Rep. Michaud Presses USTR on State-owned Enterprises in TPP

Sep 25, 2013 Issues: Global Trade

WASHINGTON, DC – Today, Representative Mike Michaud (D-ME), Chairman of the House Trade Working Group, sent a letter to United States Trade Representative Michael Froman urging him to level the playing field for American companies trying to compete against state-owned enterprises (SOEs).

“I am worried the agreement will not in practice level the playing field for American companies, particularly our small and medium-sized enterprises, trying to compete against SOEs. I urge the United States Trade Representative (USTR) to ensure any SOE disciplines are subject to a dispute settlement mechanism that will provide accessible, timely, and effective relief for American businesses and workers,” wrote Michaud.

The full text of the letter Michaud sent today can be found below:

September 25, 2013

Ambassador Michael Froman
United States Trade Representative
600 17th Street NW
Washington, D.C. 20508

Dear Ambassador Froman:

I am writing to express strong support for the incorporation of meaningful disciplines for state-owned or state-controlled commercial enterprises (SOEs) in the Trans-Pacific Partnership (TPP) and to express concerns about the SOE proposal the U.S. has tabled in the negotiations.  I am worried the agreement will not in practice level the playing field for American companies, particularly our small and medium-sized enterprises, trying to compete against SOEs.  I urge the United States Trade Representative (USTR) to ensure any SOE disciplines are subject to a dispute settlement mechanism that will provide accessible, timely, and effective relief for American businesses and workers.

There are several components of the SOE disciplines that will be critical to the disciplines’ effectiveness and accessibility to American companies.  First, it will be important for U.S. businesses to be able to identify readily which entities are SOEs.  American businesses cannot be solely responsible for determining which companies are receiving subsidies or other state support as a requirement for obtaining relief from trade distorting practices in TPP countries, particularly given the lack of transparency in many of those countries.  I urge USTR to include in the agreement explicit transparency requirements for SOE reporting and to make available a registry of SOEs that includes the types of subsidies entities receive.  This information must be updated frequently and transparently and must be publicly accessible.  

Second, the definition of SOE must be broad enough to include those companies involved in commercial trade activities that are either recognized as an SOE by the government or acting as an SOE.  Some TPP member countries advertise their transition away from SOEs.  Frequently that transition is in name only, and the state continues to control and support the entities. These companies are equally capable of undermining U.S. businesses, and TPP must address them as well.  The definition must also avoid overreach—public services such as universities, hospitals, and public utilities must not be included.  

Third, the SOE disciplines must be subject to a dispute settlement mechanism, and that mechanism must be able to respond to petitions of injury efficiently.  In order to be effective, the agreement must set up this mechanism to be quick and transparent.  It is also imperative that the agreement include well-defined, expeditious timelines by which disputes must be considered.  A dispute settlement that leads to protracted proceedings will not protect American companies (or their employees) who are facing harm from subsidized entities.   

Fourth, the injury test included in the SOE chapter will be critical to the ability of the agreement to actually discipline the use of SOEs.  I urge USTR to include the injury standard found in U.S. trade law and to ensure that the threat of injury is actionable.  A reasonable injury test that is explicit and free from subjectivity will be critical to making the disciplines workable for American businesses.

Finally, it is important that TPP provide a transparent process by which stakeholders can raise concerns with their government and press for consultations on an SOE issue.  I urge USTR to create a docket through which affected parties can file petitions for Administrative action with respect to problematic activities by SOEs in TPP countries.  This docket should appropriately mask proprietary information for the protection of the petitioners, but it must be publicly accessible.  Congress and the public will need information from the docket to monitor the effectiveness of the SOE disciplines and their enforcement mechanism and to ensure enforcement against subsidized enterprises that disadvantage U.S. businesses.

I applaud the inclusion of SOE disciplines in the agreement, particularly given the significant presence of state-controlled companies in TPP countries.  Without the provisions outlined above, however, I am concerned that the disciplines will not provide relief for our smaller businesses and their employees.  It is critical that these disciplines are meaningful and that they are subject to an effective dispute settlement mechanism that puts a stop to trade-distorting practices before American companies are put out of business and our workers lose their jobs.

Thank you for your consideration of this letter.  

Sincerely,

Mike Michaud
Member of Congress