WT/TPR/S/16 Trade Policy Review
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II. CHANGES INU.S.TRADE POLICY MAKING
(1) Overview
1. While retaining thefundamental constitutional authority fortrade policy making, theU.S.
Congress hasdelegated theoperation oftradepolicy totheAdministration subject tospecific statutory
requirements. U.S.trade policy isanchored intheWTO multilateral trading system, complemented
byregionalandbilateraltradeagreements.TheU.S.waiverfortheCaribbeanBasinEconomicRecovery
Acthasbeenrenewed bytheWTO General Council until2005: U.S.regional trade agreements have
beendiscussed, orarecurrently under review, intherelevant WTO forum. Inarecent development,
twostatutes allow foractions bytheAdministration against investors inCuba, IranandLibya, aswell
asforpossible future court actions against investors inCuba.
2. FollowingtheconclusionoftheWTOAgreement,theU.S.CongresspassedtheUruguayRound
Agreements Act,amending domestic legislation tobring itintoconformity withtheU.S.multilateral
commitments. Themain elements ofthese commitments are:tariff reductions by34percentover
fiveyears; tariffication ofallquantitative import restrictions applied toagricultural products; binding
ofallbuttwoimport tariff linesandbinding ofdomestic support andexport subsidies foragricultural
products; integration intoGATT 1994 provisions overtenyears, ofquantitative restrictions applied
totextile andclothing products; extension ofpatent protection from17years fromgrant to20years
from filing andresurrection ofcertain intellectual property rights which were already inthepublic
domain; andparticipation inthenewly established World Trade Organization. TheUnited States also
participatesinthePlurilateralTradeAgreementsconcludedundertheUruguayRound,withtheexception
oftheInternational Dairy Agreement.
3. Since thelast1994Review, nonewregional agreements involving theUnited States havebeen
reached, butthepreviously agreed United States-Israel, United States-Canada andNorth American
FreeTrade Agreements havebeenimplemented according toschedule. Mechanisms provided under
these Agreements forongoing negotiations, bilateral orregional consultation anddispute settlement
provisions havebeenusedasenvisaged (section (3)(iii)). Aframework forconsultations made inthe
context oftheFreeTrade AreaoftheAmericas (FTAA) andtheAsia-Pacific Economic Cooperation
(APEC) forahasbeenestablished andactively used.
4. TheUnited States concluded 30bilateral trade agreements in1993, 37in1994, 28in1995
andeight during 1January-16 February 1996. Twenty ofthese agreements werenotyetinforce as
of16February 1996, generally because theyrequired legislative approval either bythetreaty partner
orUnited States. Areas addressed inbilateral agreements include inparticular product-specific market
access, protection ofintellectual property rights andinvestment relations (Table AII.1). Incases where
bilateral agreements havebeensuperseded bymultilateral agreements covering thesame areas, the
commitmentsmadeunderthesebilateralagreementshavegenerallybeenintegratedintothesemultilateral
agreements. Examples include bilateral agreements covering agricultural products which havebeen
integrated intheWTO Agreements, andtheU.S.-EU Government Procurement Agreement, which
wasintegrated intheWTO Plurilateral Agreement onGovernment Procurement.
5. TheUnited States continues tograntselected developing countries unilateral preferential access
toitsmarket under theCaribbean Basin Economic Recovery Act(CBERA), theAndean Trade
Preferences Act(ATPA)and Generalized System ofPreferences (GSP). GSPwassuspended from
September toDecember 1994 andagain from August 1995 toSeptember 1996; inbothcases itwas
reinstated retroactively (Chapter III(2)(ii)).United States WT/TPR/S/16
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(2) Internal Trade Policy Making
(i) Authority fortrade policy
6. TheU.S.Constitution confers onCongress thepower toregulate commerce withforeign nations
(Article I,Section 8,Clause 3)andthepower toraise taxes, including customs duties (Article 1,
Section 7,Clause 1).1Import tariffs andallother restrictions onmerchandise trade arethusthe
prerogative ofCongress. Trade inservices ispartially covered byfederal andpartially byStatelaw,
withimportant differences inlegislative authority among sectors (Chapter IV(7) and(8)). The
Constitution explicitly authorizes Congress toprotect useful inventions andwriters. Federal legislation
covering trademarks isauthorized under theCommerce Clause oftheConstitution; however, some
rights protected bytheTRIPS Agreements arecovered byStateandnotfederal law(Chapter III(8)).
7. Atthefederal level, Congress hasdelegated theadministration ofimport tariffs andemergency
trademeasures totheExecutive Branch andindependent statutory agencies, subject tojudicial review.2
Complementary tothisdelegation, Congress requires theUnited States Trade Representative (USTR)
toreport annually, onbehalf ofthePresident, ontheimplementation oftradeagreements. Inaddition,
theUSTR regularly briefs ontradematters thefiveSenators andfiveRepresentatives whoareofficially
designated ascongressional advisors tointernational trade negotiators3,maintains contact withother
members ofCongress, andtestifies toCongressional Committees asinvited. Since thelastReview,
reporting requirements ontheactivities oftheWorld Trade Organization havebecome more detailed.
Inparallel, theU.S.International Trade Commission (USITC) alsoreports toCongress ontheoperation
oftrade agreements.
8. TheU.S.Constitution provides thePresident withtheauthority toenterintonegotiations with
anyforeign power andsignanyinternational agreement asanExecutive Agreement. Treaties are
negotiated bythePresident, butatreaty mayonlyenter intoforce onceatwo-thirds majority inthe
Senate provides itsadvice andconsent tothetreaty andthePresident ratifies it.Treaties havetheforce
oflawintheUnited States. Recent trade agreements havebeenExecutive Agreements, which donot
require Senate advice andconsent butwhich aregenerally considered, according totheauthorities,
tohavetheforce oflaw; ifnecessary, legislation isenacted oramended topermit theperformance
oftrade agreements. When considering legislation under fast-track authority, Congress approves or
disapproves legislation butmaynotamend it.Fast-track authority hasalways beengranted foralimited
timeandforspecific negotiations, most recently fortheNAFTA andUruguay Round negotiations.
Atpresent, fast-track authority isnotineffect, butthisdoesnotimpede theAdministration from
1Thisapplies onlytolegislative rules. Administrative rules authorized byStatute areunder thepurview of
theExecutive Branch ofGovernment.
2Theadministration oftrade policy measures maybechallenged incourt andappealed uptotheSupreme
Court. Since thelastU.S. Trade Policy Review, theSupreme Court hasnotheard anycases involving trade
policy issues.
3Trade Actof1974, Section 161.WT/TPR/S/16 Trade Policy Review
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negotiating ontradematters inanyforum; however, itcould complicate thepassage through Congress
ofimplementing legislation resulting from suchnegotiations.4
9. SignedbytheAdministration,theWTOAgreementhasthestatusunderU.S.lawofanExecutive
Agreement. U.S.implementing legislation, theUruguay Round Agreements Actof1994, amended
existing lawstobring them intoconformity withU.S.commitments made intheRound.5TheAct,
interalia,gaveeffect tothestaged tariff reductions andtothetariff bindings agreed intheU.S.WTO
Schedule. Italsoprovides thePresident withauthority tomodify orreduce instages anytariff inthe
U.S.Schedule, provided thattheaction isagreed inamultilateral negotiation under theauspices of
theWTO andthatitapplies toatariff category thatwassubject toreciprocal dutyelimination or
harmonization negotiations during theUruguay Round; andtocorrect technical errors intheU.S.
Schedule.6According totheauthorities, thePresident willusethisprovision togrant duty-free status
fornewpharmaceutical products, asagreed innegotiations with16other major trading countries.7
10. Inaddition totariff reductions, theActamended alarge number oftrade-related statutes,
including theTariff Actof1930, Agricultural Marketing Agreement Actof1937, Trade Actof1974
andtheOmnibus Trade andCompetitiveness Actof1988. Issues raised inaGATT dispute settlement
report onSection 337oftheTariff Actof1930 (Chapter III(8)) andacomplaint byBrazil involving
U.S.m.f.n. treatment ofnon-rubber footwear imports werealsoaddressed (Table AII.2b). Likeother
tariff-cutting legislation, theActwassubject tothe"pay-as-you-go" principle established bythe1990
Omnibus Budget Actandtherefore includes specific revenue-raising measures tocompensate forthe
estimated revenue losses from tariff cuts.
11. InAugust 1996, theU.S.Generalized System ofPreferences (GSP) wasretroactively reinitated
until31May1997, afterhaving beensuspended fromSeptember toDecember 1994andAugust 1995
toSeptember 1996 (Chapter III(2)(ii)). Thepay-as-you-go principle mayhavecontributed tothis
suspensionas,accordingtotheauthorities,therewasnomajorobjectioninCongressagainstGSPrenewal
other thanthecompensation ofrevenue losses byother measures. Theprinciple alsoapplies tothe
tariff cutsforshiprepairs thatarepartoftheimplementing legislation oftheOECD Shipbuilding
Agreement;relevantlegislationforthecutshadbeendiscussedintheHouseWaysandMeansCommittee
4There issome suggestion thattheabsence ofsuchauthority maybeafactor inthediscussions onChile 's
accession toNAFTA. According totheU.S. authorities, "Atthattime, theGovernment ofChile determined
itwasinappropriate tocontinue negotiations until theU.S. Congress hadprovided thePresident "fast track"
authority tonegotiate trade agreements." U.S. Trade Representative (1996), pp.78-79.
