United States WT/TPR/S/56 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
(1) OVERVIEW  
1. No major changes regarding the Unites States' trade policy regime have taken place since the 
last U.S. Review in 1996.  "Fast-track" Congressiona l consideration of legislation implementing U.S. 
trade agreements expired in 1994;  however, th e Uruguay Round Agreements Act (URAA) gave the 
President authority to modify U.S. duties to the ex tent necessary to complete the "zero-for-zero" tariff 
negotiations begun during the Uruguay Round, regulatory changes may be effected in the U.S. trade 
regime as necessary and trade negotiations may be  started, and completed, without "fast-track" 
provisions. 
2. The United States has been an active participant in WTO activities in the period under review, 
as witnessed by its participation in the WTO ne gotiations on Telecommunications and Financial 
Services, as well as in the first round of the Information Technology Agreement (ITA) tariff 
reductions, the WTO Guidelines for the Negotiation of Mutual Recognition Agreements on Accountancy, and two agreements to  expand the coverage of the Agre ement on Pharmaceuticals.  The 
United States is hosting the WTO's Third Minister ial Conference, to take place in Seattle in 
November 1999.  The United States has used exte nsively the WTO dispute settlement mechanism in 
the 1996-98 period.  It has been a party in 78 disputes; of which 48 as plaintiff, and 30 as defendant.  The United States participates in the Working Groups on Competition Policy and Investment, as well 
as that on Electronic Commerce. 
3. No new regional arrangements we re concluded by the United States in the 1996-98 period.  
However, in the context of the North America Free Trade Agreement (NAFTA), a second round of 
accelerated tariff reductions was put in place, on 1 A ugust 1998 with Mexico.  All tariffs covered by 
the NAFTA were eliminated between the United Stat es and Canada on 1 January 1998.  In addition, 
NAFTA rules of origin with resp ect to automobiles were modified in 1998.  Negotiations started 
within the Asia-Pacific Economic Cooperation (APEC) to push forward an agenda of tariff cuts in 
eight sectors, which are expected to be brought to  the WTO.  Negotiations towards a Free Trade Area 
of the Americas (FTAA) were given a push forward in the Santiago Summit in April 1998.  A joint 
plan between the United States and the European Union for a Transatlantic Economic Partnership 
(TEP) was concluded in November 1998. 
4. The United States concluded 63 bilateral trade,  investment, and intellectual property rights 
agreements between 1996 and 1998, of which 53 entered into force on 31 December 1998.  The scope 
of these agreements varies considerably:  some address a trade practice by a U.S. trading partner; 
some are market-opening agreements;  some are sector or area specific, mostly for the protection of investment or intellectual property rights;  and othe rs are mutual recognition agreements on standards.  
Some of these agreements are with countries that  are not-Members of the WTO and are aimed at 
setting disciplines similar to those already in existence in the multilateral trading system. 
5. The United States grants unilateral preferentia l market access to products from selected 
developing countries, under schemes such as the Generalized System of Preferences (GSP), the 
Andean Trade Preferences Act (ATPA), and the Ca ribbean Basin Economic Recovery Act (CBERA).  
An initiative to grant wider preferences to African countries, is being considered by Congress.  The 
GSP was renewed for a year in 1998, up to 30 June 1999. 
(2) T
RADE POLICY OBJECTIVES  
6. Over the years, various provisions of U.S. trade legislation have set out U.S. negotiating 
objectives with respect to particular trade subjects.   For example, the Trade Act of 1974 and the WT/TPR/S/56 Trade Policy Review 
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Omnibus Trade and Competitiveness Act of 1988, included  general and specific trade negotiating 
objectives that Congress prescribed for the Tokyo Ro und and the Uruguay Round, respectively.  Bills 
introduced in Congress in 1997 and 1998 to renew "f ast-track" legislative procedures, including the 
Reciprocal Trade Agreements Act of 19981, drew on the two earlier Acts and identified objectives to 
be pursued in future negotiations, in particul ar enhancing market access for goods and services, 
reinforcing intellectual property protection, a nd increasing market access in agricultural trade. 
(3) DEVELOPMENT AND ADMINISTRATION OF TRADE POLICY  
(i) Main trade laws and authority 
7. The provisions of U.S. trade legislation are set out in Title 19 of the U.S. Code.  Some of the 
principal trade laws included in Title 19 are:  the Tariff Act of 1930, as amended;  the Trade Act of 
1974;  the Trade Agreements Act of 1979;  the Omnibus Trade and Competitiveness Act of 1988;  the 
North American Free Trade Agreement Implem entation Act of 1993;  and the Uruguay Round 
Agreements Act of 1994 (URAA). 
8. The Tariff Act of 1930 (19 U.S.C. Chapter 4), includes provisions regarding determination 
and collection of customs duties, customs admini stration, foreign trade zones, anti-dumping and 
countervailing duties.  Chapter 7 of Title 19 (T rade Expansion Program ) contains provisions 
regarding trade agreements, including the general aut hority to enter into negotiations (Subchapter 2, 
Part I);  national security provisions (Subchapter  2, Part IV);  general provisions such as the 
most-favoured-nation (MFN) principle;  and tari ff adjustment.  The Trade Act of 1974, which 
includes provisions regarding negotiating authorit y for trade agreements, bilateral negotiations, 
safeguards, the balance-of-payments authority, an d authorizes the granting of preferences under the 
GSP, among other things, is contained in 19 U.S.C.  Chapter 12.  The Trade Agreements Act of 1979 
(19 U.S.C. Chapter 13) establishes the links betwee n trade agreements and U.S. law, and includes a 
number of provisions regarding standards, and U.S.  participation in intern ational standard setting 
activities.  The URAA is contained in Chapter 22 of Title 19. 
9. Under the U.S. Constitution, Congress has the u ltimate authority to regulate trade with 
foreign nations, while the President negotiates a nd concludes trade agreements on behalf of the 
United States.  U.S. law and policy governing trade in goods is largely the province of the Federal 
Government.  The U.S. legal regime for services, investment and intellectual property, however, is a 
mix of federal and state law, with state regulation predominant in certain areas.  For example, state 
legislation largely governs the provision of professional services as well as certain aspects of financial services, such as insurance (Chapter IV).  Intellectual property rights issues are covered by federal 
legislation in the case of patents and copyright, while trade marks are protected by both federal and 
state laws.  Over the years, Congress has delegated to  the President the administration of certain trade 
policy issues.  Since the mid-1930s, for example,  Congress has repeatedly given the President 
authority to implement tariff reductions in exch ange for trade concessions from other countries.  
During the period 1974 to 1994, Congress put in pl ace "fast-track" procedures under which legislation 
required to implement free-trade and multilateral trade agreements could be submitted to Congress 
and voted on without amendment and within a fixed period (section iii). 
(ii) Agencies involved in trade policy formulation and implementation  
10. The main agency responsible for trade policy fo rmulation is the Office of the United States 
Trade Representative (USTR), which is part of th e Executive Office of the President.  USTR is in 
                                                     
