Froman Pledges Trade Enforcement With China During Nomination Hearing

Besides a rebuke over his personal investments from Senate Finance Committee Ranking Member Orrin Hatch, R-Utah, Froman had a smooth hearing, with both Hatch and Committee Chairman Max Baucus, D-Mont., vowing to support his nomination. Many Senators expressed relief over Froman’s pledge to begin work on TPA, along with his remark that President Obama had personally requested to begin renewal of the Fast Track negotiating authority. “It’s about time,” Hatch said. Without TPA, “other countries are moving ahead on trade agreements and we’re kind of slipping behind.”

The lack of TPA has helped fuel a “crisis of morale” at USTR, said Sen. Rob Portman, R-Ohio. Portman and Hatch cited a 2000 study showing that USTR placed last among small agencies in effective leadership due to factors such as employee satisfaction. Froman said his experience shows staff tend to have high morale “when they feel like they’re working on something important.” Progress on trade agreements such as TPP, the EU-U.S. agreement and World Trade Organization negotiations will help give USTR staff that “sense of mission,” he said.

Hatch used his opening statement to expose what he called the “hypocrisy” of the Obama administration: The President has sharply criticized Wall Street excess and offshore tax havens, yet his nominee Froman received more than $5 million in bonuses during his tenure at Citigroup and has roughly half a million dollars invested in a Cayman Islands hedge fund, Hatch said. “I don’t raise these issues to suggest that Mr. Froman has done something wrong or that he has not complied with our tax laws,” Hatch said. “I believe he has complied … I want to point out what appears to be hypocrisy on the part of President Obama and his administration.”

Froman said he was not aware of any tax benefits he received by virtue of the offshore fund -- which he called simply an investment fund where all gains and losses are passed onto the investors -- adding that he has “paid every cent of taxes” on it.

Concern Over Trade Discrimination by China, India

Much of the nomination debate focused on China. “I don’t think anybody wants to China-bash,” said Baucus. Yet he asked Froman what the USTR could do to level the playing field with China. Sen. Sherrod Brown, D-Ohio, warned about the job-killing effects of currency manipulation, while Sen. Ron Wyden, D-Ore., wanted Froman to stress continued U.S. efforts to secure antidumping/countervailing duties on solar panels from China (see 13020431 for the latest on that case).

“[There is] no greater issue than our trade relationship with China,” Froman said. USTR is “very focused” on making progress -- on issues like state-owned enterprises and financial regulations -- wherever the agency can, he said. Froman told Brown that currency manipulation is also high on that agenda, “raised with China at any meeting on every level.” Brown is one of the sponsors of a currency manipulation bill introduced June 5 (see 13060606).

Other Senators wanted Froman’s assurances on Japan, that the country will open its restrictive automotive market as part of its entry into the Trans-Pacific Partnership. The country’s tight auto barriers have led to “many years of frustration,” said Sen. Robert Casey, D-Pa. “There’s a lot of skepticism about the ability to open up these markets.”

Before the U.S. agreed to let Japan join the TPP, it engaged in a series of bilateral negotiations on various sectors, including insurance and automobiles, Froman said. Japan agreed to some concessions up front, including more market access and “terms of reference for a parallel negotiation on autos.” The TPP has the potential to resolve Japan’s restrictive issues, by decreasing discrimination against U.S. exports and allowing more “immediate access” to foreign markets, Casey said.

During the hearing Froman also vowed to support the yarn-forward rule of origin in the TPP, begin work on renewing the African Growth and Opportunity Act, and ensure the U.S. is using available enforcement tools to protect intellectual property rights. Multiple Senators expressed concern over IPR violations in India, especially in the area of pharmaceuticals.

India’s protectionism shuts out U.S. companies, Hatch said, making it difficult for U.S. pharmaceutical companies to secure patents, forcing them to abandon Indian markets. Sen. Rob Portman, R-Ohio, called it a “lack of respect for U.S. drug patents,” in disregard of WTO rules. Imports from India in Ohio have shrunk by 5 percent, Portman said. Hatch also questioned whether it was appropriate for India to enjoy Generalized System of Preferences benefits if the country continues to discriminate against U.S. companies. Sen. Robert Menendez, D-N.J., asked Froman “How do we … intend to enforce [IPR]?,” warning that other countries could follow in the steps of India’s non-compliance.

Froman said he intends to push for GSP renewal -- it is set to expire July 31 -- and then sit down and look at potential reforms to the program. On India, Froman said Secretary of State John Kerry will visit the country this summer and will discuss patent, licensing and market access issues with India’s leaders. “Ultimately, it comes down to the possibility of enforcement as well,” he said.

Baucus told Froman he would have the “full support” of the Finance Committee, adding that since he’s been a member of Finance, there has never been a more vital time for USTR. “Competition is so much bigger, and the need for protection is so much bigger, that we don’t have much time left as a country, by my judgment. You’re the man for the job, you’re the man for the time, and we want to work with you.” -- Claire Yan, Jessica Arriens