United States WT/TPR/S/126 
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II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICY 
(1) INTRODUCTION  
1. Reflecting in part the importance of trade in the U.S. economy (Chapter I), the United States 
remains committed to an open, transparent, and effe ctive system of international trade disciplines and 
procedures, and has in the context of this Revi ew reaffirmed its full commitment to the WTO, 
described as the core of U.S. international trad e relations.  The United States is, in particular, 
committed to completing the Doha Development Agenda (DDA). 
2. Consistent with the above, the President's 2003 International Trade Agenda seeks to create, 
"in close partnership with the Congress, a world trading system that is dramatically more open and 
more free".  To help implement the Administra tion’s trade initiatives, the President sought and 
obtained Trade Promotion Authority (TPA), a successor to "fast-track" authority.  The contents of this 
legislation confirm that the United States promotes  a wide array of U.S. values through its trade 
agenda.  TPA brings greater pred ictability to trade negotiations, and represents a commitment by the 
Congress and the President to work towards trade liber alization.  This commitment may also go some 
way to dispel concerns arising from other initiativ es taken since 2001, notably the protection granted 
to the steel industry and increased s upport to agriculture (see Chapter IV). 
3. The United States has stated its intention to wo rk also on regional and bilateral initiatives to 
promote free trade, thus exerting its leverage for openness and creating a climate for "competitive 
liberalization".  As a result, in addition to the two free-trade agreements (FTAs) in force at the time of 
its previous Review, as of June 2003 the Unite d States had concluded three other FTAs and was 
negotiating new agreements with several countries.  Unilateral preferences in favour of developing 
countries have also been expanded;  these prefer ences may be conditional on compliance with various 
U.S. policy objectives. 
4. The U.S. authorities have emphasized that trade liberalization and adherence to WTO 
commitments are integral to the design of their FTAs.  Indeed, the U.S. strategy of expanding its 
network of FTAs could serve as a building block fo r further multilateral trade liberalization, if 
liberalization on a preferential basis is preparator y work, and builds support, for more comprehensive 
efforts.  Moreover, the U.S. regional agreements can serve to draw its partners more closely into the 
trading regime, help improve the competitiveness of  partner-country products and build capacity on 
trade issues.  The U.S. preferential strategy may ra ise concerns in some quarters about the possible 
dilution of U.S. attention to the acknowledged "f irst-best" system, a multilateral system based on non-
discrimination.  Negotiating and administrative resour ces could be distracted, including on the part of 
smaller U.S. partners, away from the "first-best".   Further, vested interests could be created, 
complicating multilateral negotiations.  Also, care should be taken that the trade and regulatory 
structures, including the rules of origin, attendant  on U.S. regional agreements do not hinder trade. 
5. In the wake of the 11 September attacks, changes to the U.S. trade regime have also been 
implemented to ensure the nation's security.  These in clude the creation of a new department in charge 
of homeland security, and the transfer to that de partment of some agencies with trade-related 
responsibilities. 
6. The United States has maintained its long-standing policy of national treatment of foreign 
direct investment (FDI), subject to sector-specifi c restrictions that in most cases are motivated by 
prudential and national security cons iderations.  Although FDI policy has not changed since the last 
Review of the United States, the authorities indicated  that security receives more consideration in the 
implementation of FDI provisions. WT/TPR/S/126 Trade Policy Review 
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(2) INSTITUTIONAL AND POLICY FRAMEWORK  
(i) Institutions and recent changes 
7. The main agency responsible for trade policy fo rmulation is the Office of the United States 
Trade Representative (USTR), which is part of the Executive Office of the President.  USTR engages 
in extensive interagency coordination in the form ulation of trade policy.  This coordination is 
accomplished through the Trade Policy Review Grou p (TPRG) and the Trade Policy Staff Committee 
(TPSC).  These groups, administered and chaired by USTR and composed of 17 federal agencies and offices, make up the sub-cabinet-level mechanism fo r developing and coordi nating U.S. Government 
positions on international trade and trade-related investment issues.  The significance of any single 
agency in the development of policy depends on  the nature and scope of the trade issue under 
consideration.  USTR, coordinating with other Ex ecutive agencies, works in close collaboration with 
the Congress:  under the U.S. Constitution (Article I, Section 8), Congress has the ultimate authority 
to regulate trade with foreign nations, while the President has the responsibility and authority to 
undertake negotiations and conclude ag reements with foreign governments.
1 
8. Implementation of U.S. investment policy is partly the responsibility of the Committee on 
Foreign Investment in the United States (CFIUS),  an inter-agency body created in 1975.  The 
membership of the CFIUS comprises the Departments of Commerce;  Defense;  Homeland Security;  Justice, State, and the Treasury;  the Council of Economic Advisors; the National Security Council;  
the National Economic Council;  the Office of Manage ment and Budget;  the Office of Science and 
Technology Policy; and the USTR.  The CFIUS is chaired by the Treasury Department.  CFIUS has 
the responsibility to conduct investigations unde r the Exon-Florio amendment (see (5) below). 
9. The Department of Homeland Security (DHS) started operations in March 2003, under the 
provisions of the Homeland Security Act of 2002.
2  It has five major Directorates and regroups 22 
government agencies, certain with trade-related re sponsibilities.  The largest of the Directorates, 
Border and Transportation Security, brings under one roof several trade-related agencies, such as the 
Customs and Border Protection (formerly the U.S. Customs Service – Chapter III(2) (i)), the Bureau of 
Immigration and Customs Enforcement, and the Anim al & Plant Health Inspection Service (APHIS – 
see Chapter III(2)(vii)).  Other DHS agencies, such  as Transportation Security Administration, may 
also have responsibilities relevant to WTO obligati ons, depending on the nature and scope of their 
specific activities. 
10. The DHS has as its primary mission to prevent terrorist attacks within the United States, 
reduce America's vulnerability to terrorism, minimize  the damage and assist in recovery from attacks 
in the United States, and carry out all functions of entities transferred to it.  DHS also acts  as a focal 
point for natural and man-made cris is and emergency planning.  It must ensure that functions of the 
agencies and subdivisions within DHS that are not directly related to securing the homeland are not diminished except by specific act of Congress;  ensure that the overall economic security of the 
United States is not diminished by efforts, activities, and programmes aimed at securing the 
homeland, and monitor connections between illegal drug trafficking a nd terrorism, coordinate efforts 
to sever such connections, and otherwise contribute to efforts to interdict illegal drug trafficking.  
According to the authorities, the Congress' objective was to make the new department accountable for improving homeland security and facilitating lawful commerce. 
                                                     
