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TABLE OF CONTENTS

List of Frequently Used Acronyms ...................................................... viii

THE PRESIDENT’S TRADE POLICY AGENDA

I. Overview and the 2003 Agenda .................................................. 1

THE PRESIDENT’S 2002 ANNUAL REPORT

ON THE TRADE AGREEMENTS PROGRAM

II. The World Trade Organization .................................................. 18

A. Introduction .......................................................... 18

B. Trade Negotiations Committee and The Doha Development Agenda .............. 18

1. Special Session of the Committee on Agriculture ....................... 21

2. Special Session of the Council for Trade in Services .................... 24

3. Negotiating Group on Non-Agricultural Market Access .................. 25

4. Negotiating Group on Rules ....................................... 26

5. Special Session of the Committee on Trade and Environment ............. 29

6. Special Session of the Dispute Settlement Body ........................ 31

7. Special Session of the Council for Trade-Related Aspects of Intellectual 

Property Rights (TRIPS) .......................................... 32

8. Special Session of the Committee on Trade and Development ............. 33

C. Work Programs established under the Doha Development Agenda ................ 34

1. Working Group on Transparency in Government Procurement ............ 35

2. Trade Facilitation ............................................... 36

3. Working Group on Trade and Competition Policy ...................... 37

4. Working Group on Trade and Investment ............................. 38

5. Work Program on Electronic Commerce .............................. 39

6. Working Group on Trade, Debt, and Finance .......................... 40

7. Working Group on Trade and Transfer of Technology ................... 41

D. General Council Activities ............................................... 42

1. The Dispute Settlement Understanding ............................... 44

a. Disputes Brought by the United States ......................... 47

b. Disputes Brought Against the United States .................... 52

2. Trade Policy Review Body ........................................ 62

E. Council for Trade in Goods .............................................. 64

1. Committee on Agriculture ......................................... 65

2. Committee on Antidumping Practices ................................ 67

3. Committee on Customs Valuation. .................................. 71

4. Committee on Import Licensing .................................... 73

5. Committee on Market Access ...................................... 74

6. Committee on Rules of Origin ..................................... 76

7. Committee on Safeguards ......................................... 78

8. Committee on Sanitary and Phytosanitary Measures ..................... 80

9. Committee on Subsidies and Countervailing Measures .................. 84

10. Committee on Technical Barriers to Trade ............................ 90

11. Committee on Trade-Related Investment Measures ..................... 94
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12. Textiles Monitoring Body ......................................... 95

13. Working Party on State Trading .................................... 97

F. Council for Trade in Services ............................................. 98

1. Committee on Trade in Financial Services ............................ 99

2. Working Party on Domestic Regulation ............................. 100

3. Working Party on GATS Rules .................................... 101

4. Committee on Specific Commitments ............................... 102

G. Council on Trade-Related Aspects of Intellectual Property Rights ............... 103

H. Other General Council Bodies/Activities ................................... 110

1. Committee on Trade and Environment .............................. 110

2. Committee on Trade and Development .............................. 111

3. Committee on Balance of Payments Restrictions ...................... 114

4. Committee on Budget, Finance, and Administration ................... 115

5. Committee on Regional Trade Agreements ........................... 116

6. Accessions to the World Trade Organization ......................... 118

I. Plurilateral Agreements ................................................ 122

1. Committee on the Expansion of Trade in Information Technology Products . 122

2. Committee on Government Procurement ............................ 123

3. Committee on Trade in Civil Aircraft ............................... 124

III. Regional Negotiations ........................................................ 126

A. Free Trade Area of the Americas ......................................... 126

B. North American Free Trade Agreement .................................... 128

1. Operation of the Agreement ...................................... 128

2. Rules of Origin ................................................ 129

3. NAFTA and Labor ............................................. 129

4. NAFTA and the Environment ..................................... 130

C. Asia Pacific Economic Cooperation ....................................... 130

1. Leadership in the Multilateral Trading System ........................ 132

2. Advancement of APEC’s Work on Trade and Investment Liberalization and

Facilitation ................................................... 132

3. Free Trade Agreements .......................................... 136

IV. Bilateral Negotiations ........................................................ 137

A. Free Trade Agreements ................................................ 137

1. Chile ........................................................ 137

2. Singapore .................................................... 138

B. The Americas ........................................................ 139

1. Canada ....................................................... 139

a. Softwood Lumber ........................................ 139

b. Agriculture ............................................. 140

c. Intellectual Property Rights ................................ 141

2. Mexico ...................................................... 141

a. Intellectual Property Rights ................................ 141

b. Agriculture ............................................. 142

c. Telecommunications ..................................... 143

3. Brazil and Southern Cone ........................................ 143

a. Mercosur (Argentina, Brazil, Paraguay and Uruguay) ........... 143

b. Argentina .............................................. 143
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c. Brazil ................................................. 144

d. Paraguay ............................................... 145

e. Uruguay ............................................... 146

f. Chile .................................................. 146

4. The Andean Community ......................................... 146

a. Andean Trade Preference Act .............................. 146

b. ATPDEA Eligibility ...................................... 147

5. Central America and the Caribbean ................................ 147

a. U.S.-Central America Free Trade Agreement (CAFTA) Negotiations 147

b. Central America ......................................... 148

c. Caribbean Basin Initiative ................................. 148

d. The Caribbean .......................................... 149

C. Western Europe ...................................................... 150

1. European Union ............................................... 150

a. Geographical Indications .................................. 151

b. Agricultural Biotechnology ................................ 151

c. Positive Economic Agenda ................................ 152

d. Transatlantic Economic Partnership .......................... 152

e. Public Dialogues ........................................ 152

f. Technical Regulations and Standards ......................... 152

g. Foreign Sales Corporation Tax Rules ......................... 153

h. Ban on Growth Promoting Hormones in Meat Production ........ 153

i. Veterinary Equivalence - U.S. Poultry Exports to the EU ......... 154

j. Wine ................................................. 154

k. Margin of Preference ..................................... 154

2. EFTA ....................................................... 155

3. Turkey ....................................................... 155

D. Russia, Central Europe and the Newly Independent States ..................... 156

1. Normal Trade Relations Status .................................... 156

2. Intellectual Property Rights ....................................... 157

a. Ukraine – Optical Media Piracy ............................. 157

b. Hungary, Slovenia, and Poland – Protection of Confidential Data . . 157

c. The Russian Federation – Widespread Piracy .................. 158

3. Generalized System of Preferences ................................. 158

4. WTO Accession ............................................... 159

5. Bilateral Trade Agreements and Bilateral Investment Treaties ............ 160

6. EU Association Agreements ...................................... 160

a. Poland – Tariff Reductions ................................ 160

b. Hungary – Tariff Reductions ............................... 160

c. The Czech Republic and Slovakia – Waiver of Tariffs on Civil 

Aircraft and Parts ........................................ 161

7. Country Specific Issues .......................................... 161

a. Russia – Market Access for Poultry ......................... 161

b. Russia – Product Standards, Testing, Labeling and Certification ... 161

c. Russia – Aircraft Market Access ............................ 162

E. Mediterranean/Middle East ............................................. 162

1. Morocco Free Trade Agreement ................................... 163

2. Egypt ........................................................ 163

3. Israel ........................................................ 163
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4. Jordan – Implementing the Free Trade Agreement ..................... 163

5. Jordan – Qualifying Industrial Zones ............................... 164

6. Trade and Investment Framework Agreements ........................ 165

7. WTO Accession ............................................... 165

8. Intellectual Property Rights ....................................... 165

F. Asia and the Pacific ................................................... 165

1. Australia ..................................................... 166

a. Free Trade Agreement .................................... 166

b. Bilateral Issues .......................................... 167

2. New Zealand .................................................. 167

3. The Association of Southeast Asian Nations (ASEAN) ................. 167

a. Indonesia .............................................. 168

b. Malaysia ............................................... 168

c. Philippines ............................................. 169

d. Singapore .............................................. 170

e. Thailand ............................................... 170

f. Cambodia .............................................. 171

g. Normalization of Trade Relations with Vietnam and Laos ........ 172

3. Republic of Korea .............................................. 173

a. Macroeconomics and Trade ................................ 173

b. Motor Vehicles .......................................... 173

c. Steel .................................................. 174

d. Pharmaceuticals ......................................... 174

e. Intellectual Property Rights ................................ 175

f. Telecommunications ..................................... 176

g. Financial Services ....................................... 177

h. Government Support for Semiconductor Production and Export .... 177

i. Cinema Screen Quotas .................................... 177

j. Bilateral Investment Treaty ................................ 178

k. Cosmeceuticals .......................................... 178

l. Agriculture ............................................. 178

m. Import Clearance Procedures, Food Standards, and Labeling ...... 179

4. India ........................................................ 180

a. General ................................................ 180

b. Trade Dialogue .......................................... 181

c. Auto TRIMS ........................................... 181

d. Intellectual Property Rights ................................ 181

e. Reference Pricing ........................................ 182

f. Export Subsidies ........................................ 182

5. Pakistan ...................................................... 182

6. Afghanistan ................................................... 182

7. People’s Republic of China ....................................... 183

8. Japan ........................................................ 185

a. Regulatory Reform and Competition Policy Initiative ............ 187

b. Bilateral Consultations .................................... 197

c. Sectoral Issues .......................................... 201

9. Taiwan ....................................................... 203

a. Agriculture ............................................. 203

b. Intellectual Property Rights ................................ 204
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c. Telecommunications ..................................... 204

d. Pharmaceuticals ......................................... 205

10. Hong Kong (Special Administrative Region) ......................... 205

a. Intellectual Property Rights ................................ 205

b. Telecommunications ..................................... 205

G. Africa .............................................................. 205

1. Overview ..................................................... 205

2. Proposed Free Trade Agreement with Southern Africa .................. 206

3. Implementing the African Growth and Opportunity Act ................. 207

4. Promoting Economic Reform, Growth and Development ................ 208

5. Expanding Bilateral and Regional Trade and Investment Relationships ..... 209

a. South Africa ............................................ 210

b. Nigeria ................................................ 210

c. Ghana ................................................. 211

d. Other Countries and Regions ............................... 211

6. Facilitating Sub-Saharan Africa’s Integration Into the Multilateral Trading

System ....................................................... 211

V. Other Multilateral Activities ................................................... 212

A. Trade and the Environment ............................................. 212

1. Trade Act of 2002 (TPA) Guidance on Environment ................... 213

2. Multilateral Fora ............................................... 213

3. The North American Free Trade Agreement (NAFTA) ................. 214

4. The Western Hemisphere ........................................ 215

5. Bilateral Activities .............................................. 215

B. Trade and Labor ...................................................... 215

1. Trade Act of 2002 (TPA) Guidance on Trade and Labor ................ 216

2. Multilateral Efforts ............................................. 217

3. Regional Activities ............................................. 217

4. Bilateral Activities .............................................. 218

C. Organization for Economic Cooperation and Development ..................... 218

1. Work Program ................................................. 219

2. Competition Policy and Trade ..................................... 219

3. The OECD Anti-Bribery Convention: Deterring Bribery of Foreign Public 

Officials ...................................................... 219

4. Dialogue with Non-OECD Members ............................... 220

5. Environment and Trade .......................................... 221

6. Export Credits ................................................. 221

7. Investment .................................................... 222

8. Labor and Trade ............................................... 223

9. Regional Economic Integration .................................... 224

10. Regulatory Reform ............................................. 224

11. Services ..................................................... 224

12. Steel ......................................................... 225

13. Developing Countries ........................................... 225

D. Semiconductor Agreement .............................................. 226

E. Steel Trade Policy .................................................... 227
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VI. Trade Enforcement Activities .................................................. 229

A. Enforcing U.S. Trade Agreements ........................................ 229

1. Overview ..................................................... 229

2. WTO Dispute Settlement ........................................ 230

3. Other Monitoring and Enforcement Activities ........................ 231

a. Subsidies Enforcement .................................... 231

b. Monitoring Foreign Antidumping and Countervailing Duty Actions

...................................................... 232

B. U.S. Trade Laws ...................................................... 233

1. Section 301 ................................................... 233

a. Operation of the Statute ................................... 233

b. Intellectual Property Laws and Practices of the Government of 

Ukraine (301-121) ....................................... 234

c. Wheat Trading Practices of the Canadian Wheat Board (301-120) . . 234

d. EC - Measures Concerning Meat and Meat Products (Hormones) 

(301-62a) .............................................. 235

2. Special 301 .......................................................... 236

a. 2002 Special 301 Review Announcements .................... 237

b. Intellectual Property and Health Policy ....................... 237

c. Implementation of Special 301 .............................. 238

d. Ongoing Initiatives ....................................... 239

3. Telecommunications - Section 1377 Reviews ......................... 241

4. Government Procurement ........................................ 243

5. Antidumping Actions ........................................... 243

6. Countervailing Duty Actions ...................................... 244

7. Unfair Import Practices (Section 337) ............................... 244

a. Section 201 ............................................. 245

b. Section 421 ............................................. 247

c. China Textile Safeguard ................................... 247

8. Trade Adjustment Assistance ..................................... 248

a. Assistance for Workers ................................... 248

b. Assistance for Firms and Industries .......................... 249

9. Generalized System of Preferences ................................. 249

VII. Trade Policy Development .............................................. 252

A. Trade Capacity Building ............................................... 252

1. FTAA-Hemispheric Cooperation Program ........................... 252

2. Central America ............................................... 253

3. Africa ....................................................... 253

a. African Growth and Opportunity Act (AGOA) ................. 253

b. FTA Negotiations ........................................ 253

B. Congressional Affairs ..................................................... 254

C. Private Sector Advisory System and Intergovernmental Affairs ..................... 254

1. The Advisory Committee System .................................. 255

a. President’s Advisory Committee on Trade Policy and Negotiations . 255

b. Policy Advisory Committees ............................... 256

c. Sectoral, Functional and Technical Committees ................ 256
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2. State and Local Government Relations .............................. 256

a. State Point of Contact System .............................. 256

b. Intergovernmental Policy Advisory Committee ................. 257

c. Meetings of State and Local Associations ..................... 257

d. Consultations Regarding Specific Trade Issues ................. 257

3. Public and Private Sector Outreach ................................. 257

a. 2002 Outreach Efforts .................................... 257

b. Improving the Advisory Committee System ................... 259

D. Policy Coordination ....................................................... 259

Annex I: U.S. Trade in 2002

I. 2001 Overview .................................................. 1

II. Goods Trade .................................................... 3

III. Services Trade .................................................. 11

IV. The U.S. Trade Deficit ........................................... 17

Annex II: Background Information About the WTO

Annex III: List of Trade Agreements

I. Agreements That Have Entered Into Force ............................. 1

II. Agreements That Have Been Negotiated But Have Not

Yet Entered Into Force ........................................... 17

III. Other Trade-Related Agreements and Declarations ..................... 19
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LIST OF FREQUENTLY USED ACRONYMS

AD .................................... Antidumping

AGOA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . African Growth and Opportunity Act

APEC .................................. Asia Pacific Economic Cooperation

ASEAN ................................ Association of Southeast Asian Nations

ATC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agreement on Textiles and Clothing

ATPA .................................. Andean Trade Preferences Act

ATPDEA ............................... Andean Trade Promotion & Drug

Eradication Act

BIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Built-In Agenda

BIT .................................... Bilateral Investment Treaty

BOP ................................... Balance of Payments 

CACM ................................. Central American Common Market

CAFTA ................................ Central American Free Trade Area

CARICOM .............................. Caribbean Common Market

CBERA ................................ Caribbean Basin Economic Recovery Act

CBI .................................... Caribbean Basin Initiative

CFTA .................................. Canada Free Trade Agreement

CITEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Telecommunications division of the OAS

COMESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common Market for Eastern & Southern 

 Africa 

CTE ................................... Committee on Trade and the Environment

CTG ................................... Council for Trade in Goods

CVD ................................... Countervailing Duty

DSB ................................... Dispute Settlement Body

DSU ................................... Dispute Settlement Understanding

EU .................................... European Union

EFTA .................................. European Free Trade Association

FTAA .................................. Free Trade Area of the Americas

FOIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Freedom of Information Act

GATT .................................. General Agreement on Tariffs and Trade 

GATS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Agreements on Trade in Services

GDP ................................... Gross Domestic Product

GEC ................................... Global Electronic Commerce

GSP ................................... Generalized System of Preferences

GPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government Procurement Agreement

IFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Financial Institution

IPR .................................... Intellectual Property Rights 

ITA .................................... Information Technology Agreement 

LDBDC ................................ Least Developed Beneficiary Developing

Country

MAI ................................... Multilateral Agreement on Investment
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MERCOSUL/MERCOSUR ................. Southern Common Market

MFA ................................... Multifiber Arrangement

MFN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Most Favored Nation

MOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market-Oriented, Sector-Selective

MOU .................................. Memorandum of Understanding

MRA .................................. Mutual Recognition Agreement

NAFTA ................................ North American Free Trade Agreement

NEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Economic Council

NIS .................................... Newly Independent States

NSC ................................... National Security Council

NTR ................................... Normal Trade Relations 

OAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organization of American States

OECD .................................. Organization for Economic Cooperation and

Development

OPIC .................................. Overseas Private Investment Corporation

PNTR .................................. Permanent Normal Trade Relations

ROU ................................... Record of Understanding

SACU .................................. Southern African Customs Union

SADC .................................. Southern African Development Community

SPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanitary and Phytosanitary Measures

SRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specified Risk Material

TAA ................................... Trade Adjustment Assistance

TABD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trans-Atlantic Business Dialogue

TACD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trans-Atlantic Consumer Dialogue

TAEVD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trans-Atlantic Environment Dialogue

TALD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trans-Atlantic Labor Dialogue

TBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technical Barriers to Trade

TEP ................................... Transatlantic Economic Partnership

TIFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade & Investment Framework Agreement

TPRG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade Policy Review Group

TPSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade Policy Staff Committee 

TRIMS ................................. Trade Related Investment Measures

TRIPS .................................. Trade Related Intellectual Property Rights

UNCTAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Nations Conference on Trade & 

 . Development

URAA ................................. Uruguay Round Agreements Act

USDA .................................. U.S. Department of Agriculture 

USITC ................................. U.S. International Trade Commission 

USTR .................................. United States Trade Representative 

VRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voluntary Restraint Agreement

WAEMU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . West African Economic & Monetary Union

WTO .................................. World Trade Organization
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I. Overview and the 2003 Agenda

Over the past year President Bush and his Administration have restored America’s leadership on trade and 

are now pressing aggressively to secure the benefits of open markets for American families, farmers, 

manufacturers, workers, consumers, and businesses. The President is advancing, in close partnership with 

the Congress, an activist strategy “to ignite a new era of global economic growth through a world trading 

system that is dramatically more open and more free.” 

A key achievement this past year was the renewal of the Executive-Congressional partnership embodied in 

Trade Promotion Authority (TPA). With that authority restored after a lapse of eight years, the 

Administration has begun to fulfill the vision of open markets and development articulated at the launch of 

new global trade negotiations in Doha, Qatar, in 2001. The United States has submitted far-reaching 

proposals to the World Trade Organization (WTO), including plans to remove all tariffs on manufactured 

goods, open agriculture and services markets, and address the special needs of poorer developing 

countries. 

Working closely with the Congress, the Administration capped the year by completing Free Trade 

Agreement (FTA) negotiations with Chile and Singapore, which, when implemented, will open new 

markets for American exporters while expanding choice and value for American consumers. By lowering 

prices through imports and increasing incomes through trade, America’s newest trade agreements will 

build on the success of the North American Free Trade Agreement (NAFTA) and the Uruguay Round, 

which together already provide the average American family of four with benefits of between $1,300 and 

$2,000—each and every year. 

As President Bush has noted, “America is back in the business of promoting open trade to build our 

prosperity and to spur economic growth.”

The Bush Administration looks forward to continuing to work with the Congress in 2003 as together we 

lay a firm foundation for a more prosperous America by passing the free trade agreements with Chile and 

Singapore; building upon our proposals to open markets in global trade talks; advancing negotiations on 

the Free Trade Area of the Americas (FTAA); negotiating new FTAs with the five countries of the Central

American Common Market, Australia, Morocco, and the five countries of the Southern African Customs 

Union; enforcing U.S. trade laws; and monitoring and pressing China’s and Taiwan’s compliance with 

their WTO obligations. 

Realizing the Free Trade Vision

Following World War II, America successfully employed trade to help shape a positive bipartisan agenda 

of growth, openness, and security. With the end of the Cold War, however, the Executive-Congressional 

partnership that fueled that historic progress lapsed, weakening U.S. trade leadership.

To lead globally, President Bush recognized that he had to reverse the retreat at home. He worked 

successfully with Congress to enact the Trade Act of 2002. This Act included Trade Promotion Authority 

(TPA), which re-established the authority necessary to credibly negotiate comprehensive trade agreements 

by ensuring that they will be approved or rejected, but not amended. 
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The Trade Act of 2002, however, included more than just TPA. As the legislation moved through 

Congress, pro-trade Republicans and Democrats worked closely with the Administration to incorporate 

trade-related environmental and labor issues, while simultaneously addressing concerns about sovereignty 

and protectionism. The Act tripled funding for the Trade Adjustment Assistance program—from $416 

million in 2002 to $1.3 billion in 2004—to provide training, other reemployment services, and income 

support to Americans who need to acquire new skills due to job transitions in the international economy. 

In addition, the Act created a refundable health insurance tax credit for eligible trade-impacted workers. 

The Trade Act also included a large, immediate down payment on open trade for the world’s poorest 

nations, cutting tariffs to zero for an estimated $20 billion in American imports from the developing world 

by renewing and expanding the Andean Trade Preference Act, the African Growth and Opportunity Act, 

the Generalized System of Preferences, and the Caribbean Basin Trade Preferences Act.

The Bush Administration is committed to active consultations with Congress to ensure that America’s 

negotiating objectives draw upon the views of its elected representatives, and that they have regular 

opportunities to provide advice throughout the negotiating process. The Trade Act of 2002 established a 

new Congressional Oversight Group with bipartisan representation from all the committees with 

jurisdiction over legislation affecting trade. The Administration will continue to consult regularly with 

Congress on U.S. trade policy, both through the Oversight Group and through the committees of 

jurisdiction.

Even as it has rebuilt support for trade at home, this Administration has been working abroad to open 

markets on all levels: globally, regionally, and bilaterally. By moving forward on multiple fronts, the 

United States is exerting its leverage for openness, creating a new competition in liberalization, targeting 

the needs of poorer developing countries, and creating a fresh political dynamic by putting free trade on a 

global offensive.

Coming to office in the wake of the WTO’s 1999 Seattle debacle, the Bush Administration recognized the 

importance of launching new global trade negotiations to open markets and spur growth and development. 

 Our leadership—in conjunction with the European Union, many developing countries, and others—was 

instrumental in launching the Doha Development Agenda (DDA), against long odds. The Administration 

also played a key role in enlarging and strengthening the WTO by adding China and Taiwan to its ranks. 

By adding these important economies to the WTO, we are helping to ensure that China and Taiwan 

commit to a rules-based, open system of trade that will expand opportunities for Americans in these 

markets. Since 1995, the United States has helped add 17 new Members to the WTO—and efforts are in 

train to add Russia and other nations in the future.

The United States is committed to the goal of completing the DDA by the agreed deadline of 2005. To 

maximize the likelihood of success, the United States is also invigorating a drive for regional and bilateral 

FTAs. These agreements promote and reinforce the powerful links among commerce, economic reform, 

development, and investment, thereby strengthening security and the momentum for free and open 

societies. Under NAFTA, U.S. trade with Mexico almost tripled and trade with Canada nearly doubled; as 

important, all three members have become more competitive internationally. NAFTA proved definitively 

that both developed and developing countries gain from free-trade partnerships. It enabled Mexico to 

bounce back quickly from its 1994 financial crisis, launched the country on the path of becoming a global 

economic competitor, and supported its transformation to a more open democratic society.

In the months following the Congressional grant of TPA, the Bush Administration completed FTA 

negotiations with Chile and Singapore, began new FTA negotiations with the five nations of the Central 
3

American Common Market, and announced FTA negotiations with the five countries of the Southern 

African Customs Union, Morocco, and Australia. We pushed forward the negotiations among 34 

democracies for a Free Trade Area of the Americas and will co-chair this effort with Brazil until it is 

successfully concluded. The United States is once again seizing the global initiative on trade.

Pressing Forward with Global Trade Negotiations

Since the launching of new global trade negotiations at Doha in 2001, the United States has offered a 

series of bold proposals to liberalize trade in the three key sectors of the international economy: industrial 

and consumer goods, agriculture, and services. The U.S. leadership demonstrated by these proposals has 

been instrumental in maintaining forward momentum in the negotiations and in keeping WTO Members 

focused on the core issues of market access.

Consumer and industrial goods. The U.S. proposal for manufactured goods calls for the elimination of all 

tariffs on these products by 2015. This was the trade sector first targeted by the founders of the General 

Agreement on Tariffs and Trade in 1947. After more than 50 years’ work, about half the world’s trade in 

goods is now free from tariffs. It is time to finish the job.

The U.S. proposal would level the playing field first by harmonizing disparate tariffs at lower levels and 

then eliminating them altogether. We envision this happening in a two-stage process. 

The first phase would take place between 2005 and 2010. During that time, WTO Members would 

eliminate all non-agricultural tariffs currently at or under 5 percent. This step would completely eliminate 

tariffs on more than three-quarters of imports into the United States, the European Union, and Japan in just 

five years. It would significantly boost trade among the major industrialized nations and spur exports from 

developing countries to developed nations.

During the 2005-2010 period, countries could also eliminate non-agricultural tariffs in highly traded goods 

sectors—such as environmental technologies, aircraft, and construction equipment—through a series of 

zero-for-zero initiatives with trade partners that are ready to commit to greater levels of openness. In 

addition, for all other duties the United States is proposing a “Tariff Equalizer” formula, which would 

bring all remaining non-agricultural tariffs down to less than 8 percent. In order to achieve greater equity, 

the highest tariffs would fall farther than the lower tariffs.

The second phase of the U.S. proposal would be carried out between 2010 and 2015. During those five 

years, all WTO Members would make equal annual cuts, until their tariffs on goods are eliminated. With 

zero tariffs, the manufacturing sectors of developing countries could compete fairly. The proposal would 

eliminate the barriers among developing countries, which pay 70 percent of their tariffs on manufactured 

goods to one another. By eliminating barriers to the farm and manufactured-goods trade, the income of the 

developing world could be boosted by over $500 billion.

The zero-tariff world that the United States is proposing would mean substantial new opportunities for 

U.S. exporters. It would also represent a major tax cut for America’s working families, directly saving 

them more than $18 billion per year on the import taxes they currently pay in the form of higher prices. 

The dynamic, pro-business, pro-consumer, and pro-competitive effects of slashing tariffs would mean that 

America’s national income would increase by $95 billion under the U.S. goods proposal. Together with 

the tax cut from lower tariffs, that would mean an economic gain of about $1,600 per year for the average 

family of four.

Agriculture. America’s farmers are a key to our economic vitality. Dollar for dollar we export more wheat 
4

than coal, more fruits and vegetables than household appliances, more meat than steel, and more corn than 

cosmetics.

The U.S. goal in the farm negotiations is to harmonize tariffs and trade-distorting subsidies while slashing 

them to much lower levels, on a path towards elimination. The last global trade negotiation—the Uruguay 

Round—accepted high and asymmetrical levels of subsidies and tariffs in order to begin to move toward 

some initial discipline in the sector. For example, the Round set a cap on the European Union’s 

production-distorting subsidies that was three times the size of America’s, even though agriculture 

represents about the same proportion of our economies.

The 2002 U.S. Farm Bill—which authorized up to $123 billion in all types of food-stamp, conservation, 

and farm spending over six years—made clear that while the United States will respect WTO limits, it will 

not cut agricultural support unilaterally. America’s farmers and many agricultural leaders in Congress 

back our WTO proposal that all nations should cut tariffs and harmful subsidies together. The United 

States wants to eliminate the most egregious and distorting agricultural payments—export subsidies. The 

United States would cut global subsidies that distort domestic farm production by some $100 billion, 

slashing our own limit almost in half. We would cut the global average farm tariff from 60 percent to 15 

percent, and the American average from 12 percent to 5 percent. The United States also advocates 

agreeing on a date for the total elimination of agricultural tariffs and distorting subsidies.

Services. The United States is by far the world’s leading exporter of services. We have submitted requests 

to our WTO partners that would broaden opportunities for growth and development in this critical sector, 

which is just taking off in the international economy. Services represent about two-thirds of the U.S. 

economy and 80 percent of our employment, yet they account for only about 20 percent of world trade. 

Services liberalization would open up new avenues for trade, benefiting both the United States and our 

trading partners. The World Bank has pointed out that eliminating services barriers in developing 

countries alone could yield them a $900 billion gain.

As WTO negotiations have progressed, we are making significant progress in a number of other areas 

covered by the Doha declaration, including:

Capacity Building. The United States is committed to expanding the circle of nations that benefit from 

global trade. We listen to the concerns of developing countries and assist in their efforts to expand free 

trade. This past year, we devoted $638 million—more than any other single country—to help developing 

economies build the capacity to take part in trade negotiations, implement the rules, and seize 

opportunities. We have also acted in partnership with the Inter-American Development Bank and other 

multilateral institutions to provide new capacity-enhancing resources and expertise. 

In addition, the Bush Administration is emphasizing the important contributions that small businesses 

make to the U.S. and global economies. Small businesses are a powerful source of jobs and innovation at 

home and an engine of economic development abroad. By helping to build bridges between American 

small businesses and potential new trading partners, these enterprises can become an integral part of our 

larger trade capacity building strategy. Working with the U.S. Small Business Administration, we have 

established an Office of Small Business Affairs at the Office of the United States Trade Representative 

(USTR) that is charged with insuring that American small business concerns are incorporated into our 

trade policy pursuits. 

Intellectual Property. The United States agreed at Doha that the available flexibility in the global 

intellectual-property rules could be used to allow countries to license medicines compulsorily to deal with 
5

HIV/AIDS, tuberculosis, malaria and other epidemics. We are also committed to helping those poor 

regions and states obtain medicines that they cannot manufacture locally. To keep faith with our Doha 

obligations, the Administration has issued a pledge: while we pursue a global understanding on how these 

life-saving medicines can best be provided to countries that cannot produce the medicines themselves, the 

United States will not challenge in dispute settlement any WTO Member that uses the compulsory 

licensing provisions of the TRIPS Agreement to export such drugs to a poor country in need. The 

Administration believes we must strike the necessary balance between protecting life-saving research and 

patents and helping those truly needy that face infectious epidemics.

Trade Rules. The international rules that govern unfair trade practices should be improved, not weakened. 

 Indeed, the DDA explicitly states that any negotiation of trade remedy laws will preserve the basic 

concepts, principles, and effectiveness of existing agreements, as well as their instruments and objectives. 

This clear mandate will enable the United States to press for trade remedies to be applied in a manner 

consistent with international obligations. Inappropriate and non-transparent application of these laws can 

damage the legitimate commercial interests of U.S. exporters. 

The Environment. Work has progressed well over the past year on the DDA’s trade and environment 

agenda. The United States has urged new disciplines on harmful fisheries subsidies, prompting 

discussions in the Rules Negotiating Group on the inadequacy of existing rules in preventing trade 

distortion and resource misallocation in this important sector. The Bush Administration has stood firm 

against efforts to use so-called non-trade concerns, including using unjustified trade-distorting measures 

under the guise of environmental policy, to undermine the agenda for agricultural liberalization. At the 

same time, we helped move discussions forward on increasing market access for environmental goods and 

services in several WTO fora. WTO Members also began to identify avenues for increasing mutual 

supportiveness of multilateral environmental agreements (MEAs) and the WTO, particularly with respect 

to cooperation and communication between these institutions. 

Electronic Commerce. The United States is actively engaged in the work program on electronic 

commerce, now being conducted under the auspices of the WTO’s General Council. In 2002, two 

meetings were dedicated to e-commerce and focused on classification and fiscal implications of 

electronically transmitted products. As the work progresses, the United States will push for a set of 

objectives to form the basis for a positive statement from the WTO about the importance of free-trade 

principles and rules to the development of global e-commerce.

Transparency in Government Procurement and Efficient Customs Procedures. The Administration also 

continues to push for the reciprocal removal of discriminatory government procurement practices in a wide 

range of multilateral, regional and bilateral fora, including the WTO. The Administration is urging the 

conclusion of an Agreement on Transparency in Government Procurement that would apply to all Members 

of the WTO. The United States is also taking part in negotiations on new WTO rules to facilitate trade by 

making procedures at international borders more transparent and efficient.

Labor Issues. The United States has continued to press for increased cooperation between the WTO and the 

International Labor Organization (ILO). We charted important progress in 2002: In the Governing Body of 

the ILO, the United States supported the creation of the ILO’s World Commission on the Social Dimensions 

of Globalization, which is undertaking a thorough analysis of the implications of trade and investment 

liberalization on employment, wages, and workers’ rights. We look forward to the Commission’s 2003 

report.

The Administration’s commitment to mutually supportive trade and labor policies has also benefited greatly 
6

from a partnership between USTR and the Department of Labor’s International Labor Affairs Bureau 

(ILAB). ILAB has directly supported the work of the ILO, focusing particularly promoting the 1998 ILO 

Declaration on Fundamental Principles and Rights at Work and the International Program for the 

Elimination of Child Labor (ILO/IPEC). ILAB is working with the ILO and other international 

organizations to assist countries in implementing core labor standards and is also providing technical 

cooperation to strengthen the capacities of developing countries’ Labor Ministries to implement social safety 

net programs and combat the spread of HIV/AIDS. Realizing that child labor can never be fully eliminated 

until poverty is vanquished, the Administration and ILO/IPEC have focused on the eradication of the worst 

forms of child labor, including bonded or forced labor, child prostitution, and work under hazardous 

conditions. We have also bolstered the U.S. trade and labor agenda through ILAB analyses of labor laws and 

the worker rights situation of our trading partners.

Commitment to Progress within the WTO. To help maintain the momentum after the Doha agreement, 

WTO Members agreed that Mexico would chair the mid-term review of progress at the September 2003 

Ministerial in Cancun. This meeting will provide WTO Members with the opportunity to chart a course for 

the final phase of negotiations. We welcome the leadership role that Mexico is playing by hosting this 

important meeting. 

As negotiations progress, the United States will be placing special emphasis on a continued effort to ensure 

the involvement of the poorest and least developed nations, in order to assist them in securing the benefits of 

trade and to help keep all WTO Members effectively invested in the process. In 2002, we reaffirmed the 

U.S. commitment to the principle of special differential treatment for least developed countries in order to 

better integrate them into the global trading system, and devoted unprecedented resources to help such 

countries build the capacity to take part in trade negotiations, implement the rules, and seize opportunities. 

We have acted in partnership with the Inter-American Development Bank to integrate trade and finance, and 

we are urging the World Bank and the IMF to back their rhetoric on trade with resources.

Monitoring China’s and Taiwan’s Compliance with WTO Obligations

In 2001, the United States played a key role in breaking through logjams to complete the historic accessions 

to the WTO of China (after a 15-year effort) and Taiwan (after a 9-year effort). This achievement built on 

the work of four U.S. Administrations. To achieve a successful result, we solved many multilateral issues, 

including those relating to agriculture, trading rights, distribution, and insurance, while navigating the 

political sensitivities to enable China and Taiwan to join the WTO within 24 hours of one another. 

Throughout 2002, the Bush Administration worked closely with other countries, as well as the private 

sector, to monitor China’s and Taiwan’s compliance with the terms of their WTO membership. On 

December 11, 2002—the first anniversary of China’s accession to the WTO—USTR published a report 

prepared pursuant to section 421 of the U.S.-China Relations Act of 2000. The report updates Congress on 

China’s compliance. 

Overall, during the first year of its WTO membership, China made significant progress in implementing its 

WTO commitments, although much is left to do. It made numerous required systemic changes and 

implemented specific commitments, such as tariff reductions, the removal of numerous non-tariff barriers, 

and the issuance of regulations to increase market access for foreign firms in a variety of services sectors. 

Nevertheless, we have serious concerns about areas where implementation has not yet occurred or is 

inadequate—particularly in agriculture, intellectual property rights enforcement, and certain services sectors.

An extensive interagency team of experts closely monitors China’s WTO compliance efforts. This effort is 
7

overseen by the Trade Policy Staff Committee (TPSC) Subcommittee on China WTO Compliance, which is 

composed of experts from USTR, the Departments of Commerce, State, Agriculture, Treasury, and the U.S. 

Patent and Trademark Office. It works closely with State Department economic officers, Foreign 

Commercial Service officers and Market Access and Compliance officers from the Commerce Department, 

Foreign Agricultural Service officers and Customs attaches at the U.S. Embassy and Consulates General in 

China, who are active in gathering and analyzing information, maintaining regular contacts with U.S. 

industries operating in China, and maintaining regular contacts with Chinese government officials at key 

ministries and agencies.

When compliance problems arose in 2002, the Administration used all available means to obtain China’s 

full cooperation, including intervention at the highest levels of government. Throughout the year, USTR 

worked closely with affected U.S. industries on compliance concerns, and utilized bilateral channels through 

multiple agencies to press them. The Administration also broadened enforcement efforts by working on 

China issues with like-minded WTO Members through the Transitional Review Mechanism and on an ad 

hoc basis. Through these efforts, the Administration made progress on a number of fronts. For example, we 

addressed and continue to monitor a series of problems arising from China’s new biotechnology regulations 

that threatened U.S. soybean exports ($1 billion worth in 2001) and other commodities. In the services area, 

the Administration successfully pressed China to modify new measures that threatened to restrict access by 

American express delivery firms, and we made progress in dealing with the concerns of U.S. insurance 

companies regarding China’s use of excessively-high capitalization requirements and other prudential 

standards. USTR also established a regular dialogue on compliance with China’s lead trade agency, 

MOFTEC, in September 2002. This dialogue is designed to bring all relevant Chinese ministries and 

agencies together in one forum to facilitate the resolution of outstanding contentious issues.

Taiwan’s accession to the WTO has increased access for a wide range of U.S. goods and services, including 

agricultural exports, during 2002. However, we continue to track potential compliance problems with 

Taiwan’s WTO commitments, while we work to address existing problems regarding market access for 

agriculture goods, intellectual property rights protection, and Taiwan’s telecommunications services market. 

 Throughout the year, the Administration worked closely with U.S. industries and other agencies on these 

compliance and other market access concerns. We used all available bilateral channels to press the Taiwan 

authorities to address shortcomings in these areas.

The Administration will continue this crucial work in 2003, both to address unresolved concerns and to 

tackle any new problems that arise. The backing we have received from the Congress—in terms of 

resources and attention—has been and will remain fundamental to the achievement of our mission. We will 

work closely with U.S. businesses, farmers, and labor groups—and with China and Taiwan—to address 

problems and take action when necessary. 

Advancing Russia’s Accession to the WTO

The United States has begun a new era in its relations with Russia. Whether in the realms of security, 

foreign policy, or economics, President Bush has emphasized the need to move beyond Cold War strictures 

and stereotypes. 

To take another step towards closing out the history books of the Cold War, the President has urged the 

Congress to finally end the application of the Jackson-Vanik amendment to Russia. It has been over a 

decade since the unification of Germany in 1990 and the dissolution of the Soviet Union in 1991. 

Furthermore, Russia has been in full compliance with Jackson-Vanik’s emigration provisions since 1994. 

As we move ahead, the Administration will continue consulting closely with various groups on the 
8

protection of freedom of religion and other human rights in conjunction with this action.

In 2003, we will continue our intensified effort to negotiate the terms of Russia’s accession to the WTO on 

commercially meaningful terms. President Putin has made WTO membership and integration into the global 

trading system a priority. We will support Russia as it promotes reforms, further establishes the rule of law 

in the economy, and adheres to WTO commitments that support a more open economy. This effort needs to 

include action by the Duma to establish a fully effective legal infrastructure for a market economy. 

To achieve a successful WTO accession, Russia must abide by multilateral trade rules, and the United States 

and 144 other member nations will insist on that course as talks proceed. Working closely with the 

Congress, the Administration will stress the need for Russia to offer fair market access in important U.S. 

export sectors—in agriculture and financial services, for example—and to adhere to international standards 

in areas such as food safety. Unfortunately, Russia’s actions on poultry and other meats has sent a negative 

signal about the seriousness of its commitment to join the WTO. If Russia continues down this path, it risks 

losing the benefits of WTO membership—and even current levels of market access for its exports.

Advancing Hemispheric Trade Liberalization: The Free Trade Area of the Americas

On the regional front, this Administration has been pressing ahead to create the largest free trade zone in 

history, covering 800 million people and stretching from Alaska to Tierra del Fuego: the Free Trade Area 

of the Americas. This endeavor will be trying and difficult, but when completed it will be an historic 

fulfillment of a U.S. vision dating to the 19th Century. 

In November 2002 in Quito, Ecuador, the United States energized the FTAA negotiations by agreeing on a 

firm schedule and deadlines for specific offers to cut tariffs and reduce barriers. Ministers recommitted 

themselves to the 2005 deadline for completion of negotiations, delivered new instructions to negotiating 

groups, released an updated draft negotiating text, and agreed to tariff reductions from applied rates rather 

than WTO bound rates. Upon the close of the Quito Ministerial, the United States and Brazil assumed cochairmanship of the FTAA process, providing an opportunity for cooperation with a key partner and 

economic power as the pace of negotiations accelerates. Looking ahead, the United States will advance 

bold market access proposals for manufactured and consumer goods, agriculture, services, government 

procurement, and investment. We will also host the next Ministerial meeting in Miami in November 2003.

President Bush, like his counterparts throughout the Americas, knows that the FTAA is crucial in our quest 

to build a prosperous and secure hemisphere. Free trade offers the first and best hope of creating the 

economic growth necessary to alleviate endemic poverty and raise living standards throughout the 

Americas. The scope of our endeavor is grand: The FTAA will be the largest free market in the world, 

with a combined gross domestic product of over $13 trillion.

Hemispheric openness is important in its own right, but it will also have a multiplier effect on growth by 

encouraging fuller participation by those countries in the Americas that have been bystanders in the global 

trading system. FTAA negotiators are developing provisions that will provide trade capacity building and 

technical assistance to smaller economies in the Americas, especially in the Caribbean. Our FTAA offers 

also take into account the special circumstances of these small island nations by building on existing 

patterns of preferential openness.

Fundamental freedoms and human rights are core principles of the Summit of the Americas process, as 

reiterated in Quito this year. The FTAA will strengthen democracy throughout the Hemisphere—a 

proposition that is not just theory, but fact. Time and time again, the world has witnessed the evolution 
9

from open markets to open political systems, from South Korea to Taiwan to Mexico. Free trade will 

likewise bolster young democracies in the Americas and the Caribbean. 

During the Quito Ministerial, the governments of the Americas also affirmed their commitment to the 

observance of internationally recognized labor standards. This echoed the agreement by the hemisphere’s 

heads of state at the Third Summit of the Americas to “promote compliance with internationally 

recognized core labor standards.” The Inter-American Conference of Ministers of Labor (IACML) is 

responsible for implementing the labor-related mandates of the Third Summit of the Americas and 

represents a parallel process for addressing the labor implications of economic integration. The 

Department of Labor represents the United States in the IACML and co-chairs the working group charged 

with examining the labor dimensions of the Summit of the Americas process. In the Quito Declaration, 

Trade Ministers also noted the work of the IACML with respect to globalization and labor and requested 

that the results of that work be shared with them.

As we continue building support for the FTAA, it will be important to point to the successful record of 

America’s first regional trade agreement, the decade-old NAFTA. Throughout the months ahead, we will 

continue to publicize NAFTA’s substantial benefits and consider additional ways to deepen integration 

throughout the Americas. NAFTA has been a case study in globalization along a 2,000-mile border; it 

demonstrates how free trade between developed and developing countries can boost prosperity, economic 

stability, productive integration, and the development of civil society.

Pressing Other Regional and Bilateral Agreements

Whether the cause is democracy, expanding commercial opportunity, security, economic integration or free 

trade, advocates of reform often need to move towards a broad goal step by step—working with willing 

partners, building coalitions, and gradually expanding the circle of cooperation. Just as modern business 

markets rely on the integration of networks, we need a web of mutually reinforcing regional and bilateral 

trade agreements to meet diverse commercial, economic, developmental and political challenges. 

The Bush Administration recently completed free trade negotiations with Chile and Singapore. Both of 

these agreements offer increased opportunities for U.S. businesses, farmers, and workers and send a 

message to the world that the United States will embrace closer ties with nations that are committed to 

open markets—whether in the Western Hemisphere, across the Pacific, or beyond the Atlantic. As we 

moved these FTA negotiations toward completion, we worked closely with the Congress—and the Senate 

Finance and House Ways and Means Committees in particular—to determine how best to address the 

concerns and interests of the Congress and the American people. For example, the Chile and Singapore 

agreements successfully incorporate new approaches to governing e-commerce, labor, investment, and the 

environment that were articulated in the Trade Act of 2002.

In 2002 we also notified the Congress and then launched FTA negotiations with a number of new 

countries: 

• With Morocco, a leading moderate and reformist Arab nation that offers commercial opportunity, can 

serve as a model and hub for a region that can gain enormously from economic reforms, and has been 

a staunch partner in the global effort to defeat terrorism. 
10

• With the five nations of the Central American Common Market—Costa Rica, El Salvador, Guatemala, 

Honduras, and Nicaragua—to encourage economic development and democracy in a region that has 

shown its potential by already representing $20 billion in trade with the United States and which has 

made great progress over the decade. 

• With the five members of the Southern African Customs Union (Botswana, Lesotho, Namibia, South 

Africa, and Swaziland), which will be America’s first free trade agreement with Sub-Saharan African 

nations. The 48 countries of sub-Saharan Africa represent a largely untapped market for American 

business. As these countries progress economically, they will require substantial new infrastructure in 

sectors as diverse as energy, agriculture, and telecommunications—areas in which U.S. firms lead the 

world. Thanks to the President’s leadership on Africa, there is today a unique convergence of 

opportunities for us to promote African development and expand commercial opportunities for 

American businesses. 

• And with Australia, our 14th largest trading partner and a growing economy, a key U.S. ally, and an 

important center in the network of American companies doing business in the Asia-Pacific region.

These regional and bilateral FTAs will bring substantial economic gains to American families, workers, 

consumers, farmers, and businesses. They also promote the broader U.S. trade agenda by serving as 

models, breaking new negotiating ground, and setting high standards. Our agreements with Chile and 

Singapore, for example, have helped advance U.S. interests in areas such as e-commerce, intellectual 

property, labor and environmental standards, regulatory transparency, and the burgeoning services trade. 

As we work intensively on these FTA negotiations, the United States is learning about the perspectives of 

our trading partners. Our FTA partners are the vanguard of a new global coalition for open markets. 

These partners are also helping us to expand support for free trade at home. Each set of talks enables 

legislators and the public to see the practical benefits of more open trade, often with societies of special 

interest for reasons of history, geography, security, or other ties. The Bush Administration’s FTA 

initiatives have helped shift the debate in America to the agenda of opening markets, and away from the 

protectionists’ defensive agenda of closing them.

Our regional and bilateral free-trade agenda conveys the message that America is open to trade 

liberalization with all regions—Latin America, sub-Saharan Africa, the Asia-Pacific, the Arab world—and 

with both developing and developed economies. In October 2002, President Bush laid the groundwork for 

future market-opening initiatives by announcing the Enterprise for ASEAN Initiative. The EAI offers the 

prospect of bilateral FTAs between the United States and those members of the Association of Southeast 

Asian Nations that are ready to meet the high standards of a U.S. FTA, and also pledges to assist countries 

in joining the WTO. This past year we also signed Trade and Investment Framework Agreements with Sri 

Lanka, Brunei, the West African Monetary Union, Tunisia, Bahrain, and Thailand. In addition, the United 

States signed a Comprehensive Trade Package with Hungary in 2002 that lowered barriers to $180 million 

worth of U.S. exports per year.

We look forward to discussing these initiatives with the appropriate committees in the Congress, and we 

will seek continued input on these and other possible FTAs. 

Over the coming year, we intend to press the goals articulated in the Trade Act of 2002. The President’s 
11

regional and bilateral free trade agenda—combined with a clear commitment to reducing global barriers to 

trade through the WTO—will leverage the American economy’s size and attractiveness to stimulate 

competition for openness, moving the world closer, step-by-step, towards the goal of comprehensive free 

trade. 

Building New Bridges: Preferential Trade Programs and Capacity Building

A free and open trading system is critical for the developing world. As President Bush has pointed out, 

“Open trade fuels the engines of economic growth that creates new jobs and new income. It applies the 

power of markets to the needs of the poor. It spurs the process of economic and legal reform. It helps 

dismantle protectionist bureaucracies that stifle incentive and invite corruption. And open trade reinforces 

the habits of liberty that sustain democracy over the long term.” 

Over the past year, the United States has matched its rhetoric on helping developing countries through 

trade with action. First, the Trade Act of 2002 renewed the Generalized System of Preferences (GSP), 

which enables some 3,500 products from 140 developing economies to enter the United States free of 

duties. We have invited countries to submit petitions for products that should be added to the GSP list.

Second, the new Trade Act extended and augmented the Andean Trade Preference Act (ATPA)—which 

President George H.W. Bush first implemented in 1991—by increasing the list of duty-free products to 

some 6,300. ATPA is a vital program for the four Andean democracies on the front lines of the fight 

against narcotics production and trafficking.

Third, the Act expanded the Caribbean Trade Partnership Act by liberalizing apparel provisions, providing 

a vital economic stepping stone for some of the poorest countries in our hemisphere.

Finally, we continued the important implementation of the far-sighted African Growth and Opportunity 

Act (AGOA), which Congress enacted in May 2000 and expanded with the “AGOA II” provisions of the 

Trade Act of 2002. AGOA opens the door for African nations to enter the trading system effectively, 

increases opportunities for U.S. exports and businesses, supports government reforms and transparency, 

and widens the recognition of the benefits of trade in the United States. It extends duty-free and quota-free 

access to the U.S. market for nearly all goods produced in the 38 eligible beneficiary nations of subSaharan Africa. Moreover, by providing incentives for African countries to open their markets and 

improve the environment for trade and investment, AGOA has helped to boost American exports to the 

region. U.S. merchandise exports to sub-Saharan Africa are up by 25 percent since AGOA’s enactment, to 

nearly $7 billion last year, led by aircraft, oil and gas field equipment, and motor vehicles and spare parts.

The second annual AGOA forum in January 2003 provided an opportunity to evaluate AGOA’s 

achievements and address implementation challenges. Gathering in Mauritius, Members of Congress, 

Administration officials, and business representatives all learned more about AGOA success stories, such 

as new jobs and investments in Cape Verde, Senegal, Rwanda, and Uganda. The real, positive experiences 

of American businesses and their African hosts provide models to emulate and help us better address the 

challenges inherent in promoting growth and commercial opportunities in Africa—particularly the 

challenge of maximizing and realizing tangible benefits across all the countries in the region.

Moving forward, the Bush Administration is committed to expanding America’s economic links with 

Africa. Most important, we are asking the Congress to extend AGOA beyond its 2008 expiration date. 
12

We have opened Regional Hubs for Global Competitiveness in Botswana, Kenya, and Ghana in 2002—

each staffed with technical experts who will provide support on WTO issues, AGOA implementation, 

private sector development, and other trade topics. We are adding a specialist to each Hub from the 

Department of Agriculture to help African farm exports meet U.S. health and safety standards. Finally, we 

have designated a new Deputy Assistant Trade Representative who focuses exclusively on trade 

capacity-building activities.

Through AGOA and our other preferential trade programs, the Bush Administration will lend increasing 

support to developing countries that desire to take part in trade negotiations, implement complex 

agreements, and use trade as an engine of economic growth. We will build on current partnerships among 

agencies of the U.S. Government—such as AID, OPIC, and the Department of Agriculture—and with 

multilateral and regional institutions. Congressional advice, encouragement, and support is vital to this 

endeavor. 

Monitoring and Enforcing Trade Agreements

For the United States to maintain an effective trade policy and an open international trading system, our 

citizens must have confidence that trade is fair and works for the good of our people. That means ensuring 

that other countries live up to their obligations under the trade agreements they sign. Over the past year, 

we have successfully resolved disputes and aggressively monitored and enforced U.S. rights under 

international trade agreements and U.S. court rulings in ways that benefit American producers, exporters, 

and consumers. Sectors that have been affected include entertainment, textiles, high-technology, 

automobiles, and agriculture.

In 2003, we will seek to resolve favorably other trade disputes in a way that best serves America’s 

interests. Among the most prominent cases are telecommunications with Mexico; softwood lumber with 

Canada; beef with the European Union; the Foreign Sales Corporation (FSC) WTO case brought by the 

EU; and apples with Japan. In the FSC case, the Administration will consult and work closely with the 

Congress to determine an approach that will meet our WTO obligations.

We intend to continue addressing unjustified science and health measures that impede farm exports, and 

undermine safe and productive innovation in agriculture. We will be vigilant in defending the right to 

market safe agricultural biotechnology products in Europe and elsewhere—the continuation of a long 

tradition in agricultural progress—which holds out great potential for mitigating the environmental impact 

of food production, nourishing the world’s expanding population, improving health and nutrition, and 

bolstering farmers’ productivity and prosperity around the world, most especially in the developing world.
13

Preserving Safeguards and Trade Laws Against Unfair Practices

One of the principal negotiating objectives of the Trade Act of 2002 is to “preserve the ability of the 

United States to enforce rigorously its trade laws, including the antidumping, countervailing duty, and 

safeguard laws, and avoid agreements that lessen the effectiveness of domestic and international 

disciplines on unfair trade, especially dumping and subsidies, or that lessen the effectiveness of domestic 

and international safeguard provisions, in order to ensure that United States workers, agricultural 

producers, and firms can compete fully on fair terms and enjoy the benefits of reciprocal trade 

concessions.”

Maintaining public support for open trade means providing appropriate assistance to those industries that 

find it difficult to adjust promptly to the rapid changes unleashed by technology, trade, and other forces. 

We will continue our commitment to the effective use of statutory safeguards, consistent with WTO rules, 

to assist American producers. Used properly, these safeguards—for example, Section 201 of the Trade 

Act of 1974—can give producers vital breathing space while they restructure and regain competitiveness.

On March 5, 2002, for instance, in response to a unanimous finding by the U.S. International Trade 

Commission (ITC) that imports were a substantial cause of serious injury to the U.S. steel industry, the 

President announced temporary tariffs on imports of certain steel products. The ITC safeguard 

investigation was part of a three-pronged initiative announced on June 5, 2001, that also included 

negotiations at the Organization for Economic Cooperation and Development (OECD) to encourage the 

reduction of excess global capacity and to eliminate the market-distorting subsidies that led to current 

overcapacity. 

The President’s approach has given the U.S. steel industry and its workers the chance to adjust to import 

competition while safeguarding the needs of steel consumers. The Section 201 remedy preserved access to 

specialty steels by excluding over 700 products from the increased tariffs. In addition, the tariffs did not 

apply to imports from countries that have committed to the highest level of reciprocal market access—our 

NAFTA and other FTA partners. Most developing countries have also continued to enjoy open access to 

the U.S. steel market.

Since the temporary tariffs took effect, domestic steel companies have taken serious steps to restructure 

and increase productivity. As of January 2003, these steps included: International Steel Group’s (ISG) 

purchase of the steelmaking assets of LTV Corporation and Acme Steel; ISG’s offer to purchase the assets 

of Bethlehem Steel; two competing offers to purchase National Steel Corp.; the negotiation of a 

groundbreaking labor contract between the United Steelworkers of America and ISG; and numerous 

mergers and acquisitions in the minimill sector.

We made important progress in the OECD steel negotiations in 2002. Participants established a peer 

review process to examine global steel capacity closures and decided to immediately develop the elements 

of an agreement for cutting trade-distorting subsidies in steel.