5Parallel totheratification oftheUruguay Round Agreement bytheU.S.Congress, theAdministration agreed
tosupport aproposal which would, ifappropriate legislation were enacted, establish acommission offivefederal
judges tomonitor WTO dispute-settlement reports thatruleagainst theUnited States; thelegislation isstillin
itsformativestages.TheCommissionwouldconsiderwhetherapanelortheAppellateBody,exceededitsauthority
orterms ofreference, added totheobligations ordiminished therights thattheUnited States assumed under
theAgreements oracted arbitrarily orcapriciously orotherwise departed from theprocedures setoutforpanels
andtheAppellate Body under theagreements. Following anaffirmative decision bytheCommission, Congress
maypassajointresolution thatcallsupon thePresident tonegotiate newdispute settlement rules tocorrect the
problemindicatedbytheCommission.IftheCommissionmakesthreeaffirmativedeterminationswithinafive-year
period, Congress maypassajointresolution withdrawing approval oftheWTO Agreement. (U.S. International
Trade Commission (1995a).
6Uruguay Round Agreements Act,Section 111(b).
7Statement ofAdministrative Action (1994), p.702.United States WT/TPR/S/16
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andtheSenate Finance Committee butasof30September 1996hadnotyetbeenapproved byCongress
(section (ii)). Atpresent there arenoindications onthepossibility ofCongressional approval inthe
nearfuture foranyother tariff-cutting Bill,including aproposal thatwould provide NAFTA parity
totheCaribbean Basin Economic Recovery Actcountries (Chapter IV(3)).
12. Since thelastReview, Congress hasalsoenacted anumber ofnon-tariff-cutting Statutes with
animpact onU.S.trade. Thus, foreign aidandexport support measures havebeencutinthe1996
Budget; the1996 Federal Agricultural Improvement andReform Act(theFAIR Act)significantly
liberalizes restraints onagricultural production (Chapter IV(2)); andthe1996 Telecommunications
Actincreases intra-sectoral competition (Chapter IV(7)). Thelatter sector-specific Actsmaycontribute
overtimetotheincreased competitiveness ofU.S.exports inthose sectors, where itisalready aworld
leader ineither volume ortechnology.
13. During 1996, Congress passed andthePresident enacted bysignature theCuban Liberty and
Democratic Solidarity (LIBERTAD) Actof1996 (the"Helms-Burton Act") andtheIranandLibya
Sanctions Actof1996. TheHelms Burton Act,initsTitleIII,allows U.S.nationals totakeprivate
action inU.S.courts toobtain compensation from companies "trafficking" inconfiscated property,
claims towhich areowned bythose U.S.nationals; effective 1August 1996, thePresident suspended
therighttofilesuitforsixmonths. TheAct,under TitleIV,alsodirects theU.S.StateDepartment
todenyvisastoexecutives andcontrolling shareholders (aswellastheirspouses andminor children)
ofthecompanies determined tobe"trafficking" insuchproperty (Chapter III(3)(i)). TheIranand
Libya Sanctions Actmandates thatthePresident takestwoactions outofalistofsixagainst companies
thatinvest more thanUS$40 million intheoilindustry ofIranorLibya during agiven period orthat
trade withLibya inviolation ofU.N. Security Council resolutions (Chapter III(3)(i)).
14. During 1993-95 theUnited States negotiated over75bilateral tradeagreements, mainly covering
market access forU.S.exports, investment, andprotection ofintellectual property (section (iii)). Of
these onlythose addressing investment aretreaties which have toreceive adivce andconsent to
ratification.
(ii) Trade policy making intheExecutive Branch
15. According tothe1996Trade Policy Agenda ofthePresident oftheUnited States, theobjective
ofthePresident istoensure "equal access onequal terms intrade", based on"...thatsimple principle
ofreciprocity, where everyone plays bythesame rules".8Thisprinciple istobeachieved through
anarrayoftradepolicyinstrumentswhichareco-ordinatedbytheUSTRandtheSecretaryofCommerce.
Ingeneral, theUSTR hastheleading responsibility foralltrade policy measures which involve
conditional access totheU.S.market, including negotiations conducted under WTO auspices, andfor
co-ordinating U.S. policies ontrade inservices andintellectual property rights. Trade policy is
formulated atCabinet levelintheTrade Policy Committee (TPC), chaired bytheUSTR.9
16. TheUSTR chairs theTrade Policy Review Group (TPRG), asubordinate group oftheTPC
which includes theSecretaries ofAgriculture, Commerce, Labour, State andTreasury, andupon
8U.S. Trade Representative (1996), p.2.
9Omnibus Trade andCompetitiveness Actof1988, Section 1601.WT/TPR/S/16 Trade Policy Review
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invitation representatives fromother relevant agencies.10ThisGroup iscomplemented attheworking
levelbytheTrade Policy StaffCommittee (TPSC). TheUSTR isalsoViceChairman oftheOverseas
Private Investment Corporation (OPIC), andisfurther amember oftheNational Advisory Committee
onInternational Monetary andFinancial Policies andanon-voting member oftheExport-Import Bank.
Theoffice oftheUSTR co-ordinates contacts withtheStates andtheprivate sector. Italsoresponds
toprivate sector petitions inthecontext ofinvestigations pursuant toSection 301ofthe1974 Trade
Act(asamended); Sections 301-310 oftheActprovide authority andprocedures under U.S.lawto
enforce U.S. rights under international trade agreements andtorespond tocertain "unfair" foreign
practices (Chapter III(3)(iii)).
17. In1996, USTR established aMonitoring andEvaluation Unittowatch theimplementation
oftrade agreements byU.S.trading partners. TheUnitwillco-ordinate theuseofalready existing
instruments fortheenforcement oftrade agreements through compliance anddispute settlement
procedures inallfora.11According totheauthorities, themission oftheUnitcovers alltrade
agreements, butpriority initsactivities willbegiven to:high-dollar, high-volume exports, high-growth
exports, barriers which affect jobcreation andexisting jobs,barriers which arewidespread andcover
many markets andbarriers faced bysmall andmedium-sized businesses.
18. TheDepartment ofCommerce includes anumber ofagencies involved intheimplementation
ofmeasures thataffect U.S. external trade, including theBureau ofExport Administration, the
International Trade Administration, theNational Institute ofStandards andTechnology andthePatent
andTrademark Office. Commerce hasrecently established aTrade Compliance Center (TCC), which
willbuilduponandcomplement thework ofUSTR 'sTrade Enforcement Unit. TheCenter willcollect
information ontrade compliance, develop acomputerized database andinformation retrieval system,
andperform focused research andanalysis oncompliance issues, including developing methodologies
forevaluating compliance withtradeagreements. TheSecretary ofCommerce chairs theinter-agency
Trade Promotion Coordinating Committee (TPCC), which covers export marketing andfinance
programmes supported by19federal agencies. In1993, thePresident announced theimplementation
oftheNational Export Strategy developed bytheTPCC (Chapter III(3)(v)).
(3) Changes inExternal Trade Policy Focus
(i) U.S.participation intheWorld Trade Organization
19. TheUnited States regards theWorld Trade Organization (WTO) ascentral toitsinternational
trade relations. Thus, itgrants allWTO members, except Cuba, unconditional m.f.n. treatment.
Congressional passage oftheUruguay Round Agreements Act,toimplement U.S. commitments
undertaken intheRound, alsoensures thecontinued veryactive participation intheWTO andthus,
therules-based multilateral trading system.
10TheTPRG wasformally authorized under Section 1621 oftheOmnibus Trade andCompetitiveness Act
of1988 (U.S. Congress, 1995, pp.208-209).
11USTR press release, 5January 1996 "USTR Establishes aPermanent Monitoring andEnforcement Unit",
posted ontheInternet.United States WT/TPR/S/16
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(a) Specific U.S.WTO commitments
20. TheUruguayRoundAgreementsActgaveeffecttoU.S.implementationoftheWTOAgreement,
ensuring participation intheWorld Trade Organization, andthePlurilateral Agreements onTrade in
Civil Aircraft, Government Procurement, andBovine Meat. TheUnited States doesnotparticipate
intheInternational Dairy Agreement. Specific U.S. commitments intheRound, andembodied in
theAct,include: thestaged reduction ofm.f.n. tariffs byanaverage of34percent; extension of
tariffbinding toallbuttwotarifflines, compared tobindings onsome 98percentoflinespreviously;
guaranteed market access toarange ofservices sectors under theGeneral Agreement onTrade in
Services; undertakings onreductions inagricultural export subsidies anddomestic support expenditures;
phasing outquantitative restrictions applied totextile andclothing products overaperiod of10years;
extension ofpatent protection from17years fromgrant to20years fromfiling; resurrection ofcertain
intellectual property rights thatwere already inthepublic domain; andimproved access inits
government procurement tosignatories ofthePlurilateral Agreement onGovernment Procurement.
