RESTRICTED
WORLD TRADE WT/TPR/S/16
21October 1996
ORGANIZATION(96-4377)
TRADE POLICY REVIEW
UNITED STATES
Report bytheSecretariat
Thisreport, prepared forthefourth Trade Policy Review oftheUnited States, has
beendrawn upbytheWTO Secretariat onitsownresponsibility. TheSecretariat
has,asrequired bytheAgreement establishing theTrade Policy Review Mechanism
(Annex 3oftheMarrakesh Agreement Establishing theWorld Trade Organization),
sought clarification from theGovernment oftheUnited States onitstrade policies
andpractices.
Document WT/TPR/G/16 contains thepolicy statement submitted bytheGovernment
oftheUnited States.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body ontheUnited States.United States WT/TPR/S/16
Page iii
CONTENTS
Page
I. THE ECONOMIC ENVIRONMENT 1
(1) Recent Economic Performance 2
(2) Major Features oftheU.S. Economy 4
(i) Agriculture 5
(ii) Manufacturing 6
(iii) Services 7
(3) Trade Performance 9
(i) Composition oftrade 9
(ii) Geographic pattern oftrade 13
(iii) Intra-industry trade 16
(4) Foreign Direct Investment 19
(5) Outlook 21
II. CHANGES INU.S. TRADE POLICY MAKING 22
(1) Overview 22
(2) Internal Trade Policy Making 23
(i) Authority fortrade policy 23
(ii) Trade policy making intheExecutive Branch 25
(3) Changes inExternal Trade Policy Focus 26
(i) U.S. participation intheWorld Trade Organization 26
(ii) Organization forEconomic Co-operation andDevelopment (OECD) 29
(iii) Regional andpreferential agreements 30
(iv) Developments inbilateral trade policy making 36WT/TPR/S/16
Page ivTrade Policy Review
Page
III. TRADE POLICIES BYMEASURE 44
(1) Overview 44
(2) M.f.n. andPreferential Tariffs andCharges 45
(i) M.f.n. tariffs andcharges 45
(ii) Tariff preferences andconcessions 48
(iii) Rules oforigin andlabelling requirements 52
(3) Trade Remedy Provisions 56
(i) Overview 56
(ii) Escape clause 56
(iii) Anti-dumping andcountervailing measures 59
(iv) Section 301oftheTrade Actof1974 70
(v) Other trade measures 76
(4) Anti-Trust Policies 77
(i) U.S. competition policy 77
(ii) Competition policy byU.S. trading partners 78
(5) Export Policies 78
(i) Export controls 78
(ii) Foreign aid,export andinvestment credits andinsurance 79
(iii) Marketing support 80
(6) Government Procurement 81
(i) Value ofgovernment procurement 81
(ii) Tendering procedures andrestrictions onU.S. companies tendering abroad 83
(iii) Buy-American provisions 83
(iv) International commitments 84
(v) U.S. policies andforeign procurement practices 89
(7) Standards, Technical Regulations andConformity Assessment 89
(i) Overview 89
(ii) Development ofstandards andtechnical regulations 90
(iii) Conformity assessment procedures andcosts 94
(iv) International co-operation andagreements 97
(8) Trade-Related Intellectual Property Rights 98
(i) Overview ofintellectual property protection 98
(ii) Therôleofintellectual property intheU.S. economy 104
(iii) Intellectual property inU.S. regional andbilateral agreements 106United States WT/TPR/S/16
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Page
IV. TRADE POLICIES BYSECTOR 107
(1) Overview 107
(2) Agriculture andFood Products 107
(i) Recent developments 107
(ii) Domestic policies 110
(iii) Export policies 111
(iv) Import policies 114
(v) SPSmeasures andstandards 117
(vi) Policies byU.S. trading partners 117
(vii) Trade policies byagricultural sub-sector 118
(3) Textiles andClothing 122
(i) Overview 122
(ii) Trade policies 126
(4) Motor Vehicles andtheir Components 132
(i) Recent developments 132
(ii) Policy developments 134
(5) Pharmaceuticals 137
(i) Overview 137
(ii) Regulatory framework: standards andprotection for
intellectual property 139
(iii) Private sector response 142
(6) Semiconductors 143
(i) Overview ofrecent developments 143
(ii) Trade policies 145
(7) Services 146
(i) Introduction 146
(ii) Telecommunications services 147
(iii) Financial services 153
(iv) Transportation 161
(v) Other services 168
REFERENCES 171WT/TPR/S/16
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CHARTS
Page
I THE ECONOMIC ENVIRONMENT
I.1 Real GDP growth rates, industrial countries, 1990-95 1
I.2 Direction ofservices trade, 1993 and1995 17
III. TRADE POLICIES BYMEASURE
III.1 Tariff averages andshares ofunbound andnon-ad-valorem rates, bysector,
1992 and1996 47
III.2a Simple average ofm.f.n. andpreferentail tariff, byISIC category, 1995 50
III.2b Share oftariff lines subject tonon-ad-valorem duties, 1995 50
III.3a Anti-dumping dutycasesummary, 1990-95 64
III.3b Countervailing dutycasesummary, 1990-95 64
III.4 Anti-dumping andcountervailing duties enforced bytheUnited States,