 
1These bills were not enacted in the 105th Congress.  See section on "fast-track", below. United States WT/TPR/S/56 
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charge of developing and coordinating U.S. interna tional trade policy and conducting negotiations in 
respect of trade, commodities, and investment. 
11. USTR deals with all WTO matters, and with  trade, commodity, and direct investment issues 
in OECD and UNCTAD.  The agen cy is headed by the United St ates Trade Representative who is a 
member of the President's Cabinet and is the main negotiator, trade advisor, and spokesperson for the 
President on trade, commodity and investment matte rs.  USTR works in consultation with Congress, 
particularly with the five Members from each House who are appointed as official Congressional 
advisors on trade policy, with its primary comm ittees of jurisdiction, the House Ways and Means 
Committee and Senate Finance Committee, and with  other Senators or Representatives who have 
been appointed as advisors on particular issues or negotiations.  USTR reports  annually to Congress, 
on behalf of the President, on the U.S. trade agreem ents programme and its implementation, including 
WTO activities. 
12. Within USTR, the Office of Monitoring and Enfo rcement is in charge of monitoring foreign 
countries' compliance with trade agreements, of pursuing enforcement actions, invoking dispute 
settlement procedures in the WTO and under the NA FTA, and applying and enforcing trade laws 
administered by the USTR. 
13. USTR administers and chairs two bodies where U.S. Government positio ns on international 
trade and trade-related investment issues are devel oped and coordinated:  the staff-level Trade Policy 
Staff Committee (TPSC), and th e subcabinet-level Trade Policy Review Group (TPRG), both 
composed of 17 federal agencies and offices.  A third body, the cabinet-level National Economic 
Council (NEC), chaired by the President, has been playing an increasingly important role in trade 
policy formulation.  The NEC Deputies Committee considers decision memoranda from the TPRG, as 
well as particularly important or c ontroversial trade-related issues. 
14. USTR is also responsible for responding to Section 301 complaints against unfair foreign 
trade practices, coordinating inter-agency vi ews in import relief cases under Section 201(escape 
clause) as well as investigations regarding perceive d discrimination in public procurement (Executive 
Order 13116, which reinstituted Title VII of the Omnibus Trade and Competitiveness Act of 1988) 
and telecommunications equipment procurem ent (Section 1377 of the Omnibus Trade and 
Competitiveness Act of 1988); it has the authority, under the Omnibus Trade and Competitiveness Act of 1988, to take action under Section 301 of the Tr ade Act of 1974, subject to the direction of the 
President.  USTR also administers the Generalized System of Preferences. 
15. Advisory committees, established by Congress in  1974, and coordinated by USTR, play an 
important role in trade policy formulation.  They provide information and advice on U.S. negotiating objectives and bargaining positions before entering into  trade agreements;  on the operation of any 
trade agreement once entered into;  and on other ma tters arising in connection with the development, 
implementation, and administration of U.S. trade policy.  The private sector advisory committee 
system consists of 33 advisory committees, with a total membership of approximately 1,000 advisors.  
The advisory committee system is organized in th ree tiers: the President’s Advisory Committee for 
Trade Policy and Negotiations (ACTPN); seven policy advisory committees; and 25 technical, 
sectoral, and functional advisory committees.  The President appoints the 45 ACTPN members who must broadly represent key economic sectors affected by trade, for two-year terms, in accordance with the Trade Act of 1974.  The committee considers tr ade policy issues in the context of the overall 
national interest.  The seven policy advisory co mmittees are appointed by the USTR alone or in 
conjunction with other Cabinet officers.  They ar e the Industry Policy Advisory Committee (IPAC);  
the Agricultural Policy Advisory Committee (APAC) ;  the Labor Advisory Committee (LAC);  the 
Defense Policy Advisory Committee (DPACT);  a nd the Trade and Environment Policy Advisory WT/TPR/S/56 Trade Policy Review 
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Committee (TEPAC), managed jointly by USTR a nd the Departments of Commerce, Agriculture, 
Labor, and Defense, and the Environmental Protection Agency, resp ectively;  and the 
Intergovernmental Policy Advisory Committee (IG PAC), and the Trade Advisory Committee on 
Africa (TACA) managed solely by USTR. 
16. The 25 sectoral, functional, and technical advisory committees, are organized in two areas: 
industry (Industry Sector Advisory Committees or ISACs) and agriculture (Agricultural Technical 
Advisory Committees or ATACs).  Representatives are appointed jointly by the USTR and the 
Secretaries of Commerce or Agriculture, respect ively.  Each sectoral or technical committee  
represents a specific sector or commodity group and provides specific technical advice concerning the 
effect that trade policy decisions may have on its sector.  There are three functional advisory 
committees monitoring issues such as customs valu ation, unfair trade practices, and intellectual 
property. 
17. USTR’s Office of Intergovernmental Affairs and Public Liaison is in charge of coordinating 
the activities of the private sector advisory committ ee system.  The office also  serves as the liaison for 
all state and local governments for purposes of im plementing the NAFTA and the WTO Agreements. 
18. Several units of the Department of Commerce play an important role in both trade policy 
formulation and administration.  These include the International Trade Administration (ITA), the Bureau of Export Administration (BEA), the Nationa l Institute of Standard s and Technology (NIST), 
the Patent and Trademark Office (PTO), and th e National Telecommunications and Information 
Administration (NTIA).  An important function of the ITA concerns gathering information on and 
evaluating trade agreement compliance through the Trade Compliance Center.   
19. The Import Administration, which is a part of the ITA, and the United States International 
Trade Commission (USITC), also conduct investiga tions in anti-dumping and countervailing duty 
proceedings.  The USITC also conducts safeguards investigations under Section 201 of the Trade Act 
of 1974, as well as investigations under Section 337 of the Tariff Act of 1930, which deals with unfair 
practices in U.S. import trade, in particular the infringement of U.S. inte llectual property rights.  
20. The Department of Agriculture (USDA) plays a key role in the formulation and 
implementation of trade policy for agricultural produc ts.  The Foreign Agricultural Service (FAS) is 
the primary trade policy agency within USDA.  It works closely with USTR in the formulation of 
agricultural trade policy and operates agricultura l export and import programmes such as the Dairy 
Export Incentive Program (DEIP) and the dairy a nd sugar import licensing programmes.  The Animal 
and Plant Health Inspection Service (APHIS) and the Food Safety Inspection Service (FSIS) are 
responsible for the inspection of many imported agri cultural products, and are involved in the work of 
international standard setting b odies such as Codex Alimentarius. 
21. The State Department's Bureau of Economic and Business Affairs (EB) formulates and 
carries out U.S. foreign economic policy in coop eration with other U.S. government agencies 
including the Department of the Treasury, the Department of Commerce, the Department of 
Transportation, USTR, the Export-Import Bank, etc.  The EB's main role is to integrate U.S. 
economic interests with the overall foreign policy goa ls of the United States in the negotiation of 
agreements with foreign governme nts bilaterally, and in multilate ral organizations, including the 
WTO.  The EB coordinates issues related to econo mic sanctions, takes the lead in negotiations on 
bilateral civil aviation treaties and in issues regard ing combating bribery in international trade, and 
participates in WTO activities. United States WT/TPR/S/56 
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22. Other agencies that are part of the TPSC and participate in the formulation of U.S. trade 
policy include the Departments of the Treasury, Labor , Justice, Defense, Interior, Transportation, 
Energy, and Health and Human Services, the E nvironmental Protection Agency, the Office of 
Management and Budget, the Counc il of Economic Advisors, the U.S. Agency for International 
Development, the National Economic Council and the National Security Council.  The U.S. 
International Trade Commission, which is not part of the executive branch, is a non-voting member of 
the TPSC and an observer at TPRG meetings.  
(iii) "Fast-track" procedures 
23. Under the Reciprocal Trade Agreements Act of 1934, Congress delegated authority to the 
President to modify or reduce tariffs up to 50%, in exchange for reciprocal concessions negotiated 
with U.S. trading partners.  This authority was the impetus for numerous bilateral trade agreements 
and was the authority the President used to im plement U.S. tariff reduc tions negotiated under the 
General Agreement on Tariffs and Trade (GATT).  The renewal of this authority was the base for 
U.S. participation in the early GATT rounds of tariff negotiations, through to the Kennedy Round.  
The Act was extended eleven times, generally fo r periods of between one and three years. 
24. Once negotiations in the GATT advanced to include non-tariff measures, Congress extended 
the President’s tariff proclamation authority and al so put in place "fast-track" procedures.  Under 
these procedures, Congress agreed to expedited cons ideration and vote, without amendment, on trade 
legislation submitted by the President to implemen t trade agreements, provided that the President 
notified and consulted with Congress over the course of the negotiation according to prescribed rules.  
First enacted in the Trade Act of 1974, and later renewed through the Omnibus Trade and 
Competitiveness Act of 1988, "fast-track" procedures have been used in connection with U.S. 
participation in five major trade negotiations.  U.S. negotiations in the Uruguay Round and the 
NAFTA were conducted under "fast-track" procedur es in place under the 1988 Act.  "Fast-track" 
lapsed in 1994 after the Uruguay Round was comple ted along with most of the President's tariff 
reduction authority. 
25. Since 1974, the President's tariff proclamation authority and "fast-track" procedures have 
generally been enacted together. "Fast-track" was renewed in the 1988 Act, with specific procedures 
applicable to bilateral and regional agreements i nvolving the elimination or the harmonization of 
tariffs. The President's tariff-cutting authority unde r the 1988 Act allowed him to eliminate tariffs of 
5% or less, while entitling him to reduce ta riffs above 5% by up to 50% (Table II.1).2  Tariff 
reductions covered by the Preside nt's authority in the Tokyo Round and the Uruguay Round were 
subject to staging requirements, under which the annua l aggregate reduction in the rate of duty on any 
article could not exceed the greater of 3% ad valorem  or one tenth of the total reduction.  The 
reduction constraints were applicable to applied rates rather than bound rates. 
                                                      
 2 The President's tariff proclamation authority allowed tariffs to be cut by up to 40% in the 
Tokyo Round (Table II.1) WT/TPR/S/56 Trade Policy Review 
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Table II.1 
Comparison of 1974 and 1988 proclamation authority/"f ast-track" legislation with proposed 1998 legislation 
 Trade Agreements Act of 
1974 Omnibus Trade and 
Competitiveness Act of 1988 Proposed Export Expansion and 
Reciprocal Trade Agreements Act 
of 1998 
Key provisions Negotiating objectives, tariff 
proclamation authority , and 
"fast-track" procedures to enter into trade agreements, modify 
or continue existing duties.  
Authority to proclaim the necessary modifications. Negotiating objectives, tariff 
proclamation authority , and 
"fast-track" procedures to enter into trade agreements, modify or 
continue existing duties.  
Authority to proclaim the necessary modifications. Negotiating objectives, tariff 
proclamation authority , and "fast-
track" procedures to  enter into trade 
agreements, modify or continue 
existing duties.  Authority to 
proclaim the necessary modifications. 
Beginning and ending 
dates of proclamation authority 3 January 1975 – 
2 January 1980.  Proclamation 
authority and "fast-track" 
procedures renewed by Congress in 1979 and 1984. 
 23 August 1988 - 1 June 1991. 
Proclamation authority and "fast-track" procedures renewed by 
Congress in 1991 and extended to 1 June 1993.  Extended in 1993 to 
16 April 1994 only for Uruguay 
Round Negotiations. From approval to 1 October 2001, 
with an extension possible through 30 September 2005. 
Limitation on authority to reduce duty No tariff reduction to a rate 
below 40% of the rate applied 
on 1 January 1975, except for tariffs below 5% at that date. No tariff reduction to a rate below 
50% of the rate applied on 23 
August 1988, except for tariffs below 5% at that date. No tariff reduction to a rate below 
50% of the rate applied on date of 
enactment of bill, except for tariffs below 5% at that date. 
Staging requirement The annual aggregate reduction 
in the rate of duty on any article 
must not exceed the greater of 3% ad valorem  or one tenth of 
the total reduction.  No tariff 
reduction to take more than 10 years. The annual aggregate reduction in 
the rate of duty on any article 
must not exceed the greater of 3% ad valorem  or one tenth of the 
total reduction.  No tariff 
reduction to take more than 10 years. The annual aggregate reduction in 
the rate of duty on any article must 
not exceed the greater of 3% ad valorem  or one tenth of the total 
reduction.  No tariff reduction to 
take more than 10 years. 
Inclusion of 
GATT/WTO 
negotiations in limitation 
on duty reductions Yes. Yes. No. 
Overall negotiating 
objective To obtain more open and 
equitable market access and reduction of trade distortions. 
Eliminate agricultural barriers to the maximum extent 
feasible. To obtain more open equitable 
and reciprocal market access; the reduction or elimination of 
barriers and other trade-distorting policies and practices; a more 
effective system of international 
trading disciplines and procedures. To obtain more open and reciprocal 
market access for U.S. exports; to obtain the reduction or elimination 
of trade barriers and distortions affecting U.S. exports; to further 
strengthen the system of 
international dispute settlement; to foster economic growth, raise living 
standards, and promote full 
employment in the United States and to enhance the global economy; 
and to address aspects of foreign 
government policies and practices regarding labour, the environment, and other matters directly related to 
trade and hindering U.S. exports or 
distorting U.S. trade. 
Applicability of "fast-
track" to free-trade 
agreements Yes. Yes.  Special notification and 
consultation procedures apply. Yes. 
Sectoral negotiating 
objectives Tariff reduction and 
elimination of non-barriers to 
trade. Open foreign markets for U.S. 
manufacturing, especially high 
technology products, and agricultural goods.  Eliminate 
barriers in trade in services. Intellectual property, agriculture, 
electronic commerce, information 
technology, environmental and labour issues. 
Table II.1 (cont'd) United States WT/TPR/S/56 
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 Trade Agreements Act of 
1974 Omnibus Trade and 
Competitiveness Act of 1988 Proposed Export Expansion and 
Reciprocal Trade Agreements Act 
of 1998 
Requirements to qualify 
for "fast-track" President must consult with 
Congressional committees of jurisdiction during negotiations 
and notify Congress at least 90 
days before signing the trade agreement.  President must also 
solicit advice of private sector 
advisory groups and the public.  After agreement is reached, President submits to Congress a 
draft bill and a Statement 
Administrative Action, explaining how the Executive 
intends to carry out the 
agreement under existing legislative authority. President must consult with 
Congressional committees of jurisdiction during negotiations 
and notify Congress at least 90 
days before signing the trade agreement.  President must also 
solicit advice of private sector 
advisory groups and the public.  For free-trade agreements, President must notify and consult 
Congressional trade committees 
before or at an early stage of negotiations.  After agreement is 
reached, President submits to 
Congress a draft bill and a Statement Administrative Action, 
explaining how the Executive 
intends to carry out the agreement under existing legislative 
authority. Enables Congress to set priorities, 
provide advice, and exercise oversight at all stages of the 
negotiations and even after the 
agreement is concluded.  New consultation requirements in the 
Bill provide that the President must 
give written notice to Congress and put in writing the goals aimed at with any trade negotiation prior to 
its initiation.  Consultations to be 
maintained as negotiations progress and before an agreement is 
concluded. 
Procedure for withdrawing "fast-track" No specific procedure included. Congress may withdraw "fast-
track" if President fails or refuses 
to consult with Congress.  Congress may withdraw "fast-track" 
if President fails or refuses to 
consult with Congress. 
 
