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[image: In this newsletter: This Week in Washington:
Debt Ceiling DebateFinancial Shorts: Forex Swaps; Derivative Capital
Cushion; Public Opinion on Corp TaxFTAs: South Korea, Columbia and Panama]


*Washington Update– May 3, 2011*
[image: In this newsletter: This Week in Washington: Debt Ceiling
DebateFinancial Shorts: Forex Swaps; Derivative Capital Cushion; Public
Opinion on Corp TaxFTAs: South Korea, Columbia and Panama] [image:
In this newsletter: This Week in Washington: Debt Ceiling DebateFinancial
Shorts: Forex Swaps; Derivative Capital Cushion; Public Opinion on Corp
TaxFTAs: South Korea, Columbia and Panama] [image: 1. This Week in
Washington: Debt Ceiling DebateCongress returned this week from a two-week
recess just as the Treasury Department has announced that a
greater-than-expected increase in tax revenue has extended the government’s
ability to pay its bills without an increase in the debt ceiling by about a
month. The new date is August 2. The new estimate creates a significant
grace period for Congress to consider an increase in the maximum amount that
the government can borrow, a step that House Republicans say they will not
take without an agreement to curb spending. Many Republicans have publicly
agreed that Congress must raise the ceiling, although they insist that the
White House must first agree to some form of meaningful spending limits. A
vocal minority of members, however, have said that they are reluctant to
raise the limit, and that Secretary Geithner has overstated the possible
consequences of leaving the limit in place.Some bipartisan talks are under
way in the Senate, and Vice President Biden is to convene a negotiating
session between White House officials and Congressional leaders later this
week. There is a growing consensus among Democrats that some restrictions on
spending are reasonable and necessary to secure an agreement with
Republicans.Reflecting the political potency of the issue, several moderate
Democrats in the Senate have joined their GOP colleagues in both houses in
calling for the debt ceiling vote to include a menu of specific cuts instead
of a “clean” debt bill-a straight up-or-down vote- that the White House has
called for. The willingness of Congressional Democrats to examine such
options reflects a recognition that lawmakers cannot credibly forge ahead
with a vote on the debt limit without some accompanying anti-deficit steps
to make the increase palatable to voters. This heightens the possibility
that any deal would include reductions to programs more guaranteed than the
ones included in last month’s FY 2011 agreement. But according to party
operatives, Republicans hope to roll all of this into a bargaining strategy:
trading a temporary extension of the ceiling — five, six or seven months —
for an escalating menu of cuts.The experience in the 1980s with the
Gramm-Rudman law, and later attempts to impose automatic budget controls
through pay-as-you-go rules, also show that Congress and the White House can
and will find ways around them even if the proposals survive legal
challenges. Faced with the prospect of spending cuts or tax increases
required under the Gramm-Rudman law, lawmakers sometimes looked to more
optimistic economic projections to avoid the reductions or skirted the cuts
with budget gimmicks. And Congress has often waived its pay-as-you-go rules
when they got in the way of costly legislation like the 2009 stimulus
spending. The reality is that the fear factor is the single most important
incentive for a deal. A prolonged impasse could lead lawmakers to cobble
together a package of small-ball reform measures that allows them to raise
the debt limit but does little more than offer political cover. In coming
weeks, the debt-limit fight is likely to become entangled in the
consideration of broader plans to address the government’s chronic budget
deficits and the mounting debt. 2. Financial Shorts: Forex Swaps, Derivative
Capital Cushions; Public Opinion on Corporate TaxIn what was characterized
as a victory for business, the Treasury Department proposed that commonly
used foreign exchange swaps and forwards should be exempted from rules
intended to tighten oversight of other derivatives. The Treasury said that
forcing these derivatives through clearinghouses and onto exchanges was not
necessary because existing procedures in the foreign exchange market
mitigate risk and ensure stability. Foreign exchange swaps and forwards,
which represent about 5 percent of the $600 trillion over-the-counter
derivatives market, are used to lock in prices as protection against
exchange rate fluctuations. Businesses, big banks and the securities
industry lobbied the administration to exempt the financial instruments from
the rules. They argued that clearing requirements were unnecessary given
that most contracts expired after one week. Under the Dodd-Frank financial
reform legislation enacted last year, the Treasury Secretary was given the
power to determine whether the narrow subset of foreign exchange derivatives
should be tightly regulated. The rest of the over-the-counter derivatives
market would be forced through clearinghouses, which would stand between two
parties and assume the risk if one party defaults. Some fear that this
decision to exempt foreign exchange derivatives will open up the opportunity
for arbitrage in which derivatives users look to employ the least-regulated
products. However, the foreign exchange swaps market is different from other
derivatives markets and under Dodd-Frank it would be illegal to use the
instruments to evade tougher scrutiny that applies to other derivatives. The
proposal is open for comment for 30 days, after which the Treasury will
issue its final decision. The derivatives market received another round of
regulations last week as the CFTC proposed rules that would force hedge
funds and other firms that trade derivatives to bolster their capital
cushion. The new capital rules are largely aimed at some 200 swap dealers-
brokerage firms, large energy trading shops and Wall Street affiliates that
arrange deals. They will also apply to hedge funds and other companies that
have huge positions in swaps. Regulators hope that this proposal to build
capital cushions in the derivatives industry could help prevent a repeat of
the 2008 financial collapse. Firms will now have to put aside enough cash to
cover unforeseen calamities. Until recently, regulators had little authority
to set any rules for this market. Still, there is no guarantee that enhanced
capital levels will avert future disasters or that there is a magic number
that regulators see as a cure-all. Swap dealers and major trading firms that
are already registered with the commission as futures brokers will have to
hold at least $20 million in so-called adjusted net capital. Another set of
firms will have to keep “tangible net equity” equal to $20 million. This
standard will allow energy firms, for example, to count oil in the ground as
part of their calculation. CFTC Chairman Gary Gensler expressed concern that
the proposal is too lenient on the industry, but the commissioners voted 4
to 1 in favor of advancing the proposal to a 60-day public comment period.
They are expected to vote on a final version of the rules by the fall. One
of the agency’s two Republican commissioners voted against the plan, in line
with actions of some Republican lawmakers that have introduced measures in
Congress to delay or derail the capital requirements and other commission
rules.According to a recent New York Times/CBS News poll, most Americans say
they still prefer cuts in government spending to increasing taxes on
corporations as a means of cutting the federal budget deficit. But when
given a choice between raising taxes on corporations and raising taxes on
households that make more than $250,000 a year, almost two-thirds of
respondents opt for taxing businesses. There is a strong partisan divide: A
majority of Republicans and independents favor cutting government spending
over raising taxes on businesses, while Democrats are evenly divided.