 
1 Article II (2) of the Constitution. 
2 The text of the Homeland Security Act is av ailable online at:  http ://www.dhs.gov/ interweb/ 
assetlibrary/hr_5005_enr.pdf. United States WT/TPR/S/126 
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11. Section 135 of the Trade Act of 1974, as amende d, mandates an advisory committee process.  
Under this process, committees are established to provide information and advice to the Executive 
before the United States enters into a trade agre ement, with respect to existing agreements, or 
regarding any other trade policy matter.  These advi sory committees are managed by USTR, or jointly 
by the USTR with the Departments of Commerce, Agri culture or Labor.  The President is required by 
law to obtain their advice during trade negotiations, and they are required to file reports to the 
Congress on the agreements as they are being cons idered.  The Trade Act of 2002 (see below) 
established a new Congressional Oversight Group whic h could include bipartisan representation from 
all the committees with jurisdiction over legislation affecting trade. 
12. Private sector advisory committees have an impor tant role in trade policy formulation, and 
provide advice and input in the context of trad e negotiations.  Private sector committees include 
sectoral, functional, and technical advisory commit tees, but are generally organized in two main 
areas:  industry (Industry Sector Advisory Comm ittees or Industry Functional Committees on issues 
such as intellectual property and customs), and agriculture (Agricultural Technical Advisory 
Committees or ATACs).3 
(ii) Main legislative developments 
13. The main legislative development in the field of trade since the previous U.S. Review has 
been the passage of the Trade Act of 2002 ( PL 107-210) in August 2002, which contains the 
Bipartisan Trade Promotion Authority Act of 2002 (TPA).  The Trade Act is organized into 
five divisions:  Division A re-authorizes the Trade Adjustment Assistance programme 
(Chapter III(4)(ii)).  Division B is the Bipartisan Trade Promotion Authority Act;  Division C is titled 
the Andean Trade Preference Act, but also contains provisions requiring a report on the FTA with Israel, modifications of the duty treatment for tuna , as well as modifications of trade benefits under 
the Caribbean Basin Economic Recovery Act and th e African Growth and Opportunity Act (see (4) 
below).  Division D – Extension of Certain Prefer ential Trade Treatment – extends the Generalized 
System of Preferences, and Division E – Miscellane ous Provisions – contains  detailed provisions for 
customs duties on wool, extends payments to ma nufacturers under the Wool Research Trust Fund, 
establishes a fund for WTO dispute settlement, redu ces duties on certain boilers used in nuclear 
facilities, and amends the sugar dut y to ensure that imports of molasses do not circumvent the sugar 
tariff-rate quota.
4 
14. The TPA expires in June 2005 (Section 2103) but may be extended until June 2007 if the 
Presidents requests an extension and Congress does not  disapprove.  The TPA was previously known 
as "fast-track" authority, which lapsed in 1994 and was not renewed until 2002.  Under the TPA, 
when considering legislation for a new trade agreement, Congress can approve or reject the 
legislation, but must do so without amendment and w ithin a fixed period.  This legislation therefore 
greatly facilitates the negot iation of trade agreements because it requi res that, if they are approved by 
Congress, the form agreed by negotiators must re main unchanged.  The U.S. Government considers 
that the granting by Congress of TPA authority embodies a renewed partnership between Congress and the Executive on trade-related issues after 11 Se ptember 2001, based on the recognition that the 
expansion of international trade is vital to the na tional security of the United States, and that trade 
agreements maximize opportunities for the critical sectors of the U.S. economy.  Also in 2002, the Farm Security and Rural Investment Act was enacted (Chapter IV(2)). 
                                                     
 
3 For more details the role of advisory committees in the development of U.S. policy on international 
trade, see USTR (2003b), pp. 254-260. 
4 The text of the Trade Act of 2002 (Public Law 107-210, 116 Stat 988), is available online at:  
http://www.tpa.gov/pl107_210.pdf. WT/TPR/S/126 Trade Policy Review 
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(iii) Policy objectives 
15. The TPA legislation outlines 17 "principal negotiating objectives" that will guide the 
United States in its trade negotiations.5  In addition to the removal of trade barriers in goods,  services, 
and foreign investment, these objectives cover a broad spectrum of policy priorities, including 
transparency, the avoidance of regulatory measures as a means to advantage domestic producers, the 
respect of intellectual property, liberal conditi ons for electronic commerce, and the continued 
incorporation of labour and environmental issues in to future U.S. trade agreements.  The authorities 
indicated that the environmental objectives, among ot her things, relate to effective enforcement of 
domestic environmental protection la ws, maintaining high levels of e nvironmental protection, and not 
derogating from laws and policies to encourage trade or investment;  they also refer to establishing 
consultative mechanisms to promote capacity build ing for environmental protection and conservation 
of natural resources. 
16. The principal negotiating objective of the United States regarding foreign investment is "to 
reduce or eliminate artificial or trade-distorting ba rriers to foreign investment, while ensuring that 
foreign investors in the United States are not accord ed greater substantive rights with respect to 
investment protection than United States investors in the United States, and to secure for investors 
important rights comparable to those that would be available under United States legal principles and 
practices."6  These objectives are to be achieved by, among other things, reducing or eliminating 
performance requirements and exceptions to national treatment, freeing the transfer of funds relating 
to investments, establishing standards for expropria tion and compensation, and for fair and equitable 
treatment consistent with U.S. practice, and pr oviding meaningful and transparent procedures for 
resolving investment disputes. 
17. The President's 2003 International Trade Agenda has been presented as a strategy to ignite, 
"in close partnership with the Congress,  a new era of global economic growth through a world 
trading system that is dramatic ally more open and more free".7  On the strength of the TPA, the 
President also declared that the United States is committed to the goal of completing the Doha 
Development Agenda (DDA) by the agreed deadlin e of 2005 and that to maximize the likelihood of 
success, the United States is also invigorating a drive for regional and bilateral FTAs;  this strategy is 
based on the United States "exerting its levera ge for openness, creating a new competition in 
liberalization".8 
18. U.S. trade policies are connected to its broader policy aims.  While negotiations with partners 
in the western hemisphere can be seen as part of  a process towards the conclusion of the Free Trade 
Area of the Americas, the selection of FTA partners further afield is determined, in part, by several objectives including economic and other considerations.
9  This strategy is also evident in the granting 
of unilateral preferences:  for instance, the eligib ility criteria of the African Growth and Opportunity 
Act are, in part, a country's commitment not to engage in activities that undermine U.S. national 
security or foreign policy interests, while the count ries of the Andean region benefit from preferential 
access to the U.S. market partly in recognition of their efforts to combat drugs trafficking.  The 
                                                      