Given America’s relative openness, strong, effective laws against unfair practices are important for 

maintaining domestic support for trade. This Administration has used and continues to back the use of 

these laws. At the same time, however, we recognize that the recent proliferation overseas of antidumping 

laws in particular has resulted in abuses against U.S. exporters by countries that do not apply their laws in 

a fair and transparent manner. Our objective in the WTO negotiations is to curb abuses while preserving 
14

the basic concepts, principles, and effectiveness of trade remedy laws. Moreover, the United States has 

insisted that any discussion of trade remedy laws must also address the underlying subsidy and dumping 

practices that give rise to the need for trade remedies in the first place.

We continue to advance an affirmative U.S. agenda, targeting the increasing misuse of these laws, 

particularly by developing countries, to block U.S. exports. From 1995 through the first half of 2002, there 

were 105 investigations by 18 countries of U.S. exporters. The most frequently targeted U.S. industries are 

chemical, steel, and other metal producers, although U.S. farm products are increasingly being blocked. 

The WTO negotiations will help us address significant shortcomings in foreign antidumping and 

countervailing duty procedures by more clearly defining the specific circumstances that give rise to unfair 

trade, improving transparency in how antidumping laws are applied, and strengthening due process. 

Aligning Trade with America’s Values

America’s trade agenda needs to be aligned securely with the values of our society. Trade promotes 

freedom by supporting the development of the private sector, encouraging the rule of law, spurring 

economic liberty, and increasing freedom of choice. Trade also serves our security interests in the 

campaign against terrorism by helping to tackle the global challenges of poverty and privation. Poverty 

does not cause terrorism, but there is little doubt that poor, fragmented societies can become havens in 

which terrorists can thrive.

Developing countries have much to gain by joining the global trading system. From Seoul to Santiago, 

when trade grows, income follows. The World Bank conducted a study of developing countries that 

opened themselves to global competition in the 1990s and of those that did not. The income per person for 

globalizing developing countries grew by five percent a year, while incomes in non-globalizing poor 

countries grew just over one percent. Developing countries that embraced trade and openness sharply 

reduced absolute poverty rates over the last 20 years, and the income levels of the poorest households have 

kept up with the growth.

By knitting Americans to peoples beyond our shores, new U.S. trade agreements can also encourage 

reforms that will help establish the basic building blocks for long-term development in open societies, 

including:

• The rule of law: Trade agreements encourage the development of enforceable contracts and fair, 

transparent governance—helping to expose corruption.

 

• Private property rights: These are a necessary ingredient for economic development because they 

encourage saving, investment, exchange, and entrepreneurship. Trade agreements bolster property 

rights by safeguarding the right to establish businesses, guaranteeing that investments will not be 

appropriated arbitrarily, supporting privatization, and fostering knowledge industries.

 

• Competition: Free trade fosters competition, the hallmark of successful economies. Developing 

countries suffer at the hands of elites who cling to their positions by depriving ordinary citizens of 

less-expensive, better-quality goods and services that can be had through competition. Free trade 

agreements attack manipulated licensing systems, state monopolies and oligarchies that keep 

affordable products off store shelves.
15

 

• Sectoral reform: Trade agreements drive market reforms in sectors ranging from e-commerce to 

farming. For example, in our FTA discussions with Morocco, we are examining how we can work 

with Morocco’s World Bank program to restructure its agricultural sector. The United States has also 

advanced an aggressive agriculture reform proposal in the WTO negotiations that would eliminate 

$100 billion globally in trade-distorting farm subsidies and lead to better agricultural policies in 

developed and developing countries alike.

 

• Regional integration: The lesson of the European Union and NAFTA is that location matters, in 

economics as in politics. Therefore, as FTA negotiations with democracies in Central America and 

Southern Africa progress, we will explore how best to support beneficial regional integration and 

promote growth clusters.

From its first days, the Bush Administration recognized that poor countries cannot succeed with economic 

reform and growth if they are eviscerated by pandemics. Lower-priced medicines and appropriate 

flexibility on the implementation of intellectual property protection must be part of a larger global response 

to health pandemics, involving education, prevention, care, training, and treatment. The United States is 

committed to supplying funds for HIV/AIDS, tuberculosis, and malaria assistance, and funding related 

research, prevention, care, and treatment programs, much of which helps to address problems in 

developing countries. 

President Bush has made fighting HIV/AIDS a priority of U.S. foreign policy. The United States is the 

international leader in combating this pandemic. The seriousness of the Administration’s commitment to 

battle AIDS was recently underscored by President Bush’s dramatic call for a tripling of U.S. AIDS 

spending—to $15 billion over the next five years—to establish an Emergency Plan for AIDS Relief. This 

comprehensive program is designed to prevent 7 million new AIDS infections, treat at least 2 million 

people with life-extending drugs, and provide humane care for millions of people suffering from AIDS, 

and to meet the needs of children orphaned by AIDS. In 2002, President Bush launched the $500 million 

Mother-and-Child HIV Prevention Initiative designed to prevent mother-to-child transmissions. 

Additionally, the United States was the first contributor—and remains the largest—to the international 

“Global Fund to Fight AIDS, TB and Malaria.” 

 

Free trade is about freedom. This value is at the heart of our larger reform and development agenda. Just 

as U.S. economic policy after World War II helped establish democracy in Western Europe and Japan, 

today’s free trade agenda will both open new markets for the United States and strengthen fragile 

democracies in Central and South America, Africa, and Asia.

Promoting a Cleaner Environment, Better Working Conditions, and Investment Protection

Free trade promotes free markets, economic growth, expanded employment opportunities, and higher 

incomes. As countries grow wealthier, their citizens demand better working conditions and a cleaner 

environment. Economic growth gives governments more resources and incentives to promote and enforce 

strong standards in these areas. 

The Trade Act of 2002 gave us detailed guidance on the continued incorporation of labor and 

environmental issues into U.S. trade agreements, representing a delicate balance across the spectrum of 

concerns. The Administration has been drawing on this guidance—and would welcome additional 
16

advice—as we pursue these topics in our current trade negotiations. Similarly, we are conducting 

discussions with non-governmental organizations and the business community to ascertain how we can 

address concerns posed about investment provisions in trade agreements. 

The Chile and Singapore FTAs incorporate Congressional guidance into a robust environment and labor 

packages that place obligations within the text of these agreements and emphasize the importance of 

cooperative action. These FTAs obligate signatories to set high levels of environmental and labor 

protection, strive to improve those protections, and not fail to effectively enforce their domestic laws in a 

manner affecting trade. This “effective enforcement provision” is subject to dispute settlement. 

In the case of Singapore, a small developed country with limited available land, cooperative efforts will 

focus both on combating illegal wildlife trade and on building environmental capacity in Singapore’s 

Southeast Asian neighbors. With Chile, we recognized a need for broader initiatives, both to address the 

special needs of a natural resource-based economy and to build environmental capacity in the Southern 

Cone. The U.S.-Chile FTA sets out eight initial cooperative projects and calls for the negotiation of a 

separate environmental cooperation agreement. 

On labor, the Trade Act of 2002 stresses the need “to promote respect for worker rights and the rights of 

children consistent with the core labor standards of the International Labor Organization.” In our FTAs 

with Chile and Singapore, we reaffirmed our respective obligations as members of the ILO and committed 

to uphold the ILO Declaration on Fundamental Principles and Rights at Work. We examined carefully at 

the domestic labor laws in Chile and Singapore and verified that their laws did, in fact, adequately respect 

the ILO’s core worker rights. We also achieved a principal negotiating objective of TPA by including

labor provisions that obligate signatories to effectively enforce domestic labor laws when they may affect 

trade. In support of the goal to promote respect for worker rights, the United States and Chile agreed to 

move forward on two labor technical cooperation projects—labor justice reform and labor law compliance.

 In 2003, the United States will seek to negotiate labor and environment clauses in our trade agreements 

with the five Central American countries, Morocco, Southern Africa, and Australia.

The Chile and Singapore FTAs include an innovative system of monetary assessments to help settle labor 

and environmental disputes in a manner equivalent to how we resolve commercial disputes. In these 

agreements, the first course of action in a labor, environmental, or commercial dispute will be consultation. 

 If this fails, however, all disputes will be handled through the same settlement procedures. If these 

procedures fail to bring an offending party into compliance, fines are a possibility—the funds from which 

will be earmarked for measures to address the underlying labor or environmental problems. This system 

creates an incentive to comply to avoid fines, and also serves to reduce the likelihood of future noncompliance by using funds to remedy enforcement deficiencies. Only as a last resort—in cases of noncompliance and a failure to pay a monetary assessment—will FTA signatories have recourse to withdraw 

trade benefits. And those actions must be, as the Congress stated, “appropriate” to the severity of the 

violation.

The Administration has also addressed Congressional concerns about the intersections among investment, 

labor, and environmental protections. The Singapore and Chile FTAs provide greater transparency and 

accountability in the disputes that investors can bring against host governments and ensure that U.S. 

investors abroad get protections comparable to those afforded under U.S. domestic law, while making clear 

that foreign investors in the United States do not have greater substantive rights than domestic companies. 

These agreements incorporate foreign investment negotiating objectives from the Trade Act of 2002, 
17

including the authorization of amicus curiae submissions and public access to investor-state arbitration 

hearings and documents. In addition, the United States, Singapore, and Chile committed to explore the 

development and use of appellate mechanisms in investor-state dispute settlement and agreed on provisions 

aimed at eliminating and deterring frivolous claims. Drawing upon U.S. legal principles and practice, we 

clarified the obligations on expropriation and “fair and equitable” treatment.

In the Doha Development Agenda, we are taking similar practical steps to demonstrate that good 

environmental, labor, investment policies can be economically sound. In addition, we are working to 

encourage a healthy “network” among multilateral environmental agreements and the WTO, enhance 

institutional cooperation, and foster compatible, supportive regimes. This precedent will help to 

interconnect the WTO with other specialized organizations, such as the ILO. 

We know the importance of these topics for many Members of Congress who want to ensure that the 

benefits of trade and openness in spurring growth, productivity, and higher incomes are accompanied by 

enhanced scrutiny and transparency of labor and environmental laws and conditions. Some stress the need 

to safeguard America’s sovereign rights in setting our own standards, while other Members want to deploy 

trade agreements to compel other nations to accept the standards we prefer. Some believe that the 

influence and investment of U.S. companies abroad will lead to higher standards and codes of behavior, 

while others fear the reach of globalized companies. It is our goal to use the guidance the Congress has 

given to bridge the differences, build a stronger consensus, and make a real, positive difference for 

America and the world.

Conclusion: Pressing the Free Trade Agenda Forward

In the coming year, the United States will continue to make the case for the win-win nature of trade. 

Expanded trade—imports as well as exports—improves the well being of people everywhere. Trade 

promotes more competitive businesses, as well as the availability of more choices of goods and inputs, 

with lower prices.

America’s economy depends on trade. Businesses, small and large, sell and ship their products around the 

globe. At the same time, U.S. manufacturers rely on imported inputs to production to stay competitive 

with foreign producers. Over the past decade, U.S. exports accounted for about a quarter of our country’s 

economic growth. Our exports support about 12 million jobs—jobs that pay wages 13 percent to 18 

percent higher than the U.S. average because they have higher productivity. One in three acres on 

American farms—accounting for over $56 billion in annual sales—is planted for export. And opening 

foreign markets is critical to the future growth of America’s diverse services sector.

President Bush understands the interconnection between “a world that trades in freedom” and America’s 

interests in promoting a strong world economy, lifting societies out of poverty, and reinforcing the habits 

of liberty. Having reestablished U.S. trade leadership around the globe, the President is now working with 

Congress on an activist agenda to expand economic freedom at home and abroad.

Robert B. Zoellick

United States Trade Representative

March 1, 2003
1

The information in this section is provided pursuant to the reporting requirements contained in sections

122 and 124 of the Uruguay Round Agreements Act.

18

II. The World Trade Organization1

A. Introduction

Over the past year, Members of the World Trade Organization embarked on the important business of

moving forward a major round of global trade negotiations – the Doha Development Agenda (DDA),

scheduled to be completed by January 1, 2005. The Doha Agenda is heavily oriented towards market

access issues, with agricultural reform at the heart of the agenda. These negotiations, along with the dayto-day implementation of the rules governing world trade, mark a new and welcome phase of global trade

liberalization and strengthening of the trading system that is so vital to the growth of the world economy

and continued peace and prosperity. 

This chapter outlines the progress in the work program of the WTO, and most importantly the work ahead

for 2003, beginning with the negotiations launched at Doha and the prospects for the WTO’s Fifth

Ministerial Meeting in Cancun, Mexico, September 10-14, 2003. In 2002, WTO Members moved swiftly

to organize the negotiations and then turned their attention to the market opening agenda of the

negotiations. The United States has been an active participant in the negotiations, pressing other

Members to pursue bold and aggressive trade liberalization and agricultural reform. At the same time,

given the emphasis on development, the United States and other WTO Members have provided

unprecedented contributions to strengthen technical assistance and capacity building to ensure the

participation of all Members in the negotiations. After detailing the DDA’s progress to date, this chapter

follows with a review of the implementation of existing Agreements, including the critical negotiations to

expand the WTO’s membership to include new members seeking to reform their economies and join the

rules-based system of the WTO.

B. Trade Negotiations Committee and The Doha Development Agenda

The Trade Negotiations Committee (TNC), established at the WTO’s Fourth Ministerial Conference in

Doha, Qatar, oversees the agenda and negotiations in cooperation with the WTO General Council. The

TNC met regularly throughout 2002 to supervise negotiations. Early in 2002, WTO Members established

the various negotiating bodies and designated chairs to lead the various groups and manage the agenda (a

complete listing of the bodies for the TNC and General Council is provided in Annex II). Importantly,

Members agreed to appoint the WTO Director General to serve as the Chair of the TNC. Once the TNC

was established, Members moved ahead to pursue the substantive issues in the negotiations, aided by the

preparatory work of the WTO’s built-in agenda on agriculture and services.

WTO Members reached the end of 2002 with far-reaching proposals submitted in all areas of the

negotiations, in particular on market access. The work in 2003 will be devoted to preparations for the

Ministerial Conference in Cancun, where Ministers are required to review progress at the mid-point of the
19

DDA negotiations and convene a Ministerial Conference in line with Article IV of the Marrakesh

Agreement Establishing the WTO. Under Article IV, the WTO is required to hold a ministerial

conference at least once every two years. Given the WTO’s ongoing responsibility to supervise and assist

in the implementation of commitments, for the further liberalization of trade, and for the resolution of

disputes, the Members believed it would be important for Ministers to meet on a regular basis in order to

provide necessary direction and political oversight to the organization’s work. The regular cycle of

ministerial meetings was an important innovation for the WTO. 

WTO Members in the coming year will be working to build consensus in all areas of the negotiations. As

reported in November 2001, the agreements reached at the Doha meeting open a new chapter for the

WTO. Unlike previous trade negotiating rounds, it is widely recognized that developing countries, which

now comprise more than two-thirds of the WTO’s membership, are at the center of the new negotiations. 

In addition to our traditionally close working relationship with the European Union and our developed

country partners, the United States worked closely with our developing country partners throughout the

year in setting the agenda for negotiations. This dialogue with developing countries reached from the

Cairns Group on Agriculture to our partners in sub-Saharan Africa. To prepare the approximately 35

proposals and submissions tabled in 2002, the United States solicited public comments in the Federal

Register and engaged in an extensive consultation process with Congress and the private sector. 

Prospects for 2003

The pace of negotiations will intensify in preparation for the Cancun meeting. WTO Members will need

to move expeditiously to ensure that by the time of the Cancun meeting, sufficient progress is made in the

negotiations to permit these historic negotiations to conclude on schedule, by January 1, 2005. Just as

U.S. leadership was essential to the initiation of negotiations at Doha, an aggressive and active posture by

the United States will be critical to guarantee success for America’s interests. Key subjects will include:

• Agriculture: In July 2002, the United States capped its intensive campaign for agricultural

reform by tabling a far-reaching and aggressive proposal addressing each of the three pillars of

the negotiations: market access, export subsidies and domestic support. By March 2003, the

negotiating schedule calls for an agreement on the “modalities”, or the extent to which WTO

Members will cut barriers to market access and export subsidies. At the Cancun meeting,

Ministers will assess progress and provide additional guidance on the next steps. The WTO

negotiations in agriculture are closely linked to the subject matter of the negotiations for a Free

Trade Area of the Americas (FTAA). FTAA trading partners are committed to reform in

agriculture that will only be possible in the WTO context (including as it would, commitments

from Europe to address its export subsidies). Rapid progress in 2003, particularly in the first half

of 2003, through substantive, credible proposals, is essential for both the WTO and FTAA

negotiations.

• Non-Agricultural Market Access: The United States has pressed its partners to ensure that new

market access opportunities for manufacturing will keep pace with the progress on agriculture. 

For this reason, the United States tabled a similarly ambitious and bold proposal to eliminate in

two steps all duties on industrial and consumer goods by 2015, utilizing a formula-based

approach. The United States also plans to submit a proposal addressing non-tariff barriers that

impede trade. Negotiators are to agree on modalities for these negotiations before the end of May

2003, at the latest. Working together with Congress and industry, during 2003 we will develop
20

proposals so that we meet the deadline for reaching a consensus on modalities. Past U.S. efforts

have been instrumental in bringing about the Information Technology Agreement, Chemical

Harmonization and a host of other initiatives aimed at eliminating barriers to trade in nonagricultural products. Our efforts in the Doha negotiations show a similar determination and

ambition.

• Services: An aggressive agenda for market opening in services, including audio-visual services,

financial services (including insurance), express delivery services, energy services and

telecommunication services, is being pursued in the negotiations. At the end of June 2002, the

United States and key trading partners made liberalization requests of other Members, and

liberalization offers are to be tabled in March 2003. Since the United States is the world’s leader

in services for the 21st century economy, and services account for 80 percent of U.S. employment,

our efforts in this area continue to be significant. Market opening in services is essential to the

long-term growth of the U.S. economy. For developing countries, services are a great economic

multiplier and essential to their respective development strategies.

• Dispute Settlement: The United States has led efforts to strengthen the rules governing the

settlement of disputes because the system of WTO rules is only as strong as our ability to enforce

our rights under these Agreements. For this reason, the United States has led the efforts to

promote transparency in the operation of dispute settlement. Negotiations will intensify as the

deadline to complete the review of the Dispute Settlement Understanding (DSU) in May 2003

draws near. 

• WTO Rules: Utilizing the solid mandate achieved at Doha, negotiations are now focused on

strengthening the system of trade rules and addressing the underlying causes of unfair trade

practices. American workers need strong and effective trade rules to combat unfair trade

practices, particularly as tariffs decline. While there are no major deadlines in 2003, negotiators

will continue to identify, and more precisely define, issues of concern. The process envisioned in

the WTO should result in strengthened trade rules in antidumping and subsidies, as well as new

disciplines on harmful fisheries subsidies that contribute to overfishing. 

• Trade Facilitation (Customs Procedures): Increasingly, WTO Members are convinced that the

key to developing their economies and combating corruption is in strengthening the trade rules

governing customs procedures to ensure the free flow of goods and services in the new just-intime economy. Strengthening these rules is the eventual aim of work in the WTO. Progress is

crucial, for example, to the success of our express delivery industry. In 2003, the agenda for

trade facilitation will be refined further, building on the successes achieved in the FTA

negotiations with Chile and Singapore. These agreements should provide positive momentum to

the WTO negotiating agenda in this area.

• Environment: The United States has continued to take a practical and pragmatic approach to

these important WTO negotiations, which have started with improving the process of

communication and cooperation between the Secretariats of Multilateral Environmental

Agreements (MEAs) and the WTO. Building on this cooperative spirit, the negotiations will

consider other, more difficult, areas such as the relationship of MEA’s to WTO rules. Along with

our work in market access and rules, we will continue to be vigilant to ensure that these
21

negotiations are not used to introduce protection under the guise of safeguarding the environment. 

The U.S. agenda is aimed at promoting growth, trade and the environment.

• Competition and Investment: In both of these areas, decisions will need to be taken in Cancun

about how negotiations should proceed. Substantial resistance remains, particularly from

developing countries. The United States has taken a constructive approach to these negotiations. 

2003 will be devoted to forging a consensus on a way forward that is acceptable to all WTO

Members and ensures openness and transparency in the regimes of newly-emerging markets. 

• Transparency in Government Procurement: Discussions in 2002 continued on the elements of

an agreement to govern government purchasing. The work in the WTO in 2003 will be aimed at

complementing initiatives underway in other fora, including the G-8, to combat corruption and

unfair trade practices. 

• Trade and Development: An essential ingredient in the DDA has been a more intensive program

of technical assistance and capacity building to integrate developing countries into the trading

system. The United States has pressed the WTO and other international institutions to intensify

their cooperation. Early in 2002, the WTO received pledges of financial support to its trust fund

of more than 30 million Swiss Francs. The United States contribution to WTO technical

assistance exceeded $1.6 million. Success in the negotiations will only be achieved if the United

States and its trading partners focus on the need to integrate developing countries into the

multilateral trading system. 

• Implementation: Work continued in 2002 on the rigorous work program regarding the

implementation of previously negotiated commitments, including issues that were discussed in

the Doha preparatory process. Conclusions were not reached in all areas and this work will

continue in 2003. The most contentious issues involve the treatment of rules issues, particularly

trade-related investment measures and whether to expand the negotiations in the TRIPS

agreement regarding geographical indications beyond wines and spirits. In some cases,

differences may be bridged only through further negotiation, and in still others, a consensus for

action may not emerge. The United States will continue to participate seriously in these

discussions during 2003, and in developing the report that will be provided to the TNC at the end

of the year. 

1. Special Session of the Committee on Agriculture 

Status

At the Fourth WTO Ministerial Conference in Doha, WTO Members agreed to an ambitious mandate for

agriculture, including "substantial improvements in market access; reductions of, with a view to phasing

out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support." WTO

Members also established an ambitious negotiating time line, calling for reform modalities, such as tariff

and subsidy reduction formulas, to be established no later than March 31, 2003 and submission of draft

schedules of specific commitments by the Fifth Ministerial Conference.

The WTO provides multilateral disciplines on agricultural trade policies and serves as a forum for further

negotiations on agricultural trade reform. The WTO is uniquely situated to advance the interests of U.S.
2Current Cairns Group Members are: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa

Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand, and Uruguay.

22

farmers and ranchers because only through WTO rules are U.S. producers and exporters able to impose

disciplines on the broad range of large agricultural producing and consuming Members simultaneously. 

For example, absent a WTO Agreement on Agriculture, there would be no limits on European Union

subsidization nor firm commitments for access to the Japanese market. Negotiations in the WTO provide

the best hope to further open important markets for U.S. farm products and reduce subsidized

competition.

Major Issues in 2002

The United States has taken the lead in calling for substantial reform of agricultural trade policies, across

all Members and all products. The United States has proposed comprehensive reform by reducing high

levels of allowed protection and trade-distorting support through formulas that reduce tariff and subsidy

disparities across countries, as well as strengthening WTO rules on a range of trade-related measures. In

addition, the United States has proposed that WTO Members agree to eliminate all trade-distorting

subsidies and all tariffs by a date certain. Members with heavily-distorted agricultural sectors, such as the

European Union and Japan, have opposed substantial reform and instead have called for marginal

reductions in protection and trade-distorting support while also calling for new WTO provisions to

legitimize measures oriented toward addressing non-trade concerns. Developing countries, particularly

within the Cairns Group2, look to the agriculture negotiations as a principal means for achieving more

meaningful trade participation in the global economy. Many developing country Members, including

within the Cairns Group, have called for substantial reform in developed country Members’ agricultural

policies while also proposing that reforms required of developing countries be mitigated by special and

differential treatment provisions.

The Uruguay Round Agreement on Agriculture provided the framework for further negotiations. The

three main areas for improvement in disciplines affecting agricultural trade are export subsidies, market

access, and domestic support. Negotiations on agriculture began in the year 2000 and in the first two

years some 45 proposals were submitted on behalf of 121 Members. Members focused attention in the

year 2002 on specific proposals for establishing reform modalities, consistent with the Doha mandate. 

The United States submitted the first comprehensive set of proposed modalities for reform, helping set the

discussions in Geneva on an ambitious reform track. A number of other Members, including the Cairns

Group and other developing countries, also submitted specific modality proposals oriented toward

substantial reform. The European Union, Japan, and other Members with high tariff and subsidy levels

did not come forward with specific or forthcoming modality proposals, instead making general proposals

for marginal reform.
23

Key Elements of U.S. Proposals for

Agricultural Reform

 Tariffs and TRQs. Comprehensive reductions in

tariffs and tariff disparities through the Swiss 25

formula and a 20% increase in tariff-rate quota

quantities, without exception. 

Export Subsidies. Elimination of export subsidies.

Domestic Support: Simplifies the current structure by

creating two categories of support: 1) non-trade

distorting measures that are not subject to limits; and,

2) trade-distorting measures that would be subject to

reductions. Establishes a limit of trade-distorting

support equal to 5% of the value of Members’

agriculture production. 

State Trading Enterprises. Disciplines the activities of

import and export state trading enterprises, including

ending their monopoly privileges.

Export Restrictions. Strengthens disciplines on export

restrictions to increase the reliability of global food

supply.

Export Credits. Establishes a rules-based approach to

guard against circumvention of export subsidy rules by

disciplining elements such as repayment period,

premia, and fees. Identifies the need for developing

countries to have access to export credit facilities to

enhance food security. Consideration to the concerns

of the poorer WTO Members to ensure the agreement

is appropriate for their circumstances.

Export Competition: The WTO Agreement on

Agriculture places limits on the use of export subsidies. 

Products that have not benefitted from export subsidies in

the past are banned from receiving them in the future. 

Where countries had provided export subsidies in the

past, the future use of export subsidies was capped and

reduced. Currently, the European Union accounts for

nearly 90 percent of global annual spending on

agricultural export subsidies, up to $5 billion a year. The

United States spends between $20 million and $100

million per year.

The United States has proposed phasing out over a five

year period any use of export subsidies. The goal of

eliminating export subsidies in these negotiations is

supported by many WTO Members, in particular

developing countries. Specific proposals have also been

submitted for reforming other export-related government

programs, including export credits, food aid, and

privileges enjoyed by state trading enterprises. Several

Members have also proposed stronger rules to discipline

the use of export restrictions.

Market Access: The WTO Agreement on Agriculture set

agricultural trade on a more predictable basis by

requiring the conversion of non-tariff barriers, such as

quotas and import bans, into tariffs. Today, tariffs

represent the primary WTO-consistent restriction on trade

in agricultural products. Quotas, discriminatory

licensing, and other unjustified non-tariff measures are

now prohibited. Also, all agricultural tariffs have been

reduced from earlier levels and “bound” in the WTO. A

decision by a Member to impose tariff rates above a

binding without authorization would violate WTO

obligations. Creating a “tariff-only” system for agricultural products is an important advance, yet tariffs

on agricultural products around the world remain too high. Additionally, administrative difficulties with

tariff-rate quota systems (which operate as two-tier tariff regimes) continue to impede international trade

in food and fiber products.

The United States has proposed substantial reductions for all tariffs through the use of a tariff reduction

formula that would reduce all tariffs in a manner that results in all countries having similar tariff levels. 

The U.S. proposal on tariffs – called the Swiss 25 formula – would cut the global average allowed tariff

on agricultural products from 62 percent to 15 percent and ensure that no tariff is higher than 25 percent

when cuts are fully implemented. The U.S. average tariff on agricultural products would fall from 12

percent to 5 percent. The United States also has proposed tightening disciplines on the administration of

tariff-rate quotas, expanding access under tariff-rate quotas, simplifying tariff systems, and reducing the

trade-distorting potential of state trading enterprises. Members of the Cairns Group of exporting
24

countries and many developing countries have also focused their proposals on the need for substantial

tariff reductions in developed country markets, with lesser reduction commitments required for

developing country Members. A number of Members have also proposed using safeguard mechanisms to

guard against market disruption from imports.

Domestic Support: Governments have the right to support farmers if they so choose. However, the

Agreement on Agriculture encourages that support be provided in a manner that causes no or minimal

distortions to production and trade. The Agreement caps trade-distorting domestic support that a Member

can provide to its farmers, but preserves the criteria-based “green box” policies that can provide support

to agriculture in a manner that minimizes distortions to trade. 

The United States has proposed a reduction in the level of trade-distorting support and the establishment

of a ceiling on all trade-distorting support that applies equally to all countries. Under the U.S. proposal,

the ceiling would be set at 5 percent of the value of total agricultural production. This proposal, when

phased in over five years, would cut the amount of allowed trade-distorting support globally by over $100

billion a year, reducing unfair competition in world markets and eliminating disparities resulting from

unequal levels of support provided in the base period. Some other WTO Members have called for the

elimination of all trade-distorting support while other Members have called for strengthening disciplines,

or imposing a cap on the green box of non-trade distorting support.

Prospects for 2003

The Doha mandate identifies two key deadlines for the agriculture negotiations in 2003. First, modalities,

such as tariff and subsidy reduction formulas, are to be established by March 31, 2003. To meet this

deadline, negotiators are engaged in intensive discussions in Geneva and in capitals. Second, based on

these modalities, WTO Members are to submit initial draft schedules of specific commitments, such as

reduction schedules for individual tariff lines and subsidy allowances, by the Fifth Ministerial Conference

in Cancun in September 2003. Chairman Harbinson, the Chair of the Special Session, intends to pursue

an intensive negotiating schedule in the first quarter of 2003 with these deadlines in mind. He is likely to

table a series of proposals aimed at reaching a consensus on negotiating modalities.

2. Special Session of the Council for Trade in Services

Status

Pursuant to the mandate provided in the Uruguay Round, Members embarked upon new, multi-sectoral

services negotiations in 2000 under Article XIX of the General Agreement on Trade in Services (GATS). 

The Doha Declaration recognized the work already undertaken in services negotiations and reaffirmed the

Guidelines and Procedures for the Negotiations adopted by the Council for Trade in Services (CTS) in

March 2001. The Doha mandate directed Members to conduct negotiations with a view to promoting the

economic growth of all trading partners. The Doha mandate also set deadlines for initial services requests

and offers. In February 2002, the TNC established a Special Session of the Council for Trade in Services

to serve as the negotiating body. 
25

U.S. Proposals for a Tariff-Free World

The U.S. proposal would eliminate tariffs on a full-range

of consumer and industrial goods ranging from women's

shoes, to tractors, to children's toys. The proposal calls for

a two-step approach to tariff elimination. 

Step 1: Members must cut and harmonize their

tariffs in the five year period from 2005 to

2010. WTO Members would eliminate all

tariffs at or below 5 percent by 2010, cut all

other tariffs through a "tariff equalizer"

formula to less than 8 percent by 2010, and

eliminate tariffs in certain highly-traded

industry sectors as soon as possible, but not

later than 2010.

Step 2: Members would make equal annual

cuts in remaining tariffs between 2010 and

2015. These cuts would result in zero tariffs.

The proposal also calls for a separate program to identify

and eliminate non-tariff barriers, which would run on a

parallel track with the negotiations on industrial tariffs. 

The United States will put forward an initial list of such

barriers in January.

Major Issues in 2002

The GATS negotiations entered a new phase in 2002 as WTO Members submitted requests consistent

with the time frames established in the Doha Ministerial Declaration. The United States submitted its

requests on July 1 and at the same time made public a description of the requests, available at: 

www.ustr.gov/sectors/services/2002-07-01-proposal-execsumm.PDF.

Discussions have also taken place on three provisions contained in the GATS that relate to the

negotiations. The GATS calls for an “assessment of trade in services in overall terms and on a sectoral

basis with reference to the objectives of this Agreement, including those set out in paragraph 1 of Article

IV, Increasing Participation of Developing Countries.” A number of WTO Members have made written

and oral presentations discussing the effects of services liberalization. In addition, the GATS calls for

establishment of two sets of procedures, the first dealing with the treatment of least developed countries

in the negotiations, and the second dealing with “the treatment of liberalization undertaken autonomously

by Members since previous negotiations.” In July 2000, the United States was the first to make specific

proposals regarding the former. 

Prospects for 2003

In light of the new phase of the negotiations, sessions in Geneva have been organized to allow greater

time for bilateral meetings to present and discuss requests. Country-specific liberalization offers in

response to the requests are due by March 31, 2003. 

Discussions will continue on the three topics noted

above (the “assessment,” the modalities for treatment of

least developed countries and of so-called autonomous

liberalization).

3. Negotiating Group on Non-Agricultural

Market Access

Status

At the Fourth WTO Ministerial Conference held in

Doha, Ministers agreed to launch non-agricultural

market access negotiations in order to reduce or

eliminate tariffs, including the reduction or elimination

of tariff peaks, high tariffs, and tariff escalation, as well

as non-tariff barriers, in particular on products of export

interest to developing countries. Modalities for the

reduction/elimination were to be agreed. Ministers also

affirmed that product coverage in these negotiations

would be comprehensive and without a priori

exclusions. 

Major Issues in 2002

The WTO Negotiating Group on Non-Agricultural
26

Market Access set out a work plan in 2002 designed to develop the approaches that would be utilized in

negotiations to reduce or eliminate tariff and non-tariff barriers for non-agricultural products. The

Negotiating Group agreed that proposals on possible approaches to the negotiations should be submitted

between November 1 and December 31, 2002, established March 31, 2003, as the target date for reaching

a common understanding on the possible outline of modalities and set May 31, 2003, as the deadline for

agreement on modalities. This timetable is designed to ensure agreement on the negotiating approach in

advance of the September 2003 Fifth Ministerial Conference in Cancun, Mexico. The Negotiating Group

agreed to provide information on the types of non-tariff barriers Members believe should be addressed by

January 31, 2003, with a view to reaching consensus on approaches to address non-tariff measures by

May 31, 2003 in conjunction with tariff understandings.

In May 2002, the negotiating group organized a technical assistance and training session for all

participants to facilitate participation by WTO Members in the negotiations. Work on the substantive

approaches that could be taken to liberalization began in earnest in August. Four subsequent sessions

were held in 2002 to consider specific proposals on possible approaches to tariff negotiations tabled by

the United States, Chile, China, the European Union, Hong Kong, Japan, Mexico, Oman, and

Switzerland. Most of these proposals call for a “cocktail” of different approaches to achieve the Doha

goals. Virtually all call for a tariff-cutting formula to be the core of the negotiations, with other

approaches applied to ensure that all elements of the mandate are met. In addition to various formula

approaches, proposals also suggested elimination of tariffs below 5 percent, sectoral “zero/zero”

initiatives, harmonization or “compression” methodologies to reduce the disparity across tariff schedules

and defined a number of possible approaches to special treatment for the least developed and/or other

developing country Members. While an initial deadline for such proposals had been set for December 31,

2002, proposals from several other countries are anticipated early in 2003.

Prospects for 2003

In the first half of 2003, it is anticipated that intense negotiations will occur on the best approaches to use

to reduce or eliminate tariffs and non-tariff barriers. The United States will be pursuing its tariff proposal

aggressively and working intensively with the private sector, labor, and other interested constituencies to

ensure that U.S. interests are advanced through the approaches agreed. In the second half of the year it is

anticipated that the intense process of tabling offers and undertaking bilateral negotiations will begin so

that tariffs and non-tariff barriers are liberalized to the maximum extent possible by the end of Doha

negotiations. 

4. Negotiating Group on Rules 

Status

In paragraph 28 of the Doha Ministerial Declaration, the Ministers agreed to negotiations aimed at

clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT

1994 (the Antidumping Agreement) and on Subsidies and Countervailing Measures (the Subsidies

Agreement), while preserving the basic concepts, principles and effectiveness of these Agreements and

their instruments and objectives. Ministers also directed that the negotiations take into account the needs

of developing and least developed participants. The Doha mandate specifically calls for the development

of disciplines on trade-distorting practices, which are often the underlying causes of unfair trade, and also

calls for clarified and improved WTO disciplines on fisheries subsidies. In addition, paragraph 29 of the
27

Doha Ministerial Declaration provides for negotiations aimed at clarifying and improving disciplines and

procedures under the existing WTO provisions applying to regional trade agreements.

The Doha Declaration provides for a two-phase process for the negotiations, in which participants would

identify in the initial phase of negotiations the provisions in the Agreements that they would seek to

clarify and improve in the subsequent phase. The initial issue-identification phase is expected to continue

at least until the Fifth Ministerial Conference.

Major Issues in 2002

The Rules Group held five formal meetings in 2002 (in March, May, July, October, and November) under

the Chairmanship of Ambassador Tim Groser from New Zealand. The Group based its work primarily on

the written submissions from Members, organizing its work in the following categories: (1) antidumping;

(2) subsidies, including fisheries subsidies; and (3) regional trade agreements. Since the Group was in the

initial issue-identification phase for all of the meetings in 2002, most of the 41 papers formally submitted

by Members to the Group in 2002 have raised issues for discussion rather than making proposals on how

to change the Agreements. Some of the papers presented questions or comments on prior submissions. 

Antidumping 

Given the Doha mandate that the basic concepts and principles underlying the Antidumping and

Subsidies Agreements must be preserved, the United States presented a paper at the October meeting

outlining the basic concepts and principles of the trade remedy rules. The U.S. paper identified four core

principles that would guide U.S. proposals for the Rules Negotiating Group: 

• First, these negotiations must maintain the strength and effectiveness of the trade remedy laws

and complement a fully effective dispute settlement system which enjoys the confidence of all

Members;

• Second, trade remedy laws must operate in an open and transparent manner. This principle is

fundamental to the rules-based system as a whole, and the transparency and due process

obligations should be further refined as part of these negotiations;

• Third, disciplines must be enhanced to address more effectively underlying trade-distorting

practices. Work has already begun along these lines with respect to the steel sector in discussions

among the major steel producing nations at the OECD, based on the general recognition that

market-distorting practices have contributed to global excess capacity; and

• Fourth, it is essential that dispute settlement panels and the Appellate Body, in interpreting

obligations related to trade remedy laws, follow the appropriate standard of review and not

impose on Members authorities obligations that are not contained in the Agreements.

In furtherance of the second principle, the United States presented a paper at the November meeting on

improving investigatory procedures in antidumping and countervailing duty investigations, highlighting a

number of areas in which interested parties and the public could benefit from greater openness and

transparency by investigating authorities, as well as some areas where improved procedures could reduce
28

costs. Since U.S. exporters are a major target of foreign antidumping proceedings, it is essential to 

improve transparency and due process in these proceedings so that U.S. exporters are fairly treated.

A group calling itself the “Friends of Antidumping” has presented three papers identifying a total of 31

antidumping issues for discussion by the Rules Group. The “Friends” group includes Brazil, Chile,

Colombia, Costa Rica, Hong Kong, Israel, Japan, Korea, Mexico, Norway, Singapore, Switzerland,

Taiwan ( referred to in the WTO as “Chinese Taipei”), Thailand, and Turkey, although not all of its

members have joined in each paper by the Friends. While the Friends’ papers have raised issues for

discussion rather than making specific proposals to change the Antidumping Agreement, the United

States believes that the Friends’ ultimate goal is to restrict the use of antidumping measures. In addition

to the submissions by the Friends group and the United States, papers on antidumping issues have also

been submitted by Australia, Brazil, the European Union, India, and Morocco. The United States has

been actively engaged in addressing the submissions from the Friends and other Members, posing written

questions to them, and seeking to ensure that the Doha mandate for the Rules Group is fulfilled.

Subsidies

In the subsidies area, the United States submitted a paper on special and differential treatment and the

Subsidies Agreement. This paper reviewed the substantial existing special and differential provisions in

the Subsidies Agreement and made the case against the indiscriminate use of subsidies as an economic

development tool. Other submissions on subsidies issues have been made by Australia, Brazil, Canada,

the European Union and India. Among the issues raised in these papers are: proposals for additional

special and differential treatment provisions; the OECD Arrangement on export credits; the need to

examine the original framework of the Subsidies Agreement (i.e., the traffic light approach to the

categorization of subsidies); and indirect subsidies. 

As to the issue of fisheries subsidies specifically, the discussion to date has focused on the question of

whether fisheries subsidies have, in fact, led to environmentally harmful overfishing, and whether

fisheries subsidies pose particularly unique problems which justify a stronger and/or separate set of rules. 

The United States has joined with a number of developed and developing countries (including Australia,

Chile, Ecuador, Iceland, New Zealand, Peru, and the Philippines) in calling for stronger disciplines, while

Japan and Korea, in particular, have argued that it has not been demonstrated that fisheries subsidies,

rather than poor fishery management, have led to the present poor state of the world’s fisheries. China

has also submitted a paper on fisheries subsidies issues. 

Regional Trade Agreements

The discussion in the Rules Group on regional trade agreements (RTAs) in 2002 focused on ways in

which WTO rules governing customs unions and free trade agreements, and economic integration

agreements for services, might be clarified and improved. Many of the issues encompassed by the Doha

mandate on RTAs previously have been identified during work on systemic issues within the WTO

Committee on Regional Trade Agreements. A Secretariat-prepared synopsis of that work has informed

the discussion in the Rules Group. Australia, Chile, the European Union, and Turkey submitted papers to

the Rules Group on RTA issues, and the United States has been an active participant in the RTA

discussions in the Group. 
29

Among the substantive issues discussed in 2002 are the requirements of GATT Article XXIV that RTAs

eliminate tariffs and "other restrictive regulations of commerce" on "substantially all the trade" between

parties (and the analogous provisions for the GATS), the possible harmonization of rules of origin for

RTAs, and the relationship between RTA rules and the application of trade remedies. Suggestions for

procedural improvements include clarifying when, how and to what extent Members must notify the

WTO of the provisions of a new RTA, and how the WTO can best review these provisions. Some

developing country Members, citing the GATT "Enabling Clause" decision of 1979 (GATT Decision on

Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing

Countries), have opposed applying disciplines to preferential agreements among them. Some European

Members have argued for "grandfathering" preexisting RTAs so as to exempt them from some or all new

disciplines that may emerge from the negotiations. 

Prospects for 2003

The work of the Rules Negotiating Group in 2003 in preparation for the Fifth Ministerial Conference in

Cancun will continue to focus on identifying issues to be addressed in the second phase of negotiations. 

On RTAs, a more focused discussion of possible procedural improvements within the WTO to enhance

transparency is likely in early 2003. It is expected that the Rules Group will hold three or four meetings

prior to the September Cancun meeting.

The United States will pursue an aggressive affirmative agenda in 2003, based on the four core principles

identified in the October U.S. paper. The United States expects to make a number of written submissions

raising additional issues to be addressed by the Rules Group, as well as posing additional questions with

respect to the submissions made by other Members. 

5. Special Session of the Committee on Trade and Environment

Status

Following the Fourth Ministerial Conference at Doha, the TNC established a Special Session of the

Committee on Trade and Environment (CTE) to implement the new negotiating mandate contained in

paragraph 31 of the Doha Declaration. The CTE in regular session took up other environment-related

issues which did not entail a specific negotiating mandate.

Major Issues in 2002

The CTE in Special Session met four times in 2002, including three formal meetings and a fourth

informal meeting with representatives of several secretariats for Multilateral Environmental Agreements

(MEAs). At all three formal meetings, the CTE in Special Session addressed each of the negotiating

mandates set forth in the three sub-paragraphs under paragraph 31 of the Doha Declaration: 

(i) the relationship between existing WTO rules and specific trade obligations set out in

MEAs (with specific reference to the applicability of such existing WTO rules as among

parties to such MEAs and without prejudice to the WTO rights of Members that are not

parties to any MEA in question);
30

(ii) procedures for regular information exchange between MEA secretariats and relevant

WTO committees, and the criteria for granting observer status; and

(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to

environmental goods and services.

MEA Specific Trade Obligations and WTO Rules: Negotiations under this mandate commenced with a

discussion among participants on interpretations of the mandate, prompted by a submission by the

European Union. A large number of other Members expressed opposing views regarding the scope of the

mandate, noting in particular their views that the mandate is narrowly focused on “specific trade

obligations.” Additionally, there were a variety of views on whether the terms in the mandate should be

defined in the abstract and how these negotiations could be phased. Australia submitted a proposal for

three phases, starting with an analysis of specific trade obligations contained in relevant MEAs. Most

delegations favored proceeding on the basis of the 14 agreements listed in a WTO Secretariat compilation

(WT/CTE/W/160/Rev.1). Several Members, including Switzerland and Japan, submitted more

conceptual papers proposing generic approaches for clarifying the relationship between specific trade

obligations in MEAs and WTO rules. Many Members considered these submissions to be premature,

particularly in proposing solutions when no specific problems had yet been articulated. Instead, these

delegations supported the more analytical approaches contained in submissions by Korea and New

Zealand, utilizing the phasing approach suggested by the Australian proposal. Members were able to

agree, however, to proceed with future discussions starting in 2003 by focusing on examples of specific

trade obligations, while not precluding discussion of other issues. 

Procedures for Information Exchange and Criteria for Observer Status: Members generally expressed

support for finding additional mechanisms to enhance communication and cooperation between MEA

secretariats and WTO bodies, although many suggested that the question of observer status is an issue for

the WTO overall and is currently before the General Council and TNC. The United States made the first

submission under this negotiating mandate, calling for a more formal structure for conducting information

sessions with MEA secretariats, greater access to WTO documents for MEAs that are not observers in

relevant WTO bodies, and new procedures for responding to requests for observer status from MEAs. 

The U.S. submission emphasized that these improvements in procedures could contribute to greater

coordination between trade and environment officials at international and national levels and enhance

mutual understanding with respect to negotiation and implementation of international trade and

environment obligations. The European Union followed up with a submission that complemented the

U.S. paper and called for action under this mandate not later than the Fifth Ministerial Conference. In

November, the CTE in Special Session held an informal meeting devoted to providing an opportunity for

MEA secretariats to make suggestions on how information exchange could be improved. The MEA

secretariats that participated in the meeting welcomed this opportunity, although they expressed concerns

that there had been no action to respond to their requests for observer status in the CTE in Special

Session.

Environmental Goods and Services: Members agreed at the outset of the Doha negotiations that new

market access undertakings for environmental goods and services should take place in the NonAgriculture Market Access Negotiating Group and the Committee in Trade in Services in Special Session. 

Nevertheless, they also left room for the CTE in Special Session to support these negotiating groups,

particularly with respect to the definition of environmental goods. New Zealand and the United States

made early submissions on this issue to both the Non-Agricultural Market Access Negotiating Group and
31

CTE in Special Session, suggesting that the list developed in APEC would provide a useful starting point,

while Japan made a subsequent submission that elaborated on OECD work. In discussions in the CTE in

Special Session, most delegations expressed concerns about extending the definition to include

distinctions based on non-product process and production methods (PPMs).

Prospects for 2003

Negotiations under all three mandates in paragraph 31 of the Doha Declaration are likely to focus on

concrete progress that can be accomplished by the Fifth Ministerial Conference. Under sub-paragraph

31(i), this may be limited to obtaining a clearer picture of whether there are specific problems that could

be practically addressed in these negotiations. This suggests continuing with an analysis that involves

identification of examples of specific trade obligations, while providing the opportunity for individual

Members to raise concrete concerns related to the applicability of WTO rules. Negotiations under subparagraph 31(i) may also be advanced through rapid progress under sub-paragraph 31(ii) since enhanced

communication and cooperation between MEAs and the WTO are key elements in ensuring that the two

systems of international obligations remain compatible and mutually supportive. Finally, the CTE in

Special Session is likely to explore opportunities for contributing to negotiations on market access for

environmental goods and services, particularly as a forum to discuss the importance of liberalization in

both areas in order to secure concrete benefits associated with access to state-of-the-art environmental

technologies that promote sustainable development. 

6. Special Session of the Dispute Settlement Body

Status

Following the Fourth Ministerial Conference in November, 2001, the TNC established the Special

Session of the Dispute Settlement Body (“DSB”) to fulfill the Ministerial mandate found in paragraph 30

of the Doha Declaration which provides: “We agree to negotiations on improvements and clarifications

of the Dispute Settlement Understanding. The negotiations should be based on the work done thus far as

well as any additional proposals by Members, and aim to agree on improvements and clarifications not

later than May 2003, at which time we will take steps to ensure that the results enter into force as soon as

possible thereafter.”

Major Issues in 2002

The Special Session of the DSB met frequently during 2002 in an effort to implement the Doha mandate

and report to the General Council. In the first of several phases of the review of the Understanding on

Rules and Procedures Governing the Settlement of Disputes (“DSU”), Members engaged in a general

discussion of the issues. Following that general discussion, Members then tabled proposals to clarify or

improve the DSU. 

The United States submitted a proposal in August to expand transparency and public access to dispute

settlement proceedings. The proposal would open WTO dispute settlement proceedings to the public for

the first time and give greater public access to briefs and panel reports. In addition to open hearings,

public briefs, and early public release of panel reports, the U.S. proposal called on WTO Members to

consider rules for "amicus curiae" submissions - submissions by non-parties to a dispute. WTO rules
32

currently allow such submissions, but do not provide guidelines on how they are to be considered. 

Guidelines would provide a clearer roadmap for handling such submissions.

In December, the United States, joined by Chile, submitted a proposal to help improve the effectiveness

of the WTO dispute settlement system in resolving trade disputes among WTO Members. The proposal

particularly is aimed at giving parties to a dispute more control over the process and greater flexibility to

settle disputes. Under the present dispute settlement system, parties are encouraged to resolve their

disputes, but do not always have all the tools with which to do so. The joint proposal contains specific

options aimed at giving parties greater flexibility and more control over the process.

Members conducted a review of each proposal submitted and provided an opportunity to request

explanations and pose questions of the Member(s) making the proposal. Members also had an

opportunity to discuss each issue raised by the various proposals.

Prospects for 2003

In 2003, Members will intensify their work with a view to the May 2003 deadline to complete the review

of the DSU. Many proposals were submitted in narrative form. The Chairman of the DSU review has

encouraged Members to reduce their proposals to draft legal text where appropriate early in 2003. 

Members will then discuss the various textual proposals, without prejudice to Members’ positions on the

merits of the proposal under discussion. Members will be meeting monthly in multi-day sessions through

the end of May in an effort to complete their work.

7. Special Session of the Council for Trade-Related Aspects of Intellectual Property Rights

(TRIPS)

Status

With a view to completing the work started in the TRIPS Council on the implementation of Article 23.4,

Ministers agreed at Doha to negotiate the establishment of a multilateral system of notification and

registration of geographical indications for wines and spirits by the Fifth Session of the Ministerial

Conference. This is the only issue before the Special Session of the Council.

Major Issues in 2002

During 2002, the TRIPS Council continued its negotiations under Article 23.4, which is intended to

facilitate protection of geographic indications. The European Union together with a number of other

countries submitted a proposal for a system, nearly identical to that which they had submitted previously,

under which Members would notify the WTO of their geographical indications for wines and spirits. 

Other Members would then have eighteen months in which to object to the registration of particular

notified geographical indications that they believed were not entitled to protection within their own

territory. If no objection were made, each notified geographical indication would be registered and all

WTO Members would be required to provide protection as required under Article 23. If an objection

were made, the notifying Member and the Member objecting would negotiate a solution, but the

geographical indication would have to be protected by all Members that had not objected. Argentina,

Australia, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador,

Guatemala, Honduras, Japan, Namibia, New Zealand, the Philippines, Taiwan, and the United States
33

introduced an alternative proposal (the joint proposal), similar to that which had been introduced

previously by Canada, Chile, Japan, and the United States, under which Members would notify their

geographical indications for wines and spirits for incorporation into a register on the WTO website. 

Members choosing to use the system would agree to consult the website when making any decisions

under their domestic laws related to geographical indications or, in some cases, trademarks. 

Implementation of this proposal would not impose any additional obligations with regard to geographical

indications on Members that chose not to participate nor would it place undue burdens on the WTO

Secretariat. 

Prospects for 2003

In his report to the TNC, the Chair of the Special Session of the Council for Trade-Related Aspects of

Intellectual Property Rights applauded Members’ “best endeavors” thus far. However, he noted that

positions remained far apart. With respect to the multilateral registry for geographic indications, he said

that Members were divided along two distinctively different approaches: one approach calling for the

establishment of a geographical indications database and the other approach calling for a registration

system with legal effect. He called on Members to work harder and show more flexibility. 

The United States will aggressively pursue additional support for the joint proposal in the coming year, so

that the negotiations can be completed by the Fifth Ministerial Conference.

8. Special Session of the Committee on Trade and Development

Status

The TNC established the Special Session of the Committee on Trade and Development (CTD) in

February 2002 to fulfill the Ministerial mandate found in paragraph 44 of the Doha Declaration. The

TNC charged the Special Session with conducting a review of existing special and differential treatment

(S&D) provisions available to developing country Members and with providing recommendations to the

General Council to make S&D more precise, effective, and operational as a means to more fully integrate

developing country Members into the WTO system. 

Major Issues in 2002

The CTD met frequently during 2002 in an effort to implement the Doha mandate and report to the

General Council. The first of several phases of the review began with a request for the Secretariat to

compile information relating to the range of S&D provisions available and their utilization by Members. 

Following this first phase of Secretariat research, Members submitted proposals on a number of issues

such as the principles and objectives of S&D, coherence with other international organizations, technical

assistance and capacity building, effective use of transition periods, proposals addressing specific

agreements, trade preferences and related issues, and differentiated treatment of developing country

Members. At the close of 2002, twenty-two submissions had been contributed by fourteen Members (or

groups of Members). The United States submitted a paper in June that outlined the benefits of an open,

rules-based trade regime in fostering growth and development and suggested that discussions should

naturally focus on using S&D provisions as a means to reach the goal of integrating developing country

Members into the trading system. Among the topics raised by the Africa Group was a call for a

mechanism by which Members could monitor the utilization of S&D treatment with the aim of ensuring
34

more effective use of S&D provisions. Members responded positively to the idea, acknowledging that

S&D treatment could benefit from improved monitoring.

Given the range and complexity of the issues raised in Member submissions, the CTD requested that the

General Council to provide an extension of the deadline for recommendations from July 2002 to the end

of the year. At the same session, the General Council agreed to establish a monitoring mechanism for

S&D treatment and requested that the CTD elaborate the functions, structure, and terms of reference of

such monitoring. 

In an intensive fall meeting schedule, the Special Session examined a number of cross-cutting issues and

engaged in a dialogue on the agreement-specific proposals presented by delegations in earlier

submissions. In this examination, the Special Session was aided by the participation of other WTO

Committee and Agreement experts. Chairman Ransford Smith of Jamaica scheduled seven fall sessions

around meetings of other WTO bodies. These supplementary sessions facilitated participation of experts

from the Committee on Technical Barriers to Trade, the Antidumping Committee, the Committee on

Agriculture, the Committee on Sanitary and Phyto-Sanitary Measures, and the Dispute Settlement Body. 

The resulting CTD discussions benefitted from this exchange.

In addition to sessions dedicated to agreement-specific issues, the Committee undertook a number of

discussions of cross-cutting S&D issues, including the principle and objectives guiding the use of S&D,

graduation and differentiation among Members, and benchmarking progress toward implementing

Agreements. Members expressed a range of views on these issues. Also as part of the Fall work

program, the Chair held consultations on how to elaborate the functions, structure, and terms of reference

of an S&D monitoring mechanism. The United States submitted a proposal outlining possible monitoring

procedures for consideration by Members. The proposal reinforced a role for monitoring of Doha

negotiations by the CTD. It suggested ways to strengthen ties between the negotiating bodies and

Committees, and ways to produce more effective coordination of technical assistance. In consultations

held by the Chair on monitoring, there was a convergence of views among Members on such matters as

the role of the mechanism and the sources of information. Some remaining issues, however, will require

further discussion. 

