WORLD TRADE G/L/101
4September 1996
ORGANIZATION(96-3476)
Original: English COUNCIL FOR TRADE INGOODS
19September 1996
FORMER TRUST TERRITORY OFTHE PACIFIC ISLANDS
Request forRenewal ofWaiver
Thefollowing communication hasbeenreceived from thePermanent Mission oftheUnited
States.
_________________
BytheDecision oftheCONTRACTING PARTIES oftheGATT 1947 of8September 1948
(BISD II/9), theUnited States wasgranted awaiver ofitsobligations under paragraph 1ofArticle
1oftheGATT 1947, fortheprovision ofduty-free treatment toproducts oftheTrust Territory of
thePacific Islands (TTPI) imported intothecustoms territory oftheUnited States. Thewaiver was
granted foranindefinite period. Pursuant toparagraph 1(b)(iii) oftheGATT 1994, thewaiver became
partoftheGATT 1994 when theMarrakesh Agreement Establishing theWorld Trade Organization
(“WTO Agreement ”)entered intoforce on1January 1995. Asprovided forinparagraph 2ofthe
Understanding inRespect ofWaivers ofObligations under theGeneral Agreement onTariffs andTrade
1994, unless renewed, thiswaiver willexpire on31December 1996, twoyears afterentry intoforce
oftheWTO Agreement.
OnJuly18,1947, theUnited States undertook theadministration oftheUnited Nations Trust
Territory ofthePacific Islands which included theMarshall, Caroline, andMariana Islands (except
Guam). These islands were formerly heldbyJapan under mandate. During 1986, theCovenant
establishing theCommonwealth oftheNorthern Mariana Islands (“Covenant ”),aninsular areaofthe
United States, andCompacts ofFreeAssociation (“Compacts ”)withtheUnited States fortheRepublic
oftheMarshall Islands, andtheFederated States ofMicronesia came intoeffect. In1994, theCompact
ofFreeAssociation withtheUnited States fortheRepublic ofPalau came intoeffect. With theentry
intoeffect oftheCompact withPalau andtheagreement oftheTrusteeship Council oftheUnited
Nations, theTrusteeship ofthePacific Islands wasterminated onOctober 1,1994.
Since theUnited States became theAdministering Authority, exports oftheformer TTPI have
beeneligible toduty-free treatment inthecustoms territory oftheUnited States, uponwhich suchexports
aresubstantially dependent. Thistreatment hasbeencontinued under theCovenant andCompacts.
TheUnited States requests thatMembers recognize theexceptional circumstances oftheformer
TTPI andextend thewaiver fortheperiod ending on31December 2006, inorder toenable theUnited
States tocontinue toprovide duty-free access foreligible imports from theRepublic oftheMarshall
Islands, theFederated States ofMicronesia, theCommonwealth oftheNorthern Mariana Islands, and
theRepublic ofPalau.G/L/101
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Awaiver ofparagraph 1ofArticle IoftheGATT 1994isnecessary sothattheUnited States
cancontinue toprovide suchduty-free treatment consistent withitsinternational obligations. This
request ismade inaccordance withtheGuiding Principles tobefollowed inconsidering applications
forwaivers adopted on1November 1956; theUnderstanding inRespect ofWaivers ofObligations
under theGeneral Agreement onTariffs andTrade 1994; andparagraphs 3and4ofArticle IXof
theMarrakesh Agreement Establishing theWorld Trade Organization. Thepolicy objectives and
exceptional circumstances justifying awaiver aredescribed below.
Discussion
Article I:2oftheGATT 1947 permits certain historical preferences inrespect ofduties and
charges notinexcess ofthelevels permitted under Article I:4.Article I:2permits historical preferences
“inforceexclusively between twoormoreterritories which onJuly1,1939wereconnected bycommon
sovereignty orrelations ofprotection orsuzerainty andwhich arelisted inAnnexes B,C,D.”Under
thisprovision, theUnited States provides historical preferences totheU.S.Virgin Islands, Guam and
American Samoa, which wereU.S.possessions onJuly1,1939 andwhich areincluded inAnnex D.
