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PRESS/TPRB/46
31October 1996
OPEN MARKETS -DOMESTIC AND WORLDWIDE -REMAIN THE KEY TOU.S.
ECONOMIC GROWTH
TheUnited States continues tobetheworld 'slargest trading nation inexports andimports
ofgoods andservices. Over thepastdecade, trade hasbecome increasingly important fortheU.S.
economy withtheratiooftradetoGDPin1995reaching 23.6percent,upfrom17.2percentin1985
and20.6percentin1990. AnewWTO Secretariat report onthetrade policies andpractices ofthe
United States notes thattheU.S. invests lessasashare ofGDP thanitsindustrial counterparts but
withveryefficient resource allocation, capital productivity ishigh, afactor thatunderpins U.S.
prosperity. Thereport stresses theneedtokeepmarkets securely openasamajor element inmaintaining
U.S.productivity growth.
Thereport confirms thatWTO commitments areatthecentre ofU.S. trade policy. The
application oftheUruguay Round Agreements andtheconsolidation oftrade remedy measures under
WTO dispute settlement procedures havestabilized many elements inU.S.trade policy thatattimes
wereperceived bysome asunpredictable andunilateralist. Inparallel totheimplementation ofitsWTO
commitments, theUnited States hascontinued withregional, bilateral andunilateral trade initiatives.
Thereport observes thattheU.S.'multi-track approach tointernational trade policy canbeasource
oftension within themultilateral system. TheWTO report andapolicy statement bytheGovernment
oftheUnited States, willbethesubject oftwodaysofdiscussion attheWTO 'sTrade Policy Review
Body on11and12November 1996.
Commitments made bytheU.S. during theUruguay Round include atrade-weighted tariff
reduction ofsome 35percentby1999. Fulltariff elimination onU.S.imports hasbeenagreed for
steel, pharmaceuticals, paper, furniture, medical equipment, farmequipment, construction equipment,
beerandspirits. BytheendoftheUruguay Round implementation period, some 70percentofU.S.
tarifflineswillbesubject tomost-favoured-nation (m.f.n.) ratesof5percentorless.Duty-free treatment
willcover 40percentoftariff lines. Asconcerns agriculture, quantitative import restrictions on
agricultural products have, asrequired bytheWTO Agreements, beenconverted totariffs andtariff
quotas; however, above-quota tariffs remain highandtariff quotas arenotalways filled. Agricultural
andfoodproducts accounted forsome 11percentofU.S.merchandise exports in1995, following
anincrease inthevalue ofexports -duemainly torising world market prices -bysome 30percent
since 1992. TheU.S.hasconverted domestic price support todirect income support andhasreduced
itsoverall levelofsupport toagriculture.
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Thereport discusses changes inU.S.anti-dumping andcountervailing legislation, andnotes
thatitistooearly toassess whether these changes willfacilitate affirmative findings. Thenumber
ofanti-dumping andcountervailing investigations launched intheU.S.hasdropped sharply, perhaps
duetothecontinuing U.S.economic recovery. Three safeguard investigations wereconducted in1995
and1996 withoneinvestigation concluding thatimports caused injury tothedomestic industry.
Theuseof"Section 301"legislation isnowclosely tiedtomultilateral dispute settlement, at
leastforWTO members andinareas subject toWTO rules anddisciplines. TheUnited States isthe
most active userofWTO dispute settlement provisions; ithasrequested consultations under WTO
dispute settlement provisions on19casescovering 17measures, while U.S.trading partners haveraised
ninecomplaints against eight U.S.measures. Since itslasttrade policy review in1994, theU.S.has
initiated 16"301" investigations andconcluded agreements covering twoprevious investigations. Seven
ofthe301actions initiated in1996andtwoearlier investigations (European Union, bananas; andJapan,
photographic filmandpaper) havebeenreferred totheWTO Dispute Settlement Body.
Inseparate developments, theU.S.hasenacted theCuban Liberty andDemocratic Solidarity
(LIBERTAD) ActandtheIranandLibya Sanctions Act.Theextra-territorial aspects ofthese laws
havebeencriticised byU.S.trading partners andcases against theLIBERTAD Act(Helms-Burton
Act)havebeenfiledunder theNorth-American FreeTrade Agreement (NAFTA) andtheWTO.
Voluntary export restrictions administered byU.S.trading partners havebeenphased out.A
newautomotive agreement withJapan doesnotsetquantitative targets forU.S.exports butprovides
forbilateral monitoring ofvarious qualitative commitments, while aMemorandum ofUnderstanding,
which seeks toliberalize access totheKorean vehicle market, istobeimplemented onanm.f.n. basis.
Anewco-operationagreementwithJapanonsemi-conductorsreaffirmsmarketprinciplesandestablishes
aconsultative framework open toindustry associations whose governments arecommitted totariff
elimination.
Thereport notes thattheU.S.'technical regulations aregenerally based oninternational norms
andprivately developed standards; however, there arealimited number ofmandatory environmental
processstandardsenforcedattheborder,notableexamplesbeing"dolphin-friendly"tunafishingmethods
andturtle-excluder devices usedinharvesting shrimp.
TheU.S.hasawelldeveloped andenforced system ofintellectual property protection based
onconstitutional provisions. TheTRIPS Agreement increased theduration ofprotection andresurrected
protection forworks thathadfallen intotheU.S.public domain. Thereport states thattheUnited States
monitors bilaterally theprotection forintellectual property extended byallitstrading partners,
Irrespective ofwhether abilateral agreement isinforce, theU.S.isrequired toidentify countries that
denyadequate andeffective protection forintellectual property rights orfairandequitable market access
toU.S.persons thatrelyonintellectual property protection.
Thereport notes thattextile andclothing production hasrealized significant productivity gains
onthebasisofgreater capital intensity intheU.S.market andoutward processing operations inMexico,
theCaribbean andCentral America. Inaddition toimport tariffs wellabove themanufacturing average,
theUnited States maintains country specific import quotas under theWTO Agreement onTextiles and
Clothing andhasissued 25safeguard quota callsonWTO members. Removal ofimport quotas is
tobeconducted infourphases andtheallocation ofalltextile andclothing products toeachphase has
beenpublished. Themostsensitive products havebeenlefttothelastphase, tobeimplemented in
2005. Thereport alsonotes significant changes which havebeenmade intherulesoforigin usedfor
theadministration ofimport quotas. Theorigin ofaproduct isnowspecified tobetheplace where
itisassembled andnottheplace where thetextile components arecut.
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TheWTO report notes thatservices havegained anincreasing share ofU.S.output, generating
about two-thirds ofGDP, orsome fourtimes theshare ofmanufacturing, andaccounting for65per
centofemployment in1995. Cross-border supply offoreign services hasbecome lessimportant than
establishment asamode ofdelivery. While Western Europe istheU.S.'largest trading partner for
cross-border tradeinservices withapproximately 60percent,Japan isthelargest individual destination,
taking in15.5percentofU.S.services exports. Thereport notes thatproductivity increases inservices
arelikely tobeadecisive factor inraising totalU.S. productivity growth andstandards ofliving.
Recentdevelopmentsinthetelecommunications,financialandprofessionalservicessectorshaveenhanced
suchprospects. Thebenefits totheUnited States ofmaintaining andimproving onanefficient, open
andcompetitive services sector arethusevident.
Thereport concludes thatwhile anopen, predictable world trading system iscrucial forthe
well-being oftheU.S.economy, anopen, predictable U.S.market isalsovitalfortheworld 'strading
system. Itis,therefore, essential thattheUnited States anditspartners utilize thesystem tomaintain
multilateralism asthekeytofuture developments anddiscourage pressures forincreased bilateralism
orunilateralism.
Notes toEditors:
TheWTO Secretariat 'sreport, together withareport prepared bytheUnited States, willbe
discussed bytheWTO Trade Policy Review Body (TPRB) on11and12November 1996.
TheWTO 'sTPRB conducts acollective evaluation ofthefullrange oftradepolicies practices
ofeachWTO member atregular periodic intervals andmonitors significant trends anddevelopments
which mayhaveanimpact ontheglobal trading system.