TheActalsoimplemented changes toU.S.legislation following therecommendations ofa1989GATT
dispute panel concerning Section 337oftheTariff Actof1930 andofa1992 GATT dispute panel
reportfollowingacomplaintbyBrazilconcerningm.f.n.treatmentforimportsofnon-rubberfootwear.12
21. Since thecompletion oftheUruguay Round, theUnited States hasactively participated inthe
subsequent multilateral negotiations, including onfinancial and maritime services, basic
telecommunications andthemovement ofnatural persons. During the1995 Financial Services
negotiations, theUnited States revised itsApril 1994Schedule ofspecific commitments; insodoing,
itundertook toprotect existing foreign investments infinancial services, butdidnotguarantee m.f.n.
treatment toforeign firms toestablish newfinancial services businesses, expand existing operations,
orundertake newactivities inbanking, securities, insurance andother financial services. Inaccordance
withtherectification procedures oftheWTO Market Access Committee, theUnited States alsomade
minorchangestoitsScheduleXX(ChapterIII(2)(i)).On15November1995,theWTOGeneralCouncil
adopted thedecision torenew awaiver oftheprovisions ofparagraph 1ofArticle IoftheGATT 1994
until31December 2005"...totheextent necessary topermit theUnited States Government toprovide
duty-free treatment toeligible products oftheCaribbean Basin countries ...without being required
toextend thesame duty-free treatment tolikeproducts ofanyother Member".13
22. Inthecontext oftheWTO Agreements, theUnited States hasaccepted thecommitments made
byother Members. Inview ofitsownundertakings andtheimportance ofthecommitments ofits
trading partners fortheU.S. economy, theUnited States, inaddition toitsactive rôleintheWTO
inthisregard, alsopresses "...forimplementation ofUruguay Round commitments through regional
initiativessuchastheFreeTradeAreaoftheAmericas(FTAA),TheAsia-PacificEconomicCooperation
Forum (APEC) andtheTransAtlantic Market Place".14
23. TheUnited States isalsoseeking examination byitstrading partners ofanumber ofareas,
notably on"core" labour standards aswellastransparency ingovernment procurement. Section 131
oftheUruguay Round Agreements Actdirects thePresident toseektheestablishment within theWTO
of"...aworking party toexamine therelationship ofinternationally recognized workers 'rights, ....,
12U.S. International Trade Commission (1995a).
13WTO document WT/L/104, 24November 1995. Theinitial waiver ofGATT 1947 wasgranted bythe
CONTRACTING PARTIES on15February 1985 fortheperiod 1January 1984 until 30September 1995.
14U.S. Trade Representative (1996), p.6.WT/TPR/S/16 Trade Policy Review
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tothearticles, objectives andrelated instruments oftheGATT 1947andoftheWTO, respectively".15
TheUnited States hasidentified fivecorelabour standards -freedom ofassociation, righttoorganize
andbargain collectively, prohibition offorced labour, elimination ofexploitative forms ofchildlabour
andnon-discrimination inemployment oroccupation -which itwishes tohaveexamined intheWTO
context.
(b) Transparency
24. Improved transparency ofWTO activities andpolicies ofMembers isapriority totheU.S.
authorities. Asrequired bytheUruguay Round Agreements, theUnited States hasnotified therelevant
CommitteesandCouncilsofitsanti-dumping,countervailingmeasures,safeguardandintellectualproperty
rights legislation. Inthecontext ofdiscussions ofthislegislation, theUnited States hasresponded
toquestions from itstrading partners. Equally theUnited States hasposed questions onthelawsof
other WTO member States. TheUnited States hasalsonotified therelevant Committees andCouncils
oftrade policy instruments asrequired under thevarious Agreements (Table AII.3).
25. TheTrade Policy Review Mechanism hasoffered theUnited States theopportunity toquery
thetrade policies ofthecountries under review. TheUnited States hassubmitted written questions
toevery meeting oftheTrade Policy Review Body since thelastReview andalsoparticipated actively
inthediscussions oftheBody.
(c) Dispute settlement
26. Intheperiod under review andprior to31December 1995, anumber ofoutstanding disputes
under GATT 1947andtheTokyo Round Codes wereresolved. Thepanel report onU.S."Measures
affecting theimportation andinternal saleoftobacco" wasadopted.16Venezuela withdrew acomplaint
against theUnited States regarding standards forimported gasoline, soastoinitiate thiscomplaint
under thenewWTO rules(Table AII.2a). Under theTokyo Round Codes dispute settlement provisions,
panel reports wereadopted concerning anti-dumping andcountervailing measures onimports offresh
andchilled Atlantic salmon fromNorway (27April 1994), countervailing measures onpureandalloy
magnesium fromCanada (27October 1993), measures affecting theexport ofsoftwood lumber from
Canada (27October 1993) andnon-rubber footwear from Brazil (13June1995) (Table AII.2b).
27. AccordingtotheU.S.authorities,theWTOdisputesettlementmechanism"respondstolong-held
U.S. concerns regarding international trade disputes".17During theperiod 1January 1995 to
23August 1996, theUnited States requested 19consultations under theWTO dispute settlement
mechanism. Onedispute wasresolved during consultations, fourpanels havebeenestablished and
three panels were requested oncebutnotestablished. OnePanel Report hasbeencirculated tothe
members oftheDispute Settlement Body andwasappealed byJapan.
28. U.S.trading partners haverequested nineconsultations regarding U.S.trade measures: one
hasbeenresolved during consultations; onepanel (covering twocases) concerning standards for
reformulated andconventional gasoline hasbeenconcluded; panels wereestablished inthree cases,
ofwhich oneterminated itsactivities attherequest oftheinitiating country. Afourth panel wasinitially
15Uruguay Round Agreements Act,Section 131(a).
16The1994 panel reports onU.S.import restrictions oftunaandU.S.taxes onautomobiles were notadopted.
17Statement ofAdministrative Action (1994), p.1008.United States WT/TPR/S/16
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requested butnotestablished, astheUnited States useditsrighttoobject oncetotheestablishment
ofthepanel. Thesubject matter ofthisdispute, "tariff increases onproducts fromtheEuropean Union"
hasbeenremoved since then. Consultations ontwodisputes (EC,"Helms-Burton Act"andMexico,
tomatoes) were ongoing asat15October 1996 (Table AII.2c).
29. TheUnited States appealed thepanel ruling concerning standards forreformulated and
conventional gasoline totheWTO Appellate Body. TheBody'sruling wasadopted bytheDispute
Settlement Body (DSB) on20May1996. TheUnited States hasannounced thatithasinitiated aprocess
toexamine anyandalloptions forcompliance withtherecommendations oftheDSB (Table AII.2c)18;
inthisconnection, consultations were continuing asof10October 1996.
(ii) Organization forEconomic Co-operation andDevelopment (OECD)
(a) Shipbuilding
30. InDecember 1994, theUnited States signed aninternational shipbuilding agreement negotiated
under theauspices oftheOECD, covering subsidies; injurious pricing policies; domestic andexport
financing; anddispute settlement. Implementing legislation involves elimination ofimport duties on
shiprepairs conducted insignatory countries oftheAgreement. Import duties willcontinue tobelevied
onshiprepairs innon-signatory countries. Implementing legislation isunder preparation intheHouse
Ways andMeans Committee andtheSenate Finance Committee (section (1)(i)).
(b) Multilateral Agreement onInvestment
31. AsatJuly1996, theUnited States hadnegotiated 38bilateral investment treaties; theNAFTA
alsoincludes achapter oninvestment (section (iii)). TheUnited States alsoaddresses investment issues
inthecontext oftheAsia-Pacific Economic Cooperation (APEC) forum andnegotiations relating to
theFreeTrade AreaoftheAmericas (FTAA). Following arecommendation bythePresident 'sAdvisory
CommitteeonTradePolicyandNegotiations,theUnitedStates,duringa"Quad"meetinginLosAngeles
inSeptember 1994, called foralaunch ofnegotiations intheOECD toreach a"multilateral investment
agreement". InMay1995, negotiations toreach aMultilateral Agreement onInvestment (MAI) were
launched intheOECD. TheUnited States aimstoconclude them successfully byadeadline ofMay
1997. According totheU.S.authorities, theAgreement willbe"...openforaccession toallcountries
willing toundertake itsobligations".19
32. TheUnited States seeks toinclude thefollowing elements intheMAI:
- ahighstandard ofliberalization thatgoesbeyond existing commitments;
- thebetter ofnational orm.f.n. treatment withonlylimited sectoral exceptions;
- freedom from market-distorting performance requirements;
- freedom tomake anyinvestment-related transfer, including ofprofits, capital, royalties
andfees;
- international legal standards forexpropriation, including "prompt, adequate and
effective" compensation; and
18U.S. Trade Representative, press release, 19June1996, "United States Invited Public Comments onNext
StepinWTO Dispute onEPA Rules forImported Gasoline".