Since becoming theAdministering Authority in1947, theUnited States hassought toaccord
theformer Trusteeship areas tariff preferences similar tothose accorded toinsular areas included in
Annex D.Thistreatment hasbeencontinued under theCovenant andCompacts.
Purpose
Initially, theUnited States established thesystem ofpreferential entry fortheexports ofthese
islands intothemarket oftheUnited States asameans toensure thattheeconomies oftheislands were
notdestabilized asaresult ofthechange inadministering authority from Japan totheUnited States.
Over thelonger term, theprimary purpose ofthesystem hasbeentopromote theexpansion oftrade
andtheeconomic development ofthebeneficiaries inamanner consistent withtheobjectives ofthe
GATT andwiththetrade, financial anddevelopment needs ofthebeneficiary countries, andnotto
raisebarriers ortocreate difficulties fortrade ofother Members. Thispurpose hasbecome allthe
more important aseachoftheformer Trusteeship areas haverecently become self-governing entities.
Under General Note3(a)(iv) oftheHarmonized Tariff Schedules oftheUnited States, duty-free
treatment isaccorded toallproducts oftheformer TTPI, withsome exceptions. Watches andwatch
movements, andcertain fishery products aresubject toquantity limitations, andbuttons, certain textile,
apparel, footwear andluggage products aresubject todutyinsome orallofformer TTPI. Duty-free
treatment isonlyaccorded tothein-quota quantity ofagricultural products subject toatariff- ratequota.
TheUnited States isseeking arenewal oftheitswaiver fromparagraph 1ofArticle Iinorder
tocontinue toaccord historical preferences totheformer Trust Territory ofthePacific Islands consistent
withitsinternational obligations. Thepreferential treatment covered bythewaiver ordinarily would
havebeencovered byArticle I:2andAnnex Dbutforthetiming oftheUNdecision placing theislands
under trusteeship. Thewaiver granted in1948under GATT 1947isarecognition oftheseexceptional
circumstances, circumstances which continue tothisday.
Effect onother contracting parties
Thetariff preferences provided under thepreferences inquestion donotcreate barriers or
otherwise impede thetradeofmembers duetothenature andsmall volume oftheproduction andtrade
involved andoftheunderlying economic factors affecting suchproduction andtrade.G/L/101
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TradefiguresprovidedinAnnex1showthattradeisnotsignificantandhasnotdisplacedimports
from other countries.
Effect onMFN andGSP
Theprogram didnotimpede U.S.tariffnegotiations intheUruguay Round, inwhich amajor
objective wasthezero-for-zero initiative forelimination oftariffs onamost-favored-nation basis.
Preferences granted toU.S.insular possessions areindependent oftheU.S.GSPprogram asamatter
ofstatute andamatter ofpolicy.
Conclusion
TheUnited States requests Members togiveexpeditious consideration tothisrequest, andto
decide toextend thewaiver oftheprovisions ofparagraph 1ofArticle IoftheGeneral Agreement
fortheperiod ending 31December, 2006. TheUnited States isprepared toenter intoconsultations
andtocooperate fullyinproviding additional information about thehistorical preferences granted to
theformer Trust Territory ofthePacific Islands anddiscussing thespecific terms ofthewaiver.G/L/101
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ANNEX 1
USImports from theTrust Territory ofthePacific
(Values inmillions ofdollars)
U.S.Imports
Source 1991 1992 1993 1994 1995
Total U.S.Imports 487,129 532,665 580,659 663,256 743,505
Republic oftheMarshall Islands 3 8 11 8 13
Federated States ofMicronesia 5 13 14 13 13
Republic ofPalau 0 0 1 3 6
Commonwealth oftheNorthern
Mariana Islands254 295 308 332 428