PREFACE

The Industry Trade and Technology Review (ITTR) is a quarterly staff publication of the Office of

Industries, U.S. International Trade Commission. The opinions and conclusions contained in this report are

those of the authors and are not the views of the Commission as a whole or of any individual Commissioner.

The report is intended to provide analysis of important issues and insights into the global position of U.S.

industries, the technological competitiveness of the United States, and implications of trade and policy

developments.

The information and analysis in this series are for the purpose of this report only. Nothing in this

report should be construed to indicate how the Commission would find in an investigation conducted under

any statutory authority.

Inquiries or comments on items in this report may be made directly to the author, or to:

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Quarterly Review Staff

Larry Brookhart

Karl Tsuji

assisted by

Zema Tucker

Sharon Greenfield

Monica Reed

Contributing Authors

Christopher Johnson

Richard Brown

Robert Feinburg

Robert A. Rogowsky

Director of Operations

Acting Director of Industries
AUGUST 2003

Industry Trade and Technology Review Index of Articles

i

Listing of Published Articles

(March 1999 - August 2003)

March 1999

Korea’s foreign exchange crisis and its implications for U.S.-Korean trade

Advanced structural ceramics: Vast potential has yet to be realized

June 1999

Energy services: Recent trends and future prospects

Market trends affecting the U.S. environmental services sector

Health care services: Strong fundamentals and innovations foreshadow growth in U.S. exports

and foreign direct investment

October 1999

Outsourcing by the pharmaceutical industry provides opportunities for fine chemical producers

worldwide 

Thailand’s financial crisis and progress towards recovery—Implications for U.S. trade

December 1999

Air transport services: International regulation and future prospects for liberalization

Renewed services trade negotiations in the WTO

March 2000

Machine vision: Vital technology for manufacturing industries

Agriculture in the WTO: The Seattle Ministerial and beyond

July 2000

Express services: Issues for negotiation in the World Trade Organization

Production-sharing update: Developments in 1999

Apparel market: New U.S. legislation places CBERA countries on a more equal competitive

basis with Mexico

October 2000

WTO agricultural trade negotiations: An update

Steel sector explores E-Commerce although wary of quick transition

Mexico’s emergence as a global automotive production center drives trade and investment

January 2001

U.S. metal mining: Recent trends and uncertainty discourage domestic exploration and investment

Factors affecting the competitive position of the Indian software industry

Manufacturing strategies of the North American major household appliance industry

March 2001

Apparel: Andean countries seek parity with Caribbean Basin countries to remain competitive in

the U.S. market

Chemical trade by the Central European countries: Difficulties of sector transition

Commercialization of hybrid automobiles: Prospective demand for light metals
AUGUST 2003

Index of Articles Industry Trade and Technology Review

ii

Listing of Published Articles—Continued

July 2001

Trends in China’s steel consumption

Production-sharing update: Developments in 2000

October 2001

E-commerce and nonferrous metals: Despite potential, adoption has been slow

Foreign direct investment in infrastructure services in OECD countries

December 2001

Evidence of trade, income, and employment effects of NAFTA

U.S. primary aluminum: Power costs and market conditions could cause long-term restructuring

March 2002

Dyeing and finishing of apparel fabrics

WTO agricultural trade negotiations: A second update

Aluminum metal matrix composites gaining greater market acceptance 

July 2002

U.S. telecommunication services: Industry and trade outlook

Mexico versus China: Factors affecting export and investment competition

Production-sharing update: Developments in 2001

October 2002

International trade in commercial equipment leasing services

International telecommunication markets: Accounting rate reform

December 2002

Major contraction of the domestic refined copper industry

Power generation and transmission equipment in the Latin American market

April 2003

WTO agricultural trade negotiations: Third update recapping the Doha Ministerial

Catalysts: An innovative industry responds to technological and competitive challenges

August 2003

Global copyright protection and the challenge of digital piracy

The measurement and effects of nontariff barriers to trade in basic telecommunication services
AUGUST 2003

Industry Trade and Technology Review Contents

iii

CONTENTS

Page

Global copyright protection and the challenge

of digital piracy ................................................... 1

Importance of copyright industries to the U.S. economy ......................... 1

Magnitude and effect of copyright piracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

International IPR Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Early international IPR efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

TRIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Digital piracy and the WIPO Internet Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

The measurement and effects of nontariff barriers to

trade in basic telecommunication services . . . . . . . . . . . . . . . 11

The Group on Basic Telecommunication Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Schedules of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Additional GBT components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Literature review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Econometric results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Quantity impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Appendix A: Key performance indicators of selected

industries and regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

#
AUGUST 2003

Contents Industry Trade and Technology Review

iv

CONTENTS—Continued

Page

Appendix A: Key performance indicators of selected

industries and regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Steel:

Figure A-1 Operating income trends down for minmill and specialty producers

during first quarter 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2

Table A-1 Imports decrease and exports increase during first quarter 2003

compared to fourth quarter 2002, and also compared to first quarter

year ago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2

Table A-2 Steel service centers: Shipments increase and inventories decrease

during first quarter 2003 compared to fourth quarter 2002,

consistent with seasonal demand trends . . . . . . . . . . . . . . . . . . . . . . . . A-3

Figure A-2 Steel mill products, all grades: Capability utilization drops below

90 percent during fourth quarter 2002 but remains well above

capability utilization during fourth quarter 2001 . . . . . . . . . . . . . . . . . . A-3

Automobiles:

Table A-3 U.S. sales of new passenger vehicles (cars and light trucks), domestic

and imported, and share of U.S. market accounted for by sales

of total imports and Japanese imports, by specified periods,

January 2002-June 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4

Figure A-3 U.S. sales of new passenger vehicles (cars and light trucks) increased

in the second quarter 2003; sales of domestic passenger vehicles

as a percentage of total U.S. sales gain significantly compared

to first quarter 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4

Unwrought Aluminum:

Figure A-4 Despite a 24-percent increase in first quarter imports, largely

supplied by Russia during March 2003, prices reached their

highest quarterly average since the second quarter 2001 . . . . . . . . . . . . A-5

Table A-4 Reduced production and rising input costs in first quarter 2003,

moved aluminum prices upward to 5 cents over the 12-month

low of 62.6 cents per pound in August 2002 . . . . . . . . . . . . . . . . . . . . . A-5

Flat glass:

Figure A-5 Japanese monthly average imports show increase during first 

5 months of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6

Services:

Figure A-6 Balance on U.S. service trade accounts, by quarter, 2002 and 2003 . . . . . A-7

Figure A-7 Surpluses on cross-border U.S. services transactions with selected

trading partners, by quarter, 2001-2003 . . . . . . . . . . . . . . . . . . . . . . . . . A-7

North American trade:

North American trade highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8

Table A-5 North American trade, 1998-2002, January-March 2002, and

January-March 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
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AUGUST 2003

Industry Trade and Technology Review Global Copyright Protection and Digital Piracy

 1 The views expressed in this article are the author’s. They are not the views of the U.S. International Trade

Commission (USITC) as a whole or of any individual Commissioner.

 2 Stephen Siwek, Copyright Industries in the U.S. Economy: The 2002 Report (Washington, DC: Economists

Inc., 2002), p. 1. 

 3 Ibid.

 4 Motion Picture Association of America (MPAA), Trade Barriers to Exports of U.S. Filmed Entertainment,

2002 Report to the United States Trade Representative, Dec. 2001, p. iv.

1

Global Copyright Protection and the 

Challenge of Digital Piracy

Christopher Johnson1

cjohnson@usitc.gov

(202) 205-3488

Overseas infringement of intellectual property rights (IPR) has become a significant problem

for the international trade and investment of U.S. industries that depend on recognition of

copyrights, such as the publishing, software, and entertainment industries. The growing use

of digital technology by copyright industries has increased the ease and speed with which

infringers of IPR can illegally duplicate and transmit copyrighted products, thereby

accelerating digital copyright piracy. This article discusses (1) the importance of copyright

industries to the U.S. economy, (2) the costs incurred by these industries due to overseas

copyright infringement, (3) efforts to address copyright protections in international

agreements, and (4) the challenges of digital piracy. Although other means to address

international copyright infringement exist, such as technical measures by industry and trade

policy actions by government, this article is focused primarily on copyright protections in

international agreements. 

Importance of Copyright Industries to the U.S. Economy

Copyright industries are among the fastest growing in the world and are particularly important to the

U.S. economy because the performance of these industries is characterized by above-average growth in output

and employment and higher-than-average wages and salaries. According to a study completed in 2002, the

value of output accounted for by U.S. copyright-based industries, including those producing computer

software, printed materials, movies, home videos, compact discs (CDs), audiocassettes, and other media

products, rose during 1977-2001, at an average annual growth rate of 7 percent, compared with 3 percent for

the remainder of the U.S. economy.2

 In 2002, those industries accounted for $535.1 billion in value added,

or more than 5 percent of GDP. Meanwhile, domestic employment in copyright-based industries more than

doubled between 1977 and 2001, to 4.7 million workers, representing an average annual growth rate of 5

percent, or almost 3 times the rate of growth of the U.S. economy as a whole.

U.S. exports and other overseas sales by U.S. copyright businesses amounted to almost $89 billion

in 2001, an increase of more than 9 percent from the prior year.3

 In 2000, the seven members of the U.S.

motion picture industry alone earned over $12.5 billion in film, television, and home video revenues in over

154 foreign countries around the world.4
AUGUST 2003

Global Copyright Protection and Digital Piracy Industry Trade and Technology Review

 5 U.S. industry representatives, in-person and telephone interviews by USITC staff, June 2002-Apr. 2003.

 6 Cumulative losses in numerous other countries considered less problematic than the 56 selected countries,

including the United States and European Union countries, are not included in table 1. The IIPA, an alliance

representing the major U.S. copyright industries, estimates that total U.S. industry losses due to global copyright

piracy could amount to up to $20 billion annually. For further information on how these estimates were made, see

IIPA, 2003 Special 301 Report on Global Copyright Protection and Enforcement, Feb. 14, 2003, pp. 1-6 and

appendix A, located at http://www.iipa.com.

 7 Copyright piracy traditionally has covered a range of unauthorized uses that resulted in commercial advantage

to the infringer. This has included unauthorized reproduction of copyrighted published material, broadcasts, public

performances, motion pictures, and computer software. Such piracy was facilitated by the development of tape

recorders, audiocassettes, videocassettes, and other analog means that further enabled the illicit replication and

distribution of copyrighted products and services. More recently, digital technology has resulted in new products

and services, such as CDs, digital video discs (DVDs), and the Internet, that have not only made unauthorized

copying and distribution much easier and inexpensive, but anonymous as well. 