31December 1995 66
III.5 Anti-dumping duties enforced against U.S. exports, 31December 1995 69
III.6 ISIC 3-digit sectors, producing products which aresubject toanti-dumping duties by,
andagainst, theUnited States asat31December 1995 70
III.7 Foreign development assistance andrelated programmes ofexport assistance
expenditure, 1990-95 80
III.8 Government expenditure andprocurement, 1990-95 82
III.9 Technical regulations byISIC andobjective andrational category asnotified tothe
GATT/WTO, January 1980-31 July1996 92
III.10a International receipts fortheuseofU.S. intellectual property 105
III.10b International payments fortheuseofforeign-owned intellectual property 105
IV. TRADE POLICIES BYSECTOR
IV.1 Trade inagricultural products, bytrading partner, 1992 and1995 108
IV.2 Trade inagricultural products, byproduct, 1992 and1995 119
IV.3 Imports ofclothing andtextiles, bytrading partner, 1990-95 124
IV.4 Trade inpharmaceuticals andforeign direct investment bytrading partner, 1993 138United States WT/TPR/S/16
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Page
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 U.S. economic performance, 1990-96 32
I.2 Major features oftheU.S. economy, 1990-95 5
I.3 Services intheU.S. economy, 1990-95 8
I.4 Sales ofservices byaffiliates, 1989 and1993 10
I.5 U.S. merchandise exports bybroad product categories, 1980-95 11
I.6 U.S. merchandise imports bybroad product categories, 1980-95 12
I.7 U.S. merchandise exports byregion, 1980-95 14
I.8 U.S. merchandise imports byregion, 1980-95 15
I.9 U.S. intra-industry trade withtheworld, bytheGATT Tariff Study
Categories, 1980-95 18
I.10 Foreign direct investment (FDI) bysource anddestination, selected years 20
I.11 Foreign direct investment (FDI) byactivity, selected years 21
II. CHANGES INU.S. TRADE POLICY MAKING
II.1 Decisions byNAFTA dispute panels, 1January 1994 -5February 1996 28
II.2 Summary ofselected U.S.-Japan bilateral agreements,
September 1993 -August 1996 39
III. TRADE POLICIES BYMEASURE
III.1 U.S. trade preferences byagreement, 1994 49
III.2 Rules oforigin byagreement ifthefinal product contains components originating
from more thanonecountry 53
III.3 Actions under andstatus oftrade remedy measures andinvestigations per
Section andStatute 57
III.4 Comparison ofdumping margins under individual-to-average andindividual-
to-individual price comparison 62
III.5 "Section 301" investigations active between October 1993 andJuly1996 75
III.6 Government procurement opened uptoforeign competition under the
Tokyo Round Code, 1992-93 85
III.7 Summary oftheU.S. commitments under the1994 WTO Plurilateral Agreement
onGovernment Procurement 87
III.8 Estimated value of1993 U.S. procurement contracts above Government Procurement
Agreement thresholds, excluding telecommunications entities andset-asides 88
III.9 Federal procurement included inthe1994 Agreement andshare ofset-asides
intotal, 1992 89
III.10 Number ofactive standards developed byagency/organization, 1991 90
III.11 Revenues ofindependent testing laboratories, 1985-92 95WT/TPR/S/16
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IV. TRADE POLICIES BYSECTOR
IV.1 Overview ofU.S. farm production andtrade infood products, 1990-95 109
IV.2 Domestic support andexport promotion expenditure specified intheFAIR Act
of1996, 1996-2002 110
IV.3 Export subsidy programme sales bycommodity 112
IV.4 GSM export credit programme approvals, 1989-94 113
IV.5 Foreign Market Development (FMD), Targeted Export Assistance (TEA), and
Market Promotion Program (MPP), programme levels andexpenditure, 1989-95 113
IV.6 Sales under PL480, Title I,fiscal year1993-95 114
IV.7 Import tariffs applied toagricultural andfood products, beverages andtobacco, 1992
and1996 (including advalorem equivalents ofspecific duties) 115
IV.8 U.S. exports ofselected cereal products andtheir share inworld exports, 1990-95 118
IV.9 Cereals, import duties bytrading partner, 1992-96 120
IV.10 U.S. trade inbeverages andtobacco products (SITC category 1),1990-95 121
IV.11 Import duties onoilseeds, nutsandkernels bytrading partner (SITC category 22),
1992-96 121
IV.12 Overview ofthetextile andclothing sector, 1990-95 123
IV.13 Therôleof"Section 807" (outward processing) shipments ofselected garments 126
IV.14 Bilateral textile agreements maintained bytheUnited States, 30April 1996 128
IV.15 Estimated value ofU.S. imports oftextiles andclothing covered bythefourphases
ofintegration oftheATC, byorigin, 1995 130
IV.16 Overview ofU.S. production andtrade ofautomotive products, 1990-95 133