Source : WTO Secretariat, based on U.S. legislation a nd information provided by  the U.S authorities. 
26. In order to make a trade agreement and implementing bill eligible for “fast-track” 
consideration and vote, the President was require d to consult with those Congressional committees 
having jurisdiction over the field covered by the pr ospective agreement.  This invariably entailed 
consultations with the House Ways and Mean s Committee and with the Senate's Committee on 
Finance, but also extended to a broad range of  other committees of jurisdiction.  "Fast-track" 
procedures also called for the President to notif y Congress at least 90 days before signing an 
agreement and to provide Congress with informatio n describing the prospective agreement.  After 
concluding an agreement, the President w as required to submit to Congress the proposed 
implementing legislation, along with the trade ag reement and a description of how he intended to 
carry out the agreement under his existing regulatory authority, for approval or disapproval, without 
amendment and within 90 legislative days.3 
27. Neither general tariff proclamation authorit y nor procedures for “fast-track" Congressional 
consideration of legislation implementing U.S. trad e agreements have been renewed since the end of 
the Uruguay Round.  However, the Uruguay Round Agreements Act (URAA)  gave the President 
authority to modify U.S. duties to the extent necessary to complete the "zero-for-zero" tariff 
negotiations begun during the Uruguay Round.  The Pres ident used this authority, for example, to 
carry out duty reductions under the Information Tec hnology Agreement (ITA).  Bills to extend "fast-
track" procedures were introduced in 1997 and 1998 but were not enacted.  "Fast-track" procedures 
have been important in securing Congressional approval and implementation of major trade 
Agreements requiring changes in domestic legisla tion, such as the Tokyo Round and Uruguay Round 
Agreements and the NAFTA. 
                                                      
3These are essentially days in which both the Senate and the Houses of Representatives are in session.  
The 90 legislative-day limit applied to revenue bills only (for other bills it was 60 days); however, all fast-track bills so far have been revenue bills. WT/TPR/S/56 Trade Policy Review 
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28. The Export Expansion and Reciprocal Trade Agre ements Act (EERTAA) of 1998, defeated in 
Congress in September 1998, proposed a renewal a nd an extension of "fast-track" negotiating 
procedures.  The proposal called also for a renewal of  the President's tariff reduction authority, which, 
together with "fast-track" procedures were to remain  in effect until 1 October 2001, with an extension 
possible through 30 September 2005, upon request by the President and if not opposed by Congress.  
The bill also would have enhanced the consulta tive role of Congress and, like the 1988 Act, would 
have allowed for Congress to revoke "fast-track" tr eatment for any implemen ting bill submitted with 
respect to a trade agreement if both Houses of Congr ess agreed to a procedural disapproval resolution 
based on failure or refusal by the President to consult with Congress within any 60-calendar-day 
period. 
(4) TRADE RELATIONS AND AGREEMENTS  
(i) WTO 
29. Section 126 of the Trade Act of 1974 mandates that the United States grant MFN status to all 
trading partners, unless otherwise provided for in th e Act.  Title IV of the 1974 Act regulates the 
granting of MFN status to non-market economies, including China, which, with limited exceptions, 
are eligible only for conditional MFN.4  The United States currently acco rds some form of MFN to all 
but seven countries, namely Afghanistan, Cuba, La os, the Democratic Peopl e's Republic of Korea, 
Serbia and Montenegro (Permanent MFN was revoke d in 1992 by legislation), and Viet Nam.  
Although Iran, Iraq and Libya still formally retain MFN status, imports from these countries are 
prohibited under U.S. economic embargoes. 
(a) U.S. participation in the WTO 
30. The United States has played an active role in  the WTO since its inception, in 1995, and 
continues to do so through its participation in  the different committees and councils.  During the 
1996-98, period two multilateral agr eements regarding services were finalized in the WTO:  the 
Agreement on Basic Telecommunication Services, si gned on 15 February 1997;  and the Agreement 
on Financial Services, signed on 12 December 1997, which entered into force on 1 March 1999 
(Chapter IV(I)).  Four other agreements were re ached in the WTO during the period analysed:  the 
WTO Information Technology Agreement (ITA), on 26 March 1997;  the WTO Guidelines for the 
Negotiation of Mutual Recognition Agreements  on Accountancy, si gned on 29 May 1997 
(Table AII.1), and two agreements to expand the co verage (of the duty elimination) of the Agreement 
on Pharmaceuticals, the first with effect Ma rch 1997, and the second with effect July 1999. 
31. In addition, in 1998, the United States put fo rward papers on several topics in the Committee 
on Sanitary and Phytosanitary Measures, including  on:  transparency and implementation of the 
                                                      
4In general, Title IV countries are eligible for cond itional MFN status, provided that:  (a) they are in 
compliance with the freedom of emigration requirements of section 401 of the 1974 Trade Act (Jackson-Vanik);   
and (b) a bilateral commercial agreement with the United States under section 405 of the 1974 Trade Act 
granting reciprocal MFN treatment has been concluded.  The President can make a de termination that a country 
is in full compliance with Jackson-Vanik,  or can waive the requirement for full compliance.  If the President 
determines that a country is in full compliance, he must submit a report to Congress.  Determinations of compliance must be renewed semi-annually.  Congress ca n remove a Title IV country's MFN by passing a joint 
resolution revoking the determination.  Russia is the only country currently subject to determination of 
compliance with Jackson-Vanik .  Section 402 authorizes the President to waive the requirements for full 
compliance of a country with Jackson-Vanik .  Waivers are subject to annual renewal, but renewal is usually 
automatic unless Congress passes a joint resolution disapproving the renewal.  The countries currently subject to 
Jackson-Vanik  waivers are:  Albania;  Armenia;  Azerbaijan;  Belarus;  China;  Georgia;  Kazakstan;  Moldova;  
Mongolia;  Tajikistan;  Turkmenistan;  Ukraine;  and Uzbekistan. United States WT/TPR/S/56 
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Agreement (G/SPS/GEN/77);  improvement of  the operation of notification provisions 
(G/SPS/GEN/75);  use of international standa rds (G/SPS/GEN/76);  technical cooperation and 
assistance (G/SPS/GEN/78);  regionalization (adapta tion to regional conditions) (G/SPS/GEN/101);  
and, facilitation of informal consultations on specific SPS measures (G/SPS/GEN/74).  In the 
Committee on Technical Barriers to Trade, the  United States also put forward a proposal for 
improving the notification procedures and inform ation exchange (G/TBT/W/89 and G/TBT/W/90). 
32. The United States has urged more transparency  in the WTO through the derestriction of 
documents, consultations with st akeholders and other ways to generally increase transparency, 
openness, and to achieve better coherence in the WTO's interaction with other organizations.  
Similarly, regarding market access, the United Stat es has sought to improve transparency through, 
inter alia , making trade and tariff information more widely available. 
33. The United States participated in the Committe e on the Expansion of Trade in Information 
Technology Products, which, in 1999, is  working on ITA II product expansion. 
34. In the Council on Trade-Related Aspects of In tellectual Property Rights, during 1998, the 
United States continued to encour age all Members to fully implem ent the "mailbox" and exclusive 
marketing rights provisions found in Articles 70.8 and 70.9 of the Agreement.  The United States also 
raised implementation concerns with a number of developed countries, including Denmark and 
Sweden, regarding their failure to  provide provisional relief in ci vil enforcement proceedings, and 
Ireland, for its failure to amend its  copyright law to comply with the TRIPS Agreement.  In addition, 
the United States supported the joint WTO-WIPO t echnical assistance programme for developing 
countries. 
35. In the Council for Trade in Services, in 1998, th e United States initiated a variety of steps to 
assist and monitor the implementation efforts of its  trading partners in multilateral, regional and 
bilateral discussions.  The United States supporte d a formal elaboration of cooperative activities 
between the International Telecommunication Un ion (ITU) and the WTO concerning the reforms 
necessary in many countries to implement WTO commi tments.  An exchange of letters between the 
WTO and ITU in support of cooperative activities w as agreed in principle by the WTO Council on 
Trade in Services late in 1998.  The Council is also  considering a proposal by the United States that 
the Council initiate, in 1999, an information session on technical assistance sources and needs in the telecommunications sector. 
36. The United States completed domestic ratificati on procedures related to its commitments on 
financial services, and notified the WTO of their acceptance of the Fifth Protocol to the GATS, 
thereby allowing the commitments to enter into force by 1 March 1999. 
37. The United States was a major proponent of a commitment by WTO Members to duty-free 
cyberspace and further efforts to make that  commitment permanent and legally binding.  
38. The United States will host the Third Ministerial Conference of the WTO, to take place in 
Seattle in November 1999, in which it is expected  that a new round of multilateral trade negotiations 
will be launched.  These negotiations, to begin in  early 2000, will consist of new liberalization 
commitments in services trade, a new phase of agriculture policy reform and market-opening 
undertakings and other, as yet unspecified, negotiati ons on topics to be agreed at the meeting.  
According to the authorities, the United States beli eves that WTO Members should build on what was 
agreed by Ministers in Singapore, using the Sea ttle Conference to establish a forward-looking work 
programme to examine trade issues stemming from international efforts to promote respect for 
internationally recognized core labour standards. WT/TPR/S/56 Trade Policy Review 
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39. Table AII.2 lists U.S. notifications under the WTO Agreements as of 15 March 1999. 
40. Section 125 of the URAA establishes an e xpedited process through which Congress may 
adopt a joint resolution revoking Congressional appr oval of the WTO Agreements.  A resolution may 
be introduced once every five years, following the submission by the President in that year of a 
Congressionally mandated annual repor t on the operation of the WTO. 5  Annual reports compiled in 
those years must include information regarding the effect of the WTO Agreements on U.S. interests 
and the costs and benefits of conti nued U.S. participation in the WTO.   The fifth annual report is due 
by 1 March 2000.   
41. A resolution can be introduced by any Member of the Senate or House and is considered 
"privileged", which means that on ce introduced the bill must be di scharged from committee and voted 
on within a fixed period.  Ninety legislative da ys following the submission of the annual report are 
allotted for consideration and enactment of a join t resolution.  If Congress adopts the resolution, the 
President may veto it, subject to Congressional overri de by a two-thirds vote of both Houses.  Should 
the resolution enter into effect it would withdr aw Congress’ approval for the WTO Agreements set 
out in section 102(a) of the URAA. 
(b) U.S. involvement in WTO Dispute Settlement 
42. During the period under review (1996 to 31 Marc h 1999) the United States has been involved 
in 78 disputes.6  The United States requested consultations 48 times with WTO Members including, 
inter alia , Argentina (2), Australia (4), Brazil (1), Ca nada (3), Chile (1), the European Communities 
(7), Japan (5), India (2), Indonesia (1), Korea (5), Mexico (1), and the Philippines (2).  As shown in 
Table AII.3 these disputes are at different stages:  in some cases the reports  have been adopted and 
implementation is in process;  in others, panels have already been established and the panel is active, 
while in others consultations are pending (16).  In six instances the parties reached a mutually agreed 
solution. 
43. Other WTO Members have requested 30 consul tations regarding U.S. trade measures, 
including Argentina (1), Canada (2 ), Chile (1), the European Communities (15) , India (2), Japan (2), 
Korea (2), and Mexico (1) (Table AII.4).  At the time of completion of this report (end April 1999) 
there were three disputes in which the parties had reached a mutually agreed  solution;  and three 
disputes that had been concluded, in two cases becau se the measure of contend was withdrawn, and in 
another due to expected implementation.  There ar e three active panels, and another that has already 
circulated its report;  in six instances the compla inants requested the panel to be suspended.  
Consultations are still pending in 13 cases. 
44. On 13 July 1998, the United States appealed a Panel ruling concerning the import prohibition 
of certain shrimp and shrimp produc ts.  The Appellate Body reversed the Panel's finding that the U.S. 
measure at issue was not within the scope of measures permitted under Article XX of GATT 1994, but concluded that the U.S. measure, while qualifying for provisional justification under 
Article XX(g), failed to meet the requirements of th e chapeau of Article XX.  Thus the United States 
informed the DSB that it was committed to implementing its recommendations. 
45. On 12 February 1996, the United States toge ther with Ecuador, Guatemala, Honduras, and 
Mexico requested consultations with the European  Communities regarding the EC's regime for the 
                                                     