 8 For further information on the protection of computer software under U.S. copyright law, see Christopher

Johnson and Daniel J. Walworth, Protecting U.S. Intellectual Property Rights and the Challenges of Digital Piracy,

Office of Industries Working Paper, USITC publication No. ID-05, Mar. 2003, pp. 10-12, located at

http://www.usitc.gov.

 9 The Business Software Alliance (BSA), which represents the commercial computer software industry, states

that the U.S. piracy rate declined to 23 percent in 2002, representing the lowest rate of any country. Similar

statements were made to USITC staff by representatives of other copyright industries, including IIPA, MPAA, and

the Recording Industry Association of America (RIAA), in interviews during 2002 and 2003. BSA, Eighth Annual

BSA Global Software Piracy Study, June 2003 (Wash. D.C.: International Planning and Research Corp.), June 2003,

p. 4; and U.S. copyright industry representatives, in-person and telephone interviews by USITC staff, MaySept. 2002 and Apr.-June 2003. 

2

Magnitude and Effect of Copyright Piracy

Because of the importance of copyright industries to the strength of the U.S. economy, mounting

revenue losses due to IPR infringement are of concern to U.S. industry and government officials.5

 In its

recent report to the United States Trade Representative (USTR), the International Intellectual Property

Alliance (IIPA) estimated U.S. losses in 2002, due to copyright piracy in 56 selected foreign countries for

5 copyright-based industries, to be $9.2 billion (table 1).6

 Although U.S. copyright holders continue to be

subjected to IPR piracy7

 carried out in the United States, the enactment of more stringent U.S. copyright

legislation8

 and stiffer enforcement in recent years have reduced the rate of such piracy significantly vis-á-vis

the infringement of U.S. copyright industries in many overseas markets.9

Table 1

Estimated 2002 U.S. sales losses due to copyright piracy in 56

selected countries

(Million dollars) 

U.S. Industry Estimated losses

Motion pictures . . . . . . . . . . . . . . . . . . . . . . . . . 1,322.3

Sound recordings . . . . . . . . . . . . . . . . . . . . . . . 2,142.3

Business software applications . . . . . . . . . . . . . 3,539.0

Entertainment software . . . . . . . . . . . . . . . . . . . 1,690.1

Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,208.2

Source: IIPA, 2003 Special 301 Report on Global Copyright

Protection and Enforcement, Feb. 14, 2003. 
AUGUST 2003

Industry Trade and Technology Review Global Copyright Protection and Digital Piracy

 10 Also known as digital versatile discs.

 11 BSA, “Enhancing Trade Opportunities,” Trade Policy News, 2000-2002, p. 1, found at http://www.bsa.org,

retrieved June 19, 2003.

 12 BSA, “Software Theft--Stopping the Piracy of Intellectual Property,” Copyright Policy News, 2000-2002, p. 1,

found at http://www.bsa.org, retrieved June 19, 2003; and BSA, Piracy Study, June 2003, pp. 8 and 10, found at

http://www.bsa.org, retrieved Aug. 22, 2003.

 13 Ronald Grover and Heather Green, “Hollywood Heist,” Business Week, July 14, 2003, pp. 74-82; and U.S.

industry representatives, in-person and telephone interviews by USITC staff, May 2002-Apr. 2003.

 14 One business journal estimates that within several years, 50 percent of Internet users will have broadband,

“making it easier to pass programs captured in digital form around on the Net.” Grover and Green, “Hollywood

Heist,” pp. 74-82.

 15 See more detailed discussions of WIPO in following sections.

 16 See discussion of agreement later in this section.

 17 For further details on the WIPO Internet Treaties, see the box that follows a more detailed discussion of the

treaties later in this article. Additional information on the treaties may be found on WIPO’s Internet site located at

http://www.wipo.org.

3

Copyright piracy particularly affects business and entertainment software. The Business Software

Alliance (BSA) reports that losses due to Internet and other digital piracy (including the unauthorized

replication of optical discs such as CDs and digital video discs (DVDs))10 have been rising rapidly in recent

years and are believed to contribute to an increasing percentage of overall foreign piracy losses.11 BSA has

pointed out that more than one-third of the shipment value of all personal computer software (representing

about $35 billion) was pirated in 1999, and it estimates that by 2008, foreign software piracy will cost the

U.S. economy 175,000 jobs, $4.5 billion in wages, and nearly $1 billion in tax revenues annually.12 

Meanwhile, according to U.S. music industry representatives and analysts, unauthorized downloading

and file-sharing on the Internet were responsible for a significant portion of the more than $2 billion in global

music revenue losses incurred by the industry in 2002.13 Further, although the major portion of the motion

picture industry losses in that year were due to illegal copying of CDs, DVDs, and other digital forms, in a

process known as “ripping and burning,” the industry is concerned that as online broadband services rapidly

increase, as expected over the next several years, there could be a sharp increase in lost movie revenues due

to Internet piracy.14

International IPR Agreements

In recognition of the importance of copyright industries to the U.S. economy and concerns regarding

both domestic and overseas piracy, the United States has signed a number of international agreements related

to copyright protection (table 2), including international conventions and treaties that are now administered

under the auspices of the World Intellectual Property Organization (WIPO).15 In addition, in 1995 the United

States became a party to the World Trade Organization (WTO) Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPs),16 the first multilateral intellectual property agreement with a strong

dispute-resolution mechanism enforceable between governments. These agreements have enabled the United

States to make significant progress in addressing overseas copyright piracy, and have led to higher minimum

standards of protection in the United States and other nations. However, none of these agreements

specifically addressed digital piracy. As a result, the United States and a number of other countries signed

two newly created international agreements in 1996 (which entered into force in 2002), popularly known as

the WIPO Internet Treaties,17 which clarified that copyright is applicable in the digital environment. 
AUGUST 2003

Global Copyright Protection and Digital Piracy Industry Trade and Technology Review

 18 Keith E. Maskus, Intellectual Property Rights in the Global Economy (Washington, DC: Institute for

International Economics, Aug. 2000), p. 2.

 19 In 1967, a diplomatic conference among 51 mostly industrialized countries established WIPO to administer the

Berne and Rome Conventions, as well as a number of other international treaties related to areas of IPR such as

patents, trademarks, appellations of origin, etc. Some of these other treaties administered by WIPO include the Paris

Agreement on Industrial Property (1883), the Madrid Agreement (1890), the Lisbon Agreement (1958), and the

Treaty on Intellectual Property in Respect of Integrated Circuits (1989). WIPO jointed the United Nations System in

1974. For further information on WIPO, see WIPO’s Internet site located at http://www.wipo.int/about-wipo/en.

 20 Michael P. Ryan, Knowledge Diplomacy: Global Competition and the Politics of Intellectual Property

(Washington, DC: Brookings Institution, 1998), p. 131.

4

Table 2

Major international copyright conventions

Agreement (Year)

Number of

signatories Goals Administrator

Berne Convention 

(1886, revised in 1971) 111

Basic copyright treaty based on

principles of non-discrimination and

national treatment.

World Intellectual Property

Organization

Universal Copyright

Convention (1952) 57

Copyright treaty accommodating U.S.

statutory requirements and based on

principles of non-discrimination and

national treatment.

United Nations Educational,

Scientific, and Cultural

Organization

Rome Convention (1961) 47

Protection of neighboring rights

(performers, producers of phonograms,

broadcasting organizations).

World Intellectual Property

Organization

Geneva Convention (1971) 52

Protection of producers of phonograms

against the making of duplicates in

another country.

World Intellectual Property

Organization

Source: Bernard Hoekman and Michel Kostecki, The Political Economy of the World Trading System

(Oxford: Oxford University Press,1997); and other sources.

Early International IPR Efforts 

The increase in the flow of creative ideas among more advanced countries at the end of the late 19th

century spurred international cooperation with respect to copyright protection.18 Several European countries

established the first major agreement, the Berne Convention, to address intellectual property protection

internationally (see table 2). Other international copyright-related conventions that followed in the mid-20th

century included the Universal Copyright Convention, the Rome Convention, and the Geneva Convention.

The United States and most of its major trading partners are now signatories to each of the above conventions.

In 1967, WIPO was created to administer most of the international IPR-related treaties.19 The major

accomplishment of the WIPO-administered copyright conventions was the requirement that signatory

countries provide both national treatment and most-favored-nation status for foreign countries, enabling

creators an opportunity to apply for copyright and related protection in other member countries on the same

terms as other domestic and foreign creators.

Some believe that WIPO and the international copyright regimes it oversees, although valuable in

establishing international cooperation in the protection of copyrighted products, were developed with “loose

rules, weak dispute settlement mechanisms, and [little] ability to enforce the provisions of international

treaties.”20 For instance, despite the obligations placed on member countries by the Berne Convention and
AUGUST 2003

Industry Trade and Technology Review Global Copyright Protection and Digital Piracy

 21 Ibid., pp. 94-104.

 22 Ibid.

5

the other international copyright treaties, the lack of provisions requiring minimum standards of protection

hindered the ability of the WIPO system to enforce strong copyright protection.21 

Another reported weakness of the WIPO system was that not all countries were members of WIPO

or signatories to each of the individual agreements it oversees, particularly the rapidly emerging markets in

Asia that were increasingly being targeted for exports and investments by U.S. firms.22 More importantly,

it could not guarantee protection to copyrighted products or services at or near the same level as they received

in the United States. 

TRIPs

Intellectual property protection became an increasingly important international trade policy issue for

the United States in the 1970s and 1980s as copyright (and other IPR-dependent) industries and foreign trade

became more important components of the U.S. economy (figure 1). At the time, the most authoritative

international trade forum for the industrialized countries, the General Agreement on Tariffs and Trade

(GATT), had not yet adequately addressed protection of IPR in general, let alone copyright protection. Thus,

WIPO and the conventions it oversees were the primary international agreements available to the United

States to deal with inadequate copyright protection overseas. 
AUGUST 2003

Global Copyright Protection and Digital Piracy Industry Trade and Technology Review

 23 The Uruguay Round Trade Agreements entered into force on Jan. 1, 1995, creating the WTO. See the WTO

Internet site located at http://www.wto.org.

 24 Benedicte Callan, Pirates on the High Seas: The United States and Global Intellectual Property Rights (New

York: Council on Foreign Relations, 1998), p. 19; and USTR, 2003 Trade Policy Agenda and 2002 Annual Report,

p. 103.