Prospects for 2003

There has been significant work completed over this past year as part of the S&D review by the CTD

Special Session. While discussions have shown some convergence of views, there remain a number of

areas that require further discussion in 2003. The CTD will continue the review and examination of how

S&D treatment fits within the goal of furthering the participation of developing country Members in the

WTO system. A preliminary discussion has been held on how S&D treatment and

graduation/differentiation among various levels of development might be incorporated into the

architecture of the WTO. These and other aspects of the mandate will be discussed in 2003. 

C. Work Programs established under the Doha Development Agenda 

The Doha Ministerial Declaration continued or established several additional work programs. For issues

initially raise at the WTO’s First Ministerial Conference in Singapore, modalities for negotiations are to

be developed. These discussions could lead to a decision to launch negotiations at the Fifth Ministerial

Conference scheduled for Cancun. The DDA work programs are: Transparency in Government
35

Procurement; Trade Facilitation; Relationship between Trade and Investment; Interaction between Trade

and Competition; Electronic Commerce; Trade, Debt, and Finance; and Trade and Transfer of

Technology.

1. Working Group on Transparency in Government Procurement

Status

Building on the progress in the Working Group on Government Procurement, the Doha Ministerial

Declaration calls for decisions to be taken at the Fifth WTO Ministerial Conference on the modalities for

negotiations on a potential Agreement on Transparency in Government Procurement, and for negotiations

to begin on that basis.

Continued progress toward a multilateral Agreement on Transparency in Government Procurement is an

important element of the United States’ longstanding effort to bring all WTO Members’ procurement

markets within the scope of the international rules-based trading system. This work also contributes to

broader U.S. initiatives aimed at promoting the international rule of law, combating international bribery

and corruption, and supporting the good governance practices that many WTO Members have adopted as

part of their overall structural reform programs.

Major Issues in 2002

The Working Group has made significant progress in identifying many of the key substantive elements of

a potential Agreement on Transparency in Government Procurement, including:

• Publication of information regarding the regulatory framework for procurement, including

relevant laws, regulations and administrative guidelines;

• Publication of information regarding opportunities for participation in government procurement,

including notices of future procurements;

• Clear specification in tender documents of evaluation criteria for award of contracts;

• Availability to suppliers of information on contracts that have been awarded; and

• Availability of mechanisms to challenge contract awards and other procurement decisions.

The Working Group’s discussions have confirmed that a wide range of WTO Members consider these

elements to be fundamental to an efficient and accountable procurement system and, accordingly, already

incorporate these elements, as appropriate, in their existing procurement laws, regulations, and practices.

In 2002, in addition to discussions of the potential elements of a transparency agreement, the Working

Group considered technical assistance and capacity-building needs in relation to the negotiation of such

an agreement. Many delegations recognized the importance of incorporating predictable standards of

transparency in government procurement into the rules-based international trading system. 

Accomplishing this would facilitate commercial development and the integration of all Member

economies into the global trading system. Some developing country delegations noted that computerbased information and communications technologies could provide a cost-effective way for all

governments to achieve their transparency objectives. The United States submitted two papers to the

Working Group: a Work Plan that suggested the Working Group identify the elements of an agreement

and questions on capacity-building related to a transparency agreement.
36

Prospects for 2003

The overall aim for 2003 is for the Fifth Ministerial to launch negotiations of an Agreement on

Transparency in Government Procurement. To achieve this aim, the United States will, pursuant to the

Doha Ministerial Declaration, work with other WTO Members to address several key issues relating to

the negotiation of an Agreement, including: 1) capacity building needs related to the substance of the

negotiations; and 2) the appropriate enforcement mechanisms for an agreement, including domestic

review procedures and application of WTO dispute settlement procedures to an Agreement.

2. Trade Facilitation

Status

The Fourth Ministerial Conference at Doha established an ambitious and focused work program on Trade

Facilitation leading to the Fifth Ministerial Conference, including a mandate for the Council on Trade in

Goods to “review and as appropriate, clarify and improve relevant aspects of Article V, VIII, and X of

GATT 1994 and identify the trade facilitation needs and priorities of Members, in particular developing

and least developed countries.” At Doha, it was agreed that negotiations on Trade Facilitation will take

place after the Fifth Ministerial Conference, based upon a decision to be taken at that Ministerial on the

modalities of negotiations.

Major Issues in 2002

The Council on Trade in Goods held four separate formal sessions in 2002 on Trade Facilitation, several

of which were two days in length. The first session of 2002 was devoted largely to GATT Article X

(“Publication and Administration of Trade Regulations”) and focused on improved commitments that

would enhance transparency in border regimes, such as publication of laws and regulations on the

Internet. A subsequent session was held on GATT Article VIII (“Fees and Formalities connected with

Importation and Exportation”), addressing a broad range of topics, including the potential for

strengthened or new WTO disciplines related to ensuring rapid release of imported goods. Another

Council session focused on GATT Article V (“Freedom of Transit”), a subject that is of particular interest

to land-locked developing countries. A fourth session was also held in order to address more broadly the

work undertaken throughout 2002, and to plan for 2003. Consistent with the Doha mandate, each session

included an agenda item pertaining to the identification of the trade facilitation needs and priorities of

Members, while also addressing issues to ensure adequate technical assistance and support for capacity

building in this area.

Some resistance continues on the part of certain developing country Members to developing new and

strengthened WTO commitments on Trade Facilitation. However, many developing countries joined the

United States and other Members in recognizing that developing a rules-based environment for

conducting trade transactions would be an important element for securing continued economic growth for

all WTO Members. Consensus was evident among Members that systemic reforms related to increased

transparency and efficiency in the conduct of border transactions would diminish corruption, while

providing the additional benefit of enhancing administrative capabilities that ensure effective compliance

with customs-related requirements or laws concerning health, safety, and the environment. For the

United States and many of its key trading partners, small and medium size enterprises (SMEs) have

become important stakeholders in advancing WTO work in the area of Trade Facilitation. SMEs are
37

especially poised to take advantage of opportunities provided by today’s instant communications and

ever-improving efficiencies in the movement of physical goods, while at the same time are particularly

disadvantaged when border procedures are opaque and overly burdensome.

Prospects for 2003

The Council will hold at least two formal sessions on Trade Facilitation in 2003, prior to the Fifth

Ministerial Conference. The United States will continue its leadership role, working with other key

Members to ensure that the WTO work on Trade Facilitation is well-positioned by the time of the Fifth

Ministerial Conference. The United States views this work as ultimately leading to one of the most

important systemic negotiations to be undertaken by the WTO, a true “win-win” opportunity in view of

the important linkages between a rules-based trade transaction environment and a stable economic

infrastructure. Efforts will continue in 2003 to advance ongoing complementary initiatives involving

existing Agreements such as implementation of the WTO Agreement on Customs Valuation. The United

States will also be working with key Members to ensure that technical assistance in this area is both

demand-driven and effective in bringing about concrete measurable results that will translate into

increased trade and investment opportunities for all Members.

3. Working Group on Trade and Competition Policy

Status

In 2003, the WTO Working Group on the Interaction between Trade and Competition Policy (Working

Group) enters its seventh year of work under the oversight of the WTO General Council. The Working

Group was set up by WTO Trade Ministers at their first Ministerial Conference in Singapore in December

1996. Its mandate was to “study issues raised by Members relating to the interaction between trade and

competition policy, including anti-competitive practices, in order to identify any areas that may merit

further consideration in the WTO framework.” In December 1998, the General Council authorized the

Working Group to continue its work on the basis of a more focused framework of issues. This framework

continued to serve as the basis of the Working Group’s work until the Doha Ministerial Conference in

2001.

In Paragraph 23 of the November 2001 Doha Ministerial Declaration, the Ministers agreed that

“negotiations on trade and competition policy” will take place after the Fifth Session of the Ministerial

Conference on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of

negotiations. The Ministerial Declaration provides that further work in the Working Group leading up to

the Fifth Session will focus on the clarification of: core principles, including transparency, nondiscrimination and procedural fairness; provisions on hardcore cartels; modalities for voluntary

cooperation; and support for progressive reinforcement of competition institutions in developing

countries through capacity building. The Ministers recognized the needs of developing and least

developed countries for technical assistance and capacity building in this area, and pledged to work in

cooperation with other intergovernmental organizations, including UNCTAD, to provide assistance to

respond to these needs.
38

Major Issues in 2002

The Working Group held four meetings in 2002. The Working Group continued to organize its work on

the basis of written contributions from Members, supplemented by discussion and commentary offered by

delegations at the meetings and, where requested, factual information and analysis from the WTO

Secretariat and observer organizations such as the OECD and UNCTAD. The Working Group’s

discussions focused on the issues specified in paragraphs 24 and 25 of the Doha Ministerial Declaration. 

The April meeting focused on technical assistance and capacity building; the July meeting on provisions

on hardcore cartels and modalities for voluntary cooperation; the September meeting on core principles,

including transparency, non-discrimination and procedural fairness; and the November meeting on review

and approval of the Working Group’s annual report. 

Thirty-four written submissions were contributed by 15 Members (counting the European Union and its

15 Member States as one contributor): Argentina, Australia, Canada, Egypt, the European Union, India,

Japan, Korea, Mexico, New Zealand, Romania, South Africa, Switzerland, Thailand, and the United

States. The United States played an active role in the Working Group, making five written submissions to

the Working Group in 2002. These included a submission for the April meeting on U.S. experience in

providing antitrust technical assistance; a submission for the July meeting on provisions on hardcore

cartels; a second submission for the July meeting on modalities for voluntary cooperation; a submission

for the September meeting on transparency and non-discrimination; and a second submission for the

September meeting on procedural fairness.

Prospects for 2003

The work of the Working Group until the Fifth Ministerial Conference in Cancun in September 2003 will

continue to focus on the clarification of the issues specified in the Doha Ministerial Declaration (i.e., core

principles, hardcore cartels, voluntary cooperation, technical assistance and capacity building). It is

expected that the Working Group will hold two meetings in 2003 before the Cancun Ministerial

Conference. Under the Doha Declaration, decisions are to be taken at the Cancun Ministerial Conference

regarding future negotiations in this area. 

4. Working Group on Trade and Investment

Status

The Working Group on Trade and Investment (WGTI) was established by the Singapore WTO

Ministerial Declaration in 1996. The WGTI provides a multilateral forum for the consideration of

investment liberalization and international investment agreements and their relationship to trade and

economic development. The WTO General Council oversees the work of the WGTI, whose mandate was

extended at the Doha Ministerial Conference until the Fifth Ministerial Conference to be held in Cancun. 

At the Fourth Ministerial Conference in Doha, Ministers agreed that investment negotiations “will take

place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by

explicit consensus, at that Session on the modalities of negotiations.” The United States and other

Members believe the Working Group provides an opportunity to promote international understanding of

the benefits of open investment policies. 
39

Major Issues in 2002

The Doha Declaration tasked the WGTI to use the time before the next Ministerial Conference to examine

a core set of issues that will shape WTO investment negotiations. These issues include: the scope and

definition of investment; transparency; non-discrimination; approaches to commitments on the treatment

of investment prior to establishment, based on a GATS-type, positive list; development provisions;

exceptions and balance-of-payments safeguards; and consultation and the settlement of disputes between

Members. WTO Members addressed these issues during four WGTI meetings held during 2002. The

Working Group also devoted considerable time to discussing WTO activities and plans relating to

technical assistance on trade and investment issues. 

Discussions during 2002 have revealed significant differences among Members on whether and how the

WTO should proceed with investment negotiations after the Fifth Ministerial Conference. The European

Union and Japan are the strongest advocates for investment negotiations. Some developing countries

argue that the Doha Declaration does not require that investment negotiations begin in 2003. The United

States has steered a middle course between these two positions, urging WTO Members to incorporate

several fundamental principles, including transparency and non-discrimination, into any future WTO

investment agreement. Members have also debated how an investment agreement might address the

concerns of developing countries while maintaining a commitment to strong investment protections. The

United States submitted one major proposal in the WGTI during 2002, arguing that any multilaterally

agreed disciplines or protections should extend to portfolio as well as to direct investment.

Prospects for 2003

The prospect of WTO investment negotiations beginning after the Fifth Ministerial Conference has

intensified Member participation and interest in WGTI discussions. WTO Members will need to work

intensively in 2003 to achieve consensus on the content and structure of investment negotiations. 

Members are likely to submit a number of concrete proposals on negotiating modalities to the WGTI

during 2003, as the Working Group shifts from the more conceptual discussions of 2002 to an effort to

prepare recommendations for the General Council and the Fifth Ministerial Conference. 

5. Work Program on Electronic Commerce

Status

The Doha Declaration renewed the Work Program on Electronic Commerce, and extended until the Fifth

Ministerial Conference the current practice of not imposing customs duties on electronic transmissions. 

The General Council was directed to determine the most appropriate institutional arrangement for the

Work Program. The General Council endorsed the current framework, which is a series of dedicated

discussions focused on cross-cutting issues identified in 2001. Cross-cutting issues are those issues that

may have relevance to two or more WTO bodies, such as classification of certain electronically

downloaded products. Two dedicated discussions took place in 2002, and more are planned for 2003.

Major Issues in 2002

The two dedicated discussions in 2002 examined aspects of the classification of digital products. In

particular, the Working Group considered whether such products should be considered as “goods” and
40

therefore subject to GATT, or “services” subject to GATS. Some Members would prefer to classify all

products that are digitally downloaded and electronically transmitted as services, while others consider 

such a classification premature. No conclusions were drawn, and the issue remains unresolved. Another

issue discussed in the Working Group related to the fiscal implications of electronic commerce and the

moratorium on imposing customs duties on electronic transmissions. This issue was discussed as part of

a wider seminar in the Committee on Trade and Development in April 2002. 

Prospects for 2003

The United States will continue to be an active participant in the dedicated discussions on electronic

commerce. The electronic commerce work program has the potential to play an even more useful role in

ongoing negotiations and work program discussions that impact electronic commerce if key goals or

objectives can be identified to guide such discussions. These objectives might serve as a useful measure

for Members seeking to embrace the opportunities and meet the challenges presented by global electronic

commerce.

6. Working Group on Trade, Debt, and Finance

Status

Ministers at Fourth Ministerial Conference held in Doha established the mandate for the Working Group

on Trade, Debt and Finance (TDF). Ministers instructed the Working Group to examine the relationship

between trade, debt and finance, and to examine any possible recommendations on steps that might be

taken within the mandate and competence of the WTO to enhance the capacity of the multilateral trading

system to contribute to a durable solution to the problem of external indebtedness of developing and least

developed countries, as well as strengthen the coherence of international trade and financial policies, with

a view to safeguarding the multilateral trading system from the effects of financial and monetary

instability. 

Major Issues in 2002

The Working Group held four meetings in 2002. Working Group discussions focused on the following

areas: the relationship between trade and finance; the relationship between trade and debt; and the need

for greater coherence between the WTO and other international organizations in regards to the issues of

trade, debt, and finance. During these meetings, representatives from the International Monetary Fund

(IMF), the United Nations Conference on Trade and Development (UNCTAD), the Asian Development

Bank, and the Organization for Economic Cooperation and Development (OECD) provided brief

presentations to assist the Working Group in its analysis. Additionally, the Working Group received

papers from the World Bank, the United Nations Economic Commission for Africa, and the United

Nations Economic Commission for Latin American and the Caribbean to assist the group in its

discussions.

Prospects for 2003

The Working Group on Trade, Debt and Finance, which is scheduled to meet two times in 2003, will

continue to assess trade, debt and finance linkages with a view to preparing a report to the Fifth

Ministerial Conference.
41

7. Working Group on Trade and Transfer of Technology

Status

Ministers at the Fourth Ministerial Conference at Doha agreed to an “examination ... of the relationship

between trade and transfer of technology, and of any possible recommendations on steps that might be

taken within the mandate of the WTO to increase flows of technology to developing countries.” The

TNC established the Working Group on Trade and Technology Transfer (WGTTT) under the auspices of

the General Council, which is to report to the Fifth Session of the Ministerial Conference on the Group’s

progress. 

Major Issues in 2002

The WGTTT met formally four times in 2002. Principal subjects addressed by the WGTTT during the

year included presentations on trade and transfer of technology by intergovernmental organizations and

academia; presentations on country experiences relating to trade and transfer of technology by Members;

background papers on trade and transfer of technology prepared by the Secretariat; and submissions by

Members.

At a number of sessions of the WGTTT, representatives from UNCTAD, the Institute for New

Technologies of the United Nations University (UNU/INTECH), the Industrial Promotion and

Technology Branch of UNIDO, and the World Bank made presentations on their work related to trade

and transfer of technology. A number of WTO Members shared country experiences in the field,

including the head of Brazil's Science and Technology Division, the Deputy Director of China's

Department of Science and Technology and the Director of Strategic Alliances, Industrial Research

Assistance Program, Canada, and made presentations. The Secretariat prepared a general background

paper, on its own responsibility, which Members discussed and critiqued. Another paper prepared by the

Secretariat entitled "A Taxonomy of Country Experiences on International Technology Transfers" will be

discussed at the next session of the WGTTT in 2003. 

A number of Members also prepared submissions for consideration by the Working Group. A submission

made jointly by the delegations of Bangladesh, Cuba, the Dominican Republic, Egypt, Honduras, India,

Indonesia, Jamaica, Kenya, Mauritius, Pakistan, Sri Lanka, Tanzania, Uganda, and Zimbabwe

recommended various initiatives and measures. For example, the submission recommended a possible

terms of reference for the WGTTT to examine home country measures that encourage transfer of

technology and to examine WTO agreements to determine whether certain provisions may create barriers

to transfer and dissemination of technology, with a view to making amendments; analytical work; and

technical cooperation. Some Members expressed concern that these proposals, by their nature, suggested

automatic recommendations and went beyond the Doha mandate. Another communication was received

from India, Indonesia, Kenya, Zimbabwe, Egypt, Honduras, and Cuba, identifying various WTO

provisions they believe relate to transfer of technology. The submission suggested using the provisions to

increase technology flows and suggested that the WGTTT develop concrete proposals. A submission

from the European Union proposed the WGTTT focus on developing a common understanding of the

definition of technology transfer; identifying the various channels of transfer of technology; and

examining ways to make those channels more effective. The European Union emphasized the importance

to facilitating transfer of technology of foreign direct investment, trade in goods and services, licensing of
42

technology subject to intellectual property rights, government procurement, development cooperation,

multilateral environment agreements, and private and public partnerships. 

Prospects for 2003

The WGTTT adopted a work program for 2003 in November 2002. The work of the WGTTT will turn to

developing a report to the Fifth Ministerial Conference. The Chairman will continue consultations on the

number of meetings needed in 2003 to implement the agreed work plan.

D. General Council Activities

Status

The WTO General Council is the highest decision-making body in the WTO that meets on a regular basis

during the year. It exercises all of the authority of the Ministerial Conference, which is required to meet

once every two years. (The Fourth Ministerial Conference met most recently in Doha, Qatar). The

General Council and Ministerial Conference consist of representatives of all WTO Members. Only the

Ministerial Conference and the General Council have the authority to adopt authoritative interpretations

of the WTO Agreements, submit amendments to the Agreements for consideration by Members, and

grant waivers of obligations. All accessions to the WTO must be approved by the General Council or the

Ministerial Conference. 

Technically, meetings of both the Dispute Settlement Body (DSB) and the Trade Policy Review Body

(TPRB) are meetings of the General Council convened for the purpose of discharging the responsibilities

of the DSB and TPRB respectively. 

Three major bodies report directly to the General Council: the Council for Trade in Goods, the Council

for Trade in Services, and the Council for Trade-Related Aspects of Intellectual Property Rights. The

Committee on Trade and Environment, the Committee on Trade and Development, the Committee on

Balance of Payments Restrictions, the Committee on Budget, Finance and Administration, and the

Committee on Regional Trading Arrangements report directly to the General Council. The Working

Groups established at the First Ministerial Conference in Singapore to examine investment, trade and

competition policy, and transparency in government procurement also report directly to the General

Council. A number of subsidiary bodies report through the Council for Trade in Goods or the Council for

Trade in Services to the General Council. The Doha Ministerial Declaration formed a number of new

work programs and working groups which have been given mandates to report to the General Council

such as the Working Group on Trade, Debt, and Finance and the Working Group on Trade and Transfer

of Technology. The mandates are part of DDA and these were treated earlier in this chapter.

The General Council uses both formal and informal processes to conduct the business of the WTO. In

addition, informal groupings, which generally include the United States, can play an important role in

consensus-building.

Prior to establishment of the WTO in 1995, annual meetings of GATT Contracting Parties were convened

with representatives from capitals generally at the subcabinet level, and only held at the ministerial level

to launch or conclude negotiations. Part of the logic behind this change from the GATT was the fact that

with creation of the WTO, Members had created a permanent negotiating forum to achieve trade
43

liberalization. The Financial Services Agreement, the Basic Telecommunications Services Agreement,

Information Technology Agreement, and the “built-in agenda” negotiations initiated in 2000 are examples

of how the WTO has evolved into a permanent negotiating body. 

Major Issues in 2002

Ambassador Sergio Marchi of Canada served as Chairman of the General Council in 2002. The

following issues figured prominently in the General Council activities:

Transparency: In 2002, the General Council completed work on efforts to improve its 1996 document

availability decision, a step which was advocated by several Members, including the United States. The

General Council Decision of May 14, 2002 represents a substantial, though still imperfect, improvement

over the rules that had been in place since July 1996. The most significant changes are the elimination of

the automatic restriction of certain types of documents, a significant shortening of the period during

which documents issued as restricted remain restricted, and automatic derestriction of documents that in

the past could remain restricted for an extended period of time based on the request of a Member.

Procedures for the Selection of Director-Generals: In 2002 the General Council completed work on

guidelines for the selection of the WTO Director-General. Work on the guidelines had been initiated by

Members several years ago out of a desire to reduce the risk of a repeat of the divisive selection process

that had taken place in 1999. The new guidelines set time frames for the selection process and a

mechanism for facilitating the consensus building process. While many Members had wanted the

guidelines to include procedures for voting in the case of a deadlock, there was no consensus on whether

there should be voting or what type of voting might be employed. As a result the guidelines simply state

that in the event of an intractable deadlock, Members should consider whether to put the matter to a vote

and, if so, through what procedure. 

Waivers of Obligations: As part of the annual review required by Article IX of the WTO Agreement, the

General Council considered reports on the operation of a number of previously agreed waivers, including

those applicable to the United States for the Caribbean Basin Economic Recovery Act, and preferences

for the Former Trust Territories of the Pacific Islands. The General Council also approved several other

waivers, as described in the section on the Council on Trade in Goods (CTG). Annex II contains a

detailed list of Article IX waivers currently in force.

Accessions to the WTO: The General Council, acting on behalf of the Ministerial Council, approves the

accessions of new Members to the WTO after the final terms have been adopted by the Working Parties

established by the Council. In 2002, the General Council approved the accession of Armenia and

Macedonia. They will become Members of the WTO 30 days after each of them deposit their instrument

of ratification. 

During 2002, the General Council agreed on guidelines aimed at facilitating the accession of leastdeveloped countries (LDCs). Additional details concerning the formulation of these new guidelines,

acceding countries, and the accession process are discussed below in the section entitled "Accessions to

the World Trade Organization."

Global Electronic Commerce: The Work Program on Electronic Commerce held two dedicated

discussions under the auspices of the General Council in 2002. Those sessions focused on the
44

classification of certain products that could be transmitted electronically, as well as certain fiscal

implications of electronic commerce. Further dedicated discussions are planned for 2003, also under the

guidance of the General Council.

Capacity Building through Technical Cooperation: The General Council continued its supervision of

technical assistance for the purpose of capacity building in developing countries (i.e., modernizing their

government operations to facilitate effective implementation of the WTO Agreements). For its part, the

United States donated $1 million to the WTO Global Trust Fund for Technical Assistance and an

additional $370,000 to assist African countries specifically.

Prospects for 2003

The General Council will continue its important role in overseeing implementation of the WTO

Agreements, expanding the current program of work for the WTO. It will also continue to oversee the

negotiations launched at the Fourth Ministerial Conference at Doha in 2001, including preparations for

the Fifth Ministerial Conference in Cancun, Mexico. Management of the WTO, especially with respect to

outreach efforts to the public, consultations with Members, and its work with other institutions on

capacity building, will figure prominently in Council discussions over the next year. The Council likely

will meet at least quarterly to discharge its functions and will undertake a review of a U.S. waiver to

legislation known as the “Jones Act”. 

The requirement for ministerial meetings was established in the Uruguay Round to assure regular,

political level review by ministers of the operation of the WTO, similar to the practice of other

international organizations. Ministerial Conferences were convened in Singapore (1996), Geneva (1998),

Seattle (1999), and Doha (2001). The General Council has the authority to add issues to the WTO’s

agenda, whether for a work program or negotiation. The informal processes on transparency and

oversight of the work program on electronic commerce will remain an important part of the Council’s

work. 

1. The Dispute Settlement Understanding

Status

The Understanding on Rules and Procedures Governing the Settlement of Disputes (“Dispute Settlement

Understanding” or “DSU”), which is annexed to the WTO Agreement, provides a mechanism to settle

disputes under the Uruguay Round Agreements. Thus, it is key to the enforcement of U.S. rights under

these Agreements. 

The DSU is administered by the Dispute Settlement Body (“DSB”), which is empowered to establish

dispute settlement panels, adopt panel and Appellate Body reports, oversee the implementation of panel

recommendations adopted by the DSB and authorize retaliation. The DSB makes all its decisions by

"consensus." Annex II provides more background information on the WTO dispute settlement process.
45

Major Issues in 2002

The DSB met 19 times in 2002 to oversee disputes and to address responsibilities such as consulting on

proposed amendments to the Appellate Body working procedures and approving additions to the roster of

governmental and non-governmental panelists.

Roster of Governmental and Non-Governmental Panelists: Article 8 of the DSU makes it clear that

panelists may be drawn from either the public or private sector and must be “well-qualified,” such as

persons who have served on or presented a case to a panel, represented a government in the WTO or the

GATT, served with the Secretariat, taught or published in the international trade field, or served as a

senior trade policy official. Since 1985, the Secretariat has maintained a roster of non-governmental

experts for GATT 1947 dispute settlement, which has been available for use by parties in selecting

panelists. In 1995, the DSB agreed on procedures for renewing and maintaining the roster, and expanding

it to include governmental experts. In response to a U.S. proposal, the DSB also adopted standards

increasing and systematizing the information to be submitted by roster candidates. These modifications

will aid in evaluating candidates’ qualifications and encouraging the appointment of well-qualified

candidates who have expertise in the subject matters of the Uruguay Round Agreements. In 2002, the

DSB approved by consensus a number of additional names for the roster. The United States scrutinized

the credentials of these candidates to assure the quality of the roster.

The present WTO panel roster appears in the background information in Annex II. The list in the roster

notes the areas of expertise of each roster member (goods, services and/or TRIPS). 

Rules of Conduct for the DSU: The DSB completed work on a code of ethical conduct for WTO dispute

settlement and on December 3, 1996, adopted the Rules of Conduct for the Understanding on Rules and

Procedures Governing the Settlement of Disputes. A copy of the Rules of Conduct was printed in the

Annual Report for 1996 and is available on the WTO and USTR websites. There were no changes in

these Rules in 2002.

The Rules of Conduct were designed to elaborate on the ethical standards built into the DSU, and to

maintain the integrity, impartiality and confidentiality of proceedings conducted under the DSU. The

Rules of Conduct require all individuals called upon to participate in dispute settlement proceedings to

disclose direct or indirect conflicts of interest prior to their involvement in the proceedings, and to

conduct themselves during their involvement in the proceedings so as to avoid such conflicts. The Rules

of Conduct also provide parties to a dispute an opportunity to address potential material violations of

these ethical standards. The coverage of the Rules of Conduct exceeds the goals established by Congress

in section 123(c) of the Uruguay Round Agreements Act (URAA), which directed the USTR to seek

conflict of interest rules applicable to persons serving on panels and members of the Appellate Body. The

Rules of Conduct cover not only panelists and Appellate Body members, but also: (1) arbitrators; (2)

experts participating in the dispute settlement mechanism (e.g., the Permanent Group of Experts under the

Subsidies Agreement); (3) members of the WTO Secretariat assisting a panel or assisting in a formal

arbitration proceeding; (4) the Chairman of the Textile Monitoring Body (“TMB”) and other members of

the TMB Secretariat assisting the TMB in formulating recommendations, findings or observations under

the Agreement on Textiles and Clothing; and (5) support staff of the Appellate Body.

As noted above, the Rules of Conduct established a disclosure-based system. Examples of the types of
46

information that covered persons must disclose are set forth in Annex II to the Rules, and include the

following: (1) financial interests, business interests, and property interests relevant to the dispute in 

question; (2) professional interests; (3) other active interests; (4) considered statements of personal

opinion on issues relevant to the dispute in question; and (5) employment or family interests.

Appellate Body: The DSU requires the DSB to appoint seven persons to serve on an Appellate Body,

which is to be a standing body, with members serving four-year terms, except for three initial appointees

determined by lot whose terms expired at the end of two years. At its first meeting on February 10, 1995,

the DSB formally established the Appellate Body, and agreed to arrangements for selecting its members

and staff. They also agreed that Appellate Body members would serve on a part-time basis, and sit

periodically in Geneva. The original seven Appellate Body members, who took their oath on December

11, 1995, were: Mr. James Bacchus of the United States, Mr. Christopher Beeby of New Zealand,

Professor Claus-Dieter Ehlermann of Germany, Dr. Said El-Naggar of Egypt, Justice Florentino Feliciano

of the Philippines, Mr. Julio Lacarte-Muró of Uruguay, and Professor Mitsuo Matsushita of Japan. On

June 25, 1997, it was determined by lot that the terms of Messrs. Ehlermann, Feliciano and Lacarte-Muró

would expire in December 1997. The DSB agreed on the same date to reappoint them for a final term of

four years commencing on 11 December 1997. On October 27, 1999 and November 3, 1999, the DSB

agreed to renew the terms of Messrs. Bacchus and Beeby for a final term of four years, commencing on

December 11, 1999, and to extend the terms of Dr. El-Naggar and Professor Matsushita until the end of

March 2000. On April 7, 2000, the DSB agreed to appoint Mr. Georges Michel Abi-Saab of Egypt and

Mr. A.V. Ganesan of India to a term of four years commencing on June 1, 2000. On May 25, 2000, the

DSB agreed to the appointment of Professor Yasuhei Taniguchi of Japan to serve through December 10,

2003, the remainder of the term of Mr. Beeby, who passed away on March 19, 2000. On September 25,

2001, the DSB agreed to appoint Mr. Luiz Olavo Baptista of Brazil, Mr. John S Lockhart of Australia and

Mr. Giorgio Sacerdoti of Italy to a term of four years commencing on December 19, 2001. The names

and biographical data for the Appellate Body members are included in Annex II of this report.

The Appellate Body has also adopted Working Procedures for Appellate Review. On February 28, 1997,

the Appellate Body issued a revision of the Working Procedures, providing for a two-year term for the

first Chairperson, and one-year terms for subsequent Chairpersons. In 2001 the Appellate Body amended

its working procedures to provide for no more than two consecutive terms for Chairperson. Mr. LacarteMuró, the first Chairperson, served until February 7, 1998; Mr. Beeby served as Chairperson from

February 7, 1998 to February 6, 1999; Mr. El-Naggar served as Chairperson from February 7, 1999 to

February 6, 2000; Mr. Feliciano served as Chairperson from February 7, 2000 to February 6, 2001; Mr.

Ehlermann served as Chairperson from February 7, 2001 to December 10, 2001, and Mr. Bacchus’s term

as Chairperson runs from December 15, 2001 to December 10, 2003 (including his election to serve an

additional term).

In 2002, the Appellate Body issued eight reports, of which six involved the United States as a party and

are discussed in detail below. The two other reports concerned the European Communities’ measures

affecting the labeling of sardines and Chile’s price band measures for agricultural imports. The United

States participated in both of these proceedings as an interested third party. 

Dispute Settlement Activity in 2002: During its first eight years in operation, 276 requests for

consultations (22 in 1995, 42 in1996, 46 in 1997, 44 in 1998, 31 in 1999, 30 in 2000, 27 in 2001, and 34

in 2002) were filed with the WTO. During that period, the United States filed 61 complaints against other

Members’ measures and received 71 complaints on U.S. measures. A number of disputes commenced in
47

earlier years continued to be active in 2002. What follows is a description of those disputes in which the

United States was either a complainant, defendant, or third party during the past year.

Prospects for 2003

In 2003, we expect that the DSB will continue to focus on the administration of the dispute settlement

process in the context of individual disputes. Experience gained with the DSU will be incorporated into

the U.S. litigation and negotiation strategy for enforcing U.S. WTO rights, as well as the U.S. position on

DSU reform. DSB Members will continue to consider reform proposals in 2003. 

a. Disputes Brought by the United States

In 2002, the United States continued to be one of the most active participants in the WTO dispute

settlement process. This section includes brief summaries of dispute settlement activity in 2002 where the

United States was a complainant. As demonstrated by these summaries, the WTO dispute settlement

process has proven to be an effective tool in combating barriers to U.S. exports. Indeed, in a number of

cases the United States has been able to achieve satisfactory outcomes invoking the consultation

provisions of the dispute settlement procedures, without recourse to formal panel proceedings.

Argentina—Patent and test data protection for pharmaceuticals and agricultural chemicals (DS171/196)

On May 6, 1999, the United States filed a consultation request challenging Argentina’s failure to provide

a system of exclusive marketing rights for pharmaceutical products, and to ensure that changes in its laws

and regulations during its transition period do not result in a lesser degree of consistency with the

provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS

Agreement”). Consultations were held on June 15, 1999, and again on July 27, 1999. On May 30, 2000,

the United States expanded its claims in this dispute to include new concerns that arose as a result of

Argentina’s failure to fully implement its remaining TRIPS obligations as required on January 1, 2000. 

These concerns include Argentina’s failure to protect confidential test data submitted to government

regulatory authorities for pharmaceuticals and agricultural chemicals; its denial of certain exclusive rights

for patents; its failure to provide such provisional measures as preliminary injunctions to prevent

infringements of patent rights; and its exclusion of certain subject matter from patentability. 

Consultations began July 17, 2000. On May 31, 2002, the United States and Argentina notified the DSB

that a partial settlement of this dispute had been reached. Of the ten claims raised by the United States,

eight were settled. The United States reserved its right to pursue future consultations and WTO dispute

settlement with respect to two remaining issues: protection of test data against unfair commercial use and

the application of enhanced TRIPS Agreement rights to patent applications pending as of the entry into

force of the TRIPS Agreement for Argentina (January 1, 2000). 

Brazil—Customs valuation (DS197)

The United States requested consultations on May 31, 2000 with Brazil regarding its customs valuation

regime. U.S. exporters of textile products reported that Brazil uses officially-established minimum

reference prices both as a requirement to obtain import licenses and/or as a base requirement for import. 

In practice, this system works to prohibit the import of products with declared values below the

established minimum prices. This practice appears inconsistent with Brazil’s WTO obligations, including

those under the Agreement on Customs Valuation. The United States participated as an interested third
48

party in a dispute initiated by the European Union regarding the same matter, and decided to pursue its

own case as well. The United States held consultations with Brazil on July 18, 2000, and continued to

monitor the situation in 2002.

Canada—Export subsidies and tariff-rate quotas on dairy products (DS103)

The United States prevailed on its claim that Canada is providing subsidies to exports of dairy products in

violation of its Uruguay Round commitment to reduce the quantity of subsidized exports of dairy

products. The United States initiated this dispute in 1998, contending that Canada was providing export

subsidies on dairy products in excess of its commitment levels and was maintaining a tariff-rate quota

(TRQ) on fluid milk under which it only permitted the entry of milk in retail-sized containers by

Canadian residents for their personal use. On August 12, 1998, the following panelists were selected,

with the consent of the parties, to review the U.S. claims: Professor Tommy Koh, Chairman; Mr.

Guillermo Aguilar Alvarez and Professor Ernst-Ulrich Petersmann, Members. On May 17, 1999, the

panel issued its report upholding U.S. arguments by finding that Canada’s export subsidies are

inconsistent with the Agreement on Agriculture, and that Canada’s practice of restricting the import of

milk to retail-sized containers imported by Canadian residents is inconsistent with its obligations under

the GATT 1994. On October 13, 1999, the Appellate Body issued its report upholding the panel’s finding

that Canada’s export subsidies are inconsistent with its GATT obligations. The panel and Appellate Body

reports were adopted by the Dispute Settlement Body (DSB) on October 27, 1999. On December 22,

1999, the parties reached agreement on the time period for implementation by Canada. Under this

agreement, Canada was to complete full implementation of the DSB’s recommendations and rulings no

later than January 31, 2001. 

While Canada eliminated one of the export subsidies subject to the DSB findings, it introduced its

“commercial export milk” scheme under which exporters have access to milk at prices that are below

domestic market levels in Canada. Therefore, on February 16, 2001, the United States, along with New

Zealand, requested that the DSB reestablish the panel to review Canada’s compliance measures. At the

same time, the United States requested authorization to withdraw concessions benefiting goods from

Canada if the panel agreed that Canada had failed to comply with the rulings against it. The panel was

reestablished on March 1, 2001, with Mr. Peter PaleÖka replacing Professor Koh, who was no longer

available to serve, and with Professor Petersmann serving as Chairman. The panel found that the steps

Canada took to implement the adverse rulings regarding its dairy export practices were insufficient and

that Canada continued to subsidize its dairy exports at a level that is inconsistent with its WTO

commitments. Canada appealed the panel’s findings. On December 3, 2001, the Appellate Body

concluded that it did not have enough facts to make a ruling against Canada. 

As a result, the United States, along with New Zealand, requested on December 6, 2001 that the panel be

reconvened again to allow the complaining parties to present additional factual information. The panel

was reestablished on December 18, 2001, with Mr. Peter PaleÖka and Mr. Guillermo Aguilar Alvarez

serving as panelists, and with Professor Petersmann serving as Chairman. On July 26, 2002, the panel

found that the steps Canada took to implement the adverse rulings regarding its dairy export practices

were insufficient and that Canada continued to subsidize its dairy exports at a level that is inconsistent

with its WTO commitments. Canada appealed the panel’s findings. On December 20, 2002, the

Appellate Body upheld the panel’s findings. The DSB adopted the panel and Appellate Body reports on

January 17, 2003.
49

Canada – Measures Relating to Exports of Wheat And Treatment of Imported Grain (DS276)

On December 17, 2002, the United States requested consultations with Canada concerning the export of

wheat by the Canadian Wheat Board and the treatment accorded by Canada to grain imported into

Canada. The consultations were held on January 31, 2003. The Government of Canada established the

Canadian Wheat Board and granted to this enterprise exclusive and special privileges, including the

exclusive rights to purchase and sell Western Canadian wheat for human consumption. The actions of the

Government of Canada and the Canadian Wheat Board appear to be inconsistent with the obligations of

the Government of Canada under Article XVII of the GATT 1994. Furthermore, with regard to the

treatment of grain that is imported into Canada, the United States considers that Canadian measures

discriminate against imported grain, including grain that is the product of the United States, in breach of

the GATT 1994.

European Union—Regime for the importation, sale and distribution of bananas (DS27)

The United States, along with Ecuador, Guatemala, Honduras, and Mexico, successfully challenged the

EU banana regime under WTO dispute settlement procedures. The regime was designed, among other

things, to take away a major part of the banana distribution business of U.S. companies. On May 29,

1996, at the request of the complaining parties, the Director-General selected the following panelists to

serve in this dispute: Mr. Stuart Harbinson, Chairman; Mr. Kym Anderson and Mr. Christian Häberli,

Members. On May 22, 1997, the panel found that the EU banana regime violated WTO rules; the

Appellate Body upheld the panel’s decision on September 9, 1997. At the request of the complaining

parties, the compliance period was set by arbitration and expired on January 1, 1999. However, on

January 1, 1999, the European Union adopted a regime that perpetuated the WTO violations identified by

the panel and the Appellate Body. The United States sought WTO authorization to suspend concessions

with respect to certain products of the European Union, the value of which is equivalent to the

nullification or impairment sustained by the United States. The European Union exercised its right to

request arbitration concerning the amount of the suspension and on April 6, 1999, the arbitrators

determined the level of suspension to be $191.4 million. On April 19, 1999, the DSB authorized the

United States to suspend such concessions, and the United States imposed 100 percent ad valorem duties

on a list of EU products with an annual trade value of $191.4 million. 

On April 11, 2001, the United States and the European Union agreed to an Understanding that identified

the means by which the dispute could be resolved. Pursuant to the Understanding, the European Union

implemented a revised import licensing regime for its banana tariff-rate quota on July 1, 2001, and

allocated a significantly increased number of licenses to U.S. operators. The United States thereupon

suspended its increased duties. The European Union implemented an additional change to the tariff-rate

quota by January 1, 2002, which resulted in further increases of licenses allocated to US operators.

European Union—Protection of trademarks and geographical indications for agricultural products and

foodstuffs (DS174) 

EU Regulation 2081/92, as amended, does not provide national treatment with respect to geographical

indications for agricultural products and foodstuffs; it also does not provide sufficient protection to

pre-existing trademarks that are similar or identical to such geographical indications. The United States

considers this measure inconsistent with the European Union’s obligations under the TRIPS Agreement. 

The United States requested consultations regarding this matter on June 1, 1999. Consultations were first
50

held July 9, 1999, and continued through 2002.

European Union – Provisional Safeguard Measure on Imports of Certain Steel Products (DS260)

On May 30, 2002, the United States requested consultations with the European Union concerning the

consistency of the European Union’s provisional safeguard measures on certain steel products with the

General Agreement on Tariffs and Trade (1994) and with the WTO Agreement on Safeguards. 

Consultations were held on June 27 and July 24, 2002, which, unfortunately, did not resolve the dispute. 

Therefore, on August 19, 2002, the United States requested that a WTO panel examine these measures. 

The panel was established on September 16, 2002.

India—Measures affecting the motor vehicle sector (DS175)

In order to obtain import licenses for certain motor vehicle parts and components, India requires

manufacturing firms in the motor vehicle sector to achieve specified levels of local content, to neutralize

foreign exchange by balancing the value of certain imports with the value of exports of cars and

components over a stated period, and to limit imports to a value based on the previous year’s imports. 

Considering these requirements inconsistent with India’s obligations under the GATT 1994 and the

Agreement on Trade-related Investment Measures (“TRIMs Agreement”), the United States requested

consultations on June 2, 1999. Consultations were held July 20, 1999. The matter remained unresolved

following consultations and, on May 15, 2000, the United States requested the establishment of a panel. 

A panel was established on July 27, 2000, and on November 17, 2000, that panel was merged with a

panel established at the request of the European Union regarding the same matter. On November 24,

2000, at the request of the complaining parties, the Director-General selected the following panelists to

serve in this dispute: Mr. John Weekes, Chairman; Ms. Gloria Peña and Mr. Jeffrey Waincymer,

Members. On December 21, 2001, the panel issued its report. The panel found that the measures in

question were inconsistent with India's obligations under GATT Articles III:4 and XI:1, and it

recommended that India bring the measure into compliance with its obligations. The panel exercised

judicial economy and did not reach the claims made under the TRIMS Agreement. India appealed the

panel’s report, but then withdrew its appeal on March 14, 2002. At the DSB meeting of November 11,

2002, India announced it had implemented the DSB recommendations and rulings.

Japan - Measures Affecting the Importation of Apples (DS245)

On March 1, 2002, the United States requested consultations with Japan regarding Japan’s measures

restricting the importation of U.S. apples in connection with fire blight or the fire blight disease-causing

organism, Erwinia amylovora. These restrictions include: the prohibition of imported apples from U.S.

states other than Washington or Oregon; the prohibition of imported apples from orchards in which any

fire blight is detected; the prohibition of imported apples from any orchard (whether or not it is free of fire

blight) should fire blight be detected within a 500 meter buffer zone surrounding such orchard; the

requirement that export orchards be inspected three times yearly (at blossom, fruitlet, and harvest stages)

for the presence of fire blight for purposes of applying the above-mentioned prohibitions; a post-harvest

surface treatment of exported apples with chlorine; production requirements, such as chlorine treatment of

containers for harvesting and chlorine treatment of the packing line; and the post-harvest separation of

apples for export to Japan from those apples for other destinations. Consultations were held on April 18,

2002, and a panel was established on June 3, 2002. The Director-General selected as panelists Mr.

Michael Cartland, Chair, and Ms. Kathy-Ann Brown and Mr. Christian Haeberli, Members.
51

Mexico—Measures affecting trade in live swine (DS203)

On July 10, 2000, the United States requested consultations with Mexico regarding Mexico’s October 20,

1999, definitive antidumping measure involving live swine from the United States as well as sanitary and

other restrictions imposed by Mexico on imports of live swine weighing more than 110 kilograms. The

United States considers that Mexico made a determination of threat of material injury that appears

inconsistent with the Antidumping Agreement, and that other actions by Mexico in the conduct of its

investigation are also in violation of the Agreement. In addition, the United States considers that, by

maintaining restrictions on the importation of live swine weighing 110 kilograms or more, Mexico was

acting contrary to its obligations under the Agreement on Agriculture, the SPS Agreement, the Agreement

on Technical Barriers to Trade ("TBT Agreement”), and the GATT 1994. Consultations were held

September 7, 2000. Subsequent to the consultations, Mexico issued a protocol which has allowed a

resumption of U.S. shipments of live swine weighing 110 kilograms or more into Mexico. At about the

same time, Mexico self-initiated a review of its threat of injury determination based on information,

including a shortage of slaughter hogs, that suggests that market conditions have changed substantially in

Mexico. The United States continues to monitor the situation.

Mexico—Measures affecting telecommunications services (DS204)

On August 17, 2000, the United States requested consultations with Mexico regarding its commitments

and obligations under the General Agreement on Trade in Services (``GATS'') with respect to basic and

value-added telecommunications services. The U.S. consultation request covered a number of key issues,

including the Government of Mexico’s failure to: (1) maintain effective disciplines over the former

monopoly, Telmex, which is able to use its dominant position in the market to thwart competition; (2) 

ensure timely, cost-oriented interconnection that would permit competing carriers to connect to Telmex

customers to provide local, long-distance, and international service; and (3) permit alternatives to an

outmoded system of charging U.S. carriers above-cost rates for completing international calls into

Mexico. Prior to such consultations, which were held on October 10, 2000, the Government of Mexico

issued rules to regulate the anti-competitive practices of Telmex (Mexico’s major telecommunications

supplier) and announced significant reductions in long-distance interconnection rates for 2001. 

Nevertheless, given that Mexico still had not fully addressed all U.S. concerns, the United States, on

November 10, 2000, filed a request for establishment of a panel as well as an additional request for

consultations on Mexico’s newly issued measures. Those consultations were held on January 16, 2001. 

The United States requested the establishment of a panel on March 8, 2002. The panel was established on

April 17, 2002. On August 26, 2002, the Director-General appointed as chairperson Mr. Ulrich

Petersmann (Germany), and Mr. Raymond Tam (Hong Kong, China) and Mr. Björn Wellenius (Chile) as

panelists.

Venezuela – Import Licensing Measures on Certain Agricultural Products (DS275)

On November 7, 2002, the United States requested consultations with Venezuela concerning its import

licensing systems and practices that restrict agricultural imports from the United States. The United

States considers that Venezuela’s system creates a discretionary import licensing regime that appears to 

be inconsistent with the Agreement on Agriculture, the TRIMS Agreement, and the Import Licensing

Agreement. The United States held consultations with Venezuela on November 26, 2002.
52

b. Disputes Brought Against the United States

Section 124 of the URAA requires, inter alia, that the Annual Report on the WTO describe, for the

preceding fiscal year of the WTO, each proceeding before a panel or the Appellate Body that was initiated

during that fiscal year regarding Federal or State law, the status of the proceeding, and the matter at issue;

and each report issued by a panel or the Appellate Body in a dispute settlement proceeding regarding

Federal or State law. This section includes summaries of dispute settlement activity in 2002 when the

United States was a defendant.

United States—Foreign Sales Corporation (“FSC”) tax provisions (DS108)

The European Union challenged the FSC provisions of the U.S. tax law, claiming that the provisions

constitute prohibited export subsidies and import substitution subsidies under the Subsidies Agreement,

and that they violate the export subsidy provisions of the Agreement on Agriculture. A panel was

established on September 22, 1998. On November 9, 1998, the following panelists were selected, with

the consent of the parties, to review the EU claims: Mr. Crawford Falconer, Chairman; Mr. Didier

Chambovey and Mr. Seung Wha Chang, Members. The panel found that the FSC tax exemption

constitutes a prohibited export subsidy under the Subsidies Agreement, and also violates U.S. obligations

under the Agreement on Agriculture. The panel did not make findings regarding the FSC administrative

pricing rules or the EU's import substitution subsidy claims. The panel recommended that the United

States withdraw the subsidy by October 1, 2000. The panel report was circulated on October 8, 1999 and

the United States filed its notice of appeal on November 26, 1999. The Appellate Body circulated its

report on February 24, 2000. The Appellate Body upheld the panel's finding that the FSC tax exemption

constitutes a prohibited export subsidy under the Subsidies Agreement, but, like the panel, declined to

address the FSC administrative pricing rules or the EU 's import substitution subsidy claims. While the

Appellate Body reversed the panel's findings regarding the Agreement on Agriculture, it found that the

FSC tax exemption violated provisions of that Agreement other than the ones cited by the panel. The

panel and Appellate Body reports were adopted on March 20, 2000, and on April 7, 2000, the United

States announced its intention to respect its WTO obligations. On November 15, 2000, the President

signed the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 (“the ETI Act”), legislation that

repealed and replaced the FSC provisions. However, the European Union claimed that the new

legislation failed to bring the US into compliance with its WTO obligations. 

On January 14, 2002, the Appellate Body issued its report with respect to the ETI Act. The Appellate

Body affirmed the findings of the panel that: (1) the ETI Act’s tax exclusion constituted a prohibited

export subsidy under the WTO Subsidies Agreement; (2) the tax exclusion constituted an export subsidy

that violated U.S. obligations under the WTO Agriculture Agreement; (3) the ETI Act’s foreign

article/labor limitation provides less favorable treatment to “like” imported products in violation of

Article III:4 of GATT 1994; and (4) the ETI Act’s transition rules resulted in a failure to withdraw the

subsidy as recommended by the DSB under Article 4.7 of the Subsidies Agreement. The DSB adopted

the panel and Appellate Body reports on January 29, 2002.

In November 2000, the European Union had sought authority to impose countermeasures in the amount

of $4.043 billion as a result of the alleged U.S. non-compliance, and the United States had challenged this

amount by requesting arbitration. Under a September 2000 procedural agreement between the United

States and the European Union, the arbitration was suspended pending the outcome of the EU’s challenge
53

to the WTO-consistency of the ETI Act. With the adoption of the panel and Appellate Body reports, the

arbitration automatically resumed. On August 30, 2002, the arbitrator circulated its decision. The 

arbitrator found that the countermeasures sought by the European Union were “appropriate” within the

meaning of Article 4.10 of the Subsidies Agreement because, according to the arbitrator, they were not

“disproportionate to the initial wrongful act to which they are intended to respond.”

Following the adoption of the panel and Appellate Body reports, legislation was introduced in the U.S.

House of Representatives to repeal the ETI Act and hearings were held in both the U.S. House of

Representatives and the U.S. Senate.

United States—1916 Revenue Act (DS136/162)

Title VII of the Revenue Act of 1916 (15 U.S.C. §§ 71-74, entitled “Unfair Competition”), often referred

to as the Antidumping Act of 1916, allows for private claims against, and criminal prosecutions of, parties

that import or assist in importing goods into the United States at a price substantially less than the actual

market value or wholesale price. On April 1, 1999, the following panelists were selected, with the

consent of the parties, to review the EU claims: Mr. Johann Human, Chairman; Mr. Dimitrij Grçar and

Mr. Eugeniusz Piontek, Members. On January 29, 1999, the panel found that the 1916 Act is inconsistent

with WTO rules because the specific intent requirement of the Act does not satisfy the material injury test

required by the Antidumping Agreement. The panel also found that civil and criminal penalties in the

1916 Act go beyond the provisions of the Antidumping Agreement. The panel report was circulated on

March 31, 2000. Separately, Japan sought its own rulings on the same matter from the same panelists;

that report was circulated on May 29, 2000. On the same day, the United States filed notices of appeal for

both cases, which were consolidated into one Appellate Body proceeding. The Appellate Body report,

issued August 28, 2000, affirmed the panel reports. This ruling, however, has no effect on the U.S.

antidumping law, as codified in the Tariff Act of 1930, as amended. The panel and Appellate Body

reports were adopted by the DSB on September 26, 2000. On November 17, 2000, the European Union

and Japan requested arbitration to determine the period of time to be given the United States to implement

the panel’s recommendation. By mutual agreement of the parties, Mr. A.V. Ganesan was appointed to

serve as arbitrator. On February 28, 2001, he determined that the deadline for implementation was July

26, 2001. On July 24, the DSB approved a U.S. proposal to extend the deadline until the earlier of the

end of the then-current session of the U.S. Congress or December 31, 2001. Legislation to repeal the Act

and extinguish cases pending under the Act was introduced in the House on December 20, 2001 and in

the Senate on April 23, 2002, but legislative action was not completed.

United States—Section 110(5) of the Copyright Act (DS160)

As amended in 1998 by the Fairness in Music Licensing Act, section 110(5) of the U.S. Copyright Act

permits certain retail establishments to play radio or television music without paying royalties to

songwriters and music publishers. The European Union claimed that, as a result of this exception, the

United States is in violation of its TRIPS obligations. Consultations with the European Union took place

on March 2, 1999. A panel on this matter was established on May 26, 1999. On August 6, 1999, the

Director-General composed the panel as follows: Ms. Carmen Luz Guarda, Chair; Mr.

Arumugamangalam V. Ganesan and Mr. Ian F. Sheppard, Members. The panel issued its final report on

June 15, 2000, and found that one of the two exemptions provided for in section 110(5) is inconsistent

with the United States’ WTO obligations. The panel report was adopted by the DSB on July 27, 2000,

and the United States has informed the DSB of its intention to respect its WTO obligations. On October
54

23, 2000, the European Union requested arbitration to determine the period of time to be given the United

States to implement the panel’s recommendation. By mutual agreement of the parties, Mr. J. LacarteMuró was appointed to serve as arbitrator. He determined that the deadline for implementation should be

July 27, 2001. On July 24, 2001, the DSB approved a U.S. proposal to extend the deadline until the

earlier of the end of the then-current session of the U.S. Congress or December 31, 2001.

On July 23, 2001, the United States and the European Union requested arbitration to determine the level

of nullification or impairment of benefits to the European Union as a result of section 110(5)(B). In a

decision circulated to WTO Members on November 9, 2001, the arbitrators determined that the value of

the benefits lost to the European Union in this case is $1.1 million per year. On January 7, 2002, the

European Union sought authorization from the DSB to suspend obligations vis-á-vis the United States. 

The United States objected to the details of the EU request, thereby causing the matter to be referred to

arbitration. However, because the United States and the European Union have been engaged in

discussions to find a mutually acceptable resolution of the dispute, the arbitrators suspended the

proceeding pursuant to a joint request by the parties filed on February 26, 2002. The arbitration may be

resumed at any time at the request of either party.

United States—Section 211 Omnibus Appropriations Act (DS176)

Section 211 addresses the ability to register or enforce, without the consent of previous owners,

trademarks or trade names associated with businesses confiscated without compensation by the Cuban

government. The EU questioned the consistency of Section 211 with the TRIPS Agreement, and it

requested consultations on July 7, 1999. Consultations were held September 13 and December 13, 1999. 

On June 30, 2000, the European Union requested a panel. A panel was established on September 26,

2000, and at the request of the European Union the WTO Director-General composed the panel on

October 26, 2000, as follows: Mr. Wade Armstrong, Chairman; Mr. François Dessemontet and Mr.