IV.17 Wage rates inthemotor vehicle sector, annual averages, 1990-95 134
IV.18 Import tariffs applied tocarsandcarparts 135
IV.19 Overview ofthepharmaceutical sector, 1990-95 138
IV.20 Import tariffs applied topharmaceuticals (SITC category 54) 139
IV.21 Selection ofdrug approval acts 140
IV.22 Overview ofthesemiconductor industry, 1990-95 143
IV.23 U.S. banking offices offoreign banks, 1980-95 154United States WT/TPR/S/16
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APPENDIX TABLES
Page
AI.1 U.S. intra-industry trade withtheEuropean Union, bytheGATT Tariff
Study Categories, 1980-95 177
AI.2 U.S. intra-industry trade withtheJapan, bytheGATT Tariff Study
Categories, 1980-95 178
AI.3 U.S. intra-industry trade withCanada andMexico, bytheGATT Tariff
Study Categories, 1980-95 179
AII.1 Bilateral trade agreements andmemoranda ofunderstanding including those made
inthecontext ofGATT/WTO, 1January 1993 -16February 1996 180
AII.2a Disputes under GATT 1947 involving theUnited States, 1July1993 -
31December 1994 182
AII.2b Disputes under theTokyo Round Codes involving theUnited States,
1July1993 -31December 1995 183
AII.2c WTO disputes involving theUnited States, 1January 1995 -26September 1996 185
AII.3 Status ofselected notification requirements totheWTO, ascirculated to
WTO members on31July1996 190
AIII.1 U.S. tariff preferences byagreement, 31December 1995 andimports under
preferences in1994 193
AIII.2a ADinvestigations, 1980-93: coverage ofsubject imports relative tototal U.S.
imports andweighted average margins fornewcasefilings, byyear 194
AIII.2b CVD investigations, 1980-93: coverage ofsubject imports relative tototal U.S.
imports andweighted average margins fornewcasefilings, byyear 195
AIII.3 U.S. share intotalpatent applications bycountry, 1991 196
AIV.1 U.S. most favoured-nation tariff rates, byISIC category, 1996 197
AIV.2a Annual producer subsidy equivalent perproduct, 1986-88, 1990-92 and1993 to1995 202
AIV.2b Annual consumer subsidy equivalent perproduct, 1986-88, 1990-92 and1993 to1995 203
AIV.3 Major export markets forU.S. export subsidy programmes 204
AIV.4 Agricultural products subject tonon-NAFTA tariff quota 205
AIV.5 Active anti-dumping andcountervailing measures onagricultural and
food products, 31December 1995 214
AIV.6 Estimated advalorem tariff equivalents forMFA quotas andtrade-weighted average m.f.n.
tariffs, bysector, 1993 215
AIV.7 U.S. quota calls under theAgreements onTextile andClothing against WTO
members asnotified totheTMB, 1January 1995 to31July1996 216
AIV.8 U.S. content andU.S. shipment offoreign trade subzones autoassemblers, 1984-93 218
AIV.9 Comparison ofGood Manufacturing Practices (GMP) standards ofthe
World Health Organization (WHO) andtheFDA 219
AIV.10 Summary ofU.S. commitments inservices 220
AIV.11 Summary ofArticle II(m.f.n.) exemptions listed bytheUnited States 223WT/TPR/S/16
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SUMMARY OBSERVATIONS
(1) TheUnited States inWorld Trade
1. TheU.S.economy hasperformed well
sincethelastTrade Policy Review oftheUnited
States. Growth hasbeenabove theaverage in
industrial countries, inflation hasremained
moderate andtheunemployment rateisatalow
forthedecade. Concurrently, thefederal
budget deficit hasnarrowed substantially, toits
lowest share ofgross domestic product since
1979. Theexternal current account deficit has
widened slightly butthisisattributable to
increased investment, improving theprospects
forfuture growth.
2. TheU.S.economy hasahighdegree
ofallocative efficiency. Itinvests less,asa
share ofoutput, thanitsindustrial counterparts
butcapital productivity iswellabove theOECD
average,afactorthatunderpinsU.S.prosperity.
One important element inmaintaining
productivity istheopenness oftheU.S.
economy, which helps tokeepeconomic actors
under constant pressure toallocate resources
efficiently. Thisalsomeans thatitisinthe
United States 'ownbestinterest tokeep its
markets securely open.
3. Tradehasbecomeincreasinglyimportant
inU.S.economic activity. Theratio ofU.S.
trade toGDP hasrisen from17.2percentin
1985, to20.6percentin1990andto23.6per
centin1995. Thisincreased involvement in
tradetends toserveasacounter-cyclical buffer.
Intheearly1990s, exports cushioned theimpact
oftheU.S. recession, demonstrating the
importance fortheUnited States thatits
producers havesecure, liberal access toforeign
markets, within astrong, rules-based
multilateral system. Subsequently, asU.S.
growth improved, netimports accommodated
excess domestic demand, allowing lower
inflation, and interest rates, than might
otherwise havebeenthecase.