5 These 17 principal objectives cover:  trade barr iers and distortions;  trade in services;  foreign 
investment;  intellectual property;  transparency;  anti-corruption;  improvement of the WTO and multilateral trade agreements;  regulatory practices;  electronic commerce;  reciprocal trade in agriculture;  labour and the 
environment;  dispute settlement and enforcement;  WTO extended negotiations;  trade remedy laws;  border 
taxes;  textile negotiations;  and worst forms of child labour. 
6 Trade Act of 2002, section 2102(b)(3). 
7 See USTR (2003b), p. 1. 
8 USTR (2003b). 
9 Zoellick, R. B. (2002b). United States WT/TPR/S/126 
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authorities noted that in the case of AGOA the eligibili ty standards have been interpreted broadly, and 
that 38 of the 45 requesting countries have been granted eligibility. 
(3) PARTICIPATION IN THE WTO 
19. The United States was an original signatory to the GATT and is an original Member of the 
World Trade Organization.  In the context of this Review, the authorities have reaffirmed their strong 
support of the multilateral trading system, described as the core of current commitments in U.S. international trade relations.  The WTO Agreemen t was implemented in U. S. domestic law through 
the Uruguay Round Agreements Act, which amended U.S. legislation to bring it into conformity with 
WTO obligations.  The United States has continued to be one of the key participants in all areas of 
WTO activity, including the launch of global trad e negotiations in Doha in November 2001. 
20. The United States has met most of its notificati on obligations over July 2001 to June 2003.  
Exceptions include notifications on domestic s upport to agriculture, on special safeguards in 
agriculture, on state trading activities, and on import licensing (Table AII.1). 
21. Since its previous Review, and in particular in the context of the ongoing WTO negotiations, 
the United States has made contributions or proposals on a wide range of trade topics discussed in the 
WTO, including agriculture, industrial goods and servi ces.  In the area of market-access for industrial 
goods, a U.S. proposal has called for the eliminatio n of all tariffs on these products by 2015.  The 
United States has also made proposals on anti-dumping,  subsidies, competition policy, and intellectual 
property (see Chapter III for details).  The Unite d States has submitted comprehensive proposals for 
long-term agricultural trade reform, and partic ipated actively in current negotiations on the 
liberalization of trade in services (Chapter IV). 
22. Since 2001, the United States has made sever al proposals regarding the WTO dispute 
settlement mechanism.
10  The United States has also continue d to be an active complainant and 
respondent in the WTO dispute settlement mechanis m.  From mid-2001 to mid-2003, out of around 
60 new consultations requested under the Dispute Settlement Understa nding (DSU), the United States 
was a complainant in one tenth of cases (three of which were subsequently established as panels) and 
respondent in nearly half (17 of which were  established as ten panels) (Table AII.2). 
23. Recent complaints initiated by the United States ha ve been centred on agricultural products.  
Cases include Venezuela's import licensing of agri cultural products, Canada's exports of wheat, 
Mexico's anti-dumping duties on beef and rice, and the EU's policies on the import of biotech products (i.e. containing genetically modified orga nisms (GMOs)).  As the world's largest producer 
and exporter of foods derived from biotechnology, the United States is affected by bans on GMOs, 
and special approval procedures and mandatory labe lling requirements that are imposed or proposed 
on these products. 
24. The breakdown of cases against the United States by sector and by main trade topic shows 
that contingency measures affecting steel products  were the subject of most complaints from 
developing and industrialized countries (Chapter III(2)(v)).  Other recent cases include contingency 
measures applied to softwood lumber, and subsidi es granted to producers of upland cotton.  The 
dispute regarding the tax treatment of Foreign Sa les Corporations also progressed during the period 
under review, but the EU's decision to suspend c oncessions in an amount exceeding US$4 billion (by 
                                                     
 
10 WTO documents TN/DS/W/13, 22 August 2002 (on transparency), TN/DS/W/28, 
23 December 2002, and TN/DS/W/52, 14 March 200 3 (both on flexibility and Member control). WT/TPR/S/126 Trade Policy Review 
Page 20 
 
 
imposing an additional duty of up to 100% ad valorem  above bound custom duties on a list of U.S. 
products11) was pending the enactment by the U.S.  Congress of replacement legislation. 
25. A solution was found in April 2001  to the dis pute regarding the EU’s banana import regime, 
which resulted in the suspension of 100% duties on a list of products of certain member States of the 
European Union.12  As authorized by the Dispute Settle ment Body, the United States continues to 
apply  prohibitive duties against the EU on another list of products in relati on to a WTO dispute on 
beef from hormone-treated cattle.13 
26. Section 306 of the Trade Act of 1974 as amende d (the "Carousel Amendment") requires the 
USTR to review periodically the list of products s ubject to suspension of WTO concessions as a result 
of a country's non-compliance with rulings made un der a dispute settlement proceeding.   However, 
this provision has never been used, but it has been  the subject of a request  for consultation by the 
EU14, and some other members have raised questions.15 
27. As noted, a large number of cases against the United States related to anti-dumping, 
countervailing and safeguard measure s or their underlying legislation (Chapter III(2)(v)).  In July 
2003, the U.S. General Accounting Office, an arm of the U.S. Congress, issued a report on the 
standard of review and the impact of WTO trade remedy rulings, responding to Congressional 
concern that the WTO DSU was interfering with  the ability of WTO Members to rely on trade 
remedies to protect themselves from injury due to unfair foreign trade practices or unexpected import 
surges.16 
28. The GAO Report noted that although the United Stat es faced substantially more challenges of 
its trade remedy measures than other WTO Members,  the United States was also the biggest market 
and the biggest user of trade remedies.  The repo rt found that the WTO ruled for and against the 
United States and other Members in roughly the sa me ratios.  It was al so found that while WTO 
rulings resulted in few changes to Members’ laws, regulations, and practices they had had a relatively 
greater impact on those of the United States.  The majority of experts consulted in the context of the report agreed that the WTO was not treating the United States and other members differently. 
(4) P
REFERENTIAL AND OTHER ARRANGEMENTS  
(i) Introduction 
29. As of June 2003, the United States had free-tr ade agreements (FTAs) in force with Canada, 
Mexico, Israel, and Jordan;  the latter has entered in to force since the previous U.S. Review in 2001.  
Also as of June 2003, FTAs had been completed but were not yet in force with Chile and Singapore.  
The United States has also been actively engaged in  the Free Trade Area of the Americas process, and 
is conducting negotiations to create new FTAs with Australia, the Central American Common Market, 
Morocco, and the members of the So uthern African Customs Union.  Unilateral preferences in favour 
of developing countries have also been expanded si nce 2001, thus liberalizing U.S. market access for 
these countries.  However, the United States conti nues to provide access to unilateral programmes 
based on an evaluation of a country's performance in relation to U.S. policy objectives. 
                                                      
11 WTO document WT/DS108/26, 25 April 2003. 
12 WTO document WT/DS27/58, 2 July 2001. 
13 See WTO document WT/DS26/21, 15 July 1999, for the list of products, announced in 1999. 
14 WTO document WT/DS200/ series. 
15 See for example WTO document WT/TPR/M88/Add.1, 8 January 2002. 
16 U.S. General Accounting Office (July 2003b). United States WT/TPR/S/126 
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30. The U.S. authorities have argued that by promoting trade liberalization on multiple fronts the 
United States is creating incentives to open market s, through the leverage resulting from the size, 
innovation, and appeal of its economy.17  They further argue that new U.S. FTAs can be laboratories 
for innovation;  provide participating countries w ith trade capacity building to develop negotiating 
skills;  reward friendly countries pursuing economic and political reforms;  and promote investment, 
job creation and higher business standards.  Ulti mately, FTAs, in conjunction with multilateral and 
regional negotiations, aim to create new momentum for trade policy. 
31. The United States participates in three of the some 180 FTAs notified to the WTO as of 
October 2003.  The size and importance of the U.S. economy is such that these FTAs affect a 
significant share of world trade:  in 2002, intra-NAFTA merchandise imports accounted for 9% of 
world imports, while intra-NAFTA merchandise expor ts accounted for 10% of world exports.  A 
possible  concern relates to the capacity of potentia l partners to participate in multiple agreements 
although, as the U.S. authorities have noted, in the cas e of the United States this concern is reduced by 
the large U.S. contributions to trade capacity building in developing countries.18  There is also a 
question relating to the impact that these FTAs ma y have on third countries, for example through 
possible trade diversion.19 
(ii) North American Free Trade Agreement 
32. The provisions of the NAFTA covering trad e in goods were notified to the GATT on 
1 February 1993, while those covering trade in services were notified to the WTO on 1 March 1995.20 
33. Canada and Mexico continue to rank as the two main single-country trading partners in trade 
in goods of the United States, reflecting, in part , the free-trade provisions in force since 1994 under 
the North American Free Trade Agreement (NAFTA ), as well as geographical proximity.  In 2002, 
imports from Canada represented 18% of total U.S.  merchandise imports, while exports to Canada 
accounted for 23% of total U.S. merchandise exports ;  imports from Mexico represented 12% of total 
U.S. imports, while exports to Mexico accounted for 14% of total exports (see also Chapter I(5)).  The 
United States and Canada also share one of the worl d's largest direct investment relationships;  the 
stock of U.S. FDI in Mexico is also sizeable (Chapter I(5)). 
34. U.S. tariffs on Canadian imports have been eliminated except for certain out-of-quota tariff 
rates, while tariff elimination with Mexico con tinues through staged phase-outs (Chapter III(2)(iii)) 
35. As regards trade in services, imports and ex ports of services from Canada each represented 
8% of total U.S. services imports and exports in  2002;  services trade with Mexico over the same 
period accounted for 5% of U.S. total exports and imports.21  Under the NAFTA, a negative list or 
"top down" approach to services trade liberalization was adopted whereby trade in all services sectors 
is considered free of restrictions unless included in countries' lists of reservations.22  The negative list 
                                                      
