Senate panel asks Trade Representative nominee about offshore investments

WASHINGTON – Michael Froman, the administration’s choice to become the next U.S. Trade Representative, appeared headed for Senate confirmation despite Republican questions Thursday about his investments in a hedge fund in the Cayman Islands, a well-known tax haven.

Sen. Orrin Hatch of Utah said he planned to vote for Froman, who most recently has served as President Barack Obama’s deputy national security adviser for international economic affairs. He has also helped negotiate past trade agreements.

But Hatch, the top Republican on the Senate Finance Committee, said Froman was the third cabinet-level nominee this year to have made use of offshore investments. Hatch spoke of the “hypocrisy” of the Obama administration, which has strongly condemned corporations and the wealthy who keep money in foreign tax shelters. The other two were Jack Lew, now the Treasury Secretary, and Penny Pritzker, the nominee to head the Commerce Department.

Hatch also noted that Froman received more than $5 million in bonuses while working for Citigroup during the financial crisis when Citigroup was receiving $45 billion in taxpayer assistance.

“The president’s rhetoric,” Hatch said, “seemed to suggest that offshore investments, investments in outsourcing and Wall Street bonuses are not simply bad policy, but morally wrong. Yet the same vitriol used to attack the president’s political opponents does not seem to apply to his nominees for cabinet positions.”

Froman, asked about his investment by committee chairman Max Baucus, D-Mont., said he had invested in the employee-based international fund to diversify his portfolio and not because of where it was located. “I paid every penny of taxes due on that fund. I am not aware of any tax benefit that I received by virtue of investment in that fund,” he said.

Otherwise, Froman was widely praised by the committee, and Baucus said he hoped to win quick confirmation for Froman to head the trade office, which employs less than 250 but is responsible for negotiating several major trade agreements.

The USTR hopes to conclude talks this year on the Trans-Pacific Partnership, an Asia-Pacific trading bloc that last year purchased some $620 billion, or 40 per cent of U.S. goods exports. The administration is also set to launch talks on reducing trade barriers with the European Union known as the Transatlantic Trade and Investment Partnership.

It is “one of the most ambitious trade agendas in U.S. history,” Froman said.

Froman also assured the senators that Obama supported the renewal of Trade Promotion Authority, also known as fast track, which expired in 2007. Trade Promotion Authority assures that the administration can negotiate trade deals that Congress can accept or reject but cannot change. Trading partners are reluctant to sign on to trade deals that are subject to congressional tinkering, but TPA has never been popular among unions and some Democrats who want to ensure that labour and environmental rights are protected in trade deals.

Senators also presented Froman with a long list of specific trade concerns, including Chinese solar energy exports, Chinese and Japanese currency rates, Japanese obstacles to auto imports, labour rights in Bangladesh and European sanitary standards that block U.S. food product imports. Several senators urged Froman to take a tough stand on Indian policies they said have led to violations of U.S. intellectual property rights and obstacles to U.S. investment.

On Thursday a bipartisan group of 230 House members sent Obama a letter urging him to address currency manipulation in the Trans-Pacific Partnership talks.

“Over the last couple years I’ve been in countless meetings with USTR and Treasury pressing them to include meaningful currency provisions in our trade agreements,” said Rep. Mike Michaud, D-Maine. “To date they have done nothing.”