Thetworeports,togetherwithareportoftheTPRB'sdiscussionandoftheChairman'ssumming
up,willbepublished induecourse asthecomplete Trade Policy Review oftheUnited States andwill
beavailablefromtheWTOSecretariat,CentreWilliamRappard,154ruedeLausanne,1211Geneva21.
Thereports cover thedevelopment ofallaspects oftheU.S.'tradepolicies, including domestic
lawsandregulations, theinstitutional framework, trade policies bymeasure andbysector. Since the
WTO cameintoforce, the"new areas" ofservices tradeandtrade-related aspects ofintellectual property
rights arealsocovered. Attached arethesummary observations fromtheSecretariat andgovernment
reports. Fullreports willbeavailable forjournalists from theWTO Secretariat onrequest.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992&1994), Chile (1991), Colombia (1990 &1996), Costa Rica(1995), Côted'Ivoire
(1995), Czech Republic (1996), Dominican Republic (1996), Egypt (1992), theEuropean Communities
(1991, 1993 &1995), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991),
Iceland (1994), India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992and1995),
Kenya(1993),Korea,Rep.of(1992&1996),Macau(1994),Malaysia(1993),Mauritius(1995),Mexico
(1993), Morocco (1989 &1996), NewZealand (1990 &1996), Nigeria (1991), Norway (1991 &1996),
Pakistan (1995), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal (1994),
Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), SriLanka (1995), Sweden
(1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994), Turkey (1994),
theUnited States (1989, 1992&1994), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia
(1996) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
UNITED STATES
Report bytheSecretariat -Summary Observations
TheUnited States inWorld Trade
TheU.S.economy hasperformed wellsincethelastTrade Policy Review oftheUnited States.
Growth hasbeenabove theaverage inindustrial countries, inflation hasremained moderate andthe
unemployment rateisatalowforthedecade. Concurrently, thefederal budget deficit hasnarrowed
substantially, toitslowest share ofgross domestic product since 1979. Theexternal current account
deficit haswidened slightly butthisisattributable toincreased investment, improving theprospects
forfuture growth.
TheU.S. economy hasahighdegree ofallocative efficiency. Itinvests less,asashare of
output, thanitsindustrial counterparts butcapital productivity iswellabove theOECD average, afactor
thatunderpins U.S.prosperity. Oneimportant element inmaintaining productivity istheopenness
oftheU.S.economy, which helps tokeepeconomic actors under constant pressure toallocate resources
efficiently. Thisalsomeans thatitisintheUnited States 'ownbestinterest tokeepitsmarkets securely
open.
Trade hasbecome increasingly important inU.S.economic activity. TheratioofU.S.trade
toGDP hasrisenfrom 17.2percentin1985, to20.6percentin1990 andto23.6percentin1995.
Thisincreased involvement intrade tends toserve asacounter-cyclical buffer. Intheearly 1990s,
exports cushioned theimpact oftheU.S.recession, demonstrating theimportance fortheUnited States
thatitsproducers havesecure, liberal access toforeign markets, within astrong, rules-based multilateral
system. Subsequently, asU.S.growth improved, netimports accommodated excess domestic demand,
allowing lower inflation, andinterest rates, thanmight otherwise havebeenthecase.
Since thelastReview, theservices sector hasassumed anincreasing share ofU.S.output.
Inpart,thisreflects differential inflation ratesinthegoods andservices sectors, withhigher rates
inthelatter; inrecent years, productivity growth inmanufacturing hasexceeded thatofGDP. However,
withservices accounting forabout two-thirds ofGDP, orsome fourtimes theshare ofmanufacturing,
itisclearthatproductivity growth inservices isadetermining factor inU.S.living standards. The
benefits totheUnited States ofmaintaining andimproving onanefficient, openandcompetitive services
sector arethusevident. Thisisespecially thecasefor"input" services suchasfinance, communications
andtransport, where productivity gains cansignificantly lower costs inother sectors, such as
manufacturing. Within thisframework, itisalsonoteworthy thatthecross-border supply offoreign
services totheUnited States isnowlessimportant thanestablishment asamode ofdelivery, emphasizing
theongoing interest oftheUnited States inmaintaining aliberal foreign direct investment régime.
TheUnited States continues tobetheworld 'slargest single trading nation ingoods andservices,
withsome15percentofmerchandise and16percentofservices exports. TheEuropean Union remains
thelargest market forU.S.merchandise exports butthere isanongoing shiftinthedirection ofU.S.
tradetoward eastAsia, which isnowthemostimportant source ofimports. Thecomposition ofU.S.
merchandise trade hasalsocontinued tomove from primary toward manufactured products, inspite
ofrapidly growing agricultural exports. Growth ofmanufacturing exports hasbeenbroad-based, with
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increased shares forexports ofoffice machines, telecommunications equipment, chemicals, ironand
steelproducts andautomotive products. Theshare ofmanufactures inmerchandise imports hasalso
increased, ledbyoffice machines andtelecommunications equipment, non-electrical machinery, and
chemicals; theshare ofautomotive products hasdeclined.
U.S.markets andsources forgoods andforservices are,ingeneral, closely correlated. While
Western Europe asagroup istheU.S. largest trading partner forcross-border trade inservices,
accounting forapproximately 60percentofimports andexports, Japan isthelargest individual
destination, with15.5percentofU.S.services exports. Transportation isthelargest component of
services exports, withover50percent; however, exports ofbusiness services, royalties andlicensing
feeshavegrown rapidly, respectively doubling andincreasing by63percentduring 1994-95.
Institutional andLegal Framework
TheUnited States isanoriginal signatory toalltheWTO Multilateral Trade Agreements and
tothePlurilateral Agreements except fortheInternational Dairy Agreement. U.S.commitments under
theAgreements areimplemented indomestic lawbytheUruguay Round Agreements Act(URAA).
TheU.S.WTO Schedule ongoods provides forbindings onallbuttwotariff lines, andcommitments
under theGATS arewidespread. TheURAA alsoimplemented therecommendations ofGATT Panels
concerning Section 337ofthe1930 Tariff Actandm.f.n. treatment fornon-rubber footwear imports
fromBrazil, andauthorizes certain future tariffcutsthatmaybeagreed under negotiations thatstarted
inthecontext oftheUruguay Round.
TheUnited States applies m.f.n. treatment toallbutsixcountries: Afghanistan, Cuba, Laos,
theDemocratic People 'sRepublic ofKorea, Serbia andMontenegro andVietnam. Since thepassage
oftheUruguay Round Agreements Act,Congress hasenacted permanent m.f.n. status forHungary
andRomania. Russia receives m.f.n. treatment being deemed tobeinfullcompliance withtheJackson-
Vanik Amendment ofthe1974 Trade Act. Countries currently subject toJackson-Vanik waivers are
Albania, Armenia, Belarus, China, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Tajikistan,
Turkmenistan, Ukraine andUzbekistan. Iran, IraqandLibya retain m.f.n. status although imports
areprohibited under U.S.economic embargoes.
Recently, theUnited States hasenacted significant reform measures inbothagriculture and
telecommunications. These measures, which serve toremove many domestic restrictions, gobeyond
those undertaken intheWTO andcould acttosignificantly improve efficiency intherespective sectors.
Thechanges could impact onU.S.trade, andonworld markets, withtheUnited States aleader in
bothareas.
Inaseparate development, theU.S.hasenacted theCuban Liberty andDemocratic Solidarity
(LIBERTAD) Act(theHelms-Burton Act)andtheIranandLibya Sanctions Act. Theformer allows
U.S.citizens totakeprivate action inU.S.courts toobtain compensation fromcompanies "trafficking"
inconfiscated property thatitisinCuba, andclaims towhich areowned bythose U.S. nationals;
italsoauthorizes theStateDepartment torefuse U.S.visastosuchcompanies 'executives, theirspouses
andtheirminor children. ThePresident hasdeferred therighttofilesuitagainst foreign companies
using theexpropriated property ofU.S.nationals untilFebruary 1997. TheIranandLibya Sanction
ActauthorizestradesanctionsagainstforeigncompaniesinvestinginIranandLibya.Theextra-territorial
aspects ofthese lawshavebeencriticised byU.S.trading partners andcases against theHelms-Burton
Acthavebeenfiledunder NAFTA andintheWTO.