Armand de Mestral, Members. The panel report was circulated on August 6, 2001, rejecting 13 of the

EU’s 14 claims and finding that, in most respects, section 211 is not inconsistent with the obligations of

the United States under the TRIPS Agreement. The European Union appealed the decision on October 4,

2001. The Appellate Body issued its report on January 2, 2002. The Appellate Body reversed the panel’s

one finding against the United States, and upheld the panel’s favorable findings that WTO Members are

entitled to determine trademark and trade name ownership criteria. The Appellate Body found certain

instances, however, in which section 211 might breach the national treatment and most favored nation

obligations of the TRIPS Agreement. The panel and Appellate Body reports were adopted on February 1,

2002. On March 28, 2002, the United States and the European Union notified the DSB that they had

agreed that the reasonable period of time for the United States to implement the DSB’s recommendations

and rulings would expire on December 31, 2002, or on the date on which the current session of the U.S.

Congress adjourns, whichever is later, and in no event later than January 3, 2003. On December 20,

2002, this agreed period was extended to June 30, 2003. 

United States—Antidumping measures on certain hot-rolled steel products from Japan (DS184)

Japan alleged that the preliminary and final determinations of the Department of Commerce and the

USITC in their antidumping investigations of certain hot-rolled steel products from Japan, issued on

November 25 and 30, 1998, February 12, 1999, April 28, 1999, and June 23, 1999, were erroneous and

based on deficient procedures under the U.S. Tariff Act of 1930 and related regulations. Japan claimed

that these procedures and regulations violate the GATT 1994, as well as the Antidumping Agreement and
55

the Agreement Establishing the WTO. Consultations were held on January 13, 2000, and a panel was

established on March 20, 2000. In May 1999, the Director-General composed the panel as follows: Mr.

Harsha V. Singh, Chairman; Mr. Yanyong Phuangrach and Ms. Lidia di Vico, Members. On February

28, 2001, the panel circulated its report, in which it rejected most of Japan’s claims, but found that, inter

alia, particular aspects of the antidumping duty calculation, as well as one aspect of the U.S. antidumping

duty law, were inconsistent with the WTO Antidumping Agreement. On April 25, 2001, the United

States filed a notice of appeal on certain issues in the panel report. The Appellate Body report was issued

on July 24, 2001, reversing in part and affirming in part. The reports were adopted on August 23, 2001. 

Pursuant to a February 19, 2002, arbitral award, the United States was given 15 months, or until

November 23, 2002, to implement the DSB’s recommendations and rulings. On November 22, 2002, the

Department of Commerce issued a new final determination in the hot-rolled steel antidumping duty

investigation, which implemented the recommendations and rulings of the DSB with respect to the

calculation of antidumping margins in that investigation. In view of other DSB recommendations and

rulings, after consultations with Japan, the United States requested that the "reasonable period of time" in

this dispute be extended until December 31, 2003, or until the end of the first session of the next

Congress, whichever is earlier. That request was approved by the DSB at its meeting of December 5,

2002. Subsequently the two parties agreed to extend this date until December 31, 2003.

United States—Definitive safeguard measures on imports of circular welded carbon quality line pipe

from Korea (DS202)

On June 13, 2000, Korea requested consultations regarding safeguard measures imposed by the United

States on imports of circular welded carbon quality line pipe. These measures were proclaimed by the

United States on February 18, 2000, and introduced on March 1, 2000. Korea argued that such measures

were inconsistent with the Agreement on Safeguards and the GATT 1994. Consultations were held July

28, 2000. On September 14, 2000, Korea requested the establishment of a panel. A panel was

established on October 23, 2000, and composed of the following panelists: Mr. Dariusz Rosati, Chairman

(selected by the Director-General); Robert Azevedo and Eduardo Bianchi, Members (selected by mutual

agreement of the parties). The panel report was circulated on October 29, 2001. The panel found that the

U.S. measure violates the Safeguards Agreement, but at the same time rejected several of Korea's claims

related to both the measure itself and the investigation. The U.S. notice of appeal was filed with the

WTO Appellate Body on November 19, 2001.

The Appellate Body issued its report on February 15, 2002. It rejected some of the panel’s findings in

favor of the United States, but also upheld several of those findings. The DSB adopted the panel report,

as modified by the Appellate Body report, on March 8, 2002. The United States and Korea reached

agreement in the dispute on July 29, 2002. Pursuant to that agreement, the United States increased the

quantity of Korean line pipe exempt from the safeguard measure to 17,500 tons per quarter, effective

September 1, 2002. The safeguard measure remained unchanged with regard to other import sources. It

is scheduled to terminate on March 1, 2003.

United States—Antidumping measures and countervailing measures on steel plate from India (DS206) 

India contended that the Department of Commerce made several errors in its final determinations

regarding certain cut-to-length carbon quality steel plate products from India, dated December 13, 1999

and amended on February 10, 2000. India also argued that the USITC made errors with respect to the

negligibility, cumulation, and material injury caused by such products. India claimed that these errors
56

were based on deficient procedures contained in the U.S. antidumping and countervailing duty laws, and

thus raised questions concerning the obligations of the United States under the Antidumping Agreement,

the GATT 1994, the Subsidies Agreement, and the Agreement Establishing the WTO. India requested

consultations with the United States regarding this matter on October 4, 2000. The United States and

India held consultations in November 2000 and in July 2001. India then filed a panel request, which

focused on a subset of the claims it had raised during consultations. On June 21, 2002, the Panel issued

its report in the dispute, rejecting most of India’s claims. The Panel agreed with India that one aspect of

the challenged determination was not consistent with the Antidumping Agreement. It found that the

Department of Commerce had failed to explain why it would have been “unduly difficult” to use certain

information that the Indian respondent submitted. The DSB adopted the report on July 29, 2002. On

August 27, 2002, the United States announced it intentions on implementing the DSB’s rulings and

recommendations arising from the report. The United States and India subsequently reached agreement

on a reasonable period of time for implementation, ending on December 29, 2002.

United States—Countervailing duty measures concerning certain products from the European

Communities (DS212)

On November 13, 2000, the European Union requested WTO dispute settlement consultations in 14

separate U.S. countervailing duty proceedings covering imports of steel and certain other products from

member states of the European Union, all with respect to the Department of Commerce’s “change in

ownership” (or “privatization”) methodology that was challenged successfully by the European Union in

a WTO dispute concerning leaded steel products from the UK. Consultations were held December 7,

2000. Further consultations were requested on February 1, 2001, and held on April 3. A panel was

established at the EU’s request on September 10, 2001. In its panel request, the European Union

challenged 12 separate US CVD proceedings, as well as Section 771(5)(F) of the Tariff Act of 1930. At

the request of the European Union, the WTO Director-General composed the panel on November 5, 2001,

as follows: Mr. Gilles Gauthier, Chairman; Ms. Marie-Gabrielle Ineichen-Fleisch and Mr. Michael

Mulgrew, Members. 

On July 31, 2002, the panel circulated its final report. In a prior dispute concerning leaded bar from the

United Kingdom, the European Union successfully challenged the application of an earlier version of

Commerce’s methodology, known as “gamma.” In this dispute, the panel found that Commerce’s current

“same person” methodology (as well as the continued application of the “gamma” methodology in several

cases) was inconsistent with the Subsidies Agreement. The panel also found that section 771(5)(F) of the

Tariff Act of 1930 – the “change of ownership” provision in the U.S. statute – was WTO-inconsistent. 

The United States appealed, and the Appellate Body issued its report on December 9, 2002. The

Appellate Body reversed the panel with respect to section 771(5)(F), finding that it did not mandate

WTO-inconsistent behavior. The Appellate Body affirmed the panel’s findings that the “gamma” and

“same person” methodologies are inconsistent with the Subsidies Agreement, although it modified the

panel’s reasoning.

United States—Countervailing duties on certain corrosion-resistant carbon steel flat products from

Germany (DS213)

On November 13, 2000, the European Union requested dispute settlement consultations with respect to

the Department of Commerce’s countervailing duty order on certain corrosion-resistant flat rolled steel

products from Germany. In a “sunset review”, the Department of Commerce declined to revoke the order
57

based on a finding that subsidization would continue at a rate of 0.54 percent. The European Union

alleged that this action violates the Subsidies Agreement, asserting that countervailing duty orders must

be revoked where the rate of subsidization found is less than the 1 percent de minimis standard for initial

countervailing duty investigations. The United States and the European Union held consultations

pursuant to this request on December 8, 2000. A second round of consultations was held on March 21,

2001, in which the European Union made a new allegation that the automatic initiation of sunset reviews

by the United States is inconsistent with the SCM Agreement. A panel was established at the EU’s

request on September 10, 2001. The panel was composed of: Mr. Hugh McPhail, Chair, and Mr.

Wieslaw Karsz, Member (selected by agreement of the parties); and Mr. Ronald Erdmann, Member

(selected by the Director-General). 

In its final report, which was circulated on July 3, 2002, the panel made the following findings in favor of

the United States: (1) the EU claims regarding “expedited sunset reviews” and “ample opportunity” for

parties to submit evidence were not identified in the panel request, and were therefore outside the panel’s

terms of reference; (2) because Article 21.3 of the Subsidies Agreement contains no evidentiary standard

for the self-initiation of sunset reviews, the automatic self-initiation of sunset reviews by Commerce was

not a violation; and (3) the U.S. CVD law “as such” is not inconsistent with Article 21.3 with respect to

the obligation that authorities “determine” the likelihood of continuation or recurrence of subsidization in

a sunset review. Disagreeing with the United States, however, a majority of the panel found that the

Subsidies Agreement’s one percent de minimis standard for the investigation phase of a CVD proceeding

applies to sunset reviews. Because U.S. law applies a 0.5 percent de minimis standard in reviews, the

majority found a violation with respect to U.S. law “as such” and as applied in the German steel sunset

review. In a rare step, one panelist dissented from this finding. The panel also found that Commerce’s

determination of likelihood of continuation or recurrence of subsidization in the German steel sunset

review lacked “sufficient factual basis,” and therefore was inconsistent with the obligation to “determine”

under Article 21.3.

The United States appealed the de minimis finding, but not the case-specific finding concerning

Commerce’s determination of likelihood. The European Union cross-appealed on the findings it lost. 

The Appellate Body issued its report on November 28, 2002, and found in favor of the United States on

all counts. The DSB adopted the panel and Appellate Body reports on December 19, 2002.

United States—Safeguard measures on imports of line pipe and wire rod from the European Communities

(DS214)

On December 1, 2000, the European Union requested consultations with the United States regarding U.S.

safeguard measures on imports of circular welded carbon quality line pipe and wire rod. The European

Union argued that these measures are inconsistent with the Agreement on Safeguards and the GATT

1994. The European Union also claimed that certain aspects of the underlying U.S. safeguards legislation

– Sections 201 and 202 of the Trade Act of 1974 – and Section 311 of the NAFTA Implementation Act

prevented the United States from respecting certain provisions of the Agreement on Safeguards and the

GATT 1994. Consultations were held on January 26, 2001, and informal consultations continued

thereafter. A panel was established at the EU’s request on September 10, 2001, but it has not yet been

composed.
58

United States—Continued Dumping and Subsidy Offset Act of 2000 (CDSOA) (DS217/234)

On December 21, 2000, Australia, Brazil, Chile, the European Union, India, Indonesia, Japan, Korea, and

Thailand requested consultations with the United States regarding the Continued Dumping and Subsidy

Offset Act of 2000 (19 USC 754), which amended Title VII of the Tariff Act of 1930 to transfer import

duties collected under U.S. antidumping and countervailing duty orders from the U.S. Treasury to the

companies that filed the antidumping and countervailing duty petitions. Consultations were held on

February 6, 2001. On May 21, 2001, Canada and Mexico also requested consultations on the same

matter, which were held on June 29, 2001. On July 12, 2001, the original nine complaining parties

requested the establishment of a panel, which was established on August 23. On September 10, 2001, a

panel was established at the request of Canada and Mexico, and all complaints were consolidated into one

panel. The panel was composed of: Mr. Luzius Wasescha, Chair (selected by mutual agreement of the

parties); and Mr. Maamoun Abdel-Fattah and Mr. William Falconer, Members (selected by the DirectorGeneral). 

The panel issued its report on September 2, 2002, finding against the United States on three of the five

principal claims brought by the complaining parties. Specifically, the panel found that the CDSOA

constitutes a specific action against dumping and subsidies and therefore is inconsistent with the WTO

Antidumping and SCM Agreements as well as GATT Article VI. The panel also found that the CDSOA

distorts the standing determination conducted by the Commerce Department and therefore is inconsistent

with the standing provisions in the Antidumping and SCM Agreements. The United States prevailed

against the complainants’ claims under the Antidumping and SCM Agreements that the CDSOA distorts

the Commerce Department’s consideration of price undertakings (agreements to settle AD/CVD

investigations). The panel also rejected Mexico’s actionable subsidy claim brought under the SCM

Agreement. Finally, the panel rejected the complainants’ claims under Article X:3 of the GATT, Article

15 of the Anti-dumping Agreement, and Articles 4.10 and 7.9 of the SCM Agreement. The United States

appealed the panel’s adverse findings on October 1, 2002. The Appellate Body issued its report on

January 16, 2003, upholding the panel’s finding that the DCSOA is an impermissible action against

dumping and subsidies, but reversing the panel’s finding on standing. The DSB adopted the panel and

Appellate Body reports on January 27, 2003. At the meeting, the United States stated its intention to

implement the DSB recommendations and rulings. 

United States—Countervailing duties on certain carbon steel products from Brazil (DS218)

On December 21, 2000, Brazil requested consultations with the United States regarding U.S. 

countervailing duties on certain carbon steel products from Brazil, alleging that the Department of

Commerce’s “change in ownership” (or “privatization”) methodology, which was ruled inconsistent with

the WTO Subsidies Agreement when applied to leaded steel products from the UK, violates the Subsidies

Agreement as it was applied by the United States in this countervailing duty case. Consultations were

held on January 17, 2001.

United States—Section 129(c)(1), Uruguay Round Agreements Act (URAA) (DS221)

On January 17, 2001, Canada requested consultations with the United States regarding Section 129(c)(1)

of the URAA, and the accompanying Statement of Administrative Action (SAA) at page 1026 of the

SAA, alleging that this provision precludes the United States from complying fully with rulings of the

WTO Dispute Settlement Body in cases where the United States has acted inconsistently with its WTO
59

obligations with respect to an antidumping or countervailing duty proceeding. The United States and

Canada held consultations in March 2001, and a panel was established at Canada’s request in August 

2001. The following three panelists were selected by mutual agreement of the parties: Mrs. Claudia

Orozco, Chair; and Mr. Edmund McGovern and Mr. Simon Farbenbloom, Members. On June 12, 2002,

the Panel issued a report rejecting Canada’s challenge. The Panel agreed with the United States that

Canada had misinterpreted section 129(c)(1) and found that the provision does not breach any of the

WTO provisions that Canada had cited. The Panel refused Canada’s request to issue legal findings on the

nature of a Member’s implementation obligations in WTO cases involving antidumping and

countervailing duty measures, since section 129(c)(1) did not implicate any entries of merchandise that

would be affected by such issues. Canada did not appeal.

United States—Antidumping duties on seamless pipe from Italy (DS225)

On February 5, 2001, the European Union requested consultations with the United States regarding

antidumping duties imposed by the United States on seamless line and pressure pipe from Italy,

complaining about the final results of a “sunset” review of that antidumping order, as well as the

procedures followed by the Department of Commerce generally for initiating “sunset” reviews pursuant

to Section 751 of the Tariff Act of 1930 and 19 CFR §351. The European Union alleges that these

measures violate the WTO Antidumping Agreement. Consultations were held on March 21, 2001.

United States—Preliminary determinations with respect to certain softwood lumber from Canada

(DS236) 

On August 21, 2001, Canada requested consultations with the United States regarding the U.S.

Department of Commerce’s preliminary countervailing duty and critical circumstances determinations

concerning certain softwood lumber from Canada, as well as section 777A(e)(2)(A) and (B) of the Tariff

Act of 1930 (19 U.S.C. 1677f-1(e)(2)(A) and (B)). Consultations were held on September 17, 2001, and

a panel was established at Canada’s request on December 5, 2001. The panel members were: Dr. Dariusz

Rosati, Chair (selected by the Director-General); and Mr. Robert Arnott (selected by mutual agreement of

the parties) and Mr. Gonzalo Biggs (selected by the Director-General), Members. On September 27,

2002, the panel released its report, which: (1) agreed with the United States that the Canadian provincial

governments’ sale to lumber producers of timber from public lands constitutes a “financial contribution”

by the government that can give rise to a subsidy under the terms of the WTO Subsidies Agreement; (2)

agreed with the United States that the provisions of U.S. law governing expedited and administrative

reviews of final countervailing duty orders are not inconsistent with U.S. obligations under the WTO

Subsidies Agreement; (3) found against the United States with respect to the particular methodology used

to calculate the amount of the subsidy; and (4) found against the United States with respect to the

retroactive imposition of provisional remedies based on its preliminary determination that “critical

circumstances” existed in this case. The Dispute Settlement Body adopted the panel’s report on

November 1, 2002. 

United States—Final countervailing duty determination with respect to certain softwood lumber from

Canada (DS257) 

On May 3, 2002, Canada requested consultations with the United States regarding the U.S. Department of

Commerce’s final countervailing duty determination concerning certain softwood lumber from Canada. 

Among other things, Canada challenges the evidence upon which the investigation was initiated, claims
60

that Commerce imposed countervailing duties against programs and policies that are not subsides and are

not “specific” within the meaning of the Agreement on Subsidies and Countervailing Measures, and that

the Commerce Department failed to conduct its investigation properly. Consultations were held on June

18, 2002, and a panel was established at Canada’s request on October 1, 2002. The panel is composed of

Mr. Elbio Rosselli, Chair, and Mr. Weislaw Karsz and Mr. Remo Moretta, Members (all selected by the

Director-General). 

United States—Calculation of dumping margins (DS239)

On September 18, 2001, the United States received from Brazil a request for consultations regarding the

de minimis standard as applied by the U.S. Department of Commerce in conducting reviews of

antidumping orders, and the practice of “zeroing” (or, not offsetting “dumped” sales with “non-dumped”

sales) in conducting investigations and reviews. Brazil submitted a revised request on November 1, 2001,

focusing specifically on the antidumping duty order on silicon metal from Brazil. Consultations were

held on December 7, 2001.

United States – Definitive safeguard measures on imports of certain steel products (DS248-49, 251-54,

258-59)

By Presidential Proclamation 7529 of March 5, 2002, the United States imposed safeguard measures on

ten products: certain carbon flat-rolled steel, hot-rolled bar, cold-finished bar, rebar, certain welded pipe,

carbon and alloy fittings and flanges, stainless steel bar, stainless steel rod, stainless steel wire, and tin

mill steel. The measures consisted for the most part of supplemental tariffs, with one type of certain

carbon flat-rolled steel (steel slab) being subject to a tariff-rate quota (“TRQ”). All measures are

scheduled to remain in effect until March 21, 2005, with the tariff rates being decreased by one-fifth in

the second and third years. (For the slab TRQ, the in-quota quantity would increase by 3 percent each

year). Our FTA partners (Canada, Mexico, Israel and Jordan), along with developing country WTO

Members that account for less than three percent of total imports, are not subject to these measures.

The EC, Japan, Korea, China, Switzerland, and Norway requested consultations under the WTO Dispute

Settlement Understanding in March and early April of 2002. Consultations were held on 11-12 April

2002 with these countries as complaining parties, and Canada, Mexico, New Zealand, and Venezuela as

third parties. These countries requested the formation of panels, which were established and consolidated

with each other in June and July of 2002. New Zealand requested consultations on the steel safeguard

measures on May 14, and Brazil on May 21. Consultations were held simultaneously with both on June

13. Panels were established in response to the New Zealand and Brazil requests, and consolidated with

the panels in the other disputes. The United States reached agreement with the complaining parties to

request that the panel adopt an extended briefing schedule. The United States and the complaining parties

could not reach agreement on any panelist for the dispute. Accordingly, the Director-General selected all

three panelists on July 25, 2002, with Ambassador Stefan Johannesson as chair, and Mr. Mohan Kumar,

and Ms. Margaret Liang as panelists. It is scheduled to issue its report to the parties on April 14, 2003. 

Chinese Taipei subsequently requested consultations on November 1, 2002, and the consultations were

held December 12, 2002.
61

United States—Rules of origin for textiles and apparel products (DS243)

Section 334 of the Uruguay Round Agreements Act established statutory rules of origin for textile and

apparel products. Section 405 of the Trade and Development Act of 2000 amended Section 334. On

January 11, 2002, India requested consultations regarding the rules set out in Section 334 and Section

405, claiming that they distorted textile trade and were protectionist in violation of the Agreement on

Rules of Origin. Consultations with India took place on February 7, 2002, February 28, 2002 and March

26, 2002. A panel on this matter was established on June 24, 2002, and composed on October 10, 2002. 

The members are as follows: Mr. Lars Anell, Chair; Mr. Donald McRae and Ms. Elizabeth Chelliah. The

first meeting of the Parties with the Panel was held on December 12-13, 2002. A decision is expected on

April 11, 2003. 

United States – Sunset review of antidumping duties on corrosion-resistant carbon steel flat products

from Japan (DS244)

On January 30, 2002, Japan requested consultations with the United States regarding the final

determination of both the United States Department of Commerce and the United States International

Trade Commission on the full sunset review of corrosion-resistant carbon steel flat products from Japan,

issued on August 2, 2000 and November 21, 2000, respectively. Consultations were held on March 14,

2002. A panel was established at Japan’s request on May 22, 2002. The Director-General selected as

panelists Mr. Dariusz Rosati, Chair, and Mr. Martin Garcia and Mr. David Unterhalter, Members.

United States – Equalizing excise tax imposed by Florida on processed orange and grapefruit products

(DS250)

On March 20, 2002, Brazil requested consultations with the United States regarding the "Equalizing

Excise Tax" imposed by the State of Florida on processed orange and grapefruit products produced from

citrus fruit grown outside the United States – Section 601.155 Florida Statutes. Consultations were held

with Brazil on May 2, 2002, and June 27, 2002, and a panel was established on October 1, 2002, but is

not yet composed.

United States – Sunset reviews of antidumping and countervailing duties on certain steel products from

France and Germany (DS262)

On July 25, 2002, the European Union requested consultations with the United States with respect to antidumping and countervailing duties imposed by the United States on imports of corrosion-resistant carbon

steel flat products (“corrosion resistant steel”) from France (dealt with under US case numbers A-427-808

and C-427-810) and Germany (dealt with under US case numbers A-428-815 and C-428-817), and on

imports of cut-to-length carbon steel plate (“cut-to-length steel”) from Germany (dealt with under US

case numbers A-428-816 and C-428-817). Consultations were held on September 12, 2002.

United States—Final dumping determination on softwood lumber from Canada (DS264)

On September 13, 2002, Canada requested WTO dispute settlement consultations concerning the

amended final determination by the U.S. Department of Commerce of sales at less than fair value with

respect to certain softwood lumber from Canada, as published in the May 22, 2002 Federal Register,

along with an antidumping duty order with respect to imports of the subject products. Canada alleged
62

that Commerce’s initiation of its investigation concerning the subject products, as well as aspects of its

methodology in reaching its final determination, violated the GATT 1994 and the Agreement on

Implementation of Article VI of GATT 1994. Consultations were held on October 11, 2002. However,

they failed to resolve the matter. On December 6, 2002, Canada requested establishment of a WTO

dispute settlement panel to consider this matter. The United States opposed that request at the December

19, 2002 meeting of the WTO Dispute Settlement Body (“DSB”). The DSB established a panel on

January 8, 2003, but it is not yet composed.

United States – Subsidies on upland cotton (DS267)

On September 27, 2002, Brazil requested consultations with the United States regarding alleged

prohibited and actionable subsidies provided to U.S. producers, users and exporters of upland cotton, as

well as legislation, regulations, statutory instructions and amendments thereto providing such subsidies. 

Consultations were held on December 3-4, 2002, and December 19, 2002.

United States – Sunset reviews of antidumping measures on oil country tubular goods from Argentina

(DS268)

On October 7, 2002, Argentina requested consultations with the United States regarding the final

determinations of the United States Department of Commerce (USDOC) and the United States

International Trade Commission in the sunset reviews of the antidumping duty order on oil country

tubular goods (OCTG) from Argentina, issued on November 7, 2000, and June 2001, respectively, and

the USDOC’s determination to continue the antidumping duty order on OCTG from Argentina, issued on

July 25, 2001. Consultations were held on November 14, 2002, and December 17, 2002.

United States—Investigation of the U.S. International Trade Commission in softwood lumber from

Canada (DS277)

On December 20, 2002, Canada requested WTO dispute settlement consultations concerning the May 16,

2002 determination of the U.S. International Trade Commission (notice of which was published in the

May 22, 2002 Federal Register) that imports of softwood lumber from Canada, which the U.S.

Department of Commerce found to be subsidized and sold at less than fair value, threatened an industry in

the United States with material injury. Canada alleged that flaws in the U.S. International Trade

Commission’s determination caused the United States to violate various aspects of the GATT 1994, the

Agreement on Implementation of Article VI of GATT 1994, and the Agreement on Subsidies and

Countervailing Measures. On December 23, 2002, the United States accepted Canada’s request to enter

into consultations.

2. Trade Policy Review Body

Status

The Trade Policy Review Body (TPRB), a subsidiary body of the General Council, was created by the

Marrakesh Agreement Establishing the WTO to administer the Trade Policy Review Mechanism

(TPRM). The TPRM serves as a valuable resource for improving transparency in WTO Members’ trade

and investment regimes and in ensuring adherence to WTO rules. The TPRM examines national trade

policies of WTO Members on a schedule designed to cover all WTO Members on a frequency determined
63

by trade volume. The process starts with an independent report on a Member’s trade policies and

practices that is written by the WTO Secretariat on the basis of information provided by the relevant

Member. This report is accompanied by a report prepared by the Member under review. Together the

reports are subsequently discussed by WTO Members in a TPRB session, at which representatives of the

Member under review discuss the reports on its trade policies and practices and answer questions. The

purpose of the process is to strengthen Member observance of WTO provisions and contribute to the

smoother functioning of the multilateral trading system. A number of Members have remarked that the

preparations for the review are helpful in improving their own trade policy formulation and coordination. 

The current process reflects improvements to streamline the instrument and gives it more coverage and

flexibility. Reports now cover services, intellectual property rights and other issues addressed by WTO

Agreements. The reports issued for the reviews are available to the public on the WTO’s web site at

www.wto.org. Documents are filed on the site’s Document Distribution Facility under the document

symbol “WT/TPR.”

Major Issues in 2002

During 2002, the TPRB conducted 15 reviews: Guatemala, Pakistan, Malawi, Mexico, Slovenia, India,

Barbados, the European Union, Mauritania, Australia, the Dominican Republic, Zambia, Japan,

Venezuela and Hong Kong. Five countries were reviewed for the first time, including two least

developed countries, Malawi and Mauritania. As of the end of 2002, the TPRM had conducted 165

reviews, covering 89 out of 130 Members (counting the European Union as a single Member) and

representing approximately 85 percent of world merchandise trade. Sixteen of the WTO’s 30 least

developed country Members have been reviewed. 

For many developing and least developed countries, the reports represent the first comprehensive analysis

of their commercial policies, laws and regulations and have implications and uses beyond the meeting of

the TPRB. Some Members have used the Secretariat’s Report as a national trade and investment

promotion document, while others have indicated that the report has served as a basis for internal analysis

of inefficiencies and overlaps in domestic laws and government agencies. For other trading partners and

U.S. businesses, the reports are a dependable resource for assessing the commercial environment of 

WTO Member countries. 

Reviews have emphasized the macroeconomic and structural context for trade policies, including the

effects of economic and trade reforms, transparency with respect to the formulation and implementation

of policy, and the current economic performance of Members under review. Another important issue has

been the balance between multilateral, bilateral, regional and unilateral trade policy initiatives; in

particular, the priorities given to multilateral and regional arrangements have been important systemic

concerns. Closer attention has been given to the link between Members’ trade policies and the

implementation of WTO Agreements, focusing on Members’ participation in particular Agreements, the

fulfillment of notification requirements, the implementation of TRIPS, the use of antidumping measures,

government procurement, state-trading, the introduction by developing-countries of customs valuation

methods, the adaptation of national legislation to WTO requirements and technical assistance. Despite

the importance of the TPRM, the WTO’s ability to carry out Trade Policy Reviews is being challenged as

the Membership expands. 
64

Prospects for 2003

The TPRM is an important tool for monitoring and surveillance and an effective avenue to encourage

Members to meet their WTO obligations and to maintain or expand trade liberalization measures. The

program for 2003 calls for conducting 16 reviews covering 21 Members (Niger and Senegal will be

reviewed simultaneously, and Botswana, Lesotho, Namibia South Africa and Swaziland will be reviewed

jointly as members of the Southern African Customs Union). Members to be reviewed individually in

2003 include: the Maldives, El Salvador, Canada, Burundi, New Zealand, Morocco, Indonesia, Honduras,

Bulgaria, Guyana, Haiti, Thailand, Chile, and Turkey.

E. Council for Trade in Goods

Status

The WTO Council for Trade in Goods (CTG) oversees the activities of 12 committees (Agriculture,

Antidumping Practices, Customs Valuation, Import Licensing Procedures, Information Technology,

Market Access, Rules of Origin, Safeguards, Sanitary and Phytosanitary Measures, Subsidies and

Countervailing Measures, Technical Barriers to Trade and Trade-related Investment Measures (TRIMS))

in addition to the Textiles Monitoring Body (TMB), and the Working Party on State Trading.

Major Issues in 2002

In 2002, the CTG held seven formal meetings. As the central oversight body in the WTO for all

agreements related to trade in goods, the CTG primarily devoted its attention to providing formal

approval of decisions and recommendations proposed by its subsidiary bodies. The CTG also served as a

forum for airing initial complaints regarding actions taken by individual Members with respect to the

operation of agreements. Many of these complaints were resolved through consultation. In addition, four

major issues were extensively debated in the CTG in 2002: 

Waivers: The CTG approved several requests for waivers, including those related to the implementation

of the Harmonized Tariff System, renegotiation of tariff schedules, and waivers for El Salvador and the

Cote d’Ivoire with respect to the application of minimum values for customs valuation. A list of waivers

currently in force can be found in Annex II. 

Review of the Agreement on Textiles and Clothing (ATC): The CTG met four times during 2002 to

conduct the major review of the implementation of the ATC in the second stage (1998-2001) of its

integration into the WTO. Article 8.11 of the ATC contains the provisions regarding integration. These

discussions revealed a major disagreement between textile exporters (typically developing country

Members) and importers (mostly developed-country Members). The developing countries assert that the

spirit of the ATC requires faster liberalization by importers. Exporters point out, for example, that almost

all textile products subject to quota restraint in 1995 will still be subject to quotas until the end of the

ATC in 2004. Importers reply that they have fulfilled the requirements of the ATC in precisely the

manner foreseen by the drafters of the Agreement. With respect to the issue of quotas remaining in force

until 2004, importers maintain that the Agreement provides for faster growth rates compared to the

situation existing before the entry into force of the ATC. These faster growth rates have resulted in a

substantial increase in developing country textile exports since 1995. The differences in views between
65

exporting and importing countries resulted in the Chair of the CTG reporting that he was not in a position

to draft a report with recommendations for the CTG’s consideration. 

Doha Implementation Issues: The CTG met a number of times formally and informally to consider tirets

4.4 and 4.5 of the Doha Ministerial Declaration related to textile implementation issues. The discussion

covered the same issues and revealed the same differences of opinion encountered in the major review of

the Agreement on Textiles and Clothing. The outcome of the discussion paralleled the outcome of the

ATC review. The Chair reported that he was not in a position to put any draft recommendations before

the CTG. 

China Transitional Review: On November 22, the CTG conducted China’s Transitional Review (TRM) as

mandated by the Protocol on the Accession of the People’s Republic of China to the WTO. China

supplied the CTG with information, answered questions posed by Members and reviewed the TRM

reports of CTG subsidiary bodies. (See Chapter IV Section F on China for more detailed discussion of its

implementation of WTO commitments).

Trade Faciliation: The CTG met three times in 2002 in sessions dedicated to this issue. The CTG

discussed how to improve and clarify Article X (transparency), Article VIII on fees and formalities, and 

Article V (transit). Progress was made in all of these areas and work will continue in 2003.

Prospects for 2003

The CTG will continue to be the focal point for discussing agreements in the WTO dealing with trade in

goods. One issue that Members may continue to consider is whether to reorganize the Councils in a way

that eliminates the CTG, allowing the General Council to assume direct oversight responsibilities. 

Outstanding waiver requests will also be further examined.

1. Committee on Agriculture

Status

The WTO Committee on Agriculture oversees the implementation of the Agreement on Agriculture and

provides a forum for WTO Members to consult on matters related to provisions of the Agreement. In

many cases, the Committee resolves problems without needing to refer them to WTO dispute settlement. 

The Committee also has responsibility for monitoring the parties to the Marrakesh Ministerial Decision

on Measures Concerning the Possible Negative Effects of the Reform Program on Least Developed and

Net Food-Importing Developing Countries (or “NFIDC Decision”). 

Major Issues in 2002

The Committee held four formal meetings in March, June, September, and November, 2002 to address

ongoing issues related to the implementation of the Agreement on Agriculture. The Committee also met

in Special Session to negotiate on continuing the reform process in agriculture.

During its meetings, the Committee reviewed progress on the implementation of commitments negotiated

in the Uruguay Round. This review was undertaken on the basis of notifications by Members in the areas
66

of market access, domestic support, export subsidies, export prohibitions and restrictions, and general

matters relevant to the implementation of commitments.

In total, 196 notifications were subject to review during 2002. The United States actively participated in

the notification process and raised specific issues concerning the operation of Members’ agricultural

policies. For example, the United States raised questions concerning elements of domestic support

programs used by the European Union and Japan; identified restrictive import licensing and tariff-rate

quota administration practices used by China, the Dominican Republic, and Costa Rica; questioned

Taiwan’s use of the special agricultural safeguard; and raised concerns with China’s and India’s export

policies. The Committee also proved to be an effective forum for raising issues relevant to the

implementation of Members commitments. For example, the United States identified concerns with

Venezuela’s import regime, Turkey’s rice import policy, and new European Union subsidies to wine

producers.

On a number of occasions, U.S. intervention in the Committee led to corrective action by the Members

concerned. For example, Costa Rica allowed the entry of shipments of U.S. rice that had been held up

after the United States raised the issue of Costa Rica’s restrictive import requirements in the Committee

on Agriculture. U.S. interventions in the Committee concerning Venezuela’s import licensing system

resulted in Venezuela allowing some corn to be imported. However, Venezuela failed to establish an

open and predictable system for issuing import licenses, and in November, the United States requested

dispute settlement consultations with Venezuela to discuss its import licensing practices that restrict

imports of a wide range of U.S. agricultural goods including corn, sorghum, dairy products, fruits,

poultry, beef, pork, yellow grease, and soybean meal.

As a follow-up to the relevant Committee recommendations that were approved by the Doha Ministerial

Conference, the following implementation-related issues were considered or further considered at the

Committee's meetings: (1) the development of internationally agreed disciplines to govern the provision

of export credits, export credit guarantees, or insurance programs pursuant to Article 10.2 of the

Agreement on Agriculture, taking into account the effect of such disciplines on net food-importing

countries; (2) improving the effectiveness of the implementation of the NFIDC Decision; and (3)

enhancing Members’ notifications on tariff-rate quotas (TRQs) in accordance with the General Council’s

decision regarding the administration of TRQ regimes in a transparent, equitable, and non-discriminatory

manner. In line with the reporting requirements approved by the Doha Ministerial Conference, a followup report on these issues was submitted to the General Council on the responsibility of the Chairman.

At the meeting of the Committee in March, Dominica and Jordan were included in the WTO list of net

food-importing developing countries. This list currently comprises the least developed countries as

recognized by the United Nations, and the following 23 developing country Members of the WTO: 

Barbados, Botswana, Côte d’Ivoire, Cuba, Dominica, the Dominican Republic, Egypt, Honduras,

Jamaica, Jordan, Kenya, Mauritius, Morocco, Pakistan, Peru, Saint Kitts and Nevis, Saint Lucia, Saint

Vincent and the Grenadines, Senegal, Sri Lanka, Trinidad and Tobago, Tunisia, and Venezuela. The

annual monitoring exercise on the follow-up to the Marrakesh NFIDC Decision as a whole was

undertaken at the November meeting of the Committee.

At the meeting in September, the Committee held its annual Transitional Review under paragraph 18 of

the Protocol of Accession of the People’s Republic of China. The United States submitted extensive

questions on China’s TRQ administration and export subsidies in this forum. The Committee’s report
67

regarding its review was submitted to the Council for Trade in Goods on the responsibility of the

Chairman.

Prospects for 2003

The United States will continue to make full use of Committee meetings to ensure timely notification,

transparency and enforcement of Uruguay Round commitments as they relate to export subsidies, market

access, domestic support or any other trade-distorting practices by WTO Members. In addition, the

Committee will continue to monitor and analyze the impact of the possible negative effects of the reform

process on least developed and net food-importing developing countries as indicated in the Agreement on

Agriculture.

2. Committee on Antidumping Practices

Status

The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994

(the Antidumping Agreement) sets forth detailed rules and disciplines prescribing the manner and basis

on which Members may take action to offset the injurious dumping of products imported from another

Member. Implementation of the Agreement is overseen by the Committee on Antidumping Practices,

which operates in conjunction with two subsidiary bodies, the Working Group on Implementation

(formerly the Ad Hoc Group on Implementation) and the Informal Group on Anticircumvention.

The Ministerial Decision on Implementation-Related Issues and Concerns in November 2001 referred

three issues to the Committee (and, with respect to the first two issues, to the Working Group as well) for

examination and preparation of appropriate recommendations within twelve months: (1) clarification of

the modalities of application of Article 15 of the Antidumping Agreement pertaining to developing

country Members; (2) the timeframe to be used in calculating the volume of dumped imports for making

the determination under Article 5.8 of the Antidumping Agreement as to whether the volume of such

imports is negligible; and (3) guidelines for the improvement of annual reviews under Article 18.6 of the

Antidumping Agreement. The Committee reached agreement in November 2002 on recommendations

with respect to Article 5.8 and Article 18.6, but was unable to reach agreement on a recommendation with

respect to Article 15.

The Working Group is an active body which focuses on practical issues and concerns relating to

implementation. Based on papers submitted by Members on specific topics for discussion, the activities

of the Working Group permit Members to develop a better understanding of the similarities and

differences in their policies and practices for implementing the terms of the Antidumping Agreement. 

Where possible, the Working Group endeavors to develop draft recommendations on the topics it

discusses, which it forwards to the Antidumping Committee for consideration. To date, the Committee

has adopted Working Group recommendations on: (1) pre-initiation notifications under Article 5.5 of the

Agreement; (2) the periods used for data collection in investigations of dumped imports and of injury

caused or threatened to be caused by such imports; (3) extensions of time to supply information; and, as

noted above, (4) the timeframe for measuring whether import volumes are negligible under Article 5.8. 

The Committee considered at its April and October 2002 meetings a draft decision regarding the status to

be accorded adopted recommendations, but was unable to reach a consensus on the text of the decision,

and will consider the issue again at its April 2003 meeting. The Working Group reached a consensus in
68

October 2001 on a recommendation concerning the contents of preliminary affirmative determinations,

but that recommendation was tabled by the Committee, given the lack of agreement within the Committee

on the draft decision regarding the status of adopted recommendations.

At Marrakesh in 1994, Ministers adopted a Decision on Anticircumvention directing the Antidumping

Committee to develop rules to address the problem of circumvention of antidumping measures. In 1997,

the Antidumping Committee agreed upon a framework for discussing this important topic and established

the Informal Group on Anticircumvention. Under this framework, the Informal Group held meetings in

April and October 2002 to discuss the topics of: (1) what constitutes circumvention; (2) what is being

done by Members confronted with what they consider to be circumvention; and (3) to what extent

circumvention can be dealt with under existing WTO rules and what other options may be deemed

necessary.

Major Issues in 2002

The Antidumping Committee remains an important venue for reviewing Members’ compliance with the

detailed provisions in the Antidumping Agreement, improving mutual understanding of those provisions,

and providing opportunities to exchange views and experience with respect to Members’ application of

antidumping remedies. 

In 2002, the Antidumping Committee held two regular meetings, in April and October, as did the

Working Group on Implementation and the Informal Group on Anticircumvention. At its regular

meetings, the Antidumping Committee focused on implementation of the Antidumping Agreement, in

particular, by continuing its review of Members’ antidumping legislation. The Committee also reviewed

reports required of Members that provide preliminary and final antidumping measures and actions taken

in each case over the preceding six months. 

Among the more significant activities undertaken in 2002 by the Antidumping Committee, the Working

Group on Implementation and the Informal Group on Anticircumvention are the following:

Doha Implementation Issues: A major focus of the work of the Committee and Working Group was on

the issues referred by the Doha Ministerial Decision on Implementation-Related Issues and Concerns. In

addition to discussing these Doha implementation issues at the regular meetings in April and October, the

Committee and Working Group also convened special meetings in March, June, September, November,

and December to further address these issues. The United States played a major role in this process,

tabling written proposals containing draft recommendations with respect to Article 15 and Article 18.6,

and playing an active role in the discussions of the Committee and/or Working Group on all three issues. 

As previously noted, the Committee reached agreement in November 2002 on recommendations with

respect to Article 5.8 and Article 18.6, but was unable to reach agreement on a recommendation with

respect to Article 15.

Notification and Review of Antidumping Legislation: To date, 72 Members of the WTO have notified that

they currently have antidumping legislation in place, while 31 Members have notified that they maintain

no such legislation. In 2002, the Antidumping Committee reviewed notifications of new or amended

antidumping legislation submitted by Antigua and Barbuda; Argentina; Brazil; El Salvador; Georgia;

Grenada; India; Japan; Lithuania; Moldova; Myanmar; Pakistan; Peru; Philippines; Taiwan; Turkey; and

Uruguay. In addition, the Committee continued its review (for the most part via a written question and
69

answer procedure) of the previously notified legislation of Peru. Members, including the United States,

were active in formulating written questions and in making follow-up inquiries at Committee meetings.

Notification and Review of Antidumping Actions: In 2002, 27 WTO Members notified antidumping

actions taken during the latter half of 2001, whereas 30 Members did so for the first half of 2002. (By

comparison, 39 Members notified that they had not taken any antidumping actions during the latter half

of 2001, while 26 Members notified that they had taken no actions in the first half of 2002). These

actions, in addition to outstanding antidumping measures currently maintained by WTO Members, were

identified in semi-annual reports submitted for the Antidumping Committee’s review and discussion.

China Transitional Review: At the October 2002 meeting, the Committee undertook, pursuant to the

Protocol on the Accession of the People’s Republic of China, its first transitional review with respect to

China’s implementation of the Agreement. A number of Members, including the United States,

addressed written and oral questions to China, primarily relating to China’s notification to the WTO of its

antidumping regulations. China’s representatives provided responsive information at the October 2002

meeting.

Working Group on Implementation: The Working Group held two rounds of multi-day working meetings

in April and October 2002, as well as special one-day meetings in March, June, September, November

and December. The Working Group’s principal focus in 2002 was on the implementation issues under

Article 5.8 and Article 15 referred by the Ministers at Doha. In addition to these implementation issues,

the Group also considered at the April and October 2002 meetings a draft recommendation on conditions

of competition relevant to cumulation under Article 3.3. No agreement has been reached by the Group on

this draft recommendation, but it was agreed to continue work on this topic in the next year.

The Working Group continues to serve as an active venue for work regarding the practical

implementation of WTO antidumping provisions. It offers important opportunities for Members to

examine issues and candidly exchange views and information across a broad range of topics. It has drawn

a high level of participation by Members and, in particular, by capital-based experts and officials of

antidumping administering authorities, many of whom are eager to obtain insight and information from

their peers. Since the inception of the Working Group, the United States has submitted papers on most

topics, and has been an active participant at all meetings. Implementation concerns and questions

stemming both from one’s own administrative experience and from observing the practices of others are

equally addressed. While not a negotiating forum in either a technical or formal sense, the Working

Group serves a vitally important role in promoting improved understanding of the Agreement’s

provisions and exploring options for “best practices” among antidumping administrators.

Informal Group on Anticircumvention: The Antidumping Committee’s establishment of the Informal

Group on Anticircumvention in 1997 marked an important step towards fulfilling the Decision of

Ministers at Marrakesh to refer this matter to the Committee. At its two meetings in 2002, the Informal

Group on Anticircumvention continued its useful discussions on the first two items of the agreed

framework of “what constitutes circumvention?” and “what is being done by Members confronted with

what they consider to be circumvention?” In addition, the Informal Group began discussions on the third

topic of the agreed framework: “to what extent can circumvention be dealt with under the relevant WTO

rules? To what extent can it not? And what other options may be deemed necessary?” 
70

Members submitted papers and made presentations outlining scenarios based on factual situations faced

by their investigating authorities, and exchanged views on how their respective authorities might respond

to such situations. Moreover, those Members, such as the United States, that have legislation intended to

address circumvention, responded to inquiries from other Members as to how such legislation operates

and the manner in which certain issues may be treated. As to the third topic, the United States submitted

a paper in which it reviewed some of the scenarios previously discussed in the Informal Group, and noted

that while there was as yet no consensus on what constitutes circumvention, Members would also benefit

from general guidelines on what does not constitute circumvention.

Prospects for 2003

Work will proceed in 2003 on the areas that the Antidumping Committee, the Working Group on

Implementation and the Informal Group on Anticircumvention addressed this past year, with the

exception of the three Doha implementation issues, on which the Committee’s work was completed in

2002. The Antidumping Committee will pursue its review of Members’ notifications of antidumping

legislation, and Members will continue to have the opportunity to submit additional questions concerning

previously reviewed notifications. This ongoing review process in the Committee is important to

ensuring that antidumping laws around the world are properly drafted and implemented, thereby

contributing to a well-functioning, liberal trading system. As notifications of antidumping legislation are

not restricted documents, U.S. exporters will continue to enjoy access to information about the

antidumping laws of other countries that should assist them in better understanding the operation of such

laws and in taking them into account in commercial planning.

The preparation by Members and review in the Committee of semi-annual reports and reports of

preliminary and final antidumping actions will also continue in 2003. These reports are becoming

accessible to the general public, in keeping with the objectives of the Uruguay Round Agreements Act. 

(Information on accessing WTO notifications is included in Annex II). This promotes improved public

knowledge and appreciation of the trends in and focus of all WTO Members’ antidumping actions. 

Discussions in the Working Group on Implementation will continue to play an important role as more and

more Members enact laws and begin to apply them. There has been a sharp and widespread interest in

clarifying understanding of the many complex provisions of the Antidumping Agreement. Tackling these

issues in a serious manner will require the involvement of the Working Group, as that is the setting best

suited to provide the kind and degree of technical and administrative insight needed to shed light on

important nuances and to offer practical alternatives for solving problems. Indeed, it is only in the

Antidumping Committee and the Working Group that Members can devote the considerable time and

resources needed to conduct a responsible examination of these questions. For these reasons, the United

States will continue to rely upon the Working Group to learn in greater detail about other Members’

administration of their antidumping laws, especially as that forum provides opportunities to discuss not

only the laws, as written, but also the operational practices which Members employ to implement them. 

Therefore, as Members continue to submit papers on the topics being considered and participate actively

in the discussions, the Group’s utility should continue to grow. In addition to its continuing work on a

draft recommendation on conditions of competition relevant to cumulation under Article 3.3, the Working

Group will also select and begin addressing new topics for discussion in 2003. 

The work of the Informal Group on Anticircumvention will also continue in 2003 according to the

framework for discussion on which Members agreed. Many Members, including the United States,
71

recognize the importance of using the Informal Group to pursue the 1994 decision of Ministers at

Marrakesh, who expressed the desirability of achieving uniform rules in this area as soon as possible.

3. Committee on Customs Valuation. 

Status

The purpose of the WTO Agreement on the Implementation of GATT Article VII (also known as the

“WTO Agreement on Customs Valuation”) is to ensure that determinations of the customs value for the

application of duty rates to imported goods are conducted in a neutral and uniform manner, precluding the

use of arbitrary or fictitious customs values. Adherence to the Agreement is an important issue for U.S.

exporters, particularly to ensure that market access opportunities provided through tariff reductions are

not negated by unwarranted and unreasonable “uplifts” in the customs value of goods to which tariffs are

applied.

Major Issues in 2002

The Agreement is administered by the WTO Committee on Customs Valuation, which met formally eight

times in 2002. The Agreement established a Technical Committee on Customs Valuation under the

auspices of the World Customs Organization (WCO). In accordance with a 1999 recommendation of the

WTO Working Party on Preshipment Inspection which was adopted by the General Council, the

Committee on Customs Valuation also continued to provide a forum for reviewing the operation of

various Members’ preshipment inspection regimes and the implementation of the WTO Agreement on

Preshipment Inspection. In July 2002, the WTO Secretariat compiled information indicating that 31

Members were using preshipment inspection regimes.

Experience continues to demonstrate that the implementation of the Agreement on Customs Valuation

often represents the first concrete and meaningful step taken by developing countries toward reforming

their customs regimes, and ultimately moving to a rules-based border environment for conducting trade

transactions. Because the Agreement precludes the use of arbitrary customs valuation methodologies, an

additional positive result is to diminish one of the incentives for corruption by customs officials. For all

of these reasons, as part of an overall strategic approach to trade facilitation, the United States has taken

an aggressive leadership role at the WTO on matters related to customs valuation. 

U.S. exporters across all sectors – including agriculture, automotive, textile, steel, and information

technology products – have experienced difficulties related to the conduct of customs valuation regimes

outside of the disciplines set forth under the WTO Agreement on Customs Valuation. U.S. exporters to

many developing countries have had market access gains undermined through the application of

arbitrarily-established minimum import prices, often used as a crude, broad-brush type of trade remedy–-

one that provides no measure of administrative transparency or procedural fairness. The use of arbitrary

and inappropriate “uplifts” in the valuation of goods by importing countries when applying tariffs can

result in an unwarranted doubling or tripling of duties. It is notable that such a use of minimum import

prices, a practice inconsistent with the operation of the Agreement on Customs Valuation, is diminishing

as more developing countries undertake full implementation of the Agreement.

Achieving universal adherence to the WTO Agreement on Customs Valuation has been a longstanding

and important objective of the United States, dating back more than twenty years. The Agreement was
72

initially negotiated in the Tokyo Round, but its acceptance was voluntary as a “code,” until mandated as

part of membership in the WTO. Under the Uruguay Round Agreement, special transitional measures

were provided for developing country Members, allowing for delayed implementation of the Agreement

on Customs Valuation and resulting in individual implementation deadlines for such Members beginning

in 2000. 

While many developing country Members undertook timely implementation of the Agreement, the

Committee continued throughout 2002 to address various individual Member requests for either a

transitional reservation for implementation methodology, or for a further extension of time for overall

implementation. Working with key trading partners, the United States led consultations on each request,

which resulted in the development of a detailed decision tailored to the situation of the requesting

Member. Each decision has included an individualized benchmarked work program toward full

implementation, along with requirements to report on progress and specific commitments on other

implementation issues important to U.S. export interests.

In accordance with the Doha Ministerial mandate on “Implementation-Related Issues and Concerns,” in

2002 the Committee continued to examine five proposals from India pertaining to the operation of several

provisions of the Agreement. Support for these proposals from other WTO Members was generally quite

limited. The Committee also actively worked to meet another Doha implementation-related mandate to

“identify and assess practical means” for addressing concerns by several Members on the accuracy of

declared values of imported goods.

An important part of the Committee’s work is the examination of implementing legislation. As of

November 2002, 73 Members had notified their national legislation on customs valuation. During 2002,

the Committee concluded the examinations of the legislation of Brunei Darussalam, Croatia, Georgia,

Kenya, Korea, Lithuania, Moldova, Tunisia, and Venezuela. In November 2002, while commencing an

examination of China’s implementing customs valuation legislation, the Committee also conducted a

Transitional Review in accordance with Paragraph 18 of the Protocol of China’s accession to the WTO.

The Committee’s work throughout 2002 continued to reflect a cooperative focus among all Members

toward practical methods to address the specific problems of individual Members. As part of its problemsolving approach, the Committee continued to take an active role in exploring how best to ensure

effective technical assistance, including with regard to meeting post-implementation needs of developing

country Members. As part of ongoing Committee efforts to re-invigorate its work in this area, in

November 2002 a two-day seminar was held on technical assistance. The seminar focused on working to

enhance coordination and cooperation among donors of assistance related to customs valuation, and

exploring potential linkage between such technical assistance and the individual implementation work

programs elaborated by various developing country Members.

Prospects for 2003

The Committee’s work in 2003 will include a review of the relevant implementing legislation and

regulations notified by Members, along with addressing any further requests by other Members

concerning implementation deadlines. The Committee will monitor progress by Members with regard to

their respective work programs that were included in the decisions granting transitional reservations or

extensions of time for implementation. The Committee will also continue to examine the

implementation-related proposals by India, as well as work toward addressing concerns by several
73

Members with regard to accuracy of declared values on imported goods. In this regard, the Committee

will continue to provide a forum for sustained focus on issues arising from practices of all Members that

have implemented the Agreement, to ensure that such Members’ customs valuation regimes do not utilize

arbitrary or fictitious values such as through the use of minimum import prices. Finally, the Committee

will continue to address technical assistance issues as a matter of high priority.

4. Committee on Import Licensing

Status

The Agreement on Import Licensing Procedures establishes rules for all WTO Members that use import

licensing systems to regulate their trade. Its aim is to ensure that the procedures used by Members in

operating their import licensing systems do not in themselves form barriers to trade, to increase the

transparency and predictability of such regimes, and to create disciplines to protect the importer against

unreasonable requirements or delays associated with the licensing regime. While the Agreement’s

provisions do not directly address the WTO consistency of the underlying measures that licensing

systems regulate, they establish the base line of what constitutes a fair and non-discriminatory application

of the procedures. The Agreement covers both “automatic” licensing systems, which are intended only to

monitor imports, not regulate them, and “non-automatic” licensing systems where certain conditions must

be met before a license is issued. Governments often use non-automatic licensing to administer import

restrictions, for quotas and TRQs or to administer safety or other requirements (e.g., for hazardous goods,

armaments, antiquities, etc.). Requirements for permission to import that act like import licenses, such as

certification of standards and sanitary and technical regulations, are also subject to the rules of the

Agreement. 

The Committee on Import Licensing was established to administer the Agreement and monitor

compliance with the mutually agreed rules for the application of these widely used measures. The

Committee does this by reviewing initial or follow-up information on import licensing requirements that

WTO Members are required to submit on a regular basis. The Committee meets twice a year to review

these submissions, to receive questions from Members on the licensing regimes described, and to address

specific observations and complaints concerning Members’ licensing systems. While not a substitute for

dispute settlement procedures, these consultations on specific issues allow Members to clarify problems

and possibly to resolve them before they become disputes. As use of import licensing increases, e.g., to

enforce national security, environmental, and technical requirements, to administer TRQs, or to manage

safeguard measures, utilization of the Committee as a forum for discussion and review will increase.

Major Issues in 2002

At its meetings in May and September 2002, the Committee reviewed 79 initial or revised notifications,

completed questionnaires on procedures, and replies to questions from Committee Members from 48 WTO

Members (including European Union Member States). The United States submitted written questions on a

number of the notifications in order to clarify the nature of the procedures and to verify that the legislation

notified met the procedural requirements of the Agreement. The most extensive of these questions

concerned the establishment and maintenance of non-automatic licensing systems for selected agricultural

products for what appeared to be protective purposes by both Turkey and Venezuela. The United States

sought information on the reasons and WTO justification for the licensing requirements, on their scope of
74

operation, and on their non-transparent and arbitrary application, as they had not been notified to the

Committee nor addressed in the most recent responses to the Import Licensing questionnaire. 