 
519 U.S.C. section  3535,  Review of participation in the WTO. 
6In general, the disputes included are those where action began between 1 January 1996 and 31 March 
1999; however, some disputes which had not been  resolved by 31 March 1999 were also taken into account. United States WT/TPR/S/56 
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importation, sale and distribution of bananas (WT/DS27).7  The complainants held that the EC's 
regime for importation, sale and distribution of bana nas was inconsistent with GATT Articles I, II, III, 
X, XI and XIII as well as with provisions of the WTO Agreements on Import Licensing, Agriculture, 
Trade-Related Investment Measures, and the GATS.  A Panel was established on 8 May 1996, which 
found that the EC's banana  import regime, and the licensing pro cedures for the importation of bananas 
under this regime, were inconsiste nt with certain EC obligations under the WTO.  The Panel further 
found that the Lomé waiver waives the inconsistenc y with GATT Article XIII, but not inconsistencies 
arising from the licensing system.  The report of the Panel was circulated to Members on 22 May 1997.  On 11 June 1997, the European Comm unities notified its intention to appeal the Panel 
Report.  The Appellate Body mostly upheld the Pane l's findings, but reversed the Panel's findings that 
the inconsistency with GATT Article XIII is waived by the Lomé waiver, and that certain aspects of 
the licensing regime violated Article X of GATT a nd the Import Licensing Agreement.  The report of 
the Appellate Body was circulated to Member s on 9 September 1997.  On 25 September 1997, the 
Appellate Body report and the Panel report, as modifi ed by the Appellate Body, were adopted by the 
WTO Dispute Settlement Body (DSB).  On 17 Nove mber 1997, the complainants requested that the 
"reasonable period of time" for implementation of the recommendations and rulings of the DSB be 
determined by binding arbitration.  The Arb itrator found the reasonable period of time for 
implementation to be the period from 25 Septembe r 1997 to 1 January 1999.  The report of the 
Arbitrator was circulated to Members on 7 January 1998. 
46. On 18 August 1998, the complainants (the Un ited States, Ecuador, Guatemala, Honduras, and 
Mexico (WT/DS27)) requested consultations with  the EC, regarding the WTO-consistency of 
measures adopted by the EC in purported complian ce with the recommendations and rulings of the 
Panel and Appellate Body.  On 25 November 1998,  the EC announced that it had completed its 
implementation of the recommendations of the DSB,  and that the new system would be operational 
from 1 January 1999.  The complainants expressed their disagreement with the WTO-consistency of 
this system.  On 15 December 1998, the EC requested  the establishment of a panel under Article 21.5 
to determine that the implementing measures of the EC must be presumed to conform to WTO rules 
unless challenged in accordance with DSU procedures.  On 18 December 1998, Ecuador requested the 
re-establishment of the original panel to ex amine whether EC measures to implement the 
recommendations of the DSB were WTO-consistent .  On 12 January 1999, the DSB agreed to 
reconvene the original panel pursuant to Article  21.5 to examine both Ecuador's and the EC's 
requests.
8  On 14 January 1999, the United States, requested authorization from the DSB under 
Article 22.2 for suspension of tariff concessions and re lated obligations with respect to the EC and its 
member States.  At the DSB meeting on 29 January 1999, the EC requested arbitration under the Dispute Settlement Understanding (DSU) Article 22 .6, on the level of suspension of concessions 
requested by the United States.  The DSB referred th e issue of the level of suspension to the original 
panel for arbitration.  Pursuant to Article 22. 6 of the DSU, the request for the suspension of 
concessions by the United States was deferred by the DSB until the determination, through 
arbitration, of the appropriate level for the suspen sion of concessions.  The arbitrators were unable to 
make a determination within the statutory peri od (60 days) and requested additional time and 
information. 
                                                     
 
7The complainants in this case, other than Ecuador, had requested consultations with the EC on the 
same issue on 28 September 1995 (WT/DS16).  After Ec uador's accession to the WTO, the current complainants 
again requested consultations with the EC on 5 February 1996. 
8Belize, Cameroon, Colombia, Costa Rica, Côte d'I voire, Dominica, the Dominican Republic, Grenada, 
Haiti, Jamaica, St. Lucia, Mauritius, Nicaragua, St. Vincent and the Grenadines indicated their interest to join as 
third parties in both panels, while Japan and India indicated their third-party interest only in the EC panel and Brazil only in Ecuador's panel. WT/TPR/S/56 Trade Policy Review 
Page 30 
 
 
47. The U.S. Trade Representative announced that, effective 3 March 1999, the U.S. Customs 
Services would begin "withholding liquidation" on im ports valued at over US$500 million of selected 
products from the European Union.9  Withholding liquidation imposes contingent liability for 100% 
duties on affected products.  This measure applied to products originating in Austria, Belgium, 
Finland, France, the Federal Republic of Germany,  Greece, Ireland, Italy, Luxembourg, Portugal, 
Spain, Sweden, or the United Kingdom.10 
48. On April 6, the arbitrators issued their final decision finding that: there is a continuation of 
nullification or impairment of U.S. benefits under th e EC’s revised banana regime; and that the level 
of nullification or impairment suffered by the United States is $191.4 million per year. The DSB 
authorized the United States to suspend con cessions and related oblig ations under GATT 1994 
covering trade in an amount of $191.4 million per year.11  On April 19, the U.S. Trade Representative 
published a determination in the Federal Register  imposing a 100% ad valorem  rate of duty on 
articles described in the Annex to the notice that  are the products of certain EC member States.12  The 
amount of trade affected by this action, as measured by 1998 import values, is equivalent to the level 
of nullification or impairment determined by the WTO arbitrators in their decision of 6 April 1999. 
49. In addition, on 20 January 1999, the United States, Guatemala, Honduras, Mexico, and 
Panama, requested consultations with the European  Communities regarding the implementation of the 
recommendations of the DSB in European Communities – Regime for the Importation, Sale and 
Distribution of Bananas (WT/DS158/1).  The complaining parties stated that the 15-month reasonable 
period of time for the EC to implement th e DSB's recommendations and rulings ended on 
1 January 1999.  They contended that the EC modifi ed its regime in a manner that will not permit this 
                                                      
9The goods affected are:  m eat of swine, other than hams, shoulder s, bellies (streaky) and cuts thereof, 
salted, in brine, dried or smoked (HS 02101900);  pecorino cheese, from sheep's milk, in original loaves, not 
suitable for grating (HS 04069057);  sweet biscuits; waffles and wafers (HS 19053000);  bath preparations, other than bath salts (HS 33073050);  candles, tapers and the like (HS 34060000); non-adhesive plates, sheets, 
film, foil and strip, non-cellular, not reinforced or combined with other materials, of polymers of propylene 
(HS 39202000);  handbag s, with or without shoulder st raps or without handle, with  outer surface of sheeting of 
plastics (HS 42022215);  articles of a kind normally carri ed in the pocket or handb ag, with outer surface of 
reinforced or laminated plastics (HS 42023210); uncoated felt paper and paperboard in rolls or sheets 
(HS 48055000); folding cartons, boxes and cases of non-corrugated paper or paperboard (HS 48192000);  lithographs on paper or paperboard, not over 0.51mm in thickness, printed not over 20 years at time of 
importation (HS 49119120); sweaters, pullovers, sweatshirts , waistcoats (vests) and similar articles, knitted or 
crocheted, wholly of cashmere (HS 61101010);  bed linen, not knit or crochet, printed, of cotton, not containing 
any embroidery, lace, braid, edging, trimming, piping or appliq ue work, not napped (H S 63022190);  lead-acid 
storage batteries other than of a kind used for starting piston engines or as the primary source of power for electric vehicles (HS 85072080);  electrothermic coffee or tea makers, for domestic purposes (HS 85167100). 
10USTR Press Release,  3 March 1999. 
11 Arbitrators’ Decision. 
12The articles listed in the Annex were the following products of Austria, Belgium, Finland, France, the 
Federal Republic of Germany, Greece, Ireland, Ital y, Luxembourg, Portugal, Spain, Sweden, or the 
United Kingdom:  bath preparations, other than bath salts (HS 33073050); handbags, with or without shoulder 
straps or without handle, with outer surface of sheeting of plastics (HS 42022215);  articles of a kind normally 
carried in the pocket or ha ndbag, with outer surface of  reinforced or laminated plastics (HS 42023210);  un-
coated felt paper and paperboard in rolls or sheets  (HS 48055000); folding cartons, boxes and cases of non-corrugated paper or paperboard (HS 48192000);  lithographs on paper or paperboard, not over 0.51 mm in 
thickness, printed not over 20 years at time of importation (HS 49119120); bed linen, not knit or crochet, 
printed, of cotton, not containing an y embroidery, lace, braid, edging, tri mming, piping or applique work, not 
napped (HS 63022190);  lead-acid storage batteries other than of a kind used for starting piston engines or as the 
primary source of power for electric vehicles (HS 85072080); and electrothermic coffee or tea makers, for 
domestic purposes (HS 85167100) (except for Italy) (USTR Press Release on Retaliation in EU Bananas Dispute, 9 April 1999). United States WT/TPR/S/56 
 Page 31 
 
 
dispute to conclude at this time on the basis of a solution that is acceptable to their governments, and 
as a result, jointly requested consultations with th e EC concerning the modified banana regime.  The 
complaining parties contend that their objective is to clarify and discuss in detail with the EC the various aspects of the modified banana regime, in cluding their effect on the market, concerns about 
their WTO-inconsistency, and ways that the EC might modify its regime in order to produce a 
satisfactory settlement of this disput e.  Consultations have taken place. 
(ii) Other Multilateral agreements 
50. The International Tropical Timber Agreement en tered into force in the United States on 
1 January 1997. 
(iii) Regional agreements 
(a) Asia-Pacific Economic  Cooperation (APEC) 
51. In Bogor, Indonesia, in 1994, APEC members adopted the goal of "open and free trade and 
investment" for the region, to be completed by  2010 for industrialized economies and by 2020 for 
developing economies.  In a 1995 meeting in Osaka, 14 trade and trade-related areas, to which the 
"Bogor goal" would apply, were identified.13  In the 1996 meeting at Subic Bay, in addition to 
developing individual and co llective action-plans for implementing these goals, APEC members 
decided to proceed with the identification of sect ors where early voluntary liberalization could be 
achieved, with a consequent positive impact on trad e, investment and economic growth in the APEC 
economies.  This decision was reaffirmed by A PEC Trade Ministers in May 1997, when a deadline 
for the identification of these sectors was established.   APEC Ministers also noted their intention to 
build a "critical mass" of support among non-APEC members for these initiatives.   When the deadline 
was met, in November 1997, APEC leaders, meeti ng in Vancouver, Canada, re viewed information on 
over 40 potential sectors and selected 15.  Nine of thes e sectors were selected for early action in 1998:  
chemicals, energy, environmental goods and services, fish and fish products, forest products, gems 
and jewelry, medical equipment, toys, and c onclusion of a mutual recognition agreement on 
telecommunications ("first tier sectors") (Box II.1).  APEC Ministers directed that the details of these 
initiatives, with respect to product scope, end dates a nd end rates for tariff cutting be completed by the 
date of the APEC ministerial meeting on tr ade in June 1998, with a view to beginning 
implementation, in the WTO context where appropr iate, in 1999.  In addition, proposals were 
expected to proceed in the six other selected sector s:  oilseeds and oilseed products, food, automotive, 
civil aircraft, fertilizer, and natural and synt hetic rubber, for recommendation to leaders in 
November 1998.14 
52. At the June 1998 meeting of APEC Trade Minist ers in Kuching, Malaysia, members endorsed 
the completion of an APEC Telecommunications  Mutual Recognition Ag reement, and adopted 
parameters for product scope, end dat es and end rates for tariff reductions in the other eight "first tier" 
sectors. APEC members failed to reach a consensus w ith respect to tariff cuts at their November 1998 
meeting in Kuala Lumpur, but agreed to endeavour to  complete in 1999 an initiative to cut tariffs in 
these sectors, to be negotiated in the WTO, and to work to achieve the critical mass of support in the 
WTO that would be necessary for the successful comple tion of such an agreement.  It was also 
decided that initiatives related to non-tariff measures , trade facilitation, and economic and technical 
cooperation in these sectors woul d be pursued within APEC. 
                                                      