Democrats strongly support increasing corporate taxes rather than adding to
the taxes of affluent households; Republicans and independents are split. In
general, however, few Americans back increasing taxes on American
businesses: only 37 percent said corporate taxes should be increased to help
reduce the federal budget deficit. The rest agree with an alternative
argument that increased taxes would discourage American companies from
creating jobs and hurt them in the global marketplace. Thirty-two percent
would rather see corporate taxes remain as they are now and 26 percent said
taxes on corporate profits should be decreased. Six in 10 Americans surveyed
think companies use their tax savings to give bonuses to executives and
dividends to shareholders. About a quarter, 23 percent, said they thought
tax savings were mostly reinvested back in the corporation and only 4
percent said savings were used to create new jobs for American workers.
Almost half said all companies should be taxed at the same rate. About a
third said some industries deserved a tax break. Small businesses, green
companies and those in the health care industry were most frequently
mentioned as deserving of tax breaks. 3. FTAs: South Korea, Columbia and
PanamaRepublicans have renewed pressure on President Barack Obama to quickly
submit free trade deals with South Korea, Colombia and Panama to Congress
for action by July 1. The July deadline looms large because that is when
rival trade deals take effect— South Korean's pact with the European Union
and Colombia's with Canada—that threaten to further erode U.S. market share
in those countries.While administration officials have said all three deals
would attract the bipartisan support to pass, Democrats remain divided. Only
the South Korean deal has attracted the backing of some unions, after a
December deal that further opened up the country's auto sector. However, the
White House has begun talks with Congress on the timing of passing trade
deals with South Korea, Colombia and Panama. Like the proposed Korea deal,
the Panama and Colombia free-trade pacts were negotiated by the Bush
administration, but have languished without congressional ratification.US
Trade Representative Ron Kirk announced that the Administration is ready to
launch talks on submitting the Panama deal for approval after the Panamanian
government ratified a tax treaty that removes one of the last hurdles to
completion of the trade pact. Panama in the past has been a tax haven used
by those trying to avoid paying taxes. The issues surrounding Colombia,
however, are a more direct test of Obama’s campaign pledge to retool US
trade policy so that it does not extend free-trade privileges to countries
with lower labor, environmental and other standards. While the approach has
a moral dimension, it is also meant to keep US workers from competing
against countries where goods can be produced more cheaply because the laws
are lax. However, after a recent meeting in Washington between President
Obama and Colombian President Juan Manuel Santos to discuss the trade pact,
Santos agreed to improve labor conditions in Colombia. Under the plan
brokered by US and Colombian trade officials, Colombia will follow a roadmap
to make incremental changes to its labor laws this year including providing
greater protections for union leaders, such as shop stewards and bargaining
committee members, for workers trying to organize or join a union, and for
former union activists who may be threatened because of their past
activities. The plan also requires the Colombian government to revise its
teacher relocation and protection program to address high risks to teachers,
require sentences of up to five years in jail for threats against labor
union workers and direct the Colombian National Police to assign 95
full-time judicial police investigators to help in prosecution. US trade
officials plan to monitor Colombia's progress on this labor rights action
plan to determine when the deal is ready to move forward. US Trade
Representative Ron Kirk said there’s “zero” possibility that the three
pending free-trade agreements will be bundled into a single bill. However,
Republicans in Congress want to consider all three at the same time so that
Congress can take them up by July 1. Senator Mitch McConnell (R-KY) led 43
Republicans in vowing to block action on President Obama’s nominees for
Commerce Secretary and other trade-related nominees until Congress gets all
three agreements. Kirk said his office is discussing with lawmakers when to
send the implementing legislation for accords with South Korea, Colombia and
Panama. The deals won’t be sent as a package because no legal precedent
exists and combining them into one measure would increase the risk for
rejection on procedural grounds, he said. Overall, President Obama is
seeking to move forward on a broad trade agenda beyond the free-trade
agreements. That includes not only trying to renew expired programs to
assist displaced workers - that will likely be used as a carrot to persuade
some Democratic voters to pass the three FTAs- but also to provide duty-free
preferences to imports from developing countries and prepare for lifting
trade restrictions with Russia as that nation seeks to join the World Trade
Organization.] [image: 1. This Week in Washington: Debt Ceiling
DebateCongress returned this week from a two-week recess just as the
Treasury Department has announced that a greater-than-expected increase in
tax revenue has extended the government’s ability to pay its bills without
an increase in the debt ceiling by about a month. The new date is August 2.
The new estimate creates a significant grace period for Congress to consider
an increase in the maximum amount that the government can borrow, a step
that House Republicans say they will not take without an agreement to curb
spending. Many Republicans have publicly agreed that Congress must raise the
ceiling, although they insist that the White House must first agree to some
form of meaningful spending limits. A vocal minority of members, however,
have said that they are reluctant to raise the limit, and that Secretary
Geithner has overstated the possible consequences of leaving the limit in
place.Some bipartisan talks are under way in the Senate, and Vice President
Biden is to convene a negotiating session between White House officials and
Congressional leaders later this week. There is a growing consensus among
Democrats that some restrictions on spending are reasonable and necessary to
secure an agreement with Republicans.Reflecting the political potency of the
issue, several moderate Democrats in the Senate have joined their GOP
colleagues in both houses in calling for the debt ceiling vote to include a
menu of specific cuts instead of a “clean” debt bill-a straight up-or-down
vote- that the White House has called for. The willingness of Congressional
Democrats to examine such options reflects a recognition that lawmakers
cannot credibly forge ahead with a vote on the debt limit without some
accompanying anti-deficit steps to make the increase palatable to voters.