In November 2002, the United States requested and held consultations with Venezuela under WTO dispute

settlement procedures on this issue. Information was also requested from Costa Rica on its use of nonautomatic licensing to operate TRQs on certain agricultural imports. Other questions focused on the use of

licensing and other forms of prior authorization requirements to administer the application of technical

regulations and sanitary and phytosanitary requirements on imports. 

The Committee continued discussions on how the number and frequency of notifications by Members

could be increased. The Chairman reported that at the end of 2002, 31 of 144 Members (counting

European Union member states individually), had never submitted a notification to the Committee. While

this represented a small improvement from the total in 2001, many of the notifications to the Committee

were not being submitted with the frequency required by the Agreement. Based on follow-up letters from

the Chairman to Members reminding them of their obligations and identifying questions that have not yet

received a response, a number of delegations indicated that their submissions were being developed and

would soon be provided.

In addition to the traditional review of notifications and discussions, the Committee carried out its first

review of China’s implementation of its WTO accession commitments in the area of import licensing

procedures as part of the Transitional Review Mechanism (TRM). The United States and other WTO

Members expressed a number of concerns with China's implementation of its commitments, in particular

in the use of import licensing to administer import quotas, TRQs, and sanitary and phytosanitary

requirements for imports. Additional information was requested of China. 

Prospects for 2003

Consideration of licensing in the administration of agricultural TRQs will intensify as the Doha

negotiations proceed. This will include consideration of possible modifications to the Agreement

necessary to improve operation of these mechanisms. The Committee will continue discussions to

encourage enhanced compliance with the notification and other transparency requirements of the

Agreement. This has become a long-standing priority of the Committee. In addition, timely submission of

initial information on licensing regimes, including responses to the questionnaire, is a standard

commitment of newly acceding Members. The Committee also will continue to be the point of first

contact in the WTO for Members with complaints or questions on the licensing regimes of other Members,

and additional attention will be given to encouraging timely responses by Committee Members to

questions submitted on the notified information. The Committee will also continue to conduct annual

reviews of China’s import licensing operations in support of the TRM.

5. Committee on Market Access

Status

WTO Members established the Committee on Market Access in January 1995, consolidating the work of

the Committee on Tariff Concessions and the Technical Group on Quantitative Restrictions and other

Non-Tariff Measures from the GATT 1947. The Committee on Market Access supervises the

implementation of concessions on tariffs and non-tariff measures (where not explicitly covered by another
75

WTO body, e.g., the Textiles Monitoring Body (TMB)). The Committee also is responsible for

verification of new concessions on market access in the goods area. The Committee reports to the Council

on Trade in Goods.

Major Issues in 2002

During 2002, WTO Members continued implementing the ambitious package of tariff cuts agreed in the

Uruguay Round with the Committee having responsibility for verifying that implementation is proceeding

on schedule. The Committee held three formal and ten informal meetings in 2002 to discuss: the ongoing

review of WTO tariff schedules to accommodate updates to the Harmonized System (HS) tariff

nomenclature; the WTO Integrated Data Base; finalizing consolidated schedules of WTO tariff

concessions in current HS nomenclature; and implementation issues related to “substantial interest.” The

Committee also conducted its first annual transitional review of China’s implementation of its WTO

accession commitments.

Updates to the Harmonized System (HS) nomenclature: In 1993, the Customs Cooperation Council (now

known as the World Customs Organization, or WCO) agreed to approximately 400 sets of amendments to

the HS, which were to enter into effect on January 1, 1996. These amendments result in changes to the

WTO schedules of tariff bindings. Using agreed examination procedures, Members have the right to

object to any proposed nomenclature change affecting bound tariff items on grounds that the new

nomenclature (as well as any increase in tariff levels for an item above existing bindings) represents a

modification of the tariff concession and can pursue unresolved objections under GATT 1994 Article

XXVIII. 

Since 1996, successive waivers have been granted by decisions of the General Council until the

implementation procedures can be finalized. The majority of WTO Members have completed the process,

but a few Members continue to require waivers. The Committee also examined issues related to the

transposition and renegotiation of the schedules of certain Members which had adopted the HS in the years

following its introduction on January 1, 1988. 

Using the same procedures, the Committee also began to review Members’ WCO amendments which took

effect on January 1, 2002 (HS2002). Drawing from the experience of HS96, the Committee, working with

the Secretariat, has developed electronic procedures that will facilitate and expedite the process of

reviewing and approving the 373 proposed amendments under HS2002. The United States submitted its

proposed changes to the Secretariat in December 2001.

Integrated Data Base (IDB): The Committee addressed issues concerning the IDB, which is to be updated

annually with information on the tariffs, trade data, and non-tariff measures maintained by WTO

Members. Members are required to provide this information as a result of a General Council Decision

adopted in July 1997. The U.S. objectives are to achieve full participation in the IDB by all WTO

Members and, ultimately, to develop a method to make the trade and tariff information publicly available. 

In recent years, the United States has taken an active role in pressing for a more relevant database structure

with the aim of improving the trade and tariff data supplied by WTO Members. 

During 2002, the separate Negotiating Group on Non-Agricultural Market Access also took up this issue

and developed procedures to facilitate the transfer of applicable tariff and trade data from other sources. 
76

As a result, participation has continued to improve. As of September 2001, seventy-four Members and

four acceding countries had provided IDB submissions. 

Consolidated schedule of tariff concessions (CTS): The Committee completed its work to create a

PC-compatible structure for tariff and trade data. The electronic CTS includes: tariff bindings for each

WTO Member that reflects Uruguay Round tariff concessions; HS96 updates to tariff nomenclature and

bindings; and, any other modifications to the WTO schedule (e.g., participation in the Information

Technology Agreement). The data base also includes agricultural support tables. The CTS will be linked

to the IDB and will serve as the vehicle for conducting agricultural and newly mandated non-agricultural

market access negotiations in the WTO.

China Transitional Review: In September, the Committee conducted the first annual review of China’s

implementation of its WTO commitments on market access. The review included issues, such as

implementation of China’s schedule of tariff commitments, tariff-rate quota administration, management

of industrial quotas, and China’s application of value added and consumption taxes. 

Implementation Issues: The Committee also discussed two implementation issues referred by the General

Council. The first, proposed by St. Lucia, dealt with the definition of “substantial supplier” in the context

of quota allocations. The Secretariat undertook several analyses on the issue but several other developing

countries expressed concern that the proposal could undermine the rights and obligations of Members. 

The Committee also briefly examined the issue of redistribution of negotiating rights. In December, the

Committee reported it could not reach a consensus on either issue. The General Council likely will direct

the Committee to continue its work in 2003.

Prospects for 2003

The Committee will play an integral role in the negotiations for non-agricultural goods launched at Doha. 

The ongoing work program of the Committee, while highly technical, will ensure that all WTO Members’

schedules are up-to-date and available in electronic spreadsheet format so that the negotiations on goods

market access can be performed with greater efficiency. The Committee will likely explore technical

assistance needs related to data submissions and use. 

As it finalizes the HS96 updates, the Committee will turn to reviewing Members’ amended schedules

based on the HS2002 updates. The electronic verification process, which incorporates the CTS data, will

facilitate the review process and help developing countries to generate their own HS2002 submissions.

6. Committee on Rules of Origin

Status

The objective of the WTO Agreement on Rules of Origin is to increase transparency, predictability, and

consistency in both the preparation and application of rules of origin. The Agreement on Rules of Origin

provides important disciplines for conducting preferential and non-preferential origin regimes, such as the

obligation to provide binding origin rulings upon request to traders within 150 days of request. In addition

to setting forth disciplines related to the administration of rules of origin, the Agreement provides for a

work program leading to the multilateral harmonization of rules of origin used for non-preferential trade

regimes. The harmonization work program is more complex than initially envisioned under the
77

Agreement, which originally set for the work to be completed within three years after its commencement

in July 1995. This work program continued throughout 2002.

The Agreement is administered by the WTO Committee on Rules of Origin, which met formally three

times in 2002. The Committee has also served as a forum to exchange views on notifications by Members

concerning their national rules of origin, along with those relevant judicial decisions and administrative

rulings of general application. The Agreement also established a Technical Committee on Rules of Origin

in the World Customs Organization to assist in the harmonization work program.

As of the end of 2002, 83 WTO Members had made notifications concerning non-preferential rules of

origin, of which 42 Members notified their non-preferential rules of origin and 41 Members notified that

they did not have a non-preferential rules of origin regime. Eighty-seven Members had made notifications

concerning preferential rules of origin, of which 84 notified their preferential rules of origin and three

notified that they did not have preferential rules of origin.

Major Issues in 2002

The WTO Committee on Rules of Origin continued to focus on the work program on the multilateral

harmonization of non-preferential rules of origin. U.S. proposals for the WTO origin harmonization work

program have been developed under the auspices of a Section 332 study being conducted by the U.S.

International Trade Commission pursuant to a request by the U.S. Trade Representative. The proposals

reflect input received from the private sector and ongoing consultations with the private sector as the

negotiations have progressed from the technical stage to deliberations at the WTO Committee on Rules of

Origin. Representatives from several U.S. Government agencies continue to be actively involved in the

WTO origin harmonization work, including the U.S. Customs Service, the U.S. Department of Commerce,

and the U.S. Department of Agriculture.

In addition to its three formal meetings, the Committee conducted numerous informal consultations and

working party sessions related to the harmonization work program negotiations. The Committee

proceeded in accordance with a December 2001 mandate from the General Council, which extended the

harmonization work program while specifically requesting that the Committee on Rules of Origin focus

during the first half of 2002 on identifying core policy issues arising under the harmonization work

program that would require attention of the General Council. 

The Committee continued to make progress in reducing the number of issues that remained outstanding

under the harmonization work program, and proceeding on a track toward achieving consensus on productspecific rules of origin for more than 5000 tariff lines. In mid-2002, the Chairman of the Committee

transmitted approximately 90 unresolved issues to the General Council as “core policy issues.” Many of

these issues are particularly significant due to their broad application across important product sectors,

including steel, beef products, sugar, automotive goods, and dairy products. Specific origin questions

among these “core policy issues” include, for example, how to determine the origin of fish caught in an

Exclusive Economic Zone, or whether the refinement, fractionation, and hydrogenation substantially

transform oil and fat products to a degree appropriate to confer country of origin. During the fall, the

General Council commenced working informally to address these issues, focusing on the implications of

implementing the results of the work program in a manner consistent with the rights and obligations under

other WTO Agreements.
78

Prospects for 2003

Virtually all issues and problems cited by U.S. exporters as arising under the origin regimes of U.S. trading

partners arise from administrative practices that result in non-transparency, discrimination, and a lack of

predictability. Attention will continue to be given to the implementation of the Agreement’s important

disciplines related to transparency, which are recognized elements of what are considered to be “best

customs practices.”

Further progress in the harmonization work program on its current track will remain contingent on

achieving appropriate resolution of the ‘core policy issues’ transmitted by the Committee to the General

Council. In accordance with a decision taken by the General Council in December 2002, work will

continue on addressing these issues, with a report to the General Council due in July 2003, with an aim to

complete any necessary technical work within six months of resolution of such issues. The General

Council put forward the objective of completion of the remaining technical work of the harmonization

work program within six months of resolution of the “core policy issues.”

7. Committee on Safeguards

Status

The Committee on Safeguards was established to administer the WTO Agreement on Safeguards. The

Agreement establishes rules for the application of safeguard measures as provided in Article XIX of GATT

1994. Effective safeguards rules are important to the viability and integrity of the multilateral trading

system. The availability of a safeguards mechanism gives WTO Members the assurance that they can act

quickly to help industries adjust to import surges, thus providing them with the flexibility they otherwise

would not have to open their markets to international competition. At the same time, WTO safeguard rules

ensure that such actions are of limited duration and are gradually less restrictive over time.

The Agreement on Safeguards incorporates into WTO rules many concepts embodied in U.S. safeguards

law (section 201 of the Trade Act of 1974, as amended). The Agreement requires all WTO Members to

use transparent and objective procedures when taking emergency actions to prevent or remedy serious

injury to a domestic industry caused by increased imports.

Among its key provisions, the Agreement:

• requires a transparent, public process for making injury determinations;

• sets out clearer definitions than GATT Article XIX of the criteria for injury determinations;

• requires safeguard measures to be steadily liberalized over their duration;

• establishes an eight-year maximum duration for safeguard actions, and requires a review no later

than the mid-term of any measure with a duration exceeding three years;

• allows safeguard actions to be taken for three years, without the requirement of compensation or

the possibility of retaliation; and,

• prohibits so-called “grey area” measures, such as voluntary restraint agreements and orderly

marketing agreements, which had been utilized by countries to avoid GATT disciplines and which

adversely affected third-country markets. 
79

Major Issues in 2002

During its two meetings in April and October 2002, the Committee continued its review of Members’

laws, regulations, and administrative procedures, based on notifications required by Article 12.6 of the

Agreement. The Committee reviewed new or amended legislative texts from the Dominican Republic,

Korea, Lithuania, Moldova, Poland, and Taiwan. As of October 2002, 52 Members had notified the

Committee of their domestic safeguards legislation, while 47 other Members had notified that they had no

such specific legislation.

The Committee previously noted that all notified pre-existing measures covered by Articles 10 and 11 of

the Agreement had been phased out by January 1, 2000. Nigeria notified, in 1998, that its import

prohibitions on wheat flour, sorghum, millet, gypsum and kaolin were “pre-existing Article XIX

measures.” At the Committee’s April 2002 meeting, Nigeria confirmed that these measures were still in

force.

The Committee reviewed Article 12.1(a) notifications from the following Members of the initiation of a 

safeguard investigatory process relating to serious injury or threat thereof and the reasons for it: Bulgaria

on crown corks, ammonium nitrate, urea and certain steel products; Canada on certain steel products; Chile

on certain steel products, lighters and fructose/glucose; Costa Rica on rice; the Czech Republic on

ammonium nitrate, cocoa powder, citric acid, wire, ropes and cables, tubes and pipes, and certain steel

products; the European Union on certain steel products; Hungary on certain steel products; India on

phenol, acetone, epichlorohydrin, industrial sewing machine needles, and vegetable oil; Jordan on

magnetic tapes, ceramic sinks, ceramic tiles, cooking appliances, electric accumulators, and pasta; Latvia

on live pigs and pork; Mexico on plywood panels; the People’s Republic of China on certain steel

products; Poland on calcium carbide, water heaters and certain steel products; the Slovak Republic on

ammonium nitrate; and Venezuela on paper and iron/steel “U sections.”

The Committee reviewed Article 12.1(b) notifications from the following Members of a finding of serious

injury or threat thereof caused by increased imports: Brazil on coconuts; Bulgaria on crown corks; Canada

on certain steel products; the Czech Republic on cocoa powder; the European Union on certain steel

products; India on phenol and epichlorohydrin; Jordan on magnetic tapes; Lithuania on pastry yeast; the

Philippines on grey portland cement and ceramic floor tiles; the Slovak Republic on sugar; and the United

States on certain steel products.

The Committee reviewed Article 12.1(c) notifications from the following Members of a decision to apply

or extend a safeguard measure: Brazil on coconuts; Chile on certain steel products; the Czech Republic on

cocoa powder; the European Union on certain steel products; India on acetone, phenol and gamma ferric

oxide/magnetic iron oxide; Jordan on magnetic tapes; Lithuania on pastry yeast; the Philippines on ceramic

floor tiles; the Slovak Republic on sugar; and the United States on certain steel products. The Committee

also reviewed supplemental notifications under Article 12.1(c) from the United States with respect to the

termination of a safeguard measure on lamb meat, and the modification of existing safeguard measures on

circular welded line pipe and on certain wire rod.

The Committee received notifications from the following Members of the termination of a safeguard

investigation with no safeguard measure imposed: Chile on steel, lighters and glucose; Japan on tatamiomote, welsh onion and shiitake mushrooms; Morocco on rubber; the Philippines on tomato paste; El

Salvador on fertilizer; and the United States on certain steel products. 
80

The Committee reviewed a notification from Brazil on the results of the mid-term review of its safeguard

measure on toys. 

The Committee reviewed Article 12.4 notifications from the following Members of the application of a

provisional safeguard measure: Bulgaria on ammonium nitrate; Chile on certain steel products; Costa Rica

on rice; the Czech Republic on cocoa powder; the European Union on certain steel products; Hungary on

certain steel products; Jordan on magnetic tapes; the People’s Republic of China on certain steel products;

the Philippines on grey portland cement and ceramic floor tiles; Poland on certain steel products.

China Transitional Review. At the October 2002 meeting, the Committee undertook, pursuant to the

Protocol on the Accession of the People’s Republic of China, its first transitional review with respect to

China’s implementation of the Agreement. A number of Members, including the United States, addressed

written and oral questions to China, primarily relating to China’s notification to the WTO of its safeguard

regulations, with some questions relating to China’s notifications of its safeguard investigation with

respect to certain steel products. China’s representatives provided responses at the October meeting. 

Implementation Issue. At its regular meetings in April and October 2002, and at an informal meeting in

October 2002, the Committee discussed a safeguards implementation issue pursuant to paragraph 12 of the

Doha Ministerial Declaration and section 13 of the Ministerial Decision on Implementation-Related Issues

and Concerns. This implementation issue concerned a proposal to amend Article 9.1 of the Agreement,

which currently provides that safeguard measures shall not be applied against a product originating from a

developing country Member as long as its share of imports of the product concerned in the importing

Member does not exceed 3 percent, provided that developing country Members with less than 3 percent

import share collectively account for not more than 9 percent of total imports of the product concerned. 

The proposed amendment would have raised the 3 percent threshold to 7 percent, and the 9 percent

threshold to 15 percent. The Committee was unable to reach consensus, and its consideration of this

implementation issue has concluded. 

Prospects for 2003

The Committee’s work in 2003 will continue to focus on the reviews of safeguard actions that have been

notified to the Committee and on the notifications of any new or amended safeguards laws. In addition, 

while the Committee’s consideration of the Article 9.1 implementation issue has concluded, it was agreed

that Article 9.1 will be on the agenda for the Committee’s April 2003 meeting, pursuant to which the

Committee may discuss any concerns that Members have regarding Article 9.1, including concerns beyond

those discussed in 2002, but without any mandate for the Committee to address any particular issues. 

8. Committee on Sanitary and Phytosanitary Measures

Status

The WTO Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures establishes rules

and procedures to ensure that sanitary and phytosanitary measures address legitimate human, animal and

plant health concerns; do not arbitrarily or unjustifiably discriminate between Members’ agricultural and

food products; and are not disguised restrictions on international trade. SPS measures protect against risks

associated with plant- or animal-borne pests and diseases; additives, contaminants, toxins; and diseasecausing organisms in foods, beverages, or feedstuffs. Fundamentally, the Agreement requires that such

measures be based on science and developed through systematic risk assessment procedures. At the same
81

time, the SPS Agreement preserves every WTO Member’s right to choose the level of protection it

considers appropriate with respect to SPS risks.

The SPS Committee is a forum for consultation on Members’ existing or proposed SPS measures that

affect international trade, the implementation and administration of the Agreement, technical assistance,

and the activities of the international standard-setting bodies. It also includes discussions of the

Agreement’s provisions related to transparency in the development and application of SPS measures,

special and differential treatment, technical assistance, and equivalence.

Participation in the Committee is open to all WTO Members. Certain non-WTO Members also participate

as observers, in accordance with guidance agreed by the General Council. In addition, representatives of a

number of international organizations are invited to attend meetings of the Committee as observers on an

ad hoc basis: the Food and Agriculture Organization (FAO), the World Health Organization (WHO), the

FAO/WHO Codex Alimentarius Commission, the FAO International Plant Protection Convention

Secretariat (IPPC), the International Office of Epizootics (OIE), the International Organization for

Standardization (ISO), the International Trade Center (ITC), and others. 

A number of documents relating to the work of the SPS Committee are available to the public directly

from the WTO website: www.wto.org. The SPS Committee documents are indicated by the symbols,

“G/SPS/....” Beginning in 2000, notifications of proposed SPS measures are indicated by G/SPS/N (“N”

stands for “notification”)/USA (which in this case stands for the United States of America; three letter

symbols will be used to designate the WTO Member originating the notification)/X (where “x” will

indicate the numerical sequence for that country or Member). Parties in the United States interested in

submitting comments to foreign governments on their proposals should send them through the U.S. inquiry

point shown in the box below. Reports of Committee meetings are issued as “G/SPS/R/...” (followed by a

number). Submissions by Members (e.g., statements; informational documents; proposals; etc.) and other

working documents of the Committee are issued as “G/SPS/W/...” (followed by a number). As a general

rule, written information provided by the United States to the Committee is provided on an “unrestricted”

basis and available to the public on the WTO’s website.

Major Issues in 2002

In 2002, the Committee met three times. These meetings are used increasingly by Members to raise

concerns regarding the new and existing SPS measures of other Members. The United States views this as

a positive development as it demonstrates growing familiarity with and implementation of the provisions

of the SPS Agreement and increasing recognition of the value of the Committee as a venue to discuss SPSrelated trade issues among Members. The Committee also continued discussions about the implementation

of the Agreement, especially regarding notifications and equivalence.

With assistance from the United States and other donors, all 34 countries participating in the Free Trade

Area of the Americas negotiations attended the November meeting of the Committee. This significantly

expanded capital-based participation in the Committee and plans are being made to continue this assistance

for attendance at future meetings.

Avian Influenza: During 2002, the Committee engaged in extensive discussions regarding the activities of

Members to control and eradicate avian influenza. The United States experienced geographically limited

outbreaks in 2002 of low pathenogenic avian influenza which prompted some Members to restrict U.S.
3

 Bovine Spongiform Encephalopathy and Transmissible Spongiform Encephalopathy

82

exports of poultry and poultry products without sufficient scientific justification. These discussions led to

a request by the Committee to the International Office of Epizootics (OIE) to review and modify as

appropriate international standards regarding avian influenza. The results of the OIE’s efforts should

provide updated science-based international standards to facilitate trade in poultry and poultry products. 

Foot and Mouth Disease: During 2002, the Committee also discussed Members’ activities to control and

eradicate Foot and Mouth Disease (FMD). The initial outbreak in February 2001, and subsequent spread

of the epidemic to several countries in Europe and in other countries, prompted many Members, including

the United States, to take emergency actions restricting trade to protect animals within their borders and

control the epidemic. As measures were implemented and the epidemic was controlled, Members reported

in November 2001 that they were gradually relaxing emergency control measures. The International

Office of Epizootics continued to provide updated information regarding international standards for the

control of FMD and the disease status of countries.

BSE-TSE3: The Committee also devoted considerable time to discussing Members’ activities regarding

BSE and TSE’s. Several Members have proposed and introduced measures to protect consumers and

animals against BSE. The Committee discussed the need for these measure to be based on science and that

international standards should be used as the basis of Members’ actions, unless Members have a scientific

justification for a more protective measure than that provided by the international standard. The United

States anticipates that BSE will continue to be an issue of interest and concern to many Members, and the

Committee will have extensive discussions about the nature of the disease and measures taken by Members

to protect public health and animal health. Several Members, including the United States, raised concerns

about the non-science based categorization of countries’ BSE-status and the use of this categorization to

restrict trade.

Equivalence: At the request of developing country Members, the Committee held several informal

meetings on the provisions of Article 4 of the Agreement - Equivalence. In 2001, the United States

submitted a paper (G/SPS/W/111) outlining our views and the activities of regulatory agencies as they

relate to equivalence. This paper and submissions from other Members enabled the Committee to develop

and approve a decision of the Committee (G/SPS/19) which outlines steps designed to make it easier for

Members to make use of the provisions of Article 4 of the Agreement. In 2002, the Committee began

discussions on certain aspects of this decision which need clarification. The Committee adopted a work

plan for the next two years on the clarification of this decision.

Notifications: During several discussions in the Committee regarding specific trade concerns among

Members and equivalence, Members indicated that a specific discussion on the notification requirements

and process would be helpful. The Committee decided to have informal meetings on notifications and

transparency in 2002. At the June meeting, the Committee adopted a revision to the notification form and

added space for Members to describe measures recognized to be equivalent.

Technical Assistance: In June 2000, the United States submitted information (G/SPS/W/181) on technical

assistance which had been provided to Members on SPS issues and updated this information in July 2001
83

U.S. INQUIRY POINT

Office of Food Safety and Technical

Services

Attention: Carolyn F. Wilson

Foreign Agricultural Service

U.S. Department of Agriculture

AG Box 1027

Room 5545 South Agriculture Building

14th and Independence Avenue, S.W.

Washington, DC 20250-1027

Telephone: (202) 720-2239

Fax: (202) 690-0677

email: ofsts@fas.usda.gov

(G/SPS/W/181add.1). At the June Committee meeting, the United States provided updated information

(G/SPS/W/181add.2) describing the technical assistance provided by U.S. agencies since the last report. 

China’s Transitional Review: The United States participated in the Committee’s first review of China’s

implementation of its WTO obligations under the mechanism established in Section 18 of the Protocol on

the Accession of the People’s Republic of China. The United States submitted questions regarding

China’s inspection permits, raw meat and poultry standards, pest risk assessment, and harmonization of

international standards (G/SPS/W/126). This paper and those of other Members formed the basis of the

Committee’s discussions at the November meeting. China provided oral responses to the questions raised

by the United States and other Members and restated its commitment to implement the provisions of the

SPS Agreement.

Transparency: The SPS Agreement provides a process whereby WTO Members can obtain information on

other Members’ proposed SPS regulations and control, inspection, and approval procedures, and the

opportunity to provide comments on those proposals before implementing Members’ make their final

decisions. These transparency procedures have proved extremely useful in preventing trade problems

associated with SPS measures. The United States continued to press all WTO Members to establish an

official notification authority, as required by the Agreement, and to ensure that the Agreement’s

notification requirements are fully and effectively implemented. Each Member is also required to establish

a central contact point, known as an inquiry point, to be responsible for responding to requests for

information or making the appropriate referral. This inquiry point circulates notifications received under

the Agreement to interested parties for comment. The SPS inquiry point for the United States is:

Prospects for 2003

The Committee will continue to monitor implementation

of the Agreement by WTO Members. As mentioned

above, the number of specific trade concerns raised in the

Committee appears to be increasing and the Committee

has been a useful forum for Members to raise concerns

and then work bilaterally to resolve specific trade

concerns. The number of disputes in this area is

evidence of the importance and Members place on the

effective operation of the Agreement. The Committee

will continue to be an important forum for Members to

provide information about efforts to manage and control

food safety and animal health emergencies as well as

ongoing food safety, animal and plant health activities

that affect international trade. 

In addition, during 2003, the United States expects the Committee to continue discussions on technical

assistance, notifications and equivalence. To date, developed countries have submitted most of the papers

and the United States will be encouraging developing country Members to participate more actively in

both formal meetings and informal consultations to identify improvements. As a result of implementation

discussions in the General Council, the Committee will need to address plans for conducting a review of

the Agreement as agreed upon by the General Council. The Committee will continue to monitor the

development of international standards, guidelines and recommendations by standard-setting
4

For further information, see also the Joint Report of the United States Trade Representative and the U.S.

Department of Commerce, Subsidies Enforcement Annual Report to the Congress, February 2003.

5

 Prior to 2000, Article 8 of the Agreement provided that certain limited kinds of government assistance

granted for industrial research and development (R&D), regional development, or environmental compliance

purposes would be treated as non-actionable subsidies so long as such assistance conformed to the applicable terms

and conditions set forth in Article 8. In addition, Article 6.1 of the Agreement provided that certain other subsidies,

referred to as dark amber subsidies, could be presumed to cause serious prejudice. These were: (i) subsidies to cover

an industry’s operating losses; (ii) repeated subsidies to cover a firm’s operating losses; (iii) the direct forgiveness of

debt (including grants for debt repayment); and (iv) when the ad valorem subsidization of a product exceeds five

percent. If such subsidies were challenged on the basis of these dark amber provisions in a WTO dispute settlement

proceeding, the subsidizing government would have the burden of showing that serious prejudice had not resulted

from the subsidy. However, as explained in our1999 report, a mandatory review was conducted in 1999 under

Article 31 of the Agreement to determine whether to extend the application of these provisions beyond December 31

of that year. They expired on January 1, 2000 because a consensus could not be reached among WTO Members on

whether to extend or the terms by which these provisions might be extended beyond their five-year period of

provisional application. 

84

organizations. The Committee will seek to identify areas where the development of additional or new

standards would facilitate international trade and provide this information to the appropriate standardsetting organization for consideration. The Committee will also prepare for and conduct a review of

China’s implementation of the SPS Agreement.

9. Committee on Subsidies and Countervailing Measures4

Status

The Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) provides rules and

disciplines for the use of government subsidies and the application of remedies – through either WTO

dispute settlement or countervailing duty (CVD) action – to address subsidized trade that causes harmful

commercial effects. The Agreement nominally divides subsidy practices among three classes: prohibited

(red light) subsidies; permitted yet actionable (yellow light) subsidies; and permitted, non-actionable

(green light) subsidies.5 Export subsidies and import substitution subsidies are prohibited. All other

subsidies are permitted, yet are also actionable (through CVD or dispute settlement action) if they are (i)

“specific”, i.e., limited to a firm, industry or group thereof within the territory of a WTO Member and (ii)

found to cause adverse trade effects, such as material injury to a domestic industry or serious prejudice to

the trade interests of another WTO Member. With the expiration of the Agreement’s provisions on green

light subsidies, at present, the only non-actionable subsidies are those which are not specific, as defined

above.

Major Issues in 2002

The Committee held two regular meetings in 2002. In addition to its routine activities concerned with

reviewing and clarifying the consistency of WTO Members’ domestic laws, regulations and actions with

Agreement requirements, the Committee continued to accord special attention to the general matter of
6

 In keeping with WTO practice, the review of legislative provisions which pertain or apply to both

antidumping and CVD actions by a Member generally took place in the Antidumping Committee. 

7

 One Indian subsidy program not notified of particular interest to U.S. industry provides subsidies to

producers of a specific fertilizer. In April 2002, the United States submitted written questions to India regarding this

program. A partial written response to these questions was received in November 2002 and is being reviewed to

determine the appropriate future course of action. 

85

subsidy notifications and the process by which such notifications are made to and considered by the

Subsidies Committee. In this regard, the Committee took action to address the poor and declining state of

compliance with subsidy notifications in an effort to find a long-term solution to the problem. During the

fall meeting, the Committee also undertook its first transitional review with respect to China’s

implementation of the Agreement 

The Committee throughout the year extensively discussed and addressed a very large number of requests

made by certain developing countries to extend the transition period for the phase-out of their export

subsidy programs as well as other implementation issues referred to it by the Fourth Ministerial

Conference. At the fall formal meeting of the Committee, the United States expressed serious concerns

regarding the government financial assistance provided to the Korean specialty paper industry. Finally, the

Committee selected a new Member for its Permanent Group of Experts. Further information on these

various activities is provided below.

Review and Discussion of Notifications: Throughout the year, Members submitted notifications of: (i) new

or amended CVD legislation and regulations; (ii) CVD investigations initiated and decisions taken; and

(iii) measures which meet the definition of a subsidy and which are specific to certain recipients within the

territory of the notifying Member. Notifications of CVD legislation and actions, as well as subsidy

notifications, were reviewed and discussed by the Committee at both of its regular meetings. In reviewing

notified CVD legislation and subsidies, the Committee procedures provide for the exchange in advance of

written questions and answers in order to clarify the operation of the notified measures and their

relationship to the obligations of the Agreement. To date, 95 Members of the WTO (counting the

European Union as one) have notified that they currently have CVD legislation in place, while 34

Members have not yet notified that they maintain such legislation. Among the notifications of CVD laws

and regulations reviewed in 2002 were those of Antigua and Barbuda, Argentina, El Salvador, Georgia,

Grenada, India, Moldova, Myanmar, Pakistan, Peru, Philippines and Uruguay.6 The notifications of the

following Members were scheduled to be reviewed at the fall 2002 regular meeting: Antigua and Barbuda,

Argentina, Brazil, Grenada, Japan, Lithuania, Taiwan, and Turkey but were postponed until next year.

As for CVD measures, eight WTO Members notified CVD actions taken during the latter half of 2001, and

eight Members notified actions taken in the first half of 2002. The Committee reviewed actions taken by

Argentina, Australia, Canada, the European Union, Mexico, New Zealand, South Africa and the United

States. With respect to subsidy notifications, the Committee continued its examination of new and full

notifications submitted for 1998 and 2001, as well as updating notifications submitted for 1999 and 2000.7

Importantly, the United States submitted its subsidy notification in 2002 – covering the years 1998-2001 – 

thereby bringing it into compliance with its subsidy notification obligations under the Agreement. 
8

 Any extension granted by the Committee would only preclude a WTO dispute settlement case from being

brought against the export subsidies at issue. A Member’s ability to bring a countervailing duty action under its

national laws would not be affected. 

86

As of January 1, 2002, when Membership in the WTO had reached 144, only 51 Members had submitted

new and full subsidy notifications for 2001, while 47 and 39 Members, respectively, had submitted

updating notifications for the 1999 and 2000 periods. Notably, 32 Members have never made a subsidy

notification to the WTO.

In view of the ongoing difficulties experienced by Members, in meeting the Agreement’s subsidy

notification obligations, a three-prong strategy has been employed to address the problems of subsidy

notifications. The first prong was to examine alternative practical approaches to the frequency and nature

of subsidy notifications, as well as their review. In 2001, Members decided to devote maximum effort to

submitting new and full notifications, every two years, and to de-emphasize the review of the annual

updating notifications. Examination of the format for a subsidy notification constitutes the second prong

of the strategy. Efforts in this regard were made in 2002 and will continue into 2003. The third prong was

the organization of a subsidy notification seminar, geared to participation by capital-based officials

responsible for notification, held prior to the fall committee meeting. The WTO funded capital-based

participation from Members which identified themselves as developing countries in need of assistance. 

China Transitional Review. At the fall meeting, the Committee undertook, pursuant to the Protocol on the

Accession of the People’s Republic of China, its first transitional review with respect to China’s

implementation of the Agreement. A number of Members, including the United States, addressed written

and oral questions to China, relating to China’s notification to the WTO of its countervailing duty law and

regulations, subsidy programs and pricing policies. At the meeting, China’s representatives provided

responsive information.

Extension of the transition period for the phase out of export subsidies: Under the Agreement, most

developing countries were obligated to eliminate their export subsidies by December 31, 2001. Article

27.4 of the Agreement allows for an extension of this deadline provided consultations were entered into

with the Subsidies Committee by December 31, 2002. The Committee has the authority to decide whether

an extension is justified. In making this determination, the Committee must consider the “economic,

financial and development needs” of the developing country Member. If the Committee grants an

extension, annual consultations with the Committee must be held to determine the necessity of maintaining

the subsidies.8 If the Committee does not affirmatively sanction a continuation, the export subsidies must

be phased out within two years. 

In an attempt to try and address the concerns of small exporter developing countries, a special procedure

within the context of Article 27.4 of the Agreement, was adopted at the Fourth Ministerial Conference

under which countries whose share of world exports was not more than 0.10 percent and whose Gross

National Income was not greater than $20 billion could be granted a limited extension for particular types

of export subsidy programs subject to rigorous transparency and standstill provisions. Members meeting
9

 In addition to agreement on the specific length of the extension, it was also agreed at the Fourth

Ministerial Conference, in essence, that the Committee should look favorably upon the extension requests of

Members which do not meet all the specific eligibility criteria for the special small exporter procedures but which

are similarly situated to those that do meet all the criteria. This provision added at the request of Colombia.

10

 Bolivia, Guatemala, Honduras, Kenya and Sri Lanka are all listed in Annex VII of the Subsidies

Agreement and thus, may continue to provide export subsidies until their “graduation”. Therefore, these countries

have only reserved their rights under the special procedures in the event they graduate during the five-year extension

period contemplated by the special procedures. Because these countries are only reserving their rights at this time,

the Committee did need to make any decisions as to whether their particular programs qualify under the special

procedures. 

87

all the qualifications for the agreed upon special procedures are eligible for a five-year extension of the

transition period, in addition to the two years referred to under Article 27.4.9

Colombia, El Salvador, Panama and Thailand made requests under the normal extension process provided

for in the Agreement. Antigua and Barbuda, Barbados, Belize, Bolivia, Costa Rica, Dominica, Dominican

Republic, El Salvador, Grenada, Guatemala, Honduras, Jamaica, Jordan, Kenya, Mauritius, Panama, Papua

New Guinea, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Sri Lanka, and Suriname made

requests under the special procedures adopted at the Fourth Ministerial Conference for small exporter

developing countries.10 Uruguay requested an extension for one program under both the normal and

special procedures. Additionally, Colombia sought an extension for two of its export subsidies programs

under a procedure agreed to at the Fourth Ministerial Conference analogous to that provided for small

exporter developing countries.

Altogether the Committee conducted a detailed review of more than 70 export subsidy programs for which

extensions were requested. Although nearly all of the requests were granted, some were eventually

withdrawn and others were not approved for the full extension requested. Throughout the review and

approval process, the United States took a leadership role to define as narrowly as possible the scope of the

extensions and to ensure that the conditions imposed on the extensions will strengthen the ability of the

developing countries involved to come into compliance with their obligations upon expiration of the

extension.

Other implementation issues: Two other implementation issues were addressed by the Committee in 2002:

(1) a review of the Agreement’s provisions regarding countervailing duty investigations; and, (2) the

methodology for the calculation of the per capita GNP threshold in Annex VII of the Agreement.

1. Review of the provisions of the Agreement regarding countervailing duty investigations

The General Council first referred this topic to the Committee in August 2001. Brazil and India submitted

papers making specific proposals as to how to clarify or, in some instances, modify the provisions of the

Agreement regarding countervailing duty investigations. The proposals related to: the appropriate

definitions of “domestic industry”and “like product;” the use of “facts available;” numerous calculation

issues; and the conduct of annual reviews of countervailing duty orders already in place. Due to the

breadth and complexity of the issues raised and the relatively short period of time prior to the Fourth

Ministerial Conference, very little substantive discussion occurred with respect to the specific proposals

made beyond the formal presentation of proposals. Thus, the Committee recommended to the General
11 See, G/SCM/45.

12 This de minimis for Annex VII countries is 3 percent, compared with the 2 percent for other developing

countries.

13 Annex VII(b) countries are Bolivia, Cameroon, Congo, Cote d’Ivoire, Dominican Republic, Egypt,

Ghana, Guatemala, Guyana, India, Indonesia, Kenya, Morocco, Nicaragua, Nigeria, Pakistan, Philippines, Senegal,

Sri Lanka, and Zimbabwe. In recognition of the technical error made in the final compilation of this list and

pursuant to a General Council decision, Honduras was formally added to Annex VII(b) on January 20, 2001.

88

Council that the Committee continue to consider these issues and report to the General Council by July 31,

2002. This recommendation was adopted as part of the implementation decision adopted at the Fourth

Ministerial Conference.

Pursuant to this mandate, the Committee held several meetings to address the procedural and substantive

aspects of the review. The substance of the review was conducted on the basis of the proposals from

Brazil and India tabled prior to the Fourth Ministerial Conference, as well as an exchange of written

questions and answers. No consensus was reached as to how to address these issues. Many Members,

including the United States, suggested that the Rules Negotiating Group was the most appropriate forum to

discuss the issues raised. The Committee Chair submitted his report to the General Council in July 2002.11

2. The methodology for the calculation of the per capita GNP threshold in Annex VII of the

Agreement

Annex VII of the Agreement identifies certain lesser developed countries that are eligible for particular

special and differential treatment. Specifically, the export subsidies of these countries are not prohibited

and, therefore, are not actionable under the dispute settlement process. Secondly, a higher de minimis

threshold is provided for in countervailing duty investigations of imports from these countries, although

this standard expired at the end of 2002.12 The countries identified in Annex VII include those WTO

Members designated by the United Nations as “least developed countries” (Annex VII(a)) as well as

countries that had, at the time of the negotiation of the Agreement, a per capita GNP under $1,000 per

annum and are specifically listed in Annex VII(b).13 A country automatically “graduates” from Annex

VII(b) status when its per capita GNP rises above the $1,000 threshold. When a Member crosses this

threshold it becomes subject to the subsidy disciplines of other developing country Members.

Since the adoption of the Agreement in 1995, the de facto interpretation by the Committee of the $1,000

threshold was current (i.e., nominal or inflated) dollars. The concern with this interpretation, however,

was that a Member could graduate from Annex VII on the basis of inflation alone, rather than on the basis

of real economic growth.

In 2001, the Chairman of the Committee, in conjunction with the WTO Secretariat, developed an approach

based on certain World Bank data that were used by the Uruguay Round negotiators in 1990 in developing

Annex VII(b). While many Members expressed the view that they could accept this proposed

methodology, other Members indicated that it was more appropriate to rely on more recently available

data. Thus, it was not possible to reach a consensus on the question of methodology.

At the Fourth Ministerial Conference, it was agreed:
14 The addition of the phrase “for three consecutive years” was added at the request of Honduras which

was concerned that their possible graduation from Annex VII in the near future might place them in a worse

condition than those Members which avail themselves of the special procedures under Article 27.4 for small

developing country exporters.

89

. . . that Annex VII(b) to the Agreement on Subsidies and Countervailing Measures includes the Members

that are listed therein until their GNP per capita reaches U.S. $1,000 in constant 1990 dollars for three

consecutive years. This decision will enter into effect upon the adoption by the Committee on Subsidies

and Countervailing Measures of an appropriate methodology for calculating constant 1990 dollars. If,

however, the Committee on Subsidies and Countervailing Measures does not reach a consensus agreement

on an appropriate methodology by 1 January 2003, the methodology proposed by the Chairman of the

Committee set forth in G/SCM/38, Appendix 2 shall be applied. A Member shall not leave Annex VII(b)

so long as its GNP per capita in current dollars has not reached U.S. $1000 based upon the most recent

data from the World Bank.14

In the course of 2002, no alternative methodology was proposed. Therefore, the Chairman’s methodology

proposed in 2001 will be applied in the future. 

Financial Support by the Government of Korea for the Korean specialty paper industry: At the fall formal

meeting in 2002, the United States made a statement expressing concern regarding the financial support

which various Korean government authorities have been providing to the Korean specialty paper industry. 

In the wake of the Asian financial crisis, several Korean paper companies, like many other companies in

Korea, were beset by severe liquidity shortages and overwhelming debt-to-equity ratios. As has been seen

in other sectors, such as steel and semiconductors, some companies, which under normal market conditions

would have been reorganized, sold, or forced out of business, were instead the beneficiaries of special

government help designed to ensure their survival. In the paper sector, there have been reports of debt-forequity swaps, reduced interest rates on various types of loans, loan guarantees, extensions on debt

repayment periods, and tax benefits for facilities expansion. Most, if not all of these measures appear to

have been undertaken either directly by the government or by government-owned or -controlled financial

institutions, such as the Korea Development Bank and the Industrial Bank of Korea, which frequently

implement government policy. In addition to expressing its concern, the United States submitted written

questions to Korean authorities on a bilateral basis and received partial answers which are currently under

review.

Permanent Group of Experts: Article 24 of the Agreement directs the Committee to establish a Permanent

Group of Experts (PGE), “composed of five independent persons, highly qualified in the fields of subsidies

and trade relations.” The Agreement articulates three possible roles for the PGE: (i) to provide, at the

request of a dispute settlement panel, a binding ruling on whether a particular practice brought before that

panel constitutes a prohibited subsidy, within the meaning of Article 3 of the Agreement; (ii) to provide, at

the request of the Committee, an advisory opinion on the existence and nature of any subsidy; and (iii) to

provide, at the request of a WTO Member, a “confidential” advisory opinion on the nature of any subsidy

proposed to be introduced or currently maintained by that Member. To date, the PGE has not yet been

called upon to perform any of the aforementioned duties. Article 24 further provides for the Committee to

elect the experts to the PGE, with one of the five experts being replaced every year. At of the beginning of

2002, the members of the Permanent Group of Experts were: Prof. Okan Aktan; Mr. Jorge Castro Bernieri;
90

Dr. Marco Bronckers; Prof. R.G. Flores Jr.; and Mr. Hyung-Jin Kim. At its spring 2002 regular meeting,

the Committee re-elected Prof. Aktan to serve another term. 

Prospects for 2003

In 2003, the United States will continue to work with others to try to identify ways to rationalize the

burdens of subsidy notification for all WTO Members without diminishing transparency or taking away

from the other substantive benefits of the notification obligation. Second, the United States will participate

actively in the review of other WTO Members’ CVD legislation and actions, as well as China’s

Transitional Review, and will bring to Members’ and the Committee’s attention any concerns which may

arise about such laws or actions, whether in general or in the context of specific proceedings. The United

States will also actively review any additional normal extension requests made under Article 27.4 and will

ensure the close adherence to the provisions of the agreed upon extension procedures for small exporter

developing countries. Finally, the United States is prepared to take a leadership role in addressing any

technical questions that the Subsidies Committee may be asked to consider in the context of issues that

may arise within the Rules Negotiating Group. 

10. Committee on Technical Barriers to Trade

Status

The Agreement on Technical Barriers to Trade (TBT Agreement) establishes rules and procedures

regarding the development, adoption, and application of voluntary product standards, mandatory technical

regulations, and the procedures (such as testing or certification) used to determine whether a particular

product meets such standards or regulations. Its aim is to prevent the use of technical requirements as

unnecessary barriers to trade. The Agreement applies to a broad range of industrial and agricultural

products, though sanitary and phytosanitary (SPS) measures and specifications for government

procurement are covered under separate agreements. It establishes rules that help to distinguish legitimate

standards and technical regulations from protectionist measures. Standards, technical regulations and

conformity assessment procedures are to be developed and applied on a non-discriminatory basis,

developed and applied transparently, and should be based on relevant international standards and

guidelines, when appropriate. 
15 Participation in the Committee is open to all WTO Members. Certain non-WTO Member governments

also participate, in accordance with guidance agreed on by the General Council. Representatives of a number of

international intergovernmental organizations were invited to attend meetings of the Committee as observers: the

International Monetary Fund (IMF), the United Nations Conference on Trade and Development (UNCTAD); the

International Trade Center (ITC); the International Organization for Standardization (ISO); the International

Electrotechnical Commission (IEC); the Food and Agriculture Organization (FAO); the World Health Organization

(WHO); the FAO/WHO Codex Alimentarius Commission; the International Office of Epizootics (OIE); the

Organization for Economic Cooperation and Development (OECD); the UN Economic Commission for Europe

(UN/ECE); and the World Bank. The International Organization of Legal Metrology (OIML), the United Nations

Industrial Development Organization (UNIDO), the Latin American Integration Association (ALADI), the European

Free Trade Association (EFTA) and the African, Caribbean and Pacific Group of States (ACP) have been granted

observer status on an ad hoc basis, pending final agreement by the General Council on the application of the

guidelines for observer status for international intergovernmental organizations in the WTO.

91

U.S. Inquiry Point

National Center for Standards and Certification

Information

National Institute of Standards and Technology (NIST)

100 Bureau Drive, Stop 2150

Gaithersburg, MD 20899-2150

Telephone: (301) 975-4040

Fax: (301) 926-1559

email: ncsci@NIST.GOV

NIST offers a free web-based service, Export Alert!,

that provides U.S. customers with the opportunity to

review and comment on proposed foreign technical

regulations that can affect them. By registering for the

Export Alert! Service, U.S. customers receive, via email, notifications of drafts or changes to foreign

regulations for a specific industry sector and/or

country. To register on-line contact:

http://ts.nist.gov/ncsci. 

The TBT Committee15 serves as a forum for consultation on issues associated with the implementation and

administration of the Agreement. This includes discussions and/or presentations concerning specific

standards, technical regulations and conformity assessment procedures maintained by a Member that are

creating adverse trade consequences and/or are perceived to be violations of the Agreement. It also

includes an exchange of information on Member government practices related to implementation of the

Agreement and relevant international developments.

Transparency and Availability of WTO/TBT Documents: A key opportunity for the public resulting from

the TBT Agreement is the ability to obtain information on proposed standards, technical regulations and

conformity assessment procedures, and to provide written comments for consideration on those proposals

before they are finalized. Members are also required to establish a central contact point, known as an

inquiry point, which is responsible for responding to requests for information on technical requirements or

making the appropriate referral.

The National Institute of Standards and Technology

(NIST) serves as the U.S. inquiry point. NIST

maintains a reference collection of standards,

specifications, test methods, codes and recommended

practices. This reference material includes U.S.

Government agencies’ regulations, standards of U.S.

private standards-developing organizations, and

foreign national standardizing bodies. The inquiry

point responds to requests for information concerning

federal, state and private regulations, standards and

conformity assessment procedures. Upon request,

NIST will provide copies of notifications of proposed

regulations from foreign governments received under

the TBT Agreement. The NIST also will provide

information on central contact points for information

maintained by other WTO Members. The NIST refers

requests for information concerning standards and

technical regulations for agricultural products,
16

 Before 2000, the numbering of notifications of proposed technical regulations and conformity

assessment procedures read: “G/TBT/Notif./...” (followed by a number).

92

including SPS measures, to the U.S. Department of Agriculture, which maintains the U.S. inquiry point

under the Sanitary and Phytosanitary Agreement.

A number of documents relating to the work of the TBT Committee are available to the public directly

from the WTO website: www.wto.org. TBT Committee documents are indicated by the symbols,

“G/TBT/....” Notifications by Members of proposed technical regulations and conformity assessment

procedures which are available for comment are issued as: G/TBT/N (the “N” stands for

“notification”)/USA (which in this case stands for the United States of America; three letter symbols will

be used to designate the WTO Member originating the notification)/X (where “x” will indicate the

numerical sequence for that country or Member).16 Parties in the United States interested in submitting

comments to foreign governments on their proposals should send them through the U.S. inquiry point at

the address above. Minutes of the Committee meetings are issued as “G/TBT/M/...” (followed by a

number). Submissions by Members (e.g., statements, informational documents, proposals, etc.) and other

working documents of the Committee are issued as “G/TBT/W/...” (followed by a number). As a general

rule, written information provided by the United States to the Committee is provided on an “unrestricted”

basis and is available to the public on the WTO’s website.

Major Issues in 2002

The TBT Committee met three times in 2002. At the meetings, the Committee addressed implementation

of the Agreement, including an exchange of information on actions taken by Members domestically to

ensure implementation and ongoing compliance. A number of Members used the Committee meetings to

raise concerns about specific technical regulations which affected, or had the potential to affect, trade

adversely and were perceived to create unnecessary barriers to trade. U.S. interventions were primarily

targeted at a variety of proposals from the European Commission that could seriously disrupt trade. 

The Committee conducted its seventh Annual Review of the Implementation and Operation of the

Agreement based on background documentation contained in G/TBT/11, and its Seventh Annual Review

of the Code of Good Practice for the Preparation, Adoption and Application of Standards (Annex 3 of the

Agreement) based on background documentation contained in G/TBT/CS/1/Add.6 and

G/TBT/CS/2/Rev.8. Decisions and recommendations adopted by the Committee are contained in

G/TBT/1/Rev.8.

Follow-up to the Second Triennial Review of the Agreement: Beyond bilateral trade concerns discussed

under “Statements on Implementation,” the work of the Committee has focused on issues identified in the

Second Triennial Review of the Agreement (see G/TBT/9). The review provided the opportunity for WTO

Members to review and discuss all of the provisions of the Agreement, which facilitated a common

understanding of their rights and obligations under the Agreement. In follow-up to that review, priority

attention has been given to technical assistance and the implementation needs of developing countries, as

well as to trade effects resulting from labeling requirements.

Technical Assistance: In the Second Triennial Review, the Committee recognized the importance of

ensuring that solutions to implementation problems were targeted at the specific priorities and needs
93

identified by individual or groups of developing country Members. This called for effective coordination

at the national level between authorities, agencies, and other interested parties to identify and assess the

priority infrastructure needs of a specific Member. The Committee recognized the need for coordination

and cooperation between donor Members and organizations, as well as between the Committee, other

relevant WTO bodies, and donor organizations. In order to enhance the effectiveness of technical

assistance and cooperation, the Committee agreed to develop a demand-driven technical cooperation

program beginning with the identification and prioritization of needs by developing countries, and working

with other relevant international and regional organizations. To this end, the Committee developed and

conducted a Questionnaire for a Survey to Assist Developing Country Members to Identify and Prioritize

their Specific Needs in the TBT Field (G/TBT/W/178). To date, some 50 WTO Members have responded

to the survey and a Workshop is planned on Technical Assistance for March 2003. While the survey

responses are not publically available, the Secretariat prepared an un-restricted summary of the

information received prior to the October 17, 2002, meeting of the Committee (G/TBT/W/186). The

United States is evaluating the requests received with a view to targeting resources to assist with

implementation, as appropriate.

Labeling: The Committee intensified its exchange of information on issues associated with labeling

requirements, noting the frequency with which specific concerns regarding mandatory labeling were raised

at meetings of the Committee during discussions on implementation, and stressing that although such

requirements can be legitimate measures, they should not become disguised restrictions on trade. Since the

conclusion of the Second Triennial Review, a number of Members have put forward papers on the subject:

Switzerland (G/TBT/W/162), the United States (G/TBT/W/165), Canada (G/TBT/W/174), the European

Union (G/TBT/W/175), and Japan (G/TBT/W/176). Although Switzerland and the European Union have

suggested the need for clarification of TBT disciplines to better address labeling concerns, their view has

gained little support, with most WTO Members including the United States who have emphasized the need

to comply with existing obligations. In response to a request from the Committee, the Secretariat prepared

two background papers to inform the discussions: a compilation of notifications made since 1995

(G/TBT/W/183), and a compilation of specific trade concerns related to labeling raised at meetings of the

TBT Committee (G/TBT/W/184). The Secretariat estimates some 723 notifications have been made

between January 1, 1995 and August 31, 2002 which involved labeling proposals. The Committee is

developing an agenda for a “learning event” (originally proposed by Canada) to be held in conjunction

with its June 2003 Committee meeting.

Prospects for 2003

The Committee will continue to monitor implementation of the Agreement by WTO Members. The

number of specific trade concerns raised in the Committee appears to be increasing. The Committee has

been a useful forum for Members to raise concerns and facilitate bilateral resolution of specific concerns. 

In 2003, the Committee is required to conclude its Third Triennial Review of the Agreement, which is

mandated by Article 15.4. The Second Triennial Review requires the Committee to evaluate its progress

on implementing the technical assistance work program. The United States is considering other areas

which may be useful to highlight in the context of the review that could assist Members in implementation.
94

11. Committee on Trade-Related Investment Measures

Status

The Agreement on Trade-Related Investment Measures (TRIMS) prohibits investment measures that

violate the GATT Article III obligation to treat imports no less favorably than domestically produced

products and the GATT Article XI obligation not to impose quantitative restrictions on imports. The

TRIMS Agreement thus requires the elimination of certain measures imposing requirements on the

performance of foreign investors, such as measures that require, or provide benefits for, the incorporation

of local inputs in manufacturing processes (“local content requirements”) or measures that restrict a firm’s

imports to an amount related to the quantity of its exports or of its foreign exchange earnings (“trade

balancing requirements”). The Agreement provides an illustrative list of measures that violate its

obligations. When the WTO Agreement entered into force in January 1, 1995, formal notification to the

WTO, and eventual elimination, of any TRIMS in place was required. Developed countries were required

to eliminate notified TRIMS by January 1, 1997. Developing countries were required to eliminate any

TRIMS by January 1, 2000. Least developed countries were given a deadline of January 1, 2002. Several

developing countries requested and were granted up to four additional years in which to come into full

compliance with their TRIMS Agreement obligations.

Developments relating to the TRIMS Agreement are monitored and discussed both in the Council for

Trade in Goods (CTG) and in the Committee on Trade-Related Investment Measures (TRIMS Committee).