13Tariffs, non-tariff measures, services, intellect ual property rights, competition policy, standards, 
customs procedures, investment, rules of origin, gove rnment procurement, deregulation, dispute settlement, 
mobility of business people, and Uruguay Round compliance. 
14Federal Register,  15 May 1998, Vol. 63, No. 94.  WT/TPR/S/56 Trade Policy Review 
Page 32 
 
 
Box II.1:  APEC market-opening initiatives 
The market opening initiatives for the 15 sectors included the following: 
(a) elimination of tariffs on environmental goods an d liberalization of trade in environmental services 
based on the GATS and binding in the WTO; 
(b) elimination of tariffs on me dical equipment in three years; 
(c) elimination of tariffs on forest products (HS Chapters 44, 46, 47, 48, 49 and parts of 38 and 94), in 
the 2000-2004 period, and development and adoption of performance-based building standards; 
(d) elimination of tariffs on fish an d fish products no later than 31 December 2005, with tariffs currently 
applied at 20% or less phased out more quickly, and flexibility to phase out tariffs on a limited number of 
products over a longer period;  non- tariff measures would be eliminated  by 31 December 2007; elimination of 
WTO-inconsistent subsidies and sanitary and phytosanitary measures; 
(e) progressive reduction of tariffs on certain toys, beginning from 1998 and completed by a date to be 
determined, but no later than 2005; non-tariff measures to be eliminated by the same date; 
(f) reduction of tariffs on gems and jewellery included in HTSUS Chapter 71 to 0-5% by 2005; 
(g) mutual recognition of test results and certifications  for telecommunications; 
(h) commitment to lower applied tariffs on chemical s to the rates established in the Uruguay Round 
chemical tariff harmonization agreement in two parts: by 2001 for tariffs up to and including 10%, and by 2004 for tariffs over 10%, and to bind these rates in  the WTO (sensitive products would be allowed a longer 
implementation period); 
(i) progressive removal of tariffs on coal and gas and energy-related equipment by 2005; 
(j) harmonization of standards on autos; 
(k) reduction of tariffs on certain categories of fresh fruit and vegetables, processed foods, and beverages 
to bring applied tariffs to 5% or less by 2004 with th e aim of eliminating all tariffs in these subsectors by 
2020; 
(l) elimination of tariffs, non-tari ff measures, and export subsidies on all oilseeds and oilseed products 
by 2002; 
(m) gradual reduction of tariffs on rubber; 
(n) elimination of tariffs on civil aircraft in two equal cuts on 1 January 1999 and 1 January 2000, to be bound in WTO Schedules at zero; 
(o) elimination of tariffs on fertilizers by 2002 and binding in the WTO. 
Source:  APEC Secretariat.  
 
(b) Free trade Area of the Americas (FTAA) 
53. The creation of the FTAA, by 34 Western Hemis phere countries by no later than the year 
2005, was decided in December 1994 at the Summit of the Americas, in Miami.  A "Plan of Action" 
for the FTAA was devised and twelve Working Groups  were created to prepare for the negotiations.  
The United States participated in these Working Gr oups from 1995 through the first quarter of 1998.  
Thereafter at the second Summit of the Americas in San tiago, Chile, in April 1998, it was agreed to 
initiate negotiations leading to the formation of  a free-trade area; general principles for the 
negotiations were approved, among which, that the outcome of the negotiations would be a "single 
undertaking", and that the FTAA negotiations would "improve on WTO rules and disciplines wherever possible". United States WT/TPR/S/56 
 Page 33 
 
 
54. The United States seeks in the negotiations, inter alia,  elimination of tariffs and non-tariff 
measures; the reduction of trade-distorting practices in agriculture; the establishment of a legal framework for investment and related capital flows; an increase in transparency and efficiency in 
customs procedures;  increased protection of intell ectual property rights, and enhanced liberalization 
of services;  an improvement in the observance and promotion of worker rights;  and to make trade 
liberalization and environmenta l policies mutually supportive.
15 
55. The negotiations are currently organized in th e following negotiating groups:  market access 
(including standards and technical barriers to trad e, customs procedures, and rules of origin);  
investment; agriculture (including sanitary and phyto sanitary measures);  subsidies, anti-dumping and 
countervailing duties; government procurement; intellectual property rights;  competition policy; 
services;  and dispute settlement.  The United States chairs the group on govern ment procurement.  A 
ministerial meeting to assess the first year of  negotiations will take place in Toronto in 
November 1999. 
(c) North American Free Trade Agreement (NAFTA) 
56. Trade among NAFTA members has increased substa ntially since its inception in 1993.  U.S. 
goods exports to NAFTA partners rose over 65.7% in  the 1993-98 period, or  by about US$94 billion 
(to US$236 billion) in 1998;  U.S. merchandise expo rts to Canada rose 56%, those to Mexico, 90%.  
A large percentage of tariffs have been eliminat ed through six reciprocal reductions started on 
1 January 1994, and two accelerated rounds of negot iations, the second of wh ich was implemented on 
1 August 1998.  The items for accelerated tariff elimination were selected based on requests by 
consumers, producers and traders.  Remaining tariffs  on most items are scheduled for elimination on a 
ten-year staging period, while a few items are on a 15- year staging period.  All tariffs covered by the 
NAFTA were eliminated between the Unite d States and Canada on 1 January 1998. 
57. The NAFTA provides disciplines on investment, including a prohibition of most local-content 
requirements, and for exclusive supplier contracts.   In the NAFTA Investment and Services Working 
Group (ISWG) members have exchanged information on non-conforming investment measures at the 
subnational level. 
58. The NAFTA increased the North American cont ent requirement for duty-free treatment of 
automobiles from 50% to 56% in 1998.  The NAFTA Rules of Origin Working Group is currently addressing the change of references to tariff items in  the rules of origin from country-specific to a 
generic format. 
59. The NAFTA envisages the elimination of all non- tariff barriers to agricultural trade between 
the United States and Mexico by 2008.  Import-sensi tive products were grante d transition periods and 
special safeguards.  Under the U.S.-Canada Fr ee Trade Agreement, wh ose agricultural trade 
provisions were largely incorporated into the NAFTA , a large number of tariffs affecting agricultural 
trade between the United States and Canada were el iminated on 1 January 1998.  Exceptions to this, 
in the case of the United States, apply to imports of  dairy products, sugar, certain sugar-containing 
products, and peanut butter, which are covered by tariff quotas.  Data on tariff quotas utilization is 
exchanged by NAFTA members.  Four committees ar e responsible for the implementation of NAFTA 
provisions with respect to agriculture.
16  
                                                      
15USTR, (1999), p. 157. 
16The Committee on Agricultural Trade, the Working Group on Grade and Quality Standards in 
Agriculture, the Working Group on Agricultural Subsidies, and the Advisory Committee on Private International Disputes on Agricultural Goods. WT/TPR/S/56 Trade Policy Review 
Page 34 
 
 
60. The North American Agreement on Labor Coope ration (NAALC), signed by NAFTA parties, 
is aimed at contributing to the enforcement of domestic labour laws and administered by the NAFTA 
Labor Secretariat.  Up to end 1998, 20 submissions  regarding concerns from a party with respect to 
labour practices by another party have been filed with the Secretariat under the NAALC.  The U.S. 
National Administrative Office (NAO), within the Department of Labor, also reviews submissions 
concerning practices by other NAALC parties.  A to tal of 13 submissions have been filed with the 
U.S. NAO, of which 11 against Mexico and two agai nst Canada.  Six of these cases (the two against 
Canada and four against Mexico) are still pending.  Mexico has filed four submissions with its 
national NAO involving the United States,  and Canada has submitted one.17 
61. The NAFTA parties have also subscribed a North American Agreement on Environmental 
Cooperation (NAAEC), which created the Nort h American Commission on Environmental 
Cooperation (CEC) whose work is supported by an Environmental Secretariat located in Montreal, 
Canada.  The work of the CEC concentrates on e nvironmental conservation;  protection of human 
health;  cooperation and law enforcement, and the tr ade-off between the environment, trade, and the 
economy .  The Border Environment Cooperation Commissi on, is a NAFTA-created institution, which 
certifies environmental projects with the aim of improving the U.S.-Mexico border environment.  
Since its creation, 24 environmental infrastructur e projects have been certified.  Since it was 
established in 1995, the North American Develo pment Bank (NAD Bank) has approved a total of 
US$105 million in loans, guarantees, and grants to he lp finance 14 environmental projects.  In April 
of 1997, the NAD Bank and the Environmental Pr otection Agency (EPA) established the Border 
Environment Infrastructure Fund. 
62. The main dispute settlement m echanisms of the NA FTA are found in Chapters 11, 19 and 20 
of the Agreement.  Disputes relating to the investment  provisions of Chapter 11  may be referred either 
to government-to-government dispute settlement under the Agreement or, in some  cases, to investor-
state arbitration.  Chapter 19 (Article 1904) prov ides for binational panel review of anti-dumping, 
countervailing duty and injury fina l determinations by domestic NAFTA-member agencies.  Under 
Chapter 19 panels may also review amendments ma de by Canada, the United States or Mexico to 
their anti-dumping or countervailing duty law.  Panel decisions may affirm, remand, or affirm in part 
and remand in part a domestic agency 's determination.  In the latter two cases, a final order affirming 
determination on remand is issued.  According to NAFTA Article 1904 Panel Rules, final panel 
decisions are to be released within 315 days of the date on which a request for a panel is made.  Based 
on the Panel Rules, a detailed schedule is establishe d for each Chapter 19 panel review (Table II.2).  
63. Chapter 19 establishes an "extraordinary challe nge” procedure to deal with concerns that 
certain actions may have affected a binational panel’s decision and threaten the integrity of the review 
process under this procedure. A party can appeal a panel's decision to a three-member committee of 
judges or former judges, which makes a decision to a ffirm, vacate, or remand the panel's decision.  In 
addition, Chapter 19 contains a mechanism desi gned to address cases in which application of a 
country’s domestic law undermines the binational panel process.  
64. From the establishment of the NAFTA until end-December 1998, 44 Chapter 19 panels had 
completed their work or had cases pending.  In  the 1996-98 period, 18 complaints were presented 
against determinations by agencies of the United States; six were by exporters or producers from 
Canada and twelve from Mexican.  Products subject to  more than one investigations were:  porcelain-
on-steel cooking and cooling ware; steel products; a nd cement.  In early 1999, two new Chapter 19 
investigations were initiated regarding results of U.S. Department of Commerce administrative 
reviews of anti-dumping duties on certain steel pr oducts from Canada (Table AII.5).  During the 
                                                      
17USTR (1999), p. 164. United States WT/TPR/S/56 
 Page 35 
 
 
1996-98 period, eleven determinations by Canadian  and Mexican agencies involving U.S. products 
have been appealed eleven times under Chapter 19. 
Table II.2 
Model schedule for a NAFTA Chapter 19 panel review as per the Rules of Procedures 
R.34 Request for panel review filed Day 0 
R.39 Complaints to be filed by 30 da ys after Request for Panel Review 
R.40 Notices of appearance to be filed by  45 days after Request  for Panel Review 
Annex 1901.2(3) Panel selection to be completed by Parties by Day 55 
R.41 Final determination, reasons, index and administrative record to be 
filed by 15 days after filing of Notice of Appearance 
Annex 1901.2(3) Parties to select 5th panelist by (if Parties unable to agree) Day 61 
R.57(1) Briefs by complainants to be filed by 60 days after filing of Administrative Record 
R.57(2) Briefs by investigating authority or participants in support to be 
filed by 60 days after Complainants' Briefs 
R.57(3) Reply briefs to be filed by  15 days after Authority's Briefs 
R.57(4) Appendix to the briefs to be filed by 10 days after Reply Briefs 
R.67(1) Oral argument to begin by 30 days after Reply Briefs 
Article 1904.14 Panel decision due by Day 315 
 
