HOUSE ACTION

COMMISSION ON INTERNATIONAL TRADE AND STATE SOVEREIGNTY

MINUTES

Monday, May 21, 2007

Approved 7/16/2007

Members Present: Rep. Kathie Keenan, Co-chair; Sen. Ginny Lyons, Co-chair;

John Boomhover; Lawrence Bruce, Jr.; Daniel Brush; Elliot Burg; Dana Eidsness

Members Absent: None

Also Present: Legislative staff, the public, and the press

Recording: CD 2007 – 10, 11, 12

Convene

At 9:15 a.m., Sen. Lyons convened the meeting in Room 10 of the Vermont State House. She asked Commission members, the public, and the press to introduce themselves.

Follow up on Letter to Vermont Department of Labor

Documents distributed

Letter from Commission to Patricia Moulton Powden, Commissioner, Department of Labor, 1/16/07
Letter from Commissioner Powden to Sen. Lyons, 5/15/07

Andy Condon, Economic and Market Information Chief, Department of Labor, testified as a replacement for Commissioner of Labor, Patricia Moulton Powden. Any Condon apologized that the Commissioner could not attend the meeting. Sen. Lyons noted the Commission’s sent a letter to the Vermont Department of Labor on January 15, 2007 requesting information regarding impact of international trade and international trade agreement on jobs in Vermont. Sen. Lyons also noted that the Department of Labor’s response was sent May 15, 2007, and the response was incomplete and lacked specific information requested by the Commission.

Andy Condon then reviewed the letter and documents that the Department of Labor had prepared in response to the Commission’s letter. Andy Condon also reviewed additional documents that he had prepared.

Sen. Lyons stated that under its statutory charge, the Commission is tasked with understanding how trade agreements affect the State, State sovereignty, jobs within Vermont, and environment. Information that the Department presented to the Commission indicating job loss in Vermont due to trade is of great concern. Andy Condon said several of the issues were not in his expertise and he would not have the answers today.

Dan Brush asked in regard to the printing industry and Standard Register in Middlebury, how the Department of Labor encouraged workers to apply for employment benefits when the employees were faced with job losses? Andy Condon said a team was sent to the work place and they explained to employees how to get unemployment benefits and find new jobs. Dan Brush asked what about trade adjustment assistance (TAA) benefits? Andy Condon said he did not know.

Sen. Lyons stated that she believed that IBM lost 7 jobs that were transferred to China, and she wondered if such job losses were indicated in the documents reviewed by Mr. Condon. Andy Condon said he knows that TAA petitions are limited to countries with which we have trade agreements. John Boomhover noted we have no Trade agreement with China. Sen. Lyons said that she believed IBM transferred the lost Vermont positions to their own facilities in China and wondered if such a job transfer would be eligible for TAA benefits. She said she would like the Department of Labor and the Legislative Counsel to research this question.

Sen. Lyons also asked the Department of Labor for a comparison of all jobs lost in state by sector. Andy Condon said his document traces the top 20 exporting industry sections in the State. Sen. Lyons asked for IBM to be separated. Andy Condon said the Department does not know what percent of IBM’s product is exported and how much labor is affected. What happens after the product comes back? Sen. Lyons asked if we count this twice. Dana Eidsness said yes.

Andy Condon summarized his testimony by saying that jobs in Vermont were lost during the relevant time period analyzed by the Department of Labor, but it is difficult to attribute this job loss to international trade. Sen. Lyons asked how many corporations in Vermont are multi-national companies with international facilities, and how many of the jobs have been shifted overseas?

Elliot Burg asked if the Department of Labor had a list of names and addresses of companies represented in the chart that the Department had prepared regarding job loss in the state? Elliot Burg also stated that a survey of such companies is another way to access what has happened to jobs. Andy Condon said that the Department maintained a list of companies, but deemed the list confidential. However, Mr. Condon stated that the Department may be able to come to an understanding with the Commission so that a list of companies could be used for a survey. Elliot Burg also asked if the Department of Labor possesses a larger list of companies which have lost jobs but not qualified for assistance? Andy Condon said yes they have a list of individuals who lost jobs and could provide it to the Commission if they can get around confidentiality issues.