Major Issues in 2002

During 2002, the CTG continued the review of the operation of the TRIMS Agreement mandated by

Article 9 of the Agreement. As part of this review, Members discussed a study of trade-related investment

measures and other performance requirements prepared jointly by the secretariats of the WTO and

UNCTAD. The first part of the joint study described different types of performance requirements and

surveyed disciplines on such requirements found in various international agreements. The second part of

the study reviewed evidence on the economic impact of TRIMS and other performance requirements. 

Members also discussed a proposal submitted by Brazil and India recommending that the TRIMS

Agreement be amended to allow developing countries to use measures prohibited by the Agreement for

development purposes. The United States and several other WTO Member countries opposed the

Brazil/India proposal, arguing that TRIMS have been shown to distort trade flows and discourage foreign

investment, harming developing countries. The United States opposed any amendment of the TRIMS

Agreement and suggested that the Article 9 review should be concluded.

During its May 7 meeting, the CTG assigned to the TRIMS Committee responsibility for conducting work

on outstanding TRIMS implementation issues under the Doha Ministerial mandate. The TRIMS

Committee met four times during 2002 to discuss implementation and other issues. In these meetings, and

in the CTG, the United States continued to press WTO Members that received extensions of the deadline

for phasing out their remaining TRIMS to meet their phase-out deadlines and to come into full compliance

with the Agreement. The TRIMS Committee also devoted some time to discussions of the joint

WTO/UNCTAD study.

Pursuant to paragraph 18 the Protocol on the Accession of the People’s Republic of China to the WTO, the

TRIMS Committee also reviewed China’s implementation of the TRIMS Agreement and related
95

provisions of the Protocol. The United States joined several other WTO Members, including the European

Union and Japan, in pressing China to meet its TRIMS obligations and to clarify the intent of several

domestic laws and regulations. In response to questions by the United States and other countries, China

provided more detailed information on its progress in implementing the TRIMS Agreement and on related

domestic policies during an October TRIMS Committee meeting, 

Prospects for 2003

The CTG and the TRIMS Committee, with strong support from the United States, will continue to monitor

the status of the TRIMS phase-out efforts of the developing countries that received formal extensions of

the deadline for complying with the Agreement. The Article 9 review will continue. The TRIMS

Committee will also continue to work on implementation issues, which are likely to be a principal focus of

discussion at the Fifth Ministerial Conference.

12. Textiles Monitoring Body

Status

The Textiles Monitoring Body (TMB), established in the Agreement on Textiles and Clothing (ATC),

supervises the implementation of all aspects of the Agreement. In 2002, TMB membership was composed

of appointees and alternates from the United States, the European Union, Japan, Canada/Norway,

Switzerland/Turkey, Brazil, Thailand, China/Pakistan/Macau, India/Egypt, and Hong Kong/Republic of

Korea. Each TMB member serves in a personal capacity. 

The ATC succeeded the Multifiber Arrangement (MFA) as an interim arrangement establishing special

rules for trade in textile and apparel products on January 1, 1995. All Members of the WTO are subject to

the disciplines of the ATC, whether or not they were signatories to the MFA, and only Members of the

WTO are entitled to the benefits of the ATC. The ATC is a ten-year arrangement which provides for the

gradual integration of the textile and clothing sector into the WTO and provides for improved market

access and the gradual and orderly phase-out of the special quantitative arrangements that have regulated

trade in the sector among the major exporting and importing nations. 

The United States has implemented the ATC in a manner which ensures that the affected U.S. industries

and workers as well as U.S. importers and retailers have a gradual, stable and predictable regime under

which to operate during the quota phase-out period. At the same time, the United States has aggressively

sought to ensure full compliance with market-opening commitments by U.S. trading partners, so that U.S.

exporters may enjoy growing opportunities in foreign markets. 

Under the ATC, the United States is required to “integrate” products which accounted for specified

percentages of 1990 imports in volume over three stages during the course of the transition period– that is,

to designate those textile and apparel products for which it will henceforth observe full GATT disciplines. 

Once a WTO Member has “integrated” a product, the Member may not impose or maintain import quotas

on that product other than under normal GATT procedures, such as Article XIX. As required by Section

331 of the Uruguay Round Agreements Act, the United States selected the products for early integration

after seeking public comment, and published the list of items at the outset of the transition period, for

purposes of certainty and transparency. The integration commitments for stages one and two were

completed in 1995 and 1998. The United States notified the TMB in 2001 of the integration commitments
96

for stage three and implemented these commitments on January 1, 2002. The list for all three stages may

be found in the Federal Register, volume 60, number 83, pages 21075-21130, May 1, 1995. 

Also keyed to the ATC “stages” is a requirement that the United States and other importing Members

increase the annual growth rates applicable to each quota maintained under the Agreement by designated

factors. Under the ATC, the weighted average annual growth rate for WTO Members’ quotas increased

from 4.9 percent in 1994 to 9.3 percent in 2002. 

Major Issues in 2002

Notifications: A considerable portion of the TMB’s time was spent reviewing notifications made under

Article 2 of the ATC dealing with textile products integrated into normal GATT rules and no longer

subject to the provisions of the ATC. WTO Members wishing to retain the right to use the Article 6

safeguard mechanism were required in 2001 to submit a list of products comprising at least 18 percent by

trade volume of the products included in the annex to the ATC. A number of these notifications were

defective for various reasons and in a number of cases the TMB’s review has carried into 2002. The TMB

expressed concern that a number of countries which announced their intention to retain the right to use

Article 6 safeguards failed to make the required integration notification. TMB documents are available on

the WTO’s web site: http://www.wto.org. Documents are filed in the Document Distribution Facility

under the document symbol “G/TMB.” The TMB also reviewed notifications from the United States, the

European Union, Canada and Turkey concerning their textile restraints on China and Taiwan. These

notifications were made to the TMB following the accession of China to the WTO in December 2001 and

Taiwan in January 2002. 

Doha Implementation Issues: The Council on Trade in Goods (CTG) met a number of times formally and

informally to consider tirets 4.4 and 4.5 of the Doha Ministerial Declaration related to textile

implementation issues. The discussion covered the same issues and revealed the same differences of

opinion encountered in the major review of the Agreement on Textiles and Clothing (see CTG section) . 

The outcome of the discussion paralleled the outcome of the ATC review. The Chair reported that he was

not in a position to put any draft recommendations before the CTG. 

Prospects for 2003

The United States will continue to monitor compliance by trading partners with market opening

commitments, and will raise concerns regarding the implementation of these commitments in the TMB or

other WTO fora, as appropriate. The United States will also pursue further market openings, including in

the negotiation of new Members’ accessions to the WTO. In addition, the United States will continue to

respond to surges in imports of textile products which cause or threaten serious damage to U.S. domestic

producers. The United States will also continue efforts to enhance cooperation with U.S. trading partners

and improve the effectiveness of customs measures to ensure that restraints on textile products are not

circumvented through illegal transshipment or other means. 
97

13. Working Party on State Trading

Status

Article XVII of GATT 1994 requires Members to place certain restrictions on the behavior of state trading

firms and on private firms to which they accord special or exclusive privileges to engage in importation

and exportation. Among other things, Article XVII requires Members to ensure that these “state trading

enterprises” act in a manner consistent with the general principle of non-discriminatory treatment, that is to

make purchases or sales solely in accordance with commercial considerations, and to abide by other GATT

disciplines. To address the ambiguity regarding which types of firms fall within the scope of “state trading

enterprises,” an agreement was reached in the Uruguay Round referred to as “The Understanding on the

Interpretation of Article XVII” (the “Understanding”). The Understanding provides a working definition

of a state trading enterprise and instructs Members to notify the Working Party of all enterprises in their

territory that fall within the agreed definition, whether or not such enterprises have imported or exported

goods.

A WTO Working Party was established to review, inter alia, the notifications of state trading enterprises

and the coverage of state trading enterprises that are notified, and to develop an illustrative list of

relationships between Members and state trading enterprises and the kinds of activities engaged in by these

enterprises. All Members are required under Article XVII of GATT 1994 and paragraph 1 of the

Understanding to submit annually notifications of their state trading activities. 

The Uruguay Round ensured that the operation of agricultural state trading enterprises would be subject to

international scrutiny and disciplines. Before the Uruguay Round, agricultural products were effectively

outside the disciplines, of GATT 1947. This limited the scrutiny of state trading enterprises since many of

them directed trade in agricultural products. The lack of tariff bindings on agricultural products in most

countries also limited the scope of GATT 1947 disciplines because without tariff bindings governments

could raise import duties and state trading enterprises could impose domestic mark-ups on imported

products.

The Uruguay Round Agreement on Agriculture marked an important step in bringing the activities of

agricultural state trading entities under the same disciplines that apply to non-agricultural products. All

agricultural tariffs (including TRQs) are now bound. While further work is needed on the administration

of TRQs, bindings act to limit the scope of state traders to manipulate imports. Likewise, the disciplines

on export competition, including value and quantity ceilings on export subsidies, apply fully to state

trading enterprises. U.S. agricultural producers and exporters have expressed concerns about the operation

of certain state trading enterprises, particularly single-desk importers or exporters of agricultural products,

and called for more meaningful disciplines. 

Major Issues in 2002

New and full notifications were first required in 1995 and, subsequently, every third year thereafter. 

Updating notifications indicating any changes are to be made in the intervening years. The notifications

submitted by WTO Members as of November 19, 2002 were: 21 updating notifications for 2002; 20 new

and full notification for 2001; 6 updating notifications for 2000; five updating notifications for 1999; four

updating notifications for 1998; and two updating notifications for 1997.
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The Working Party held one formal meeting in November 2002 where it reviewed Member notifications. 

At the meeting, the Working Party discussed the situation regarding the notifications of state trading

enterprises.

Prospects for 2003

In December 2002, the United States submitted a request for information from Canada concerning the

sales and purchases of western Canadian wheat by the Canadian Wheat Board, pursuant to Article

XVII:4(c) of GATT 1994. The Article provides that a Member who has reason to believe its interests are

being adversely affected by the operations of a state trading enterprise may request the Member

establishing, maintaining or authorizing such enterprise supply information about its operations related to

the GATT. The United States believes that its interests are being adversely affected by the operations of

the Canadian Wheat Board (CWB), which the Government of Canada notified to the WTO. The request

for additional information was made in concert with the filing of a U.S. request for consultations under the

Dispute Settlement Understanding.

As part of the agricultural negotiations in the WTO, the United States proposed specific disciplines on both

import and export agricultural state trading enterprises that would expand transparency and competition for

these entities. Specifically, the United States has proposed the elimination of exclusive trading rights of

single desk exporters, stronger notification requirements, and the elimination of the use of government

funds or guarantees to finance potential operational deficits or to otherwise insulate export state trading

enterprises from market or pricing risk. 

The Working Party on state trading enterprises will contribute to the ongoing discussion of these and other

state trading issues through its review of new notifications and its examination of what further information

might be appropriate to notify to enhance transparency of state trading enterprises. The Working Party

will undertake a process to identify solutions to the problem of compliance with notification obligations. 

F. Council for Trade in Services

Status

The General Agreement on Trade in Services (GATS) is the first multilateral, legally enforceable

agreement covering trade and investment in the services sector. It is designed to reduce or eliminate

governmental measures that prevent services from being freely provided across national borders or that

discriminate against locally-established service firms with foreign ownership. The Agreement provides a

legal framework for addressing barriers to trade and investment in services. It includes specific

commitments by WTO Members to restrict their use of those barriers and provides a forum for further

negotiations to open services markets around the world. These commitments are contained in national

schedules, similar to the national schedules for tariffs. The Council for Trade in Services (CTS) oversees

implementation of the GATS and reports to the General Council. Ongoing negotiations take place in the

CTS meeting in Special Session, described earlier in this chapter. The following section discusses work of

the CTS regular session.
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Major Issues in 2002

The Council reached agreement on procedures dealing with changes to exemptions from Most Favored

Nation (MFN) treatment. A GATS annex provides that such exemptions are subject to negotiation but

procedures did not exist should a WTO Member decide to liberalize or terminate an MFN exemption. 

Procedures also did not exist to allow for purely technical changes. Document S/L/106 contains

procedures agreed to in 2002 by the Council.

As discussed below, the CTS decided to extend the deadline for negotiations on the question of emergency

safeguards, under GATS Article X, to March 15, 2004.

At the request of the concerned WTO Members, the CTS took the steps necessary to allow Bolivia and

Papua New Guinea to implement new commitments on financial services and basic telecommunications,

respectively.

The United States, with the support of other WTO Members, raised concerns with China’s implementation

of its GATS commitments in the insurance and express delivery sectors during regular CTS meetings and

as part of the Transitional Review of China’s implementation of its services commitments.

The CTS has discussed proposals by some WTO Members for a technical review of one or more GATS

provisions. Discussion has focused on the scheduling provisions in Article XX:2, which may produce

unintended confusion. No decision has yet been taken on whether to conduct such a review.

The air transport review, which is required in the GATS Annex on Air Transport Services, began in late

2000. The review continued in 2002, although only one meeting was held. The review examines

“developments in the air transport sector and the operation of this Annex with a view to considering the

possible further application of the Agreement in this sector.” The CTS chair held informal consultations

on scheduling of further meetings. In October 2001, the United States submitted a written statement

presenting its views that to date bilateral and plurilateral venues outside the WTO have proven to be

effective in promoting liberalization in this important sector (available at http://docsonline.wto.org.

Documents are filed in the Document Distribution Facility under the document symbol: S/C/W/198).

Prospects for 2003

The CTS will continue to discuss work related to ongoing implementation of the GATS.

1. Committee on Trade in Financial Services

Status 

The Committee on Trade in Financial Services (CTFS) enables WTO Members to explore any financial

services market access or regulatory issue deemed appropriate, including implementation of existing trade

commitments.
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Major Issues in 2002

CTFS met five times in 2002. Several WTO Members reported the developments under their financial

services regimes. One focus of discussion was transparency in development and application of financial

services regulations spurred by an earlier presentation from the United States regarding the advance notice

and comment procedures it followed for regulations necessary to implement the Financial Modernization

Act. Taiwan, Mexico, and Canada shared their own experiences regarding development of advance notice

and comment and other transparency measures. 

In October 2002, the CTFS carried out a review of China’s implementation of its WTO financial services

commitments as part of China’s Transitional Review. The United States and other WTO Members

expressed concerns with China’s implementation of its commitments in the insurance, motor vehicle

financing, banking and other financial sectors. 

WTO Members urged those seven countries that have not yet ratified their commitments under the 1997

Financial Services Agreement – the Fifth Protocol to the GATS – to do so as quickly as possible and

required those Members to provide detailed information on the status of their domestic ratification

processes. During the reporting period, Bolivia notified that it had completed ratification procedures and

subsequently obtained the agreement of CTS Members to reopen the Fifth Protocol for acceptance. Brazil,

the Dominican Republic, Jamaica, Poland, the Philippines, and Uruguay have not yet completed their

ratification procedures.

In July, the IMF made a presentation on the Financial Sector Assessment Program. 

Prospects for 2003

Work will continue on transparency and other technical issues in support of the ongoing negotiations.

2. Working Party on Domestic Regulation

Status

GATS Article VI, on Domestic Regulation, directs the CTS to develop any necessary disciplines, with a

view to ensuring that measures relating to qualification requirements and procedures, technical standards,

and licensing requirements and procedures “do not constitute unnecessary barriers to trade in services.” A

1994 Ministerial Decision assigned priority to the professional services sector, for which the Working

Party on Professional Services (WPPS) was established. The WPPS developed Guidelines for the

Negotiation of Mutual Recognition Agreements in the Accountancy Sector, adopted by the WTO in May

1997. The WPPS completed Disciplines on Domestic Regulation in the Accountancy Sector in December

1998 (The texts are available at www.wto.org).

After the completion of the Accountancy Disciplines, in May 1999 the CTS established a new Working

Party on Domestic Regulation (WPDR) which also took on the work of the predecessor WPPS and its

existing mandate. Using the experience from accountancy, the WPDR is now charged with determining

whether these or similar disciplines may be generally applicable across sectors. The Working Party is to

report its recommendations to the CTS not later than the conclusion of the services negotiations. 
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Major Issues in 2002

With respect to development of generally applicable regulatory disciplines, Members have discussed

needed improvements in GATS transparency obligations, which the United States supports. Members also

have begun discussion of possible disciplines aimed at ensuring that regulations are not in themselves a

restriction on the supply of services. The United States has taken a deliberate approach in this second area

and has supported discussion focusing first on problems or restrictions for which new disciplines would be

appropriate. Some Members suggested that any regulatory disciplines only apply to sectors in which

countries have scheduled specific commitments. 

To continue work on professional services, Members agreed to solicit views on the accountancy

disciplines from their relevant domestic professional bodies, exploring whether the accountancy disciplines

might serve as a model for those professions with appropriate modifications. As agreed, Members

contacted their domestic professional bodies, requesting comments on the applicability of the accountancy

disciplines to those professions. Some professions in various countries found that the disciplines, with

perhaps a few modifications, could apply to their profession; some professions in several countries found

otherwise. Given the large number of professions and Member countries, the information thus far is

incomplete and work is continuing. Members also agreed on a list of international professional

organizations, compiled by the Secretariat from Member submissions, and sent a letter to the organizations

listed to consult regarding the applicability of the accountancy disciplines to those professions.

Prospects for 2003

The Working Party will continue discussion of possible regulatory disciplines, both horizontal and sectorspecific, to promote the GATS objective of effective market access.

The work program on accounting was an important step in the multilateral liberalization of this important

sector. While the United States was disappointed that Members ultimately were not able to agree to early

application of the accountancy disciplines, the disciplines remain open for improvement before they are to

become effective at the conclusion of the current GATS negotiations. The United States will be working

to improve the accountancy disciplines, as well as working with interested U.S. constituencies to consider

their applicability to other professions. 

3. Working Party on GATS Rules

Status

The Working Party on GATS Rules was established to determine whether the GATS should include new

disciplines on safeguards, government procurement, or subsidies. 

Major Issues in 2002

Of the three issues, the GATS established a deadline only for safeguards. In 2002, this deadline was again

extended, to March 15, 2004, reflecting the continuing disagreement among WTO Members on both the

desirability and feasibility of a safeguards provision for trade in services. Additionally, Members agreed

to provide a progress report by March 2003 on safeguards negotiations and to prepare to “take stock of

progress” on government procurement and subsidies at the Fifth Ministerial Conference. 
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Safeguards discussions in 2002 evaluated different approaches including establishing a core mechanism

for emergency safeguards or the desirability and feasibility of services safeguards across different modes

of delivering services. Discussions drew from submissions made by Australia, the European Union, and

the United States. The United States argued that the desirability and feasibility of an emergency safeguard

mechanism had not been adequately considered and needed to be discussed further. Members also drew

on previous submissions by ASEAN, Canada, Mexico, Mauritius, Argentina, Chile, Switzerland, and

Costa Rica which addressed concepts including domestic industry, acquired rights, modal application of

safeguards, situations justifying safeguards, and indicators and criteria to determine injury and causality. 

All discussions were without prejudice to the question of whether the GATS should include such

provisions. 

Regarding government procurement, work continued on definitional questions relevant to services and

how such disciplines would relate to the results of ongoing negotiations in the WTO Working Group on

Transparency in Government Procurement. Members also discussed an EU proposal to establish

transparency disciplines and market access commitments for government procurement of services. The

United States noted its interest in pursuing transparency of government procurement in goods and services

through the WTO Working Group on Transparency in Government Procurement. 

With respect to subsidies negotiations, the Committee is working through a "checklist" of issues to help

understand better whether new provisions are appropriate in this area, including identification of trade

distortions caused by subsidy-like measures. Chile and other WTO Members favor circulating a revised

questionnaire on all subsidies, not simply those that are trade-distortive. Discussion was limited in this

area due to the Working Party’s focus on safeguards and government procurement. 

Prospects for 2003

Information-gathering and discussion on all three issues will continue. The continuing sharp divergence of

views on safeguards may result in this issue being discussed at a political level. Developing countries are

indicating that their meaningful services liberalization commitments in the current negotiations may

depend on agreement for an emergency safeguard mechanism. On government procurement, the United

States will have to ensure that any course of action does not negatively affect U.S. objectives in the WTO

Working Group on Transparency and Government Procurement. Subsidies discussions will continue to

focus on definitional issues, including the scope of subsidies to be considered. 

4. Committee on Specific Commitments

Status

The Committee on Specific Commitments examines ways to improve the technical accuracy of scheduling

commitments, primarily in preparation for the GATS negotiations, and oversees application of the

procedures for the modification of schedules under Article XXI of the GATS. The Committee also

oversees implementation of commitments in Member schedules in sectors for which there is no sectoral

body, currently all sectors except financial services. The Committee works to improve the classification of

services so that scheduled commitments reflect the services activities, particularly to ensure coverage of

evolving services.
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Major Issues in 2002

In 2002, the Committee took up two issues relevant to new commitments resulting from the ongoing

GATS negotiations. First, the Committee decided that new commitments ultimately should be included in

a single, consolidated schedule that would incorporate both pre-existing and new commitments. Second,

the Committee agreed that offers should be presented on the basis of informal consolidated schedules

incorporating Uruguay Round and post-Uruguay Round commitments (e.g., from the extended

negotiations on financial services and basic telecommunications). 

The Committee also continued work on improving classification of services in individual sectors for which

problems have been identified.

Prospects for 2003

Work will continue on technical issues, including classification of services, in support of the ongoing

negotiations.

G. Council on Trade-Related Aspects of Intellectual Property Rights

Status

The Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) is a

multilateral agreement that sets minimum standards of protection for copyrights and neighboring rights,

trademarks, geographical indications, industrial designs, patents, integrated-circuit layout designs, and

undisclosed information. The TRIPS Agreement also establishes minimum standards for the enforcement

of intellectual property rights through civil actions for infringement and, at least in regard to copyright

piracy and trademark counterfeiting, in criminal actions and actions at the border. The TRIPS Agreement

requires as well that, with very limited exceptions, WTO Members provide national and most-favorednation treatment to the nationals of other WTO Members with regards to the protection and enforcement of

intellectual property rights. Disputes between WTO Members regarding implementation of the TRIPS

Agreement can be settled using the procedures of the WTO’s Dispute Settlement Understanding. 

The TRIPS Agreement entered into force on January 1, 1995, and its obligations to provide “most favored

nation” and national treatment became effective on January 1, 1996 for all Members. Most substantive

obligations are phased in based on a Member’s level of development. Developed-country Members were

required to implement the obligations of the Agreement fully by January 1, 1996; developing country

Members generally had to implement fully by January 1, 2000; and least-developed country Members

must implement by January 1, 2006. Based on a proposal made by the United States at the Doha WTO

Ministerial Conference, however, the transition period for least developed countries to implement or apply

Sections 5 and 7 of Part II of the TRIPS Agreement with respect to pharmaceutical products, or to enforce

rights with respect to such products, was extended by the TRIPS Council until January 1, 2016. The WTO

General Council, on the recommendation of the TRIPS Council, similarly waived until 2016 the obligation

for least developed country Members to provide exclusive marketing rights for certain pharmaceutical

products if those Members did not provide product protection for pharmaceutical inventions.

The WTO TRIPS Council monitors implementation of the TRIPS Agreement, provides a forum in which

WTO Members can consult on intellectual property matters, and carries out the specific responsibilities
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assigned to the Council in the TRIPS Agreement. The TRIPS Agreement is important to U.S. interests and

has yielded significant benefits for U.S. industries and individuals, from those engaged in the

pharmaceutical, agricultural, chemical, and biotechnology industries to those producing motion pictures,

sound recordings, software, books, magazines, and consumer goods.

Major Issues in 2002

In 2002, the TRIPS Council held four formal meetings, including “special negotiation sessions” on the 

establishment of a multilateral system for notification and registration of geographical indications for

wines and spirits called for in Article 23.4 of the Agreement (See separate discussion of this topic

elsewhere in Chapter IV and below). In addition to continuing its work reviewing the implementation of

the Agreement by developing countries and newly-acceding Members, the Council’s work in 2002 focused

on TRIPS issues addressed in the Doha Ministerial Declaration and the Declaration on the TRIPS

Agreement and Public Health.

Review of Developing Country Members’ TRIPS Implementation: As a result of the Agreement’s

staggered implementation provisions, the TRIPS Council during 2002 devoted much of its time to

reviewing the Agreement’s implementation by developing country Members and newly acceding Members

as well as to providing assistance to developing country Members so they can fully implement the

Agreement. In particular, the TRIPS Council called for developing country Members to respond to the

questionnaires already answered by developed-country Members regarding their protection of

geographical indications and implementation of the Agreement’s enforcement provisions, and to provide

detailed information on their implementation of Article 27.3(b) of the Agreement. This article permits

Members to exclude from patentability plants, animals, and essential biological processes for producing

plants and animals. The Council also concentrated on institution building internally and with the World

Intellectual Property Organization (WIPO). During the TRIPS Council meetings, the United States

continued to press for full implementation of the TRIPS Agreement by developing country Members and

participated actively, during the reviews of legislation by highlighting specific concerns regarding

individual Members’ implementation of their obligations. 

During 2002, the TRIPS Council initiated reviews of the implementing legislation of China (as part of

China’s transitional review), Taiwan, Qatar, Saint Vincent and the Grenadines, and completed its reviews

of the legislation of Albania, Antigua and Barbuda, Barbados, Botswana, Brunei Darussalam, Taiwan,

Côte d’Ivoire, Gabon, Ghana, Guyana, India, Lithuania, Malaysia, Namibia, Oman, Sri Lanka, Thailand,

Tunisia, the United Arab Emirates, and Uruguay.

Intellectual Property and Access to Medicines: At the Doha Ministerial Conference, Ministers

acknowledged the serious public health problems afflicting Africa and other developing and least

developed countries, especially those resulting from HIV/AIDS, malaria, tuberculosis, and other

epidemics. In doing so, WTO Ministers adopted the Declaration on the TRIPS Agreement and Public

Health, clarifying the flexibilities available in the TRIPS Agreement that may be used by WTO Members

to address public health crises. The declaration sends a strong message of support for the TRIPS

Agreement, confirming that it is an essential part of the wider national and international response to the

public health crises that afflict many developing and least developed Members of the WTO, in particular

those resulting from HIV/AIDS, tuberculosis and malaria and other epidemics. Ministers worked in a

cooperative and constructive fashion to produce a political statement that answers the questions identified

by certain Members regarding the flexibility inherent in the TRIPS Agreement. This strong political
105

statement demonstrates that TRIPS is part of the solution to these crises. The statement does so, without

altering the rights and obligations of WTO Members under the TRIPS Agreement, by reaffirming that

Members are maintaining their commitments under the Agreement while at the same time highlighting the

flexibilities in the Agreement. Ministers agreed on the need for a balance between the needs of poor

countries without the resources to pay for cutting-edge pharmaceuticals and the need to ensure that the

patent rights system which promotes the continued development and creation of new lifesaving drugs is

promoted. 

The United States is pleased that the Declaration reflects and confirms our profound conviction that the

exclusive rights provided by Members as required under the TRIPS Agreement are a powerful force

supporting public health objectives. As a consequence of Ministers’ efforts, we believe those Members

suffering under the effects of the pandemics of HIV/AIDS, tuberculosis and malaria, particularly those in

sub-Saharan Africa, should have greater confidence in meeting their responsibilities to address these crises. 

The United States will continue working with the international community to ensure that additional

funding and resources are made available to the least developed and developing country Members to assist

them in addressing their public health care problems.

One major part of the Doha Declaration was the agreement to provide an additional ten-year transition

period (until 2016) for least developed countries, which was first proposed by the United States. On June

27, 2002, the TRIPS Council implemented this aspect of the Doha Declaration by taking a decision that

least developed country Members will not be obliged, with respect to pharmaceutical products, to

implement or apply sections 5 and 7 of Part II of the TRIPS Agreement or to enforce rights provided for

under these Sections until January 1, 2016. This decision is made without prejudice to the right of least

developed country Members to seek other extensions of the period provided for in paragraph 1 of Article

66 of the TRIPS Agreement.

In paragraph 6 of the Declaration on the TRIPS Agreement and Public Health, Ministers recognized the

complex issues associated with the ability of certain Members lacking domestic manufacturing capacity to

make use of the flexibilities in the TRIPS Agreement. Ministers directed the TRIPS Council to find an

expeditious solution to the difficulties certain Members might face in using compulsory licensing if they

lacked sufficient manufacturing capacity in the pharmaceutical sector and to report to the WTO General

Council by the end of 2002. The TRIPS Council began its work at the March 2002 meeting and continued

throughout 2002 in both formal and informal meetings. Developed country Members generally supported

a solution that, with appropriate provisions on scope, safeguards and transparency, would waive the

obligation in paragraph 31(f) that requires that compulsory licenses, when granted, be predominantly for

the supply of the domestic market, since it is this limitation that could make it difficult for a Member

lacking manufacturing capacity of its own to obtain a needed pharmaceutical if that product were patented

in the Member from which supply was being sought. 

Throughout the ensuing negotiations to develop such a solution, the United States remained committed to

the Doha Declaration and worked intensively to find a solution that would provide life-saving drugs to

those truly in need. As the negotiations drew to a close, however, it became clear that some WTO

Members and advocacy organizations sought to expand the scope of diseases beyond that intended at Doha

to allow countries to override drug patents to treat a wide range of concerns, such as obesity. The United

States was seriously concerned that this approach could substantially undermine the WTO rules on patents

which provide incentives for the development of new pharmaceutical products. As no consensus could be

obtained in support of the final proposal made by the Chairman of the TRIPS Council, negotiations
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concluded for the year on December 20, 2002. In concluding the negotiations, Members agreed that the

General Council should instruct the TRIPS Council to resume its work as soon as possible in the new year

so that a decision on this issue could be taken at the next meeting of the General Council on February 10,

2003.

While pledging to continue to work with other WTO Members to try to find a solution within the WTO, on

December 20, the United States announced an immediate practical solution to allow African and other

developing countries to gain greater access to pharmaceuticals and HIV/AIDS test kits when facing public

health crises. The United States pledged to permit these countries to override patents on drugs produced

outside their countries in order to fight HIV/AIDS, malaria, tuberculosis, and other types of infectious

epidemics, including those that may arise in the future. Specifically, the United States pledged not to

challenge any WTO Member that contravenes WTO rules to export drugs produced under compulsory

license to a country in need, and called on others to join the United States in this moratorium on dispute

settlement.

The United States notified the WTO in early January 2003 of the specific terms and conditions of the

moratorium. The key elements of this moratorium include a commitment not to pursue dispute settlement

against a Member that notifies the TRIPS Council of its intention to issue a compulsory license to permit

the production and export of a patented pharmaceutical product or HIV/AIDS test kit to eligible importing

economies. Eligible importing economies will be those economies, other than those classified by the

world bank as "high income economies," that: (1) are facing a grave public health crisis associated with

HIV/AIDS, malaria or tuberculosis or other infectious epidemics of comparable scale and gravity,

including those that may arise in the future; (2) have no or insufficient production capacities in the

pharmaceutical sector; and (3) have so notified the TRIPS Council. The moratorium will also include

measures to guard against product diversion, including steps to ensure that the product can be easily

identified and a requirement that all countries, to the extent of their ability, act to ensure that the drugs are

not diverted from countries in need.

TRIPS-related WTO Dispute Settlement Cases: During the year, the United States continued to pursue

consultations with the European Union regarding its failure to provide TRIPS-consistent protection of

geographical indications of U.S. nationals. On May 31, the United States and Argentina notified the

partial settlement of a WTO dispute settlement procedure related to patent and data protection issues. Of

the ten claims raised by the United States, eight were settled. The United States reserved its right to pursue

future consultations and WTO dispute settlement with respect to two claims: protection of test data against

unfair commercial use, and the application of enhanced TRIPS rights to patent applications pending as of

the entry into force of TRIPS for Argentina. 

There are a number of other WTO Members that likewise appear not to be in full compliance with their

TRIPS obligations. The United States, for this reason, is still considering initiating dispute settlement

procedures with members of the Andean Community, the Dominican Republic, Hungary, India, Israel, and

Kuwait. We will continue to consult informally with these countries in an effort to encourage them to

resolve outstanding TRIPS compliance concerns as soon as possible. We will also gather data on these

and other countries’ enforcement of their TRIPS obligations and assess the best cases for further action if

consultations prove unsuccessful.

Geographical Indications: The Doha Ministerial Declaration directed the TRIPS Council to discuss

“issues related to extension” of Article 23-level protection to geographical indications for products other
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than wines and spirits and to report to the Trade Negotiations Committee by the end of 2002 for

appropriate action. Throughout 2002, the United States has argued that demandeurs had not established

that the protection provided geographical indications for products other than wines and spirits was not

adequate, that the administrative costs and burdens would be considerable for those Members that did not

have a longstanding statutory regime for the protection of geographical indications, and that the benefits

accruing to those few Members that had longstanding statutory regimes for the protection of geographical

indications would represent a windfall, while other Members with few or no geographical indications

would receive no counterbalancing benefits. A number of multiple-sponsor papers were introduced during

the year expressing the views and concerns of both supporters of extension and Members opposing such

extension. To facilitate the discussion, the Council Chairman identified three sets of issues and focused

discussions at each meeting on one or more sets. The Secretariat prepared compilations of oral statements

of various Members and of documents submitted, to assist Members in making reference to those

statements and documents. At the November meeting, those favoring negotiations on extension

recommended a report to the Trade Negotiations Committee proposing initiation of negotiations on such

extension while those opposing extension of Article 23 to geographical indications for products other than

wines and spirits recommended that the report note that issues had been discussed thoroughly but no

consensus reached. 

Ultimately, no consensus could be reached in the TRIPS Council on how the Chair should report to the

TNC on the issues related to extension of Article 23-level protection to geographical indications for

products other than wines and spirits. At the TNC meeting, in light of the strong divergence of positions

on the way forward on geographical indications and other implementation issues, the TNC Chair closed

the discussion by saying he would consult further with Members and revert to this issue at the next

meeting of the TNC (February 4-5, 2003).

No further progress has been made on the Article 24.2 review of the application by Members of TRIPS

provisions on geographical indications in spite of the review continuing to be on the TRIPS Council’s 

agenda. At each of the 2002 TRIPS Council meetings, the United States urged developing country

Members that have not yet provided information on their regimes for the protection of geographical

indications, and most of them have not, to do so. The United States also continued to support a proposal

by New Zealand in 2000, and by Australia in 2001, that the Council conduct the review by addressing each

article of the TRIPS Agreement covering geographical indications in light of the experience of Members

as reflected in the responses to the “checklist,” but others, including the European Union, continue to

oppose such a review, saying that Members that are interested can read the papers. 

Review of Current Exceptions to Patentability for Plants and Animals: TRIPS Article 27.3(b) permits

Members to except from patentability plants and animals and biological processes for the production of

plants and animals. Members may not, however, except from patentability micro-organisms and nonbiological and microbiological processes. As called for in the Agreement, the TRIPS Council initiated a

review of this provision in 1999 and, because of the interest expressed by some Members, the discussion

continued through 2000 and 2001. In 1999, in order to facilitate the review by enabling easy comparisons,

the Secretariat had prepared a synoptic table of information provided by developed Members on their

practices. This portion of the review revealed that there was considerable uniformity in the practices of the

developed Members. During the discussion, the United States noted that the ability to patent

micro-organisms and non-biological and microbiological processes, as well as plants and animals, had

given rise to a whole new industry that has brought inestimable benefits in health care, agriculture, and

protection of the environment in those countries providing patent protection in this area. In 2001, the
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United States again called for developing country Members to provide this same information so that the

Council would have a more complete picture on which to base its discussion. Regrettably, most

developing country Members have chosen not to provide such information and have raised topics that fall

outside the scope of Article 27.3(b), such as the relationship between the TRIPS Agreement and the

Convention on Biological Diversity (CBD), and traditional knowledge. 

The Doha Ministerial Declaration directs the Council for TRIPS, in pursuing its work program under the

review of Article 27.3(b) to examine, inter alia, the relationship between the TRIPS Agreement and the

CBD, and the protection of traditional knowledge and folklore. The Council, at its March 2002 meeting,

agreed to handle each of these topics as a separate agenda item, in order to avoid confusion, but the

discussions have tended to overlap during 2002. Since the review began in 1999, the United States has

introduced five separate papers discussing various aspects of the subjects under discussion, including a

paper discussing in depth the provisions of the CBD that might have any relationship to the TRIPS

Agreement and describing how the CBD’s provisions regarding access to genetic resources and benefit

sharing can be implemented through an access regime based on contracts that would spell out the

conditions of access, including benefit sharing and reporting. Other papers describe the practices of the

National Cancer Institute and the access regime of the U.S. National Park Service as examples of how a

contractual access regime would function. The United States has suggested that any Member that has a

question about whether a particular CBD implementation proposal would run afoul of TRIPS obligations

raise the issue with the Council so that it might obtain the views of other Members. Updated information

on organization activities was submitted from the FAO, the CBD, UNCTAD, UPOV, WIPO and the World

Bank.

Non-violation: The Doha Ministerial Declaration on Implementation directs the TRIPS Council to continue

its examination of the scope and modalities for non-violation nullification and impairment complaints

related to the TRIPS Agreement, to make recommendations to the Fifth Ministerial Conference, and,

during the intervening period, not to make use of such complaints. Throughout the year, the Council

continued to discuss the operation of non-violation nullification and impairment complaints in the context

of the TRIPS Agreement. Some Members argued that the possibility of such complaints created

uncertainty. As in past years, the United States continued to argue that no more uncertainty was created

than was the case with other WTO agreements, and that Article 26 of the Dispute Settlement

Understanding and GATT decisions on non-violation provide sufficient guidance to enable a panel or the

Appellate Body to make appropriate determinations in such cases.

Electronic Commerce: The TRIPS Council continued discussing the provisions of the TRIPS Agreement

most relevant to electronic commerce and explored how these provisions apply in the digital world. The

United States specifically suggested that the Secretariat might usefully undertake a study of how Members

are implementing TRIPS with respect to the Internet environment. The United States will continue to

support discussion of the application of the TRIPS Agreement in the digital environment. The Secretariat

updated its factual background note on intellectual property and electronic commerce.

Further Reviews of the TRIPS Agreement: Article 71.1 calls for a review of the Agreement in light of

experience gained in implementation, beginning in 2002. The Council continues to consider how the

review should best be conducted in light of the Council’s other work. The Doha Ministerial Declaration

directs that, in its work under this Article, the Council is also to consider the relationship between

intellectual property and the CBD, traditional knowledge, folklore, and other relevant new developments

raised by Members pursuant to Article 71.1.
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Technical cooperation and capacity building: As in each past year, the United States and other Members

provided reports on their activities in connection with technical cooperation and capacity building.

Implementation of Article 66.2: Article 66.2 requires developed countries to provide incentives for

enterprises and institutions in their territories to promote and encourage technology transfer to least

developed Members in order to enable them to create a sound and viable technological base. This

provision was reaffirmed in the Doha Decision on Implementation-related Issues and Concerns and the

TRIPS Council was directed to put in place a mechanism for ensuring monitoring and full implementation

of the obligation, and developed countries were directed to submit before the end of 2002 detailed reports

on the actual functioning of the incentives they provide. The reports are to be reviewed in the TRIPS

Council and are to be updated annually. The Chairman circulated an informal paper prior to the September

meeting suggesting elements that might be considered by the Council to fulfill the instructions. Another

informal note was circulated by the Chairman containing a draft decision for consideration by the TRIPS

Council. The United States had given detailed reports on specific U.S. Government institutions (the

African Development Foundation and Agency for International Development) at the first two Council

meetings. Because there was insufficient time for consultations, the Chairman pushed back the discussion

of the implementation of Article 66.2 to the February 2003 TRIPS Council meeting. As a result, the

United States submitted its report on Article 66.2 at the end of December 2002.

Prospects for 2003 

In 2003, the TRIPS Council will continue to focus on its built-in agenda and the additional mandates

established in Doha, including on the Council’s work on paragraph 6 of the Doha Declaration on TRIPS

and Public Health, on issues related to the extension of Article 23-level protection for geographical

indications for products other than wines and spirits, on the relationship between the TRIPS Agreement

and the CBD, and on traditional knowledge and folklore, as well as other relevant new developments.

U.S. objectives for 2003 continue to be: 

• to achieve a multilateral solution to the compulsory licensing issue identified in paragraph 6 of the

Doha Declaration on TRIPS and Public Health;

• to resolve differences through dispute settlement consultations and panels, where appropriate;

• to continue its efforts to ensure full TRIPS implementation by developing-country Members;

• to ensure that provisions of the TRIPS Agreement are not weakened; and

• to develop further Members’ views on the relationship between the TRIPS Agreement and

electronic commerce.
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H. Other General Council Bodies/Activities

1. Committee on Trade and Environment

Status

The Committee on Trade and Environment (CTE) was created by the WTO General Council on January

31, 1995, pursuant to the Marrakesh Ministerial Decision on Trade and Environment. Following the Doha

Ministerial Conference concluded in November 2002, the CTE in regular session continued discussion of

many of the issues under consideration in recent years. The CTE regular session focused on issues

identified in the Doha Declaration as those to pursue within the Committee’s current terms of reference,

including market access for issues associated with environmental measures; TRIPS and environment, and

labeling for environmental purposes under paragraph 32; capacity-building and environmental reviews

under paragraph 33; and discussion of the environmental aspects of Doha negotiations under paragraph 51.

Major Issues in 2002

The CTE in regular session met three times in 2002. The United States played an active role in

discussions, particularly with respect to those issues identified in the Doha Declaration, as discussed

below.

Market Access under Doha Sub-Paragraph 32(i): The CTE in regular session structured discussions on

both a general and sectoral basis. With respect to the general discussion, Members focused on a

submission from India that outlined some of the particular challenges faced by developing countries in

meeting environmental requirements in the markets of developed countries. On sectoral questions,

Members considered a submission from New Zealand on fisheries (which is being negotiated separately in

the Rules Negotiating Group), Japan on forestry, and Saudi Arabia on energy.

TRIPS and Environment under Doha Sub-Paragraph 32(ii): Discussions under this item continued to

focus, as they had prior to the Doha Ministerial Conference, on whether there may be any inherent

conflicts between the TRIPS Agreement and the Convention on Biological Diversity (CBD) with respect

to genetic resources and traditional knowledge. While Members generally acknowledged that the TRIPS

Council was the most appropriate forum to consider this issue, they reiterated in the CTE in regular session

views that had been previously expressed in the TRIPS Council. In this regard, a few Members argued for

consideration of changes to the TRIPS Agreement to address perceived contradictions between the WTO

and the CBD. The United States referred to two papers that it had circulated last year in the TRIPS

Council on the relationship between WTO and CBD provisions and on programs for the sharing of

benefits associated with genetic resources, making clear its view that there is no incompatibility between

WTO Agreements and the CBD.

Labeling for Environmental Purposes under Doha Sub-Paragraph 32(iii): Members focused discussions

on a paper from Switzerland. Most noted the view that existing WTO obligations, particularly those set

forth in the TBT and SPS agreements, are sufficient with respect to the development and application of

labeling programs and that there is no need for negotiations in this area.

Capacity Building and Environmental Reviews under Doha Paragraph 33: Many developing country

Members stressed the importance of benefitting from technical assistance related to negotiations in the
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WTO on trade and environment, particularly given the complexity of some of these issues. Most Members

agreed that a key aspect of capacity building in this area involves increasing communication and

coordination between trade and environment officials at national levels. Regarding environmental

reviews, the United States and Canada regularly updated the CTE in regular session on their respective

reviews of the WTO negotiations, while the European Union provided information on its sustainability

impact assessments.

Discussion of Environmental Effects of Negotiations under Doha Paragraph 51: Most of the discussion

that took place under paragraph 51during 2002 involved procedural questions of how to carry out this

mandate. The United States, however, pushed other Members to move beyond procedural questions and

onto a substantive discussion of Members’ views of what might be the environmental implications of

negotiations across all areas of the Doha mandate.

Prospects for 2003

Much of the focus in 2003 is likely to continue to be on the environmental issues identified in the Doha

Declaration that do not have a negotiating mandate, particularly with respect to those issues identified for

reporting at the Fifth Ministerial Conference. Additionally, the CTE in regular session is likely to devote

increasing attention to the substance of the mandate in paragraph 51 of the Doha Declaration.

2. Committee on Trade and Development

Status

The GATT established the Committee on Trade and Development (CTD) in 1965 to strengthen the

institution’s role in the economic development of less-developed Contracting Parties. In the WTO, the

CTD is a subsidiary body of the General Council. The Committee provides developing-country Members,

who comprise two-thirds of the WTO’s Membership, an opportunity to discuss trade issues from a

development perspective, in contrast to the other committees in the WTO structure which are responsible

for the operation and implementation of particular Agreements. The Committee focuses on the means to

accomplish the WTO’s goal of full integration of Members into the multilateral trading system with

particular attention paid to the benefits of trade liberalization as means a to improve the prospects for

economic development. 

Following the WTO’s First Ministerial Conference held in Singapore in 1996, the CTD formed a

sub-committee to implement a plan of action agreed by Ministers that was designed to concentrate efforts

to integrate least-developed countries into the trading system. The plan of action outlines an “Integrated

Framework” (IF) to better coordinate trade-related technical assistance activities of donors to

least-developed countries from six core international organizations: the International Monetary Fund, the

International Trade Center, the United Nations Conference on Trade and Development, the United Nations

Development Program, the World Bank, and the WTO. The IF process also encourages the participation

of the broader development community through a consultative group of bilateral donors and other

multilateral organizations. The Doha Declaration, in order to continue progress toward this goal,

instructed the subcommittee to design a work plan to consider issues of importance to least-developed

countries including further coordination of technical assistance through the IF and additional steps to

facilitate the process of least-developed countries in joining the WTO.
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Major Issues in 2002

The Committee held eight formal meetings and one seminar in 2002. The Committee’s work focused on

the participation of developing countries in world trade, the implementation of WTO agreements, technical

cooperation and training, small economy issues, the development dimensions of electronic commerce,

development of guidelines for the terms of accession for least-developed countries seeking to join the

WTO, and the generalized system of tariff preferences. The Committee held one seminar which examined

the revenue implications of electronic commerce.

WTO Technical Assistance Plan: The Doha Ministerial Declaration confirmed that technical cooperation

and capacity building are core elements of the development dimension of the multilateral trading system. 

Ministers established an extensive mandate on technical cooperation and capacity building to enable

beneficiary countries to implement WTO rules and obligations, and prepare them for effective

participation in the work of the WTO, including for future negotiations. 

Throughout 2002, the Committee worked to improve the WTO’s trade-related technical assistance

programs. The WTO Secretariat introduced its first annual technical assistance plan to coordinate the

trade-related technical assistance requests of developing countries, which form the basis for the 2002 plan. 

The WTO received over 900 requests from 111 countries (reflecting all levels of development) and

delivered over 450 activities for trade-related technical assistance in 2002. Activities generally took the

form of regional or national seminars and workshops, trade policy courses, and internships, and covered

topics ranging from accession and market access issues to technical barriers to trade. In addition, the U.S.

Government contributed $250,000 to expand the WTO’s Trade Policy Training Programs to two

universities in Africa, located in Morocco and Kenya. This important WTO project, which builds on the

excellent Trade Policy Training Courses offered in Geneva, will be continued in 2003.

While concerns persist about the quality of the technical assistance plan, the Committee has worked

tirelessly with donors and recipient Members to improve its efficiency and effectiveness. Continued

collaboration among all participants will ensure the success of the plan as it strives to meet the goals of the

DDA. 

Small Economy Issues: The Doha Declaration mandates an examination of issues relating to trade of small

economies with the objective of framing responses to those issues identified. The goal of this activity is to

achieve the fuller integration of such economies into the multilateral trading system, not to create a

sub-category of WTO Members. In written submissions and Committee discussions, a number of small

economy Members described the structural impediments or shared characteristics of vulnerability of small

economies in the multilateral trading system. The United States engaged in Committee discussions on

development strategies for small economies, emphasizing the potential benefits of Doha negotiations for

smaller economies which rely on an open trading system to foster growth. The Declaration mandates that

the General Council provide recommendations to the Fifth Ministerial Conference.

Sub-Committee on Least-Developed Countries: In 2002, the Sub-Committee on Least-Developed

Countries took several important steps towards its goal of furthering trade integration of least-developed

countries. The Subcommittee began the year by adopting a work program focusing on several key issues

for least developed countries, including market access, trade-related technical assistance and capacity

building, support for diversification of production and the export base, mainstreaming trade to improve

participation in the multilateral trading system, and accessions of least developed countries into the WTO. 
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The “Integrated Framework”(IF): The IF process starts with a Diagnostic Trade Integration Study (DTIS),

which analyzes the technical assistance requirements for each country. Such analysis is critical to enabling

least developed countries to draw on the benefits of the multilateral trading system. Beginning as a pilot

process in 2001, diagnostic studies were conducted for three countries: Cambodia, Madagascar, and

Mauritania. Additional studies are scheduled for Burundi, Djibouti, Eritrea, Ethiopia, Guinea, Lesotho,

Malawi, Mali, Nepal, Senegal, and Yemen. The DTIS is a first step toward mainstreaming trade,

producing policy recommendations, identifying technical assistance needs, and developing poverty

reduction strategies. Follow-up activities are planned for each country. Timely and effective follow-up

projects remain the greatest challenge to the IF process. The U.S. Government has set aside $3 million to

support such projects and has helped fund the DTIS during the past two years by contributing to the

Integrated Framework Trust Fund. Voluntary contributions finance the Trust Fund, which is managed on

behalf of the six agencies by the UNDP. Total pledges from all donors amounted to $10.4 million as of

October 2002.

WTO Accessions of Least Developed Countries: The Sub-Committee also worked to develop guidelines to

streamline and simplify the accession process for least developed applicant countries, which the General

Council adopted in December 2002. The guidelines reflect to a large extent the current consensus that

least developed accession applicants should have full recourse to the flexibilities and transitional

provisions already provided for least developed countries in WTO Agreements and that market access

commitments should not be onerous. The agreed guidelines call for minimizing the number of meetings,

and other methods to help accelerate the negotiating process for least-developed countries prepared to

undertake reasonable market access commitments and to adopt and enforce WTO-consistent trade rules. 

In designing these guidelines, the United States worked with other WTO Members and the Secretariat to

ensure that technical assistance will be available to help least developed countries to implement their WTO

commitments.

Electronic Commerce Seminar: In April 2002, the Sub-Committee held a seminar on the revenue effect of

electronic commerce. The seminar concluded that e-commerce posed both a challenge and an opportunity

to developed and developing countries and for both governments and companies. The direct effects on

government revenue appeared small whereas the potential gains in efficiency for an economy can be large. 

Prospects for 2003

The CTD will continue its function as the forum for discussion of development issues within the WTO. 

Particular emphasis is likely to be placed on participation of developing countries in the multilateral

trading system, electronic commerce, issues facing small-economy Members, and efforts to improve the

effectiveness and accountability of technical cooperation. 

The Sub-Committee on Least-Developed Countries will meet four times in 2003. The Sub-Committee will

continue to take steps to improve the opportunities available to the least-developed countries and increase

integration into the trading system through encouraging greater participation in the Doha negotiations, the

subcommittee’s agreed work plan, and technical cooperation efforts such as the IF process.
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3. Committee on Balance of Payments Restrictions

Status

WTO rules require any Member imposing restrictions for balance of payments purposes to consult

regularly with the Balance of Payments (BOP) Committee to determine whether the use of restrictive

measures is necessary or desirable to address its balance of payments difficulties. Full consultations

involve a complete examination of a country’s trade restrictions and balance of payments situation, while

simplified consultations provide more general reviews. Full consultations are held when restrictive

measures are introduced or modified, or at the request of a Member in view of improvements in the

balance of payments. The Uruguay Round results strengthened substantially the provisions on balance of

payments. The BOP Committee works closely with the International Monetary Fund in conducting its

consultations. 

Major Issues in 2002

Since entry-into-force of the WTO on January 1, 1995, the WTO BOP Committee has demonstrated that

the new WTO rules provide Members additional, effective tools to enforce obligations under the BOP

provisions. The year began with the welcomed announcement by Pakistan that it had completed its

phase-out plan of BOP restrictions ahead of schedule. In February and again in October, the BOP

Committee consulted with Bangladesh on the maintenance of restrictions on four items for BOP purposes. 

Members noted that Bangladesh had begun the removal of most restrictions under the timetable agreed in

consultations concluded in 2000. The Committee approved the maintenance of import restrictions on the

four products in question until 2009 recognizing the unique circumstances of Bangladesh as a

least-developed country facing continuing balance-of-payments difficulties.

The BOP Committee undertook discussions of two new items in 2002. As part of the work program

agreed at Doha, the BOP Committee requested a paper outlining the evolving role of the IMF in BOP

proceedings. The paper was prepared by the Secretariat with the help of the IMF, reviewed by Members,

and discussed by the Committee. The Committee also discussed proposals to clarify the various roles of

the Committee and the IMF in BOP proceedings. In this regard, the Chair made some suggestions on

which the Committee did not reach a consensus in 2002. At the November meeting, the BOP Committee

also conducted the first annual review of China’s accession commitments as part of Transitional Review

Mechanism.

Prospects for 2003

Should other Members resort to new BOP measures, the WTO provides for a program of rigorous

consultation with the Committee. The United States expects the Committee to continue to ensure that

WTO BOP provisions are used as intended, to address legitimate, serious BOP problems through the

imposition of temporary, price-based measures. The Committee will continue to rely upon its close

cooperation with the IMF and plans on further consultations among Members on several ideas proposed by

the Chair with a view to clarifying the respective roles of the IMF and Committee in BOP proceedings.
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4. Committee on Budget, Finance, and Administration

Status

WTO Members are responsible for establishing and approving the budget for the WTO Secretariat via the

Budget Committee. Although the Committee meets throughout the year to address the financial

requirements of the organization, the formal process to approve the budget for the upcoming year begins in

the fall when the Secretariat provides to Members the financial data from the previous year and forecasts

the financial needs for the upcoming year. The WTO annual budget is reviewed by the Committee and

approved by the WTO General Council. It is the practice in the WTO to take decisions on budgetary

issues by consensus. 

The United States is an active participant in the Budget Committee. For the 2003 budget, the U.S.

assessment rate is 15.899 percent of the total assessment, or Swiss Francs (CHF) 24,452,662 (about $17.5

million). During the course of 2002, the United States paid off longstanding accumulated arrears to the

WTO of CHF 3,205,232 (about $2.1 million). The total assessments of WTO Members are based on the

share of WTO Members’ trade in goods, services, and intellectual property. Details on the WTO’s budget

required by Section 124 of the Uruguay Round Agreements Act are provided in Annex II. 

Major Issues in 2002

In 2002, the demands created by the launch of the new round of negotiations in Doha and the capacity

building needs of developing countries continued to be the major issues facing the Budget Committee. In

addition, the Committee began work on the first triennial review of WTO salaries. 

Agreed Budget for 2003: After considerable discussion aimed at reconciling growing demands on the

WTO Secretariat as a result of the new round of negotiations with budgetary realities, the Committee

proposed, and the General Council approved, a 2003 budget for the WTO Secretariat and Appellate Body

of CHF 154,954,350 (approximately $110 million). 

As a result of the ongoing first triennial review of WTO salaries, the agreed budget for 2003 provides for

an interim salary adjustment of 4 percent, with a 3 percent raise effective January 1, 2003 and the

remainder effective July 1, 2003. These adjustments were made because it was found during the review

process that WTO salaries had fallen behind UN salaries. In addition, the budget package provides for the

possibility of a further adjustment of salaries on July 1, 2003 to take into account a further increase in UN

salaries for its professional staff that was still pending at the UN when the Budget Committee completed

its work. The Director-General had proposed a higher level of increase to make WTO salaries comparable

to a broader range of international institutions dealing with economic issues. However, some Members did

not agree with the reasoning behind this proposal and many others believed they needed more time to

consider the whole issue of the methodology for determining the remuneration of WTO staff. Therefore, it

was decided to continue the triennial review but to complete it and reach conclusions by the end of March

2003. If this review results in a further increase in salaries, the increase would take effect on January 1,

2004. The 2003 budget also provides for an increase in the staffing of the organization by six people to

address higher workloads resulting from the launch of the new round. 