Source : Information provided by the NAFTA Secretariat. 
65. The dispute settlement provisions of Chapter 20 are applicable to disag reements that arise 
concerning the interpretation or application of the NAFTA. Special rules apply to disputes relating to 
the financial services provisions of Chapter 14.  Under Article 2008, in cases where disputes 
concerning the NAFTA are not solved through consu ltation within a specified period of time, they 
may be referred, at the request of either Party, to an arbitration panel.  Model rules of procedure for 
Chapter 20 panels have been deve loped by Canada, the United States and Mexico. The rules establish 
a model timeline for Chapter 20 panel proceedings (Table II.3). Two reviews have been completed 
under Chapter 20 since the inception of NAFTA;  one was a review of U.S. measures. 
Table II.3 
Model schedule for NAFTA Chapter 20 Arbitral Panel as per the Rules of Procedures (Two Disputing Parties) 
Article 2008 Request for Arbitral  Panel by Party filed on Day 0 
Article  2011.1(b) Selection of  Chair to be completed by Within 15 days after request for Arbitral 
Panel 
Rule 5 & Article 2012(3) Terms of reference may be filed by  20 days after filing of request 
Article 2011.1(c)  Panel selection to be comp leted by  15 days after selection of Chair 
Rule 7 Initial written submission (complaining Party) to be  filed by  10 days after panel selection is completed 
Rule 7 Written counter-submission (Party complained against) to be 
filed by 20 days after initial written submission 
Rule 7 Initial written submission (3rd.Party) to be filed by 20 days  after initial written submission 
Rule 26 List of deliberators and others attending the hearing to be 
delivered by 5 days before the hearing 
Rule 21 Hearing to be held by Hear ing (to be determined by Chair)  
Rule 32 Supplementary written submission to be filed by within 10 days of hearing 
Rule 38 Request for Scientific Revi ew Board to be filed by not later than 15 days after the hearing 
Article 2016(2) Initial Re port to be filed by within 90 days after panel selection is 
completed 
Article 2016(4) Comments on Initial Report to be filed by within 14 days after presentation of Initial 
Report 
Article 2017(1) Final report due by w ithin 30 days after Initial Report 
 
Source : Information provided by the NAFTA Secretariat. WT/TPR/S/56 Trade Policy Review 
Page 36 
 
 
(iv) Preferential agreements 
(a) The U.S. Generalized System of Preferences (GSP) Programme 
66. The U.S. GSP was started on 1 January 1976, a nd was initially authorized by the Trade Act 
of 1974 (19 U.S.C. 2461-2465) to grant preferences for a ten-year period.  The programme grants preferential duty-free entry to some 4,468 products (as at July 1998) from 149 designated beneficiary 
countries and territories (Box II.2).  Under section 504 of the 1974 Act, as amended (19 U.S.C. 2464), 
the President has authority, under specified circum stances, to withdraw, suspend, or limit the 
application of duty-free treatment under the GSP. 
Box II.2:  Countries granted GSP treatment as of 1 January 1998 
Independent countries 
Albania, Angola, Antigua and Barbuda, Argentina, Ar menia, Bahrain, Bangladesh, Barbados, Belarus, 
Belize, Benin, Bhutan, Bolivia, Bosnia and Herce govina, Botswana, Brazil, Bulgaria, Burkina Faso, 
Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Chile, Colombia, Comoros, Congo, Costa Rica, Côte d'Ivoire, Croatia, Cyprus, Czech Republic, Djibouti, Dominica, the Dominican Republic, 
Ecuador, Egypt, El Salvador, Equa torial Guinea, Estonia, Ethiopia,  Fiji, Gambia, Ghana, Grenada, 
Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Hondu ras, Hungary, India, Indonesia, Jamaica, Jordan, 
Kazakhstan, Kenya, Kiribati, Kyrgyz stan, Latvia, Lebanon, Lesotho, Lith uania, Former Y ugoslav Republic 
of Macedonia, Madagascar, Malawi, Mali, Malta, Mauritius, Moldova, Morocco, Mozambique, Namibia, 
Nepal, Niger, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, the Philippines, Poland, 
Romania, Russia, Rwanda, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Sao Tome 
and Principe, Senegal, Seychelles, Sierra Leone, Slovakia, Slovenia, Solomon Islands, Somalia, South Africa, Sri Lanka, Suriname, Swazila nd, Tanzania, Thailand, Togo, Tonga, Trinidad and Tobago, Tunisia, 
Turkey, Tuvalu, Uganda, Ukraine, Uruguay, Uzbekistan, Vanuatu, Venezuela, Western Samoa, Yemen 
Arab Republic (Sanaa), Zaire, Zambia, Zimbabwe.  
Non-independent countries and territories 
Anguilla, British Indian Ocean Terr itory, Christmas Island (Austra lia), Cocos (Keeling) Islands, 
Cook Islands, Falkland Islands (Isl as Malvinas), French Polynesia, Gi braltar, Heard Island and McDonald 
Islands, Montserrat, New Caledonia, Niue Norfolk Island, Pitcairn Islands, Saint Helena, Tokelau, 
Turks and Caicos Islands, Virg in Islands, British Wallis and Fut una, West Bank and Gaza Strip, 
Western Sahara. 
Associations of countries (treated as one country) 
Member countries of the Andean Group;  Members of the Association of South East Asian Nations 
(ASEAN) eligible for GSP except Brunei Darussalam, Ma laysia and Singapore;  Member countries of the 
Caribbean Common Market (CARICOM), except the Bahamas. 
Beneficiary countries design ated as least developed beneficiary developing countries 
Bangladesh, Benin, Bhutan, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, 
Chad, Comoros, Djibouti, Equatorial Guinea, The Gambia, Guinea, Guinea-B issau, Haiti, Kiribati, 
Lesotho, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, Sao Tome and Principe, Sierra Leone, 
Somalia, Tanzania, Togo, Tuvalu, Uganda, Vanuatu,  Western Samoa, Yemen Arab Republic (Sanaa). 
Source:   Information provided by the U.S. authorities. 
67. The authorization to grant GSP treatment has been renewed several times.  The GSP was 
further extended until 30 September 1994 and the Uruguay Round Agreements  Act extended it again 
without modification until 31 July 1995.  The progr amme was renewed by the GSP Renewal Act of United States WT/TPR/S/56 
 Page 37 
 
 
1996 on 1 October 1996 with retro active effect to 1 August 1995.18  Filers were entitled to refunds on 
the estimated MFN duties paid when the merchandi se benefiting from the scheme was imported into 
the United States.19 The extension granted by the 1996 Act was through 31 May 1997.  A number of 
products from Pakistan were excluded re troactively from GSP benefits in 1996.20 
68. The GSP was renewed again on 5 August 1997 thr ough 30 June 1998, with retroactive effect 
to 1 June 1997, as a provision of the Budget Reconc iliation Tax Act of 1997.  Refunds were made on 
all duties paid, with interest, on GSP-eligible me rchandise that was entered between these two dates.21 
69. The proposed Export Expansion and Recipro cal Trade Agreement Act contained an 
amendment to the date of termination of preferen ces (Section 505 of the Trade Act of 1974 (19 U.S.C. 
2465)), extending it to 31 December 2000 for GSP bene ficiary developing countries, and to 30 June 
2008 for beneficiaries of the African Growth and O pportunity Act.  After the Export Expansion and 
Reciprocal Trade Agreements Act was defeated in the House of Representatives on 25 September 
1998, GSP renewal became part of the Omnibus  Appropriations bill of FY1999, which does not 
include however, the issues of NAFTA-parity for CBI countries, or the Africa Act. 22  The Bill granted 
a one-year extension of the GSP programme un til 30 June 1999, retroactively effective from 
1 July 1998, with entitlements to refunds extended to goods on which duty had been paid during the 
period between 1 July of 1998 and the enactment of the Act.23 
70. Since the last Trade Policy Review of the United States, the composition of beneficiary 
countries has changed through the designation of Ca mbodia on 31 July 1997, and the removal from 
the list of beneficiaries of Aruba, Cayman Islands , Cyprus, Greenland, Macau, Malaysia, and the 
Netherlands Antilles, as of 1 January 1998.  Additio nally, in 1997, nearly 1, 800 previously excluded 
items were added to the GSP programme for least-developed beneficiary countries. 
                                                      
18The GSP Act was included in the Small Business Job Protection Act of 1996, signed by the President 
on 20 August 1996. Subtitle J of Title I contains provisions entitled the GSP Renewal Act of 1996. Since the Act applied retroactively, a duty refund procedure for merchandise that entered between 31 July 1995 and 
30 September 1996 was established.  
19To obtain a refund, a statement requesting a refund, as provided by section 1953 of the GSP Renewal 
Act of 1996, had to be presented, enumerating the entry numbers and line items for which refunds were 
requested, the amount requested to be refunded for each line item, and the total amount owed for all entry 
summaries. Duties deposited were reimbursed with interest, pursuant to section 505 of the Tariff Act of 1930, as 
amended (19 U.S.C. 1505), based on the quarterly Internal Revenue Service interest rates used to calculate 
interest on refunds of customs duties. For the period 1 July 1995 to 31 March 1996 the interest rate was 8%; for the period 1 April to 30 June 1996 it was 7%, and for the period 1 July to 31 December 1996, it was 8 %. 
Federal Register,  16 September 1996, Vol. 61, No.16. 
20These products were gloves designed for use in sports, of plastics (HTSUS 03926.20.30); batting 
gloves (4203.21.20);  cros s-country ski gloves, mittens and mitts (4 203.21.55);  ski or snowmobile gloves, 
mittens and mitts (4203.21.60);  gloves, mittens, etc., of leather, specially designed for use in  sports;  carpets 
(4203.21.80;  5701.10.13; 5702.10.10; 5702.91.20;  5805.00.20;  6304.99.10;  6304.99.40);  surgical instruments (9018.90.80); inflatable balls, excluding f ootballs or soccer balls (9506.62.80); and articles or 
equipment for exer cise (9506.91.00). 
21Federal Register,  3 September 1997, Vol. 62, No. 170). Refunds were subject to an interest rate of 
8% throughout the period . 
22Subtitle B of the Omnibus Appropriations bill of FY 1999, dealing with trade provisions, amends the 
Trade Act of 1974 to extend the Generalized System of Preferences through 30 June 1999 and provides for the retroactive application of certain liquidations and re liquidations. (Section 1012).  An earlier bill proposing a 
longer extension of the GSP, "A bill to amend the Tr ade Act of 1974 to extend the Generalized System of 
Preferences until May 31, 2007", had been introduced in the House of Representatives in May 1997.  
23Requests for refund were to be made up to 180 days after the Act was enacted. WT/TPR/S/56 Trade Policy Review 
Page 38 
 