17 Zoellick, R. B. (2002a). 
18 For example, WTO (2003a), argues  that in the case of Honduras, the burden imposed by preferential 
agreements, including with the United States, is of special concern in view of its limited institutional capacity to 
take part in numerous trade negotiations and observe the commitments undertaken. 
19 The empirical evidence on this su bject is not unambiguous but a number of studies have found that 
NAFTA has resulted in trade diversion.  For example, see Fukao, Okubo and Stern (2002), and Wall (2002).  
For a recent discussion of trade diversion and other issues related to trade agreements involving the United States see U.S. Interna tional Trade Commission (2003c). 
20 WTO documents L/7176, 1 February 1993 (goods) and S/C/N/4, 1 March 1995 (services). 
21 Services statistics are available online at:  http://www.bea.gov. 
22 Reservations must be listed with refere nce to the law or re gulation in effect. WT/TPR/S/126 Trade Policy Review 
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approach confers an inherent dynamism to th e NAFTA as new services sectors are automatically 
covered under the Agreement.  (This approach di ffers from the GATS architecture, which takes a 
positive list or "bottom up" approach.)  Additionall y, the NAFTA contains an MFN clause which, in 
effect, provides that if any NAFTA party grants more favourable treatment on investment or cross-
border trade in services to investors or services supp liers from a third country, this treatment would be 
owed to similarly situated investors or service suppliers from the other NAFTA parties. 
36. In 2002, 54% of total U.S. imports from Ca nada entered under the NAFTA regime, and 45% 
entered at MFN rates.  The latter may, or may not, be at zero import duty. The remaining 1% of imports fell under a variety of programmes among wh ich were civil aircraft, the auto pact, and 
pharmaceuticals.  For Mexico, the import figures we re 62% under the NAFTA regime and 37% at 
MFN rates.  Trade taking place outside of the NAFTA regime may be indicative of prevailing zero MFN rates, or may reflect exporters availing th emselves of low MFN rates rather than zero duty 
NAFTA rates, if, for example, the margin of preference offered under NAFTA is not sufficiently 
attractive to offset the cost of comply ing with rules of origin requirements.
23  On the occasion of 
"NAFTA at Ten" in October 2003, the NAFTA pa rties announced a trilateral initiative to pursue 
further liberalization of the NAFTA rules of origin. 
37. Trade between the United States and its NAFTA partners remains largely free of problems, 
though certain tensions in bilatera l trade persist.  In particular, cases have continued to be brought 
against the United States under Chapter 19, which provides for bi-national panel review of anti-
dumping, countervailing duty, and injury final de terminations by domestic  NAFTA-member agencies 
(see also Chapter III(2)(v)).  Ne w cases since 2001 concerned, among others, cement, softwood 
lumber, and steel products.  As of June 2003, a to tal of 24 cases brought against the United States 
remained active under Chapter 19.24 
38. Trade in softwood lumber between the United St ates and Canada continues to be a source of 
friction.  Following the expiry of the 1996 U.S.-Canada Softwood Lumber Agreement, in 2001, the U.S. lumber industry filed anti-dumping and co untervailing duty petitions regarding Canadian 
softwood lumber.  As of June 2003, Canada was challenging, before the WTO and a NAFTA panel, 
the U.S. final determinations of subsidy, dumping, and threat of injury announced in April 2002.  In 
July 2003, a NAFTA panel ruled that some aspects of the United States' application of anti-dumping 
duties on Canadian softwood lumber were inconsiste nt with U.S. domestic law. Further decisions on 
the appeal before the NAFTA panel on countervailing duties and threat of injury, issued in August 
and September 2003, affirmed and rema nded in part U.S. determinations. 
39. Since 2001, Mexico has appealed, under Chap ter 19 of the NAFTA, U.S. anti-dumping 
measures imposed on oil-country tubular goods and cement, and countervailing duties imposed on 
steel plate from Mexico. 
40. Chapter 11 of the NAFTA contains disciplines on foreign investment (see also section (5) 
below).  There has been a substantial increase in th e number of investor-state arbitration proceedings 
under Chapter 11 in recent years, including cases involving the United States as respondent, and 
controversy has arisen regarding interpretations that have been adopted by some arbitral tribunals on 
                                                     
 
23 See Danielle Goldfarb (2003), pp. 7-13. 
24 Further details are available online at:  http:// www.nafta-sec-alena.org/De faultSite/home/index_e. 
aspx. United States WT/TPR/S/126 
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key concepts, such as "fair and equitable treatment,"  and regarding the application of the notion of 
indirect expropriation to certain kinds of regulatory measures.25 
41. Of the four dispute cases under Chapter 11 brought against the United States prior to 2000, 
three have been concluded:  in January 2003, th e NAFTA tribunal dismissed claims by a Canadian 
contractor for damages for alleged injuries due to U. S. legislation requiring that federally funded state 
highway projects use only domestically produced stee l;  in October 2002, a tribunal issued an award 
dismissing claims made by Mondev Internationa l Ltd (Canada), concerning a decision by the 
Massachusetts Supreme Judicial Court in a lawsuit against the City of Boston and the Boston Redevelopment Authority;  in June 2003, a tri bunal dismissed the claims brought against the United 
States by the Loewen Group, Inc. and Raymond L.  Loewen (Canada), concerning alleged injuries 
arising from litigation before Mississippi state cour ts. The fourth dispute case, brought by Methanex 
Corp. (Canada), remained pending as of June 2003.
26 
42. Since 2000, two additional cases have been brought against the United States:  by the Canfor 
Corporation (Canada), concerning losses allegedly su ffered as a result of certain U.S. anti-dumping, 
countervailing duty, and material injury determin ations on softwood lumber;  and by Kenex Ltd 
(Canada), seeking damages for alleged injuries r esulting from the Drug Enforcement Administration's 
interpretation of the Controlled Substances Act as pr ohibiting the sale of products that cause THC, a 
psychoactive ingredient in the cannabi s plant, to enter the human body. 
(iii) Other free-trade agreements in force as of June 2003 
43. The U.S.-Israel FTA in industrial products was notified to the WTO on 13 September 1985 
under GATT Article XXIV;  as of June 2003, the U.S had not yet notified the WTO of the Agreement 
on Trade in Agricultural Products (ATAP).27 
44. The 1985 U.S.-Israel FTA covering trade in indus trial products was complemented in 1996 by 
ATAP, which expired at the end of 2001.  Its bene fits have been extended until the end of 2003 to 
allow parties time to negotiate a new agreement.  Un der ATAP most Israeli agricultural products have 
duty-free access to the U.S. market.  Four formal rounds of negotiation on a new bilateral agreement 
on trade in agricultural products were held in 2002,  and two rounds were held  in 2003.  The parties 
are in the final stages of negotiating a new agreement. 
45. U.S. tariffs on imports from Israel in 2002 aver age 0.7% (see Chapter III(2)).  In the period 
1998-02 U.S. exports to Israel grew at an annual rate  of 0.2%, while the annual average growth of  
imports was 9.6%.  Almost 50% of U.S. imports  from Israel in 2002 consisted of precious or 
semi-precious stones. 
46. The U.S.-Jordan Free Trade Agreement, signe d in October 2000, entered into force in 
December 2001.28  It was notified to the WTO under GATT Article XXIV and GATS Article V.29 
47. The U.S.-Jordan FTA provides for duty-free imports into the United States for most goods 
within four stages of implementation (see Chapter II I(2)).  It also contains provisions on trade and 
                                                      