As provided for in last year’s decision creating the Doha Development Agenda Trust Fund, which is

financed by voluntary contributions, the Budget Committee was required to set a target level for
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contributions for 2003. Based on the 2003 Plan for Trade-Related Technical Assistance, which was agreed

by the WTO’s Committee on Trade and Development, the Budget Committee agreed to a target of CHF 24

million. In addition, the regular budget of the WTO for 2003 provides for one more of the highly

acclaimed WTO training courses, which educate developing countries’ officials on how to participate in

the work of the WTO, including how to meet their trade obligations. 

Building Facilities: The Budget Committee continued to consider a building proposal from the Swiss

government intended to accommodate the current needs of the WTO Secretariat, which exceeds the space

available in the WTO’s main building, and to take into account the future needs of the WTO and its

Appellate Body. The proposal allows for the WTO to finance design studies and construction of the

building with a loan of CHF 50,000,000 (close to $31 million) payable over 50 years. The Government of

Switzerland would pay the interest on the loan and the Canton of Geneva would pay for the rental of the

ground the building would occupy until 2059, at which time the WTO could either purchase the land,

negotiate an extension of the agreement, or sell the building. Construction could begin in 2005 and be

completed in 2007-2008. A final decision will need to be made by the General Council at some time in the

future. Last year the Budget Committee recommended, and the General Council agreed, to accept

Switzerland’s proposal in principle so that the Swiss authorities can hold the necessary land and work with

the WTO to develop the additional plans and analysis that will be necessary to take a final decision. This

year the Swiss authorities briefed the Budget Committee on a design competition that it was initiating for

the new building, which will be necessary for the Swiss authorities to make their proposal for action to the

General Council.

Prospects for 2003

In 2003, the Budget Committee will work on an urgent basis to complete its work on the triennial review

of salaries and to recommend to the General Council by the end of March 2003 an agreed methodology for

establishing staff salaries. The Budget Committee will also work closely with the Committee on Trade and

Development to develop a program of technical cooperation for 2004 and recommend to the General

Council a target level of financing from the Doha Development Agenda Trust Fund that will be necessary

to fund these efforts. Additional consideration will also need to be given to the Swiss proposal on

additional facilities for the WTO. The Budget Committee has also agreed, on the initiative of the United

States, to consider moving to a biennial budgeting cycle, as opposed to the current annual budget cycle. In

addition, the Committee will take a comprehensive look at the staffing of the Secretariat as compared to

the demands placed upon it by Members, as well as ways of achieving savings by adjusting the way the

WTO does business.

5. Committee on Regional Trade Agreements

Status

The Committee on Regional Trade Agreements (CRTA), a subsidiary body of the General Council, was

established in early 1996 as a central body to oversee all regional agreements to which Members are party. 

The CRTA is charged with conducting reviews of individual agreements, seeking ways to facilitate and

improve the review process, implementing the biennial reporting requirements established by the Uruguay

Round agreements, and considering the systemic implications of such agreements and regional initiatives

on the multilateral trading system. Prior to 1996, these reviews were typically conducted by a “working

party” formed to review a specific agreement.
17 A list of all regional trade agreements notified to the GATT/WTO and in force is included in Annex II to

this report.

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The WTO addresses regional trade agreements in more than one agreement. In the GATT 1947, Article

XXIV was the principal provision governing Free Trade Areas (FTAs), Customs Unions (CUs), and

interim agreements leading to an FTA or CU. Additionally, the 1979 Decision on Differential and More

Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries, commonly known as

the “Enabling Clause,” provides a basis for agreements between or among developing countries. The

Uruguay Round added two more provisions: the Understanding on the Interpretation of Article XXIV,

which clarifies and enhances the requirements of GATT Article XXIV; and Article V of the General

Agreement on Trade in Services (GATS), which governs services economic integration agreements.

FTAs and CUs are authorized departures from the principle of MFN treatment if certain requirements are

met. First, tariffs and other restrictions on trade must be eliminated on substantially all trade between the

parties. Second, the incidence of duties and other restrictions of commerce applied to third countries upon

the formation of the FTA or CU must not, on the whole, be higher or more restrictive than was the case

before the agreement. Finally, while interim agreements leading to FTAs or CUs are permissible,

transition periods to full FTAs or CUs can exceed ten years only in exceptional cases. With respect to the

formation of a CU, the parties must notify Members to negotiate compensation to other Members for

exceeding their WTO bindings with market access concessions. An analogous compensation requirement

exists for services as well.

Major Issues in 2002

Examination of Reports: The Committee held three formal meetings during 2002. The Committee has

125 agreements under review, 102 referred by the Council on Trade in Goods, 22 by the Council for Trade

in Services, and 1 by the Committee on Trade and Development17. In January 2002, the United States

notified the entry into force of the U.S.-Jordan FTA. The Committee has completed its factual

examination for over 70 agreements but has a backlog of draft reports, as Members do not agree on the

nature of appropriate conclusions. At the same time, in 2002 the Committee received 11 biennial reports

on regional agreements notified under Article XXIV of GATT 1947.

Other Issues: The Committee discussed two horizontal surveys prepared by the Secretariat to assist the

Committee understand more specifically the impact of regional trade agreements on the multilateral

trading system. The reports, Rules of Origin Regimes in RTAs ((WT/REG/W/45) and Coverage,

Liberalization Process and Transitional Provisions in RTAs (WT/REG/W/46) were made publicly

available in September 2002. The Committee also sponsored a well-attended seminar on April 26, entitled

“Regionalism and the WTO” that engaged economists and the academic community to focus on the

impact of regional trade agreements on the multilateral trading system, particularly in terms of market

access and various regulatory regimes.

Prospects for 2003

Paragraph 29 of the Doha Declaration calls for clarifying and improving rules for regional trade

agreements, a mandate that is being undertaken by the Rules Negotiating Group. Accordingly, the

discussion of systemic issues and improving the examination process in the CRTA has in effect been put in
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abeyance. In the meantime, two meetings have been scheduled for 2003, during which the Committee will

continue to review the new regional trade agreements notified to the WTO and referred to the Committee. 

The biennial reporting requirement on the operation of agreements has been shifted by a year, to 2004,

given the 2003 workload due to preparations for the Fifth Ministerial Conference planned for September in

Cancun.

6. Accessions to the World Trade Organization

Status

Taiwan became the 144th WTO Member on January 1, 2002. In addition, the General Council approved

the accession packages of Armenia and Macedonia (officially known as the Former Yugoslav Republic of

Macedonia), both of which will become Members after their respective parliaments ratify their accession

commitments. Significant progress towards completion of negotiations also was recorded with the twentysix applicants with established Working Parties, particularly with Russia, Ukraine, Cambodia, and Nepal. 

Along with Samoa and Tonga, it is expected that negotiations will enter a critical phase for these countries

during 2003. WTO Members agreed on guidelines to accelerate and simplify the accession process for

least developed countries (LDCs). Equatorial Guinea joined Ethiopia and Sao Tome and Principe as

observers to the WTO, not yet seeking accession.

By the end of 2002, only five of the accession applicants with established Working Parties had not yet

activated their accession process by submitting initial descriptions of their trade regimes. Bosnia, Yemen,

and Yugoslavia provided this essential information during 2002. Initial working parties convened for the

accessions of Azerbaijan, Lebanon, and Uzbekistan to conduct a first review of the information that these

applicants submitted. After a hiatus of almost four years, work on Algeria’s accession resumed at an

accelerated pace. Working Party meetings and/or bilateral market access negotiations were also held

during 2002 with Armenia, Cambodia, Kazakhstan, Macedonia, Nepal, Russia, Ukraine, and Vietnam. 

The chart included in Annex II of this report presents the current status of each accession negotiation. 

Countries and separate customs territories seeking to join the WTO must negotiate the terms of their

accession with current Members, as provided for in Article XII of the WTO Agreement. It is widely

recognized that the accession process, with its emphasis on implementation of WTO provisions and the

establishment of stable and predictable market access for goods and services, provides a proven framework

for adoption of policies and practices that encourage growth, development, and investment. 

The accession process strengthens the international trading system by ensuring that new Members

understand and can implement WTO rules from the outset, and it offers current Members the opportunity

to secure expanded market access opportunities and to address outstanding trade issues in a multilateral

context. In a typical accession negotiation, the applicant submits an application to the WTO General

Council, which establishes a Working Party to review information on the applicant’s trade regime and to

conduct the negotiations. Accession negotiations can be time consuming and technically complex,

involving a detailed review of the applicant’s entire trade regime by the Working Party and negotiations

for import market access. Applicants need to be prepared to make legislative changes to implement WTO

institutional and regulatory requirements, to eliminate existing WTO-inconsistent measures, and to make

trade-liberalizing specific commitments on market access for goods, services, and agriculture.
18Twenty-nine LDCs are already WTO Members. Of the nine additional LDCs that have applied for WTO

accession, only Vanuatu has completed negotiations, but it has not submitted the results to the General Council for

approval. Negotiations with Cambodia, Nepal, and Samoa are advanced and moving forward. Bhutan, Cape Verde,

Laos, Sudan, and Yemen have not yet commenced negotiations. Of the ten remaining LDCs that have not applied

for WTO membership, three (Ethiopia, Equatorial Guinea, and Sao Tome and Principe) are WTO observers.

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The terms of accession developed with Working Party Members in these bilateral and multilateral

negotiations are recorded in an accession “protocol package” consisting of a Working Party report and

Protocol of Accession, consolidated schedules of specific commitments on market access for imported

goods and foreign service suppliers, and agriculture schedules that include commitments on export

subsidies and domestic supports. The Working Party adopts the completed protocol package containing

the negotiated terms of accession and transmits it with its recommendation to the General Council or

Ministerial Conference for approval. After approval, accession applicants normally submit the package to

their domestic authorities for ratification. Thirty days after the applicant’s instrument of ratification is

received in Geneva, WTO Membership becomes effective.

The United States provides a broad range of technical assistance to countries seeking accession to the

WTO to help them meet the requirements and challenges presented, both by the negotiations and the

process of implementing WTO provisions in their trade regimes. This assistance is provided through

USAID and the Commercial Law Development Program (CLDP) of the U.S. Department of Commerce. 

The assistance can include short-term technical expertise focused on specific issues, e.g., Customs, IPR, or

TBT, and/or a WTO expert in residence in the acceding country. Current WTO Members that received

technical assistance in their accession process from the United States include Albania, Armenia, Bulgaria,

Estonia, Georgia, Jordan, Kyrgyz Republic, Latvia, Lithuania, Macedonia, and Moldova. Most had U.S.-

provided resident experts for some portion of the process. Among current accession applicants, the United

States provides a resident WTO expert for the accessions of Azerbaijan, Cape Verde, Lebanon, Ukraine,

and Yugoslavia, and a U.S.-funded WTO expert resident in the Kyrgyz Republic provides WTO accession

assistance to Kazakhstan, Uzbekistan, and Tajikistan on an “as requested” basis. The United States

provides other forms of technical and expert support on WTO accession issues to Algeria, Bosnia, Nepal,

Russia, and Vietnam.

Major Issues in 2002

As part of broader efforts to address the concerns of developing countries in the context of work on the

Doha Development Agenda, in December 2002, the General Council formalized guidelines for a

streamlined and accelerated accession process for least developed accession applicants.18 WTO Members

have recognized that LDCs, as countries with extremely low levels of income and economic development,

face unique problems in applying for WTO accession, e.g., lack of human resources to conduct the

negotiations, infrastructure deficiencies, and a general lack of capacity to implement WTO provisions

without additional time and technical assistance. Most of the elements of the new guidelines were already

being applied in ongoing LDC accessions, e.g., moderated market access requests, use of existing WTO

provisions for LDCs and additional transitions for implementation of WTO Agreements and other

commitments, and extensive recourse to technical assistance. The guidelines also include more specific

suggestions, for instance, that account be taken of the levels of concessions and commitments undertaken

by current LDC Members, and that transitional arrangements be accompanied by action plans for WTO

compliance by the LDC applicant, and that technical assistance and capacity building measures be
19In addition to Armenia, seven of the remaining 28 WTO accession applicants with active Working Parties

are covered by Title IV. They are: Azerbaijan, Belarus, Kazakhstan, Russia, Ukraine, Uzbekistan, and Vietnam. 

For further information on this issue, please consult Chapter IV. 

20 The United States invoked nonapplication of the WTO when Romania became an original Member in

1995, and when the accession packages of Mongolia, the Kyrgyz Republic, Georgia and Moldova were approved by

the WTO General Council in 1996, 1998, 1999, and 2001, respectively. Congress subsequently authorized the

President to grant Romania, Mongolia, the Kyrgyz Republic, and Georgia permanent NTR, and the United States

withdrew its invocation of non-application in the WTO for these countries. 

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available to complete implementation. However, the guidelines do not mandate a “one size fits all”

template for commitments, and preserve the ability of WTO Members to use the process to promote reform

and build trade capacity in the applicant economic regimes while simplifying and streamlining the

accession process.

Intensive work to complete the accessions of Armenia and Macedonia and to make progress on those of

Russia, Cambodia, Nepal, and Algeria took up most of the attention given by WTO Members to individual

accessions in 2002. Taking note of this progress, Ukraine, Kazakhstan, and other accession applicants also

sought to intensify negotiations during 2002, but as work on the Doha Ministerial agenda intensified, work

on other accessions slowed considerably, especially in the latter part of the year. While there were no

WTO meetings scheduled on Saudi Arabia's WTO accession during 2002, bilateral contacts and work on

legislative implementation continued. U.S. And Saudi Arabian representatives met in September to

review the status of work and exchange information on possible next steps.

Macedonia completed its negotiations in July 2002, substantially revising the legal basis for its trade

regime to bring it into conformity with WTO Agreements and undertaking market access commitments

that lock in liberal non-agricultural tariff and services terms, cap and roll back protective agricultural

tariffs, and confirm elimination of agricultural export subsidies. The General Council approved

Macedonia’s accession package in October 2002.

Armenia, the fourth of the Republics of the former Soviet Union and the twelfth transforming economy to

complete accession negotiations under Article XII of the WTO Agreement, was also able to complete

legislative work in 2002. At the time its accession package was approved by the General Council in

December 2002, Armenia affirmed that it would not take any direct or indirect action that would impede or

slow down the accession process of Azerbaijan to the WTO, nor block the decision-making process

concerning the accession of Azerbaijan to the WTO. Prior to General Council approval of the accession

package, the United States invoked the non-application provisions of the WTO Agreement contained in

Article XIII with respect to Armenia. This was necessary because the United States must retain the right to

withdraw “normal trade relations” (NTR) (called “most-favored-nation” treatment in the WTO) for WTO

Members that receive NTR with the United States subject to the provisions of the “Jackson-Vanik” clause

and the other requirements of Title IV of the Trade Act of 1974.19 In such cases, the United States and the

other country do not have “WTO relations” which, among other things, prevents the United States from

bringing a WTO dispute based on a violation by the other country of the WTO or the commitments in its

accession package. This brings to six the number of times since the establishment of the WTO in 1995

that the United States as invoked non-application.20 
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Prospects for 2003

The quickening pace of work on Doha issues and preparations for the Fifth Ministerial Conference in

Cancun, Mexico in September 2003 will occupy an increasing share of WTO Members’ time and

resources during the year. As a consequence, most attention will be on accession applicants already well

advanced in the process of implementing WTO provisions and in market access negotiations, as well as on

continuing efforts to promote progress in the accessions of LDCs. U.S. representatives will remain key

players in all accession meetings, as the negotiations provide opportunities to expand market access for

U.S. exports, to encourage trade liberalization in developing and transforming economies, to promote trade

capacity building in LDC applicants, and to support a high standard of implementation of WTO provisions

by both new and current Members. 

Of all the accession negotiations still underway, Russia is the furthest advanced. During 2002, the

Working Party on Russia’s WTO Accession met five times. At each meeting, delegations reviewed

progress in Russia’s legislative plan for implementation of WTO provisions and in bilateral market access

negotiations. Based on progress to date, an initial draft of the Working Party report was developed and 

circulated in March. On the margins of Working Party meetings and other WTO meetings, delegations

also met plurilaterally to clarify specific issues in the accession, e.g., in the areas of agriculture, TRIPS,

TBT/SPS, services, and energy/subsidies. The goal of the Working Party is to finalize a Working Party

report text that accurately reflects both Russia’s commitments to WTO implementation and how they have

implemented those commitments. The United States strongly supports Russia’s WTO accession efforts,

and U.S. and Russian teams intensified their bilateral contacts on all aspects of the accession during 2002

to give momentum to the Working Party process. Despite these efforts, a great deal of work remains to be

done to bridge outstanding issues in goods and services market access negotiations, to address Russia’s

commitments on agricultural supports and subsidies, and to establish the legal basis for implementing

WTO obligations in the Russian trade regime. Russia, nevertheless, is seeking an accelerated pace for

work. Deputy Prime Minister Kudrin, addressing the Working Party in December, pressed for completion

of the accession process as soon as possible and pledged the full efforts of the Russian government to

promote a rapid completion of the negotiations. 

The United States is also committed to promoting trade capacity building among least developed countries

through the WTO accessions process. Negotiations with LDCS Cambodia, Nepal, Samoa and Tonga , are

expected to make substantial additional progress in 2003. Cape Verde has also announced its intentions to

move decisively towards WTO Membership in 2003. The United States chairs Cape Verde’s Working

Party and is providing technical support to its negotiating team to assist in achieving this goal.

Algeria, Kazakstan, and Belarus, whose accession negotiations stalled earlier in the process, sought to reenergize their negotiations during 2002, and have indicated that they will make WTO accession a priority

during 2003. Azerbaijan, Lebanon, and Uzbekistan, which initiated Working Party deliberations in 2002,

will be seeking additional meetings, and Yugoslavia, Bosnia, and Yemen, which circulated initial

documentation in 2002, will press for initial Working Party reviews. 
21 ITA participants are: Albania, Australia, Bulgaria, Canada, Costa Rica, Croatia, Cyprus, Czech Republic,

El Salvador, Estonia, European Union (on behalf of 15 Member States), Georgia, Hong Kong China, Iceland, India,

Indonesia, Israel, Japan, Jordan, Republic of Korea, Krygyz Republic, Latvia, Lithuania, Macau, Malaysia,

Mauritius, Moldova, New Zealand, Norway, Oman, Panama, Philippines, Poland, Romania, Singapore, Slovak

Republic, Slovenia, Switzerland and Liechtenstein, Taiwan, Thailand, Turkey, and the United States. Armenia,

China, Egypt, Macedonia and Morocco have indicated their intention to join the ITA. 

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I. Plurilateral Agreements

1. Committee on the Expansion of Trade in Information Technology Products

Status

The Information Technology Agreement, or ITA, was concluded at the WTO’s First Ministerial

Conference at Singapore in December 1996. The Agreement eliminated tariffs as of January 1, 2000 on a

wide range of information technology products. Currently, the ITA has 57 participants representing 93

percent of world trade in information technology products.21 The Agreement covers computers and

computer equipment, electronic components including semiconductors, computer software products, settop boxes, telecommunications equipment, semiconductor manufacturing equipment and computer-based

analytical instruments.

Major Issues in 2002

The WTO Committee of ITA Participants held four formal meetings in 2002, during which the Committee

reviewed the implementation status of the Agreement. While most participants have fully implemented

tariff commitments, a few countries are still awaiting the completion of domestic procedural requirements

or have not yet submitted the necessary documentation.

The Committee continued its work to address divergent classification of information technology products. 

The Committee received a reply from the WCO regarding the list of classification issues sent to it by the

Committee. An informal meeting of customs experts was held in May 2002 to discuss these classification

issues and a report is expected soon summarizing the outcome of the work undertaken by these experts.

The Committee also made progress on the NTMs Work Program, affecting trade in ITA products. As part

of this work, the Committee received over two dozen submissions from participants identifying a number

of non-tariff measures that act as unnecessary impediments to trade. The Committee prepared an overview

of the submissions on which ITA participants had an opportunity to review and comment. The Committee

also agreed to a pilot project on Electromagnetic Compatibility (EMC) and Electromagnetic Interference

(EMI). Eighteen responses were submitted to a survey on EMC drafted by Canada. Canada also proposed

for Committee consideration a workshop be held in 2003 for industry representatives and government

regulators to examine EMC practices.

In 2002, China circulated its tariff schedule to all participants. However, China’s membership in the

Committee has been blocked because it has been requiring end-use certification for ITA products.
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Additionally, the Committee agreed to adopt the General Council decision (WT/L/452) to derestrict and

circulate documents of the Committee, with the exception of the documents pertaining to the NTM work

program. The decision to derestrict the NTM document series remains to be addressed by the Committee.

Prospects for 2003

The Committee’s work program on non-tariff measures continues to proceed in step with tariff

implementation issues. The Committee will need to take a decision on whether to hold an EMC workshop

and if so, work to maximize participation from both developed and developing ITA participants. 

Throughout 2003 the Committee will continue to undertake its mandated work, including reviewing new

applicants’ tariff schedules for ITA participation, along with addressing further technical classification

issues. In addition, the Committee will continue to monitor implementation of the Agreement, including

undertaking any necessary clarifications.

2. Committee on Government Procurement

Status

The WTO Government Procurement Agreement (GPA) is a “plurilateral” agreement included in Annex 4

to the WTO Agreement. As such, it is not part of the WTO’s single undertaking and its membership is

limited to WTO Members that specifically signed the GPA in Marrakesh or that have subsequently

acceded to it. WTO Members are not required to join the GPA, but the United States strongly encourages

all WTO Members to participate in this important Agreement. The 28 current signatories are: the United

States, the European Union and its member states (Austria, Belgium, Denmark, Finland, France, Germany,

Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, United Kingdom), the

Netherlands with respect to Aruba, Canada, Hong Kong, China, Iceland, Israel, Japan, Liechtenstein,

Norway, the Republic of Korea, Singapore and Switzerland. Iceland acceded to the GPA in April 2001. 

Albania, Bulgaria, Chinese Taipei, Estonia, Georgia, Jordan, the Kyrgyz Republic, Latvia, Lithuania,

Moldova, Oman, Panama, and Slovenia are in the process of negotiating GPA accession. As provided in

the Protocol of Accession of the People’s Republic of China, China became an observer in the

Government Procurement Committee in February 2002.

Major Issues in 2002

Article XXIV:7 of the GPA calls for the Parties to conduct further negotiations with a view to improving

both the text of the Agreement and its market access coverage. In 2002, the Parties focused primarily on

the simplification and improvement of the Agreement, with the overall objective of promoting expanded

membership of the GPA by making it more accessible to non-members. The review has also included

discussion of expansion of coverage of the Agreement and elimination of remaining discriminatory

measures and practices.

With these objectives in mind, the United States has taken the lead in advocating significant streamlining

and clarification of the GPA’s procedural requirements, while continuing to ensure full transparency and

predictable market access. Much of the existing text of the GPA was developed in the late 1970s during

the negotiations on the original GATT Government Procurement Code. As the current review of the

Agreement has proceeded, the Committee has become aware that the GPA text needs to be carefully
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analyzed and modified to reflect ongoing modernization of the Parties’ procurement systems and

technologies.

As provided for in the GPA, the Committee monitors participants’ implementing legislation. The

Committee has completed the reviews of the national implementing legislation of Canada; the European

Union; Hong Kong, China; Israel; Japan; Korea; Liechtenstein; Norway; Singapore; Switzerland; and the

United States.

Prospects for 2003

In 2003, the Committee will continue its review and revision of the text of the GPA, focusing on proposals

by the United States and other Parties aimed at “streamlining” the Agreement’s procedural requirements. 

The Committee has agreed to complete negotiations under Article XXIV:7 by January 1, 2005. The

Committee has the aim of reaching provisional agreement on the revised text of the GPA by the Fifth

Ministerial Conference, recognizing that it may not be possible to conclude some elements of the text until

market access negotiations are completed. 

The Committee plans to take up market access negotiations in 2003. It will consider proposals that have

been made with respect to potential negotiations to further expand the Agreement’s market access

coverage. In 2003, the Committee will take up the review of the implementing legislation of Iceland, and

continue its review of the legislation of the Netherlands with respect to Aruba.

The Committee also plans in 2003 to consider ways to improve accession procedures, including modalities

that could accelerate the process in the case of Members with economies in transition and developing

countries.

3. Committee on Trade in Civil Aircraft

Status

The Agreement on Trade in Civil Aircraft (Aircraft Agreement), concluded in 1979, is a plurilateral

agreement. The Aircraft Agreement is part of the WTO Agreements, however, it is in force only for those

Members who have accepted it.

The Aircraft Agreement requires signatories to eliminate duties on civil aircraft, their engines,

subassemblies and parts, ground flight simulators and their components, and to provide these benefits on a

non-discriminatory or MFN basis to all WTO Members. On non-tariff issues, the Aircraft Agreement

establishes international obligations concerning government intervention in aircraft and aircraft component

development, manufacture and marketing.

As of January 1, 2003, there were 30 signatories to the Aircraft Agreement: Bulgaria, Canada, the

European Union, Austria, Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the

Netherlands, Portugal, Spain, Sweden, the United Kingdom, Egypt, Estonia, Georgia, Japan, Latvia,

Lithuania, Macau, Malta, Norway, Romania, Switzerland, Taiwan, and the United States. Although

Albania and Croatia have committed to become parties upon accession to the WTO, which occurred in

2001, neither has formally accepted the Agreement. Oman agreed to become a party within three years of

accession, which occurred in 2001.
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Major Issues in 2002

The Aircraft Committee, permanently established under the Aircraft Agreement, provides the signatories

an opportunity to consult on the operation of the Agreement, to propose amendments to the Agreement and

to resolve any disputes. During 2002, the full Committee met twice. 

In addition to adopting several technical and statistical improvements in the operation of the Agreement,

the Committee also agreed to provide duty-free treatment to aircraft ground maintenance simulators on a

provisional basis, since this product does not currently fall within the defined coverage of the Agreement. 

The United States also raised certain activities by other signatories that might result in market distortions,

such as government support for Airbus aircraft development and marketing. 

Prospects for 2003

The United States will continue to make it a high priority for countries with aircraft industries that are

seeking membership in the WTO to become signatories to the Aircraft Agreement. In addition, other

countries that might procure civil aircraft products, but are not currently significant aircraft product

manufacturers, are being encouraged to become signatories to the Agreement in order to foster

non-discriminatory and efficient selection processes for aircraft products based solely upon product

quality, price, and delivery.
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III. Regional Negotiations

A. Free Trade Area of the Americas

In 2002, the United States and the other 33 governments participating in the Free Trade Area of the

Americas (FTAA) negotiations initiated market access negotiations, continued to make progress on the

draft texts of the Agreement in negotiations, and launched a Hemispheric Cooperation Program to assist

countries in negotiating, undertaking the FTAA obligations, and adjusting to regional integration. The

FTAA will create the largest free trade area in the world, with over 800 million people. American

workers, farmers, consumers and businesses will benefit from increased access to Latin American markets

and greater variety of products available here.

The negotiations are guided by general principles and objectives approved by the leaders of the 34

democratically-elected FTAA countries. Among the most important principles are that the FTAA should

improve upon World Trade Organization (WTO) rules and disciplines wherever possible and appropriate. 

Among the most important objectives are: progressive elimination of tariffs and non-tariff barriers, as well

as other measures with equivalent effects, which restrict trade; elimination of agricultural export subsidies

on trade in the hemisphere; liberalization of trade in services in order to achieve hemispheric free trade

under conditions of certainty and transparency; adequate and effective protection of intellectual property

rights, taking into account changes in technology; establishment of a fair and transparent legal framework

for investment and related capital flows; that our trade liberalization and environment policies are

mutually supportive, and observance and promotion of internationally-recognized core labor standards, as

was agreed at the 2002 Trade Ministerial in Quito, Ecuador.

During the course of the year, the United States participated actively in meetings of each of the nine FTAA

negotiating groups (market access, agriculture, intellectual property rights, services, investment,

government procurement, competition policy, dispute settlement, and subsidies/antidumping/countervailing duties) and the four non-negotiating groups and committees (the Technical

Committee on Institutional Issues (TCI), the Consultative Group on Smaller Economies (SME), the Joint

Government - Private Sector Committee of Experts on Electronic Commerce (ECOM), and the Committee

of Government Representatives on the Participation of Civil Society (SOC)). The work of the nine

negotiating groups focused on eliminating to the greatest extent possible the brackets in the existing text,

while the TCI focused on developing initial proposals for texts on the general and institutional provisions

of the agreement for the Trade Ministers’ review at their November 1, 2002, meeting in Quito, Ecuador.

At the Quito Ministerial meeting, the FTAA Trade Ministers received the second draft consolidated texts,

provided guidance for the next phase of the FTAA negotiations, and reinforced the deadlines set by the

Vice Ministers for the market access phase of the negotiations which commenced on May 15, 2002. 

Ministers confirmed that the exchange of initial market access offers in agricultural and industrial

products, services, investment, and government procurement will occur between December 15, 2002 and

February 15, 2003, that requests for improvements in initial offers will take place between February 15 and

June 15, 2003, and that the process for exchanging improved offers will begin no later than July 15, 2003. 

This timetable was set to reinforce the commitment of the FTAA governments to conclude the negotiations
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of the Agreement by January 2005, the deadline agreed by Heads of State and Government at the Quebec

Summit.

In addition to assuming the co-chairmanship of the FTAA with Brazil, the United States worked with the

other FTAA countries to ensure a slate of strong chairs was selected for each of the FTAA negotiating

groups and committees. Beginning November 1, 2002, officials from the following countries assumed

chairmanships of FTAA entities: Colombia (Market Access); Uruguay (Agriculture); Costa Rica

(Government Procurement); Panama (Investment); Peru (Competition Policy); Dominican Republic

(Intellectual Property Rights); Caricom (Services); Canada (Dispute Settlement); Argentina

(Subsidies/Antidumping/Countervailing Duties); Chile (Technical Committee on Institutional Issues);

Ecuador (Consultative Group on Smaller Economies); and Bolivia (Committee of Government

Representatives on the Participation of Civil Society).

The United States won endorsement for the Hemispheric Cooperation Program, a comprehensive trade

capacity-building program to help small and developing countries in the region to fully benefit from the

FTAA. Ambassador Zoellick announced at Quito that President Bush would seek a 37 percent increase in

U.S. trade capacity-building assistance for the region in FY 2003, to $140 million.

Ambassador Zoellick, along with the other 33 FTAA Trade Ministers met with representatives of the

Seventh Americas Business Forum (ABF) on October 31, 2002, and received detailed recommendations

from workshops covering all areas of the negotiations. The 34 Ministers also met with representatives of

hemispheric environmental groups, labor unions, parliamentarians and indigenous peoples to receive

recommendations. USTR also participated in a civil society meeting held on the margins of the Quito

Ministerial to discuss U.S. environmental assessments of trade agreements.

In an effort to further improve the transparency of the FTAA process and to build broader public

understanding of and support for the FTAA, at the November 2002 Ministerial, the Ministers made the

decision again to make public the second draft consolidated texts of the FTAA agreement. The text is

available on the USTR website (www.ustr.gov) and the official FTAA website (www.ftaa-alca.org). The

Ministers also instructed each of the nine FTAA negotiating groups to continue to work to reach consensus

on the draft chapters and to eliminate brackets to the maximum extent possible.

In a complementary effort to provide the public with an opportunity for input on the FTAA process, the

FTAA Committee of Government Representatives on the Participation of Civil Society issued an Open and

On-Going Invitation for comment on all aspects of the FTAA negotiations. Information on the Open and

On-Going Invitation can be found on both the USTR and FTAA websites. On three previous occasions,

the Civil Society Committee has invited the public to comment on the FTAA negotiations. As has

happened in the past, the FTAA Civil Society Committee will oversee the timely delivery of all

submissions to the negotiators so that they may review and benefit from the comments of civil society.

The FTAA countries have also pledged to use national mechanisms to disseminate the invitation further. 

In December 2002, USTR issued a Federal Register Notice (FRN) to solicit comments on the second

FTAA draft text and other components of the negotiations, and a separate FRN (also in December 2002) to

advertise the issuance of the Civil Society Committee’s Open and On-Going Invitation. USTR also issued

a press release and notices to trade advisory committees alerting the public to the Open Invitation. USTR

regularly briefed members of the statutory Advisory Committees and others in several public meetings.

FTAA Trade Ministers agreed that their next meeting will be hosted by the United States, in Miami,

Florida during the fourth quarter of 2003, with another meeting set for Brazil in 2004.
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The United States, along with the Governments of Mexico and Canada, coordinated the first regional

seminar on the FTAA in the hemisphere, entitled “FTAA: Opportunities and Challenges for North

America,” hosted in Merida, Mexico, on July 18, 2002. The objective of the North America Regional

Seminar was to foster a constructive dialogue with civil society, which was represented by over one

hundred people from throughout North America. High-level government officials involved in the FTAA

negotiations also participated. Topics discussed in the three panels featured in the North America seminar

included: market access and agriculture; services and investment; and transparency and civil society

participation in the FTAA process. Each panel included presentations by a representative of civil society

and a government official from each of the three countries.

U.S. Government officials also met with civil society representatives on the margins of the FTAA Vice

Ministerial-level meeting in August to discuss the status of the negotiations, hear the interests and concerns

expressed by civil society and to encourage further civil society participation in the FTAA process. 

B. North American Free Trade Agreement 

Overview

On January 1, 1994, the North American Free Trade Agreement (NAFTA) between the United States,

Canada and Mexico entered into force. NAFTA created the world’s largest free trade area, which now

links 414 million people producing more than $11 trillion worth of goods and services. The dismantling of

trade barriers and the opening of markets has led to economic growth and rising prosperity in all three

countries. NAFTA also includes the first significant labor and environmental cooperation agreements that

the United States has negotiated as part of a trade agreement. The NAFTA has dramatically improved our

trade and economic relations with our neighbors. The net result of these efforts is more economic

opportunity and growth, greater fairness in our trade relations, and a coordinated effort to better protect

worker rights and the environment in North America. NAFTA also included significant labor and

environment side agreements to augment the trade agreement.

The magnitude of our trade relations in North America is impressive: U.S. two-way trade with Canada and

Mexico exceeds U.S. trade with the European Union and Japan combined. U.S. goods exports to NAFTA

partners nearly doubled between 1993 and 2001, from $142 billion to $265 billion, significantly higher

than export growth of 44 percent for the rest of the world over the same period.

NAFTA’s record is clear. By lowering trade barriers, the agreement has expanded trade in all three

countries. This has led to increased employment, more choices for consumers at competitive prices, and

rising prosperity. From 1993 (the year preceding the start of NAFTA implementation) to 2001, trade

among the NAFTA nations climbed 109 percent, from $297 billion to $622 billion. Each day the NAFTA

parties conduct nearly $1.7 billion in trilateral trade. Thanks to NAFTA, North America is one of the most

competitive, prosperous and economically integrated regions in the world.

Elements of NAFTA

1. Operation of the Agreement

The NAFTA’s central oversight body is the NAFTA Free Trade Commission, chaired jointly by the U.S.

Trade Representative, the Canadian Minister for International Trade, and the Mexican Secretary of

Economy. The NAFTA Commission is responsible for overseeing implementation and elaboration of the

NAFTA and for dispute settlement. The Commission held its most recent annual meeting in May 2002 in
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Mexico. The ministers reiterated their commitment to full and timely implementation of the Agreement,

and released “NAFTA at Eight,” a summary of the achievements to date. The Commission agreed to

explore additional ways to stimulate further trade in North America. The ministers also agreed to

cooperate in other trade negotiations, including the FTAA, WTO, and APEC.

2. Rules of Origin

In 2002, the NAFTA Parties agreed on changes to liberalize the NAFTA Rules of Origin for seven

products: alcoholic beverages, chassis fitted with engines, esters of glycerol, headphones with

microphones, pearl jewelry, petroleum/topped crude, and photocopiers. These changes are scheduled to

take effect upon the completion of each party’s domestic procedures.

3. NAFTA and Labor

The North American Agreement on Labor Cooperation (NAALC), a supplemental agreement to the

NAFTA, promotes effective enforcement of domestic labor laws and fosters transparency in their

administration. The NAALC also has generated a trilateral work program in the areas of migrant worker

rights, occupational safety and health, employment and training, and child labor. 

Each NAFTA Party has also established a National Administrative Office (NAO) within its Labor Ministry

to serve as a contact point for information, to examine labor concerns, and to coordinate the expansive

cooperative work programs. In addition, the Agreement created a trinational Commission for Labor

Cooperation, comprised on a Ministerial Council and an administrative Secretariat.

Under the NAALC and various NAO procedural guidelines, any person can file a submission to request

their government to review the labor practices of a NAFTA partner. Several submissions have resulted in

ministerial consultations and the adoption of work programs to address the underlying concerns. In 2002,

the U.S. Secretary of Labor and the Mexican Secretary of Labor and Social Welfare held ministerial

consultations to address issues raised in public submissions. The ministers agreed to work together to

address issues related to freedom of association and protection of the right to organize; the right to bargain

collectively; minimum employment standards; prevention of occupational injuries and illnesses;

compensation in cases of occupational injuries and illnesses; and protection of migrant workers.

Pursuant to ministerial agreements signed by the U.S., Mexican and Canadian ministers of labor, the

parties held a public forum on working conditions and treatment of migrant and agricultural workers in the

United States and established a Trilateral Technical Working Group on Safety and Health to develop

specific recommendations for consideration by the governments and to identify technical areas for

collaboration aimed at improving occupational safety and health in the workplace. The United States and

Mexico also collaborated in specific areas of workforce development including Internet-based job banks,

one stop employment service centers, occupational classification system, and development of labor market

information. 

Over the last several years, the Parties have held numerous trilateral conferences, seminars, and technical

exchanges to share information and make improvements in many critical areas. By addressing issues of

labor rights, the NAALC has contributed to transparency and public dialogue on labor issues.
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4. NAFTA and the Environment

A further supplemental accord, the North American Agreement on Environmental Cooperation (NAAEC),

ensures that trade liberalization and efforts to protect the environment are mutually supportive. The

NAAEC created the Commission for Environmental Cooperation (CEC), which is comprised of: (1) the

Council made up of the environmental ministers from the United States, Canada, and Mexico; (2) the Joint

Public Advisory Committee made up of five private citizens from each of the NAFTA countries; and (3)

the Secretariat made up of professional staff, located in Montreal, Canada.

The 2003-2005 Program Plan, approved in December 2002, is centered around four core program areas:

Environment, Economy and Trade; Conservation of Biodiversity; Pollutants and Health; and Law and

Policy. Additional information on the CEC work program can be found in Chapter V.

In November 1993, Mexico and the United States agreed on arrangements to help border communities

with environmental infrastructure projects, so as to further the goals of the NAFTA and the NAAEC. The

Border Environment Cooperation Commission (BECC) and the North American Development Bank

(NADB) are working with more than 100 communities throughout the U.S.-Mexico border region to

address their environmental infrastructure needs. Since their creation, the institutions have been

instrumental in the development of over 50 projects, now complete or under construction, with an

aggregate cost of nearly $1.35 billion. These projects, when complete, will serve about 9 million residents

of the United States and Mexico, with new projects being developed continually.

C. Asia Pacific Economic Cooperation

Overview

Over the past nine years, the Asia Pacific Economic Cooperation (APEC) forum, which was founded in

1989, was transformed from a largely consultative body to a dynamic force for market opening and trade

expansion in the Asia Pacific region and in the world. Recognizing that the Asia Pacific accounted for

more than half of U.S. exports to the world, and had steadily increased in importance in recent years, the

United States invited Leaders from 18 Asia Pacific economies to Blake Island, Washington in 1993, the

first ever regional meeting of Leaders, who have met annually since.

The growth in U.S. goods exports to APEC clearly demonstrates the benefits of market opening and trade

expansion. Since 1994, U.S. exports to APEC increased nearly 37 percent. In 2002, two-way trade with

APEC members totaled $1.2 trillion, a decline of 1.4 percent from 2001.

It was at Blake Island that APEC Leaders first expressed their collective desire to move toward an “Asia

Pacific community” of economies. APEC has made progress on this vision.

• In 1994, APEC Leaders announced their commitment to the “Bogor vision” to establish free and

open trade and investment in the region by 2010 for industrialized economies and 2020 for

developing economies;

• In 1995, the Osaka Action Agenda, which developed a specific road map for opening markets in

the region in 14 substantive areas, was agreed upon;

• In 1996, APEC economies submitted their first “Individual Action Plans” indicating how they

intended to move toward fulfillment of the Bogor goals. Moreover, APEC Leaders called for
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conclusion of the Information Technology Agreement in the WTO, which acted as a decisive

catalyst toward successful completion of this agreement in 1997;

• In 1997 and 1998, APEC Leaders, seeking to further advance APEC’s leadership role in the

multilateral trading system, called for the opening of 15 key sectors on a global basis, developed

the details for market opening in each sector, and affirmed their commitment to working to this

end in the WTO;

• In 1999, APEC Leaders called for a new round of WTO negotiations, to include among other

things industrial tariffs, the abolition of agricultural export subsidies, as well as the eight

“accelerated tariff liberalization” sectors that APEC had identified in 1997-98;

• In 2000, APEC Leaders reiterated the importance of agreement on a WTO agenda as soon as

possible in 2001, and the need to launch a new WTO round before the end of the year in 2001. 

They also launched a broad based Action Agenda on the New Economy, to ensure that APEC

members used advances in information technology to boost productivity and stimulate economic

growth in the region; 

• In 2001, APEC Leaders, meeting shortly before the WTO Ministerial in Doha, Qatar, gave strong

support to the launch of the new WTO Round at Doha, as well as the accession of China and

Taiwan to the WTO at the Doha Ministerial. At the urging of the United States, they also adopted

the Shanghai Accord, a series of specific commitments to ensure APEC reaches its free trade and

investment goals, and agreed to a policy dialogue on agricultural biotechnology; and

• In 2002, APEC Leaders welcomed the launch of new multilateral trade negotiations in Doha and

encouraged all economies to pursue substantive negotiations in all areas of the Doha Development

Agenda (DDA) by the agreed time lines to ensure that the deadline of 1 January, 2005, to conclude

such negotiations is met. To fulfill the Shanghai Accord, they also agreed to adopt specific

transparency standards, reduce trade barriers critical for the digital economy, and implement a plan

to facilitate trade that will significantly reduce business transaction costs.

2002 Activities

APEC Trade Ministers and Leaders recognized the importance of last year’s launch of multilateral trade

negotiations at Doha, called on all WTO members to intensify substantive discussions in Geneva on all

elements of the DDA, and stressed the region’s continued commitment to trade expansion and market

opening. While APEC economies continued to open their markets in 2002 (see the APEC 2002 Economic

Outlook, and the 2002 Individual Action Plans at www.apecsec.org.sg), Ministers and Leaders emphasized

the need for APEC to take a leadership role on global trade issues so the DDA negotiations will be

successfully completed by 1 January 2005. 

Important activity took place at all APEC levels in 2002 to give effect to APEC’s vision of free and open

regional trade and investment. APEC demonstrated its continuing commitment to this vision in several

concrete ways. In particular, it:

• reaffirmed its commitment to play a leading role in the multilateral trading system;

• took concrete steps to implement key aspects of the Shanghai Accord - advancing its own work

program of regional trade and investment liberalization and facilitation; and
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• constructed a database of detailed information on bilateral and multilateral WTO capacity building

activities in the region.

1. Leadership in the Multilateral Trading System

APEC Trade Ministers indicated clearly their desire for the region to continue to play a leading, catalytic

role in fostering the opening of markets worldwide. At the APEC Trade Ministers meeting in Puerto

Vallarta in May 2002, Ministers welcomed the launch of the DDA and noted the important role that APEC

played in achieving this outcome. Trade Ministers agreed to make progress on all elements of the agenda,

including market access, agriculture, trade rules, investment, competition, trade facilitation and

transparency in government procurement. In doing so, they committed to meeting the mandates and

schedules established for all of the relevant negotiating and working groups. Specifically, APEC Members

agreed on the WTO deadline of June 30, 2002, to submit initial services requests, and agreed that

modalities for non-agricultural market access negotiations should be established by April 30, 2003.

At the October joint ministerial meeting in Los Cabos, APEC Ministers called on all WTO members to

intensify substantive discussions in Geneva on all elements of the DDA in order to maintain the

negotiating timetable, and agreed to work to ensure that the cooperative dynamic in APEC complements

and supports the DDA negotiations. Ministers committed to working together to meet all DDA deadlines

and schedules in preparation for the September 2003 Ministerial in Cancun, Mexico. The Cancun

Ministerial was also the agreed target date for APEC Ministers to negotiate the establishment of a system

of notification and registration of geographical indications for wines and spirits under the WTO TRIPS

Agreement. Additionally, they agreed on March 2003 as the goal for establishing modalities for the

agriculture negotiations, and agreed in particular that one of the objectives of such negotiations should be

the abolition of all forms of agricultural export subsidies and unjustifiable export prohibitions. Ministers

agreed to ensure a common understanding on the modalities for the non-agricultural market access

negotiations is achieved by March 31, 2003, so that agreement on the modalities for those negotiations is

reached by May 31, 2003.

To continue building confidence in the WTO, APEC Ministers and Leaders also emphasized the

importance of the many APEC activities undertaken in 2002 to provide capacity building assistance under

the APEC Strategic Plan, created in 2000 to help developing APEC economies implement their WTO

obligations. Ministers and Leaders welcomed the creation of APEC’s new electronic database for WTO

capacity building, and noted the valuable role it will play in monitoring and coordinating capacity building

efforts in the region. Ministers and Leaders called for APEC to continue developing new assistance

programs under the Strategic Plan and implement them on an accelerated basis. Ministers also agreed to

bolster APEC’s capacity building activities by including work focused on building developing economies’

confidence in the DDA. They agreed to encourage and coordinate confidence building activities in all

areas of the DDA, including investment, competition, trade facilitation, transparency in government

procurement, and trade and environment.

2. Advancement of APEC’s Work on Trade and Investment Liberalization and Facilitation

APEC took concrete steps to implement key provisions of the Shanghai Accord. Ministers agreed that

implementation of the Shanghai Accord provides critical elements of a new “APEC Implementation

Framework” through which APEC economies agree to move forward to achieve the Bogor Goals. 

Mexico’s chosen theme of “Implementing the Vision” was appropriate, as APEC Leaders met in Los

Cabos and endorsed three important initiatives from the Shanghai Accord:
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• a Statement to Implement APEC Transparency Standards by January 2005, to foster greater

predictability and openness of government;

• a Statement to Implement APEC Policies on Trade and the Digital Economy, containing trade

policies for the digital economy that sixteen APEC economies agreed to implement as a

“Pathfinder Initiative;” and

• an APEC Trade Facilitation Action Plan to implement APEC’s commitment to reduce

international trade transaction costs by five percent in the APEC region by 2006.

The Shanghai Accord also called for the creation of “Pathfinder Initiatives” - cooperative arrangements

which enable a group of countries to pilot initiatives, even though not all APEC Members can initially

participate – to advance trade liberalization in the region more quickly. In addition to the Statement to

Implement APEC Policies on Trade and the Digital Economy, in Los Cabos Leaders also endorsed

Pathfinder Initiatives on: advance passenger information systems; the revised Kyoto Convention on the

Simplification and Harmonization of Customs Procedures; electronic SPS certification (e-cert); electronic

certificates of origin; a mutual recognition arrangement of conformity assessment on electrical and

electronic equipment; and corporate governance.

APEC Members report annually on their actions to achieve free trade and investment by preparing

Individual Action Plans (IAPs). The Shanghai Accord called for, and APEC Senior Officials developed, a

more meaningful process for reviewing IAPs. This year APEC Senior Officials met in Acapulco to

conduct the first of these enhanced IAP peer reviews. Mexico and Japan offered to be the first to have

their IAPs reviewed in detail. The delegations from Mexico and Japan presented opening statements,

while officials from other APEC economies, as well as outside experts, submitted oral and written

questions to both economies. The participants engaged in a productive exchange, bringing increased focus

to trade and investment liberalization in APEC. In Los Cabos, Ministers welcomed the new IAP peer

review process, and stressed its importance as a means to chart progress toward meeting the Bogor Goals. 

Reports of the IAP Peer Review Meetings can be found on the APEC website (www.apecsec.org.sg).

APEC work on trade and investment liberalization and facilitation is overseen by the Committee on Trade

and Investment (CTI) and its sub-fora. The CTI and its sub-fora have well-developed, specific work

programs in the fifteen substantive issue areas first defined in the 1995 Osaka Action Agenda (OAA). 

These areas are: tariffs, non-tariff measures, services, investment, government procurement, standards and

conformance, customs, competition policy, deregulation, intellectual property rights, dispute mediation,

mobility of business people, rules of origin, information gathering/analysis, and implementation of the

Uruguay Round. In 2002, Ministers endorsed the recommendation of the CTI and senior officials to

broaden the OAA to better reflect fundamental changes in the global economy, including by incorporating

a new chapter on Strengthening Economic Legal Infrastructure in Part I of the OAA.

While the CTI has overall responsibility for developing and overseeing work in the fifteen substantive

OAA issues areas, much of the work program at a technical level is conducted by CTI sub-fora. The CTI

met three times during 2002 in Mexico: in Mexico City, 25-26 February; in Merida, 21-22 May; and in

Acapulco, 16-17 August. In addition, the following CTI sub-fora met:

• Market Access Group (MAG) – Mexico City, 21 February; Merida, 19-20 May; and Acapulco, 14

August;
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• Group on Services (GOS) – Mexico City, 19-20 February; Merida, 16-18 May; and Acapulco, 13-15

August;

• Investment Experts’ Group (IEG) – Lima, Peru, 28 February – 1 March; Merida, 19-20 May; and

Acapulco, 11-12 August;

• Sub-Committee on Standards and Conformance (SCSC) – Mexico City, 23-24 February; Merida, 19-

20 May; and Acapulco, 15-16 August;

• Sub-Committee on Customs Procedures (SCCP) – Mexico City, 22-25 February; and Acapulco, 13-15

August;

• Intellectual Property Rights Experts’ Group (IPEG) – Hong Kong, China, 19-20 March; and Los

Angeles, the United States of America, 22-23 July;

• Competition Policy/Deregulation Group – Merida, 17-18 May; 

• Government Procurement Experts’ Group (GPEG) – Mexico City, 19-20 February; and Acapulco, 12-

13 August;

• Informal Experts’ Group on the Mobility of Business People (IEGBM) – Mexico City, 21-22 February;

Merida, 27-28 May; and Acapulco, 14-15 August;

• WTO Capacity Building Group – Mexico City, 23 February; and Acapulco, 14 August.

Progress on Collective Action Plans

Among other things, the CTI and its sub-fora are responsible for implementing APEC’s “Collective Action

Plans” (CAP) in each of the fifteen areas. The objective of the Collective Action Plans is to develop

cooperative means and programs by which APEC members progress toward the APEC goals of regional

open and free trade and investment. In 2002, a number of concrete results were achieved in the

implementation of these Collective Action Plans. A complete description of steps undertaken in advancing

Collective Action Plans can be found in the Committee on Trade and Investment’s 2002 Annual Report to

Ministers, which is at the APEC Secretariat’s website (www.apecsec.org.sg).

Highlights of Collective Actions conducted by some of the key CTI sub-fora are outlined below.

The Sub-Committee on Standards and Conformance (SCSC) completed several technical infrastructure

development projects. SCSC undertook a review of the various Mutual Recognition Agreements (MRAs)

under its umbrella of activities and worked on improving their effectiveness and relevance to regulators. 

Two economies (Australia and Singapore) acted as pathfinders to start participating in Parts II and III of

the APEC MRA on electrical and electronic products, which was first implemented in December 1999

when 10 APEC member economies indicated their intention to participate in Part I. Today, 14 member

economies are participating in this Part.

The Sub-Committee on Customs Procedures (SCCP) continued implementing its multi-year technical

assistance programs aimed at assisting members in CAP implementation. The SCCP completed a best

practices compendium of customs and business partnership, and conducted for the first time the SCCP

Peer Review on CAPs, stage 2 (CAPs for which technical assistance has been completed).
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The Market Access Group (MAG) focused on intensifying its confidence-building work on tariffs and non

tariff measures (NTMs), including through conducting trade policy discussions (TPDs) on NTMs and

Trade Facilitation and Domestic Consultations for WTO negotiations. MAG built on its report “APEC

Economies: Breaking Down the Barriers,” published in 2001. In 2002 further case studies were collected

on regulatory and administrative reforms, as well as an examination of ways to assess the benefits of such

reforms and how their contribution helps to facilitate trade in APEC. MAG started an electronic newsletter

as an outreach initiative to promote its trade liberalization and facilitation work to business in the region.

The Group on Services (GOS) conducted work on transparency and domestic regulation under Phase III of

the “Development of the Menu of Options for Voluntary Liberalization, Facilitation and Promotion of

ECOTECH in Services Trade and Investment.” This work is related to the WTO services negotiations,

and GOS will deepen this work next year. GOS is also responsible for two studies that will be undertaken

concerning services liberalization. Work has begun on a study of environmental services liberalization. 

Work is to be commenced on a study of the Costs and Benefits of Services Trade Liberalization, which

will focus on particular sectors. GOS had a useful exchange of information on economies’ approach to

agreements on mutual recognition of professional standards/qualifications.

The Investment Experts’ Group (IEG) was tasked by Ministers to review economies’ progress in

implementing the Menu of Options on Investment and to provide a report by the Ministerial Meeting in

2003. The Menu of Options was expanded to include “Competition Policy and Regulatory Reform.” The

IEG also completed Phase I of the Study on Cross-border Mergers and Acquisitions. 

The Intellectual Property Rights Experts' Group (IPEG) commenced implementation of its newly

overhauled CAP, focusing in particular on enforcement. IPEG endorsed the IP Toolkit proposal to allow

member economies to have access to IP-related enforcement information. It also conducted an IP

Enforcement Seminar in conjunction with the IPEG Meeting held in Los Angeles in July 2002. The

objective of the seminar was to provide IP enforcement personnel the opportunity to discuss with industry

representatives the techniques and process on investigating IP infringement and preparing effective

prosecutions.

The Competition Policy and Deregulation Group (CPDG) continued to promote dialogue, information

exchange and study of competition policy, competition laws, their enforcement and interrelationship with

other policies related to deregulation, trade and investment. 

The Government Procurement Experts' Group (GPEG) work during the year focused on continuing the

agreed process of voluntary reviews and reporting by member economies on consistency of their

government procurement regimes with the Non-Binding Principles on Government Procurement (NBPs)

adopted in 1999. The GPEG also hosted a series of presentations on e-procurement aimed at

demonstrating the contribution electronic government procurement systems can make to the achievement

of the NBPs and capacity building through the sharing of technical information.

The Informal Experts’ Group on Mobility of Business People (IEGBM) continued to support the APEC

Business Advisory Council's (ABAC's) call for expanding the APEC Business Travel Card. Thirteen

economies now participate in the scheme. IEGBM has completed and launched a website that will

enhance dialogue with the APEC business community, other APEC fora and within the IEGBM itself. The

IEGBM undertook several capacity building activities during the year, such as a project on document

examination techniques, where developing APEC Members were provided training in the use of a generic

resource package to assist implementation of effective and speedy document examination regimes. The

group also endorsed a “Standards for Professional Conduct” paper.
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The WTO Capacity Building Group (WTO Group) produced a major deliverable this year, launching a

website containing detailed information on bilateral and APEC-funded WTO-related capacity building

projects in the region (www.apec-trta.org). The information was gathered from matrices completed by

APEC economies, describing their bilateral capacity building activities. The web-site provides

organization and direction to regional capacity building, and supports the work of the WTO in this area. 