 
71. Following the results of the 1995 GSP Annual Re view, the list of eligible articles was 
amended to remove various produc ts on 31 May 1997 and a new competitive need ceiling was set for 
1996 and each year thereafter.  The U.S. Governme nt, through the GSP Subcommittee, conducts an 
annual review of the list of articles and countri es eligible for duty-free treatment.  A listing of 
modifications under consideration (other than those involving the automatic "competitive need" 
limits) is published in the Federal Register  each year in July or August.  Any modifications in the list 
take effect on 1 July of the following calendar year. 
72. Under the GSP programme, interested parti es may request that additional articles be 
designated as eligible for GSP duty-free treatment, pr ovided that the article has not been accepted for 
review within the three preceding calendar years.  Th e duty-free treatment accorded to eligible articles 
under the GSP may also in some cases be withdrawn,  suspended or limited.  During the annual review 
any person may file a request to have the GSP stat us of any eligible beneficiary developing country 
reviewed with respect to any of the designation cr iteria listed in sections 502(b) or (c) of the Trade 
Act of 1974 (19 U.S.C. 2642 (b) and (c)).  The Trade Policy Staff Committee (TPSC) chaired by the 
USTR may self- initiate any of the actions mentioned above.24 
73. If a request to withdraw, limit or suspend eligibility  is presented, the petitioner must provide 
information with respect to the relevant U.S. indus try for the most recent three-year period, including 
actual production and production capacity;  employment  figures, including wage rates;  sales figures 
in terms of quantity, value and price;  quantity and value of exports, as well as principal export markets;  cost analysis; profitability;  description of  the competitive situation of the domestic industry;  
identification of competitors;  analysis of the effect imports receiving duty-free treatment under the 
GSP have on competition;  identification of tariff an d non-tariff barriers to sales in foreign markets.  
Similar information, but with respect to the market  of the potential beneficiary must be provided to 
the TPSC to request to designate new articles.
25  The information provided in this case must also 
include data on exports to the United States in terms of quantity, value and price, as well as considerations that affect the competitiveness of th ese exports relative to exports to the United States 
by other beneficiary countries of a like or dir ectly competitive product.  The TPSC announces in the 
Federal Register  requests that will be considered for full ex amination in the annual review.  In some 
cases, the USTR requests advice from the USITC.  The TPSC then holds public hearings and prepares 
recommendations for the President on any modifications  to the GSP.  The advice of the Trade Policy 
Review Group or the Trade Policy Committee for fu rther review of recommendations is sometimes 
sought. 
                                                     
 
24Petitions to remove duty-free status from beneficiary developing countries in 1998 were made for 
nucleic acids and their salts; other heterocyclic compounds. 
25The following petitions for waiver of competitive need limit for a product on the list of eligible 
products were made in 1998 :  salts of oxometallic (Chile);  peroxometallic acids (Chile);  unsaturated acrylic 
monocarboxylic acids, cyclic monocarboxylic acids, their anhydrides, halides, peroxides and peroxyacids; their 
halogenated, sulfonated, nitrated or nitrosated derivatives (Estonia); plywood, veneered panels and similar 
laminated wood :  (subheading note 1 to chapter 44 of the HTS) (Indonesia); plywood, veneered panels and 
similar laminated wood:  Other, (Indonesia); articles of jewelry and parts thereof, of precious metal or of metal 
clad with precious metal:  (HS head ing 7113) (Thailand); other:  necklaces and neck chains, of gold (India); 
refined copper and copper alloys, unwrought (other than master alloys of heading 7405) (Chile); table, kitchen 
or other household articles and parts thereof, of copper;  pot scourers and scouring or polishing pads, gloves and the like, of copper;  sanitary ware and parts thereof, of copper (India); transmission sh afts (Brazil);  a range of 
radio transmitters (Indonesia);  r eception apparatus for televisions;  vi deo monitors and video projectors 
(Thailand);  electric sound or visual signalling (Philippines);  parts and acce ssories of the motor vehicles of 
headings 8701 to 8705:  brakes and servo-brakes and parts thereof (Brazil); optical fibers (Indonesia). United States WT/TPR/S/56 
 Page 39 
 
 
74. Annual reviews, which began in  1986, commence on 1 June of the preceding year (deadline 
for acceptance of petitions);  requests are published in the Federal Register  on 15 July;  public 
hearings and submission of written br iefs and rebuttal materials take pl ace in September and October.  
Results are announced on 1 April for implemen tation on 1 July.  Apart from the annual review, 
Section 504(c)(2) of Title V of the Trade Act of  1974 (19 U.S.C. 2464(c)(2)) requires that a general 
review of eligible articles be held periodically  to determine the competitiveness of products from 
beneficiary countries.  Articles determined to be "s ufficiently competitive" are subject to a new lower 
competitive need limit, set at 25% of the value of total U.S. imports of the article, or an annually 
adjusted figure (US$80 million in 1997).  All other articles are subject to the original competitive 
need limits of 50%.  The 50% limit is waived wh en imports do not exceed a de minimis threshold 
(US$13.5 million in 1997). 
75. General reviews also include consideration of requests for competitive need limit waivers 
pursuant to section 504(c)(3)(A) of Title V of the Trade Act of 1974 as amended26, and requests for a 
determination of no domestic pr oduction under section 504(d)(1) of Title V of the Trade Act of 1974 
as amended.27  Lower competitive need limits are determ ined based on their effect on promoting the 
economic development of developing countries through expansion of their exports; the impact on U.S. 
industry; whether other developed countries are undertaking a similar initiative; the beneficiary 
country's per capita GNP, and its living standard;  an d the extent to which the beneficiary country is 
enforcing intellectual property rights and eliminati ng restrictions to trade in services, among other 
considerations. 
76. According to the provisions of section 504(c) of the Trade Act of 1974, a number of products 
that are generally eligible for GSP treatment are not entitled to duty-free treatment if originating in 
certain countries.  Products from the following countri es are included in the list:  Argentina, Bahrain, 
Belize, Brazil, Bulgaria, Chile, Colombia, Costa Rica, Croatia, Czech Republic, Dominican Republic, 
Ecuador, Guatemala, Honduras, Hungary, India, In donesia, Kazakhstan, Lebanon, Former Yugoslav 
Republic of Macedonia, Malaysia, Morocco, Oman, Pakistan, Peru, Philippin es, Romania, Russia, 
Slovenia, South Africa, Sri Lanka, Thailand, Trinid ad and Tobago, Turkey, Ukraine, and Venezuela. 
(b) Andean Trade Preference Act (ATPA) 
77. The ATPA, became effective on 4 December  1991 for a period of ten years ending on 
4 December 2001.  The Act grants the President th e authorization to eliminate duties on all imports, 
with certain exceptions28, from Bolivia, Colombia, Ecuador an d Peru, with scope to offer these 
countries export opportunities to help them reduce the production and traffick ing of illicit drugs.  
On 2 July 1992, Colombia was designated as a bene ficiary country for purposes of the Act;  some 
days later Bolivia was granted beneficiary status.  Duty-free treatment for Colombia and Bolivia, was 
effective on 22 July 1992.  Ecuador was designa ted beneficiary country effective 30 April 1993 
(58 FR 19547) and Peru was granted this st atus effective 26 August 1993 (58 FR 43239). 
78. The modifications to the Harmonized Tariff Sc hedule of the United States (HTSUS), required 
to implement the preferences, are contained in General Note 11, of the U.S. Tariff Schedule, and are identified by the designation "J''.  The implementation of preferences under the ATPA also led to the addition of Sections 10.201 through 10.208 to part 10 of the Customs Regulations (19 CFR Part 10).  
These amendments became e ffective on 26 October 1998.
29 
                                                      
2619 U.S.C. 2464(c). 
2719 U.S.C. 2464(d)(1). 
28WTO document WT/L/232, 10 October 1997. 
29Federal Register,   25 September, 1998, Vol. 63, No. 186. WT/TPR/S/56 Trade Policy Review 
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79. To be eligible for duty-free import treatment unde r the Act, an article must meet three basic 
requirements:  (a) it must be imported directly from a beneficiary country into the customs territory of the United States;  (b) it must be wholly the grow th, product, or manufacture of a beneficiary country 
or must be a new or different article of commerce that has been grown, produced, or manufactured in 
a beneficiary country;  and (c) it must have a minimum domestic value content of 35%.
30  The cost or 
value of materials produced in the customs territory of the United States (other than in Puerto Rico) 
may be counted toward the 35% value-content require ment to a maximum of 15% of the value of the 
imported article.  Eight categories of products ar e excluded from duty-free treatment (Section 204(b) 
of the ATPA).  These are:  textiles and apparel ar ticles subject to textile agreements;  footwear not 
eligible under the GSP;  tuna in airtight contai ners; petroleum and derive d products classified under 
HTSUS headings 2709 and 2710;  watches and watc h parts; handbags, luggage, flat goods, work 
gloves, and leather wearing apparel that are the product of any beneficiary country and were not 
designated on 5 August 1983, as elig ible articles for purposes of the GSP;  sugar syrups and 
molasses31;  rum and tafia classified in subheading HTSUS 2208.40.00. 
80. On 14 October 1996, the United States was granted until 4 December 2001, a renewal of the 
waiver from its obligations under paragraph 1 of Article I of the GATT 1994, to allow for the 
provision of duty-free treatment to eligible products of beneficiary countries as authorized under the 
ATPA.32  The United States is required to submit to  the WTO General Council an annual report on the 
implementation of the trade-relate d provisions of the ATPA with a view to facilitating the annual 
review provided for in paragraph 4 of Article IX of the WTO Agreement.  The report must give an 
account of the performance of the ATPA, in terms of  preferential market acces s to the United States 
for products of the four beneficiaries.  The Un ited States has satisfied the reporting requirement each 
year. 
81. Imports from the four Andean countries granted duty-free entry to the United States under 
ATPA reached US$1.3 billion (0.16% of total U.S. imports in 1996), about one sixth of total U.S. 
imports from ATPA beneficiary countries, which totalled US$7.9 billion  (1% of total imports).33 
82. Colombia is the main ATPA beneficiary country ;  in 1996, it was the source of 44.1% of all 
imports under ATPA.  Peru ranked second, with 30.4 % of all U.S. imports under ATPA in 1996;  
Ecuador was the third, with 17.2%;  and Bolivia  was the fourth, with 8.3% of the total. 
83. The main product benefiting from preferences is fresh cut flowers, mainly from Colombia, 
but to some extent also from Ecuador.  The relati ve share of this industry in the total value of 
preferences granted has been falling; from 60% in 19 93 to 34% in 1996.  This is the result of the fast 
growth of other import categories entered under A TPA, including jewellery, refined unwrought lead, 
cathodes of refined copper, tuna and skipjack not in airtight containers , unwrought metal products, 
                                                      
