Hatch Faults USTR For Failing To Be ‘Bulwark’ Against Federal Regulators


Senate Finance Committee Ranking Member Orrin Hatch (R-UT) today (May 1) faulted the Office of the U.S. Trade Representative for rolling over to demands by federal regulators to restrict the scope of trade rules so that they do not interfere with consumer protections, and argued that this kind of behavior could hobble the president’s trade agenda.

“Too often during the inter-agency process, regulatory agencies are just saying no to cooperative participation in international trade negotiations,” Hatch charged in his opening statement at a hearing on President Obama’s trade agenda that featured USTR Michael Froman.

The ranking member said he had observed a “failure” by USTR “to effectively play its traditional role as a bulwark against other federal agencies.” He specifically cited what he said was the Department of Health and Human Services’ insistence that it needed flexibility to regulate tobacco products, which led a USTR proposal that he characterized as carving out the regulation of tobacco products from any rules under the Trans-Pacific Partnership (TPP).

Hatch also pointed to the Department of Treasury’s insistence on “relegating financial services discussion to pre-existing forums” which he said resulted in USTR’s position that financial services should be carved out of the trade negotiations with the European Union.

Finally, charged that the Food and Drug Administration’s fear that a full enforceable sanitary and phytosanitary (SPS) chapter in TPP would open its regulations to dispute settlement led to a USTR proposal that excludes SPS disciplines from dispute settlement.

“There is a clear pattern here. If this does not change, I am worried that any agreement this administration negotiates will never match the president’s rhetoric of concluding high-standard 21st century agreements,” Hatch said. “Of course, the history of this administration’s trade agenda has yet to be written and there is still time to correct course.”

Hatch, in his statement, argued that interference by federal regulators has also contributed to low staff morale at USTR. He said that USTR ranks “dead last” in employee job satisfaction among small agencies, in an apparent reference to the Office of Personnel Management’s annual report on the subject, which in 2013 found that only 29 percent of USTR staff felt positive about their overall work satisfaction.

That represented a 7 percentage point drop from the previous year. The 2013 survey – which 63 percent of USTR employees responded to – found that the percent of staffers who had trust and confidence in their supervisors increased 20 percentage points from the previous year – from 51 to 71 percent. But it also found that only 28 percent of USTR employees would recommend their agency as a good place to work, an 8 percentage point drop from the previous year.

Hatch also said he was “profoundly” disappointed by the administration’s failure to bring a WTO case against India over what he charged is its failure to protect U.S. intellectual property.

“Countries around the world are taking note of the president’s failure to act in this area, and this is feeding the perception that they can refuse to protect, and even actively violate, U.S. intellectual property rights with impunity,” Hatch said. He also criticized Canada’s patent policies as violating the North American Free Trade Agreement and the WTO and asked Froman what he is doing to ensure compliance.

Froman answered that he is alarmed about the deterioration of the “innovation environment” in India, and has raised the issue at the highest levels. He noted that India is in the midst of an election and that he is looking forward to “engaging with the new government of India as soon as it’s in place.”

On Canada, Froman said the issue of patent protection is now under litigation in Canada but that the U.S. is continuing to engage with Canada on the issue.

At issue in the patent dispute with Canada is the domestic courts’ interpretation of patent utility. The courts ruled that if a company makes a particular promise in its patent application, it must show evidence that the drug can live up to that promise in order to prove utility.

Companies are not allowed to supplement their application with information later. A Canadian court, in a patent case involving Eli Lilly, ruled that the company had no evidence upon which a reasonable person would think that the drug could have a long-term use, which the court found that Lilly had promised.

Hatch’s comments on tobacco drew a quick rebuke from public health advocates, who fought back by citing a new poll they say illustrates wide public support for addressing public health and tobacco issues in the TPP and other U.S. trade agreements.

“It’s important to the administration, the USTR, and Congress to know that the public is behind us on this issue,” Gregg Haifley, director of federal relations for the American Cancer Society Cancer Action Network, said in an interview.

Haifley cited a public opinion poll commissioned by his group and conducted by Democratic and Republican pollsters that found 79 percent of likely voters ranked “protecting public health and safety” among their top three priorities for a U.S. trade agreement.

That was higher than 77 percent who ranked “protecting jobs being lost from trade” as among their top three priorities, and 70 percent who ranked “protecting the environment” as among their top three, according toan executive summary of the poll dated March 18. That said, more voters said their number one priority in trade agreements was protecting jobs, with 37 percent of likely voters doing so, compared to 34 percent who rated protecting public health as their first priority.

The poll also found that a majority of likely voters support including a provision to protect countries’ rights to regulate tobacco as part of the TPP. “By a significant 56-37 percent margin, voters favor including language that limits the tobacco industry’s ability to challenge laws regulating tobacco in countries,” the executive summary said.

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