Budget cuts could impair trade agenda: USTR

A top trade official warned that automatic budgets cuts that start taking effect on Friday could hamper ongoing U.S. trade talks in the Asia-Pacific region and another proposed set of negotiations with the European Union.

"The sequester cuts will add a significant hurdle to these and other efforts to support American jobs by opening markets, including through reduced staffing (and) reduced ability to engage with our trading partners," said Tim Reif, general counsel with the U.S. Trade Representative's office.

"Additionally, USTR may no longer have the funding to initiate new legal disputes, which would result in reduced enforcement of trade agreements, so the sequester is an important issue for us," Reif said at a trade conference at the Georgetown University Law Center.

It was the latest warning from President Barack Obama's administration of the negative impact of the automatic spending cuts, or "sequester," set to begin on March 1 because the White House and Congress have not agreed on any alternative plan to reduce the federal budget deficit.

The cuts come as United States engages in negotiations with 10 countries in the Asia-Pacific region on a free trade pact. Expectations also are rising that Japan will join the talks following Japanese Prime Minister Shinzo Abe's meeting with Obama last week at the White House.

"Including the world's third-largest economy in a comprehensive high-standard agreement would be a tremendous economic and strategic benefit for both our economies," Reif said, adding the United States "welcomed" Tokyo's renewed signs of interest in the negotiations.

U.S. trade officials are also preparing to launch trade negotiations with the 27-nation European Union and on another set of talks to forge an international agreement to tear down barriers to trade and investment in service sectors ranging from banking to insurance to telecommunications.

Another U.S.-led trade initiative is aimed at updating the World Trade Organization's 1996 Information Technology Agreement by eliminating tariffs on an expanded list of technology goods.

The U.S. Trade Representative's office on Friday is due to release its annual report on the "president's trade agenda," laying out its priorities for the year.

The report usually contains few surprises but some lawmakers and business groups have been hoping the 2013 edition will call for "trade promotion authority" (TPA), a piece of legislation considered essential for U.S. trade negotiations.

Reif's comments at the law school on Thursday suggested the report would stop short of that.

"We obviously recognize the importance of trade promotion authority" and have had discussions with key congressional committee about the bill, Reif said.

"We will expand that dialogue to include a more directed conversation about TPA at the appropriate time."

TPA, which expired in 2007, allows the White House to negotiate agreements that can be submitted be Congress for a straight up-or-down vote without any amendment. It is intended to give other countries confidence that any deal they strike with the United States won't be picked apart by U.S. lawmakers.

Congress has not voted on a TPA bill since 2002, when it caused a bitter fight. Republicans, who generally favor free trade, passed the bill over the objections of Democrats, many of whom blame past trade agreements for U.S. job losses.

(Editing by Andrea Ricci and Eric Walsh)