 25 It should be noted, however, that the regional North American Free-Trade Agreement (NAFTA), among the

United States, Canada, and Mexico, which had preceded by a year the conclusion of the Uruguay Round Agreements

establishing the WTO, was the first trade agreement to establish mutual obligations on its members to provide

minimum standards of IPR protection and enforcement, including civil and criminal penalties in certain instances. 

Generally, the NAFTA provisions are very similar to the TRIPs provisions, and in some instances exceed the TRIPs

requirements. 

 26 U.S. industry representatives, telephone and written communications with USITC staff, Jan. 2003.

 27 Copyright obligations are based on the Berne Convention for the Protection of Literary and Artistic Works

(1971) and the Rome Convention (1961). Computer programs, databases, sound recordings, movies, and

performances are protected for 50 years. Broadcasts receive 20 years of protection. Rental rights (the rights to

authorize or prohibit commercial renting) are provided for performers, producers, and broadcasting companies. 

6

The United States and other large trading partners, including the European Union and Japan, sought

to have copyright and other IPR issues addressed during the GATT Uruguay Round of trade negotiations.

An agreement was negotiated, to be administered by the newly established WTO,23 namely the TRIPs

agreement. TRIPs covers copyrights (and related rights of performers; broadcasters; and producers of

records, compact discs, and videos), as well as trademarks, patents, layout-designs of integrated circuits,

geographic indications, industrial designs, and trade secrets. 

The major achievement of TRIPs for copyright industries is that it sets relatively high minimum

standards for the enforcement of copyrights for all WTO members “through civil actions for infringement

and, at least in regard to copyright piracy, . . . in criminal actions and actions at the border.”24 In addition,

TRIPs is the first multilateral intellectual property agreement with a robust dispute resolution mechanism that

is enforceable between governments.25 According to U.S. industry representatives, the accomplishments of

TRIPS cannot be understated since most of the 144 WTO members, including a number of developing

countries, are currently obligated by the agreement with respect to copyrights.26

Although TRIPs overcame many of the limitations of the previous international intellectual property

agreements, it is built around the main international conventions administered by WIPO. For instance, with

respect to copyrights, WTO members are required to comply with the provisions of the Berne Convention

for copyright protection.27 Further, as in U.S. law, computer software is to be protected as a literary work

under the Berne Convention and the conditions under which databases are to be protected by copyright are

clearly specified. 

The WTO has several standards to objectively assess the TRIPs enforcement obligations for

copyrighted products. Among these are standards that require members to provide “adequate” procedures,

“effective” remedies that “constitute a deterrent to further infringements,” and procedures that are not

“unreasonably costly” or that cause “unreasonable delays.” Specific remedies that must be available include

the authority of courts to stop infringing imports (injunctive relief), damages “adequate to compensate for

the injury the right holder has suffered,” and preventive remedies, including possible seizure, forfeiture, and

destruction of infringing goods, when such infringement is done with criminal intent. Most importantly,

criminal remedies must be available for copyright piracy occurring on a commercial scale. 
AUGUST 2003

Industry Trade and Technology Review Global Copyright Protection and Digital Piracy

 28 There are other possible forms of digital piracy in addition to those discussed here. However, they are less

common and therefore do not receive full attention in this article. For more in-depth discussions concerning digital

piracy, see National Academy of Sciences (NAS), The Digital Dilemma, Intellectual Property in the Information

Age (Washington, DC: National Academy Press, 2000); and Internet sites of IIPA, BSA, MPAA, and RIAA, located 

at http://www.iipa.org, http://www.bsa.org, http://www.mpaa.org, and http://www.riaa.org, respectively. 

 29 This concept is discussed in more detail in NAS, The Digital Dilemma, 2000.

 30 The DMCA provides new standards for the protection of copyrights in the digital realm. Among other

provisions, the DMCA makes it illegal to circumvent antipiracy measures built into works, including most

commercial software, music, and other content on CDs and DVDs. It outlaws the act of circumvention of controls

used to prevent unauthorized access to works, and the act as well as the production, sale, or distribution of codebreaking devices used to illegally copy or make other copyright use of protected works. Under the DMCA, service

providers are expected to remove material from users’ web sites that they know, are made aware, or should know

constitute copyright infringement. Further, the legislation requires that “webcasters” pay licensing fees to record

companies. For violators, the DMCA provides for civil, administrative, and criminal remedies. Chris Gibson, WIPO

Internet Copyright Treaties Coming Into Force (London: Steptoe & Johnson, 2002), pp. 1-4; Library of Congress,

“Rulemaking on Exemptions from the Prohibition on Circumvention of Technological Measures that Control Access

to Copyrighted Works,”Apr. 30, 2002, pp. 1-3, found at http://www.loc.gov, retrieved Apr. 22, 2003; and UCLA

Online Institute for Cyberspace Law and Policy, “The Digital Millennium Copyright Act,” Feb. 8, 2001, pp. 1-2,

found at http://www.gseis.ucla.edu, retrieved July 27, 2002. 

7

Digital Piracy and the WIPO Internet Treaties

TRIPs was finalized prior to consideration of digital piracy, the area currently of greatest concern to

the copyright industries. Digital piracy takes two primary forms.28 The first is the replication and distribution

of illegal copies of tangible media, most frequently of the optical disc variety (CDs and DVDs). Also

included in this category is the unauthorized use of the content on discs across multiple users. This problem

occurs around the world (including in the United States) with varying degrees of severity. The second form

of digital piracy is the transmission of copyright-protected data over the Internet, as information can just as

easily be sent across the world as it can be sent across the country. In both cases, digital piracy is an

international problem.

The digital world facilitates generation of perfect copies quickly and efficiently, at negligible cost.

Companies naturally have taken advantage of these characteristics to distribute their content easily (at low

cost) and in a format that consumers value. Yet, the very qualities that make the digital format so attractive

to the copyright industry also have the potential for illicit use. Thus, almost anyone with the incentive to do

so can become an illegal distributor.29

In response to growing concerns over digital piracy, the United States and a number of other countries

signed the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT)

in 1996, often referred to as the “Internet Treaties” (box 1). Both treaties require member countries to provide

a basic framework of rights, allowing creators to control and be compensated for the many ways in which

their creative content can be used by others in digital networks. The United States implemented the WIPO

treaties by adopting the Digital Millennium Copyright Act of 1998 (DMCA).30
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Global Copyright Protection and Digital Piracy Industry Trade and Technology Review

 31 U.S. industry representatives, in-person and telephone interviews by USITC staff, June 2002-Apr. 2003.

 32 IIPA, “Copyright Industries Release Report on Piracy in 63 Countries and Continue to Press their Global

Trade Priorities for 2003,” IIPA Press Release, Feb. 13, 2003, p. 4, found at http://www.iipa.org, retrieved

June 17, 2003.

 33 This article primarily focuses on the impact of overseas copyright infringement on U.S. trade, international

trade agreements, and U.S. trade strategies to address overseas piracy. For more detailed information on problems of

domestic piracy and protection of copyright under U.S. copyright law, see the footnote above on the Digital

Millennium Copyright Act; and Johnson and Walworth, Protecting U.S. Intellectual Property Rights and the

Challenges of Digital Piracy, pp. 10-12.

8

Box 1

The WIPO Internet Treaties

The WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT)

are often referred to as the “Internet Treaties” because they provide new international standards for the

protection of copyrights and related rights in the digital age. The two treaties entered into force on March 6 and

May 20, 2002, respectively, once the required minimum 30 countries had ratified each. 

‚ Both treaties make clear that the traditional intellectual property right of reproduction (copying)

continues to apply in the digital environment, including the storage of material in digital form in

an electronic medium.

‚ The treaties establish the right holders’ right to control the digital transmission of their works.

‚ The treaties ensure that right holders can use technology to protect their rights online. The treaties’

“anti-circumvention” provisions address security and piracy risks, such as those posed by

“hacking,” by requiring member countries to provide adequate legal protection and remedies

against the circumvention of technical measures, such as encryption. 

‚ A new “rights management” provision in the treaties requires member countries to prohibit the

deliberate alteration or deletion of electronic rights management information. This is the

information that can be embedded into the digital code of a creative work and used to identify the

work, its author, performer or owner, the terms and conditions for its use, and any other relevant

attributes. 

Source: Chris Gibson, WIPO Internet Copyright Treaties Coming Into Force (London: Steptoe & Johnson,

2002); and United States Trade Representative official, Washington International Trade Association, National

Foreign Trade Council, and Global Business Dialogue Program: “TRIPS Implementation: Intellectual Property

and the WTO,” Washington, DC, July 17, 2002.

Outlook

According to U.S. industry representatives, the growth of digital technology (optical discs and the

Internet) has brought new opportunities and challenges for the copyright industries, whose products will

increasingly be globally traded using these new forms of media and distribution.31 However, they state that

unless the Internet is safeguarded from the proliferation of IPR piracy, “the medium will never reach its full

potential to contribute to global economic growth and culture.”32 

Thus far, only 30 countries, or less than one-fourth of the members of the WTO, have signed the

WIPO Internet Treaties, and many of those have not yet converted the treaty provisions into law by passing

implementing domestic legislation, as the United States has done.33 U.S. industry representatives state that

if countries delay the implementation of these changes, the adverse impact on the protection of copyrighted
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Industry Trade and Technology Review Global Copyright Protection and Digital Piracy

 34 U.S. industry representatives, in-person and telephone interviews by USITC staff, June-Aug. 2002 and

Apr.-July 2003.

 35 USTR, “Internet Piracy and the WIPO Copyright Treaties,” 2003 Trade Policy Agenda and 2002 Annual

Report, Mar. 2003, pp. 239-240.

 36 Under provisions of Special 301, USTR issues an annual report to identify countries that deny adequate and

effective protection of IPR, or deny fair and equitable market access to U.S. persons or firms that rely on intellectual

property protection. Countries with laws, policies, or practices that have the greatest adverse effects on relevant U.S.

producers or products must be designated as priority foreign countries unless USTR finds that the countries are

entering into good faith negotiations or are making significant progress in bilateral or multilateral negotiations to

provide adequate and effective IPR protection. Priority foreign countries are subject to investigation and, if

necessary, trade sanctions or other actions by USTR under Section 301 provisions. For more information on

unilateral actions taken by the United States to address overseas piracy, see the discussions on Section 301 and

Special 301 in USTR, 2003 Trade Policy Agenda and 2002 Annual Report, Mar. 2003, pp. 233-239; and Johnson

and Walworth, Protecting U.S. Intellectual Property Rights and the Challenges of Digital Piracy, pp. 16-20.