4. Since thelastReview, theservices
sector hasassumed anincreasing share ofU.S.
output.Inpart,thisreflectsdifferentialinflation
rates inthegoods andservices sectors, with
higher rates inthelatter; inrecent years,productivity growth inmanufacturing has
exceeded thatofGDP. However, withservices
accounting forabout two-thirds ofGDP, or
some fourtimes theshare ofmanufacturing, it
isclear thatproductivity growth inservices is
adetermining factor inU.S.living standards.
Thebenefits totheUnited States ofmaintaining
andimproving onanefficient, open and
competitive services sector arethusevident.
Thisisespecially thecasefor"input" services
suchasfinance, communications andtransport,
where productivity gains cansignificantly lower
costs inother sectors, suchasmanufacturing.
Within thisframework, itisalsonoteworthy that
thecross-border supply offoreign services to
theUnited States isnowlessimportant than
establishment asamode ofdelivery,
emphasizing theongoing interest oftheUnited
States inmaintaining aliberal foreign direct
investment régime.
5. TheUnited States continues tobethe
world 'slargest single trading nation ingoods
and services, with some 15percent of
merchandiseand16percentofservicesexports.
TheEuropean Union remains thelargest market
forU.S.merchandise exports butthere isan
ongoing shiftinthedirection ofU.S. trade
toward eastAsia, which isnow themost
important source ofimports. Thecomposition
ofU.S.merchandise trade hasalsocontinued
tomove from primary toward manufactured
products,inspiteofrapidlygrowingagricultural
exports. Growth ofmanufacturing exports has
been broad-based, withincreased shares for
exports ofoffice machines, telecommunications
equipment, chemicals, ironandsteelproducts
andautomotive products. Theshare of
manufactures inmerchandise imports hasalso
increased, ledbyoffice machines and
telecommunications equipment, non-electrical
machinery, andchemicals; theshare of
automotive products hasdeclined.
6. U.S.markets andsources forgoods and
forservices are,ingeneral, closely correlated.
While Western Europe asagroup istheU.S.
largest trading partner forcross-border trade
inservices, accounting forapproximately
60percentofimports andexports, Japan isthe
largestindividualdestination,with15.5percentUnited States WT/TPR/S/16
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ofU.S.services exports. Transportation isthe
largest component ofservices exports, withover
50percent; however, exports ofbusiness
services,royaltiesandlicensingfeeshavegrown
rapidly, respectively doubling andincreasing
by63percentduring 1994-95.
(2) Institutional andLegal Framework
7. The United States isanoriginal
signatory toalltheWTO Multilateral Trade
Agreements andtothePlurilateral Agreements
except fortheInternational Dairy Agreement.
U.S.commitments under theAgreements are
implemented indomestic lawbytheUruguay
Round Agreements Act(URAA). TheU.S.WTO
Schedule ongoods provides forbindings onall
buttwotarifflines, andcommitments under the
GATS arewidespread. TheURAA also
implemented therecommendations ofGATT
PanelsconcerningSection337ofthe1930Tariff
Actand m.f.n. treatment fornon-rubber
footwear imports fromBrazil, andauthorizes
certain future tariff cutsthatmaybeagreed
under negotiations thatstarted inthecontext of
theUruguay Round.
8. The United States applies m.f.n.
treatment toallbutsixcountries: Afghanistan,
Cuba, Laos, theDemocratic People 'sRepublic
ofKorea, Serbia andMontenegro andVietnam.
Since thepassage oftheUruguay Round
Agreements Act, Congress has enacted
permanent m.f.n. status forHungary and
Romania. Russia receives m.f.n. treatment
being deemed tobeinfullcompliance withthe
Jackson-Vanik Amendment ofthe1974 Trade
Act. Countries currently subject toJackson-
Vanik waivers areAlbania, Armenia, Belarus,
China, Georgia, Kazakhstan, Kyrgyzstan,
Moldova, Mongolia, Tajikistan, Turkmenistan,
Ukraine andUzbekistan. Iran, IraqandLibya
retain m.f.n. status although imports are
prohibited under U.S.economic embargoes.
9. Recently, theUnited States hasenacted
significant reform measures inbothagriculture
andtelecommunications.Thesemeasures,which
serve toremove many domestic restrictions, go
beyond those undertaken intheWTO andcould
acttosignificantly improve efficiency inthe
respective sectors. Thechanges could impactonU.S.trade, andonworld markets, withthe
United States aleader inbothareas.
10. Inaseparate development, theU.S.has
enacted theCuban Liberty andDemocratic
Solidarity (LIBERTAD) Act(theHelms-Burton
Act)andtheIranandLibya Sanctions Act.The
formerallowsU.S.citizenstotakeprivateaction
inU.S. courts toobtain compensation from
companies "trafficking" inconfiscated property
thatitisinCuba, andclaims towhich are
owned bythose U.S. nationals; italso
authorizes theStateDepartment torefuse U.S.
visas tosuch companies 'executives, their
spousesandtheirminorchildren.ThePresident
hasdeferred therighttofilesuitagainst foreign
companies using theexpropriated property of
U.S.nationals untilFebruary 1997. TheIran
and Libya Sanction Actauthorizes trade
sanctions against foreign companies investing
inIranandLibya. Theextra-territorial aspects
ofthese laws have been criticised byU.S.
trading partners andcases against theHelms-
Burton Acthavebeenfiledunder NAFTA and
intheWTO.
