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Letter to Mr. Donald Trump – Trans-Pacific Partnership – Don’t drop your Slice of the Pie

 

From Oliver Massmann – General Director of Duane Morris Vietnam LLC

Dear Mr. Trump,

With respect to your recent statement that you will withdraw from the Trans-Pacific Partnership (TPP) right on day one of your office, we kindly request you to reconsider the possibility of your ratification of the TPP.

Dropping the TPP means that the U.S will lose access to government procurement of other TPP countries which amounts to USD1.492 trillion. The high standard of the government procurement chapter in the TPP can nowhere be found in existing international agreements. Moreover, it could take the U.S another decade to reach a bilateral agreement with government procurement standard as high as in the TPP. It is of utmost importance for the U.S to save time, jobs, and of course, billions of dollars by ratifying the TPP instead of negotiating a new one.

We believe the following facts will help with your decision and clearly show how TPP would help you to make America great again. What may interest you is the extremely high number of government procurement in the TPP country members from which America could benefit.

As you may already know, the population of the TPP countries exceeds 494 million people as of July 2015. The TPP countries account for 44.8 percent of U.S. total exports and 37.6 percent of U.S. general imports in 2014. By cutting over 18,000 taxes in regards to TPP, there would be a great benefit for American im- and exporters by enabling them to enter new markets.

As the U.S. international trade commission estimates, the U.S. exports of goods and services to the world would expand by USD27.2 billion by 2032 due to the TPP, while U.S. imports would expand by USD48.9 billion.

In the following table the data of each TPP country is listed to show you the procurement market American investors may get access:

  GDP (USD) Government procurement’s percentage of GDP (%) Total value of Government procurement (USD)
Australia 1.56 trillion 12.44 194,064,000,000
Brunei 11.47 billion 4.1 470,270,000
Canada 1.827 trillion 13.34 243,721,800,000
Chile 179.9 billion 2.9 5,217,100,000
Malaysia 305.3 billion 25 76,325,000,000
Mexico 1.261 trillion 5.16 65,067,600,000
New Zealand 185.8 billion 14.56 27,052,480,000
Peru 192.6 billion 17.6 33,897,600,000
Singapore 274.1 billion 9.74 26,697,340,000
Vietnam 171.4 billion 12.84 21,000,000,000 -22,000,000,000
Japan (ratified TPP) 4.92 trillion 16.22 798,024,000,000

Note: Data taken during the period of 2006-2017

As shown above government procurement of the TPP states is $1.492 trillion in total!

And those are old numbers. Most of the countries are states with strong economic growth. The sum may be much higher now.

How could America not want to get a slice of this fat pie?

The great advance of the TPP will be that even the three countries Vietnam, Malaysia and Brunei which have not agreed to coverage of their government procurement ever before and are currently not covered by an existing U.S. Free Trade Agreement or the Government Procurement Agreement of the WTO (GPA), have undertaken to do so. This is a key export opportunity for U.S. goods producers and services companies. Currently Chinese companies profit the most. 90% of power, mining, manufacturing, ferrous and chemical projects of state-owned companies in Vietnam are awarded to Chinese contractors. China State Construction Engineering Corp. (CSCEC) keeps winning important contracts although it has a poor track record and has even been blacklisted by the World Bank due to bribery charges. With TPP that market would be open to US companies which probably would be welcomed.

Some Asian-Pacific and other countries have formal policies in place disadvantaging foreign tenderers. TPP will make it possible for the first time that an American cooperation could sue for example the Republic of Vietnam or Malaysia. The procedural and legal changes regarding government procurement will enable U.S. exporters to reach markets that were closed before and compete more effectively.

In addition Canada has agreed to replace the commitments in NAFTA and update them to the level of TPP. The new level of GPA is based upon the WTO 2014 guidance and provides stronger commitments than the NAFTA.

America cannot wait until bilateral agreements might be settled!

12 years have already passed since the first negotiations on TPP started. As international agreements like NAFTA (4 years), COMESA (16 years) or SAFTA (9 year) require a lot of time to be settled, bilateral agreements will do so as well. And there is no guarantee of success. In fact it is rather unlikely. Countries like Malaysia, Brunei and Vietnam took huge steps by agreeing to a regulation of government procurement. How long a bilateral agreement would take, may be shown by the European Union – Vietnam Free Trade Agreement (EVFTA) which took 4 years before it was concluded. However, the EVFTA does not reach the standard of the TPP regarding the Chapter on Government Procurement. The creation of a fair, transparent, predictable and non-discriminatory market should not be postponed. The level of GPA might be as high as never before. It is extremely unlikely that a better agreement could be negotiated but more likely that the U.S. will be replaced by China or Russia. Japan’s Prime Minister Shinzō Abe already stated that China would be a possible replacement. But not only Japan would turn towards China. Negotiations of Australia, New Zealand, Vietnam, Malaysia, Singapore, Brunei regarding an FTA with China already began.