 37 USTR, “Free Trade with Singapore,” Trade Facts, Dec. 16, 2002, pp. 1 and 5-7; and USTR, “Free Trade with

Chile,” Dec. 11, 2003, pp. 5-6, found at http://www.ustr.gov. 

 38 Industry Functional Advisory Group on Intellectual Property Rights for Trade Policy Matters, The U.S.-

Singapore Free Trade Agreement: The Intellectual Property Provisions, Feb. 28, 2003, found at

http://www.ustr.gov, retrieved Mar. 13, 2003.

9

material on the Internet could be irreversible and, in turn, slow the growth of electronic commerce.34

Consequently, the domestic copyright industry has called on the U.S. Government to assist it in securing full

implementation of the new WIPO Internet Treaties by all countries. 

In response, the USTR has made ratification and implementation of the WCT and WPPT a key

element of its unilateral, bilateral, and multilateral trade strategies with respect to IPR.35 For instance, during

the past several years, the United States has used its Special 30136 unilateral process for addressing inadequate

IPR protection by foreign trading partners to persuade countries that have not yet signed the WIPO Internet

Treaties to do so; and those who have done so, to expeditiously implement the provisions in their domestic

laws and regulations. The U.S. copyright industry has also taken advantage of recent bilateral free trade

agreements (FTAs) signed by the United States with Singapore and Chile to incorporate key elements of the

WIPO Internet Treaties in the IPR chapters of the agreements.37 The principal U.S. trade advisory committee

representing IPR interests strongly supports the IPR provisions of these FTAs, including their references to

the WIPO treaties, on the grounds that they establish precedents to be included in future FTAs, “which can

raise the level of protection and enforcement globally.”38#

AUGUST 2003

Industry Trade and Technology Review Measuring Effects of NTBs in Voice Telephone Services

 

1

 The views expressed in this article are the authors’. They are not the views of the USITC as a whole or any

individual Commissioner.

 

2

 Voice telephone services have been selected because nontariff barriers tend to be heaviest in this subsector,

likely because these services are readily identified as a public good by business and residential users and because

they are a major source of telecommunications revenue.

11

The Measurement and Effects of Nontariff

Barriers to Trade in Basic

Telecommunication Services

Richard Brown1 Robert Feinburg1

rbrown@usitc.gov rfeinburg@usitc.gov

(202) 205-3438 (202) 205-2602

Using econometric methods, this analysis develops quantity impacts of impediments to

trade in voice telephone services.2 Quantity impacts are estimates of the difference

between trade volumes in the presence of nontariff barriers (NTBs) and trade volumes

in the absence of such barriers. These impacts, estimated on the basis of market,

demographic, and policy variables, establish a baseline from which the achievements

of future trade rounds, including the Doha Round, could be compared. In a departure

from previous literature in this area, this article draws on documents appended or

pertaining to the General Agreement on Trade in Services (GATS) to identify NTBs to

trade in basic telecommunication services, and to estimate quantity impacts on this

basis. Although previous literature has avoided the use of GATS schedules to develop

policy variables for reasons that are discussed in the article, it is the GATS schedules

and associated documents that will, in the end, reveal the extent of liberalization

achieved by negotiation. 

The article finds that market access and national treatment commitments scheduled by

the World Trade Organization (WTO) members under the GATS, when complemented

by commitments to pro-competitive regulatory principles and strict adherence to

scheduling guidelines, may be formulated into meaningful policy variables. The model

specification described in the article explains 84 to 85 percent of variation in market

penetration, measured in mainlines per hundred persons. Further, policy variables

derived from GATS commitments are found to be statistically significant, as are

variables for income and private sector ownership. 

The measurement of nontariff barriers to trade in services, and the gains associated with removing

such barriers, has been of keen interest for the past several years. This is due in part to the ongoing Doha

Round negotiations in the WTO, where services liberalization is part of the built-in agenda, and in part to

growing recognition of the prominence of the service sector in overall economic activity. The following facts

justify such interest:

• The service sector typically accounts for between 60 percent and 80 percent of gross domestic

product (GDP) in developed and developing countries alike, and represents approximately the

same share of private sector employment. 
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Measuring Effects of NTBs in Voice Telephone Services Industry Trade and Technology Review

 

3

 Organization for Economic Cooperation and Development (OECD), OECD Statistics on International Trade in

Services: Partner Country Data and Summary Analysis, 1999-2000, July 2002, p. 8.

 

4

 WTO, A Review of Statistics on Trade Flows in Services: Note by the Secretariat, Addendum, S/C/W/2/Add. 1,

Oct. 27, 2000, p. 3.

 

5

 WTO, “International Trade Statistics,” various years, found at

http://www.wto.org/english/res_e/statis_e/statis_e.htm, retrieved Oct. 28, 2002.

 

6

 As of May 2003, the United States is the only country that tracks and publishes data on services sold through

affiliates. Julian Arkell, STATS ON FATS: Statistics on Foreign Affiliate Trade in Services - The New International

Statistical Standard (Chevy Chase, MD: Mark Twain Institute, 2002), p. 17.

 

7

 U.S. Department of Commerce (USDOC), Bureau of Economic Analysis (BEA), “U.S. International Services:

Cross-Border Trade in 2001 and Sales through Affiliates in 2000,” Survey of Current Business, Oct. 2001, p. 67.

 

8

 GBT was formed in Apr. 1996 to continue negotiations after the agreement reached by its predecessor, The

Negotiating Group on Basic Telecommunications (NGBT), was deemed insufficient by the United States.

 

9

 WTO, Fourth Protocol to the General Agreement on Trade in Services, S/L/20, Apr. 30, 1996.

 

10 It is important to take the initial schedules into account because important horizontal (i.e., cross-sectoral)

limitations on foreign investment and temporary entry and stay (of services personnel) are found there. Horizontal

commitments must be read together with sector-specific commitments to identify potential business opportunities

and pertinent restrictions.

12

• Infrastructure services industries, including telecommunications, finance, energy, and

transportation, exert an economy-wide influence as they constitute inputs to all other economic

activities and facilitate trade. The efficiency with which these services are provided influences

the global competitive posture of all firms availed of their services.

• Global service exports measured $1.5 trillion in 2001,3representing 19 percent of global crossborder trade flows.4

• During 1980-2001, cross-border exports of commercial services increased at an average annual

rate of 7.2 percent, while exports of merchandise increased by 5.7 percent.5

• Sales of services through overseas affiliates have exceeded cross-border exports by a widening

margin since 1996.6 In 2000, foreign affiliates of U.S. parent firms sold services valued at $393

billion, 40 percent greater than cross-border exports of $278 billion.7

This article estimates the impact of nontariff barriers to international trade in voice telephone services.

In a departure from previous work in the area, the article presents policy variables derived from commitments

to market access, national treatment, and pro-competitive regulatory principles appended to the General

Agreement on Trade in Services (GATS), rather than formulating policy variables based on alternative

information sources. GATS commitments have been chosen in the interest of establishing a measure of trade

liberalization achieved through negotiation.

The Group on Basic Telecommunications (GBT) 

Agreement8

Schedules of Commitments

Supplemental schedules of specific commitments for basic telecommunication services were

appended to the GATS on February 8, 1998, with the adoption of the Fourth Protocol to the GATS.9 The

supplemental schedules, along with initial GATS schedules that entered into force on January 1, 1995, contain

much of the detail of the GBT Agreement.10
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Industry Trade and Technology Review Measuring Effects of NTBs in Voice Telephone Services

 

11 National treatment usually accords to foreign firms the same rights and obligations accorded to domestic firms.

 

12 A commitment to market access or national treatment is also referred to as a binding.

 

13 WTO, Note by the Chairman - Revision, S/GBT/W/2/Rev. 1, Jan. 16, 1997.

 

14 WTO, Telecommunication Services: Reference Paper, found at 

http://www.wto.org/en...top_e/serv_e/telecom_e/te123_e.htm, retrieved Feb. 27, 2003.

13

In the supplemental telecommunication schedules, one finds market access, national treatment,11 and

additional commitments pertaining to seven basic telecommunication service sectors: voice telephone

services, packet-switched data transmission services, circuit-switched data transmission services, telex

services, telegraph services, facsimile services, and private leased circuit services. Member countries

schedule commitments by sector and mode of supply (i.e., cross-border supply, consumption abroad,

commercial presence, and movement of natural persons). Due to the positive listing methodology employed

in the GATS, member countries can schedule commitments to all, none, or a combination of basic

telecommunication sectors. Commitments are of two types. Full commitments (also called bindings) indicate

that there are no limitations on foreign participation in terms of market entry or regulatory treatment. Partial

commitments indicate that limitations exist, and briefly summarize the nature of the limitation.

Others who have endeavored to measure NTBs in services have tended to formulate policy variables

by drawing on information sources other than the GATS schedules. One explanation for this is the difference

in research objectives. Other research has tended to focus on trade liberalization, however it is achieved.

This article focuses on liberalization achieved through negotiations. In service negotiations, liberalization is

achieved when countries agree to bind12 newly liberalized practices or trade liberalizing practices planned for

the future. 

A second reason why other researchers have not formulated policy variables by drawing on GATS

schedules is that these schedules have information gaps that hinder efforts to measure the effect of NTBs.

One important gap is that GATS commitments do not address some issues that strongly influence the

competitive environment, thereby calling into question whether commitments guarantee effective market

access. The following section indicates the manner in which the GBT Agreement fills these gaps. Another

difficulty with the GATS is that, where no commitment has been scheduled, it remains unclear whether or

not a trade impediment exists. Unbound limitations are identified by the absence of an entry for the sector

of interest (voice telecommunication services in this instance) or by the word “unbound.” No information on

regulatory policy, whether liberal or not, is provided in the schedules. The GBT Agreement does not address

this shortcoming.

Additional GBT Components

Telecommunication schedules are complemented by two additional documents that fill information

gaps typically found in schedules: a note circulated by the GBT Chairman,13and the regulatory reference

paper.14 In combination, these documents assist firms in identifying regulations or practices that may enhance

the value of market access and national treatment commitments. The note issued by the GBT Chairman on

January 16, 1997, provides useful guidance on scheduling and interpreting basic telecommunication

commitments, though it lacks legal status. The note stipulates that market access and national treatment

commitments on basic telecommunication services, unless otherwise stated in the schedules, encompass local,

long-distance, and international services; for public and non-public use; on a facilities and resale basis; through

any means of technology (e.g., cable, cellular, and satellite). With these stipulations, the note ensures that

commitments are scheduled in a manner that accurately reflects regulatory rules and practices, among which

there is broad diversity across countries. For instance, the U.S. telecommunications regime draws important
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Measuring Effects of NTBs in Voice Telephone Services Industry Trade and Technology Review

 

15 Bindings to the principles set forth in the reference paper could take effect upon the GBT Agreement’s entry

into force, or at a later date specified by the member country.