25 See New York University Environmental Law Journal , (2002), pp. 1-18;  and Todd Weiler (2002), 
pp. 345-353. 
26 More details are available online a t:  http://www.state.gov/s/l/c3439.htm. 
27 WTO document L/5862, 13 September 1985. 
28 Online information on the Agreement is available at:  http://www.ustr.gov/regions/eu-
med/middleeast/ US-JordanFTA.shtml. 
29 WTO documents WT/REG/134/1, 5 March 2002 (goods), and S/C/N/193, 8 October 2002 (services). WT/TPR/S/126 Trade Policy Review 
Page 24 
 
 
environment, trade and labour, electronic commerce,  and services.  The FTA contains no provisions 
on investment as the U.S. already has a b ilateral investment treaty with Jordan. 
48. Unlike the NAFTA, the liberalization of services under the U.S.-Jordan FTA is based on a 
positive-list approach.  While Jordan has granted th e United States additional commitments under the 
FTA to those it scheduled in the GATS, the Unit ed States has included the same list of specific 
commitments as it made under the GATS.  The U- S.-Jordan FTA contains no MFN clause, which 
would extend more favourable treatment granted by th e parties in the context of their other FTAs, and 
thus Jordan receives no preferential treatment in services under the FTA. 
49. Before the entry into force of the FTA, imports from Jordan had already increased 
substantially (from US$31 million in 1999 to US$4 12 million in 2002) under an import programme 
created by Presidential Proclamation No. 6955 of November 1996.  Under th is programme, products 
from the West Bank, the Gaza Strip or a qualifying in dustrial zone (QIZ) across Israel and Jordan or 
across Israel and Egypt are eligible fo r duty-free entry into the United States.30  As of July 2001, only 
Jordan and Israel had taken advantage of this programme by creating eleven QIZs. 
50. In 2002, the first year of the U.S.-Jordan FTA, U.S. goods exports to Jordan, were 
US$397 million, up 17% over 2001.  In the same period, U.S. imports from Jordan, over 90% of 
which consisted of apparel, incr eased 80%, driven mostly by the QIZ programme (see Chapter III).  
Jordan was the United States' 77th largest trading partner in term s of merchandise trade in 2002. 
(iv) Other free-trade agreements 
51. The U.S.-Singapore FTA, the first between the United States and a Southeast-Asian country, 
was signed in May 2003, approved by  the U.S. Congress in July 2003, and will enter into effect in 
January 2004.  It provides for immediate duty-free access for most goods upon entry into force of the 
Agreement, and the remaining tariffs to be  phased out over a three to ten year period.31  The FTA 
includes provisions on trade and environment, trade and labour issues, electronic commerce and 
services, intellectual property rights, rules of origin, and investment.  All core provisions can be enforced through the Agreement's dispute settleme nt provisions.  Both the U.S.-Chile and the 
U.S.-Singapore FTAs contain commitments on the transfer of capital and the avoidance of capital 
controls;  any restrictions that "substantially impe de transfers" may be subject to damages claims.  
Singapore was the United States' 12
th largest trading partner in terms of merchandise trade in 2002. 
52. The U.S.-Chile FTA, signed in June 2003 and approved by the U.S. Congress in August 2003, 
provides for immediate duty-free access for more than 85% of two-way trade in goods.32  Most 
remaining tariffs and quotas are to be  eliminated in four years and all tariffs and quotas in 12 years.  
The FTA includes provisions on trade and environment, trade and labour issues, electronic commerce and services, intellectual property rights, rules of or igin, and investment.  All core provisions can be 
enforced through the Agreement's dispute settleme nt provisions.  Chile was the United States' 37
th 
largest trading partner in terms of tr ade turnover of merchandise goods in 2002. 
                                                      
30 A qualifying industrial zone is defined as any ar ea that:  encompasses portions of the territory of 
Israel and Jordan or Israel and Egypt;  has been design ated by local authorities as an enclave where merchandise 
may enter without payment of duty or excise taxes;  and has been designated by the USTR as a qualifying industrial zone. 
31 Further information is available online at:  http://www.ustr.gov/new/fta/Singapore/consolidated_ 
texts.htm. 
32 Further information is available online at:  http://www.ustr.gov /new/fta/chile.htm. United States WT/TPR/S/126 
 Page 25 
 
 
53. In October 2002, the U.S. President launche d the Enterprise for ASEAN Initiative (EAI) to 
strengthen trade and investment ties with ASEAN, both as a region and bilaterally.  Under the EAI, 
the United States has offered the prospect of add itional bilateral FTAs with ASEAN countries.  In 
October 2003, the United States and Thailand a nnounced their intention to enter into FTA 
negotiations. 
54. In January 2003, the United States announced th e start of negotiations on the U.S.-Central 
American Free Trade Agre ement (CAFTA) covering trade in goods , services, and investment.  The 
CAFTA is structured as a single agreement between th e U.S. and the parties to the Central American 
Common Market (CACM).  Negotiations are exp ected to be completed by December 2003. 
55. Formal negotiations on an FTA with the five  members of the Southern African Customs 
Union (SACU) also began in 2003 and are expected to be completed by the end of 2004.  Also in January 2003, the United States launched negotiations  on an FTA covering investment and trade in 
goods and services with Morocco.  In March 2003,  the United States began negotiations with 
Australia on a comprehensive FTA covering invest ment, trade in goods and services, intellectual 
property, and other issues. 
56. In May 2003, the Administration unveiled an initia tive to create a series of bilateral trade 
agreements with countries in the Middle East a nd North Africa, which would culminate in a U.S.-
Middle East free-trade area by 2013.  As a first step  in this process, in May 2003 the U.S. and Bahrain 
announced their intention to negotiate an FTA, with formal negotiations expected to begin in early 
2004. 
57. In November 2002, at the Trade Ministerial in Quito, leaders reaffirmed their commitment to 
conclude negotiations on the Free Trade Area of the Americas (FTAA) by January 2005, covering 
goods, services, and investment among all the countri es of the western hemisphere except Cuba.
33  An 
updated draft negotiating text, released in Octobe r 2002, contains a commitment to make tariff 
reductions on the basis of applied rates rather than WTO bound rates.  Market access negotiations 
began in May 2002 with revised offers to be submitt ed by 15 July 2003.  The United States together 
with Brazil has assumed co-chairmanship of the FT AA process until its conclusion and is to host the 
Ministerial meeting in Miami in November 2003. The United States remains committed to the January 
2005 completion of negotiation; the goal for implementation of the FTAA is December 2005. 
(v) Unilateral preferences 
58. Programmes providing duty-free treatment for de veloping country exports consist of the 
Generalized System of Preferenc es (GSP), the Caribbean Basin Initia tive (CBI), the Andean Trade  
Preference Act (ATPA), and the African Grow th and Opportunity Act (AGOA).  Chapter III(2) 
provides detailed tariff inform ation on such arrangements. 
59. The GSP, which expired in September 2001 an d was renewed retroactively by Congress in 
August 2002, is available until 31 December 2006. 
60. The Caribbean Basin Economic Recovery Act ( CBERA), enhanced by the Caribbean Basin 
Trade Partnership Act (CBTPA), which was implemented in Oct ober 2000, provides duty-free access 
for most goods from 24 CBI beneficiary countries.34  While the CBERA is permanent, CBTPA 
                                                      