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WTO Participation
TheUnited States isoneofthemostactive users oftheWTO dispute settlement provisions.
Currently,theUnitedStateshasrequestedconsultationson19casescovering17measuresandisinvolved
inaround two-thirds ofalldispute cases raised todate. Inonecase, amutually agreed solution was
found inconsultations anddulynotified totheWTO; fourpanels havebeenestablished, andthree
others havebeenrequested once, butnotyetestablished. Onepanel report, whose findings were
subsequently appealed byJapan, hasbeenaffirmed bytheAppellate Body
NinecomplaintshavebeenraisedintheDSBagainstU.S.measures.Inthreecases,themeasures
havebeenwithdrawn. Theadverse ruling ofonepanel, covering twocases, wasappealed bytheUnited
States. TheU.S. authorities haveindicated theirintention toimplement therecommendation ofthe
Appellate Body, which partly confirmed thePanel'sdecision; consultations between theparties are
continuing.
TheUnited States played akeyrôleintheservices negotiations intheUruguay Round; to
agreatextent, theefforts ofU.S.negotiators andtheinterest ofU.S.industries behind themdetermined
thecourse ofthenegotiations inthisnewarea. Keysectors ofinterest totheUnited States inpromoting
internationalnegotiationsincludedtelecommunications,financialservices,airtransport,someprofessional
services, andaudiovisual services. TheUnited States hasalsoparticipated inallofthepost-Uruguay
Round negotiations, buttheresults havesofarbeenmixed. Inthefinancial services negotiations
concluded inJuly1995, theUnited States tookaGATS Article IIexemption enabling ittoapply
non-m.f.n. treatment toforeign financial service suppliers withrespect tonewentries andnewactivities.
TheUnited States didnotrevise itscommitments regarding themovements ofnatural persons inthe
negotiations concluded alsoinJuly1995. Intheextended negotiations onbasic telecommunications,
theUnited States submitted anoffer providing unrestricted market access andnational treatment to
foreign services andforeign service suppliers initslocaltelecommunications market. Inthenegotiations
onmaritime transport, theUnited States didnotsubmit anoffer.
While overall public expenditure isalower share ofGDPintheU.S.thaninmostother OECD
countries, federal andState procurement ofgoods andservices haveapotentially significant effect
ontrade. Buy-American orbuy-State provisions havebeeneased tosome extent, although theyremain
together withnational security provisions, serious constraints onexternal competition.
TheUnited States isasignatory totheplurilateral Government Procurement Agreement which
entered intoforce on1January 1996. TheU.S.commitments under theAgreement gosignificantly
beyondthoseitundertookintheTokyoRoundAgreement,notablybyextendingprocurementobligations
topublic utilities covering many States andbyincluding public works andservices. Access toU.S.
procurement isextended, onareciprocal basis, toothersignatories. Theeffects ofexceptions contained
intheAgreement, suchasset-asides forsmall andminority-owned businesses, havenotchanged, but
havebecame moretransparent asthecoverage oftheAgreement haswidened. Inthecontext ofTitleVII
ofthe1988 Omnibus Trade andCompetitiveness Act,theU.S.authorities monitor thegovernment
procurement practices oftheirtrading partners. TheUnited States isadvocating anewagreement in
theWTO context tocreate greater transparency ingovernment procurement.
Regional Trade Agreements
TheU.S.-Israel FreeTrade Agreement hasbeenfullyimplemented. Under theAgreement,
some important U.S.foodandbeverage imports fromIsrael arestillsubject toimport tariffs; in1994,
44percentofimports from Israel received trade preferences, ascompared to67and88percentof
itsimports from Canada andMexico, respectively, under NAFTA.
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NAFTA hasbeenimplemented onschedule, except thatthedeadline fornon-conforming State
measures oninvestment andnon-financial services wasshifted from31December 1995 to31March
1996. U.S.tariffs onimports fromCanada andMexico arenowsubstantially lower thanm.f.n. tariffs,
although some agricultural imports atbelow m.f.n. ratesaresubject totariff quotas. Elimination of
import tariffs onanumber of"sensitive" products isdelayed totheendofthetransition period, ending
1January 2008.
UnderChapter19oftheAgreement,NAFTApanelsmayreviewanti-dumpingandcountervailing
measures taken. Approximately 20percentofallmeasures taken havebeenreviewed under this
provision. Bilateral consultations under thedispute settlement provisions ofChapter 20oftheNAFTA
havealsobeenusedandonepanel hasbeenestablished, todealwiththestatus ofCanadian dairy import
tariffs. Thepanel advised thattheWTO-negotiated tariffs were therelevant rates.
Bilateral Agreements
TheUnited States hasalarge number ofbilateral agreements withenforceable provisions on
increasing market access orreducing trade barriers. These agreements primarily cover intellectual
property rights, investment, andproduct-specific market access. Intheareaofintellectual property
rights theUnited States generally seeks shorter transition periods thanthose specified intheTRIPS
Agreement, aswellaspipeline protection forpharmaceuticals andagricultural chemical products.
Since 1991, theUnited States has,asapolicy, onlyconcluded investment agreements withcountries
which agreed toanintellectual property rightagreement.
Commitments made byU.S. trading partners under bilateral agreements have often been
integrated intotheirWTO undertakings. Thishasmostnotably beenthecaseforbilateral agreements
covering agricultural products, textile andclothing items andcommitments under theplurilateral
Government Procurement Agreement.
Market access agreements, generally negotiated inthecontext ofaWTO dispute settlement
ora"Section 301" investigation, havegenerally notrequired substantial changes inU.S. policies.
AnimportantexceptionistheU.S.-CanadaSoftwoodLumberAgreement.Followinglengthydiscussions,
Canada agreed totaxexports above specified volumes totheUnited States; andtheUnited States
committed itself nottouseanti-dumping, countervailing andSection 301measures against Canadian
softwood lumber exports.
Trade Policy Features andTrends
Permanent trade policy instruments
U.S.commitments under theUruguay Round imply atrade-weighted tariffreduction ofsome
35percentby1999, withsome exceptions (advanced orretarded). Fulltariff elimination onU.S.
importshasbeenagreedforsteel,pharmaceuticals,paper,furniture,medicalequipment,farmequipment,
construction equipment, beerandspirits; partial elimination forwood andscientific equipment;
participation intariff harmonization forchemicals andnon-ferrous metals; andparticipation in
"substantial" tariff reductions forelectronics, ceramics, photographic andcinema goods. Bytheend
oftheUruguay Round implementation period, some 70percentofU.S.tariff lineswillbesubject
tom.f.n. rates of5percentorless,andduty-free treatment willcover 40percentoftariff lines.
Quantitative import restrictions onagricultural products havebeenconverted totariffs andtariffquotas,
while restrictions applied totextiles andclothing aretobeeliminated overatenyearperiod.
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TheUnited States administers avariety oftrade preferences under theNAFTA, U.S.-Israel
FreeTrade Agreements, theCaribbean Basin Economic Recovery Act,theAndean Trade Preference
ActandtheGeneralized System ofPreferences. GSPwastemporarily suspended in1994 andagain
in1995-1996, butwasrecently renewed, withretroactive effect. GSPbenefits have, intheperiod,
beenwithdrawn fromvarious exporting countries ongrounds ofincome orcompetitive need; benefits
mayalsobewithdrawn orrestored ongrounds including intellectual property protection andprotection
ofworkers 'rights.