14

distinctions between local and long-distance service providers, assigning different rights and obligations to

each, whereas in Japan, key distinctions are drawn between facilities-based service providers and resellers.

By virtue of the note, basic telecommunication service commitments were rendered more transparent and

practical in terms of identifying business opportunities.

The reference paper is considered by many observers as one of the major achievements of the GBT

Agreement, and perhaps of the entire Uruguay Round of services negotiations. The reference paper was

intended to safeguard the value of market access commitments by seeking to render specific regulatory

practices competitively neutral. In this sense, the reference paper effectively addresses the intent of Article

VI(4) of the GATS framework, which pertains to domestic regulation. Article VI(4) requires that technical

standards and licensing requirements not constitute unnecessary barriers to trade in services and that

pertaining disciplines are (1) based on objective and transparent criteria, such as competence and the ability

to supply the service; (2) not more burdensome than necessary to ensure the quality of the service; and (3)

in the case of licensing procedures, not in themselves a restriction on the supply of the service. The reference

paper embodies these broad principles, but makes them specific to basic telecommunication services.

Countries could bind to all or part of the reference paper.15 In binding to the entire reference paper, countries

committed to: 

• prevent anti-competitive practices, including cross-subsidization among other practices;

• provide interconnection on a timely basis, and upon request, under nondiscriminatory terms,

conditions, and quality, with cost-oriented rates that are transparent, reasonable, and sufficiently

unbundled (so that competing suppliers need not pay for services or facilities they do not require);

• assure that universal service obligations are administered in a transparent, nondiscriminatory, and

competitively neutral manner;

• assure public availability of licensing criteria, with timely notification of the terms and conditions

of licensing and reasons for the denial of licenses upon request;

• maintain or create independent and impartial regulators not accountable to any supplier of basic

telecommunication services; and

• allocate scarce resources, including frequencies, numbers, and rights of way, in an objective,

timely, transparent, and nondiscriminatory manner.

Literature Review

Efforts to measure NTBs on services are relatively new, with most work dated after completion of

the Uruguay Round. Marko (1998), among the first to approach the GBT Agreement in a quantitative

fashion, computes frequency measures for 69 GBT signatories based on GATS market access and national

treatment commitments for all four modes of supply. Marko uses twomethods to compute the measures, first

by considering only full commitments, and second by constructing a five-point weighting system to assess

partial commitments scheduled by member countries. Marko estimates that 45 percent of the basic
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Industry Trade and Technology Review Measuring Effects of NTBs in Voice Telephone Services

 

16 Mary Marko, An Evaluation of the Basic Telecommunications Services Agreement, CIES Policy Discussion

Paper 98/09, Dec. 1998.

 

17 A mainline is a telephone line connecting a subscriber’s terminal equipment to the public switched network and

which has a dedicated port in the telephone exchange equipment. 

 

18 Tony Warren, “The Impact on Output of Impediments to Trade and Investment in Telecommunication Services, 

ch. in Impediments to Trade in Services: Measurement and Policy Implications, eds. Christopher Findlay and Tony

Warren (London: Routledge Foundation, 2000), pp. 85-100.

 

19 Market penetration data for the year 2000 were used to allow time for commitments that became binding in 1998

to exert influence over telecommunication service markets.

 

20 One issue that is not formally addressed is the relationship between fixed and mobile telecommunications

usage. While the focus here is on fixed mainline penetration, some preliminary work suggests that similar results

may hold for mobile phone penetration.

15

telecommunication services markets represented by GBT signatories is open to free trade, reflecting how

much remains to be done despite the GBT Agreement.16

Warren (2000) takes the quantitative approach further, performing regression analysis on market

(income per capita, service quality, and unmet demand), demographic (housing density), and policy variables

of his own construction in an attempt to explain market penetration, measured as mainlines17 per 100 persons,

in 136 countries. Warren constructs four policy variables associated with market access (MA) and national

treatment (NT) mostly from data provided by the International Telecommunication Union. The variable

MA/Trade captures policies that impede market access of all potential entrants (domestic and foreign)

by restricting provision of cross-border telecommunication services; MA/Invest, policies that discriminate

against all potential entrants (domestic and foreign) seeking to supply services through partially or wholly

owned foreign affiliates; NT/Trade, policies that impede market access of potential foreign entrants by

restricting provision of cross-border services; and NT/Invest, policies that discriminate against potential

f oreign entrants seeking to supply services through foreign-invested affiliates. In regressions performed by

Warren, he reports that the latter 3 policy variables appear to be statistically significant, along with income

per capita, unmet demand, and service quality, and that these variables jointly explain 88 to 89 percent of

variation in market penetration.18

Methodology

This analysis uses ordinary least squares (OLS) to estimate the relationship between market

penetration in the year 2000,19 measured by mainlines per hundred persons,20 and selected market,

demographic, and policy variables in 67 countries. Although market penetration does not measure the quantity

of basic telecommunication services consumed, it does measure the capacity over which consumption,

including inbound and outbound international calls, could take place. Further, low market penetration tends

to be associated with state-owned and -operated telecommunication monopolies. In fact, it is low market

penetration that has motivated many countries to open their markets to foreign investment in the expectation,

or under the requirement, that better capitalized carriers would increase market penetration rates. National

calling minutes or international calling minutes may be superior variables for measuring quantity, but data are

not available for many of the 67 countries of interest here. 

In explaining market penetration, we estimate a reduced-form of supply and demand factors. On the

demand side, we anticipate that telephone service is a normal good, so that income should have a positive

impact on market penetration. On the supply side, increased population density may be a proxy for reduced

cost per household of establishing telecommunication networks (so we would expect a positive impact on

market penetration). Also supply-related, the role of the private sector in the telecommunications industry

would be expected to be cost-reducing, leading to a positive impact on penetration although, as noted below,
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Measuring Effects of NTBs in Voice Telephone Services Industry Trade and Technology Review

 

21 The natural log of Y was selected because a scatter diagram of the data suggested that mainlines per hundred

increased at a decreasing rate as income increased.

 

22 The scope of basic telecommunication services bound by countries enters into the equation because it is more

economical to provide telecommunication services in a market if a variety of services can be provided over new or

acquired network capacity. Like the GBT Chairman’s note and the reference paper, the scope of commitments affects

the value of market access commitments.

 

23 If all 4 elements of the GBT Chairman’s note were satisfied for all commitments, the country received a score of

1; if 3, then a score of 0.75; if 2, then a score of 0.5; if 1, then a score of 0.25; and if none, then a score of 0.

 

24 OECD, Working Party of the Trade Committee, “Assessing Barriers to Trade in Services: Revised Consolidated

List of Cross-Sectoral Barriers,” TD/TC/WP(99)58/FINAL, Feb. 28, 2001.

 

25 The absence of a commitment does not necessarily indicate the presence of a NTB, but the absence does

reduce the legal certainty and transparency ideally provided by schedules, and permits the implementation of higher

barriers without penalty.

16

the link may be more complicated than this, especially in developing economies. Similarly, market reform -

defined as the passage of telecommunication reform legislation and establishment of an independent regulator

- should increase market penetration. Finally, the policy measures which are the focus of this article are

intended to increase penetration, though it is an empirical question as to their impact.

We define the independent variables as follows:

• LOG(Y), the natural log of GDP per capita in 1998, resulting in a semi-log specification;21

• PS, the share of the incumbent telecommunications carrier held by the private sec tor in each

country as of 1998;

• PSOECD, the share of the incumbent telecommunic ations carrier held by the private sector in

OECD countries in 1998 (set to zero for non-OECD firms);

• PD, for population density in 1998;

• REFORM, a dummy variable that equals 1 if a country had undertaken telecommunication

market reform by 1998, and 0 otherwise; and 

• policy variables GATSPOLICY, MAPOLICY, and NTPOLICY, explained below.

The three policy variables are highly correlated and therefore their effects are examined via three

separate specifications. GATSPOLICY is a composite policy variable that reflects a scoring of market

access and national treatment commitments (taking values from 0 to 1); the scope of commitments, referring

to the share of basic telecommunication sub-sectors bound (taking values from 0 to 1);22 reference paper

bindings, referring to the share of reference paper principles bound (taking values from 0 to 1); and the depth

of commitments, referring to the extent to which all commitments scheduled applied to local, long-distance,

and international services over public and non-public works; wireline, cellular, and satellite networks; and

resale and facilities-based networks 23 (taking values from 0 to 1). Market access and national treatment

commitments are scored by the degree to which they promote or impede trade, as suggested by an OECD

document published in 2001.24 For each of the four modes of supply, this document usefully separates the

types of NTBs commonly found in schedules into three categories: those having little or no restrictive effect,

accorded a score of 0.75; restrictive effect, accorded a score of 0.5; and prohibitive or highly restrictive

effect, accorded a score of 0.25. To extend this scoring system, entries in the schedules that are unbound

(signifying no binding) are accorded a score of 0.0,25and full commitments (signifying the absence of

limitations) are accorded a score of 1.0. 
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Industry Trade and Technology Review Measuring Effects of NTBs in Voice Telephone Services

 

26 It has been noted that multiplication of the scores is relatively rigid in that a score of zero for any one of the

elements comprising the policy variable, namely those reflecting the extent of adherence to the GBT Chairman’s note

and the reference paper, results in an overall policy score of zero. In recognition of this, regressions were performed

using policy variables that were formulated by adding scores for commitments, scope, the extent of adherence to the

GBT Chairman’s note, and the extent of adherence to the reference paper. Little or no change in goodness-of-fit

(adjusted R-squared) or statistical significance resulted.

17

Proceeding through signatories’ schedules of commitments, scores are assigned to market access

and national treatment commitments on voice telephone services for each of the four modes of supply,

resulting in 8 scores ranging from 0 to 1. These scores are summed, and then multiplied26 by the product of

the scores for scope, reference paper principles, and depth, resulting in a final score that ranges from 0 to 8

for the variable GATSPOLICY. Mathematically, GATSPOLICY is equal to:

[CBMA+CBNT+CAMA+CANT+CPMA+CBNT+MPMA+MPNT]*Scope*Depth*Reference Paper, where:

CBMA = score for commitment on cross-border market access (taking values of 0 to 1);

CBNT = score for commitment on cross-border national treatment (0 to 1);

CAMA = score for commitment on consumption abroad market access (0 to1);

CANT = score for commitment on consumption abroad national treatment (0 to 1);

CPMA = score for commitment on commercial presence market access (0 to1);

CPNT = score for commitment on commercial presence national treatment (0 to 1);

MPMA = score for commitment on movement of persons market access (0 to 1);

MPNT = score for commitment on movement of persons national treatment (0 to 1);

Scope = score for scope of basic telecommunication services bound in schedule (0 to 1);

Depth = score for extent of adherence to Chairman’s note (0 to 1); and

Reference Paper = score for extent of adherence to the reference paper (0 to 1).