19U.S. Trade Representative (1996), p.71.WT/TPR/S/16 Trade Policy Review
Page 30
- access tobinding international arbitration ofdisputes, inappropriate circumstances,
between aninvestor andtheState.
(iii) Regional andpreferential agreements
(a) Overview
33. Thethreeregional tradeagreements inwhich theUnited States currently participates havebeen
discussed, orarecurrently under review intheWTO Committee onRegional Trade Agreements; the
United States-Israel FreeTrade Agreement, theCanada-United States FreeTrade Agreement andthe
North American FreeTrade Agreement. TheUnited States iscurrently involved intwoother regional
groupings withastrong focus ontradepolicy: theAsia-Pacific Economic Cooperation forum andthe
FreeTrade Agreement fortheAmericas initiative.20Since thelastreview, specific goals andtimetables
havebeenestablished byAPEC andFTAA members. Discussions andtheestablishment ofworking
parties toidentify howthesegoals canberealized markrecent developments inthesegroups. Inaddition
tomutually agreed regional trading arrangements, theUnited States unilaterally grants tariffpreferences
toselected developing countries under theCaribbean Basin Economic Recovery Act;theAndean Trade
Preference Act; andtheGeneralized System ofPreferences (Chapter III(2)(ii)).
(b) United States-Israel FreeTrade Agreement
34. TheUnited States-Israel FreeTrade Agreement hasbeenimplemented onschedule. Mosttariffs
have been removed subject tosatisfaction oftherules oforigin specified intheAgreement
(ChapterIII(3)(iii)).Remainingtariffsareleviedonagricultural,foodandtobaccoproducts(ChartIII.2).
Current discussions between thesignatories focus onthefullimplementation oftheagricultural
commitments intheFreeTrade Agreement andtheWTO. Theonlydispute raised intheAgreement 's
bilateral dispute settlement process concerned adecision bytheUnited States, in1993, tocount machine
toolsimported inpartsfrom Chinese Taipei andassembled inIsrael against thetotals inavoluntary
restraint agreement between Chinese Taipei andtheUnited States. Thisdispute wasresolved informally;
novoluntary restraint agreements arecurrently inforce.
35. TheUnited States authorities intend toextend thefree-trade status ofIsrael totheareas under
control ofthePalestinian Authority. Legislation toallow thiswaspassed byCongress andsigned into
lawbythePresident on3October 1996. Therules oforigin specified intheagreement withthe
Palestinian Authority, which aretobeapproved byCongress, allow forcumulation withIsrael, but
notwithJordan (Table III.2).
(c) NAFTA
36. Following passage through Congress, inNovember 1993, oftheNorth American FreeTrade
Agreement Implementation Act,theUnited States hasimplemented theNAFTA Agreement since
1January 1994. Under theAgreement, tariffs ongoods traded between theUnited States andMexico
wereeither eliminated immediately oraretobephased outoverfive,tenor15years, depending on
product areas. Tariffs onmost goods traded between theUnited States andCanada areduetobe
20BothAPEC andtheFTAA follow theconcept of"open regionalism", atermtheU.S.administration defines
as"...plurilateral trade arrangements that(a)arefully consistent withGATT requirements, notably thatsuch
arrangements donotincrease average external barriers, (b)areopen tonewmembers, and(c)permit additional
unilateral orreciprocal liberalization byparticipants" (U.S. International Trade Commission,1995a, p.38).United States WT/TPR/S/16
Page 31
eliminatedby1998,asagreedunderthepre-existingCanada-UnitedStatesFreeTradeAgreement(FTA);
certain agricultural products remain under tariff-rate quota21,while other sensitive products remain
under alonger phase-out period running upto1January 2008. In1994, halfofU.S.exports entered
duty-free intoMexico; in1995, tariffs onimports fromMexico weresignificantly lower thanm.f.n.
rates(Chart III.2). Since then, theNAFTA Agreement hasbeenimplemented onschedule, including
furthertariffreductionsasof1January1996,exceptthatthedeadlinefornotificationsofnon-conforming
Stateandprovincial measures oninvestment andnon-financial services wasshifted from31December
1995 to31March 1996. Furthermore, on18December 1995, theUnited States announced thatit
would accept applications from Mexican roadtransporters tooperate international services between
Mexico andtheStates ofCalifornia, Arizona, NewMexico andTexas, butthatfinalprocessing of
applications would bepostponed untilcontinuing concerns about commercial vehicle safety andsecurity
areaddressed; theU.S.authorities notethatMexico denies national treatment toU.S.trucks bynot
allowing them tousetransportation terminals within 20kilometres oftheborder. AU.S.claim that
Mexico hasfailed toprovide national treatment toU.S.investors insmall package delivery services
isalsocurrently being addressed under NAFTA 'sArticle 20dispute settlement procedures. Asat
31August 1996, NAFTA accession negotiations hadtaken place withChile only; asnoted above,
negotiations covering Chile'saccession toNAFTA havebeensuspended attherequest oftheChilean
authorities (section (1)(i)).
37. TheNAFTA Agreement explicitly affirms therights andobligations ofitssignatory countries
withrespect toeachotherunder theGATT. However, intheevent andtotheextent ofanyinconsistency
between itsprovisions andthoseoftheGATT/WTO, theNAFTA provisions prevail. Theimplementing
legislation forNAFTA specified thatanti-dumping andcountervailing measures imposed bytheMexican
authorities andagainst Mexican exports could beappealed toaNAFTA panel.22Suchanoption was
already available under Chapter 19oftheCanada-United States FreeTrade Agreement. Twenty per
centofoutstandingandnewlyenforcedanti-dumpingandcountervailingmeasuresupto5February1996
wereappealed tobi-national panels (Table II.1). Inaddition NAFTA provides fordispute settlement
under Chapter 20oftheAgreement, which iscomparable toArticle 18oftheCanada-United States
FreeTrade Agreement; ifconsultations andmeetings ofatri-national "NAFTA Trade Commission"
failtoresolve theissue, amember mayrequest adispute settlement panel toprovide itsviews and
recommendations ontheissue.
38. Since September 1993, U.S.consultations withCanada haveconcerned thefollowing products:
beer, softwood lumber; wheat; acountry music television station; split-run editions ofmagazines;
anddairyandpoultry products.23Relevant bilateral consultations withMexico concerned small-package
delivery services, standards andtelecommunications. Themagazine anddairy/poultry questions have
beentaken upunder WTO andNAFTA dispute-settlement procedures respectively, while Mexico has
pursued WTO dispute settlement procedures concerning U.S.anti-dumping measures onfreshtomatoes
andhasrequested NAFTA Article 20consultations regarding theHelms-Burton Act.
21GATT (1994); on30December 1993, theCanada-United States FreeTrade Agreement wassuspended
upon NAFTA 'sentry intoforce.
22North American Free Trade Agreement, Chapter 19.
23Agreements reached during January-September 1993 covered salmon andherring (11May1993 andApril
1994), tyres (25May 1993), provincial beermarketing practices inCanada (5August 1993) andultra-high
temperature milk(September 1993) (Table AII.1). AU.S. request forconsultations under NAFTA Chapter 20
made bytheUSTR on9February 1994 concerning Canada 'smethods ofcollecting provisional sales taxes did
notleadtoaformal dispute.WT/TPR/S/16 Trade Policy Review
Page 32
Table II.1
Decisions byNAFTA dispute panels, 1January 1994 -5February 1996
Complaint by
companies
from/against decisions
byCases which could have been
reviewed under theAgreementNumber ofcases reviewed under theAgreement
Outstanding
measures when
theAgreement
tookeffectNew
measures
enforced
during the
AgreementaActive
cases
(No.)Terminated
onrequest
(No.)Cases
decidedSummary of
decisions
Chapter 19cases oftheNAFTA Agreement
U.S. companies against
Mexican decisions12 17 2 1 1 Newdetermination
remanded
U.S. companies against
Canadian decisions14 1 1 3 4 Agency 's
determination
affirmed intwo
cases and
redetermination
remanded intwo
other cases
Mexican companies
against U.S. decisions11 11 4 - 1 Remand
determination
resulted inzero
duties
Canadian companies
against U.S. decisions18 18 1 - 1 Determination
affirmed
Mexican companies
against Canadian
decisions0 0 - - - -
Canadian companies
against Mexican
decisions0 2 3 - - -
Total Chapter 19 55 49 11 4 7 n.a.
Chapter 20oftheNAFTA Agreement
Canadian tariffs on
U.S. agricultural
productsn.a. n.a. - - 1 Canadianb
agricultural tariffs
were notin
violation ofthe
NAFTA Agreement
n.a. Notapplicable.
a Anti-dumping andcountervailing measures taken against andbyNAFTA partners asnotified totheWTO during
1January 1994-31 December 1995; oneactive appeal against aMexican decision covers acaseenforced since 1January 1996.
b July1996: Reuters, "Canada winsinfirstdispute withU.S. under NAFTA".
