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State Tactic on Coal Ports Could Bring Trade Sanctions Against U.S., Warns National Association of Manufacturers

Richards Bay coal terminal in South Africa.

Richards Bay coal terminal in South Africa.

OLYMPIA, Dec. 5.—An unprecedented Inslee Administration tactic apparently aimed at blocking development of coal ports in the state of Washington could mean big trouble for American exporters, warns the National Association of Manufacturers.

It says a plan by the state Department of Ecology to write an unusually broad environmental impact statement for a coal terminal near Bellingham might easily be taken by the World Trade Organization as an impermissible restriction on exports.  That means sanctions could be imposed against the United States, possibly choking off business for American firms. All it takes is a complaint from a member country, and because the United States hasn’t been shy about complaining about other countries, it might not take long for that to happen.  

“The tables may be turned on the United States,” argues a report issued this week by the manufacturers organization. It notes that this country prevailed over China recently in a similar case regarding restrictions on exports of raw materials. “Other WTO members may follow suit in ways that would undermine U.S. competitiveness globally,” it says.

A novel argument, to be sure, but one that demonstrates just how deep into uncharted territory the state of Washington is heading as it appears to side with environmental activists in their campaign against fossil fuels. Two large terminals proposed for Washington aim to serve the Chinese and Far Eastern markets with coal mined in the Midwest’s Powder River Basin. Ordinarily regulators would limit the scope of their review to the immediate impacts of the ports on the surrounding area.

But because coal is involved, Ecology has announced an expansive plan to evaluate the proposed Gateway Pacific Terminal near Bellingham using criteria never before used in an environmental impact statement. It will consider issues that go far beyond the state’s borders – the impact of trains between Washington and the Midwest, the impact of shipping on the Pacific Ocean, and the impact of coal-burning in China on worldwide carbon-dioxide emissions. It appears Ecology will ask those questions in such a way that a negative conclusion is inevitable. The state has no plans at this point to consider whether China will burn coal anyway, even if the coal ports are blocked.

The state has yet to decide how it will handle a similar proposal at the Port of Longview, but there is no reason to believe it will judge that project any differently. And the situation has alarmed coal-country states – Montana, North Dakota and Wyoming – to the point they are hinting a lawsuit may be in the offing. They are raising a rather different and rater more obvious legal argument than the manufacturers – they say Washington’s tactic violates the portions of the U.S. Constitution that give the federal government the ability to regulate interstate commerce and international trade. The argument raised by the manufacturers’ association has an entirely different basis, one that might be even more compelling for a trade-dependent state. Trade sanctions imposed by the World Trade Organization could mean big costs for private firms dependent on exports, a big issue in a state where made-in-Washington apples are shipped worldwide and Boeing aircraft circle the globe. The situation could mean that once again, activists here will have reason to carp about the World Trade Organization. Memories in this corner of the country remain fresh about the rioting that took place when the WTO convened in Seattle 14 years ago.

Authored by Former WTO Judge

The National Association of Manufacturers says it intends its report as a “wake-up call” for policymakers in Washington D.C and the Pacific Northwest. The report is coauthored by James Bacchus, a former Democratic congressman and a former chairman of the appellate body for the trade organization. The report says efforts in Washington and Oregon to restrict the export of coal and liquefied natural gas – popular causes among urban environmental organizations – violate WTO rules forbidding export restrictions.

On the coal terminals, the report notes that the agreement prohibits import and export restrictions other than duties and taxes. Restrictions include “measures that create uncertainties and affect investment plans, restrict market access for imports or make importation prohibitively costly.” That seems a rather good description of what the state of Washington is attempting to accomplish, Bacchus noted during the conference call. The main reason no challenges have been filed yet is probably that most trade challenges in recent years have dealt with import restrictions, rather than exports.

It also is not clear which country would take such a case to the WTO – a decision that often has as much to do with political considerations as it does trade. But it remains a real danger, Bacchus said. In his remarks to Capitol Hill energy reporters during a conference call Tuesday, he left little doubt about to whom the warning is addressed. “It is a question of creating uncertainty, and there is certainly uncertainty here. Let me add that some of the members of Congress and public officials that would be most interested in this report and this issue are among the most knowledgeable generally on trade issues. Sen. [Ed] Markey, Sen. [Ron] Wyden and Gov. Inslee are all former colleagues of mine in the House, and I have worked side-by-side with them in the House in support of trade. I think they would be very interested in this particular analysis of this issue.”

Washington State Wire has a call in to the governor’s office seeking comment.

Unreasonable Delays Impermissible

The General Agreement on Tariffs and Trade, or GATT, signed by 158 countries, forbids nations from imposing unreasonable delays in permitting processes. In the case of LNG exports, 15 applications for export licenses have been pending before the U.S. Department of Energy for many months, some of them for more than two years. The holdup appears to be political opposition in Congress, in which Oregon Sen. Wyden plays a leading role. Wyden is chairman of the Senate Energy and Natural Resources Committee.

The report notes that in a 1988 case regarding Japanese export of semiconductors, the WTO found delays of three months to be impermissible. “If three months was a problem, we can make a natural argument that 25-plus months would be a problem as well,” Aric Newhouse, NAM vice president of policy and government relations, said in the conference call.

NAM president and CEO Jay Timmons said, “Manufacturers need strong and smart energy and trade policies to expand manufacturing in the United States and remain globally competitive. Unfortunately, it has become increasingly difficult to get a permit to do just about anything in the United States, and infrastructure projects like LNG and coal export terminals are crippled by delays and regulatory obstacles. As former Chairman Bacchus highlights, there is another set of obligations that apply when it comes to exports—our international obligations as a member of the WTO. This report confirms manufacturers’ view that principles of open markets and free trade should govern whether projects are approved on U.S. soil and that all permits deserve up-or-down approval in a timely manner.”

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