Rules oforigin governing preferential treatment varybyAgreement, while differing rules
areusedtoadminister country-specific textile quotas, anti-dumping duties andgovernment procurement
preferences. Significant changes havebeenmade inrules oforigin applied totextiles andclothing,
interaliachanging theorigin ofaproduct fromtheplace werethetextile wascuttotheassembly point;
thislatter tends tomake quotas more restrictive forcountries thatspecialize inassembly ofclothing
items.
Voluntary export restrictions administered byU.S.trading partners havebeenphased outunder
implementation oftheUruguay Round Agreement. InNovember 1995, Congress lifted thebanon
exports ofAlaskan oil.TheAdministration seeks tofacilitate exports byspeeding uptheadministration
ofexport licences andexport controls, while some exports have been decontrolled, including
semiconductors, mobile telephones andsome software.
TheUnited States hasamarket-driven system ofstandards development, policed byproduct
liability laws. Technical regulations arebased oninternational norms andprivately developed standards.
Conformity assessment istested byaccredited firms inboththeUnited States andabroad. There exists
alimitednumberofmandatoryenvironmentalprocessstandardsenforcedattheborder;notableexamples
aredolphin-friendly tunafishing methods andturtle-excluder devices usedinharvesting shrimp.
TheUnited States hasawelldeveloped andenforced system ofintellectual property protection,
based onconstitutional provisions. TheUruguay Round Agreements Actincreased theduration of
protection andresurrected protection forworks thathadfallen intotheU.S.public domain. Parallel
importation ofpatented orcopyright goods maybeprevented bytherightholder, butanti-trust law
discourages unreasonable conduct inthisarea.
Temporary measures
TheUruguay Round Agreements Actmade significant changes inthemethod ofcalculation
foranti-dumping andcountervailing duties, injury assessment forthese andsafeguard measures, and
intheprocedures toobtain exclusion orders forimports thatinfringe intellectual property rights. It
istooearlytoassess theeffects ofthesechanges ontheeaseorotherwise withwhich domestic producers
mayobtain protection from "unfair" competition orsurges ofimports.
Recently, thenumber ofanti-dumping andcountervailing investigations launched intheUnited
States hasdropped sharply, perhaps inaccord withthecontinuing U.S.economic recovery. Three
safeguard investigations wereconducted in1995 and1996; onlyoneconcluded thatimports caused
injury tothedomestic industry. Thenumber ofexclusion orders ongrounds ofintellectual property
rights infringement declined from 51attheendof1992 to46in1994, rising to49atend-1995.
Theuseof"Section 301"isnowclosely tiedtomultilateral dispute settlement, atleastforWTO
members andinareas subject toWTO rules anddisciplines. Investigations maybetriggered inthe
context of"Super" 301,"Special" 301,TitleVIIoftheOmnibus Trade andCompetitiveness Actof
1988, andSections 1374and1377oftheTelecommunications Trade Actof1988. Since thelastReview,
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theUnited States hasinitiated 16"301" investigations andconcluded agreements covering twoprevious
investigations. Sanctions were applied once, briefly, inthecaseofintellectual property protection
byChina. Except forthedispute withChina, anon-WTO member, allseven 301actions initiated
during 1996 andtwoearlier investigations (European Union, bananas andJapan, photographic film
andpaper) havebeenreferred toWTO dispute settlement.
Sectoral policies
Agriculture
Agricultural andfoodproducts accounted forsome 11percentofU.S.merchandise exports
in1995, following anincrease inthevalue ofexports bysome 30percentsince 1992 inthefaceof
rising world market prices. Inthisfavourable environment, theagricultural provisions oftheWTO
andNAFTA Agreements were implemented andtheFederal Agricultural Improvement Act(FAIR)
Actof1996wasenacted, converting domestic pricesupport todirect income support; theoverall level
ofsupport toagriculture hasfallen.
With theriseinworld agricultural prices, U.S.export subsidies havedeclined tolevels well
below WTO commitments; theFAIR Acthasalsoeliminated funding forcertain export subsidies.
Tariffication ofquantitative restrictions often implies, asinother WTO members, prohibitive duty
levels. In-quota tariffs form.f.n. imports are,onaverage, some 10percent, much lower thanthe
mean ofsome 50percentforout-of-quota imports butwellabove thesimple average U.S.tariff rate
of6.3percent. Tariff quotas havegenerally beenunderutilized.
TheWTO Agreement onSanitary andPhytosanitary Measures hashadanimmediate impact
onU.S.agricultural trade. TheUnited States hasadjusted itsownsanitary andphytosanitary (SPS)
measures onmeat imports from Uruguay andchanges affecting imports from Argentina areunder
consideration. TheU.S. Department ofAgriculture hasinvited comment ontheliberalization ofa
selection ofother outstanding SPSrestrictions. Ontheother hand, theauthorities consider SPS
restrictionsasanimportantbarriertoU.S.exportsandhaverequestedfiveWTOconsultationsconcerning
fourmeasures: onewassettled during consultations andonepanel hasbeenestablished. SPSmeasures
arealsoanimportant pointofconcern inU.S.traderelations withnon-WTO members, including China.
TheFederalAgriculturalImprovementReform(FAIR)Actof1996replacesmostproduct-specific
payments andguaranteed prices byannual domestic support payments, delinked from production or
acreage anddeclining overseven years, withtotalpayments capped atUS$35.6 billion. Themain
crops covered arewheat, maize, sorghum, barley, oats,upland cotton andrice. Farmers arefreeto
shifttoother crops, except inthecaseoffruitandvegetables, unless thereisahistory ofplanting such
crops. Landsetasideprovisions havebeeneliminated except fora"conservation reserve", which idles
14.7million hectares ofenvironmentally vulnerable land. Although itistooearlytoassess theimpact
oftheActitisexpected thattheincreased supply originating fromreduced landsetasides andgreater
flexibility inproduction will,overtime, raisethecapacity ofU.S. farmers torespond tochanges
ininternational demand.
Manufacturing
Manufacturing value added hasoutpaced GDPgrowth since1992, based onsharp productivity
increases ofover3percentayearintheperiod 1992-95. Manufacturing exports in1995 weresome
32percenthigher thanin1992 andforeign direct investment inmanufacturing hascontinued tobe
important.
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Textile andclothing production hasrealized significant productivity gainsonthebasisofgreater
capital intensity intheU.S.market andoutward processing operations inMexico, theCaribbean and
Central America. Inaddition toimport tariffs wellabove themanufacturing average, theUnited States
maintains country specific import quotas under theWTO Agreement onTextiles andClothing (ATC)
andhasissued 25safeguard quota callsonWTO members. TheUnited States hasimplemented the
firstphase oftheATC andhas,asrequired byitslegislation, published theproducts tobeclassified
intheremaining threephases, withthemostsensitive products classified inthelastphase; noproducts
under quota appeared inthefirstphase, while categories imported fromtheOECD countries, including
Mexico, werewellrepresented. Asrequired bytheATC, quota growth hasbeenincreased forWTO
members; however, thechanges inrulesoforigin noted above arelikely toaffect thepattern ofquota
fulfilment.
Tariffs inmostmanufacturing sectors other thantextile andclothing andasmall number of
other items suchastrucks, arelowbycomparison tobothhistorical andinternational levels. Insome
areas, including notably pharmaceuticals andsemiconductors, theUnited States iscommitted totariff
elimination.Outwardprocessingissignificantinthesemiconductorssector.Quantitativetrademeasures,
suchas"voluntary export restrictions" byU.S.trading partners havebeenphased outsince thelast
Review; anewautomotive agreement withJapan doesnotsetquantitative targets forU.S.exports
butprovides forbilateral monitoring ofvarious qualitative commitments, while aMemorandum of
Understanding, seeking toliberalize access totheKorean vehicle market, istobeimplemented onan
m.f.n. basis. Anewco-operation agreement withJapan onsemiconductors reaffirms market principles
andestablishesaconsultativeframeworkopentoindustryassociationswhosegovernmentsarecommitted
totariff elimination.