Source: U.S. authorities andU.S. notifications totheGATT/WTO.United States WT/TPR/S/16
Page 33
Consultations withCanada
39. Following abilateral dispute withCanada onaccess ofU.S.beertotheCanadian market, the
United States andCanada reached anagreement inApril 1994 modifying thebilateral Memorandum
ofUnderstanding onProvincial Beer Marketing Practices (Table AII.1). According totheU.S.
authorities "U.S. brewers gained therighttotransport anddeliver theirproduct themselves, andto
selltheirproduct inprivate convenience andgrocery stores inQuebec".24
40. InOctober 1991, theUSTR self-initiated "Section 301" andtheDepartment ofCommerce
initiated countervailing duty investigations against softwood lumber exports from Canada
(Chapter III(3)(iv)). Anaffirmative preliminary decision bytheDepartment ofCommerce allowed
fortheuseofcountervailing duties asof6March 1992. However, following anegative ruling under
Chapter 19ofaNAFTA Panel, theduties were terminated inAugust 1994; theSection 301action
wasterminated inOctober 1994.25Subsequently, theU.S. Coalition forFairLumber Resources
challenged theconstitutionality ofthebi-national dispute settlement process and,more specifically,
thedecision inthebi-national panel ruling ofthesoftwood lumber case. Thischallenge waswithdrawn
when theUSTR andtheSecretary ofCommerce announced bilateral consultations withtheCanadian
Governmenton15December1994.Separately,theU.S.DepartmentofCommercemadeadetermination
torefund theremaining deposits heldunder thecountervailing dutyorder of1992. On16February 1996
theUnited States andCanada reached anagreement onCanadian exports ofsoftwood lumber tothe
U.S.market, effective asof1April 1996 andvalid foraperiod offiveyears. Under theagreement
Canada agreed thatsoftwood lumber exports totheUnited States originating fromBritish Colombia,
Quebec, Ontario andAlberta thatexceed 14.7billion board feetayearwillbesubject toafeeofUS$50
perthousand board feetforthefirst650million board feet,andUS$100 perthousand board feetfor
greater quantities. Nofeewillbecharged onshipments below 14.7billion board feet.26Under the
Agreement, theU.S.Government hasundertaken nottoinitiate anyinvestigations under anti-dumping,
countervailing orsafeguard legislation, orunder Section 301oftheU.S.Trade Actof1974; anyanti-
dumping orcountervailing petitions filedbyprivate parties willbedismissed bytheDepartment of
Commerce. AspartoftheAgreement, firms representing 60percentofthetotalU.S. production
oflumber haveundertaken nottofilepetitions under theseprovisions foraperiod offiveyears starting
1April 1996.27
41. On3August 1994, theUnited States andCanada reached aone-year Memorandum of
Understanding (MOU) concerning trade ingrain. TheMOU established limits onthequantity of
Canadian wheat thatcould beexported totheUnited States fora12-month period starting 11September
1994. Following theexpiry oftheMOU, theUSTR announced on26September 1995thattheUnited
24U.S. Trade Representative (1995a).
25TheTokyo Round Agreement Subsidies Code panel report onmeasures affecting theexport ofsoftwood
lumber which wasadopted on27October 1993, dealt withduties imposed under the"Section 301" 1991 and
1992 prior tothecompletion oftheaffirmative countervailing dutyinvestigation on6March 1992 (Table AII.2b).
Thepanel ruled infavour ofCanada.
26Softwood Lumber Agreement between theGovernment ofCanada andtheGovernment oftheUnited States,
signed 29May 1996.
27Softwood Lumber Agreement between theGovernment ofCanada andtheGovernment oftheUnited States,
signed 29May1996. Theprivate sector commitments areexpressed inletters totheU.S. Trade Representative
which form Annex ItotheAgreement.WT/TPR/S/16 Trade Policy Review
Page 34
States would monitor imports ofwheat from Canada andthatitwillconsult withtheGovernment of
Canada "...atsix,nine,andeleven month intervals ifCanadian exports ofdurum wheat orother wheat
exceed theproportional share ofthe1994-95 tariffratequotas thatwereinplaceunder the1994MOU".28
42. In1994, theGovernment ofCanada decided toterminate thebroadcasting licence oftheCountry
Music Television (CMT), aU.S.-based cable service operating inCanada, effective 1January 1995.
Thecompany filedaSection 301petition withtheUSTR, whoinitiated aninvestigation on6February
1995as"...certain Canadian broadcasting policies denynational treatment andmarket access toU.S.-
owned television programming services".29Theinvestigation wasterminated astheUSTR announced
on7March 1996 thatCMT andaCanadian company hadreached anagreement toestablish asingle
Canadian country music network "Country Music Television Canada". On8August 1996, theUSTR
announced thattheGovernment ofCanada hadgranted fullregulatory approval aswellasabroadcasting
licence valid untiltheyear2000 toCMT anditsCanadian partners.30USTR continues tomonitor
thesituation.
43. On15December 1995, Canada imposed an80percenttaxonadvertising revenue ofsplit-run
editions offoreign magazines published inCanada. On11March 1996, theUSTR initiated aSection
301investigation andWTO dispute settlement procedures toaddress thismatter (Table AII.2c and
Chapter III(3)(iv)).
44. Asof1January 1995, following theentry intoforceoftheUruguay Round Agreement, Canada
applied import duties ofupto350percentonimports ofmost dairy, poultry andeggproducts for
which quantitative restrictions hadbeen converted intoimport tariffs. TheUnited States, which
maintainedthatthesedutiesareincompatiblewithCanada'sNAFTAobligations,requestedconsultations
under Chapter 20oftheNAFTA Agreement inFebruary 1995. Astheseconsultations failed toresolve
thematter, adispute settlement panel wasrequested under thesame chapter oftheAgreement on
14July1995, andestablished on19January 1996(Table II.1). Therelevant Panel preliminary decision
of16July1996reportedly upheld Canada 'suseoftariffs intheareasconcerned.31Afinaldetermination
isdueinNovember 1996.
Consultations withMexico
45. After U.S.small-package delivery firms experienced difficulties inoperating inMexico, the
United States requested bilateral consultations under Chapter 20oftheNAFTA. Such consultations
were heldinMayandatministerial level inJune1995; theissue issubject toongoing bilateral
consultations.
46. According totheU.S.authorities, U.S.firms haveexperienced difficulties insatisfying Mexican
mandatory labelling andthird-party certification requirements. Following consultations, Mexico has
agreed toaccept certain U.S.- testing facilities forcertifying Mexican standards. Following a
December 1995 meeting oftheNAFTA Telecommunications Standards Subcommittee, theMexican
28U.S. Trade Representative (1996), p.114.
29U.S. Trade Representative (1996), p.114.
30U.S.TradeRepresentativepressrelease,"USTRannouncesmarketaccessrestoredincountrymusictelevision
dispute withCanada", 8August 1996, Washington, D.C.
31Reuters, 16July1996, "Canada wins infirstdispute withU.S. under NAFTA".United States WT/TPR/S/16
Page 35
Government hasalsoagreed torevise itstelecommunications terminal attachment standards onthebasis
ofU.S.-Canadian harmonized rules.
47. InDecember 1995, theUnited States andMexico heldconsultations under NAFTA Chapter 20
todiscuss aU.S.proposal toadminister NAFTA tariffquotas onseasonal tomato imports onaweekly
basis. On3April 1996, theUSTR identified Mexico, under Section 1377oftheOmnibus Trade and
Competitiveness Actof1988, asbeing inviolation ofitsNAFTA obligations regarding tendering
procedures andproducts safety tests, andannounced thatitwould request bilateral consultations under
Chapter 20oftheNAFTA Agreement.32Asnoted above, Mexico hasrequested NAFTA Chapter
20consultations withtheUnited States concerning theCuban Liberty andDemocratic Solidarity
(LIBERTAD) Actof1996.
(d) Asia-Pacific Economic Co-operation forum (APEC)
48. TheUnited States participates fullyinthework oftheAPEC forum. On15November 1994,
APEC leaders, meeting inBogor, Indonesia, issued aDeclaration ofCommon Resolve ("the Bogor
Declaration"). Thisdeclaration established thegoalofafreeandopentradeandinvestment environment
within theAPEC region inaGATT-consistent manner; "industrialized" members reaching thatgoal
by2010 and"developing" members by2020. Inaddition, theDeclaration includes commitments to
continuedunilateralliberalization;fullandacceleratedimplementationofUruguayRoundcommitments;
endeavouring torefrain frommeasures which ineffect increase protection; andacceleration oftrade
andforeign direct investment facilitation.
49. Parallel totheAction Agenda, eachAPEC member economy announced initial actions they
hadtaken orplanned totakeasa“down payment ”totheirBogor commitment. Acceleration ofUruguay
Roundimplementation,tariffreductions,andinvestmentliberalizationwerecovered.TheU.S.statement
ofinitialactionincludedimplementationin1995oftheCustomsModernizationAct,FederalProcurement
Streamlining, Export Administration Regulation, andthePaperwork Reduction Act.
