public hearings addressing
  the environment, health care, and agriculture.

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Additional Information and Terms Used in Trade
Agreements

• GATT General Agreement on Tariffs Trade
  Goods
• Requires equal treatment for all foreign
  suppliers (national treatment and most favored
  nation) and bans limits on market access
• Technical regulations may not be more
  trade-restrictive than necessary to fulfill a
  legitimate objective
• GATS General Agreement on Trade in Services
• Contains similar rules () relating to
  committed services
• No more burdensome than necessary to ensure
  quality of service (domestic regulation)
•  
• GPA Government Procurement Agreement
• Contains similar rules () relating to
  procurement in committed sectors
• Technical specifications (broadly defined) may
  not be adopted with the effect of creating
  unnecessary obstacles to international trade
• The one agreement where the USTR has sought
  states consent

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Additional Information and Terms Used in Trade
Agreements

• FTAs Multilateral free trade agreements
• NAFTA, CAFTA, proposed Free Trade Agreement of
  the Americas (FTAA)
• BITs Bilateral investment treaties
• Over 1,800 BITs signed between 1959 and 1999
• NAFTAs investor protection provisions (Chapter
  11) are patterned after the BITs
• Text of agreements http//www.wto.org/english/do
  cs_e/legal_e/gatt47.pdf

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Additional Information and Terms Used in Trade
Agreements

• National treatment/Most favored nation
• Bans discrimination in the provision of goods and
  services
• Market access
• Prohibits quantitative limitations
• Domestic regulation
• Requires laws to be no more burdensome than
  necessary (in flux)
• Minimum treatment (for investors)
• Requires treatment consistent with international
  law
• Expropriation (for investors)
• Requires compensation for loss of value