Compliance costs withtechnical regulations -notably highforpharmaceutical products and
rising intheautomobile andother manufacturing sectors -andtheaccreditation offoreign suppliers
ortesting agencies havereceived more attention. U.S. federal authorities havesupported bilateral
initiatives thatleadtotheinternational recognition ofconformity assessment tests; compliance testing
requirements mayhavecontributed totheshiftfrom merchandise trade toforeign direct investment.
Services
Private services generated 66percentofU.S.GDP and65percentofemployment in1995.
Asnoted above, productivity increases inthesector areadecisive factor intotalU.S. productivity
growth and,therefore, standards ofliving. Recent developments inthetelecommunications, financial
andprofessional services sectors haveenhanced theprospects forproductivity growth inthesesectors.
Protective policies continue inmaritime transport while airtransport issubject toliberalization on
abasis ofbilateral reciprocity under "Open Skies Agreements".
Within thegeneral regulatory environment, some deviations from theprinciples ofnational
treatment andm.f.n. exist. Legislation permitting suchdeviations, granting theauthorities thepowers
ofapplying differential treatment toforeign suppliers oragainst foreign investment orownership
(amounting insome cases toabsolute orconditional prohibitions) exists incertain areas of
telecommunications, financial, airandmaritime transport services sectors. However, newlegislation
passed in1996willopentelecommunications andradio/TV networks togreater competition. Anew
bilateral agreement withJapan oninsurance andother financial services istobeapplied onanm.f.n.
basis bybothparties toallWTO members.
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Outlook
While anopen, predictable world trading system continues tobecrucial forthewell-being
oftheU.S.economy, theconverse isalsotrue; anopen, predictable U.S.economy iscrucial forthe
health oftheworld trading system. During thepasttwoyears, theU.S.application oftheUruguay
Round Agreements andtheconsolidation oftrade remedy measures under WTO dispute settlement
procedures havestabilized many elements thatpreviously appeared unpredictable andunilateralist in
U.S.policy; theAdministration hasalsoshowed restraint inusing theinstruments available andhas
accepted WTO rulings. However, elements ofU.S.tradelegislation, evenunder theWTO, continue
tocause concern forcertain trading partners. Thus, thebackloading oftextile andclothing liberalization
remains problematic formany developing countries, eventhough conditions ofaccess haveimproved;
access togovernment procurement remains restricted invarious areas; andalthough therighttofile
suitunder theCuban Liberty andDemocratic Solidarity (LIBERTAD) Actof1996hasbeendeferred
and,sofar,nosanctions havebeen announced against companies investing inIranorLibya, the
extraterritorial application ofU.S.trade lawshasattracted significant attention.
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 onan
m.f.n. basis). Insome ongoing areasofmultilateral negotiations, concerns about thelackof"adequate"
reciprocity bysome partners havegoverned U.S.actions. While there isnodoubt thatU.S.trade
policy isfirmly founded intheWTO system, theinteraction among these various tracks remains a
source oftension within thesystem. Itistherefore crucial thattheUnited States anditspartners utilize
thesystem tomaintain multilateralism asthekeytofuture developments anddiscourage pressures for
increased bilateralism orunilateralism.
TRADE POLICY REVIEW BODY
UNITED STATES
Report bytheGovernment
TheUnited States intheMultilateral System
High-income countries liketheUnited States aswellasmiddle andlower income economies
allpursue many ofthesame economic goals: more rapid expansion ofproductivity, higher-wage
employment, increased living standards, andstrengthened economic growth. These shared aspirations
create acommon interest between theUnited States andothermembers oftheWorld Trade Organization
infaithfully implementing agreements already reached aswellasinmoving ahead where possible
inremoving remaining distortions andimpediments toglobal trade andinvestment flows.
TheUnited States government hasfocused ontradepolicy asoneoftheprincipal toolsavailable
toittoachieving thenational economic goalofexpanded domestic economic opportunity. Various
studies haveshown thewages ofU.S.jobsdirectly andindirectly supported by(goods) exports tobe
13percentto16percenthigher thantheaverage wage intheU.S.economy --apremium nodoubt
reflecting bothhigher labor productivity inexport-oriented sectors aswellastheusually expansionary
postures ofsuchindustries within thenational economy.
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Fairly traded imports likewise benefit theUnited States inexpanding therange ofchoice in
theU.S.market, inmaking available forpurchase imported goods andservices atlower costthanthey
could beproduced athome, inproviding lowcost,highquality inputs intoU.S.domestic production,
andfostering healthy competition intheU.S.economy.
These effects ofimports, together with those ofexports, increase average U.S. labour
productivity, expand national purchasing power, raisedomestic living standards andincrease attractive
opportunities foremployment andinvestment. Inaddition, theexpansion oftradethrough theremoval
ofdistortions andimpediments hashadapositive impact ontherateofeconomic growth.
TheUnited States haspursued aconsistent policy ofseeking aworld ofincreasingly open
markets andexpanded trade since thefirstReciprocal Trade Agreements ActoftheU.S. Congress
in1934. Inthe1930's,constrained byglobal political conditions, U.S.tradepolicy focused especially
onthenegotiation ofreciprocal tariff reducing agreements withother countries intheWestern
Hemisphere. During andimmediately following theSecond World War,however, U.S.policy focused
onthecreation ofarules-based, truly multilateral trading system geared toward theremoval of
impediments andthecreation ofopportunity forall.Through 50years and8successful multilateral
trade rounds under theGATT, oursupport forthemultilateral trading system anditskeyimportance
toachievement ofatrulyopenandfairglobal trading system hasnever flagged.
Inaneraoflow-cost, instantaneous communication, efficient transportation andglobalized
production, themultilateral system remains asrelevant toourtrade andeconomic interests asever.
PastachievementsunderthemultilateraltradesystemhavehelpedcreateandshapethemodernAmerican
economy intoonecharacterized byunprecedented levels ofoutput andrapidly expanding economic
opportunity. Likewise, American policy isbased onthebelief thatifthepromise oftheUruguay Round
andageneralized movement toward more openmarkets --bothinternal andattheborder --around
theglobe istorealize itsfullpotential, anexpanded andfurther strengthened multilateral trading system
must beitsfoundation.
TheUnited States haspursued aconsistent tradepolicy based onthisglobal view. Ourpolicy
isclearly motivated onourviewofnational selfinterest, buttheendurance ofthispolicy oversomany
years alsoreflects theprofound belief oftheUnited States thatopenglobal markets benefit alltrade
partners. Theexpansion oftrade through theremoval ofbarriers anddistortions isa"positive sum"
endeavor, inwhich thegains frombetter useofnational resources andtheenhancements toinvestment
andgrowth areavailable toeachcountry, notattheexpense ofothers, butrather inaddition tothe
gains reaped byothers.
TheU.S.government isstrongly committed tobuilding aworld oftrulyopenmarkets with
theWorld Trade Organization asthecenterpiece oftherequisite open market disciplines. Despite
thehighlevelofpercapita output andincome already achieved intheUnited States, theU.S.public
haslegitimate concerns about jobsecurity andliving standards; about howtoassure expanded economic
andattractive employment opportunities inthefuture; about howtospread suchopportunities more
widely among thepopulation; and,howtoprepare better forthematerial responsibilities ofanaging
population. While anumber ofpurely domestic economic initiatives havebeenpursued inorder to
address these concerns, theU.S.government hasalsoconsidered trade policy asanintegral partof
efforts todevelop U.S.national economic interests andhelptomeetthesepublic concerns. Inworking
toexpand thescope ofopenmarkets globally aswellastoinvest athome inpeople andknowledge,
aswellasplants andequipment, thegovernment isfullycommitted tocontributing tothecreation of
economic opportunity andprosperity intheUnited States andabroad.
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TheUnited States Economic andTrade Environment
TheUnited States istheworld ’slargest importing andexporting nation. Itisalsothelargest
investor worldwide andthelargest recipient offoreign direct investment. Depending ontheestimate,
theUnited States continues toaccount for20to25percentofrealglobal production. Assuch, its
economic performance andpolicies haveasignificant impact ontheworld economy andtheglobal
trading system. Recent U.S.economic performance hasbeenimpressive andU.S.trade hasgrown
rapidly.