WTO Participation
11. TheUnited States isoneofthemost
active users oftheWTO dispute settlement
provisions. Currently, theUnited States has
requested consultations on19cases covering
17measures and isinvolved inaround
two-thirds ofalldispute cases raised todate.
Inonecase, amutually agreed solution was
found inconsultations anddulynotified tothe
WTO; fourpanels havebeenestablished, and
three others havebeenrequested once, butnot
yetestablished. Onepanel report, whose
findings weresubsequently appealed byJapan,
hasbeenaffirmed bytheAppellate Body
12. Ninecomplaints havebeenraised inthe
DSBagainst U.S.measures. Inthreecases, the
measures havebeenwithdrawn. Theadverse
ruling ofonepanel, covering twocases, was
appealed bytheUnited States. TheU.S.
authorities have indicated their intention to
implement therecommendation oftheAppellate
Body, which partly confirmed thePanel 's
decision; consultations between theparties are
continuing.WT/TPR/S/16
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13. TheUnited States played akeyrôlein
theservices negotiations intheUruguay Round;
toagreat extent, theefforts ofU.S.negotiators
andtheinterest ofU.S.industries behind them
determined thecourse ofthenegotiations inthis
newarea. Keysectors ofinterest totheUnited
States inpromoting international negotiations
includedtelecommunications,financialservices,
airtransport, some professional services, and
audiovisualservices.TheUnitedStateshasalso
participated inallofthepost-Uruguay Round
negotiations, buttheresults havesofarbeen
mixed. Inthefinancial services negotiations
concluded inJuly1995, theUnited States took
aGATS Article IIexemption enabling ittoapply
non-m.f.n. treatment toforeign financial service
suppliers withrespect tonewentries andnew
activities. TheUnited States didnotrevise its
commitmentsregardingthemovementsofnatural
persons inthenegotiations concluded alsoin
July1995.Intheextendednegotiationsonbasic
telecommunications,theUnitedStatessubmitted
anofferproviding unrestricted market access
andnational treatment toforeign services and
foreign service suppliers initslocal
telecommunications market. Inthenegotiations
onmaritime transport, theUnited States didnot
submit anoffer.
14. While overall public expenditure isa
lower share ofGDP intheU.S.thaninmost
other OECD countries, federal andState
procurement ofgoods andservices have a
potentially significant effect ontrade. Buy-
American orbuy-State provisions have been
eased tosome extent, although theyremain
together with national security provisions,
serious constraints onexternal competition.
15. TheUnited States isasignatory tothe
plurilateralGovernmentProcurementAgreement
which entered intoforce on1January 1996.
TheU.S.commitments under theAgreement go
significantly beyond those itundertook inthe
Tokyo Round Agreement, notably byextending
procurement obligations topublic utilities
covering many States andbyincluding public
worksandservices.AccesstoU.S.procurement
isextended, onareciprocal basis, toother
signatories. Theeffects ofexceptions contained
intheAgreement, suchasset-asides forsmall
and minority-owned businesses, have notchanged, buthavebecame moretransparent as
thecoverage oftheAgreement haswidened.
Inthecontext ofTitleVIIofthe1988Omnibus
Trade andCompetitiveness Act, theU.S.
authoritiesmonitorthegovernmentprocurement
practices oftheir trading partners. The
United States isadvocating anewagreement
intheWTO context tocreate greater
transparency ingovernment procurement.
Regional Trade Agreements
16. TheU.S.-Israel FreeTrade Agreement
hasbeen fully implemented. Under the
Agreement, some important U.S. food and
beverage imports fromIsrael arestillsubject
toimport tariffs; in1994, 44percentof
imports fromIsrael received trade preferences,
ascompared to67and88percentofitsimports
fromCanada andMexico, respectively, under
NAFTA.
17. NAFTA hasbeen implemented on
schedule, except thatthedeadline fornon-
conforming State measures oninvestment and
non-financial services wasshifted from 31
December 1995to31March 1996. U.S.tariffs
onimports fromCanada andMexico arenow
substantially lower thanm.f.n. tariffs, although
someagricultural imports atbelow m.f.n. rates
aresubject totariff quotas. Elimination of
import tariffs onanumber of"sensitive"
products isdelayed totheendofthetransition
period, ending 1January 2008.
18. Under Chapter 19oftheAgreement,
NAFTA panels mayreview anti-dumping and
countervailing measures taken. Approximately
20percentofallmeasures taken have been
reviewed under thisprovision. Bilateral
consultations under thedispute settlement
provisions ofChapter 20oftheNAFTA have
also been used andonepanel hasbeen
established, todealwiththestatus ofCanadian
dairy import tariffs. Thepanel advised thatthe
WTO-negotiated tariffs weretherelevant rates.