This heightens the possibility that any deal would include reductions to
programs more guaranteed than the ones included in last month’s FY 2011
agreement. But according to party operatives, Republicans hope to roll all
of this into a bargaining strategy: trading a temporary extension of the
ceiling — five, six or seven months — for an escalating menu of cuts.The
experience in the 1980s with the Gramm-Rudman law, and later attempts to
impose automatic budget controls through pay-as-you-go rules, also show that
Congress and the White House can and will find ways around them even if the
proposals survive legal challenges. Faced with the prospect of spending cuts
or tax increases required under the Gramm-Rudman law, lawmakers sometimes
looked to more optimistic economic projections to avoid the reductions or
skirted the cuts with budget gimmicks. And Congress has often waived its
pay-as-you-go rules when they got in the way of costly legislation like the
2009 stimulus spending. The reality is that the fear factor is the single
most important incentive for a deal. A prolonged impasse could lead
lawmakers to cobble together a package of small-ball reform measures that
allows them to raise the debt limit but does little more than offer
political cover. In coming weeks, the debt-limit fight is likely to become
entangled in the consideration of broader plans to address the government’s
chronic budget deficits and the mounting debt. 2. Financial Shorts: Forex
Swaps, Derivative Capital Cushions; Public Opinion on Corporate TaxIn what
was characterized as a victory for business, the Treasury Department
proposed that commonly used foreign exchange swaps and forwards should be
exempted from rules intended to tighten oversight of other derivatives. The
Treasury said that forcing these derivatives through clearinghouses and onto
exchanges was not necessary because existing procedures in the foreign
exchange market mitigate risk and ensure stability. Foreign exchange swaps
and forwards, which represent about 5 percent of the $600 trillion
over-the-counter derivatives market, are used to lock in prices as
protection against exchange rate fluctuations. Businesses, big banks and the
securities industry lobbied the administration to exempt the financial
instruments from the rules. They argued that clearing requirements were
unnecessary given that most contracts expired after one week. Under the
Dodd-Frank financial reform legislation enacted last year, the Treasury
Secretary was given the power to determine whether the narrow subset of
foreign exchange derivatives should be tightly regulated. The rest of the
over-the-counter derivatives market would be forced through clearinghouses,
which would stand between two parties and assume the risk if one party
defaults. Some fear that this decision to exempt foreign exchange
derivatives will open up the opportunity for arbitrage in which derivatives
users look to employ the least-regulated products. However, the foreign
exchange swaps market is different from other derivatives markets and under
Dodd-Frank it would be illegal to use the instruments to evade tougher
scrutiny that applies to other derivatives. The proposal is open for comment
for 30 days, after which the Treasury will issue its final decision. The
derivatives market received another round of regulations last week as the
CFTC proposed rules that would force hedge funds and other firms that trade
derivatives to bolster their capital cushion. The new capital rules are
largely aimed at some 200 swap dealers- brokerage firms, large energy
trading shops and Wall Street affiliates that arrange deals. They will also
apply to hedge funds and other companies that have huge positions in swaps.
Regulators hope that this proposal to build capital cushions in the
derivatives industry could help prevent a repeat of the 2008 financial
collapse. Firms will now have to put aside enough cash to cover unforeseen
calamities. Until recently, regulators had little authority to set any rules
for this market. Still, there is no guarantee that enhanced capital levels
will avert future disasters or that there is a magic number that regulators
see as a cure-all. Swap dealers and major trading firms that are already
registered with the commission as futures brokers will have to hold at least
$20 million in so-called adjusted net capital. Another set of firms will
have to keep “tangible net equity” equal to $20 million. This standard will
allow energy firms, for example, to count oil in the ground as part of their
calculation. CFTC Chairman Gary Gensler expressed concern that the proposal
is too lenient on the industry, but the commissioners voted 4 to 1 in favor
of advancing the proposal to a 60-day public comment period. They are
expected to vote on a final version of the rules by the fall. One of the
agency’s two Republican commissioners voted against the plan, in line with
actions of some Republican lawmakers that have introduced measures in
Congress to delay or derail the capital requirements and other commission
rules.According to a recent New York Times/CBS News poll, most Americans say
they still prefer cuts in government spending to increasing taxes on
corporations as a means of cutting the federal budget deficit. But when
given a choice between raising taxes on corporations and raising taxes on
households that make more than $250,000 a year, almost two-thirds of
respondents opt for taxing businesses. There is a strong partisan divide: A
majority of Republicans and independents favor cutting government spending
over raising taxes on businesses, while Democrats are evenly divided.
Democrats strongly support increasing corporate taxes rather than adding to
the taxes of affluent households; Republicans and independents are split. In
general, however, few Americans back increasing taxes on American
businesses: only 37 percent said corporate taxes should be increased to help
reduce the federal budget deficit. The rest agree with an alternative
argument that increased taxes would discourage American companies from
creating jobs and hurt them in the global marketplace. Thirty-two percent
would rather see corporate taxes remain as they are now and 26 percent said
taxes on corporate profits should be decreased. Six in 10 Americans surveyed
think companies use their tax savings to give bonuses to executives and
dividends to shareholders. About a quarter, 23 percent, said they thought
tax savings were mostly reinvested back in the corporation and only 4
percent said savings were used to create new jobs for American workers.
