U.S. Hopeful TPP Countries Will Begin Real SOE Negotiations At Ne...
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Inside U.S. Trade - 03/29/2013
U.S. Hopeful TPP Countries Will Begin Real SOE Negotiations At Next Round
Posted: March 28, 2013
The United States is hoping that countries participating in the Trans-Pacific Partnership (TPP) negotiations will be ready to negotiate for the first time on a U.S. proposal for disciplines on state-owned enterprises (SOEs) when they meet for the next negotiating round in Lima, Peru, in May, according to the lead U.S negotiator on this issue. "So the step where we are now is that countries should normally come to the table willing to support specific language in our proposal, or propose an alternative," Deputy Assistant U.S. Trade Representative Daniel Watson told Inside U.S. Trade after speaking at a March 28 event hosted by the Washington International Trade Association (WITA). "Our hope is that that's what everybody will be coming to the table with" in Lima, he said. Watson stressed that he could not say for certain whether this would occur. But it is the U.S. sense that many of the countries have gone through a certain level of internal consultation and will be in a "different place" by the Lima round than they have been up to now. He also noted that the U.S. has had a number of "complicated interactions" with all of the TPP countries on the SOE issue. Watson made a similar point during his public remarks at the event. "So I think where we're at right now is that some countries have gotten to a point where they've largely completed their domestic consultations, and our expectation is that we will be engaging with them very closely . . . and certainly it is our hope that we will have a different level of consensus at the table at the Lima round," Watson said. The U.S. in October 2011 tabled its SOE proposal, which imposes transparency requirements for SOEs as well as disciplines to ensure that SOEs do not receive advantages that distort their competition with private firms in commercial markets. SOE discussions at subsequent TPP rounds have consisted largely of other countries asking questions and seeking clarifications about the U.S. proposal, but business representatives have long pressed for substantive negotiations on the SOE provisions to begin. Watson stressed that there is an "agreement in principle" between TPP countries that there should be a "level playing field" between SOEs and private companies, and that this sentiment has been expressed by all countries at the table at one time or another with varying levels of strength. However, there are strong disagreements on how this should be achieved. For example, TPP governments such as Singapore as well as stakeholders have insisted that the TPP should discipline behavior or outcomes rather than ownership (Inside U.S. Trade, March 15). In other words, they argue that SOEs should not be targeted by the TPP rules solely because they are state-owned, but only if they are behaving in such a way that distorts trade. This is particularly an issue for Singaporean state-owned investment firm Temasek, which believes that it should not have to be subject to the SOE rules because it already operates in a commercial manner. Temasek worries that if the companies it is invested in are subject to SOE disciplines and reporting requirements, this could disadvantage them in competition with private firms. Watson acknowledged that it has been difficult to come up with common language on SOEs in TPP given the diversity of practice in the various countries. "There's just a really daunting array of sensitivities and practical problems that emerge when you start looking at each of these countries' specific regimes," he said. "So that's one of the things that really has shaped this negotiation, and continues to be a challenge." He also said that negotiators have faced two main challenges when it comes to the SOE negotiations. The first is that the U.S. proposal breaks new ground by going far beyond existing multilateral or bilateral rules on SOEs or state trading enterprises. The second challenge is that, because these SOE rules are such a new issue, it requires lots of internal consultation by TPP countries, often with parts of their government that are not familiar with trade agreement language. "I think the best way to look at this negotiation from my point of view is that part of what's been happening over the rounds since we tabled is looking through . . . the questions, the information that's necessary for people to do the consultation
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U.S. Hopeful TPP Countries Will Begin Real SOE Negotiations At Ne...
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that they have to do," he said. "Part of it is weighing how the U.S. proposal addresses the concern in the way that they think maybe it should be addressed." In response to a question, Watson sought to dispel two "misconceptions" about what USTR is trying to achieve on SOEs in the TPP negotiations. The first is that U.S. efforts to establish SOE discplines in TPP are not targeted at any specific country or countries in TPP or the wider Asia-Pacific region, he said. Instead, the proposal is more aimed at setting a standard for the global trading system in light of the inadequacy of current trade rules on SOEs, he signaled. Secondly, he stressed that the U.S. proposal is only focused on SOEs that compete with the private sector in commercial markets, and is not intended to require privatization of SOEs that provide a public service. "That's a different issue," he said.
Inside U.S. Trade - 03/29/2013, Vol. 31, No. 13
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