33 FTAA online information.  Availa ble at:  http://www.ftaa-alca.org. 
34 Eligible countries are Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Costa Rica, 
Dominica, Dominican Republic, El Salvador, Grenad a, Guatemala, Guyana, Haiti, Honduras, Jamaica, WT/TPR/S/126 Trade Policy Review 
Page 26 
 
 
benefits are available until September 2008.  The pr ogramme will be terminated  before that if the 
FTAA or another FTA between the U.S. and CBTPA bene ficiary country enters into force before that 
date.35  The United States has been granted a waiver for CBERA by the General Council, pursuant to 
Article IX:4 of the WTO Agreement, which is valid until 31 December 2005.36  As of June 2003, the 
United States had not yet requested a WTO waiver for the benefits added by the CBTPA. 
61. Imports from CBERA countries account for 1.8% of  total U.S. imports;  this share has not 
changed since 2000.  However, within these imports there has been a shift away from MFN treatment 
towards the CBTPA programme;  imports under the latte r grew to US$7 billion in three years.  Most 
of the imports under CBTPA in 2002 (about US $6 billion) consisted of clothing products. 
62. The provisions of AGOA, enacted in May 2000 and authorized until September 2008, were 
amended in the 2002 Trade Act.37  The new provisions, commonly known as AGOA II, improve upon 
existing rules on textiles.  AGOA requires the Presi dent to determine annua lly which sub-Saharan 
African countries are eligible for the benefits of the Act.  Thirty-eight countries met the Act's 
requirements for 2003, up from 36 previously.38  The United States has not yet requested a WTO 
waiver for the AGOA programme (June 2003). 
63. Although imports from the 38 eligible c ountries declined between 2000 and 2002 (from 
US$18 billion to US$14 billion), the shift fro m MFN conditions towards the AGOA import 
programme has been sizeable;  US$8 billion of imports entered the United States under AGOA 
benefits in 2002.  A large share of this (US $6.2 billion) consisted of  petroleum products (HS 
27090020, otherwise subject to an MFN duty of 11.5 cents per barrel);  other products imported under 
AGOA preferences included passenger cars  (HS87032300,  subject to an MFN duty of 2.5%), and 
clothing products such as trousers, sweaters, a nd shirts (HS61 and 62 – see Chapter IV(3)(iii)). 
64. The Andean Trade Promotion and Drug Eradication Act (ATPDEA), part of the Trade Act of 
2002, renewed and extended the ATPA till December  2006, increased the number of eligible duty-
free products, and expanded bene fits in the apparel sector (see Chapter IV(3)(iii)).39  Bolivia, 
Colombia, Ecuador, and Peru have all been designate d full beneficiaries of the ATPA (Venezuela, the 
fifth member of the Andean Community, is not e ligible for designation under the ATPA statute).  
There was a net decline in imports entering under the ATPA programme  between 2000 and 2002, 
compensated by an increase of imports unde r MFN and the GSP programme, following the 
termination of the ATPA in December 2001.  Th e waiver granted to the United States  for the 
implementation of ATPA by the Ge neral Council, pursuant to Article  IX:4 of the WTO Agreement, 
expired on 4 December 2001.40  The United States has not yet requested a WTO waiver for the 
expanded ATPA programme  (as of June 2003). 
                                                                                                                                                                     
Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the 
Grenadines, Trinidad and Toba go, and British Virgin Islands. 
35 USTR (2002a). 
36 See document WT/L/104. 
37 AGOA online information.  Available at: http://www.agoa.gov;  and USTR (2003a). 
38 Countries eligible under the AGOA are Benin;  Botswana;  Cameroon;  Cape Verde;  Central African 
Republic;  Chad;  Republic of Congo;  Côte d'Ivoire;  Democratic Republic of Congo;  Djibouti;  Eritrea;  
Ethiopia;  Gabon;  The Gambia;  Ghana;  Guinea;  Guin ea-Bissau;  Kenya;  Lesotho;  Madagascar;  Malawi;  
Mali;  Mauritania;  Mauritius;  Mozambique;  Namibia;  Niger;  Nigeria;  Rwanda;  Sao Tome and Principe;  
Senegal;  Seychelles;  Sierra Leone;  South Afri ca;  Swaziland;  Tanzania;  Uganda;  and Zambia. 
39 See USTR (2003c). 
40 See document WT/L/184. United States WT/TPR/S/126 
 Page 27 
 
 
(vi) Other trade-related arrangements 
65. The United States has continued its participati on in other multilateral fora, such as the Asia 
Pacific Economic Cooperation (APEC), whose goal is to establish free and open trade and investment 
in the region by 2010 for industrialized economies and 2020 for developing economies.41  Progress 
towards liberalization is measured on the basis of Individual Action Plans (IAPs), prepared annually 
by each APEC member and submitted for periodic peer review.42  Trade liberalization within the 
APEC framework is based on the policy of "open re gionalism" whereby tariff reductions are applied 
both to APEC members and non-APEC members on  a non-discriminatory basis.  However, in 
October 2003, APEC leaders agreed to advan ce free trade in a coordinated manner among 
multilateral, regional, and bilateral frameworks so that they are complementary and mutually 
reinforcing.  This agreement reflected the current  trend towards the negotiation of bilateral trade 
agreements among APEC members. 
66. In an effort to increase objectivity and tran sparency, APEC strengthened its peer review 
process in 2001 in order to examine the progress of APEC economies in achieving their free and open trade and investment targets under their IAPs.  The United States will be reviewed under this process 
in 2004.
43 
(5) FOREIGN INVESTMENT REGIME  
67. The United States has a generally liberal foreign investment regime, albeit with some sectoral 
exceptions long maintained a policy of national treatme nt of foreign direct investment (FDI), subject 
to sector-specific restrictions that are motivated in most cases by prudential and national security 
considerations.44  Although during the late 1980s legislation was adopted authorizing the President to 
prevent foreign acquisitions on national security gro unds, the overall level of restrictiveness of U.S. 
FDI policy has not changed significantly during the l ast two decades.  In this regard, the OECD has 
recently observed that there has been almost no ch ange in the United States concerning FDI policy, 
while most other countries have greatly liberalized  access for foreign investors.  As a result, the 
United States is at about the OECD mean in terms of overall restrictiveness to inward FDI.45 
(i) Reporting and review requirements 
68. The International Investment and Trade in Serv ices Survey Act provides for the collection of 
information by the Federal Government on foreign in vestment in the United States for analytical and 
statistical purposes.  Reporting requirements are admini stered by the Bureau of Economic Analysis in 
the Department of Commerce with regard to direct inward investment, and by the Department of the 
Treasury with respect to (long-term) portfolio inward  investment.  Specific requirements regarding the 
reporting of foreign acquisitions of agricultural land are set forth in the Agricultural Foreign Investment Disclosure Act, which is administ ered by the Department of Agriculture. 
69. In general, foreign investment is not subj ect to review.  However, Section 721 of the  Defense 
Production Act of 1950, as amended, provides authority  for the President to take action on national 
security grounds with respect to any foreign acquis ition, merger or takeover of a corporation engaged 
in commerce in the United States (thus, this does not cover the establishment of a start-up or "greenfield" investment).  Under this provision,  commonly known as the Exon-Florio amendment, the 
                                                     