Almost half said all companies should be taxed at the same rate. About a
third said some industries deserved a tax break. Small businesses, green
companies and those in the health care industry were most frequently
mentioned as deserving of tax breaks. 3. FTAs: South Korea, Columbia and
PanamaRepublicans have renewed pressure on President Barack Obama to quickly
submit free trade deals with South Korea, Colombia and Panama to Congress
for action by July 1. The July deadline looms large because that is when
rival trade deals take effect— South Korean's pact with the European Union
and Colombia's with Canada—that threaten to further erode U.S. market share
in those countries.While administration officials have said all three deals
would attract the bipartisan support to pass, Democrats remain divided. Only
the South Korean deal has attracted the backing of some unions, after a
December deal that further opened up the country's auto sector. However, the
White House has begun talks with Congress on the timing of passing trade
deals with South Korea, Colombia and Panama. Like the proposed Korea deal,
the Panama and Colombia free-trade pacts were negotiated by the Bush
administration, but have languished without congressional ratification.US
Trade Representative Ron Kirk announced that the Administration is ready to
launch talks on submitting the Panama deal for approval after the Panamanian
government ratified a tax treaty that removes one of the last hurdles to
completion of the trade pact. Panama in the past has been a tax haven used
by those trying to avoid paying taxes. The issues surrounding Colombia,
however, are a more direct test of Obama’s campaign pledge to retool US
trade policy so that it does not extend free-trade privileges to countries
with lower labor, environmental and other standards. While the approach has
a moral dimension, it is also meant to keep US workers from competing
against countries where goods can be produced more cheaply because the laws
are lax. However, after a recent meeting in Washington between President
Obama and Colombian President Juan Manuel Santos to discuss the trade pact,
Santos agreed to improve labor conditions in Colombia. Under the plan
brokered by US and Colombian trade officials, Colombia will follow a roadmap
to make incremental changes to its labor laws this year including providing
greater protections for union leaders, such as shop stewards and bargaining
committee members, for workers trying to organize or join a union, and for
former union activists who may be threatened because of their past
activities. The plan also requires the Colombian government to revise its
teacher relocation and protection program to address high risks to teachers,
require sentences of up to five years in jail for threats against labor
union workers and direct the Colombian National Police to assign 95
full-time judicial police investigators to help in prosecution. US trade
officials plan to monitor Colombia's progress on this labor rights action
plan to determine when the deal is ready to move forward. US Trade
Representative Ron Kirk said there’s “zero” possibility that the three
pending free-trade agreements will be bundled into a single bill. However,
Republicans in Congress want to consider all three at the same time so that
Congress can take them up by July 1. Senator Mitch McConnell (R-KY) led 43
Republicans in vowing to block action on President Obama’s nominees for
Commerce Secretary and other trade-related nominees until Congress gets all
three agreements. Kirk said his office is discussing with lawmakers when to
send the implementing legislation for accords with South Korea, Colombia and
Panama. The deals won’t be sent as a package because no legal precedent
exists and combining them into one measure would increase the risk for
rejection on procedural grounds, he said. Overall, President Obama is
seeking to move forward on a broad trade agenda beyond the free-trade
agreements. That includes not only trying to renew expired programs to
assist displaced workers - that will likely be used as a carrot to persuade
some Democratic voters to pass the three FTAs- but also to provide duty-free
preferences to imports from developing countries and prepare for lifting
trade restrictions with Russia as that nation seeks to join the World Trade
Organization.] [image: 1. This Week in Washington: Debt Ceiling
DebateCongress returned this week from a two-week recess just as the
Treasury Department has announced that a greater-than-expected increase in
tax revenue has extended the government’s ability to pay its bills without
an increase in the debt ceiling by about a month. The new date is August 2.
The new estimate creates a significant grace period for Congress to consider
an increase in the maximum amount that the government can borrow, a step
that House Republicans say they will not take without an agreement to curb
spending. Many Republicans have publicly agreed that Congress must raise the
ceiling, although they insist that the White House must first agree to some
form of meaningful spending limits. A vocal minority of members, however,
have said that they are reluctant to raise the limit, and that Secretary
Geithner has overstated the possible consequences of leaving the limit in
place.Some bipartisan talks are under way in the Senate, and Vice President
Biden is to convene a negotiating session between White House officials and
Congressional leaders later this week. There is a growing consensus among
Democrats that some restrictions on spending are reasonable and necessary to
secure an agreement with Republicans.Reflecting the political potency of the
issue, several moderate Democrats in the Senate have joined their GOP
colleagues in both houses in calling for the debt ceiling vote to include a
menu of specific cuts instead of a “clean” debt bill-a straight up-or-down
vote- that the White House has called for. The willingness of Congressional
Democrats to examine such options reflects a recognition that lawmakers
cannot credibly forge ahead with a vote on the debt limit without some
accompanying anti-deficit steps to make the increase palatable to voters.
This heightens the possibility that any deal would include reductions to
programs more guaranteed than the ones included in last month’s FY 2011
agreement. But according to party operatives, Republicans hope to roll all
of this into a bargaining strategy: trading a temporary extension of the
ceiling — five, six or seven months — for an escalating menu of cuts.The
experience in the 1980s with the Gramm-Rudman law, and later attempts to
impose automatic budget controls through pay-as-you-go rules, also show that
Congress and the White House can and will find ways around them even if the
proposals survive legal challenges. Faced with the prospect of spending cuts
or tax increases required under the Gramm-Rudman law, lawmakers sometimes
looked to more optimistic economic projections to avoid the reductions or
skirted the cuts with budget gimmicks. And Congress has often waived its
pay-as-you-go rules when they got in the way of costly legislation like the
2009 stimulus spending. The reality is that the fear factor is the single
most important incentive for a deal. A prolonged impasse could lead
lawmakers to cobble together a package of small-ball reform measures that
allows them to raise the debt limit but does little more than offer
political cover. In coming weeks, the debt-limit fight is likely to become
entangled in the consideration of broader plans to address the government’s
chronic budget deficits and the mounting debt. 2. Financial Shorts: Forex
Swaps, Derivative Capital Cushions; Public Opinion on Corporate TaxIn what
was characterized as a victory for business, the Treasury Department
proposed that commonly used foreign exchange swaps and forwards should be
exempted from rules intended to tighten oversight of other derivatives. The
Treasury said that forcing these derivatives through clearinghouses and onto
exchanges was not necessary because existing procedures in the foreign
exchange market mitigate risk and ensure stability. Foreign exchange swaps
and forwards, which represent about 5 percent of the $600 trillion
over-the-counter derivatives market, are used to lock in prices as
protection against exchange rate fluctuations. Businesses, big banks and the
securities industry lobbied the administration to exempt the financial
instruments from the rules. They argued that clearing requirements were
unnecessary given that most contracts expired after one week. Under the
Dodd-Frank financial reform legislation enacted last year, the Treasury
Secretary was given the power to determine whether the narrow subset of
foreign exchange derivatives should be tightly regulated. The rest of the
over-the-counter derivatives market would be forced through clearinghouses,
which would stand between two parties and assume the risk if one party
defaults. Some fear that this decision to exempt foreign exchange
derivatives will open up the opportunity for arbitrage in which derivatives
users look to employ the least-regulated products. However, the foreign
exchange swaps market is different from other derivatives markets and under
Dodd-Frank it would be illegal to use the instruments to evade tougher
scrutiny that applies to other derivatives. The proposal is open for comment
for 30 days, after which the Treasury will issue its final decision. The
derivatives market received another round of regulations last week as the
CFTC proposed rules that would force hedge funds and other firms that trade
derivatives to bolster their capital cushion. The new capital rules are
largely aimed at some 200 swap dealers- brokerage firms, large energy
trading shops and Wall Street affiliates that arrange deals. They will also
apply to hedge funds and other companies that have huge positions in swaps.