50. APEC members latterly agreed totheOsaka Action Agenda on19November 1995. Concrete
workareasidentifiedundertheAgendaare:tariffs,non-tariffmeasures,services,investment,standards,
customs, intellectual property rights, competition policy, government procurement, deregulation, rules
oforigin, dispute mediation, mobility ofbusiness people, implementation ofUruguay Round outcomes,
andinformation gathering andanalysis. Trade facilitation isincluded under customs harmonization
andalignment ofstandards. Foreachofthese actions theAgenda defines objectives, guidelines for
individual action andagreed stepstobetaken collectively. Allactions implemented under thisAgenda
mustbetransparent, consistent withWTO obligations andnon-discriminatory tootherAPEC members.
APEC members willeachsubmit plans onactions tobetaken bytheNovember 1996APEC Ministerial
andLeaders 'Meeting tobeheldinthePhilippines.
51. Asecond partoftheAction Agenda specifies work tobeundertaken collectively inworking
groups covering thefollowing areas: telecommunications andinformation; transportation; energy;
human resource development; tourism; marine resource conservation; fisheries; industrial science
andtechnology; trade andinvestment data; andtrade promotion. Foreachworking group common
policy concepts havebeendeveloped andjointactivities havebeendefined.
32U.S.TradeRepresentative,pressrelease3April1996,"AnnualReviewofTelecommunicationsAgreemen ts
under Section 1377 ofthe1988 Trade Actcompleted".WT/TPR/S/16 Trade Policy Review
Page 36
(e) FreeTrade Area oftheAmericas (FTAA)
52. AttheSummit oftheAmericas heldon9-11December 1994, leaders from 34countries in
theWestern Hemisphere adopted aU.S.proposal torealize aFreeTrade AreaoftheAmericas (FTAA)
bytheyear2005.33On30June1995, atthefirstHemisphere Trade Ministerial Meeting, heldinDenver,
Colorado, Minsters pledged tobegin awork programme toprepare fortheinitiation ofnegotiations
fortheFTAA, andagreed toensure thattheFTAA willbeconsistent withtheWTO; balanced and
comprehensive inscope; thatitwillnotraisebarriers toother countries 'trade; andthatitwillconsist
ofasingle undertaking, comprising mutual rights andobligations.34Seven working groups were
established, covering market access; customs procedures andrulesoforigin; investment; standards
andtechnical barriers totrade; sanitary andphytosanitary measures; subsidies, anti-dumping and
countervailing duties; andsmaller economies. Fouradditional working groups wereestablished during
theMarch 1996 Ministerial Meeting inColombia, covering government procurement; intellectual
property rights; services andcompetition policy. Theworking groups aredirected towork witha
viewtopresenting conclusions andrecommendations forconclusions atthe1997 FTAA Ministerial
Meeting.
(iv) Developments inbilateral trade policy making
(a) Overview
53. Overtheperiod1993-95,theUnitedStatesconcluded95enforceabletradeagreements,including
some inthecontext oftheWTO (Table AII.1). Themainissues theUnited States hassought toaddress
inabilateral context were related tomarket access, including through foreign direct investment;
competition policy (Chapter III(4)); government procurement (Chapter III(6)); accreditation andmutual
recognition agreements related tostandard setting andcompliance testing (Chapter III(7)); issues related
tointellectual property which arenotaddressed in,orgobeyond, theTRIPS Agreement (Chapter III(8)).
TheUnited States hasalsoconcluded bilateral agreements limiting commercial space launches from
China, Russia andUkraine. Recent developments inselected bilateral trade relations arediscussed
below. Since 1991, U.S.policy hasbeenthatnobilateral investment agreements aretobeconcluded
withcountries which donotagree alsotocover protection forintellectual property. Thefirstbilateral
investment treaty under thisnewpolicy wassigned in1992.
(b) European Union
54. Since thelastReview, bilateral agreements andconsultations between theUnited States and
theEuropean Union haveconcerned government procurement; financial services; compensation for
tariff increases inAustria, Finland andSweden following theiraccession totheEU;implementation
oftheGATT 1947 andtheWTO Agreement onCustoms Valuation; theEUimport banonfurfrom
countries which allow theuseofleg-hold traps; theEUbanana import régime; theEUimport régime
formeatandmeatproducts produced using growth hormones; the"Transatlantic Marketplace" and
theU.S.Cuban Liberty andDemocratic Solidarity (LIBERTAD) Act. Following theU.S.decision
tointroduce abroad exemption tom.f.n. treatment infinancial services, thebilateral financial services
agreement commits theUnited States togrant EUfinancial services firms substantially fullaccess and
national treatment, provided thattheEUmaintained itsWTO commitments onfinancial services. The
33Except Cuba, allcountries inthehemisphere participated inthemeeting andtheinitiative.
34U.S. International Trade Commission (1996a).United States WT/TPR/S/16
Page 37
bilateral government procurement agreement, notified totheWTO in199435,hasfrom1January 1996
beenintegrated intheWTO Plurilateral Agreement onGovernment Procurement (Chapter III(6)).
Bilateral consultations other thantheTransatlantic Market Place areconducted inthecontext ofthe
WTO Agreements, including consultations under theDispute Settlement Mechanism regarding duties
onimports ofgrain, therégime forimportation, saleanddistribution ofbananas, measures affecting
meatandmeatproducts (hormones), theCuban Liberty andDemocratic Solidarity (LIBERTAD) Act
andU.S.tariff increases onproducts from theEU(Table AII.2c). TheU.S.-EU Agreement onEU
Grains Margin ofPreference initialled inNovember 1995 addressed theissues regarding theEU
implementation oftheGATT 1947 andtheWTO Agreement onCustoms Valuation (Table AII.1).36
55. On1January 1989, sanctions tookeffect onEUexports totheUnited States inresponse to
theimplementation bytheEuropean Union oftheAnimal Hormone Directive banning imports ofmeat
treated withgrowth hormones. Thesanctions raised customs duties onUS$100 million ofprevious
EUexports totheUnited States. Since theEUenabled non-treated U.S.beeftoentertheEU,sanctions
werepartially lifted: effective 28July1989 theU.S.Trade Representative suspended theadditional
dutyonporkhams andshoulders37;on8December 1989, theU.S.Trade Representative suspended
theapplication oftheincreased dutyonimports ofcertain tomato sauces38andon16May1990 a
technical amendment wasmade tothesubheadings ontomato sauces.39In1994Dutch exports ofboneless
veal were classified asfalling within thescope ofthe100percentretaliatory duties. On
13December 1995 theU.S. Court ofInternational Trade ruled thattheU.S. Customs Service had
erred inclassifying freshorchilled boneless vealfromtheNetherlands asbeef.40On26January 1996,
theUnited States requested consultations withtheEuropean Union ontheEUhormone banunder the
WTOdisputesettlementprovisions.Apanelwasestablishedon20May1996.Underaseparatedispute,
on18April 1996theEUrequested consultations under WTO dispute settlement provisions concerning
theoutstanding tariffincreases. TheUnited States announced on16July1996thatitwould withdraw
these sanctions (Table AII.2c).
56. InDecember 1995, theUnited States andtheEUagreed upontheNewTransatlantic Agenda,
which includes acommitment toexpand tradethrough aninitiative called theTransatlantic Marketplace.
FortheUnited States, multilateral issues onwhich jointwork should bedoneincluded aneffort to
eliminate tariffs oninformation technology products, newinternational rulesforintellectual property
rights andgovernment procurement andtheconclusion oftheMultilateral Agreement onInvestment
intheOECD. Bilateral issues focused onefforts toresolve outstanding trade disputes; toconclude
Mutual Recognition Agreements (MRAs) toreduce regulatory burdens andreduce standards-related
barriers;toconcludeanagreementoncustomsco-operation;spurinnovationandtechnicalcompatibility
35GATT document GPR/W/126, dated 8June 1994.
36Inaddition theUnited States andtheEUconcluded aU.S.-EU Market Access Agreement forTextiles and
Clothing (1993) andan"Agreement onRecognition ofBourbon Whiskey andTennessee Whiskey onDistinctive
U.S. Products" (28March 1994).
3754Federal Registrar 31398.
3854Federal Registrar 50673.
3955Federal Registrar 20376.
40Foodcomm International v.United States, No.95-05-00734 (Slip Op.95-202, 13December 1995), cited
in:p.22.WT/TPR/S/16 Trade Policy Review
Page 38
under theInformation Society Dialogue; andestablish jointworking groups onemployment and
labour-related issues. TheTransatlantic Marketplace initiative iscomplemented bytheTransatlantic
Business Dialogue inwhich private sector executives co-operate andmake suggestions forreductions
inbilateral trade barriers. Atthesame time, theUnited States andtheEUreached agreement on
compensation forthenegative effects onU.S. trade ofEUenlargement withAustria, Finland and
Sweden.