Skipping this agreement would cost America billions of money and would cut off American jobs. Negotiating bilateral agreements would cost America many years, billions of Dollars and it is highly unlikely that it would reach a GPA standard  that would be even close to TPP.

Is America’s interest able to wait?

The answer is NO!

Sincerely,

Oliver Massmann

 

*Should you require any supporting evidence for the statements above, we will provide them immediately.

 

 

Lawyer in Vietnam Oliver Massmann WTO Dispute Shrimp Case Agreement reached

On 18th July 2016, the United States (US) and Vietnam reached an Agreement on the Imposition of Anti-dumping Duty on Certain Frozen Warm-water Shrimp from Vietnam to resolve two long standing WTO disputes brought by Vietnam: United States – Anti-dumping Measures on Certain Shrimp from Vietnam (DS404) and United States – Anti-dumping Measures on Certain Shrimp from Vietnam (DS429).

The history of these disputes could be traced back to 31st December 2003, after the very first anti-dumping case against Vietnam carried out by the U.S. in June, 2002 when the Vietnamese fishing industry had to confront another anti-dumping petition against certain frozen and canned warm-water shrimp imported into the U.S. by the U.S Shrimp Trade Action Committee, an ad hoc representative of the U.S. Southern Shrimp Alliance.

In this case, Vietnam was not the only respondent but there were five other countries including Brazil, Ecuador, India, Thailand and China. The case was investigated by the US Department of Commerce (DOC) and the US International Trade Commission (ITC). According to the ITC, shrimp imports account for eighty-seven percent of the one billion pounds of shrimp consumed in the U.S. annually.[1] Of that, shrimp imports from the six countries in the petition make up seventy-five percent of the total shrimp imports into the U.S. market. According to the petitioner, the alleged dumped products from these countries caused the price of the U.S. shrimp harvest to decrease by fifty percent from 2000 to 2002, falling from $1.25 billion to $560 million;[2] thus the U.S. shrimpers could not compete, leading to nearly 70,000 job losses in the shrimp industry within the eight states.[3] The DOC then initiated its dumping investigation on 8 January, 2004.

The DOC again upheld its conclusion from the Catfish case that Vietnam is a non-market economy (“NME”) after examining six criteria prescribed in the Tariff Act of 1930 in determining whether a country operates on market economy principles. Upon determining that Vietnam is a NME, in order to determine the normal values and export values of Vietnamese fish, the DOC had to find “an economically comparable ME that is a significant producer of comparable merchandise”[4] that could substitute for Vietnam’s costs of production. In this case, Bangladesh was chosen as a surrogate country.

The US utilized zeroing method to determine dumping margin in the case at hand. As a matter of general understanding, zeroing referred to the practice of some WTO Members in calculating dumping margin by comparing weighted-average normal value to individual export prices. Under this methodology, the difference between normal value and export price was calculated per transaction. Positive margins, i.e., the export price is lower than the normal value, were taken as is. However, negative margins, i.e., the export price is higher than the normal value, were counted as zero. Zeroing drops transactions that have negative margins, thus resulting in higher overall dumping margins and as a matter of fact, higher applied anti-dumping duty.

In contrast with the E.U.’s prospective zeroing system, under the U.S. retrospective system, the anti-dumping duty imposed at the end of the original investigation following the calculation of the dumping margin only serves as a temporary estimation for future liability.[5] The actual payment of anti-dumping duties will be determined during the annual administrative or duty assessment reviews. As mentioned above, zeroing increases the level of dumping margin. When used in the retrospective system, the impact of zeroing is amplified as it adds an element of uncertainty. The importer of goods subject to anti-dumping order only has an estimate of its extra duty. He will be unwilling to import goods from the subject exporter because of the possibility of a higher duty when the U.S. authority conducts the administrative review.[6]

During the process, several companies were investigated. The mandatory defendants were Minh Phu Seafood Corporation, Kim Anh Limited Company, Minh Hai Joint Stock Seafoods Processing Company and Camau Frozen Seafood Processing Import – Export Corporation (Camimex). Some voluntary defendants that could be mentioned are Cai Doi Vam Seafood Import Export Company, Can Tho Agriculture and Animal, Products Import Export Company; Can Tho Animal Fisheries Product Processing Export Enterprise, Cuu Long Seaproducts Company, Danang Seaproducts Import Export Company. However, Kim Anh Limited Company, one of the compulsory defendants, refused to cooperate due to abundant amount of data that needs to be collected, resulting it being subject to the very high country-wide rate.

Eventually, after over a year of investigation, ITC announced that Vietnamese shrimp are sold at dumping prices and the import of this shrimp is detrimental to the shrimp industry of the US. As a result, Vietnamese shrimp were subjected to anti-dumping duties at varying rates depending on the results of the investigation. In the second and third administrative reviews, the DOC decided to impose an insignificant duty rate of 0-0.01 percent on mandatory respondents, but not on voluntary respondents. These voluntary respondents were subject to the initial rate of 4.57 percent. The country-wide rate was the same as in the initial determination, i.e., 25.76 percent.