30Sections 204(a)-(c) of the Act (19 U.S.C. 3203(a)-(c)) Section 204(a), containing the basic origin 
rules for duty-free treatment is based on Section 213(a) of the Caribbean Basin Economic Recovery Act, as amended (19 U.S.C. 2703(a));  following these guidelines, combining or packaging operations or mere dilution 
with water or another substance does not confer bene ficiary country origin. Ther e are two main differences 
between the Acts regarding rules of origin.  The first is that the ATPA allows inputs from CBI beneficiary 
countries to be included to calculate the 35% value-cont ent requirement, while the CBI Act does not provide for 
the inclusion of inputs from ATPA beneficiaries in the calculation of the 35% threshold. The second difference 
is that, under the CBI, a product may be entered into Puerto Rico for transformation and further consumption in 
the United States without being subject to duties,  while the ATPA has no corresponding provision  
(Federal Register,  25 September 1998, Vol. 63, No. 186)). 
31Classified under subheadings HSTUS 1701.11.03, 1701.12.02, 1701.99.02, 1702.90.32, 1806.10.42, 
and 2106.90.12. 
32WTO document WT/L/184, 18 October 1996. 
33WTO document WT/L/232, 10 October 1997. United States WT/TPR/S/56 
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and raw sugar.  It also reflects the effect of the inclusion of Peru in the preferential scheme from late 
1993.  The USITC estimates that U.S. imports of ne arly all of the 20 leading ATPA-exclusive items 
produced net welfare gains for U.S. consumers in 1997.  Fresh cut roses yielded the largest such net 
gain, followed by asparagus and chrysanthem ums, carnations, anthuriums, and orchids.34 
(c) Caribbean Basin Economic Recovery Act (CBERA) 
84. The CBERA programme, which started operatin g on 1 January 1984 is designed to grant 
preferential tariff treatment to most products of  24 designated Caribbean, Central American, and 
South American countries.  A waiver to its obliga tions under Article I of the GATT was granted to the 
United States by the CONTRACTING PARTIES of the GATT 1947 on 15 February 1985 for the 
period 1 January 1984 to 30 September 1995 to implement the Caribbean Basin Economic Recovery 
Act, under which the Caribbean Basi n Initiative (CBI) was established.  A request for renewal of the 
waiver for ten years was presented by the United States to the WTO Council for Trade in Goods on 
13 September 1995.  It was approved by the Council on 26 September 1995.  35 Duty-free treatment 
granted under the CBI is allowed under Chap ter 15 of Title 19 of the U.S. Code.36  The programme 
was revised in 1990 (CBI II) and was given an inde finite duration and extended to include economic 
assistance to exporters from beneficiary countries. 
85. To benefit from CBI preferential treatment, goods  must be manufactured, produced or grown 
in a CBI beneficiary country, or, if this is not the case, substantially transformed in one; they must 
also be directly imported from a beneficiary country in to the customs territory of the United States.  In 
the case of transformation, at least 35% of the cost of the merchandise must be attributable to direct 
processing in one or more countries qualifying for CBI benefits.37  Materials imported from the 
United States and used in the production of the exported good, may count for up to 20 percentage 
points of the 35% threshold.  Origin is also c onferred on goods manufactured from material imported 
from Puerto Rico and the U.S. Virgin Islands;  in  this case, imports may account for the whole of the 
35% requirement.  Articles assembled in a benefici ary country containing 100% U.S. components are 
granted duty-free access to the United States, except for textiles and apparel, which are subject to duty 
on the value added in country of assembly.  
86. A wide range of products are eligible for benefits under CBI II;  products excluded from 
duty-free treatment include:  textile and apparel ite ms subject to textile agreements;  footwear, 
handbags, luggage, leather wearing a pparel, work gloves, and flat goods;  tuna prepared or preserved 
in airtight containers;  petroleum or petr oleum products;  and watches and watch parts. 
87. A bill to temporarily give certain products from CBI countries similar access to that given to 
Mexico under NAFTA was defeated in Congress in  November 1997.  The proposal would have 
granted imports of textiles and a pparel meeting NAFTA rules of or igin, or manufactured in a CBI 
country with material cut or manufactured in the United States,  duty-free and quota-free access to the 
U.S. market.  A similar initiative was again include d in the Trade and Tariff Act of 1998, proposed in 
the House of Representatives in October 1998.  Th is contained a "United States-Caribbean Basin 
Trade Enhancement Act'', aimed at encouraging CBERA beneficiaries to continue the process of 
                                                      
34USITC (1998a). 
35 WTO document G/C/M/6, 23 October 1995. 
3619 U.S.C. Sections 2701-2707. 
37Included in the cost calculation are:  material inpu ts from any beneficiary country;  direct labour 
costs, and depreciation of machinery and equipment;  engineering, design, research and development costs;  and 
inspection and testing costs.  Excluded  from the cost calculation are:  insurance, advertising, administrative 
salaries, business profits, commissions, and any other costs not related directly to the development or production of a specific product. WT/TPR/S/56 Trade Policy Review 
Page 42 
 
 
reform of their economies by proposing to offer NA FTA tariff treatment to those willing to prepare 
for FTAA membership.  This bill was not enacted in the 105th Congress. 
88. According to a report by the USITC, U.S. imports under CBERA grew from 6.7% of total 
U.S. imports from the region in 1984 to 19% in 1997.38  The leading U.S. imports under CBERA 
between 1984 and 1997 were electrical machinery a nd equipment, sugar a nd sugar products, and 
tobacco and tobacco products.  The share of thes e products in total imports has, however, been 
declining;  other products, such as medical goods, meth anol, and eligible footwear have been showing 
the fastest growth rates.  According to the repor t, the Dominican Republic, Costa Rica, Guatemala, 
and Honduras were the main sources of U.S. im ports under CBERA in 1997.  The study concluded 
that the CBERA has no negative effects on U.S. in dustry; U.S. imports of the 20 leading CBERA-
exclusive items, except for two sugar items, produced net welfare gains for U.S. consumers in 1997.  
(v) Bilateral agreements 
(a) United States-European Union Tr ansatlantic Economic Partnership 
89. The 1990 Trans-Atlantic Declaration between th e United States and the European Union set 
up biannual contacts at a presidential level, betwee n the U.S. Secretary of State and EU foreign 
ministers, and between the EU Commission and the re levant U.S. cabinet officials.  At the United 
States-European Union Summit, held in Madrid  in December 1995, the United States and the 
European Union agreed on a New Transatlantic Ag enda (NTA), a main component of which was the 
New Transatlantic Marketplace initiative.  The NT A focussed on issues such as reducing regulatory 
barriers, harmonizing standards, eliminating ta riffs on information technology products, and 
improving international rules regarding government  procurement and intellectual property rights. 
90. Under the NTA, the United States and the Eur opean Union finalized agreements on mutual 
recognition of testing and conformity assessment, cust oms cooperation, and equi valency in veterinary 
standards and procedures.  In December 1997, the tw o sides issued a joint declaration outlining their 
commitment to enhancing regulatory coopera tion while facilitating consumer protection. 
91. At the United States-European Union Summit in London, in May 1998, negotiations toward a 
Transatlantic Economic Partnershi p (TEP) were announced.  It wa s agreed that the TEP would 
incorporate both bilateral and multilateral issues,  and that it would have three components:  
(a) negotiations to reduce barriers to bilateral tr ade in services, industrial goods, and agricultural 
products;  (b) cooperative efforts in the WTO and other international organizations to reduce or 
eliminate barriers that hinder international trade a nd capital flows and to address other related issues;  
and (c) efforts to enhance the transatlantic  dialogue between business, non-governmental 
organizations, and governments on trade and investment matters. 
92. Initiatives such as the Transatla ntic Business Dialogue (TABD), the Transatlantic Consumer 
Dialogue (TACD), and the Transatlantic Labor Di alogue, provide fora for the interchange and 
harmonization of views in the process towards the TEP.  The TABD has been a forum for pursuing 
bilateral liberalization issues that later have been multilateralized;  examples of this include the ITA, 
initially pursued at a bilateral level and la ter taken to the WTO, and discussions on 
telecommunications and financial services reflected later in the respective WTO Agreements.  The TABD's steering committee was also behind the preparation of recommendations for the Madrid meeting, which led to the formation of the NTA. 
                                                     
 
38USITC (1998b). United States WT/TPR/S/56 
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93. In November 1998, the United States and the European Union concluded a joint action plan 
for the TEP39;  the Plan created an agenda to address trade i ssues in eight areas:  services;  agriculture;  
government procurement;  intellectual property;  tec hnical barriers to trade;  environmental issues;  
labour issues;  and competition policy. 
94. At the multilateral level, the Plan calls for, among other things:  regular meetings between the 
United States and the European Union in prepar ation for the 1999 WTO Ministerial Conference in 
Seattle; the adoption, where possible, of common approaches in the review  of the WTO's DSU;  
cooperation on developing a multilate ral agenda for negotiations in  services, intellectual property 
rights and agriculture;  cooperati on in concluding successfully the ITA II;  full cooperation for the 
improvement of multilateral rules on government procurement;  and cooperation in the areas of 
investment, competition policy, electronic commerce,  trade and the environment, and core labour 
standards. 
95. At the bilateral level, the Plan outlines a numbe r of goals in the eight areas addressed.  In the 
area of technical barriers to trade, the aims are:  to reduce, where possible, barriers resulting from 
diverging regulatory requirements;  extension of  the existing U.S.-EU Mutual Recognition Agreement 
to new sectors;  and coordination to determine th e feasibility of increased use of mutually agreed 
international standards.  In services, Plan objectives include cooperation to prev ent future barriers to 
market access, and negotiation of mutual recogniti on agreements on specific sectors.  In government 
procurement, the Plan is aimed at expanding market access opportunities, particularly through 
increased use of electronic procurement.  With respect to intellectual property, there are a number of 
objectives, including resolution of procedural issues that could allow U.S. acceptance of the Madrid 
protocol concerning trade marks;  and improved prot ection for computer programmes.  In agriculture, 
the goals include regular communica tion between U.S. and EU interage ncy food safety contact points;  
cooperation on dangerous f ood products and on risk assessment;  creation of a biotechnology working 
group to consider, inter alia,  the establishment of a pilot project to encourage simultaneous 
applications for scientific assessm ents in the United States and an EU member state.  The link 
between environmental concerns and trade will be discussed in a TEP Environment Group. With 
respect to labour issues, the Plan calls for an ex change of views between the United States and the 
European Union regarding the implementation of the workers rights provisions of their respective 
GSP schemes.  In competition policy, the goal is to apply the United States- European Union Positive 
Comity Agreement, concluded in 1998.  In elec tronic commerce, the agenda includes discussions on 
issues such as the elimination of legal and regulator y barriers;  the promotion of voluntary standards; 
and continued duty-free treatment of electronic transmissions. 
(b) Other bilateral agreements 
96. Out of 63 bilateral trade, investment, or inte llectual property rights agreement signed by the 
United States between 1996 and 1998, 53 had entere d into force by 31 December 1998 (Table AII.1).  
The largest number of agreements was with Japan (nine), followed by the European Union (six). 
(5) B ILATERAL INVESTMENT TREATY PROGRAMME  
97. Investment policy is regulated by the provisi ons of the Bilateral Investment Treaty (BIT) 
Program. The main objectives of the BIT are to:  (i) protect U.S. investment abroad in countries where 
U.S. investors’ rights are not protected through existing agreements;  (ii) encourage adoption in 
foreign countries of market-oriented domestic policies that treat private investment fairly;  and (iii) 
support the development of international law standa rds consistent with these objectives.  Prospective 
BIT partners are also generally expected, at the time the BIT is signed, to make a commitment to 
                                                      
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Page 44 
 
 
implement all TRIPS Agreement obligations within a reasonable period of time.  BITs complement 
and support regional initiatives on investment liberalization such as APEC and the FTAA. 
98. According to the authorities, BITs lay the policy groundwork for broader multilateral 
initiatives in the OECD and eventual ly, the WTO.  The main elements  present in BITs signed by the 
United States include MFN and/or and national treat ment (whichever is more favorable) subject to 
certain specific exceptions listed in annexes or protocol s to the treaties;  limits on expropriation (it can 
occur only, for a public purpose, in a non-discrim inatory manner, under due process of law, and is 
subject to compensation);  the right for investors to transfer funds into and out of the country at a market-determined exchange rate;  restriction of the host country's ability to require investors to adopt 
trade distorting practices, and prohibition of local-c ontent or export-performance requirements;  the 
right to submit an investment dispute with the treat y partner's government to international arbitration 
(no requirement to use domestic courts);  and the ri ght to appoint the top managerial personnel of their 
choice, regardless of nationality. 
99. Bilateral investment agreements have been s ubscribed by the United States with Albania, 
Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Bolivia, Bulg aria, Cameroon, The Democratic 
Republic of the Congo, The Republic of the Co ngo, Croatia, Czech Republic, Ecuador, Egypt, 
El Salvador, Estonia, Georgia, Grenada, Haiti, H onduras, Jamaica, Jordan, Kazakhstan, Kyrgyzstan, 
Laos (initialled only), Latvia, Lithuania, Mo ldova, Mongolia, Morocco, Mozambique, Nicaragua, 
Panama, Poland, Romania, Russia, Senegal, Slova kia, Sri Lanka, Trinidad and Tobago, Tunisia, 
Turkey, Ukraine, and Uzbekistan.  Of these, the treaties with Azerbaijan, Bolivia, Croatia, 
El Salvador, Jordan, Lithuania, Mozamb ique, were signed between 1996 and 1999.