The variables MAPOLICY, which reflects only market access commitments for the four modes of

supply, and NTPOLICY, which reflects only the national treatment commitments, are calculated in the same

manner. For these variables, final scores range from 0 to 4.

Econometric Results

Specific ations 1 through 4 (table 1) appear to explain 84 to 85 percent of variation in market

penetration, and GDP per capita (Y), private ownership (PS and PSOECD), GATSPOLICY, and

MAPOLICY have statistically significant coefficients. Among these specifications, the second yields the

strongest result among the policy variables. In this specification, GDP per capita, which explains most of the

variation in network penetration, is statistically significant at the 1-percent level, and indicates that if GDP per

capita increased by 1 percent, then market penetration would increase by 0.11 mainlines per hundred.

Estimated coefficients for private ownership of incumbent telecommunication carriers suggest that such

holdings affect lesser developed countries and developed countries differently. Looking across all

67 countries in the sample, the coefficient of PS, which is statistically significant at the 1-percent level,

indicates that an increase in private sector ownership of 1 percentage point would reduce market penetration

by 0.12 mainlines per hundred. Perhaps the best explanation of this is that, once private investors begin to

exercise some operational control, they are apt to require that additions to basic telecommunication

infrastructure generate returns that justify construction expenditures. This could reduce mainlines per

hundred, at least initially. Alternative explanations are that private participation in many developed and

developing countries’ basic telecommunication markets has only recently been permitted, and so the benefits

of private participation have not yet taken hold, or that the coefficient is simply picking up lower pre-existing

penetration rates that are sometimes associated with past government-owned and -operated incumbents.
AUGUST 2003

Measuring Effects of NTBs in Voice Telephone Services Industry Trade and Technology Review

18

Table 1

Econometric results estimated on the basis of the specified market, demographic,

and policy variables

Variable Specification 1 Specification 2 Specification 3 Specification 4

GATSPOLICY ............ 1.16*

(1.45)

(

1

)

(

1

)

(

1

)

(

1

)

(

1

)

(

1

)

MAPOLICY .............. (

1

)

(

1

)

2.80**

(1.75)

(

1

)

(

1

)

3.03*

(1.71)

NTPOLICY .............. (

1

)

(

1

)

(

1

)

(

1

)

1.42

(1.14)

-0.26

(-0.19)

Log(Y) .................. 11.61***

(6.81)

11.27***

(6.56)

12.13***

(7.75)

11.27***

(6.54)

PS ..................... -0.12***

(-3.98)

-0.12***

(-4.00)

-0.12***

(-3.90)

-0.12***

(-3.90)

PSOECD ................ 0.18***

(3.76)

0.18***

(3.73)

0.19***

(3.85)

0.18***

(3.73)

PD ..................... 0.00

(1.26)

0.00*

(1.39)

0.00

(1.07)

0.00*

(1.33)

REFORM ................ -1.33

(-0.65)

-1.85

(-0.89)

-0.94

(-0.45)

-1.92

(-0.91)

Adj. R2

.................. 0.84 0.85 0.84 0.84

 

1 Not applicable.

Note: T-statistics are in parentheses. Significance levels are determined by a one-sided t-test after correction for

heteroskedasticity. The following indicates the level of statistical significance found for each independent

variable: 

 * = The estimated coefficient has a 10 percent level of significance

 ** = The estimated coefficient has a 5 percent level of significance.

*** = The estimated coefficient has a 1 percent level of significance.

Source: Compiled by the U.S. International Trade Commission.

In OECD countries, estimated coefficients suggest that private participation increases market

penetration, with a 1-percentage point increase in private holdings driving network penetration up by 0.18

mainlines per hundred. This effect, which is also statistically significant at the 1-percent level, may reflect

longer standing private participation in these markets, and correspondingly higher market penetration. An 

alternative explanation is that higher incomes simply tend to be associated with higher mainlines per hundred;

OECD countries can simply afford better telecommunication systems. Interaction of the variables PS and

PSOECD suggests that the net effect of private holdings is positive, with a 1-percentage point increase in

private holdings driving network penetration up by 0.06 mainlines per hundred.

The estimated coefficients for MAPOLICY and GATSPOLICY appear statistically significant at

the 5-percent and 10-percent level, respectively, while that for NTPOLICY does not appear significant.

Several factors seem important in this respect. First, scheduling guidelines issued to WTO member countries

during the Uruguay Round defined market access limitations, but not national treatment limitations. This may

have assisted countries in more readily identifying and scheduling market access barriers, and hindered

identification of national treatment barriers. Second, by scheduling convention, where a measure was

identified as being a limitation on both market access and national treatment, countries were directed to
AUGUST 2003

Industry Trade and Technology Review Measuring Effects of NTBs in Voice Telephone Services

19

capture the measures in the market access column alone, increasing the amount of information about nontariff

barriers in the market access commitments while reducing such information in national treatment

commitments. Last, as noted above, the GBT Agreement promoted the scheduling of effective market

access commitments by formulating agreed pro-competitive regulatory principles, and by controlling for

practical impediments to market access identified in the GBT Chairman’s note.

The estimated coefficient of PD is statistically significant at the 10-percent level, though the

coefficient itself is near zero, and the variable REFORM did not prove statistically significant. With

respect to the former, a possible explanation is that a fair number of developing economies with low

market penetration rates have high population densities. For instance, Bangladesh, India, and El Salvador

rank among the 10 most densely populated countries in this sample. With respect to the latter, the

principal difficulty may be one of measurement. It is difficult to specifically define what constitutes

reform, and to differentiate between genuine reforms and “paper” reforms.

Quantity Impacts

Given these econometric results, it is possible to simulate the implied quantity effects of

impediments to trade in voice telephone services. Because the market access policy variable appears to

be most robust, quantity impacts are computed by multiplying the estimated coefficient of MAPOLICY by

the difference between the highest possible score for the variable (i.e., 4) and the market access policy

scores computed for each country, which range in value from 0 to 4. Quantity impacts for all 67 markets

are presented in table 2. The quantity impacts show that the adoption of fully liberal market access

policies would increase market penetration rates in relatively restrictive countries, such as Bangladesh and

Brazil, by a great deal, specifically by 11.2 mainlines per hundred. In less restrictive countries, where

market access policies are nearly fully liberalized, as in many OECD markets, market penetration would

increase by a relatively small amount if market access policies were fully liberalized.

Conclusion

Evolving developments in voice telephone services could provide a future opportunity to refine this

analysis by factoring in the policy commitments to packet- and circuit-switched data transmission, since it

is now believed that data transmission volumes approximately match voice transmissions. Use of such

variables would provide for more comprehensive analysis, perhaps yielding insights relevant to electronic

commerce. It would also be worthwhile to explore cellular communications more thoroughly as this

communication appears to be a significant complement to, and especially in developing countries a

substitute for, wireline networks. Incorporation of cellular communications would provide a forwardlooking dimension to the analysis, providing a useful baseline from which to measure the effects of

liberalizing emerging communication technologies. Finally, further refinements to this methodology might

be considered after conclusion of the Doha Round of GATS negotiations, when analysis of new

telecommunication commitments may yield estimates of lower quantity impacts, providing a measure of

liberalization bound in GATS commitments.
AUGUST 2003

Measuring Effects of NTBs in Voice Telephone Services Industry Trade and Technology Review

20

Table 2

Quantity impacts: Predicted change in mainlines and percent change in mainlines due to full liberalization,

2000

Country Change in mainlines Country Change in mainlines

Per hundred Percent Per hundred Percent

Albania ................... 7.52 192 Italy .................... 1.40 3

Argentina ................. 8.20 38 Jamaica ............... 9.10 46

Australia .................. 2.80 5 Japan ................. 4.00 7

Austria .................... 1.40 3 Korea .................. 4.20 9

Bangladesh ............... 11.20 3,111 Luxembourg ............ 1.40 2

Barbados ................. 7.00 16 Malaysia ............... 11.20 56

Belgium .................. 1.40 3 Mauritius ............... 11.20 48

Belize ..................... 4.90 33 Mexico ................. 7.70 62

Bolivia .................... 10.50 174 Morocco ............... 11.20 223

Brazil ..................... 11.20 62 Netherlands ............ 1.40 2

Brunei Darussalam ........ 10.75 44 New Zealand ........... 2.80 6

Bulgaria .................. 7.52 21 Norway ................ 0.70 1

Canada ................... 5.60 8 Pakistan ............... 11.20 519

Chile ..................... 4.90 22 Papua New Guinea ..... 6.30 467

Colombia ................. 7.60 45 Peru ................... 7.70 115

Cote d'Ivoire ............... 7.60 427 Philippines ............. 11.05 276

Croatia ................... 9.10 25 Poland ................. 8.05 29

Cyprus .................... 11.20 17 Portugal ............... 7.00 16

Czech Republic ............ 7.00 19 Romania ............... 7.00 40

Denmark .................. 1.40 2 Senegal ............... 9.40 435

Ecuador .................. 11.20 112 Singapore .............. 7.93 16

El Salvador ................ 4.00 40 South Africa ............ 9.10 80

Finland ................... 3.50 6 Spain .................. 2.80 7

France .................... 1.40 2 Sri Lanka .............. 10.90 268

Germany .................. 1.40 2 Suriname .............. 10.30 59

Greece ................... 7.00 13 Sweden ................ 1.40 2

Guatemala ................ 2.80 49 Switzerland ............. 4.20 6

Hong Kong, China ......... 6.70 11 Thailand ............... 11.20 121

Hungary .................. 7.00 19 Trinidad & Tobago ...... 6.40 28

Iceland ................... 1.40 2 Tunisia ................ 11.20 125

India ...................... 11.20 350 United States. .......... 2.80 4

Indonesia ................. 6.62 211 United Kingdom ........ 1.40 2

Ireland .................... 7.00 17 Venezuela .............. 10.40 96

Israel ..................... 9.20 19

Source: Compiled by the U.S. International Trade Commission.