Sen. Lyons asked the audience for any questions.

Aaron Webster Leonard Jones, of STARS, noted that Vermont trade with Asian had increased while the state’s trade with Europe trade decreased. He asked if there was a specific strategy for working with Asia. Andy Condon said it would be best to ask the question of the Agency of Commerce, but to his knowledge, there was no policy to favor Asia.

Gary Murphy, the former second delegate of the local affiliate of the Graphic Communications Conference of the International Brotherhood of Teamsters (GCC/IBT Local) said China was not part of free trade agreement. Mr Murphy also stated that a large problem with the TAA process is being recognition by the U.S. Department of Labor. He said that employees that lost jobs at the Capitol City Press were initially denied TAA recognition, and had to go through an appeals process which cost $500,000 before the U.S. Department of Labor accepted their claims. Sen. Lyons asked Mr. Murphy to testify at the next meeting of the Commission regarding his experience with the TAA process.

Instead of addressing the question of TAA process, Sen. Lyons suggested Andy Condon finish his presentation due to the fact the Commissioner was not present. Sen. Lyons stated that the topic of TAA would be on the agenda at the next meeting. Gary Murphy said his main point was people were confused by the TAA process and the average person cannot be expected to understand the process or know how to navigate it. Consequently, Mr. Murphy stated that the Department of Labor could do more to help people understand the process. Dana Eidsness said she may be able to have the Agency of Commerce and Community Development and the Department of Labor put together an educational program.

Sen. Lyons said at the next meeting that the Commission would look at the TAA process of determination and the process of working with displaced workers. Dan Brush noted fewer than 50 people out of 185 from Capitol City Press who were eligible utilized the TAA benefits, and that the process was very frustrating. Sen. Lyons said there is the program and then the reality of losing jobs. She said the Commission would write the Department another letter.

Follow up on Letter to United States Trade Representative

Documents distributed

Letter from Commission to USTR Christopher Melley and Daniel Watson, 1/30/07

Tiffany Moore, Public Affairs Liaison, U.S. Trade Representative’s (USTR’s) Office, testified via telephone. She stated that a number of USTR staff were also on the phone. The other USTR staff included: Daniel Watson, of the Services office and the USTR negotiator for the Working Party on Domestic Regulation; Bob Gibson of the USTR Services office; and Patrick Gilbride of the Intergovernmental and Public Affairs Office. Al Boright, Robin Lunge, and Michael O’Grady joined the Commission in the discussion. Tiffany Moore said she would like to clarify the Commission’s communication with USTR. Ms. Moore testified that the USTR seeks state input on trade agreements and attempts to get unified positions from individual states on issues. She stated that the USTR wants to work cooperatively with the Commission to help Vermont enjoy the benefit of trade agreements. She said the best way to consult with USTR is a cooperative effort before things escalate and she looked forward to this opportunity.

Sen. Lyons said the goal of the Commission was to reinforce export and international trade opportunities for Vermont businesses while also retaining jobs in the State of Vermont. She wants to protect workers, as well as state sovereignty and wants to ensure that the state’s concerns regarding the impact of trade agreements are addressed. She said the Commission can work closely with USTR to promote free trade while simultaneously protecting state sovereignty.

She asked the Commission members and others present to introduce themselves.

Robin Lunge asked questions in the pharmaceutical area about provisions in the U.S.-Korea agreement. She asked about carve outs in the agreement for preferred drug lists (PDLs) and Medicaid programs. The USTR responded that there is a carve out, Medicaid programs are excluded from the chapter on pharmaceuticals. The USTR stated that VA and DOD programs are excluded as well.

Elliot Burg asked if there is something in writing which would confirm USTR’s position. Tiffany Moore said she was sure there have been letters and correspondence and she stated that she would send the Commission clarification. Sen. Lyons said other state commissions have concerns as well. Tiffany Moore said members of the USTR’s Intergovernmental Policy Advisory Committee (IGPAC) are well aware of USTR’s positions. Sen. Lyons said that the Commission is statutorily charged with understanding trade issues. In addition, Dana Eidsness, as the Vermont state point of contact, and IGPAC are also tasked with understanding the impact that trade has on states and state government.