(c) Japan
57. InJuly1993, theUnited States andJapan agreed toestablish theU.S.-Japan Framework for
aNewEconomic Partnership (theFramework) which serves asamechanism forconsultations regarding
economic co-operation. Fiveareas fornegotiations were specifically mentioned intheFramework:
measures tobetaken ingovernment procurement; regulatory reforms andcompetitiveness; measures
to"expand saleopportunity" fortheautomobile sector; economic harmonization measures inboth
countries covering foreign direct investment, intellectual property rights andlong-term relationships
between buyers andsuppliers; andimplementation ofalready existing bilateral arrangements and
measures.41TheFramework Agreement wasfollowed upon24May1994byan"Agreement Clarifying
theFramework Agreement". Since thelastReview andasat31August 1996, tenbilateral agreements
havebeenconcluded under thisFramework Agreement, while another sixhavebeenconcluded not
related totheFramework.42
58. Under theFramework, agreements were concluded intheareas ofgovernment procurement
oftelecommunications equipment, medical technology andprocurement byNTT; intellectual property
rightprotection (twoagreements); andmarket access forinsurance, flatglass, financial services, autos
andautoparts; andforeign direct investment. Non-Framework bilateral agreements covered apples,
construction, cellular phones, civilaviation andsemiconductors (Table II.2). Agreements which cover
WTO areas ofcompetence, suchasgovernment procurement andtrade inservices, arenotified tothe
Organization,otheragreementssuchasthosedealingwithcompetitionpolicy,civilaviationandincentives
forforeign investment arenot.
41GATT (1994).
42Inaddition, fourbilateral agreements concerning rice, harmonized chemical tariffs, copper andmarket
accesswereincludedintheUruguayRoundAgreemen ts.Anagreemen tformarketaccessfortextilesandclothing
wasalsoconcluded during 1994 (Table AII.1)United States WT/TPR/S/16
Page 39
Table II.2
Summary ofselected U.S.-Japan bilateral agreements, September 1993 -August 1996
Agreement
topicDate Measures taken M.f.n.
statusMonitoring of
implementation
conducted byWTO notification
Apples 13September
1993Phytosanitary measures
applied toJapan 'simportsYes Signatories Available toWTO members
upon request
Intellectual
property rights20January
1994Changes inJapan 'sIPR
lawYes Signatories Included inJapan 's
notification under TRIPS
Construction
services18January
1994Changes inJapan 's
government procurement
forconstruction servicesYes Signatories Notnotified totheWTO
Cellular Phones 12March 1994 Changes inmarket access
fortelephone andthird-
party radio services... Signatories Notnotified totheWTO
Intellectual
property rights16August 1994 Changes inJapan 'sIPR
lawYes Signatories Included inJapan 's
notification under TRIPS
Insurance 11October
1994Deregulation ofJapan 's
insurance marketYes Signatories Notified totheWTO
(document S/IGFS/W/1 dated
24October 1994)
Telecommun-
ications
government
procurement1November
1994Deregulation ofJapan 's
government procurement
practices inthissectorYes Signatories Notified totheWTO
(document GPR/SPEC/78,
dated 8June1995
NTT
procurement1November
1994Changes inNTT
procurement policiesYes Signatories Notnotified totheWTO
Medical
technology
government
procurement1November
1994Liberalization ofJapan 's
government procurement
practices inthissectorYes Signatories Notified totheWTO
(document GPR/SPEC/78,
dated 8June1995)
Flatglass 25January
1995Increased competition and
non-discriminatory
procurement practicesYes Signatories Notnotified totheWTO
Financial
services13February
1995Deregulation offinancial
services marketYes Signatories Notified totheWTO
(document S/FIN/W/1 dated
14March 1995)
Investment 20June1995 Incentives forforeign
direct investmentYes Signatories Notnotified totheWTO
Civil aviation 21July1995 Access forFederal Express
totheJapanese market
from itsregional hubinthe
PhilippinesNo Signatories Notnotified totheWTO
Autos andauto
parts23August 1995 Increased competition for
autoandautoparts sales in
JapanYes Signatories Notnotified totheWTO
Civil aviation 27March 1996 Relaxation ofthe
restrictions onaircargo
servicesNo Signatories Notnotified totheWTO
Semi-
conductorsb2August 1996 Monitoring ofmarket
developmentsNoaSignatories Notnotified totheWTO
... Notavailable.
a Jointstatement bytheGovernments oftheUnited States andJapan; Agreement between theprivate industry associations. The
Agreement isopentoallassociations fromcountries thathave, removed orcommit themselves toremove, tariffs onsemiconductors.
Source: WTO, based oninformation provided bytheU.S. authorities andWTO documents.WT/TPR/S/16 Trade Policy Review
Page 40
59. On1October 1994, theUSTR self-initiated a"Section 301"investigation withrespect tocertain
acts,policies andpractices oftheGovernment ofJapan thatrestrict ordenyU.S.autopartssuppliers '
access totheautomobile market replacement andaccessories market inJapan. On10May1995, the
USTR determined thatsuchpolicies were "unreasonable anddiscriminatory andburden orrestrict
commerce". Inparallel, onthesame day,theUSTR announced "delivery ofapre-filing notification
totheWTO indicating theU.S. intent toinvoke thedispute settlement mechanism under theWTO
tochallenge thecontinuing discrimination against U.S.exports ofautomobiles andpartstoJapan".43
On16May1995, theUSTR published aproposed determination thatwould impose atariff of
100percentonluxury motor vehicle imports from Japan.44On17May 1995, Japan requested
consultations withtheUnited States onthismatter under theWTO dispute settlement provisions; on
12-13 Juneand22-23 June1995consultations wereheldbutnoagreement wasreached. TheAgreement
wasnegotiated forafive-year period, tobeimplemented onam.f.n. basis(Table II.2). On28June1995
theUnited States andJapan reached anagreement onthismatter, nosanctions were imposed. On
19July1995, Japan informed theWTO Dispute Settlement Body thatitwould nolonger pursue dispute
settlement procedures initiated byitsrequest forconsultations (Table AII.2c). TheUnited States-Japan
Automotive Agreement wasformally signed on23August 1995 (Chapter IV(4)).
60. On17July1995, theUnited States joined theEUinitsconsultations under theWTO dispute
settlement provisions concerning Japan'staxes onalcoholic beverages. Apanel wasestablished on
27September 1995 following arequest bytheUnited States, Canada andtheEU. Thepanel report
wascirculated on11July1996, indicating thatJapan hadviolated Article IIIofGATT. Japan appealed
thePanel decision on8August 1996. On9February 1996 theUnited States requested consultations
withJapan under theWTO dispute settlement procedures andinitiated inparallel aSpecial 301
investigation concerning Japan's"measures concerning sound recording" (Table AII.2c). On
13June1996 theUnited States requested consultations under theWTO dispute settlement provisions
concerning "measures affecting consumer photographic filmandpaper" and"measures affecting
distribution services". Asat22August 1996 these consultations arestillongoing (Table AII.2c).
61. Under the1991U.S.-Japan Semiconductor Agreement theGovernments ofJapan andtheUnited
States "recognized" theU.S. industry 'sexpectation ofachieving a20percentshare ofJapan's
semiconductor market bytheendof1992. Since then, theforeign share ofJapan'ssemiconductor
market reached 30.6 percentinthethird quarter of1996.45The1991 Agreement expired on
31July1996. On2August 1996 theUnited States andJapan issued aJoint Statement concerning
semiconductorsinparalleltoanAgreementbetweenEIJAandSIAoninternationalco-operationregarding
semiconductors reached onthesame day. Details aresetoutinChapter IV,section 6.
(d) Republic ofKorea
62. Since September 1993theUnited States andtheRepublic ofKorea havereached eightbilateral
agreements regarding U.S. access totheKorean market, covering: beef(31March 1993 and
29December 1993); agricultural market access (13December 1993); market access fortextiles and
clothing (1January 1995), telecommunications issues relating toequipment authorization andKorea
Telecom Company 'sprocurement (29March 1995), steel(14July1995); shelf-life (20July1995);
43U.S. International Trade Commission (1996a), p.53.
44U.S. Trade Representative, press release, 16May1995. Thelistwasalsopublished intheFederal Register,
(1995), Vol. 60,18May, pp.26745-26746.
45U.S. Trade Representative press release, "Foreign Share ofJapan 'sSemiconductor Market Tops 30%",
Washington 17June 1996.United States WT/TPR/S/16
Page 41
cigarettes (25August 1995), andpassenger cars(28September 1995) (Table AII.1). Theagreements
covering beef, agricultural products andtextile andclothing havebeenencompassed intheUruguay
Round Agreements. Thecigarettes agreement revised anunderstanding reached in1988andamended
in1989 concerning market access forcigarettes.