#
AUGUST 2003

Industry Trade and Technology Review Key Performance Indicators

A-1

APPENDIX A

Key Performance Indicators of Selected

Industries and Regions1

Title Author Page

1

Steel Harry Lenchitz

(202) 205-2737

hlenchitz@usitc.gov

A-2

A-3

Automobiles Laura A. Polly

(202) 205-3408

polly@usitc.gov

A-4

Unwrought Aluminum Judith-Anne Webster

(202) 205-3489

webster@usitc.gov

A-5

Flat Glass Vincent DeSapio

(202) 205-3435

desapio@usitc.gov

A-6

Services Cynthia Payne

(202) 205-3410

payne@usitc.gov

A-7

North American Trade Audry Tafoya2

Ruben Mata

(202) 205-3403

mata@usitc.gov

A-8

A-9

The data and views presented for the following indicators are compiled from the industry sources noted and are 1 

those of the authors. They are not the views of the United States International Trade Commission as a whole or of

any individual Commissioner. Nothing contained in this information based on published sources should be construed

to indicate how the Commission would find in an investigation conducted under any statutory authority.

Research assistance provided by Audry Tafoya, intern from the Center for North American Studies, American 2 

University.
AUGUST 2003

Key Performance Indicators Industry Trade and Technology Review

A-2

STEEL

• The U.S. Bankruptcy Court for the Northern District of West Virginia gave its final approval to Weirton Steel Corp.

for a $225 million debtor-in-possession (DIP) financing facility on June 16, 2003. Weirton had been operating

under interim DIP financing since filing a voluntary petition for reorganization under Chapter 11 bankruptcy in May,

2003. See http://www.weirton.com 

• The United Steelworkers of America (USWA) announced that union members at six former Bethlehem Steel

locations ratified a labor contract with the new owners of the facilities, International Steel Group (ISG), on June 16,

2003. The agreement brings the former Bethlehem employees into the contract that covers former LTV and Acme

Steel employees now employed by ISG. See http://www.uswa.org

 

• Wheeling-Pittsburgh Corporation (WPC) formally exited bankruptcy on August 1, 2003, after signing a new labor

agreement with the United Steel Workers of America (USWA). A new labor agreement was one of the Emergency

Steel Loan Guarantee Board's conditions when it approved WPC's $250 million loan guarantee application in

March 2003. See http://www.wpsc.com and http://www.uswa.org

 

• United States Steel Corporation (USS) signed a letter of intent with International Steel Group Inc. (ISG) to

exchange the assets of its plate business, including the plate mill at Gary Works, for the assets of ISG’s No. 2

pickle line at Indiana Harbor Works, on August 13, 2003. The transaction is expected to close in the fourth quarter

of 2003. See http://www.uss.com

 

Table A–1

Imports decrease and exports increase during first quarter 2003 compared to fourth quarter 2002,

and also compared to first quarter year ago

Item Q4 2002

Percentage

change, Q1 2003

from

Q4 2002 Q1 20031

Percentage

change, Q1

2003 from

Q1 2002

Producers’ shipments (1,000 short tons) ... ... ... ... . 24,358 6.9 26,037 8.8

Finished imports (1,000 short tons) ... ... ... ... ... . . 6,418 -20.3 5,113 -12.6

Ingots, blooms, billets, and slabs (1,000 short tons) ... . 2,258 -41.1 1,331 -43.9

Exports (1,000 short tons) ... ... ... ... ... ... ... ... 1,581 25.6 1,986 34.9

Apparent supply, finished (1,000 short tons) ... ... ... . 29,195 -0.1 29,164 3.0

Ratio of finished imports to apparent supply (percent) ... 22.0 -4.5 17.5 3.2 2 2

 Preliminary. 1

 Percentage point change.

2

Note.–Because of rounding, figures may not add to the totals shown.

Source: American Iron and Steel Institute.
AUGUST 2003

Industry Trade and Technology Review Key Performance Indicators

A-3

STEEL

Table A–2

Steel service centers: Shipments increase and inventories decrease during first quarter 2003

compared to fourth quarter 2002, consistent with seasonal demand trends

Item Dec. 2002 Mar. 2003

Percentage

change, Mar.

2003 from

 Dec. 2002 Q1 2002 Q1 2003

Percentage

change, Q1

2003 from

 Q1 2002

Shipments (1,000 short tons) ... ... ... 3,213 4,102 23.9 12,416 11,702 -5.8

Ending inventories (1,000 short tons) ... 15,117 14,044 -7.1 13,222 14,044 6.2

Inventories on hand (months) ... ... ... 4.7 3.4 ( ) 3.2 3.4 ( )

1 1

 Not applicable. 1

Note.–Metals Service Center Institute data collection and presentation methods have been updated. Data presented

for Dec. 2002 and first quarter 2002 have been updated, and differ from previously published data.

Source: Metals Service Center Institute.

• U.S. service center steel shipments for first quarter 2003 were down, and inventories were up, compared to

shipments and inventories for first quarter 2002 (table A-2), according to the Metals Service Center Institute. See

http://www.ssci.org

 

• The American Institute for International Steel import market survey (June 2003) predicts a drop in import orders for

the next 3 to 5 months for most steel products, including semifinished, hot and cold rolled, corrosion resistant, and

structurals, while import orders for cut-to-length plate, wire rod, and pipe and tube remain essentially unchanged. 

See http://www.aiis.org

 

• World crude steel production for the first 6 months of 2003 was 513 million tons, an increase of 8.2 percent

compared with the first 6 months of 2002, according to the International Iron and Steel Institute. China produced

114 million tons, accounting for more than 22 percent of world production thus far for 2003. See

http://www.worldsteel.org

 

• Domestic capability utilization continued to decline during first quarter 2003 (Figure A-2). The drop in capability

utilization was largely driven by the results of integrated producers, whose shipments were down by almost 10

percent from fourth quarter 2002. Modest increases in shipments by minimill and specialty producers did little to

increase their capability utilization. See http://www.steel.org
AUGUST 2003

Key Performance Indicators Industry Trade and Technology Review

A-4

AUTOMOBILES

Table A–3

U.S. sales of new passenger vehicles (cars and light trucks), domestic and imported, and share of U.S. market accounted

for by sales of total imports and Japanese imports, by specified periods, January 2002-June 2003

Percentage change 

Item

Apr.-June

2003

Jan.-June

2003

Apr.-June 2003

from

Jan.-Mar. 2003

Jan.-June 2003

from

Jan.-June 2002

U.S. sales of domestic passenger vehicles (1,000 units) . . . . . . .

1 3,602 6,594 20.4 -3.4

U.S. sales of imported passenger vehicles (1,000 units) . . . . . . .

2 863 1,638 11.4 1.6

Total U.S. sales (1,000 units) . . . . . . . . . . . . . . . . . . . . . . . . . .

1, 2 4,465 8,232 18.5 -2.4

Ratio of U.S. sales of imported passenger vehicles to total U.S. 

sales (percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1, 2 19.3 19.9 -6.1 4.1

U.S. sales of Japanese imports as a share of the total U.S. market

 (percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 10.1 10.6 -10.9 5.2

 Domestic passenger vehicles include U.S.-, Canadian-, and Mexican-built cars and light trucks sold in the United States. 1

 Imported passenger vehicles do not include cars and light trucks supplied by Canada and Mexico. 2

Note.–Data for 2003 forward include cars and light trucks; year-to-date data for 2002 also include cars and light trucks.

Source: Compiled from data obtained from Automotive News.

 

• For the first half of 2003, light trucks accounted for 51 percent of total passenger vehicle sales in the United States,

56 percent of domestic passenger vehicle sales, and 33 percent of import vehicle sales. During the same period,

imports from Japan of light trucks accounted for 10 percent of total U.S. light truck sales. 

 

• General Motors, Ford, and DaimlerChrysler have been the market leaders in light trucks; however, Japanese

automakers have made significant recent investments in their light truck manufacturing capacity in the United States. 

For example, in May 2003, Nissan opened a new assembly plant in Canton, MS for minivan, pickup truck, and SUV

production. 

 

• U.S. industry officials claim that, since 2000, the weak yen has contributed to the intense competition for U.S. market

share, and that the unfavorable currency conditions caused General Motors, Ford, and DaimlerChrysler to lose a

combined 8.4 percentage points of domestic market share, which translates into over 1.6 million lost passenger

vehicle sales worth over $35 billion.
AUGUST 2003

Industry Trade and Technology Review Key Performance Indicators

A-5

UNWROUGHT ALUMINUM1

 

• Imports from Russia increased significantly in March as shipments delayed by freezing weather at the Port of St.

Petersburg arrived in the United States after a spring thaw allowed port operations to resume. 

 

 

• Rising prices for unwrought aluminum in the first quarter of 2003 reflect the high cost of alumina, declining

production in the Pacific Northwest, and concern on the metal market over supply constraints that might result during

the war with Iraq.

• Current developments indicate that consumption of U.S.-made unwrought aluminum and semifabricated aluminum

products will likely increase as car manufacturers continue to replace iron and steel with aluminum due to its lighter

weight and improved fuel efficiency. For example, Toyota plans to increase production of its truck engines at its

Alabama facility (consuming 15-million pounds more of U.S.-supplied aluminum annually), and Ford has decided to

use aluminum alloys smelted in the Midwest for the 2004 F-150's rack and pinion steering housings along with

aluminum front axle carriers and tubes on its standard-size 150's which will be made in the United States.

 

 

Table A–4

Reduced production and rising input costs in first quarter 2003, moved aluminum prices upward

to 5 cents over the 12-month low of 62.6 cents per pound in August 2002

 Percentage change

Item Q1 2002 Q4 2002 Q1 2003

Q1 2003

from

 Q1 2002

Q1 2003

from

Q4 2002

Primary production (1,000 metric tons) ... ... ... . . 627 708 700 11.6 -1.1

Secondary recovery (1,000 metric tons) ... ... ... . . 735r 741r 721 -1.9 -2.7

Imports (1,000 metric tons).... ... ... ... ... ... . . 720 669 826 14.7 23.5

Import penetration (percent) ... ... ... ... ... ... . . 36.0 32.6 37.6 1.6 5.0 1 1

Exports (1,000 metric tons) ... ... ... ... ... ... . . 82 67 50 -39.0 -25.4

Average nominal price (cents/lb) ... ... ... ... ... . 65.2 65.1 67.6 3.7 3.8

LME inventory level (1,000 metric tons) ... ... ... . . 1,029 1,243 1,318 28.0 6.0

 Percentage point change 1

Note.–Revised data indicated by “r.”

Sources: Compiled from data obtained from U.S. Geological Survey and World Bureau of Metal Statistics.