Regulators hope that this proposal to build capital cushions in the
derivatives industry could help prevent a repeat of the 2008 financial
collapse. Firms will now have to put aside enough cash to cover unforeseen
calamities. Until recently, regulators had little authority to set any rules
for this market. Still, there is no guarantee that enhanced capital levels
will avert future disasters or that there is a magic number that regulators
see as a cure-all. Swap dealers and major trading firms that are already
registered with the commission as futures brokers will have to hold at least
$20 million in so-called adjusted net capital. Another set of firms will
have to keep “tangible net equity” equal to $20 million. This standard will
allow energy firms, for example, to count oil in the ground as part of their
calculation. CFTC Chairman Gary Gensler expressed concern that the proposal
is too lenient on the industry, but the commissioners voted 4 to 1 in favor
of advancing the proposal to a 60-day public comment period. They are
expected to vote on a final version of the rules by the fall. One of the
agency’s two Republican commissioners voted against the plan, in line with
actions of some Republican lawmakers that have introduced measures in
Congress to delay or derail the capital requirements and other commission
rules.According to a recent New York Times/CBS News poll, most Americans say
they still prefer cuts in government spending to increasing taxes on
corporations as a means of cutting the federal budget deficit. But when
given a choice between raising taxes on corporations and raising taxes on
households that make more than $250,000 a year, almost two-thirds of
respondents opt for taxing businesses. There is a strong partisan divide: A
majority of Republicans and independents favor cutting government spending
over raising taxes on businesses, while Democrats are evenly divided.
Democrats strongly support increasing corporate taxes rather than adding to
the taxes of affluent households; Republicans and independents are split. In
general, however, few Americans back increasing taxes on American
businesses: only 37 percent said corporate taxes should be increased to help
reduce the federal budget deficit. The rest agree with an alternative
argument that increased taxes would discourage American companies from
creating jobs and hurt them in the global marketplace. Thirty-two percent
would rather see corporate taxes remain as they are now and 26 percent said
taxes on corporate profits should be decreased. Six in 10 Americans surveyed
think companies use their tax savings to give bonuses to executives and
dividends to shareholders. About a quarter, 23 percent, said they thought
tax savings were mostly reinvested back in the corporation and only 4
percent said savings were used to create new jobs for American workers.
Almost half said all companies should be taxed at the same rate. About a
third said some industries deserved a tax break. Small businesses, green
companies and those in the health care industry were most frequently
mentioned as deserving of tax breaks. 3. FTAs: South Korea, Columbia and
PanamaRepublicans have renewed pressure on President Barack Obama to quickly
submit free trade deals with South Korea, Colombia and Panama to Congress
for action by July 1. The July deadline looms large because that is when
rival trade deals take effect— South Korean's pact with the European Union
and Colombia's with Canada—that threaten to further erode U.S. market share
in those countries.While administration officials have said all three deals
would attract the bipartisan support to pass, Democrats remain divided. Only
the South Korean deal has attracted the backing of some unions, after a
December deal that further opened up the country's auto sector. However, the
White House has begun talks with Congress on the timing of passing trade
deals with South Korea, Colombia and Panama. Like the proposed Korea deal,
the Panama and Colombia free-trade pacts were negotiated by the Bush
administration, but have languished without congressional ratification.US
Trade Representative Ron Kirk announced that the Administration is ready to
launch talks on submitting the Panama deal for approval after the Panamanian
government ratified a tax treaty that removes one of the last hurdles to
completion of the trade pact. Panama in the past has been a tax haven used
by those trying to avoid paying taxes. The issues surrounding Colombia,
however, are a more direct test of Obama’s campaign pledge to retool US
trade policy so that it does not extend free-trade privileges to countries
with lower labor, environmental and other standards. While the approach has
a moral dimension, it is also meant to keep US workers from competing
against countries where goods can be produced more cheaply because the laws
are lax. However, after a recent meeting in Washington between President
Obama and Colombian President Juan Manuel Santos to discuss the trade pact,
Santos agreed to improve labor conditions in Colombia. Under the plan
brokered by US and Colombian trade officials, Colombia will follow a roadmap
to make incremental changes to its labor laws this year including providing
greater protections for union leaders, such as shop stewards and bargaining
committee members, for workers trying to organize or join a union, and for
former union activists who may be threatened because of their past
activities. The plan also requires the Colombian government to revise its
teacher relocation and protection program to address high risks to teachers,
require sentences of up to five years in jail for threats against labor
union workers and direct the Colombian National Police to assign 95
full-time judicial police investigators to help in prosecution. US trade
officials plan to monitor Colombia's progress on this labor rights action
plan to determine when the deal is ready to move forward. US Trade
Representative Ron Kirk said there’s “zero” possibility that the three
pending free-trade agreements will be bundled into a single bill. However,
Republicans in Congress want to consider all three at the same time so that
Congress can take them up by July 1. Senator Mitch McConnell (R-KY) led 43
Republicans in vowing to block action on President Obama’s nominees for
Commerce Secretary and other trade-related nominees until Congress gets all
three agreements. Kirk said his office is discussing with lawmakers when to
send the implementing legislation for accords with South Korea, Colombia and
Panama. The deals won’t be sent as a package because no legal precedent
exists and combining them into one measure would increase the risk for
rejection on procedural grounds, he said. Overall, President Obama is
seeking to move forward on a broad trade agenda beyond the free-trade
agreements. That includes not only trying to renew expired programs to
assist displaced workers - that will likely be used as a carrot to persuade
some Democratic voters to pass the three FTAs- but also to provide duty-free
preferences to imports from developing countries and prepare for lifting
trade restrictions with Russia as that nation seeks to join the World Trade
Organization.] [image: 1. This Week in Washington: Debt Ceiling
DebateCongress returned this week from a two-week recess just as the
Treasury Department has announced that a greater-than-expected increase in
tax revenue has extended the government’s ability to pay its bills without
an increase in the debt ceiling by about a month. The new date is August 2.
The new estimate creates a significant grace period for Congress to consider
an increase in the maximum amount that the government can borrow, a step
that House Republicans say they will not take without an agreement to curb
spending. Many Republicans have publicly agreed that Congress must raise the
ceiling, although they insist that the White House must first agree to some
form of meaningful spending limits. A vocal minority of members, however,
have said that they are reluctant to raise the limit, and that Secretary
Geithner has overstated the possible consequences of leaving the limit in
place.Some bipartisan talks are under way in the Senate, and Vice President
Biden is to convene a negotiating session between White House officials and
Congressional leaders later this week. There is a growing consensus among
Democrats that some restrictions on spending are reasonable and necessary to
secure an agreement with Republicans.Reflecting the political potency of the
issue, several moderate Democrats in the Senate have joined their GOP
colleagues in both houses in calling for the debt ceiling vote to include a
menu of specific cuts instead of a “clean” debt bill-a straight up-or-down
vote- that the White House has called for. The willingness of Congressional
Democrats to examine such options reflects a recognition that lawmakers
cannot credibly forge ahead with a vote on the debt limit without some
accompanying anti-deficit steps to make the increase palatable to voters.