Robin Lunge asked how the U.S.-Korea Trade agreement and other similar agreements impact Medicare Part D, state PDLs, and a bill pending in the U.S. Congress to increase Federal role in PDL process. The USTR responded that negotiators spend most of their time on these issues and make sure state and federal programs are carved out to ensure there is no impact on those programs. In terms of negotiations involving them, they ensure Medicare is carved out.

Michael O’Grady asked about the agreement between USTR and Congress that would allow congressional review of the pending free trade agreements for Peru, Columbia, Panama, and Korea. He asked how the agreement between USTR and Congree would address environmental and labor concerns. Tiffany Moore stated that environmental and labor issues will be addressed in side agreements with the relevant party countries. She said the side agreements would likely require compliance with existing environmental and labor treaties and agreements.

Elliot Burg asked about the procedural aspects of tribunals. Do new trade agreements have investor provisions in them? Tiffany Moore said yes, they include the standard investment chapter from previous trade agreements. The language from previous agreements can be found at the USTR website. Elliot Burg asked if the new trade agreement allowed fro state participation or state involvement in trade disputes. Tiffany Moore stated that to her knowledge, the new trade agreements did not allow for state involvement in trade disputes. Elliot Burg stated that the lack of opportunity for state participation was distressing to the states.

Michael O’Grady asked if they had specific language. Tiffany Moore explained the process and said language is not public until there is agreed-upon text.

Al Boright asked if USTR can say how they are assuring foreign investors have no greater rights than U.S. investors. Tiffany Moore stated that the USTR is paying attention to the comments of states and states officials and that the trade negotiators have been attempting to address state concerns in trade negotiations. Tiffany Moore stated that the concerns of the Committee regarding no greater substantive rights would be reviewed by the USTR. Al Boright asked if terms in trade agreements could be defined so they mean the same thing as terms used in U.S. takings law. Tiffany Moore said she would have to look at that and could not answer now, but will make folks aware.

Dan Brush asked if the binding environmental and labor requirements in the side agreements with Peru, Columbia, Panama, and Korea are binding with the U.S. She said she had a fact sheet and will provide it. Sen. Lyons asked if it binds states. Tiffany Moore said no, it binds countries. Sen. Lyons asked if state statutes are protected. Tiffany Moore said no, it is not explicit. She said the parties are federal government to federal government and they are the signatories. Sen. Lyons asked if federal law preempts state law, and if state statutes are recognized and respected when free trade agreements are signed. Tiffany Moore said it does not say explicitly. Sen. Lyons said tensions between states and the federal government could be relieved if it were clear state law and state’s had sovereignty with respect to trade agreements.

Elliot Burg asked about domestic regulation, the necessity test and concerns about state standards and existence relating to terms. USTR responded that the U.S. has a long-standing opposition for years and has prevailed in the negotiations. He said there are still ongoing negotiations and there is a US position paper on web site under the services section.

GATS, Domestic Regulation Negotiations Update

Bob Stumberg, Harrison Institute for Public Law, via telephone.

Summary of comments from Bob Stumberg (excerpts from IGPAC memo of May 22^nd)

Negotiations at the World Trade Organization (WTO) appear to be on the verge of endorsing new “disciplines” on domestic regulation that would apply at all levels of government – federal, state and local. The negotiations are authorized by the General Agreement on Trade in Services (GATS). The chairman of the negotiations recently circulated his third draft of proposed disciplines in an effort to broker a compromise. This third draft came two weeks after the United States posted its position on the second draft, which the chairman circulated in February.

The quickening pace of exchanges shows a serious commitment by the WTO nations to reach closure on domestic regulation. In fact, this may be the penultimate draft, the last real opportunity for reflection and comment. By what it deletes and what it keeps, the chairman’s third draft does reflect compromise. For example:

· Safeguarding regulatory authority. The third draft still constrains regulatory authority, which is the purpose of the disciplines. However, the most explicit threat to regulatory authority – the necessity test – is gone. This would have required governments to use the approach that is least burdensome to service suppliers. Gone also are disciplines on equivalency, verification of qualification requirements, and expanded notification of technical standards to the WTO.

