Time was, back in the days when trade had bipartisan support, the President would ask the Congress for authority to negotiate new trade agreements and then bring them to Congress for an up-or-down vote. No amendments allowed. That was the “fast track”. Without the fast track, any trade agreement is subject to all the amendments that the House or Senate care to load onto it. Meaning that an administration first had to negotiate trade agreements with other countries and, once that was wrapped up, had to negotiate them again with his own Congress. This often necessitated taking the agreement back to another government, hat in hand, confessing that the Congress was forcing our negotiators to change things that had already been agreed to.

This happened with the free trade agreement with South Korea that finally was approved by Congress last year. President Obama refused to take that agreement, as well as those with Panama and Colombia, to the Congress because he knew he would have a tough time getting them through unamended. And besides, they had been negotiated under his Republican predecessor – so they must have something awful in them. We finally worked through that, but how many years did it take?

No country wants its trade negotiators to waste time talking to the Americans unless they have some prospect of getting an agreement that the Congress won’t tamper with. This is part of the reason that the Obama Administration has failed to launch any new bilateral free trade talks in all these years, the only major trading power not to do so. But there is talk that the negotiations for an expanded Trans Pacific Partnership may bear fruit, if not this fall then perhaps next year. This is a multilateral negotiation with careful balancing of interests and, given the recent entry of Japan, Canada and Mexico to the TPP talks, I think the process will take considerably longer than the White House says. Much that was decided among the original negotiators will have to be reopened with these new players.

But the White House sees that someday it will need to take a TPP agreement to the Congress. And behind that a Transatlantic Trade and Investment Partnership (TTIP). It may be beginning to dawn on them that they won’t want Congress opening up up every section and topic in those agreements and that they might want a fast track in place. Excuse me, I mean trade promotion authority.

tradebenefitsamerica.org

Congress last passed trade promotion authority in 2002 and time expired on it in 2007. This past six years has seen only limited negotiating activity by the United States. One result is that our chief negotiators, the Office of the U.S. Trade Representatives, has lost good, experienced negotiators and is known in Washington to have just about the lowest morale of any government agency. It is time for America to again be a major player in trade talks.

Personal note: I was a U.S. trade negotiator in the Tokyo Round talks in the 1970s. I won’t forget that we feverishly drafted positions and goals for the United States, and proposals that became the foundation of the many agreements that came out of the Tokyo Round. But, after preparing everything and itching to begin negotiating, we were stymied for a full year – sitting on our hands waiting for the Congress to give us fast track authority. Without it, no one wanted to waste time talking to us. Tough to negotiate with nobody on the other side of the table.

I may still take on the occasional contract if something interests me, but I decided that forty years in the international trade business is probably enough. I plan to keep on blogging, but have taken down the Kekepana website. If you type in kekepana.com, you now arrive right here – at Business Beyond the Reef.

Timely award.

I plan to keep on posting on Business Beyond The Reef. International business and trade policy still fascinate me, though I will likely post just 2-3 times a week. I will also continue to do pro bono work concerned with trade matters. Just this Monday I taught classes about foreign market entry, finding qualified buyers, and leveraging trade agreements as part of an Export University course offered by the Hawaii Pacific Export Council.

The review covered both Switzerland and Liechtenstein, since they have a customs agreement, an open border and most foreign trade issues are handled in Berne, not Vaduz. There are a few minor differences, but we’ll get to those. For the most part, just assume that anything said about Switzerland applies to Liechtenstein, too.

The really strange thing – in this world of percentage ad valorem customs duties – is that Switzerland doesn’t use them. At all. The Swiss are the only WTO members to exclusively use specific duties, generally a set number of Swiss francs per weight of the item being imported. This means that the ad valorem equivalent can go up or down, depending on what is happening with exchange rates. Without changing a single customs duty, Switzerland’s average tariff in ad valorem terms climbed from 8.1% in 2008 to 9.2% in 2012 – running against the grain of what has happened in most countries. Those specific duties amounted to only 2.3% for non-agricultural products in 2012, but averaged a whopping 31.9% for agricultural goods. See what I meant amount protecting farmers?

Many tariff items carry zero duty rates, and others are so low that Switzerland has become known for its nuisance duties. More than 40% of its tariff items carry duties that are equivalent to less than 2%. These can’t contribute much to national tax revenues and are surely a nuisance to importers.

Given the technical excellence that Switzerland is known for, I am not surprised that the country has 23,080 product standards. Luckily for traders, 95% of these are recognized international standards that your products are likely to already meet. And, if your product is already cleared for sale in the European Union, Switzerland is likely to permit free sale in its territory under the so-called “Cassis de Dijon principle” without further technical checks.

Liechtenstein belongs to the European Economic Area (the EU, Liechtenstein, Iceland and Norway) and Switzerland does not, so there are a few things that require adjustment between Liechtenstein and Switzerland. A few products (e.g., fish) face different customs duties and others (e.g., some telecom equipment, salt and pharmaceuticals) encounter different non-tariff restrictions.

Chocolate factory outside of Gruyères

Much of the focus of the comments and questions from Members was on agriculture. Clarification was sought … on tariff peaks and complex variable tariffs, the justification of classifying certain measures in the Green Box, the difference between the system of “observed prices” and “administered prices” in price support measures, ending the compulsory levy on milk, and plans for phasing-out export subsidies entirely.
~ Concluding remarks by the TPR Chairperson, 4/25/2013

Switzerland is plagued by agricultural surpluses (small wonder, given how they are protected) and provides export subsidies to get those surpluses down on dairy products, flour and other milled products that go into food products. The subsidies partially compensate food manufacturers, such as Swiss chocolate makers, for the high prices they have to pay for domestic ingredients.