This heightens the possibility that any deal would include reductions to
programs more guaranteed than the ones included in last month’s FY 2011
agreement. But according to party operatives, Republicans hope to roll all
of this into a bargaining strategy: trading a temporary extension of the
ceiling — five, six or seven months — for an escalating menu of cuts.The
experience in the 1980s with the Gramm-Rudman law, and later attempts to
impose automatic budget controls through pay-as-you-go rules, also show that
Congress and the White House can and will find ways around them even if the
proposals survive legal challenges. Faced with the prospect of spending cuts
or tax increases required under the Gramm-Rudman law, lawmakers sometimes
looked to more optimistic economic projections to avoid the reductions or
skirted the cuts with budget gimmicks. And Congress has often waived its
pay-as-you-go rules when they got in the way of costly legislation like the
2009 stimulus spending. The reality is that the fear factor is the single
most important incentive for a deal. A prolonged impasse could lead
lawmakers to cobble together a package of small-ball reform measures that
allows them to raise the debt limit but does little more than offer
political cover. In coming weeks, the debt-limit fight is likely to become
entangled in the consideration of broader plans to address the government’s
chronic budget deficits and the mounting debt. 2. Financial Shorts: Forex
Swaps, Derivative Capital Cushions; Public Opinion on Corporate TaxIn what
was characterized as a victory for business, the Treasury Department
proposed that commonly used foreign exchange swaps and forwards should be
exempted from rules intended to tighten oversight of other derivatives. The
Treasury said that forcing these derivatives through clearinghouses and onto
exchanges was not necessary because existing procedures in the foreign
exchange market mitigate risk and ensure stability. Foreign exchange swaps
and forwards, which represent about 5 percent of the $600 trillion
over-the-counter derivatives market, are used to lock in prices as
protection against exchange rate fluctuations. Businesses, big banks and the
securities industry lobbied the administration to exempt the financial
instruments from the rules. They argued that clearing requirements were
unnecessary given that most contracts expired after one week. Under the
Dodd-Frank financial reform legislation enacted last year, the Treasury
Secretary was given the power to determine whether the narrow subset of
foreign exchange derivatives should be tightly regulated. The rest of the
over-the-counter derivatives market would be forced through clearinghouses,
which would stand between two parties and assume the risk if one party
defaults. Some fear that this decision to exempt foreign exchange
derivatives will open up the opportunity for arbitrage in which derivatives
users look to employ the least-regulated products. However, the foreign
exchange swaps market is different from other derivatives markets and under
Dodd-Frank it would be illegal to use the instruments to evade tougher
scrutiny that applies to other derivatives. The proposal is open for comment
for 30 days, after which the Treasury will issue its final decision. The
derivatives market received another round of regulations last week as the
CFTC proposed rules that would force hedge funds and other firms that trade
derivatives to bolster their capital cushion. The new capital rules are
largely aimed at some 200 swap dealers- brokerage firms, large energy
trading shops and Wall Street affiliates that arrange deals. They will also
apply to hedge funds and other companies that have huge positions in swaps.
Regulators hope that this proposal to build capital cushions in the
derivatives industry could help prevent a repeat of the 2008 financial
collapse. Firms will now have to put aside enough cash to cover unforeseen
calamities. Until recently, regulators had little authority to set any rules
for this market. Still, there is no guarantee that enhanced capital levels
will avert future disasters or that there is a magic number that regulators
see as a cure-all. Swap dealers and major trading firms that are already
registered with the commission as futures brokers will have to hold at least
$20 million in so-called adjusted net capital. Another set of firms will
have to keep “tangible net equity” equal to $20 million. This standard will
allow energy firms, for example, to count oil in the ground as part of their
calculation. CFTC Chairman Gary Gensler expressed concern that the proposal
is too lenient on the industry, but the commissioners voted 4 to 1 in favor
of advancing the proposal to a 60-day public comment period. They are
expected to vote on a final version of the rules by the fall. One of the
agency’s two Republican commissioners voted against the plan, in line with
actions of some Republican lawmakers that have introduced measures in
Congress to delay or derail the capital requirements and other commission
rules.According to a recent New York Times/CBS News poll, most Americans say
they still prefer cuts in government spending to increasing taxes on
corporations as a means of cutting the federal budget deficit. But when
given a choice between raising taxes on corporations and raising taxes on
households that make more than $250,000 a year, almost two-thirds of
respondents opt for taxing businesses. There is a strong partisan divide: A
majority of Republicans and independents favor cutting government spending
over raising taxes on businesses, while Democrats are evenly divided.
Democrats strongly support increasing corporate taxes rather than adding to
the taxes of affluent households; Republicans and independents are split. In
general, however, few Americans back increasing taxes on American
businesses: only 37 percent said corporate taxes should be increased to help
reduce the federal budget deficit. The rest agree with an alternative
argument that increased taxes would discourage American companies from
creating jobs and hurt them in the global marketplace. Thirty-two percent
would rather see corporate taxes remain as they are now and 26 percent said
taxes on corporate profits should be decreased. Six in 10 Americans surveyed
think companies use their tax savings to give bonuses to executives and
dividends to shareholders. About a quarter, 23 percent, said they thought
tax savings were mostly reinvested back in the corporation and only 4
percent said savings were used to create new jobs for American workers.