·Constraining regulatory authority. In place of “necessity,” the third draft substitutes a new stated purpose of avoiding “disguised barriers to trade” and narrows the scope of the right to regulate at subnational levels of government. These are interpretive guidelines that could influence interpretation of the 30 proposed substantive and procedural disciplines. The most prominent substantive disciplines require regulations to be pre-established, based on objective criteria and relevant to the service. The pre-established test could affect the law of when development rights or property rights vest or to whom regulatory changes are applicable. The objectivity test could affect delegation of power to regulatory agencies, especially if the objectivity test aims to rein in subjective judgment of what is in the public interest. The relevance test could exclude criteria based on environmental, historical or aesthetic impacts that are external to the service. Procedural disciplines include a simplicity test, a one-authority rule, and limits on licensing fees, to name a few.

The chairman’s third draft embodies significant compromises between countries that take polar views on whether disciplines on domestic regulation are needed. It should not be surprising, then, that the chairman’s draft preserves rather than clarifies the ambiguity of legal tests about which the parties disagree. From the 30 proposed disciplines, we have identified 13 ambiguous legal tests that bear directly on state and local regulatory authority. If these are adopted, it will be the plain language of the disciplines that matters, not the intent of negotiators. The following chart lists these 13 points of ambiguity, as well as changes in the third draft that safeguard regulatory authority better than in the second draft. The purpose of the chart is to help state and local officials set a reasonably short agenda for state-federal consultation, keeping in mind our opening questions:

· Do the constraints on domestic regulation merit further state-federal consultation in terms of examples or importance? The plain language of the general provisions – that domestic regulations must be pre-established, based on objective criteria, and relevant to the service – could be interpreted by dispute panels as a significant departure from U.S. constitutional law and regulatory practice. The disciplines could affect federal domestic regulations almost as deeply.

· Are there options for clarifying ambiguous terms that might lead to confusion or conflict? Important legal tests can be clarified in a footnote definition. For example: “national policy objectives” can be defined as objectives identified at the national or subnational level; “pre-established” can be defined as referring to a final (not pending) license decision or limited to licensing of professionals; “objective” can be defined as not arbitrary; “relevant” can be defined to encompass the external impact of a service. Any of these can be stated as “best endeavor” rather than “shall.”

· Does the third draft reflect an appropriate balance between the nations that seek the least burdensome regulations versus nations that seek to safeguard policy space for domestic regulation? Overall balance is a political judgment that calls on state and local officials to consider “trade offense” as well as “regulatory defense”. Considering that new disciplines deepen sector commitments, striking that balance would be easier if the disciplines are accompanied by a process to clarify or limit sector commitments in light of the new disciplines.

State of Play on GATS & Domestic Regulation: The WPDR Chairman’s Third Draft
¶	Safeguards Regulatory Authority	Constrains Regulatory Authority
Statement of purpose
*	Deletes the necessity test
2		Based on objective criteria
2		Avoid disguised restrictions on trade
3		Replaced “domestic” with “national” objectives
General provisions
10	Coverage excludes limits on commitments
11		Pre-established
11		Based on objective criteria
11		Relevant to supply of services
Licensing requirements & procedures
2		Broad scope of licensing, not just professions
17		Less-restrictive means than residency requirements
18		Procedures as simple as possible
18		One competent authority
19		Impartial to all market participants
26		Fees commensurate with costs of regulation
Qualification requirements & procedures
*	Deletes recognition of equivalent req’s
*	Deletes discipline on verification of req’s
27		Professional experience must compliment education
Technical standards
*	Deletes WTO notification requirement
9		Broad scope of technical standards
41	Retains “should” in place of “shall”	Should take international standards into account

Elliot Burg articulated the question the Commission might ask the USTR: creates impossibility for regulating states because you can’t possibly foresee every impact that some future proposal is going to have on your environment, community, state. Unless you can predict that, things are going to come up.

Budget Update

Documents distributed

H.537 Sec. 233a Appropriations Bill Conference Report, May 2007; and International Trade Commission Costs, undated used for expense estimates, Joint Fiscal Office

Rep. Kathie Keenan said $12,000 was in the Budget Conference Report for the Trade Commission.

Review and Approve 3/26/07 Meeting Minutes

The minutes were approved unanimously.