These results have raised a lot of controversial responses. Beside Vietnamese companies whose rights and benefits were directly affected by this decision, some US parties have also shown disagreements towards this announcement. Mr. Adam Sitkoff, Executive Director of Amcham Vietnam in Hanoi, stated during his interview with VnExpress that the duties applied on Vietnamese shrimp were unreasonable as Vietnam, similar to other shrimp exporters, utilized the most advanced shrimp production methods, something that American shrimp providers did not have. As a result, the Vietnamese shrimp prices became lower, which is not a sign of dumping.

For fear that the DOC would continue using the same calculation methodology used in the second and third administrative reviews, resulting in unfair treatment for Vietnamese enterprises in the fourth administrative review, the Vietnam Association of Seafood Exporters and Producers (“VASEP”) and the Vietnam Chamber of Commerce and Industry (“VCCI”) recommended the Government to initiate the WTO dispute settlement mechanism by first holding consultation with the U.S. on this matter on 01 February 2010. The consultation failed and the Government of Vietnam requested the establishment of a panel on 07 April 2010. Vietnam challenged, inter alia, “(i) the application of zeroing to individually-investigated respondents in the second and third administrative reviews, and its continued application in the subsequent reviews; (ii) the U.S zeroing methodology ‘as such’; and (iii) the use of the zeroing methodology to calculate the “all others” rate in the second and third administrative reviews.”[7] On 11 July 2011, the Panel issued its report of the case.

The Panel ruled in favor of Vietnam that the DOC’s zeroing methodology in determining dumping margin for mandatory respondents in the second and third administrative reviews was inconsistent with Article 2.4 of the Anti-Dumping Agreement (“ADA”). Moreover, the Panel also ruled that the using of zeroing in any administrative review constituted a violation under Article 9.3 of the ADA and Article VI:2 of the GATT 1994.[8]

This ruling of the Panel is considered to be consistent with the decisions of other WTO panels and Appellate Body in previous cases regarding the U.S. zeroing methodology. Although the US never opposed to this decision, they did continue applying zeroing methodology for subsequent administrative reviews and the first sunset review.

The case would not have been a success without the active participation of several associations, including VASEP and the VCCI. From the very beginning, these associations did evaluate the case from Vietnam’s viewpoint and in accordance with international practice. Then, they recommended the government to start the proceedings based on convincing arguments, as well as propaganda to gain support from the public. VASEP and VCCI also contributed a lot to the success of the case by proposing experienced international trade lawyers.

Although the case is among more than 480 WTO disputes since 1995, US – Shrimp marks a significant and critical change in Vietnam’s use of WTO dispute settlement mechanism, leaving a lot of lessons learned by Vietnamese enterprises and associations.

On 20th May 2016, upon Vietnam’s request, the DOC has implemented procedures to comply with the WTO Panel’s decision. Eventually, on July 18th, 2016 Vietnam and the US finally signed an agreement, according to which a Vietnamese exporter of frozen warm-water shrimp – Minh Phu Group – will no longer be subject to the antidumping duty order.  In addition, certain domestic litigation will be resolved and duty deposits will be refunded to the Minh Phu Group.  The antidumping duty order will remain in place for all other exporters of warm-water shrimp from Vietnam.

This move shows negotiation efforts of Vietnam and the US’ goodwill to respect its WTO obligations. It also reflects the US’s goodwill to strengthen its multi-faceted cooperation with Vietnam, especially in the context that the two countries participate in the Trans-Pacific Partnership (TPP) agreement.

Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

THANK YOU !

 

 

[1] U.S. Slaps Tariffs on Shrimp from China, ‘Vietnam: Commerce Department Acts after Complaints from American Harvesters’, Chicago Sun Times, 2004, p. 62.

[2] Burnett, Richard, ‘Struggling U.S. Shrimpers File Anti-dumping Petition: An Industry Group Says Six Countries Sold Shrimp at Artificially Low Prices’, 2004, http://articles.orlandosentinel.com/2004-01-01/news/0401010416_1_shrimp-petition-industry).

[3] Southern Shrimp Alliance, Press Release: Shrimpers Hail Finding of Dumped Shrimp from China and Vietnam, 30 November 2004, http://www.shrimpalliance.com/Press%20Releases/ 11-30-04%20DOC%20Final.pdf.

[4] Section 773(c)(4), Tariff Act of 1930.

[5] Chad P. Bown and Thomas J. Prusa, US Anti-dumping – Much Do about Zeroing, 2010, p.30.

[6] Ibid., p.33.

[7] http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds404_e.htm.

[8] Panel Report, US – Shrimp, para. 8.1.