Almost half said all companies should be taxed at the same rate. About a
third said some industries deserved a tax break. Small businesses, green
companies and those in the health care industry were most frequently
mentioned as deserving of tax breaks. 3. FTAs: South Korea, Columbia and
PanamaRepublicans have renewed pressure on President Barack Obama to quickly
submit free trade deals with South Korea, Colombia and Panama to Congress
for action by July 1. The July deadline looms large because that is when
rival trade deals take effect— South Korean's pact with the European Union
and Colombia's with Canada—that threaten to further erode U.S. market share
in those countries.While administration officials have said all three deals
would attract the bipartisan support to pass, Democrats remain divided. Only
the South Korean deal has attracted the backing of some unions, after a
December deal that further opened up the country's auto sector. However, the
White House has begun talks with Congress on the timing of passing trade
deals with South Korea, Colombia and Panama. Like the proposed Korea deal,
the Panama and Colombia free-trade pacts were negotiated by the Bush
administration, but have languished without congressional ratification.US
Trade Representative Ron Kirk announced that the Administration is ready to
launch talks on submitting the Panama deal for approval after the Panamanian
government ratified a tax treaty that removes one of the last hurdles to
completion of the trade pact. Panama in the past has been a tax haven used
by those trying to avoid paying taxes. The issues surrounding Colombia,
however, are a more direct test of Obama’s campaign pledge to retool US
trade policy so that it does not extend free-trade privileges to countries
with lower labor, environmental and other standards. While the approach has
a moral dimension, it is also meant to keep US workers from competing
against countries where goods can be produced more cheaply because the laws
are lax. However, after a recent meeting in Washington between President
Obama and Colombian President Juan Manuel Santos to discuss the trade pact,
Santos agreed to improve labor conditions in Colombia. Under the plan
brokered by US and Colombian trade officials, Colombia will follow a roadmap
to make incremental changes to its labor laws this year including providing
greater protections for union leaders, such as shop stewards and bargaining
committee members, for workers trying to organize or join a union, and for
former union activists who may be threatened because of their past
activities. The plan also requires the Colombian government to revise its
teacher relocation and protection program to address high risks to teachers,
require sentences of up to five years in jail for threats against labor
union workers and direct the Colombian National Police to assign 95
full-time judicial police investigators to help in prosecution. US trade
officials plan to monitor Colombia's progress on this labor rights action
plan to determine when the deal is ready to move forward. US Trade
Representative Ron Kirk said there’s “zero” possibility that the three
pending free-trade agreements will be bundled into a single bill. However,
Republicans in Congress want to consider all three at the same time so that
Congress can take them up by July 1. Senator Mitch McConnell (R-KY) led 43
Republicans in vowing to block action on President Obama’s nominees for
Commerce Secretary and other trade-related nominees until Congress gets all
three agreements. Kirk said his office is discussing with lawmakers when to
send the implementing legislation for accords with South Korea, Colombia and
Panama. The deals won’t be sent as a package because no legal precedent
exists and combining them into one measure would increase the risk for
rejection on procedural grounds, he said. Overall, President Obama is
seeking to move forward on a broad trade agenda beyond the free-trade
agreements. That includes not only trying to renew expired programs to
assist displaced workers - that will likely be used as a carrot to persuade
some Democratic voters to pass the three FTAs- but also to provide duty-free
preferences to imports from developing countries and prepare for lifting
trade restrictions with Russia as that nation seeks to join the World Trade
Organization.] [image: 1. This Week in Washington: Debt Ceiling
DebateCongress returned this week from a two-week recess just as the
Treasury Department has announced that a greater-than-expected increase in
tax revenue has extended the government’s ability to pay its bills without
an increase in the debt ceiling by about a month. The new date is August 2.
The new estimate creates a significant grace period for Congress to consider
an increase in the maximum amount that the government can borrow, a step
that House Republicans say they will not take without an agreement to curb
spending. Many Republicans have publicly agreed that Congress must raise the
ceiling, although they insist that the White House must first agree to some
form of meaningful spending limits. A vocal minority of members, however,
have said that they are reluctant to raise the limit, and that Secretary
Geithner has overstated the possible consequences of leaving the limit in
place.Some bipartisan talks are under way in the Senate, and Vice President
Biden is to convene a negotiating session between White House officials and
Congressional leaders later this week. There is a growing consensus among
Democrats that some restrictions on spending are reasonable and necessary to
secure an agreement with Republicans.Reflecting the political potency of the
issue, several moderate Democrats in the Senate have joined their GOP
colleagues in both houses in calling for the debt ceiling vote to include a
menu of specific cuts instead of a “clean” debt bill-a straight up-or-down
vote- that the White House has called for. The willingness of Congressional
Democrats to examine such options reflects a recognition that lawmakers
cannot credibly forge ahead with a vote on the debt limit without some
accompanying anti-deficit steps to make the increase palatable to voters.
This heightens the possibility that any deal would include reductions to
programs more guaranteed than the ones included in last month’s FY 2011
agreement. But according to party operatives, Republicans hope to roll all
of this into a bargaining strategy: trading a temporary extension of the
ceiling — five, six or seven months — for an escalating menu of cuts.The
experience in the 1980s with the Gramm-Rudman law, and later attempts to
impose automatic budget controls through pay-as-you-go rules, also show that
Congress and the White House can and will find ways around them even if the
proposals survive legal challenges. Faced with the prospect of spending cuts
or tax increases required under the Gramm-Rudman law, lawmakers sometimes
looked to more optimistic economic projections to avoid the reductions or
skirted the cuts with budget gimmicks. And Congress has often waived its
pay-as-you-go rules when they got in the way of costly legislation like the
2009 stimulus spending. The reality is that the fear factor is the single
most important incentive for a deal. A prolonged impasse could lead
lawmakers to cobble together a package of small-ball reform measures that
allows them to raise the debt limit but does little more than offer
political cover. In coming weeks, the debt-limit fight is likely to become
entangled in the consideration of broader plans to address the government’s
chronic budget deficits and the mounting debt. 2. Financial Shorts: Forex
Swaps, Derivative Capital Cushions; Public Opinion on Corporate TaxIn what
was characterized as a victory for business, the Treasury Department
proposed that commonly used foreign exchange swaps and forwards should be
exempted from rules intended to tighten oversight of other derivatives. The
Treasury said that forcing these derivatives through clearinghouses and onto
exchanges was not necessary because existing procedures in the foreign
exchange market mitigate risk and ensure stability. Foreign exchange swaps
and forwards, which represent about 5 percent of the $600 trillion
over-the-counter derivatives market, are used to lock in prices as
protection against exchange rate fluctuations. Businesses, big banks and the
securities industry lobbied the administration to exempt the financial
instruments from the rules. They argued that clearing requirements were
unnecessary given that most contracts expired after one week. Under the
Dodd-Frank financial reform legislation enacted last year, the Treasury
Secretary was given the power to determine whether the narrow subset of
foreign exchange derivatives should be tightly regulated. The rest of the
over-the-counter derivatives market would be forced through clearinghouses,
which would stand between two parties and assume the risk if one party
defaults. Some fear that this decision to exempt foreign exchange
derivatives will open up the opportunity for arbitrage in which derivatives
users look to employ the least-regulated products. However, the foreign
exchange swaps market is different from other derivatives markets and under
Dodd-Frank it would be illegal to use the instruments to evade tougher
scrutiny that applies to other derivatives. The proposal is open for comment
for 30 days, after which the Treasury will issue its final decision. The
derivatives market received another round of regulations last week as the
CFTC proposed rules that would force hedge funds and other firms that trade
derivatives to bolster their capital cushion. The new capital rules are
largely aimed at some 200 swap dealers- brokerage firms, large energy
trading shops and Wall Street affiliates that arrange deals. They will also
apply to hedge funds and other companies that have huge positions in swaps.