 
41 APEC online information.  Available at http://www.apecsec.org. 
42 The 2002 IAP for the United States is ava ilable online at:  http://www.apec-iap.org. 
43 Japan, Mexico and Thailand have been reviewed under this process (as at June 2003). 
44 See, e.g., Graham and Krugman (1995);  and OECD  (1995). 
45 Golub (2003), p. 16. WT/TPR/S/126 Trade Policy Review 
Page 28 
 
 
President may suspend or prohibit such an acquisition,  merger or takeover, or require divestment in 
the case of a completed transaction, if:  (i) there is  credible evidence that th e foreign entity exercising 
control might take action that threatens the national security of the United States;  and (ii) no other 
provision of federal law, excluding the Interna tional Economic Emergency Powers Act, provides 
adequate and appropriate author ity to protect national security. 
70. The Exon-Florio provision does not define "national security" but sets out certain factors, 
including the capacity and capability of domestic production to meet national defence requirements 
that the President or his designee may consider in determining the effects of a foreign acquisition on 
national security.  This element of seeming discretion in the interpretation of the concept of national 
security has entered the discussion of the Exon Florio amendment in international fora.46  The Exon-
Florio amendment's implementing regulations provi de that:  following the receipt of a voluntary 
notification of a pending or completed acquisition by a party to an acquisition or receipt of a notice of 
an acquisition by one of the agencies represented in the Committee on Foreign Investment in the 
United States (CFIUS see above), the CFIUS has a maximum of 30 days to determine whether a 
formal investigation is warranted.  If it opens an i nvestigation, the CFIUS has 45 days to complete its 
inquiry.  Once the CFIUS has submitted its report to the President, the President has 15 days within 
which to make his determination.  The CFIUS may allow a party to an acquisition to withdraw its 
notification and resubmit it at a later date, which pr ovides the investor with an additional opportunity 
to address potential security concerns without ha ving to undergo a formal investigation. 
71. Although notification is voluntary, the CFIUS may initiate a review of any transaction that 
has not been notified during a three-year period afte r the completion of that  transaction.  Moreover, 
an amendment to the Exon-Florio provision effected  in 1993 provides for mandatory investigations of 
any foreign acquisition by entities controlled by or ac ting on behalf of a foreign government, if the 
acquisition could result in control of a person engage d in interstate commerce in the U.S. that could 
affect the national security of the United States. 
72. During 1988-02, the CFIUS initiated investiga tions of 18 acquisitions;  a total of 1,434 
acquisitions that were notified to the CFIUS.47  A recent study observes in this regard that the CFIUS 
has initiated investigations under only limited circum stances and that, as a matter of practice, it tries 
to avoid the use of investigations  and presidential determinations.48  During this period, the President 
blocked an acquisition notified under the statute onl y once, in 1989, and no acquisition has been 
blocked or divested since then.49 
73. In May 2001, the CFIUS concluded its review of the acquisition of the Silicon Valley Group 
Inc. by a Dutch semiconductor equipment manufact urer, ASM Lithography NV.  The acquisition was 
approved but some concerns  have been expressed about the length of time taken to complete the 
review process and the substantial restructuring of  the proposed acquisition that was asked for as a 
condition for its approval.50  In the context of this Review, the authorities indicated that, in the wake 
of the 11 September attacks, issues relating to terro rism are given heightened consideration in the 
review of submissions under the Exon Florio provision. 
                                                      
46 See e.g. WTO document WT/TPR/M/88/Add.1, 8 January 2002, pp. 215-216 and OECD (1995), 
p. 54. 
47 U.S. General Accounting Office (2000a), p. 8;  and U.S. General Accounting Office (2002b), p. 5. 
48 U.S. General Accounting Office (2002b), p. 6. 
49 This decision concerned the acquisition of a United States aircraft parts manufacturer by a Chinese 
company.  For details see U.S. Gene ral Accounting Office (2000a), p. 9. 
50 See e.g. Fenton (2002), pp. 195-249, 198-199 and 214-215. United States WT/TPR/S/126 
 Page 29 
 
 
74. In addition to the Exon Florio provision, anot her important national-security-related aspect of 
U.S. inward FDI policy is the application of indus trial security regulations by the Department of 
Defense.  Such regulations generally require a c ontractor to obtain facility security clearance and 
individual security clearance in order to perform a government contract involving access to classified 
sites or information.  Where a contractor is dete rmined to be under forei gn ownership, control or 
influence, the Department of Defense may withhold  clearance unless certain steps are taken, such as 
the use of voting trust agreements whereby the fo reign stockholders are effectively divested of 
management control in the contractor. 
(ii) National treatment and sectoral restrictions 
75. Restrictions on FDI exist in energy, mining, and fisheries.  The Atomic Energy Act of 1954 
prohibits the issuance of licences to engage in opera tions involving the use of atomic energy to any 
entity that is owned or controlled by aliens, fore ign corporations or foreign governments.  The 
Mineral Leasing Act of 1920 make s public lands available for leasing only to citizens of the 
United States, associations of such citizens, or corporations organized under the laws of the 
United States, with respect to acquiring rights of wa y for oil pipelines, or leases or interests therein for 
mining coal, oil or certain other minerals.  Howeve r, non-U.S. citizens may own a 100% interest in a 
U.S. corporation that acquires a right-of-way for oil or gas pipelines across onshore federal lands, or 
that acquires a lease to develop mineral resour ces on on-shore federal lands, unless the foreign 
investor's home country denies U.S. citizens or cor porations, similar or like privileges for the mineral 
or access in question accorded to its own citizens or co rporations or to the citizens or corporations of 
other countries. 
76. Foreign-controlled enterprises may not engage in certain fishing operations involving coastal  
trade.  In addition, foreigners may not hold more than a minority of ownership shares in companies owning vessels that operate in U.S. fisheries.  Co rporate organization require ments apply with respect 
to the registration of flag vessels for fishing in the U.S. exclusive economic zone.  Foreign-flag 
vessels may not fish or process fish in the 200-na utical-mile U.S. exclusive economic zone except 
under the terms of a governing international fisheri es agreement or other agreement consistent with 
U.S. law.  Most other sectoral measures applied at the federal level that limit FDI (or allow FDI 
subject to reciprocity) relate to services subsector s, notably air and maritime transport services, 
communication services, and financial services (Chapter IV).  Restrictive measures applied at the State level apply in particular to real estate and financial services. 
77. Under various federal government programmes pr oviding benefits,  the eligibility of foreign-
owned companies operating in the United States fo r government funding of research and development 
is subject to conditions relating to the nature of their activities in the United States and to the 
treatment accorded to U.S.-own ed companies by the country in which their parent firm is 
incorporated.  Thus, under the Advanced Technol ogy Program, as amended by the American Pre-
eminence Act of 1991, the Secretary of Commerce mu st require, among other things, that a company's 
participation in the programme be in the economic in terest of the United States, and that the company 
be U.S.-owned or incorporated in the United States with a parent company incorporated in a country 
that meets certain reciprocity criteria and affords e ffective protection to intellectual property rights of 
U.S. firms.
51  Similar eligibility conditions apply under the Energy Policy Act of 199252, and under 
the Technology Reinvestment Project.53 
                                                      