Bilateral Agreements
19. TheUnited States hasalarge number
ofbilateral agreements with enforceable
provisions onincreasing market access orUnited States WT/TPR/S/16
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reducing trade barriers. These agreements
primarily cover intellectual property rights,
investment, andproduct-specific market access.
Intheareaofintellectual property rights the
United States generally seeks shorter transition
periods than those specified intheTRIPS
Agreement, aswellaspipeline protection for
pharmaceuticals andagricultural chemical
products. Since 1991, theUnited States has,
asapolicy, only concluded investment
agreements withcountries which agreed toan
intellectual property right agreement.
20. Commitments made byU.S. trading
partners under bilateral agreements haveoften
beenintegrated intotheirWTO undertakings.
Thishasmostnotably beenthecaseforbilateral
agreements covering agricultural products,
textile andclothing items andcommitments
under theplurilateral Government Procurement
Agreement.
21. Market access agreements, generally
negotiated inthecontext ofaWTO dispute
settlementora"Section301"investigation,have
generally notrequired substantial changes in
U.S.policies. Animportant exception isthe
U.S.-Canada Softwood Lumber Agreement.
Following lengthy discussions, Canada agreed
totaxexports above specified volumes tothe
United States; andtheUnited States committed
itself nottouseanti-dumping, countervailing
andSection 301measures against Canadian
softwood lumber exports.
(3) Trade Policy Features andTrends
(i) Permanent trade policy instruments
22. U.S.commitments under theUruguay
Round imply atrade-weighted tariff reduction
ofsome 35percentby1999, with some
exceptions (advanced orretarded). Fulltariff
elimination onU.S.imports hasbeenagreed
forsteel, pharmaceuticals, paper, furniture,
medicalequipment,farmequipment,
constructionequipment,beerandspirits;partial
elimination forwood andscientific equipment;
participation intariff harmonization for
chemicals and non-ferrous metals; and
participation in"substantial" tariff reductions
forelectronics, ceramics, photographic andcinema goods. BytheendoftheUruguay
Round implementation period, some70percent
ofU.S.tarifflineswillbesubject tom.f.n. rates
of5percentorless,andduty-free treatment
will cover 40percent oftariff lines.
Quantitative import restrictions onagricultural
productshavebeenconvertedtotariffsandtariff
quotas, while restrictions applied totextiles and
clothing aretobeeliminated overatenyear
period.
23. TheUnited States administers avariety
oftrade preferences under theNAFTA, U.S.-
Israel FreeTrade Agreements, theCaribbean
BasinEconomicRecoveryAct,theAndeanTrade
Preference ActandtheGeneralized System of
Preferences. GSPwastemporarily suspended
in1994 andagain in1995-1996, butwas
recently renewed, withretroactive effect. GSP
benefits have, intheperiod, beenwithdrawn
fromvarious exporting countries ongrounds of
income orcompetitive need; benefits mayalso
bewithdrawn orrestored ongrounds including
intellectual property protection andprotection
ofworkers 'rights.
24. Rules oforigin governing preferential
treatment varybyAgreement, while differing
rules areusedtoadminister country-specific
textile quotas, anti-dumping duties and
governmentprocurementpreferences.
Significant changes havebeenmade inrulesof
origin applied totextiles andclothing, interalia
changing theorigin ofaproduct fromtheplace
werethetextile wascuttotheassembly point;
thislatter tends tomake quotas morerestrictive
forcountries thatspecialize inassembly of
clothing items.
25. Voluntaryexportrestrictions
administeredbyU.S.tradingpartnershavebeen
phasedoutunderimplementationoftheUruguay
RoundAgreement.InNovember1995,Congress
lifted thebanonexports ofAlaskan oil.The
Administration seeks tofacilitate exports by
speedinguptheadministrationofexportlicences
andexport controls, while some exports have
beendecontrolled, including semiconductors,
mobile telephones andsome software.
26. TheUnited States hasamarket-driven
system ofstandards development, policed byWT/TPR/S/16
Page xivTrade Policy Review
product liability laws. Technical regulations
arebased oninternational norms andprivately
developed standards. Conformity assessment
istested byaccredited firms inboththeUnited
Statesandabroad.Thereexistsalimitednumber
ofmandatory environmental process standards
enforced attheborder; notable examples are
dolphin-friendlytunafishingmethodsandturtle-
excluder devices usedinharvesting shrimp.
27. TheUnited States hasawelldeveloped
andenforced system ofintellectual property
protection, based onconstitutional provisions.
TheUruguay Round Agreements Actincreased
theduration ofprotection andresurrected
protectionforworksthathadfallenintotheU.S.
public domain. Parallel importation ofpatented
orcopyright goods maybeprevented bythe
rightholder, butanti-trust lawdiscourages
unreasonable conduct inthisarea.