TheU.S.economy, which hasrecently entered thesixthyearofeconomic expansion, hasdone
wellsince thelastreview. From thesecond quarter of1994 tothesecond quarter of1996 (latest
available data), realgross domestic product expanded bymore than4.6percent. Realnon-residential
fixedinvestmentexpandedbyover17percent,whileinvestment’sproducerdurableequipmentcomponent
isupby20percentinrealterms injusttwoyears. Non-agricultural employment expanded by
5.5million jobsnet,andtherateofunemployment hasfallen from6.2percent to5.4percent in1996's
second quarter. There hasbeennodiscernible upward pressure onthecurrent moderate rateofprice
inflation andthefederal budget deficit hasfallen forthefourth yearinarowtoitslowest dollar level
since 1981.
Similarly, U.S.trade hasexperienced strong growth. Thevalue ofU.S.goods andservices
exports (excluding earnings oninvestment) grew by24percent between thesecond quarter of1994
andthesameperiod of1996. Onanannualized basis, U.S.exports ofgoods andservices wererunning
atanannual rateofover$845 billion inthefirstseven months of1996.
Reflecting strong U.S.demand, particularly forinvestment, goods andservices, U.S.imports
roseby22percent between thesecond quarter of1994andthesameperiod of1996. Imports ofgoods
andservices onanannualized basis wererunning atarateofover $935 billion in1996'sfirstseven
months. These figures reflect theU.S.position astheworld ’slargest exporting andimporting nation.
TradelikewisecontinueditsriserelativetothetotalvalueofU.S.grossnationalproduct(GNP).
Exports plusimports ontheirbroadest balance-of-payments definition (goods, services andearnings
oninvestment) rosefrom$1.8trillion (annual rate)inthesecond quarter of1994to$2.25 trillion (annual
rate)inthesecond quarter of1996, orfrom anamount equal 26.4percent ofvalue ofGNP toabout
30percent ofthevalue ofGNP. Thecorresponding figure for1970 was13percent.
Estimates ofthetotalnumber ofjobssupported byU.S.exports arenotavailable onaquarterly
basis. Onanannual basis, however, U.S.employment supported byexports hasrisenfrom10.3million
in1994toanestimated figure of11.4million for1996, based onextrapolated seven month data. This
1.1million increase inexport-supported jobsintwoyears represents roughly 20percent oftheoverall
5.5million two-year increase incivilian employment cited above (though thetimeperiods arenot
identical).
Research ontheU.S. economy hassuggested thatexport-supported jobsaremore highly
remunerated thantheU.S.national average while jobsinimport-competing sectors onaverage tend
tohaveremuneration below theU.S.national average. Trade expansion fortheUnited States therefore
canbeexpected tosomewhat shiftthecomposition ofjobcreation overtimetoward higher paying
jobs. Thisfactor andrecent strong trade growth arelikely tohavecontributed totherecent findings
ofthePresident ’sCouncil ofEconomic Advisers thatovertwo-thirds ofU.S. full-time jobgrowth
between February 1994andFebruary 1996occurred inindustry/occupation groups paying above median
wages.
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Thetwo-year timeframe ofourtrade policy reviews is,ofcourse, oftooshort aduration to
draw strong, empirically-based conclusions about theeffects ofmost recent developments likethe
Uruguay Round. However, therecent, on-going good performance oftheU.S. economy reflects
atleastinpartthepro-competitive structural posture oftheU.S.economy, bothinternally andatthe
border. TheUnited States hasoneoftheworld ’smostpro-competitive markets internally --astance
thathasbeenstrengthened overthelastseveral decades through theeconomic deregulation ofanumber
ofimportant sectors oftheeconomy --andhasinrecent years beencitedbysome outside authorities
astheworld ’smostcompetitive major economy. Inaddition, theUnited States hasoneoftheworld ’s
most openmarkets withrespect toimports andinvestment andalsoenjoys higher levels ofaverage
labor productivity andrealpercapita income thananyother major economy intheworld. U.N. trade
datashow thatin1994 theUnited States imported slightly more manufactured products thanthe
European Union, Japan andCanada combined.
These factors, webelieve, areclosely connected: thealready high, andstillincreasing, level
ofU.S.openness totradeandcompetition, andthecorresponding highlevelofeconomic achievement
andrecent strength ofeconomic performance. The50years ofeffort toward building atrulyopen
multilateral trading system, while notcomplete, havecontributed substantially toourowneconomic
success andtothatofother countries thatdidnotoffset suchpro-competitive forces either through
afailure toopenborders orthrough internal restrictions andregulations countermanding theeffects
offreertrade. Furthermore, webelieve thatthemorewidespread global movement toward freermarkets
internally andattheborder overthelastdecade isoneofthemost positive economic developments
ofourgeneration. These forces overtimepromise theextension ofbetter economic opportunities and
improved living standards forbillions oftheworld ’scitizens, inaprocess inwhich eachnation ’sgain
comes notattheexpense of,butinharmony withthegains ofothers.
TheUnited States iscommitted toexercising itsinfluence andleadership inworking withother
countries toreinforce thesestrongly pro-competitive developments. Oureconomic interests complement
those ofourtrading partners andtheglobal economic welfare. Theultimate goal, andtheultimate
vehicle, isaWTO thatiscomprehensive bothinmembership andinitscoverage ofallbarriers and
distortions restricting global trade.
Trade Policy Developments, 1994-1996
TheUruguay Round andWTO implementation
Themostsignificant demonstration ofthecompetitiveness andopenness oftheU.S.market
liesinitsimplementation oftheUruguay Round. Inanimportant demonstration ofbipartisan
commitment anddetermination, theCongress approved theresults ofthenegotiation andestablishment
oftheWTO intheUruguay Round Agreements Act(URAA). President Clinton signed theURAA
onDecember 8,1994. TheUnited States continues togivethehighest priority tofullandeffective
implementation oftheUruguay Round Agreements.
TheUnited States hadmuch togainfromopening foreign markets through theUruguay Round.
Trade agreements thatpermanently change therules andstructure oftrade, liketheUruguay Round
Agreements, arereally investments inlongtermgrowth. Astudy byGATT atthetimeoftheUruguay
Round ’sconclusion estimated thatbytheyear2005, theRound would result inanincrease inglobal
production byasmuch as$510billion (constant 1990dollars) peryear,withtheUnited States accounting
for$122billion ofthisgain. Ourownwork suggested thattheRound could add0.15to0.3percentage
points peryeartotheU.S.GDP growth rateoveradecade, withGDP growth enhancements being
experienced throughout theglobal trading system.
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American exports ofgoods andservices inthefirstyearofUruguay Round implementation
werebuoyant--up nearly 13percent from1994. Asaresult, U.S.jobssupported byexports increased
byover600,000(estimated)in1995.Whilemanyfactorscontributedtothisgrowth,theUruguayRound
would havetobeincluded asacontributory element. TheUruguay Round helped, notonlyasaresult
ofspecific barrier reductions, butalsobecause U.S.business began planning andinvesting onthebasis
ofthefullyimplemented agreement. Bybringing ahigher degree ofcertainty totheopenworld trading
system andaguaranteed blueprint forfuture staged market openings, theRound provided significant
incentives forU.S.businesses toexpand theirproduction inpreparation fortheincreased world demand.
Infact,U.S.non-residential fixed investment wasupinrealterms by10.1percent in1994
andanadditional 6.1percent in1995 --strong rates fortherelatively advanced stage oftheU.S.
economic recovery. Anticipation ofcontinued strong growth inforeign markets forU.S.exports --
dueinparttothesuccessful conclusion oftheUruguay Round --undoubtedly contributed tothis
growth-enhancing investment strength intheUnited States.