 Product coverage includes only unwrought aluminum and certain aluminum alloys for improved data comparability. 1
AUGUST 2003

Key Performance Indicators Industry Trade and Technology Review

A-6

FLAT GLASS

Background

• Although the U.S.-Japanese agreement on Japanese market access for imports of flat glass which sought to

increase access and sales of foreign flat glass in Japan expired on December 31, 1999, the U.S. Government 1

continues to urge the Japanese Government to take steps to promote access and competition in its glass

market and continues to work with U.S. industry to achieve these goals. The U.S. Government has had some

2

success in urging Japan to modify regulations that would facilitate use of energy-efficient glass in Japan.

• U.S. and Japanese negotiators have agreed that Japan’s Ministry of Trade and Industry (MITI), in conjunction

with the Japan Fair Trade Commission (JFTC), should monitor Japanese flat glass manufacturers and the glass

distribution system in Japan to promote competition in the sector.3

 

 

Current

 

• Greater Japanese demand for imported flat glass, encouraged by a somewhat more positive outlook for the

Japanese economy, increased average monthly Japanese imports from all countries by 28 percent for the first 5

months of 2003 to 2.8 million square meters compared with the same period of 2002. The average monthly

value of total Japanese flat glass imports increased 39 percent during the first 5 months of 2003 to $17.7 million

compared with the average monthly value for the comparable period in 2002.

• Japanese imports from the United States increased by quantity and value during the first 5 months of 2003

compared to the same period in 2002 (up 29 percent to 305,000 square meters and 93 percent to $6.3 million,

respectively). Average monthly imports from the United States for full-year 2002 had decreased 32 percent in

quantity and 54 percent in value compared with full-year 2001.

 Office of the U.S. Trade Representative (USTR), The President’s 1999 Annual Report on the Trade

1

Agreements Program, p. 227, downloaded from http://www.ustr.gov/reports/tpa/2000index.html on Mar. 3, 2000.

 U.S. Department of State cable, 2003 National Trade Estimate Report - Japan, message reference No. 8640, 2

prepared by U.S. Embassy, Tokyo, Dec. 16, 2002.

 USTR, Annual Submission by the Government of the United States to the Government of Japan on 3

Deregulation and Competition Policy, Oct. 12, 2000, p. 32.
AUGUST 2003

Industry Trade and Technology Review Key Performance Indicators

A-7

SERVICES
AUGUST 2003

Key Performance Indicators Industry Trade and Technology Review

 Diana I. Gregg, “Trade Balance,” found at http://www.bea.gov/bea/newsrel/trans103.pdf , retrieved on June 20,

1

2003.

 Terry Weber, “Productivity Dips in First Quarter,” The Globe and Mail, June 12, 2003, found at 2

http://www.theglobeandmail.com/servlet/story/RTGAM.20030612.wbprod0612/BNStory/Business, retrieved on June

13, 2003.

 The Dismal Scientist, “GDP Analysis - Mexico,” found at http://www.economy.com/dismal/pro/release retrieved 3

on June 5, 2003. 

 Warren Jestin and Aron Gampel, “Global Outlook,” Scotiabank, found at 4

http://scotiacapital.com/English/bus_econ/busglobe.pdf, retrieved on July 9, 2003.

 “Economic Summary,” Mexico Watch, Mar. 1, 2003, vol. 9, No. 3, p. 3.

5

 EIU Exectuive Briefing, “United States of America: Automotive Forecast,” found at 6

http://80-eb.eiu.com.proxyau.wrlc.org/index.asp?layout=show_article&article_id=1656135565, retrieved on June 26,

2003.

 Carlos Agoitia, “Productos Automotrices - Evolución Reciente y Perspectivas,” April 2003, found at 7

http:www.bancomext.com/Bancomext/publicassecciones/secciones/2508/PRODUCTOS_AUTOMOTRICzES_2002.

pdf, retrieved on June 19, 2003.

 Official statistics of the U.S. Department of Commerce. 

8

A-8

NORTH AMERICAN TRADE HIGHLIGHTS

U.S. trade with its North American partners is highlighted in table A-5. The following is a summary of key

developments during the first quarter 2003.

• Total U.S. imports from Mexico increased 8 percent from the first quarter 2002 to the first quarter of 2003,

reaching $134 billion. This growth reflects a moderate quarter to quarter increase of 1.9 percent in the U.S. gross

domestic product that was driven largely by crude petroleum, which in turn accounted for 70 percent of the

expansion in the total value of imports. The higher 2003 price for crude oil was due in part to uncertainty about oil

supply from the Middle East, Nigeria, and Venezuela, and the onset of the Iraq war in late March 2003. The

significance of petroleum in U.S.-Mexico trade was emblematic of total U.S. trade in the first quarter 2003, as

three-fourths of the $6.2-billion increase in the U.S. trade deficit with all partners during January-March 2003 was

attributable to petroleum imports.1

• Total U.S. imports from Canada grew by 10 percent despite a 5.3 percent year-to-year increase in value of the

Canadian dollar (to 73 cents) relative to the U.S. dollar. For many products, the appreciation in the Canadian 2

dollar results in U.S. consumers paying more for imports from Canada. In contrast to U.S.-Mexico trade,

petroleum accounted for 31 percent of the increase in U.S. imports from Canada in first quarter 2003.

• Total U.S. exports to Mexico decreased by 3 percent, despite a 0.9-percent quarter-to-quarter growth in the

Mexican manufacturing industry. Total U.S. exports to Canada increased by 7 percent January-March 2003, 3

largely attributable to a strong increase in Canadian consumer expenditures that rose 3.5 percent quarter to

quarter.

• Harsh winter weather in portions of the Eastern United States in 2003 compared with the relatively mild winter of

2002 led to a slowdown in housing construction in that region. That, in turn, dampened U.S. imports of forest

products from Canada, which decreased by 9 percent in the first quarter 2003.

• The value of U.S. imports of Canadian automobiles was reduced slightly during January-March 2003, reflecting

the sluggish U.S. automobile market. U.S. vehicle purchases are at a 41⁄2 year low reportedly as a result of the 4

slow U.S. economic recovery and overcapacity in the global auto industry. Despite offering consumers financial

incentives and quality improvements to stimulate demand, these initiatives reportedly have reduced U.S. auto

industry profits in order to maintain stability in sales volume.

• Mexican vehicle exports to the U.S. market decreased 7.7 percent in the first quarter of 2003, continuing a trend 5

of negative growth in this export sector, which industry observers do not expect to improve in the immediate

future. This is due, in part, to the differentiated nature of North American automobile production with Mexico’s

focus on subcompact and mid-size automobiles rather than light trucks and SUVs which is the strength of the

U.S. industry. However, the downward trend in Mexican auto exports was countered by significant growth in 6

Mexican auto parts exports. The combined value of U.S. imports of seats, wiring harnesses, engines, pumps, 7

ignitions, and other motor-vehicle parts from Mexico increased from $3.7 billion in first quarter of 2002 to $4.7

billion in first quarter of 2003, a 17-percent increase.8
AUGUST 2003

Industry Trade and Technology Review Key Performance Indicators

 The Dismal Scientist, “GDP Analysis - Mexico,” found at http://www.economy.com/dismal/pro/release, retrieved 9

on June 5, 2003.

 Joseph M. Dukert, “New Initiatives in North American Energy Cooperation,” International Association for Energy 10

Economics Newsletter, Apr. 2003.

A-9

NORTH AMERICAN TRADE

Table A-5

North American trade, 1998-2002, January-March 2002, and January-March 2003

 Percent

January-March change

Item 1998 1999 2000 2001 2002 2002 2003 2002/03

——————————Value (million dollars)——————————

U.S.-Mexico trade:

Total imports from Mexico . . . . . . . 93,017 109,018 134,734 130,509 134,121 31,056 33,489 8

U.S. imports under NAFTA:

Total value ... ... ... ... ... . 68,326 71,317 83,995 81,162 84,747 19,559 21,627 11

Percent of total imports . . . . . . 73 65 62 62 63 63 65 2

1

Total exports to Mexico . . . . . . . . . 75,369 81,381 100,442 90,537 86,076 20,184 19,593 -3

U.S. merchandise trade balance

with Mexico ... ... ... ... ...

2

-17,648 -27,637 -34,292 -39,971 -48,045 -10,873 -13,896 -28

U.S. -Canada trade:

Total imports from Canada . . . . . . 174,685 198,242 229,060 216,836 210,518 50,610 55,636 10

U.S. imports under NAFTA:

Total value ... ... ... ... ... . 111,675 115,715 123,052 113,179 115,807 27,301 28,651 5

Percent of total imports . . . . . . 64 58 54 52 55 54 51 -31

Total exports to Canada . . . . . . . . 137,768 145,731 155,601 144,621 142,543 34,031 36,412 7

U.S. merchandise trade balance 

with Canada ... ... ... ... . .

3

-36,918 -52,511 -73,459 -72,215 -67,975 -16,579 -19,225 -16

Percentage point change. 1

 The negative (-) symbol indicates a loss or trade deficit. The $48.0-billion deficit in U.S. merchandise trade with 2

Mexico in 2002 was partially offset by a $4.7-billion U.S. surplus in bilateral services trade.

 The $68.0-billion deficit in U.S. merchandise trade with Canada in 2002 was partially offset by a $5.8-billion 3

U.S. surplus in bilateral services trade. During the first quarter of 2003 the U.S. surplus in bilateral services trade

was $2.6 billion, not seasonally adjusted.

Source: Compiled by USITC staff from official statistics of the U.S. Department of Commerce. Statistics on U.S.

services trade with Canada and Mexico are based on preliminary data provided in U.S. Department of Commerce,

Bureau of Economic Analysis, “U.S. International Transactions Accounts Data,” tables 10 and 10a, found at

http://www.BEA.DOC.GOV/BEA/International/BP_web/list.CFM?ANON=92.

• Within the Mexican manufacturing sector, the industries with the strongest quarter-to-quarter growth were basic

metallic products (12.6 percent); non-metallic metals (7.3 percent); construction (5.9 percent); chemicals (5.7

percent); and paper, printing, and publishing (3.9 percent). Growth in these industries, which are less dependent

on imported components for production, can be contrasted to a 3.3-percent decrease in Mexican textile exports.9

 

• In addition to crude petroleum, natural gas is a significant part of U.S. trade with its North American partners.

Electricity companies are making greater use of natural gas to fuel their power generation plants, leading to

increased demand and prices for natural gas in the United States. This is reflected in the $3.1-billion rise in U.S. 10

imports of natural gas from Canada during January-March 2003. Domestic demand for natural gas also is rising

in Mexico with the expansion of energy-intensive manufacturing.