63. TheAutoAgreement consists ofaMemorandum ofUnderstanding (MOU), under which Korea
agrees to"...liberalize standards andcertification procedures, reduce taxes thatdiscriminate against
imported vehicles, permit foreign advertisers equal access totelevision advertising time, allow foreign
majority ownership ofautoretail financing entities andimprove consumer perception ofautoimports
inthatcountry. Korea isalsocommitted nottointroduce anynewmeasures thatadversely affect market
access".46Theagreement istobeimplemented onanm.f.n. basis; implementation ismonitored
bilaterally (Chapter IV(4)).
64. Following acomplaint byAmerican meatcompanies under Section 301ofthe1974Trade Act
theUnited States initiated consultations under theWTO Dispute Settlement Mechanism regarding the
testing andinspection ofagricultural products andgovernment-mandated shelf-life limits (Table AII.2(c)
andChapter III(5)). During consultations conducted under theWTO dispute settlement mechanism,
agreement wasreached onthemeasures concerning theshelf-life ofproducts andtheDispute Settlement
Bodywasinformedaccordinglyon31July1995.FollowingconsultationsunderWTOdisputesettlement
provisions,Koreaalsoagreedtomodifythetestingandinspectionrequirementsforagriculturalproducts.
Korea notified theWTO Committee onSanitary andPhytosanitary measures ofchanges initsSPS
procedures.47On24May1996theUnited States requested consultations onthetesting andinspection
procedures inanewdispute under WTO procedures (Table AII.2).
65. Korea hasalsobeennamed under three U.S.lawsleading to"Section 301" actions. Korea
hasbeenincluded onthe1996"Special 301Priority Watch List" (Chapter III(3)(iv)). U.S.companies
complained about theimplementation byKorea ofa1992 agreement ontelecommunications. Inan
exchange ofletters, Korea addressed thiscomplaint, allowing onemajor U.S. telecommunications
company tobidinthe1995 procurement cycle asthistender waspostponed untilearly 1996. Under
theagreement Korea alsostarted bilateral talkstoaddress U.S.concerns withcompliance andmarket
access issues outside thescope ofexisting telecommunications agreements. However, on26July1996
theUSTR identified Korea asa"Priority Foreign Country" under Section 1374 ofthe1988 Trade
ActforTelecommunicationsPractices,citing"...inadequateprogresswasmadetowardsensuringKorean
government non-intervention inprivate procurement decisions inthewireless communications market"
(Chapter III(3)(iv)(e)).48Andthirdly, on1June1995, theU.S.Committee onPipeandTube Imports
(CPTI) filedaSection 301petition withtheUSTR concerning export restrictions ofdomestically
produced steelsheet. Thepetition waswithdrawn on11July1995, aftertheKorean Government agreed
toaconsultative mechanism todiscuss publicly available data. Anagreement wasformally reached
on14July1995 (Table AII.1).
(e) China
66. TheUnited States andChina haveconcluded bilateral agreements withrespect tomarket access
andm.f.n. status ofimports; protection forintellectual property; standards andtechnical requirements;
46U.S. Trade Representative (1996), p.84.
47WTO document SPS/N/KOR/5, 5May 1995.
48U.S. Trade Representative press release, "Korea Identified as"Priority Foreign Country" under Section
1374 ofthe1988 Trade ActforTelecommunications Practices", Washington, D.C. 26July1996.WT/TPR/S/16 Trade Policy Review
Page 42
andthetransparency oftheadministration oftradepolicy measures. Allagreements areimplemented
onanm.f.n. basis andmonitored bilaterally.49
67. U.S.commercial relations withChina areconducted inthecontext ofabilateral tradeagreement
thattookeffect on1February 1980 andhasbeen renewed every three years; most recently on
1February 1995. TheAgreement extends m.f.n. status toexports from bothcountries, contains
safeguards against market disruption andcovers protection forintellectual property rights inboth
countries.50M.f.n. treatment ofChina 'sexports bytheUnited States is,however, subject toannual
review andrenewal under theJackson-Vanik Amendment (Chapter III(2)(i)).51
68. On17January 1994 China andtheUnited States reached anagreement onmarket access for
Chinese textiles andclothing totheU.S.market. TheAgreement covers textile andclothing products
under import quotas intheUnited States, annual quota growth, over-shipment inexcess ofquotas and
trans-shipment through thirdcountries (Chapter IV(3)).52
69. Inthewake ofaSection 301investigation bytheUSTR, theUnited States andChina initialled
theIntellectual Property Rights Enforcement Agreement on26February 1995 (Chapter III(3)(iv)).
Under theAgreement, China agrees toimprove protection forintellectual property rights andtoopen
itsborders forlegitimate computer software andaudio-visual products byeliminating quotas andother
market barriers. Theimplementation oftheagreement ismonitored bilaterally. Discussions on
compliance withtheAgreement havefocused on:"(1)actions tocurtail continued production ofpirated
CDsandCD-ROMS; (2)effectiveness ofCustoms enforcement against pirated exports; (3)thelevel
ofinvestigation andcivilandcriminal prosecution ofpiracy andthelevelofpenalties imposed; and
(4)fulfilment ofcommitments toopenthemarket tolegitimate computer software, motion pictures,
sound recordings andpublished products".53InMay1996 theUnited States initiated anewSection
301investigationconcerningChina'scompliancewiththe1995Agreement.Anunderstandingconcerning
China 'simplementation ofthe1995 Agreement wasreached on17June1996 (Table III.7).
70. TheUnited States continues tomonitor abilateral Memorandum ofUnderstanding (MOU)
onmarket access reached inOctober 1992. ThisMOU includes provisions ontransparency ofthe
administration oftrade policy instruments bytheChinese authorities; standards andtesting; aswell
asphytosanitary andsanitary standards. According totheU.S.authorities, areas ofconcern regarding
theimplementation oftheMOU include: phytosanitary rules which prevent market access forU.S.
citrus fruitandwheat fromthePacific Northwest; newnon-tariff measures; import substitution policies
suchasthatonmotor vehicles; andlackoftransparency ofChina 'strade policies. Under themarket
access agreement China eliminated restrictions on176items onschedule attheendof1995.
Commodities onwhich restrictions were eliminated include vehicle bodies, copy machines, vehicle
differential axles, airconditioners, automobile chassis, vegetable oil,andchemical products.54
49Thebilateral agreements have been discussed intheWTO Accession Working Party onChina.
50U.S. Trade Representative (1996), p.87.
51Under Section 402oftheTrade Actof1974 thePresident maywaive therequirements offullcompliance
ofacountry withtheJackson-Vanik conditions. Waivers aresubject toannual renewal, normally approved unless
Congress passes ajoint resolution disapproving therenewal. Thishasnever occurred.
52U.S. International Trade Commission (1995a).
53U.S. Trade Representative (1996), p.88.
54U.S. International Trade Commission (1996a), p.59.United States WT/TPR/S/16
Page 43
71. In1994, theUSTR proposed toChina toenter intoabilateral trade agreement onthe
liberalization oftelecommunication value-added services (VAS).55Thisproposal isstillunder review
inbilateral consultations. On13March 1995, theUnited States andChina renewed theirbilateral
agreement oninternational trade incommercial space launch services, originally concluded in1989,
fortheperiod 1995-2001.
(f) Russian Federation
72. On2September 1993, theUnited States andRussia signed abilateral agreement onRussia 's
participation inthecommercial space launch market, fortheperiod until31December 2000. The
Agreement wasamended on30January 1996 toallow Russia theopportunity tolaunch upto15
commercial payloads togeo-synchronous earth orbit, withfourmore launches possible ifthemarket
proves more robust thananticipated. Theamendment brought theRussian Agreement onparwith
similar agreements withChina andUkraine (sections (a)and(e)above).
73. InJanuary 1996Russia announced thatitwould increase tariffs andintroduce avariable import
levyandaminimum pricing system forimported poultry. Inaddition, inFebruary 1996, theRussian
Ministry ofAgriculture announced thatitsveterinary service would deny import certification to50
U.S.poultry production facilities inviewofalleged sanitary problems. Following changes toU.S.
veterinary certificates, Russia agreed toresume issuing import licences, andaframework wasagreed
forinspections ofU.S.poultry facilities thatshiptoRussia.
74. On30January 1996theUnited States andRussia concluded amemorandum ofunderstanding
(MOU) guaranteeing foreign aircraft manufacturers access totheRussian market. According tothe
authorities, theMOU istobeapplied onanon-discriminatory basis, subject tobilateral monitoring
provisions. On3April 1996, theU.S.andRussia signed anagreement under which Russia voluntarily
limitsexportsofRussianmunitionsandfirearmstotheUnitedStates.Concurrently,Russiawasremoved
fromtheproscribed listoftheU.S.International Traffic inArms Regulations (ITAR), thuspermitting
thetwoparties toengage incommercial defence tradeforthefirsttime. TheU.S.isalsoinconsultations
withRussiaandisconsideringpossiblemeansofresponsetoRussia'srecentannouncementthatitintends
topursue quotas tosafeguard itsvodka andethyl alcohol industries, aswellaspossible other items
suchaswhite sugar andelectric lights.
55U.S. Trade Representative (1996), p.89.