(ii) Temporary measures
28. TheUruguay Round Agreements Act
made significant changes inthemethod of
calculation foranti-dumping andcountervailing
duties, injury assessment forthese and
safeguard measures, andintheprocedures to
obtain exclusion orders forimports thatinfringe
intellectual property rights. Itistooearly to
assess theeffects ofthese changes ontheease
orotherwisewithwhichdomesticproducersmay
obtain protection from"unfair" competition or
surges ofimports.
29. Recently, thenumber ofanti-dumping
andcountervailing investigations launched in
theUnited States hasdropped sharply, perhaps
inaccord withthecontinuing U.S.economic
recovery. Three safeguard investigations were
conducted in1995 and1996; only one
concluded thatimports caused injury tothe
domestic industry. Thenumber ofexclusion
orders ongrounds ofintellectual property rights
infringement declined from 51attheendof
1992 to46in1994, rising to49atend-1995.
30. Theuseof"Section 301"isnowclosely
tiedtomultilateral dispute settlement, atleast
forWTO members andinareas subject toWTO
rules anddisciplines. Investigations maybe
triggered inthecontext of"Super" 301,"Special" 301,TitleVIIoftheOmnibus Trade
andCompetitiveness Actof1988, andSections
1374and1377oftheTelecommunicationsTrade
Actof1988. Since thelastReview, theUnited
States hasinitiated 16"301" investigations and
concluded agreements covering twoprevious
investigations. Sanctions were applied once,
briefly, inthecase ofintellectual property
protection byChina. Except forthedispute with
China, anon-WTO member, allseven
301actions initiated during 1996 andtwo
earlierinvestigations(EuropeanUnion,bananas
andJapan, photographic filmandpaper) have
beenreferred toWTO dispute settlement.
(iii) Sectoral policies
Agriculture
31. Agricultural and food products
accounted forsome 11percent ofU.S.
merchandise exports in1995, following an
increase inthevalue ofexports bysome 30per
centsince 1992 inthefaceofrising world
market prices. Inthisfavourable environment,
theagricultural provisions oftheWTO and
NAFTA Agreements wereimplemented andthe
Federal Agricultural Improvement Act(FAIR)
Actof1996 wasenacted, converting domestic
price support todirect income support; the
overall levelofsupport toagriculture hasfallen.
32. With theriseinworld agricultural
prices, U.S.export subsidies havedeclined to
levels wellbelow WTO commitments; theFAIR
Acthasalsoeliminated funding forcertain
export subsidies. Tariffication ofquantitative
restrictions often implies, asinother WTO
members, prohibitive dutylevels. In-quota
tariffs form.f.n. imports are,onaverage, some
10percent,much lower thanthemean ofsome
50percentforout-of-quota imports butwell
above thesimple average U.S.tariffrateof6.3
percent. Tariff quotas have generally been
underutilized.
33. TheWTO Agreement onSanitary and
Phytosanitary Measures hashadanimmediate
impact onU.S.agricultural trade. TheUnited
States hasadjusted itsown sanitary and
phytosanitary (SPS) measures onmeatimports
from Uruguay andchanges affecting importsUnited States WT/TPR/S/16
Page xv
fromArgentina areunder consideration. The
U.S. Department ofAgriculture hasinvited
comment ontheliberalization ofaselection of
otheroutstandingSPSrestrictions.Ontheother
hand, theauthorities consider SPSrestrictions
asanimportant barrier toU.S. exports and
have requested five WTO consultations
concerning fourmeasures: onewassettled
during consultations andonepanel hasbeen
established. SPS measures arealso an
important point ofconcern inU.S. trade
relations withnon-WTO members, including
China.
34. TheFederal Agricultural Improvement
Reform (FAIR) Actof1996 replaces most
product-specificpaymentsandguaranteedprices
byannual domestic support payments, delinked
fromproduction oracreage anddeclining over
seven years, withtotal payments capped at
US$35.6 billion. Themain crops covered are
wheat, maize, sorghum, barley, oats, upland
cotton andrice. Farmers arefreetoshiftto
other crops, except inthecaseoffruitand
vegetables, unless thereisahistory ofplanting
suchcrops. Landsetasideprovisions havebeen
eliminated except fora"conservation reserve",
which idles 14.7 million hectares of
environmentally vulnerable land. Although it
istooearly toassess theimpact oftheActitis
expected thattheincreased supply originating
from reduced land setasides andgreater
flexibility inproduction will,overtime, raise
thecapacity ofU.S. farmers torespond to
changes ininternational demand.
Manufacturing
35. Manufacturingvalueaddedhasoutpaced
GDP growth since 1992, based onsharp
productivity increases ofover3percentayear
intheperiod 1992-95. Manufacturing exports
in1995 weresome 32percenthigher thanin
1992 and foreign direct investment in
manufacturing hascontinued tobeimportant.
36. Textile andclothing production has
realized significant productivity gains onthe
basis ofgreater capital intensity intheU.S.
market andoutward processing operations in
Mexico, theCaribbean andCentral America.