Since theentry intoforce oftheUruguay Round agreements, United States policy hasbeen
tofocus onensuring theeffective andtimely implementation ofthemultilateral agreements. Thevarious
manifestations ofthispolicy range fromanactive participation inthedeliberations ofthemany WTO
committees andcouncils toanaggressive useoftheWTO ’snewdispute settlement mechanism. Where
WTO Members havebeenslowtoimplement theirUruguay Round obligations, theUnited States has
beenquick tocriticize suchinaction. Where problems havearisen inthesystemic implementation
oftheUruguay Round ’sresults, theUnited States hasworked constructively withothers totrytoremedy
thedifficulties. Where obligations havebeenignored orside-stepped, theU.S.hasinitiated action
under theDSU.
Thecentral roleoftheWTO inU.S.economic policy isalsoreflected intheresources which
theUnited States devotes tothenegotiations withtheverylargenumber ofcountries seeking toaccede
totheWTO. Inthesenegotiations, American insistence onaccession onlyonviable commercial terms
hassetthestandard forothers toemulate.
Finally, intheperiod leading uptotheSingapore Ministerial conference, theUnited States
hasputforward several initiatives forfurther liberalization within themultilateral trading system.
AtthesametimetheUnited States hassought toensure thatother initiatives toweaken therulesagreed
intheUruguay Round orproposals which distract from theeffective implementation oftheWTO
agreements donotgain undeserved credibility. IntheU.S. view, theWTO must remain a
consensus-based organization andtheWTO canonlysucceed asacredible institution overthelong
termifitswork program isseentobebeneficial toallofitsdiverse membership.
Regional initiatives
TheUnited States recognizes theprimacy oftheWTO ’smultilateral tradesystem andbelieves
thatthefirsttestofthisconviction isthefullconsistency ofregional arrangements withtheWTO ’s
multilateral rules. Withthisinmind, andinorder tocapture andexpand thebenefits ofanexpanding
global trading system, theUnited States isactively embarked onanagenda oftrade expansion in
emerging markets.
TheUnited States ’trade expansion agenda inthisareafocuses ontheexpansion oftrade in
keymarkets, inpartthrough thenegotiation ofnewtradeagreements, butalsobyenforcing compliance
withcurrent agreements (including WTO agreements) andpursuing regional trade expansion inAsia,
South America andEurope. Suchregional tradeinitiatives include theNAFTA, theFTAA, andAPEC.
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Atthesame time, weseektomaintain andimprove ourtieswithEurope through theTransatlantic
Initiative.
Asnoted above andwithout exception, theregional initiatives inwhich theUnited States is
involved looktotheWTO asproviding asolidfoundation togofurther. Inanearlier GATT Trade
Policy Review oftheUnited States, theU.S.delegation made clearthattheWTO system isseenas
thebaseuponwhich regional arrangements might bebuilt, provided thatsucharrangements gofurther
inthecause ofliberalization. Thisisfully inlinewiththefactthattheGATT hadhistorically
recognized the“desirability ofincreasing freedom oftrade bythedevelopment, through voluntary
agreements, ofcloser integration between theeconomies ofthecountries party tosuchagreements ”
(Article XXIV) aslongastheagreements didnotresult inincreasing external barriers oftheparties.
TheUnited States supports regional agreements thatareconsistent withWTO rules. Weseesuch
agreements aschallenging themultilateral system tokeeppacewiththeinterests andneeds ofMembers,
andcontributing totheWTO system intheform ofinnovation andstrengthened disciplines.
Regional agreements often achieve deeper andbroader economic integration thanmultilateral
agreements; asneighbors, members often haveinterests incommon. They canbecome models for
future multilateral liberalization innewareas, suchasservices, investment, environmental andlabour
standards. Thefollowing regional initiatives areeachexamples ofthispotential.
TheNorth American FreeTrade Agreement
InJanuary of1994, theUnited States began toimplement theNAFTA, theworld 'slargest
freetrade area: 380million people producing nearly $8trillion dollars worth ofgoods andservices.
NAFTA increases opportunity forallthreepartners --Mexico, Canada andtheUnited States --toexpand
trade andenhance growth. Theforeign trade partners oftheNAFTA countries arelikely tobenefit
aswellfrom stronger growth inNorth America, asNAFTA actstoenhance thesizeoftheNAFTA
market andpurchasing power ofNAFTA countries. Since theAgreement 'sentry intoforceonJanuary
1,1994, theU.S. government hasworked toensure thatitsprovisions areimplemented swiftly.
Cooperative agreements onlabor andtheenvironment areincluded intheNAFTA package.
NAFTA hashelped sustain North America onacourse toward freetrade during aperiod of
difficulties. From 1993 to1996 (levels annualized from thefirstseven months), U.S.exports toits
NAFTA partners increased by33percent, despite theinternational liquidity crisis beginning inMexico
inDecember of1994. U.S. exports totheworld overthesame period increased by35percent.
NAFTA isalsothefirstcomprehensive trade agreement accompanied byagreements onlabor and
environmental issues related totrade. These provisions ensure thatexpanded trade supports the
improvement oflabor andenvironmental conditions andtheenforcement ofnational labor and
environmental lawsinNorth America.
TheFreeTrade Agreement oftheAmericas
InDecember of1994, theleaders of34countries oftheWestern Hemisphere metinMiami
forthefirsthemisphericsummitsince1967,whenPresidentJohnsonmetwith19LatinAmericanleaders
atPunta delEste. AtMiami, President Clinton and33other leaders committed to"conclude the
negotiations ofthe"Free Trade Area oftheAmericas" (FTAA) nolaterthan2005."
ItisclearthattheFTAA willsupport andenhance ourcommitment tothemultilateral system.
Itispremised onthesuccess oftheUruguay Round, andonfurther contributions toward and
commitmentstothemultilateralsystem.InJuneof1995,tradeministersfromthroughoutthehemisphere
pledged thattradeliberalization should beconsistent withWTO disciplines andcomprehensive inscope.
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InMarch of1996, tradeministers reaffirmed thispledge andagreed thatapproaches forconstructing
theFTAA mustinclude consistency withGATT Article XXIV anditsUruguay Round Understanding
andwithGATS Article V.Theincrease ingrowth andimproved access tonewideas thatwillresult
fromliberalized trade brought about bytheFTAA willalsostrengthen democracy intheregion, and
promote development. Thetrade ministers oftheHemisphere willnextmeet inMayof1997 in
BeloHorizonte, Brazil, forthethirdWestern Hemisphere Trade Ministerial.
TheAsiaPacific Economic Co-operation Forum
Overthepasttwoyears theUnited States hascontinued itsactive involvement intheAsiaPacific
Economic Cooperation (APEC) Forum, which includes thelarger developing anddeveloped economies
inthePacific Rim.
TheUnited States considers APEC tobeanimportant vehicle forbuilding aregional economic
structure toensure thatpromotion ofprosperity andstability iscontinued overthelongterm. After
growing fromtheoriginal dozen countries in1989to18countries onbothrimsofthePacific, APEC
isaunique combination oftheworld 'sbiggest existing markets andtheworld 'sbiggest emerging
markets. According totheWorld Bank, tradeliberalization inthePacific Rimcountries would provide
enormous gains --notonlytotheregion buttotherestoftheworld.
APEC leaders metinBogor, Indonesia in1994andagreed todismantle barriers overthenext
25years thathaveimpeded tradeandinvestment between theireconomies. LastyearinOsaka, APEC
began toinitiate implementation intheBogor Declaration. Astheculmination ofafullyear'sefforts,
leaders ofthe18APEC economies approved theOsaka Action Agenda ontrade andinvestment
liberalization, facilitation andco-operation. ThisyearinManila, theMinisters andLeaders willpress
forward onindividual andcollective actions toreach thetrade liberalization goals setforth atBogor
andOsaka, aswellasplans forco-operation inlabour, capital, technology, infrastructure, andthe
environment.
TheNewTransatlantic Agenda
TheU.S.-European relationship, oneofthemostdurable intheworld, isfurther strengthened
bytheTransatlantic Agenda, aninitiative which seeks todeepen transatlantic relations byinitiating
specific jointU.S.-EU actions toaddress global economic, political, humanitarian andenvironmental
challenges more effectively. Thisisakeycomponent ofUnited States efforts tomeetthechallenges
posed bythepost-Cold Warreality, including theneedtobuild astrong transatlantic community of
democratic, freemarket economies.