51 15 USC 278n. 
52 42 USC 13525. 
53 10 USC 2491. WT/TPR/S/126 Trade Policy Review 
Page 30 
 
 
78. Eligibility for Overseas Private Investment Co rporation (OPIC) insurance and guarantees for 
investments is limited to entities organized in the United States and substantially (more than 50%) beneficially owned by U.S. citizens, or to fore ign entities wholly owned by U.S. citizens.  This 
provision has been listed as a national treatment ex emption for the granting of subsidies in services 
subsectors in the U.S. Initial Offer to  the WTO Council for Trade in Services.
54  T h e  O P I C  i s  a  
government agency that seeks to facilitate the "par ticipation of U.S. private capital in the economic 
and social development of less developed countri es and areas, and countries in transition from non-
market to market economies".55  OPIC is entitled to offer direct loans, loan guarantees, and political-
risk insurance for investments in 150 countries.  Th e agency's statute requires review of projects for 
their effects on human rights, the environment, worker rights, and U.S. employment. 
79. In agriculture, foreign-controlled U.S.-enterpr ises cannot obtain special emergency loans for 
agricultural purposes. 
(iii) International investment arrangements 
80. Apart from the GATS, under which the United States has made extensive commitments 
regarding the supply of services through commercial presence, the main multilateral instruments relevant to foreign investment to which the United States is a party are the OECD Code of 
Liberalization of Capital Movements
56, and the OECD National Treatment Instrument, which is 
legally non-binding.57 
81. There are 38 bilateral investment treaties in force between the United States and other 
countries (Table II.1).  Among the main characteristics of U.S. bilateral investment treaties are:  a 
broad definition of covered investments;  the gran ting of national and MFN treatment with regard to 
investment both pre- and post-establishment, subject to agreed sectoral exceptions;  the obligation to 
observe certain standards of treatment and protecti on with regard to covered investments;  rules 
concerning expropriation and compensa tion payable;  free transfer of funds;  prohibition of certain 
mandatory performance requirements;  settling of di sputes between investors and a host State through 
international arbitration.  Also of relevance to foreign investment are the treaties of friendship, 
commerce and navigation still in force between the Unite d States and some 40 countries;  the last such 
treaty was concluded in 1966 with Thailand. 
82. The NAFTA and the recently signed FTAs betw een the United States and Singapore and the 
United States and Chile contain separate chapters on foreign investment, which are similar to the 
provisions of the United States' bilateral investment treaties (see section (4)(ii) above). 
83. Bilateral investment treaties and investme nt provisions in FTAs concluded by the 
United States allow the parties to make exceptions to specified obligations in certain sectors or 
measures specified in annexes to such agreements.   In this regard, sectors in which the United States 
has usually reserved the right to adopt or maintain exceptions to the obliga tion to accord national and 
MFN treatment include:  atomic energy;  customhouse brokers;  licences for broadcast, common 
                                                      
54 WTO document TN/S/O/USA, 9 April 2003. 
55 See 22USC2191 online.  Available at:  http:// frwebgate3.access.gpo.gov/cgib in/waisgate.cgi?WAIS 
docID= 3080778963+10+0+0&WAISaction=retrieve. 
56 The Code of Liberalization contains legally bi nding obligations regarding the liberalization of 
specified capital movements, including foreign direct investment, subject to certain exceptions and country-
specific reservations.  The reservations made by th e United States are set forth in the OECD Code of 
Liberalisation of Capital Movements, OECD (2003a), p. 138. 
57 The National Treatment Instrument contains a legally non-binding commitment to accord national 
treatment to foreign-owned or controlled firms in the post-establishm ent phase.  For a recent list of exceptions 
maintained by the United States to the OECD National Treatment Instrument, see OECD (2002b), pp. 74-80. United States WT/TPR/S/126 
 Page 31 
 
 
carrier, or aeronautical radio stations;  COMS AT;  subsidies or grants, including government-
supported loans, guarantees, and insurance; and la nding of submarine cables.  The sectors in which 
the United States has reserved the right to adopt or  maintain exceptions to the obligation to accord 
MFN treatment include:  fisheries; air and mariti me transport, and related activities;  financial 
services;  and one-way satellite transmissions of  direct-to-home and direct broadcast satellite 
television services and of digital audio services (see also Chapter IV). 
Table II.1 
Bilateral investment agreements, June 2003 
Country Entry into force Country Entry into force 
Albania 4 January 1998 Jamaica 7 March 1997 
Argentina 20 October 1994 Jordan 13 June 2003 
Armenia 29 March 1996 Kazakhstan 12 January 1994 
Azerbaijan 2 August 2001 Kyrgyzstan 12 January 1994 
Bahrain 30 May 2001 Latvia 26 December 1996 
Bangladesh 25 July 1989 Lithuania 22 November 2001 
Belarus Signed but not yet in  force Moldova 25 November 1994 
Bolivia 6 June 2001 Mongolia 1 January 1997 
Bulgaria 2 June 1994 Morocco 29 May 1991 
Cameroon  6 April 1989 Panama 30 May 1991 
Congo, Democratic Republic of 
the (formerly Zaire) 28 July 1989 Poland 6 August 1994 
Congo, Republic of the 13 August 1994 Romania 15 January 1994 
Croatia 20 June 2001 Russia Signed but not yet in force 
Czech Republic 19 December 1992 Senegal 25 October 1990 
Ecuador 11 May 1997 Slovakia 19 December 1992 
Egypt 27 June 1992 Sri Lanka 1 May 1993 
El Salvador Signed but not yet in  force Trinidad and Tobago 26 Dec 1996 
Estonia 16 February 1997 Tunisia 7 February 1993 
Georgia 17 August 1997 Turkey 18 May 1990 
Grenada 3 March 1989 Ukraine 16 November 1996 
Honduras 11 July 2001 Uzbekistan Signed but not yet in force 
 
Source:  WTO Secretariat, based on data from the Trade Compliance Center at the U.S. Department of Commerce online 
 information.  Available a t:  http://www.tcc.mac.doc.gov. 
84. The United States has concluded 20 trade and investment framework agreements.58  T h e  
agreements establish an instituti onal framework within which the pa rties consult on ways to promote 
bilateral trade and investment.  Typically they provi de that the parties undertake to adopt appropriate 
measures to encourage and facilitate trade in goods  and services, and to secure favourable conditions 
for long-term investment, development, and divers ification of trade among their respective nationals 
and companies.  In addition, these agreements provi de that the parties will consider whether further 
agreements would be desirable regarding trade, ta xation, intellectual property, labour, transfer of 
technology, technical cooperation, and investment issues.  Under the recently announced Middle East 
Free Trade Initiative, among other things, that the Un ited States will offer to negotiate new trade and 
investment framework agreements with countries in the region and to deepen those already in place. 
                                                      
58 With Algeria (13 July 2001), Bahrain (11 June  2002), Brunei Darussalam (16 December 2002), the 
Common Market for Eastern and Southern Africa (October 2001), Egypt (1 July 1999), Ghana (26 February 1999), Indonesia (1996), Morocco (16 march 1995), New Zealand (2 October 1992), Nigeria (16 February 
2000), Pakistan (25 June 2003), the Philippines (1989), Singapore (11 October 1991), South Africa (18 February 
1999), Sri Lanka (25 July 2002), Taiwan (19 September 1994), Thailand (23 October 2002), Tunisia (2 October 2002), Turkey (29 September 1999) and the West African Economic and Monetary Union (24 April 2002).