Inaddition toimport tariffs wellabove themanufacturing average, theUnited States
maintains country specific import quotas under
theWTO Agreement onTextiles andClothing
(ATC) andhasissued 25safeguard quota calls
onWTO members. TheUnited States has
implemented thefirstphase oftheATCandhas,
asrequired byitslegislation, published the
products tobeclassified intheremaining three
phases, with themost sensitive products
classified inthelastphase; noproducts under
quota appeared inthefirst phase, while
categories imported fromtheOECD countries,
including Mexico, were wellrepresented. As
required bytheATC, quota growth hasbeen
increased forWTO members; however, the
changes inrulesoforigin noted above arelikely
toaffect thepattern ofquota fulfilment.
37. Tariffs inmostmanufacturing sectors
other than textile andclothing andasmall
number ofother items suchastrucks, arelow
bycomparison toboth historical and
international levels. Insome areas, including
notably pharmaceuticals andsemiconductors,
theUnited States iscommitted totariff
elimination. Outward processing issignificant
inthesemiconductorssector.Quantitativetrade
measures, such as"voluntary export
restrictions" byU.S.trading partners havebeen
phased outsince thelastReview; anew
automotive agreement withJapan doesnotset
quantitativetargetsforU.S.exportsbutprovides
forbilateral monitoring ofvarious qualitative
commitments, while aMemorandum of
Understanding, seeking toliberalize access to
theKorean vehicle market, istobeimplemented
onanm.f.n. basis. Anewco-operation
agreement with Japan onsemiconductors
reaffirms market principles andestablishes a
consultative framework open toindustry
associations whose governments arecommitted
totariff elimination.
38. Compliance costs with technical
regulations -notably highforpharmaceutical
products andrising intheautomobile andother
manufacturing sectors -andtheaccreditation
offoreign suppliers ortesting agencies have
received more attention. U.S. federal
authorities havesupported bilateral initiatives
thatleadtotheinternational recognition of
conformity assessment tests; compliance testingWT/TPR/S/16
Page xviTrade Policy Review
requirements mayhavecontributed totheshift
from merchandise trade toforeign direct
investment.
Services
39. Private services generated 66percent
ofU.S.GDP and65percentofemployment in
1995. Asnoted above, productivity increases
inthesector areadecisive factor intotalU.S.
productivity growth and,therefore, standards
ofliving. Recent developments inthe
telecommunications, financial andprofessional
services sectors haveenhanced theprospects for
productivity growth inthesesectors. Protective
policies continue inmaritime transport while air
transport issubject toliberalization onabasis
ofbilateral reciprocity under "Open Skies
Agreements".
40. Withinthegeneralregulatory
environment,somedeviationsfromtheprinciples
ofnational treatment and m.f.n. exist.
Legislation permitting suchdeviations, granting
theauthorities thepowers ofapplying
differential treatment toforeign suppliers or
against foreign investment orownership
(amounting insome cases toabsolute or
conditional prohibitions) exists incertain areas
oftelecommunications, financial, airand
maritime transport services sectors. However,
newlegislation passed in1996 willopen
telecommunications andradio/TV networks to
greater competition. Anewbilateral agreement
withJapan oninsurance andother financial
services istobeapplied onanm.f.n. basis by
bothparties toallWTO members.
(4) Outlook
41. While anopen, predictable world
trading system continues tobecrucial forthe
well-being oftheU.S.economy, theconverse
isalsotrue; anopen, predictable U.S.economy
iscrucial forthehealth oftheworld trading
system. During thepasttwoyears, theU.S.
application oftheUruguay Round Agreements
andtheconsolidation oftrade remedy measures
under WTO dispute settlement procedures have
stabilized many elements that previously
appearedunpredictableandunilateralistinU.S.
policy; theAdministration hasalsoshowedrestraint inusing theinstruments available and
hasaccepted WTOrulings. However, elements
ofU.S.trade legislation, evenunder theWTO,
continue tocause concern forcertain trading
partners. Thus, thebackloading oftextile and
clothing liberalization remains problematic for
many developing countries, even though
conditions ofaccess haveimproved; access to
government procurement remains restricted in
various areas; andalthough therighttofilesuit
under theCuban Liberty andDemocratic
Solidarity (LIBERTAD) Actof1996 hasbeen
deferred and,sofar,nosanctions havebeen
announced against companies investing inIran
orLibya, theextraterritorial application ofU.S.
trade lawshasattracted significant attention.
42. TheUnited States continues tousethree
main tracks initstrade policy making:
multilateral agreements concluded onam.f.n.
basis (asintheUruguay Round); regional
agreements; andunilateral pressure toopen
third-country markets (with bilateral resulting
agreements normally applied onanm.f.n.
basis). Insome ongoing areas ofmultilateral
negotiations, concerns about thelack of
"adequate" reciprocity bysome partners have
governed U.S.actions. While thereisnodoubt
thatU.S.trade policy isfirmly founded inthe
WTO system, theinteraction among these
varioustracksremainsasourceoftensionwithin
thesystem. Itistherefore crucial thatthe
United States anditspartners utilize thesystem
tomaintain multilateralism asthekeytofuture
developments anddiscourage pressures for
increased bilateralism orunilateralism.