Theemphasis onjointaction isarecognition ofthefactthatmany global challenges are
transnational andcanonlybesatisfactorily addressed iftheUnited States andEUacttogether; inan
ageofincreasing budgetary stringency, neither theUnited States northeEUhasthefinancial means
tosolve certain problems alone.
TheJointActionPlanalsospecificallyincludesstrengtheningthemultilateraltradeandinvestment
system by;consolidating thenewly-created World Trade Organization (WTO); exploring waystoreduce
tariffs, including aneffort toeliminate tariffs oninformation technology products; starting work on
newinternational rulesforintellectual property rights andgovernment procurement; andagreeing to
work together intheOECD toconclude amultilateral agreement oninvestment (MAI).
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Domestic regulatory developments affecting trade policy
Among themore notable structural developments intheU.S.economy arederegulation efforts
thatprovide increased incentives foractive pursuit ofmarket openness inbothmultilateral andregional
fora. Domestic regulatory developments inthetwoyears since thelastreview oftheUnited States
aresignificant. They include regulatory reform inthepublic sector, andincreased recognition ofthe
costs andbenefits ofderegulation andpromotion ofcompetitiveness inseveral important industries.
Regulatory reform
Inaddition totaking steps tomake itsprivate andregulated sectors more competitive and
efficient, theUnited States hasbeenengaged inaneffort tomake itspublic sector more efficient.
TheNational Performance Review hasfocused onmaking government agencies more performance-
andcustomer-oriented, eliminating outdated programs andpromoting newonesdesigned forthe21st
century. Forexample, theDepartment ofAgriculture hasreduced thenumber ofitsagencies from
43to29andisintheprocess ofclosing orconsolidating 1200 fieldoffices. Asapercentage oftotal
employment, Federal employment issmaller today thanatanytimesince theearly 1930's.
The“reinvention ”ofgovernment hasbeenaccompanied byaphilosophical change, asthe
United States hassought tochange itsregulatory systems from rules-based, toperformance-based,
regulations. Infacilitating compliance rather thanacting asadisciplinarian, theFederal government
hasencouraged innovation andcost-effectiveness. Regulatory systems affected include pension systems,
regulations affecting thebanking andcommunications sector, andthose affecting theenvironment.
This isregulatory reform thatresponds tofundamental changes intheeconomy, promoting
non-discriminatory competition andinnovation, butalsoretaining safeguards designed toprotect
consumers, andtheenvironment.
Deregulation
Astheauthors oftheReport ontheUnited States havecorrectly observed, “theUnited States
isamong theworld 'smost open economies, which helps tokeepeconomic actors under constant
competitive pressure nottomisallocate resources. ”Thepaceofthedomestic deregulation initiated
inthe1970'shascontinued,reinforcingAmerica’sfree-marketorientationandentrepreneurialtraditions,
andcomplementing itsopentrade policy withregulatory changes thatenhance markets andpromote
competition.Anopeninternationaltradesystemallowsallnationstousetheirresourcesmostefficiently,
thusmaximizing realincomes andliving standards. Responsible deregulation spurs competition, and
improves economic efficiency, thereby expanding economic opportunity.
Regulatory reforms inthe1970'sand1980'sdemonstrated thatremoving regulatory elements
thatneedlessly distort markets andlimitcompetition yields more efficient performance inindustries
suchasairtransport, trucking, andlong-distance telephone service. Themomentum ofthisregulatory
reform hasrecently expanded tonewareas, suchastelecommunications, where theUnited States
experienced anexplosion oftechnology andnewservice venues, andfinancial services.
Overthepastthreeyears,theUnitedStateshasmodernizedandstrengthenedthecompetitiveness
ofitsfinancialsystem.Legislationandregulatoryreformhaveeliminatedbarrierstofinancialinnovation,
promoted opencompetition infinancial services, andreduced thecosts--while improving thequality
--ofdepository institution regulation.
Regulatory reform hasbeenachieved without compromising safety andsoundness, jeopardizing
thefederaldepositinsurancefunds,orimpairingprotectionsforconsumersandcommunities.Legislative
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barriers tocompetition have been removed, allowing forfullinterstate banking andbranching.
Previously, bothbankholding companies andindividual banks faced severe restrictions ontheirability
tooperate onaninterstate basis.
Agricultural reform
TheUnited States ’commitment tothemultilateral system andtoeconomic reform isevident
inthereforms introduced intheFederal Agricultural Improvement andReform Actof1996. Forthe
nextseven years, income support tofarmers willbecompletely delinked from commodity prices.
Adeclining levelofpayments willbemade based solely onhistorical program participation andthe
number offarmers whosignupforthenewcontracts. Planting decisions andcommodity prices will
bedetermined bymarket forces, notgovernment incentives. Thisdecision, along withexport subsidy
capsapproved byCongress, willleaveU.S.agricultural support expenditures wellbelow U.S.Uruguay
Round commitment levels.
Future Developments inUnited States Trade Policy
Asemphasized atthebeginning ofthisstatement, U.S.policy isbased strongly onthepremise
thattheremoval ofbarriers anddistortions toglobal tradeenhances higher wage jobcreation, incomes,
living standards andgrowth potential, intheUnited States aswellasintheeconomies ofourtrade
partners. Inefforts toreduce barriers andexpand trade, theU.S.interest isintheresulting promotion
ofeconomic opportunity andexpansion.
Given ourstrong sense ofitsbroad effects andobjectives, U.S.tradepolicy hasbeenconsistent
overmany decades initspursuit ofmore openglobal markets. Those efforts, however, havehadto
betailored tospecific conditions andchallenges which haveevolved overtime. Atthepresent time,
wewould emphasize twoover-riding factors.
First, rapidly changing technologies incommunications, transportation andother areas are
increasing theglobal potential forwelfare-enhancing tradeingoods andservices. Withthistremendous
expansion oftrade potential, however, hascome asubstantial increase inthecomplexity ofthetrade
policy issues withwhich theglobal trading community mustdeal. Thiscomplexity comes bothfrom
anexpanded scope fortradeandincreased potential fornon-traditional tradeandtrade-related measures
torestrict ordistort trade flows. TheUruguay Round represents amajor stepforward inmatching
global tradestructures anddisciplines tocurrent realities ofinternational trade. But,while recognizing
theimportance ofourefforts tomake theWTO aseffective aspossible, wemustalsorecognize that
much work which wasbegun andevenwelladvanced intheUruguay Round, remains tobedonein
theyears ahead.
Second, themovement overthelast10years ofmany lowandmiddle income countries around
theglobe tofreer markets athome andmore outward, lessrestrictive policies attheborder isof
fundamental importance intheshaping offuture tradeflows andissues. Some 85percent oftheworld ’s
population livesincountries withlowandmiddle percapita incomes. Withfreermarkets andgreater
outward orientation many ofthese countries areorwillsoonbeexperiencing highratesofgrowth in
output, incomes andtrade. Needless tosay,fromaU.S.perspective, thisisoneofthemostpositive
developments imaginable ontheglobal economic front--fortheneweconomic opportunities thatwill
begenerated forlarge segments oftheworld ’spopulation where suchopportunities havebeenscarce,
aswellasfortheexpansion ofwelfare-enhancing trade potential these developments create for
high-income countries liketheUnited States. Substantial efforts onthetrade policy front, however,
willberequired tohelpencourage andnurture suchtrends, toaddress remaining barriers, andhasten
adjustment inalloureconomies. Because ofourbelief intheimportance oftrade, oursense ofthe
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challenges ahead andourunderstanding ofthecentrality oftheWTO toeconomic progress, weare,
aswehavebeen, committed toefforts tomaintain andexpand themomentum ofthemultilateral system,
through theWTO andother international institutions. TheUnited States remains fullycommitted to
active participation inthemultilateral system andtowork withourtrading partners toensure full
implementation ofitsachievements.
END