Regulators hope that this proposal to build capital cushions in the
derivatives industry could help prevent a repeat of the 2008 financial
collapse. Firms will now have to put aside enough cash to cover unforeseen
calamities. Until recently, regulators had little authority to set any rules
for this market. Still, there is no guarantee that enhanced capital levels
will avert future disasters or that there is a magic number that regulators
see as a cure-all. Swap dealers and major trading firms that are already
registered with the commission as futures brokers will have to hold at least
$20 million in so-called adjusted net capital. Another set of firms will
have to keep “tangible net equity” equal to $20 million. This standard will
allow energy firms, for example, to count oil in the ground as part of their
calculation. CFTC Chairman Gary Gensler expressed concern that the proposal
is too lenient on the industry, but the commissioners voted 4 to 1 in favor
of advancing the proposal to a 60-day public comment period. They are
expected to vote on a final version of the rules by the fall. One of the
agency’s two Republican commissioners voted against the plan, in line with
actions of some Republican lawmakers that have introduced measures in
Congress to delay or derail the capital requirements and other commission
rules.According to a recent New York Times/CBS News poll, most Americans say
they still prefer cuts in government spending to increasing taxes on
corporations as a means of cutting the federal budget deficit. But when
given a choice between raising taxes on corporations and raising taxes on
households that make more than $250,000 a year, almost two-thirds of
respondents opt for taxing businesses. There is a strong partisan divide: A
majority of Republicans and independents favor cutting government spending
over raising taxes on businesses, while Democrats are evenly divided.
Democrats strongly support increasing corporate taxes rather than adding to
the taxes of affluent households; Republicans and independents are split. In
general, however, few Americans back increasing taxes on American
businesses: only 37 percent said corporate taxes should be increased to help
reduce the federal budget deficit. The rest agree with an alternative
argument that increased taxes would discourage American companies from
creating jobs and hurt them in the global marketplace. Thirty-two percent
would rather see corporate taxes remain as they are now and 26 percent said
taxes on corporate profits should be decreased. Six in 10 Americans surveyed
think companies use their tax savings to give bonuses to executives and
dividends to shareholders. About a quarter, 23 percent, said they thought
tax savings were mostly reinvested back in the corporation and only 4
percent said savings were used to create new jobs for American workers.
Almost half said all companies should be taxed at the same rate. About a
third said some industries deserved a tax break. Small businesses, green
companies and those in the health care industry were most frequently
mentioned as deserving of tax breaks. 3. FTAs: South Korea, Columbia and
PanamaRepublicans have renewed pressure on President Barack Obama to quickly
submit free trade deals with South Korea, Colombia and Panama to Congress
for action by July 1. The July deadline looms large because that is when
rival trade deals take effect— South Korean's pact with the European Union
and Colombia's with Canada—that threaten to further erode U.S. market share
in those countries.While administration officials have said all three deals
would attract the bipartisan support to pass, Democrats remain divided. Only
the South Korean deal has attracted the backing of some unions, after a
December deal that further opened up the country's auto sector. However, the
White House has begun talks with Congress on the timing of passing trade
deals with South Korea, Colombia and Panama. Like the proposed Korea deal,
the Panama and Colombia free-trade pacts were negotiated by the Bush
administration, but have languished without congressional ratification.US
Trade Representative Ron Kirk announced that the Administration is ready to
launch talks on submitting the Panama deal for approval after the Panamanian
government ratified a tax treaty that removes one of the last hurdles to
completion of the trade pact. Panama in the past has been a tax haven used
by those trying to avoid paying taxes. The issues surrounding Colombia,
however, are a more direct test of Obama’s campaign pledge to retool US
trade policy so that it does not extend free-trade privileges to countries
with lower labor, environmental and other standards. While the approach has
a moral dimension, it is also meant to keep US workers from competing
against countries where goods can be produced more cheaply because the laws
are lax. However, after a recent meeting in Washington between President
Obama and Colombian President Juan Manuel Santos to discuss the trade pact,
Santos agreed to improve labor conditions in Colombia. Under the plan
brokered by US and Colombian trade officials, Colombia will follow a roadmap
to make incremental changes to its labor laws this year including providing
greater protections for union leaders, such as shop stewards and bargaining
committee members, for workers trying to organize or join a union, and for
former union activists who may be threatened because of their past
activities. The plan also requires the Colombian government to revise its
teacher relocation and protection program to address high risks to teachers,
require sentences of up to five years in jail for threats against labor
union workers and direct the Colombian National Police to assign 95
full-time judicial police investigators to help in prosecution. US trade
officials plan to monitor Colombia's progress on this labor rights action
plan to determine when the deal is ready to move forward. US Trade
Representative Ron Kirk said there’s “zero” possibility that the three
pending free-trade agreements will be bundled into a single bill. However,
Republicans in Congress want to consider all three at the same time so that
Congress can take them up by July 1. Senator Mitch McConnell (R-KY) led 43
Republicans in vowing to block action on President Obama’s nominees for
Commerce Secretary and other trade-related nominees until Congress gets all
three agreements. Kirk said his office is discussing with lawmakers when to
send the implementing legislation for accords with South Korea, Colombia and
Panama. The deals won’t be sent as a package because no legal precedent
exists and combining them into one measure would increase the risk for
rejection on procedural grounds, he said. Overall, President Obama is
seeking to move forward on a broad trade agenda beyond the free-trade
agreements. That includes not only trying to renew expired programs to
assist displaced workers - that will likely be used as a carrot to persuade
some Democratic voters to pass the three FTAs- but also to provide duty-free
preferences to imports from developing countries and prepare for lifting
trade restrictions with Russia as that nation seeks to join the World Trade
Organization.