Additionally, the WTO Group implemented projects addressing the needs identified in the APEC Strategic

Plan on Capacity Building.

Automotive and Chemical Dialogue

The Automotive Dialogue (first held in 2001) and the newly launched Chemical Dialogue are publicprivate sector dialogues recognized as important for improving the mutual understanding of key

imperatives for the development of future policy and for enhancing the competitiveness of each sector.

The 4h utomotive Dialogue was held in Singapore on 17-19 April 2002 and attracted more than 150

participants from industry and government. Following the agreement reached at its Bangkok meeting last

year, the Dialogue has been re-organized into six working groups – customs, technical regulatory

harmonization, environment, information technology, ECOTECH and market access – to advance the

substantive work program. The Dialogue endorsed the revised Principles of Automotive Technical

Regulation Harmonization and agreed to send the Principles document to all APEC Trade and

Transportation Ministers, recommending that their economies use the principles to guide their

harmonization and regulatory programs. In affirming the importance of improving members’

understanding of WTO laws and processes, the Dialogue approved a letter to be sent by the Dialogue Chair

to the Director-General of the WTO expressing the Dialogue’s interest in the new round and its possible

contributions to it. 

The 1st APEC Chemical Dialogue was held in Merida on 22-23 May 2002, and was attended by

approximately 50 participants from industry and government. The Dialogue agreed to adopt and

implement voluntarily the Globally Harmonized System on hazard classification and labeling of chemicals

and safety data sheets as soon as feasible as a contribution to APEC trade facilitation work. As a next step,

the Steering Group for the Dialogue will develop an implementation plan that includes a significant

capacity building element through education and training programs and pilot projects. The Steering Group

also agreed that the Chemical Dialogue should respond to an issue that could negatively impact trade

between member economies of the APEC region and the EU. The EU is currently drafting regulations to

submit to the Council of Ministers and the European Parliament in the fall that implement proposals for

new regulation of chemicals and downstream products (all manufactured products) contained in the “EU

White Paper: Strategy for a Future Chemicals Policy.”

3. Free Trade Agreements

APEC Trade Ministers noted the growing number of regional trade agreements (RTAs) and free trade

agreements (FTAs) being negotiated and concluded, to which many APEC members are parties. They

agreed that regional and bilateral trade agreements should serve as building blocks for multilateral

liberalization in the WTO. There was further consensus on the importance of such agreements being

consistent with WTO rules and disciplines, and in line with APEC architecture and supportive of APEC

goals and principles. Ministers instructed officials to engage in a constructive exchange of views on RTAs

and FTAs in 2003.
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IV. Bilateral Negotiations

A. Free Trade Agreements

1. Chile

Chile has been a recognized leader of economic reform and trade liberalization in Latin America and

currently is the only South American country with an investment grade credit rating. Real GDP growth

averaged eight percent for the decade prior to Chile’s economic slowdown in 1998-99. Chile’s real GDP

grew at about a 2 percent rate in 2002. 

Our two-way trade in goods and services totaled $8.8 billion in 2001. Trade in services amounted to $2.2

billion with the United States in surplus by $472 million. Trade in goods totaled $6.6 billion with the

United States in deficit by $424 million. In the seven years prior to 2001, U.S. goods trade with Chile

expanded by 44 percent and services trade by 37 percent.

On December 11, 2002, the United States and Chile reached agreement on an historic Free Trade

Agreement (FTA) designed to strip away barriers and facilitate trade and investment between both

countries. The U.S.-Chile FTA will be the first comprehensive free trade agreement between the United

States and a South American country. To date, the United States has only four FTA partners: Canada,

Mexico, Israel and Jordan. The U.S.-Chile FTA is expected to spur progress on negotiations of the Free

Trade Area of the Americas (FTAA, targeted for completion by 2005), as well as ongoing global trade

negotiations. 

The U.S.-Chile FTA will eliminate tariffs and opens markets, reduce barriers for services, protect leadingedge intellectual property, keep pace with new technologies, ensure regulatory transparency, and provide

explicit guarantees for electronic commerce and digital products and effective labor and environmental

enforcement. American workers, consumers, investors, manufacturers and farmers will enjoy access to

one of the region’s most stable and fastest growing economies, enabling products and services to flow

between the two economies with no tariffs and streamlined customs procedures.

The December 2002 agreement represented the culmination of fourteen rounds of negotiations, initiated in

December 2000. Throughout the process, U.S. negotiators consulted closely with Congress, industry

representatives and labor and environmental groups to ensure the FTA advanced U.S. interests and, in its

final provisions, reflected the goals contained in Trade Promotion Authority. Under the Trade Act of

2002, the Administration must notify Congress at least 90 days before signing an FTA. On January 30,

2003, President Bush notified Congress of his intent to enter into an FTA with Chile. During the 90-day

period, both the United States and Chile will undertake legal reviews of the texts and continue to consult

with their respective legislatures and other interested groups regarding the provisions negotiated. 

Under the agreement, more than 87 percent of two-way trade in goods will become tariff-free immediately,

with most remaining tariffs and quotas eliminated in four years and all tariffs and quotas eliminated in 12

years. Among the key U.S. industrial sectors benefitting from the agreement and the aggressive

liberalization schedule are agricultural and construction equipment, autos and auto parts, computers and
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other information technology products, medical equipment and paper products. More than three-quarters

of U.S. farm goods will enter Chile tariff-free within 4 years, with all tariffs and quotas phased out within

12 years. U.S. farm products such as pork, beef, soybeans, durum wheat, feed grains, potatoes and

processed food products will benefit from increased market access. Tariffs on wine will be harmonized at

low U.S. rates, then eliminated.

This agreement will create access to Chile’s fast growing services market, including telecommunications,

insurance, banking, securities, express delivery and professional services. U.S. firms will be able to offer

financial services to participants in Chile’s private pension system. The agreement offers state of the art

protections for digital products such as software, music, text and video. Protection for patents and trade

secrets exceeds past trade agreements.

The agreement establishes a secure, predictable legal framework for U.S. investors, sets ground-breaking

anti-corruption rules in government contracting, and guarantees U.S. firms transparent procurement

procedures to sell goods and services to Chilean government entities.

With respect to labor and the environment, both parties commit to effectively enforce their domestic labor

and environment laws. An innovative enforcement mechanism includes monetary assessments to enforce

commercial, labor and environmental obligations of the trade agreement. In addition, it establishes a

framework for cooperative environmental projects and promotes internationally recognized labor

standards. 

2. Singapore

The United States and Singapore completed the negotiations of an FTA in early 2003. The U.S.-Singapore

FTA is the first comprehensive U.S. FTA with any Asian nation. Singapore is our 11th largest trading

partner, with two-way trade of goods and services exceeding $38 billion. The provisions of the U.S.-

Singapore FTA build on the WTO and NAFTA and make important advances in many key areas. Most

tariffs will be eliminated immediately upon entry into force of the Agreement, with the remaining tariffs

phased-out over a 3-10 year period. 

The FTA chapters cover goods, rules of origin, customs administration, technical barriers to trade,

services, telecommunications, financial services, temporary entry, competition policy, government

procurement, investment, intellectual property, electronic commerce, customs cooperation, transparency,

labor and environment, and dispute settlement. 

The FTA will provide strong disciplines in the most competitive U.S. sectors. U.S. firms will enjoy

barrier-free market access, a transparent regulatory environment and non-discriminatory treatment across

a wide range of services, including: financial services (banking, insurance, securities and related services),

computer and related services, direct selling, telecommunications services, audiovisual services,

construction and engineering, tourism, advertising, express delivery, professional services (architects,

engineers, accountants, etc.), distribution services (such as wholesaling, retailing and franchising), adult

education and training services, environmental services, and energy services.

The FTA has other important features. For example, this FTA will provide: a secure, legal environment

for U.S. investors operating in Singapore; explicit guarantees for electronic commerce and digital

products; enhanced, state-of-the art protection for intellectual property; specific commitments regarding

the conduct of Singapore’s government enterprises; reinforced commitments to strong and transparent

disciplines on government procurement procedures; strong, simple and transparent rules of origin; firm
222002 estimates are annualized based on 11 months data.

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commitments to combat illegal transhipments of all traded goods and to prevent circumvention for textiles

and apparel; mobility for highly-trained personnel; and requirements to ensure effective enforcement of

domestic labor and environmental laws. An innovative enforcement mechanism includes monetary

assessments to enforce commercial, labor and environmental obligations of the trade agreement. 

The FTA with Singapore will foster economic growth and create higher paying jobs in the United States

by reducing and eliminating barriers to trade and investment. The agreement will not only improve market

opportunities for U.S. goods and services exports, but it may also serve as a model for the Asia-Pacific

region, encouraging trade liberalization, regulatory reform and transparency, including under the

Enterprise for ASEAN Initiative (EAI), which President Bush announced at the Summit of Leaders’ of the

Asia-Pacific Economic Cooperation forum in October 2002. The FTA will offer important benefits to U.S.

workers, ranchers, farmers, and businesses while reinforcing important American values in the region.

These negotiations, in recognition of Singapore’s importance as a trading partner and strategic role in the

Asia Pacific region began in December 2000. The negotiations on the U.S.-Singapore FTA have been

conducted in a transparent manner to ensure that businesses, labor organizations, non-governmental

organizations, state and local governments, and the public are kept informed and have ample opportunity

to provide input on the negotiations. The Administration has briefed Congress on the status of

negotiations through periodic meetings with the House Committee on Ways and Means and the Senate

Committee on Finance, as well as other committees with interests in the negotiations and individual

Members’ staffs. 

B. The Americas

1. Canada

Canada is the largest trading partner of the United States with over $1 billion of two-way trade crossing

our border daily. At the same time, the United States and Canada share one of the world's largest bilateral

direct investment relationships. In 2001, the stock of U.S. foreign direct investment in Canada was $139

billion, an increase of 7.9 percent from 2000. In 2001, the stock of Canadian direct foreign investment in

the United States was $108.68 billion, a decrease of 5.2 percent.22

a. Softwood Lumber

The 1996 U.S.-Canada Softwood Lumber Agreement expired on March 31, 2001. The bilateral agreement

was put in place to mitigate the effects of subsidies in several Canadian provinces. Upon expiration of the

1996 Agreement, the U.S. lumber industry filed antidumping and countervailing duty petitions regarding

Canadian softwood lumber. Preliminary investigations found both dumping and subsidies, and led to the

imposition of preliminary duties. On March 22, 2002, the U.S. Department of Commerce announced its

final, company-specific antidumping duties and a countrywide (except for the Maritime provinces)

countervailing duty determination. On April 26, 2002, the Commerce Department announced amended

final antidumping rates ranging from 2.18 percent to 12.44 percent and an amended final countervailing

duty rate of 18.79 percent.

Canada is challenging the underlying Commerce Department and ITC investigations in the WTO and

NAFTA. On November 1, 2002 the WTO Dispute Settlement Body officially adopted a panel report

which addressed the Canadian challenge of the Commerce Department’s preliminary countervailing duty
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determination. The report is a victory for the U.S. on two key issues in the ongoing dispute: Canadian

provinces’ sale of timber from public lands can constitute a subsidy under the WTO Subsidies Agreement;

and U.S. laws governing reviews of countervailing duty orders are consistent with the WTO Subsidies

Agreement.

Negotiations to find a durable solution as an alternative to litigation broke off in March 2002. The United

States remains prepared to offer Canadian lumber producers the market access they seek in exchange for

Canadian provinces implementing market-based pricing for sales of timber from public lands. However,

the provinces have not offered sufficient commitments to ensure that competitive timber markets would

operate in Canada. The Department of Commerce has indicated its willingness to consider petitions from

individual provinces for a review of provincial market reforms, with the potential for province-specific

revocation of the countervailing duty order. In the absence of an agreement on basic reforms, the United

States will effectively enforce U.S. trade laws to address the U.S. industry’s concerns about subsidies to,

and dumping of, Canadian softwood lumber.

b. Agriculture

Canada is the United States’ second largest market for food and agricultural exports. For fiscal year 2002

(October 2001 - September 2002), U.S. agricultural exports to Canada grew by 7.4 percent to $8.6 billion. 

As a result of the 1998 U.S.-Canada Record of Understanding on Agricultural Matters (ROU), the U.S.-

Canada Consultative Committee (CCA) and the Province/State Advisory Group (PSAG) were formed to

provide fora to strengthen bilateral agricultural trade relations and to facilitate discussion and cooperation

on matters related to agriculture. In 2002, the CCA and PSAG met twice on issues covering livestock,

processed food, plant, seed, and horticultural trade, as well as pesticide and animal drug regulations.

The U.S. Government continues to have concerns about the marketing practices of the Canadian Wheat

Board. On October 23, 2000, USTR initiated a Section 301 investigation of certain trade practices of the

Canadian Wheat Board, in response to a petition filed by the North Dakota Wheat Commission. At the

request of USTR, the ITC conducted an investigation on Canadian wheat marketing practices, and released

its report in December 2001. On February 15, 2002, USTR announced a positive determination in the 301

investigation that the Government of Canada provides special monopoly rights and privileges that

disadvantage U.S. wheat farmers and undermine the integrity of the trading system. 

USTR announced a four prong approach to level the playing field for American farmers and began

implementation in 2002. First, on December 17, 2002, USTR announced that it would pursue dispute

settlement proceedings against the Canadian Wheat Board and the Government of Canada in the WTO. 

Second, USTR identified specific impediments to U.S. wheat entering Canada. Those findings are a part

of the U.S. WTO dispute settlement case. Third, the United States is seeking reforms to state trading

enterprises (STE) as part of the WTO agricultural negotiations. The U.S. proposal calls for the end of

exclusive STE export rights to ensure private sector competition in markets controlled by single desk

exporters; the establishment of WTO requirements to notify acquisition costs, export pricing, and other

sales information for single desk exporters; and the elimination of the use of government funds or

guarantees to support or ensure the financial viability of single desk exporters. Fourth, the Administration

is conducting countervailing and antidumping investigations in response to petitions filed by the North

Dakota Wheat Commission. 

In April 1999, the United States and New Zealand successfully challenged Canada’s subsidized dairy

industry under WTO dispute settlement procedures. A WTO panel found that the Canadian government,

through its government-managed provincial marketing boards, was subsidizing the price of exported milk
232002 estimates are annualized based on 11 months data.

141

through a two-tiered pricing system. In light of this finding, the Panel also concluded that Canada had

violated its export subsidy reduction commitments by exporting a higher volume of subsidized dairy

products than permitted by Canada’s obligations under the WTO Agreement on Agriculture. The Panel

also found that Canada had improperly imposed a limit on the value of milk that could be imported in any

single entry under the relevant tariff-rate quota. This finding was sustained by an appeal panel in October

1999. 

Under a negotiated implementation agreement, Canada committed to bring its export regime into

compliance with its WTO export subsidy commitments on butter, skimmed milk powder and an array of

other dairy products by January 31, 2001. Although Canada eliminated one export subsidy program in this

process, new programs were substituted in nine provinces. Because the United States was concerned that

the new measures appear to duplicate most of the elements of the export subsidies which they replaced, the

United States requested a panel be reconvened to review Canada’s compliance. In July 2001, the

compliance review panel agreed with the United States that Canada was not in compliance. However,

Canada appealed the July report. On December 3, 2001, the Appellate Body determined that there was

insufficient information to make a ruling. The United States and New Zealand then requested another

WTO panel to review the additional information requested by the Appellate Body. In July 2002, the panel

concluded that Canada was continuing to provide illegal export subsidies to Canadian dairy processors

with the discounted milk. Canada appealed that decision, and in December 2002, the Appellate Body

affirmed that panel’s findings. The WTO's Dispute Settlement Body formally adopted the Appellate

Body's report on January 17, 2003. There is no further appeal.

c. Intellectual Property Rights

Canada made some progress in improving its IPR regime over the past year, including amending its patent

law to provide at least a 20-year term of protection for patents filed before October 1, 1989. However,

some problems remain unresolved. For example, Canada does not provide adequate data protection in the

pharmaceutical area, and systematic inadequacies in Canadian administrative and judicial procedures allow

early and often infringing entry of generic versions of patented medicines into the marketplace. Moreover,

progress has stalled on resolving the outstanding issue of national treatment for U.S. artists in the

distribution of proceeds from Canada's private copying levy and its “neighboring rights” regime. The

United States is also concerned about Canada’s lax, and potentially deteriorating, border measures that

appear to be non-compliant with TRIPS requirements.

2. Mexico

Mexico is our second largest single-country trading partner and has been among the fastest growing major

export markets for goods since 1993, with U.S. exports up an estimated 134 percent through 2002.23 The

NAFTA, now commencing its tenth year, has fostered this enormous relationship with its unprecedented,

comprehensive market opening rules. It is also creating a more equitable set of trade rules as Mexico’s

higher trade barriers are being reduced or eliminated.

a. Intellectual Property Rights

Piracy and counterfeiting of U.S. intellectual property in Mexico continue to raise serious concerns. Over

the past year, enforcement against piracy has declined dramatically, resulting in even greater losses for
142

U.S. copyright industries and the closure of legitimate copyright industry-related businesses in Mexico. 

Despite significant efforts to raid pirate production facilities, only a small percentage of arrests have

resulted in court decisions and deterrent penalties. The United States is concerned about the lack of

coordination between health and intellectual property agencies in Mexico. The Ministry of Health has

granted health registration to generic products even where a patent exists for these products. Both the U.S.

pharmaceutical and agrochemical industries also have expressed concern regarding the confidentiality of

data submitted in conjunction with applications for marketing approval.

b. Agriculture

North American agricultural trade has grown significantly since the NAFTA was implemented. Mexico is

currently the United States’ third largest agricultural export market. For fiscal year 2002, U.S. agricultural

exports to Mexico fell by 2.6 percent, to $7.1 billion.

Current trade irritants include Mexico’s limits on the importation and domestic consumption of high

fructose corn syrup (HFCS). In 1997, Mexico initiated an antidumping investigation and in 1998 imposed

antidumping duties. The United States challenged Mexico’s determination in the WTO. The panel ruled

in favor of the United States in January 2000. Mexico did not appeal. In September 2000, Mexico issued

a new determination that purported to comply with the original panel decision. The United States

challenged the new determination and in June 2001 the panel ruled in favor of the United States. Mexico

appealed the panel’s decision. The Appellate Body rejected Mexico’s appeal on October 22 and on

November 21, 2001, the WTO adopted the Appellate Body’s report.

On December 31, 2001, the Mexican Congress imposed a tax on soft drinks produced using HFCS. 

Although temporarily suspended by the Fox Administration, the tax was reimposed in 2002, and remains

in place. The tax effectively eliminated the use of HFCS in the Mexican beverage industry, and will

reduce sales of HFCS by U.S. firms, lower U.S. corn exports used to produce HFCS, and threaten U.S.

beverage exports. USTR continues to work to achieve a long term solution.

The Administration has worked to address problems associated with Mexico’s antidumping regime. The

United States is concerned about the procedures applied in the investigation of U.S. exports of beef, rice,

and apples. In addition, despite repeated assurances, the Mexican government has not published a

redetermination of the antidumping order on U.S. exports of live swine. Until these regulations are

published, U.S. exports continue to be subject unnecessarily to antidumping duties. In December 2002,

the Mexican Congress amended certain provisions of the Foreign Trade Law that apply to the conduct of

antidumping investigations. The United States is analyzing these changes to ensure consistency with

Mexico’s international obligations.

In April 2002, USTR and the U.S. Department of Agriculture entered into a Memorandum of

Understanding on Agricultural Trade with Mexico to strengthen cooperation on agricultural trade,

including sanitary and phytosanitary measures. The MOU established a Consultative Committee on

Agriculture, which held its inaugural meeting in October 2002, and discussed a range of issues covering

livestock, grains and horticulture.

On January 7, 2003, Mexico initiated an antidumping investigation on U.S. pork. The United States has

raised its concerns regarding the initiation, which appears to be inconsistent with the requirements of the

WTO Antidumping Agreement. 
242002 estimates are annualized based on 11 months’ data.

143

c. Telecommunications

Market barriers in Mexico’s telecommunications sector remain a serious source of concern. In particular,

through a series of rules and other measures, Mexico does not permit effective competition and otherwise

discriminates against U.S. suppliers of basic telecommunications services. As a result, wholesale

telecommunications rates for U.S.-Mexico calls are still roughly four times their cost. These high rates

cost U.S. companies and consumers about $600 million in excess payments each year. 

The United States initially requested WTO consultations with Mexico on telecommunications issues in

August 2000, and first requested the establishment of a WTO panel in November 2000. At that time,

Mexico took steps to address several important barriers to telecommunications trade. However, relevant

Mexican agencies have not yet addressed trade barriers affecting international telecommunications

services. A WTO panel was formed in April 2002 to address this issue. A further discussion of this case

is contained in Chapter II. 

3. Brazil and Southern Cone

a. Mercosur (Argentina, Brazil, Paraguay and Uruguay)

The Common Market of the South, referred to as “Mercosur”, from its Spanish abbreviation, is the largest

preferential trade agreement in Latin America. It consists of Brazil, Argentina, Uruguay and Paraguay and

represents over half of Latin America’s gross domestic product. Chile and Bolivia are Associate Members

of the group. Mercosur was established in 1991, with the goal of creating a common market. 

Implementation of the Mercosur customs union commenced January 1, 1995, with the establishment of a

common external tariff (CET), covering some 85 percent of intra-Mercosur trade. Convergence of tariffs

on remaining items is slated for completion by January 1, 2006. 

Four Plus One: In September 2001, the United States and the four Mercosur countries resumed meeting

under the auspices of the 1991 Rose Garden Agreement. This agreement created a framework, known as

the Four Plus One, for the United States and the Mercosur countries to discuss means to deepen their trade

relationship. At the September ministerial meeting, the Four Plus One agreed on a work plan and a series

of meetings to discuss coordination in multilateral fora, such as the FTAA and the WTO, and bilateral

trade and investment issues of mutual interest. The Four Plus One met in Buenos Aires, Argentina in

April 2002 and continued its work plan with respect to the multilateral agenda and on-going work on

sanitary and phytosanitary issues and technical barriers to trade.

b. Argentina

U.S. exports to Argentina were $1.5 billion in 2002, down 61 percent from 2001. Overall bilateral trade

was $4.6 billion, and the U.S. surplus of $0.9 billion in 2001 shifted into deficit of $1.6 billion in 2002.24 

A key factor in the Argentine economy is its trade with Brazil, Argentina’s number one trading partner. 

During 2002, the trade agenda with Argentina was affected by the on-going financial crisis and the

devaluation of the currency. With the conclusion of an agreement regarding the WTO patent issue (see

below) the United States Trade Representative sent a team to Argentina to explain the possibilities of

utilizing Generalized System of Preferences (GSP) to the Argentine private sector. On August 6, President
252002 estimates are annualized based on 11 months’ data.

144

Bush signed a proclamation granting Argentina’s request for GSP redesignation and de minimis waivers

for 57 tariff line items. USTR is in the process of conducting an expedited review for Argentina’s 2001

GSP petitions.

Intellectual Property Rights (IPR): Argentina’s intellectual property rights regime does not yet appear to

meet TRIPS standards and fails to fulfill long-standing commitments to the United States. Failure to

provide adequate protection for copyright and patents has led to Argentina’s placement on the Special 301

Priority Watch List through 2002. In 1997, the United States withdrew 50 percent of Argentina’s benefits

under the GSP over this same issue, and benefits will not be restored unless the concerns of the United

States are addressed adequately. In May of 1999, the United States initiated a WTO case against

Argentina because of its failure to protect patents and test data. The United States added additional claims

to this case in May of 2000, due to the fact that the TRIPS Agreement became fully applicable for

Argentina in the year 2000. The United States engaged in a series of consultations with Argentina in

Geneva throughout 2001, however, the problem remained unresolved. The establishment of the U.S.-

Argentina Bilateral Council on Trade and Investment (BCTI) gave the two countries a vehicle to address

various bilateral trade issues.

As a result of the April 24, 2002 meeting of the BCTI, the U.S. and Argentina finalized the elements of a

joint notification to the World Trade Organization (WTO) regarding the dispute on intellectual property

matters. In the joint notification, Argentina clarified how certain aspects of its intellectual property

system, such as those related to its import restriction regime, operate so as to conform with the WTO

Agreement on Trade-Related Aspects of Intellectual Property Rights. In addition, Argentina agreed to

amend its patent law to provide protection for products obtained from a process patent and to ensure that

preliminary injunctions are available in intellectual property court proceedings, among other amendments. 

Finally, on the remaining issues, including that of data protection, the United States retains its right to seek

resolution under the WTO dispute settlement mechanism. Argentina and the United States notified a

settlement of these issues to the WTO on May 31, 2002. Consultations continue on the unresolved issues.

The United States is committed to giving full consideration to Argentine requests to expand market access

for Argentine products under the preferences of the U.S. GSP.

c. Brazil

The United States exported goods valued at an estimated $12.4 billion to Brazil in 2002. Brazil’s market

accounts for 24 percent of U.S. annual exports to Latin America and the Caribbean excluding Mexico, and

72 percent of U.S. goods exports to Mercosur.25

Intellectual Property Rights (IPR): In 1997, Brazil enacted laws providing protection for computer

software, copyrights, patents and trademarks. The United States has identified certain problems with parts

of this legislation, including a local working requirement and extensive exceptions in the patent law to a

prohibition on parallel imports. U.S. industry has also voiced concerns about the high levels of piracy and

counterfeiting in Brazil and the lack of effective enforcement of copyright (especially for sound recordings

and video cassettes) and trademark legislation. In 2001, the International Intellectual Property Association

(IIPA) filed a petition to remove Brazil’s GSP benefits due to its failure to offer adequate protection to

copyrighted materials, in particular sound recordings. The petition remains under review. 
262002 estimates are annualized based on 11 months’ data.

145

On April 30, 2000, the United States requested that the WTO establish a dispute resolution panel to review

a narrow part of Brazil's patent law referred to as a local manufacturing requirement. Article 68(1)(I) of

the law provides that if a patented product is not being manufactured in Brazil within three years of the

issuance of the patent, the government may compel the patent owner to license a competitor. However,

Article 27.1 of the TRIPS Agreement provides that patents may be used without discrimination as to " . . .

whether the products are imported or locally produced." The United States continues to question the

consistency of this provision under the obligations of the TRIPS Agreement, which prohibits such

conditions. 

In June 2001 the United States and Brazil agreed to transfer their WTO disagreement over Brazil's patent

law from formal WTO litigation to a newly created bilateral consultative mechanism. Under the terms of

the agreement, Brazil will provide advance notice to the U.S. Government before utilizing Article 68

(1)(I). If Brazil seeks to activate this provision there will be an adequate opportunity for consultations in

the bilateral Consultative Mechanism. This will provide an early warning system to protect U.S. interests. 

The United States reserved all its rights in the WTO with respect to this matter.

Autos: In March 1998, USTR signed an agreement with the Government of Brazil to terminate its TRIMSinconsistent auto regime, enacted in December 1995. The regime had offered auto manufacturers reduced

duties on imports of assembled cars and auto parts and other benefits if they exported sufficient quantities

of parts and vehicles and promised to meet local content targets in their Brazilian plants. The Brazilian

government committed to eliminate the trade and investment distorting measures in its auto regime and not

to extend the measures to its Mercosur partners when their auto regimes were unified in 2000. Argentina

and Brazil recently reached agreement on a new regime, which remains TRIMS-inconsistent. Argentina

requested a WTO TRIMS extension, which was granted.

d. Paraguay

With a population of just over five million, Paraguay is one of the smaller markets in Latin America. In

2002, the United States exported an estimated $444 million worth of goods to Paraguay.26 However,

Paraguay is a major exporter of, and a transshipment point for, pirated and counterfeit products in the

region, particularly to Brazil.

Intellectual Property Rights (IPR): In January 1998, the USTR identified Paraguay as a “Priority Foreign

Country” (PFC) under the “Special 301" provisions of the Trade Act of 1974. In identifying Paraguay as a

PFC, the USTR noted deficiencies in Paraguay’s intellectual property regime, especially a lack of effective

action to enforce IPR. As required under the Trade Act of 1974 as amended, the USTR initiated an

investigation of Paraguay in February 1998. 

During negotiations under Special 301, the Government of Paraguay indicated that it had undertaken a

number of actions to improve IPR protection, such as passing new copyright and trademark laws and

undertaking efforts to improve enforcement. In November 1998, in light of commitments made by the

Government of Paraguay in a bilateral Memorandum of Understanding (MOU), USTR concluded its

Special 301 investigation. The Government of Paraguay committed to take a number of near-term and

long-term actions to address the practices that were the targets of the investigation, including

implementing institutional reforms to strengthen enforcement and taking immediate action against known

centers of piracy and counterfeiting. The U.S. Government is currently monitoring Paraguay’s
272002 estimates are annualized based on 11 months’ data.

282002 estimates are annualized based on 11 months’ data.

146

implementation of the MOU. The two governments have agreed to review the MOU with a view toward

revising and extending it in 2003.

e. Uruguay

With the smallest population of Mercosur (just over three million people), Uruguay nonetheless imported

an estimated $203 million of goods from the United States in 2002.27 Areas of recent consultation have

included coordinating U.S efforts in multilateral fora such as the FTAA and WTO and the importance of

Uruguay’s apparent failure to bring its intellectual property regime into line with TRIPS standards by

January 1, 2000. In April 2001, the two countries established the U.S.-Uruguay Joint Commission on

Trade and Investment in order to explore means to deepen the trade and investment relationship between

the two countries. This group completed a comprehensive work program in 2002.

f. Chile

U.S.-Chile bilateral trade relations in 2002 were dominated by the negotiation of an FTA as discussed at

the beginning of this Chapter.

4. The Andean Community

The U.S. trade deficit with the Andean region increased from $12.6 billion in 2001 to an estimated $13

billion in 2002. U.S. goods exports to the region were an estimated $11.5 billion in 2002, a decrease of 7

percent from 2001. U.S. goods imports were $24.6 billion in 2002, a decrease of 2 percent from 2001.28

 

The Andean Community originated as the Andean Pact in 1969, with Bolivia, Colombia, Ecuador, Peru

and Venezuela as members. However, it was only in the 1990s that the Andean Pact’s commitment to

form a customs union gained momentum, with the reduction and elimination of most duties among the

members and an increasingly common external tariff. In 1997 the Andean Community became

operational. Among its features are strengthened institutions, such as a Council of Presidents and a

Council of Foreign Ministers, meetings of Trade Ministers, and the creation of a General Secretariat of the

Andean Community mandated to act as the group’s executive body.

a. Andean Trade Preference Act

On August 6, 2002, President Bush signed into law the Andean Trade Promotion and Drug Eradication

Act (ATPDEA). In doing so he fulfilled an Administration goal to renew and expand the product coverage

of the Andean Trade Preference Act (ATPA), which had expired on December 4, 2001. The ATPA was

originally enacted in 1991 in order to provide incentives to Bolivia, Colombia, Ecuador and Peru to

diversify their economies away from narcotics production. As virtually all cocaine sold in the United

States originates in these countries, the program functions as a U.S. trade policy tool that contributes to our

fight against drug production and trafficking. It has strengthened the legitimate economies in these

Andean countries and created viable alternatives to the profitable drug trade.
292002 estimates are annualized based on 11 months’ data.

147

The original ATPA provided beneficiary countries duty-free treatment for most of their exports to the

United States, except for textiles, apparel, footwear, leather, tuna in airtight containers, and certain other

items. The ATPDEA restored all of the benefits of the original program, providing for retroactive

reimbursement of duties paid during the period since the program’s lapse in December 2001. It also

expanded the list of items eligible for duty-free treatment to about 700 more products.

The most significant expansion of benefits in the ATPA as amended by the ATPDEA is in the apparel

sector. Apparel assembled in the region from U.S. fabric or fabric components or components knit-toshape in the United States may enter the United States duty-free in unlimited quantities. Apparel

assembled from Andean regional fabric or components knit-to-shape in the region may enter duty-free

subject to a cap. The cap is set at two percent of total U.S. apparel imports, increasing annually in equal

increments to five percent. These countries currently account for only about one percent of U.S. apparel

imports. New products benefitting from the program include: tuna in pouches, leather products, footwear,

petroleum and petroleum products, and watches and watch parts.

b. ATPDEA Eligibility

The ATPDEA established a number of criteria which countries must meet in order to be designated as

eligible for the expanded benefits of the ATPA. The new criteria relate to issues such as intellectual

property rights, worker rights, government procurement procedures, and cooperation on countering

narcotics and combating terrorism. After analyzing with other U.S. Government agencies the responses to

a USTR request for public comment on the matter, USTR raised with the four countries a number of

commercial matters, investment disputes and worker rights issues related to the eligibility criteria. In

response, the four governments took several measures and provided written commitments for future

actions to address U.S. Government concerns. For instance, Colombia issued a decree on the protection of

data; Bolivia ratified its WTO financial services commitments; Ecuador committed to establish a highlevel commission to investigate the treatment of banana plantation workers; and Peru committed to issue a

decree requiring that software used by government agencies be legally acquired. On the basis of these and

other measures and commitments, the President on October 31, 2002 signed the proclamation designating

the four countries as full beneficiaries of the ATPA, as amended. The U.S. Government will continue to

monitor the performance of the beneficiary countries with respect to the program’s eligibility criteria.

5. Central America and the Caribbean

a. U.S.-Central America Free Trade Agreement (CAFTA) Negotiations

On January 8, 2003, the United States Trade Representative and Ministers from Costa Rica, El Salvador,

Guatemala, Honduras and Nicaragua announced the launch of negotiations on an agreement to eliminate

tariffs and other barriers to trade in goods, agriculture, services, and investment between the United States

and those Central American nations. Negotiations on the U.S.-Central American Free Trade Agreement,

or CAFTA, began in San José, Costa Rica, on January 27. The participants will seek to complete the

negotiations by December 2003.

The United States and Central America enjoy an increasingly productive trade partnership. U.S. exports to

the region have grown 54 percent since 1996 and totaled an estimated $9.8 billion in 2002. Imports totaled

$11.7 billion.29
148

On January 16, 2002, President Bush announced his intention to explore an FTA with Central American

nations. Throughout 2002, USTR held a series of preparatory “trade workshops” with Costa Rica, El

Salvador, Guatemala, Honduras and Nicaragua to discuss topics that are covered in a free trade agreement

such as: market access; investment and services; government procurement and intellectual property rights;

labor and environment; and institutional issues including dispute settlement. The President formally

notified Congress of his intention to begin free trade negotiations on October 1, 2002, following passage of

Trade Promotion Authority. USTR held public hearings on November 19, 2002, at which oral testimony

from more than 20 witnesses was heard and more than 40 additional written submissions were received. 

b. Central America

The United States is Central America’s principal trading partner. The Central American Common Market

(CACM) consists of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, and provides dutyfree trade for most products traded among the five countries. Panama, which has observer status, and

Belize participate in CACM summits but not in regional trade integration efforts. The Central American

countries continued during 2002 to pursue a range of bilateral and regional trade agreements. Negotiations

between Canada and El Salvador, Guatemala, Honduras and Nicaragua made substantial progress in 2002. 

Negotiations for a Panama-CACM free trade agreement have resulted in agreement on common

disciplines; negotiations of related market access provisions continued throughout 2002.

All of the countries are active participants in the FTAA negotiations. From May 2001 until October 2002,

Guatemala chaired the Negotiating Group on Agriculture, Costa Rica chaired the Negotiating Group on

Government Procurement, and Nicaragua served as Vice-Chair of the Consultative Group on Smaller

Economies. Beginning November 1, 2002, Costa Rica will continue as the chair of the Government

Procurement group and Panama will assume the chairmanship of the FTAA Investment group. At the

Quito Ministerial meeting on November 1, 2002, El Salvador offered to host a meeting of the FTAA Trade

Negotiating Committee in 2003.

The United States continues to meet with Panama under our existing Trade and Investment Council (TIC)

mechanism. In 2002, the countries met twice and maintain a ongoing work program that includes

investment issues. 

c. Caribbean Basin Initiative 

The trade programs collectively known as the Caribbean Basin Initiative (CBI) remain a vital element in

the United States’ economic relations with its neighbors in Central America and the Caribbean. CBI was

initially launched in 1983 through the Caribbean Basin Economic Recovery Act (CBERA), and was

substantially expanded in 2000 through the U.S.-Caribbean Basin Trade Partnership Act (CBTPA). 

The Trade Act of 2002 increased the type and quantity of textile and apparel articles eligible for the

preferential tariff treatment accorded to designated beneficiary CBTPA countries. Among other actions,

the Trade Act of 2002 extended duty-free treatment for clothing made in beneficiary countries from both

U.S. and regional inputs, and increased the quantity of clothing made from regional inputs that regional

producers can ship duty-free to the United States annually. The Administration will continue to work with

Congress, the private sector, CBI beneficiary countries, and other interested parties to ensure a faithful and

effective implementation of this important expansion of trade benefits.

Since its inception, the CBERA program has helped beneficiaries diversify their exports. On a regionwide basis, this export diversification has led to a more balanced production and export base and has

resulted in a reduction in the region's vulnerability to fluctuations in markets for traditional products. 
149

Since 1983, the year prior to the implementation of the CBI, total CBI country non-petroleum exports to

the United States have more than tripled. Light manufactures, principally printed circuit assemblies and

apparel, but also medical instruments and chemicals, account for an increasing share of U.S. imports from

the region and constitute the fastest growing sectors for new investment in CBERA countries and

territories. 

Apparel constitutes one of the fastest growing categories of imports from the CBI countries and territories

– growing from just 5.5 percent of total U.S. imports from the region in 1984, to nearly 46 percent in 2001,

valued at over US$9.5 billion. Apparel has ranked as the leading category of U.S. imports from the region

since 1988.

CBI currently provides 24 beneficiary countries and territories with duty-free access to the U.S. market. 

They are: Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, British Virgin Islands, Costa

Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras,

Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent

and the Grenadines, and Trinidad and Tobago. 

d. The Caribbean

The Dominican Republic: The Dominican Republic continues to lead all countries in taking advantage of

CBI, as they have done in virtually every year since the program became effective, accounting for 28

percent of U.S. imports under CBI provisions. The Dominican Republic does not belong to any regional

trade association, but has negotiated trade agreements with its partners in Central America and

CARICOM.

The Dominican Republic is the United States’ largest single trading partner in the CBI region. Reflecting

the importance of this trade relationship, the United States and the Dominican Republic revitalized the

Trade and Investment Council (TIC) mechanism and held productive meetings under the TIC during 2002,

covering both bilateral issues and cooperation in the FTAA and WTO negotiations. On November 1,

2002, the Dominican Republic assumed the chairmanship of the FTAA Intellectual Property Rights group. 

The United States has expressed ongoing concerns about the Dominican Republic’s Industrial Property

Law and its implementing regulations, which are now currently under review within the Dominican

Republic. The United States has also raised concerns regarding the discriminatory effects of the

Dominican Republic’s Dealer Protection Law 173 and has sought improvements in government

procurement practices and resolution of outstanding investment disputes.

CARICOM: Members of the Caribbean Community and Common Market (CARICOM) are: Antigua and

Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint

Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago. In

theory, CARICOM is a customs union rather than a common market. However, progress towards a

customs union remains limited.

CARICOM countries are active in the FTAA negotiations, which provide opportunity for frequent bilateral

dialogue between U.S. and Caribbean officials. In addition, the United States Trade Representative met

with CARICOM trade ministers in Trinidad in September, 2002 to discuss ways to further enhance our

trade relations both bilaterally and in multilateral trade negotiations.
302002 estimates are annualized based on 11 months data.

150

C. Western Europe

Overview

The U.S. economic relationship (measured as trade plus investment) with Western Europe is the largest

and most complex in the world. Due to the size and nature of the transatlantic economic relationship,

serious trade issues inevitably arise. Sometimes small in dollar terms, especially compared with the

overall value of transatlantic commerce, these issues can take on significance for their precedential impact

on U.S. trade policies.

From its origins in the 1950s, the European Union has grown from six to fifteen Member States, with

Austria, Finland, and Sweden becoming the newest EU members states on January 1, 1995. These fifteen

countries together comprise a market of some 370 million consumers with a total gross domestic product

of more than $8 trillion. U.S. goods exports to the EU totaled an estimated $143.5 billion in 2002. Since

1994, U.S. goods exports to the EU have increased 33 percent.30

The other major trade group within Western Europe is the European Free Trade Association (EFTA),

which includes Switzerland, Norway, Iceland, and Liechtenstein – Austria, Finland, and Sweden had also

been members prior to their accession to the EU in 1995. Formed in 1960, EFTA provides for the

elimination of tariffs on manufactured goods and selected agricultural products that originate in, and are

traded among, the member countries.

Norway, Iceland, and Liechtenstein have structured their economic relations with the EU through the

Agreement on the European Economic Area (EEA), which permits the three countries to participate in the

EU Single Market – Switzerland rejected the EEA in a referendum at the end of 1992. In practice, the

EEA involves the adoption by non-EU signatories of approximately 70 percent of EU legislation.

2002 Activities

1. European Union

In 2002, the EU continued on its path of deepening the economic and political integration of its Member

States. The pace of additional Western European integration efforts over the next few years is being set

first by the experience of implementing the Economic and Monetary Union (EMU) established by the

EU’s Maastricht Treaty, which went into force on November 1, 1993, and amendments to Maastricht

contained in the 1997 Amsterdam and 2000 Nice Treaties. Under the Maastricht Treaty schedule, eleven

Member States, on January 1, 2002, replaced their national currency notes and coins in circulation with the

new “euro.” 

The second major factor affecting the pace of European integration will be the process of enlarging the EU

to include new members to the East and South. The EU has signed association agreements and other types

of free trade arrangements with many of its neighbors, including the Czech Republic, Slovakia, Hungary,

Poland, Bulgaria, Romania, Latvia, Lithuania, Estonia, Albania, Slovenia, Israel, Algeria, Morocco, and

Tunisia. The EU has also negotiated a customs union with Turkey. In December 2002, at the EU Summit

in Copenhagen, the EU formally decided to finalize EU accession agreements with ten new members -

Cyprus, Malta, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Estonia, Latvia and Lithuania. 
151

Signature of the accession agreements for these countries is expected in early 2003, to be followed by

ratification procedures in each country involved, with the aim of formal accession to the EU of the new

members by early 2004. The EU has also committed to enter into accession negotiations with Romania

and Bulgaria (Turkey remains an accession candidate, with no EU commitment to commence formal

negotiations). Important EU institutional questions associated with enlargement still need to be resolved

as the enlargement process proceeds.

In 2002, USTR continued to devote considerable resources to addressing pressing or potential trade

problems with the EU and its individual Member States, as well as to efforts to enhance the transatlantic

economic relationship. In May 2002, U.S. and EU leaders at the U.S.-EU Summit announced their

intention to pursue as a priority a Positive Economic Agenda, aimed at increasing U.S.-EU cooperation in

a number of areas (See below). In addition, both sides worked to resolve or manage a number of ongoing

trade disputes.

a. Geographical Indications

The EU’s system for the protection of geographical indications, namely Council Regulations 1493/99 for

wines and spirits and 2081/92 for other agricultural products, is not available to other WTO Members on a

national treatment basis. All non-EU WTO members are required instead to negotiate a specific bilateral

agreement with the EU in order to achieve equivalent protection. Under the terms of the WTO TRIPS

Agreement, the EU is obligated to make such special protection available to all WTO Members, without

the requirement for concluding special agreements. In addition, both EU regulations appear to deprive

non-EU trademark owners of TRIPS-level ownership rights by requiring the phase-out of marks that

conflict with later-in-time geographical indications. U.S. industry has been vocal in raising concerns about

the impact of these EU regulations on U.S.-owned trademarks.

For these reasons, in 1999 the United States initiated formal WTO consultations with the EU on

Regulation 2081/92. A number of subsequent bilateral discussions have taken place; however, to date the

EU has not amended Regulation 2081/92 to address any of the United States’ concerns. 

b. Agricultural Biotechnology

The EU’s four and a half year moratorium on the approval of new products of modern biotechnology

continues to hinder U.S. exports of corn, and threatens exports of soya. Restarting the EU approvals

process remains a high priority for the United States in order to restore these exports. The U.S.

Government continues to raise its concerns regarding the failure of the EU to have a functioning approval

process. 

Despite implementation of EU Directive 01/18 in October 2002 (which governs the approval of

biotechnology products, including seeds and grains, for environmental release and commercialization), EU

Member States continue to refuse lifting the approvals moratorium. Member States insist that EU

proposals for new rules governing traceability and labeling and biotechnology food and feed authorizations

must first enter into force. The proposals include mandatory traceability and labeling requirements for all

biotechnology products that would be onerous and expensive for producers and foreign suppliers to meet. 

As of December 2002, the European Council had reached common positions on the proposed food and

feed directive and the traceability and labeling directives. The proposed directives must still go through

the Parliament before final adoption by the Council. If adopted, the proposals will not come into force for

at least one year.
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c. Positive Economic Agenda

U.S. and EU Leaders at the May 2002 U.S.-EU Summit in Washington agreed on a list of subject areas in

which the United States and the EU intend to initiate, or give new impetus to existing, cooperative efforts. 

Labeled as the “Positive Economic Agenda,” both sides have indicated their interest in using this list as a 

first step in an open-ended process of enhancing transatlantic cooperation, both for its own sake and as a

means to put headline-grabbing trade disputes in their proper context. The agenda initially covers

activities with respect to financial services, regulatory cooperation, electronic procurement and customs,

regulation of organic foods, and sanitary and phytosanitary measures. Through 2002, officials on both

sides worked to develop or advance transatlantic dialogues in all of these areas. 

d. Transatlantic Economic Partnership

At the May 1998 U.S.-EU Summit in London, the President and EU Leaders announced the Transatlantic

Economic Partnership (TEP) initiative, designed to deepen and systematize cooperation in the trade field. 

Under the TEP, the two sides identified a number of broad areas in which they committed to work together

in order to increase trade, avoid disputes, address disagreements, remove barriers, and achieve mutual

interests. 

These areas include: technical barriers to trade, agriculture, intellectual property, government procurement,

services, electronic commerce, environment and labor. In addition, the United States and the EU agreed to

put an emphasis throughout the initiative on shared values, i.e., they agreed to more fully involve citizens

and civil society on both sides of the Atlantic in trade policy so as to strengthen the consensus for open

trade. Cooperation under the TEP occurs with respect to bilateral matters, as well as in the context of

multilateral activities such as in the WTO. The TEP Action Plan, endorsed by Leaders at the December

1998 U.S.-EU Summit in Washington, lays out specific goals under each of the above categories. At the

June 1999 U.S.-EU Summit, U.S. and EU leaders agreed to use TEP mechanisms to carry out part of a

joint effort to identify – and hopefully defuse – potential trade problems at an early stage, before they

become irritants to the bilateral economic relationship.

e. Public Dialogues

Important companions to the official exchanges between governments in the United States and the EU are

the various private dialogues among European and American businesses, labor organizations, and

environmental and consumer groups. The first of these to be established, the Transatlantic Business

Dialogue (TABD), is a forum in which American and European business leaders can meet to discuss ways

to reduce barriers to U.S.-European trade and investment. Other dialogues – such as the Transatlantic

Consumer Dialogue (TACD) – stem from a similar premise, i.e., that corresponding organizations on both

sides of the Atlantic should share views and, where possible, present joint recommendations to

governments in both the United States and the EU on how to improve transatlantic relations and to elevate

the debate among countries in multilateral fora. In 2002, a number of the dialogues forwarded

recommendations related to trade policy issues to governments on both sides of the Atlantic.

f. Technical Regulations and Standards

As traditional trade barriers affecting transatlantic trade and investment have declined in recent years,

specific trade obstacles arising from unnecessary divergences in U.S. and EU regulations and the lack of

transparency in the EU rulemaking and standardization processes have loomed relatively larger in
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importance. During 2002, the United States continued efforts to enhance U.S.-EU regulatory cooperation

and reduce unnecessary technical barriers to transatlantic trade. 

Under the auspices of the Transatlantic Economic Partnership (TEP) initiative, the United States

Government and the European Commission in April 2002 concluded “Guidelines for Regulatory

Cooperation and Transparency.” The TEP Guidelines are voluntary principles intended to promote a more

systematic dialogue between U.S. and European regulators early in the development of regulatory

approaches. The Guidelines outline specific cooperative steps that U.S. and European regulators are

encouraged to follow in bilateral dialogues, including early and regular consultations, extensive data and

information exchanges, and sharing of contemplated regulatory approaches. The Guidelines also stress

improved transparency and public participation as necessary elements to promote more effective

regulatory cooperation, better quality regulation, and to help minimize possible regulatory-based trade

disputes. Regulatory cooperation projects launched under the Guidelines in 2002 include such areas as

cosmetics, auto safety, food additives, metrology, and nutritional labeling. 

The United States and the EU also reached agreement in 2002 under TEP auspices on a new, precedentsetting mutual recognition agreement (MRA) on marine equipment, under which designated U.S.

equipment which meets all U.S. requirements can be marketed in the EU without additional testing. This

agreement is expected to enter into force during 2003. The United States also continues to pursue

implementation of the 1998 U.S.-EU Mutual Recognition Agreement (MRA), which includes sectoral

annexes on telecommunications equipment; electromagnetic compatibility (EMC) for electrical products;

electrical safety for electrical and electronic products; good manufacturing practices (GMP) for

pharmaceutical products; product evaluation for certain medical devices; and safety of recreational craft. 

The annexes on telecommunications equipment, EMC, and recreational craft are fully operational.

g. Foreign Sales Corporation Tax Rules

Potentially the most damaging of the trade disputes currently involving the United States and the EU is the

EU’s complaint to the WTO that the U.S. Foreign Sales Corporation (FSC) tax rules are an illegal export

subsidy. The United States lost this case on February 24, 2000, repealed the FSC law, and enacted new

legislation in November to correct the shortcomings identified in the dispute. On January 14, 2002, the

WTO review of the new legislation was completed, resulting in a finding that the new legislation is also

WTO-inconsistent. Subsequently, a WTO arbitration process determined that the EU was within its rights

to retaliate against $4.043 billion of U.S. products if the United States fails to bring its law into conformity

with the WTO ruling. Legislation was introduced in the U.S. House of Representatives in 2002 that

would, inter alia, repeal the November 2000 law. The Administration will be working with the Congress

in 2003 as Congress considers a legislative solution that would bring the United States into compliance

with its WTO obligations in this area. (For more information on this dispute, see Chapter II).

h. Ban on Growth Promoting Hormones in Meat Production

The EU continues to ban the import of U.S. beef obtained from cattle treated with growth-promoting

hormones. In 1996 the United States challenged the EU ban on imports of U.S. beef in the WTO. In June

1997, a WTO panel found in favor of the United States on the basis that the EU’s ban was inconsistent

with the EU’s obligations under the WTO Agreement on the Application of Sanitary and Phytosanitary

Measures (SPS Agreement) because the ban was not based on a scientific risk assessment. In January

1998, the WTO Appellate Body upheld the panel’s finding that the EU’s ban on imported meat from

animals treated with certain growth-promoting hormones is inconsistent with obligations under the WTO

SPS Agreement. In 1999, the WTO authorized U.S. trade retaliation because the EU failed to comply with
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the WTO rulings by the May 13, 1999 deadline. Subsequent to receiving WTO authorization, in July 1999

the United States applied 100 percent duties on $116.8 million of U.S. imports from the EU. The duties

remain in effect.

In December of 2002, the EU permanently banned the use of estradiol-17-ß, a growth promoting hormone

widely used in the United States and which has been determined by the U.S. Food and Drug

Administration (FDA) to pose no health risk to consumers. The EU also presented a number of studies

that analyzed the use of hormones in beef production, though none of these studies presented any new

evidence to support the EU’s hormone ban.

The United States and the EU continue to explore possible ways to resolve this dispute.

i. Veterinary Equivalence - U.S. Poultry Exports to the EU

Though the 1999 U.S.-EU Veterinary Equivalence Agreement was designed to make trading in various

livestock products, including poultry and poultry products, less restrictive, the EU continues to maintain its

1997 ban on imports of U.S. poultry because U.S. producers have regularly used washes of lowconcentration chlorine as an antimicrobial treatment (AMT) to reduce the level of pathogens in poultry

meat production, a practice not permitted by the EU sanitary regime. The United States has been working

to compile detailed scientific information regarding U.S. food safety rules for poultry to address EU

concerns with a view to reestablishing poultry exports to the EU. U.S. and EU leaders agreed at the May

2002 Summit to place this issue on the Positive Economic Agenda (See Section on Positive Economic

Agenda above).

j. Wine 

U.S.-EU negotiations on a bilateral wine agreement were launched in 1999 and accelerated during 2002. 

The United States continues to be concerned about the EU's requirements for import certification and the

review and approval of wine making practices, and has sought reductions in the EU's export subsidies and

subsidies to its grape growers and wine producers. A major EU concern is the use of semi-generic names

on some U.S. wines. Other issues include tariffs and trade restrictive requirements under the April 29,

2002 EU wine labeling regulation (Commission Regulation No. 753/2002). The United States will

continue to press the EU to provide U.S. wine makers equitable access to the EU market.

k. Margin of Preference

In mid-2002, the European Commission (EC) notified the United States of its intentions to withdraw from

market access concessions on grains made during the Uruguay Round. These concessions, known as the

Margin of Preference (MOP), were meant to replace the EU’s pre-1995 variable levy system for grains so

as to ensure maintenance of market access opportunities for grain imports into the EU. The EC proposed

replacing the MOP with a series of global Tariff-Rate Quotas (TRQs) on grain imports, which were

scheduled to go into effect on January 1, 2003.

The United States has derived substantial benefits from the Margin of Preference. In response to the EC

proposal, the United States worked with the governments of Argentina and Canada to ensure that access to

EU markets would not be impeded. In December 2002, the United States and the EC reached an

agreement that would maintain the MOP for almost all wheat and feed grain imports. The EC agreed to

limit its changes only to certain qualities of wheat not commonly exported by the United States. These
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new import arrangements for low and medium quality common wheat and barley went into effect on

January 1, 2003. 

2. EFTA

Although USTR activity in 2002 with the EFTA countries as a group was modest, we intend to start

negotiation of a mutual recognition agreement (MRA) with the EFTA EEA countries (i.e., Norway,

Iceland, and Liechtenstein) in 2003, and we have begun exploring other ways to expand the U.S.-EFTA

trade relationship.

3. Turkey

General: As a result of its 1996 customs union with the European Union, Turkey applies the EU’s

common external customs tariff for third country (including U.S.) imports and imposes no duty on nonagricultural imports from EU and EFTA countries. Turkey’s harmonization of its trade and customs

regulations with those of the EU, coupled with a decline in most of its MFN tariff rates, benefits third

country exporters as well. Nevertheless, Turkey continues to maintain high tariff rates on many

agricultural and food products to protect domestic producers. The Turkish Government also levies high

duties, as well as excise taxes and other domestic charges, on imported alcoholic beverages that increase

wholesale prices by more than 200 percent. Turkey does not permit any meat imports.

Investment: While Turkey’s legal regime for foreign investment is liberal, private sector investment is

often hindered, regardless of nationality, by: excessive bureaucracy; political and macroeconomic

uncertainty; weaknesses in the judicial system; high tax rates; a weak framework for corporate governance;

and frequent, sometimes unclear changes in the legal and regulatory environment. The Turkish

government is considering legal and other changes to reduce red tape and dismantle other barriers to

investment. 

Intellectual Property: While maintaining that it is in full compliance with its obligations under the WTO

TRIPS agreement, Turkey provides neither patent protection nor adequate data exclusivity for

pharmaceutical products, both of which are required under TRIPS. Turkey has passed a patent law, but it

will only protect drugs coming on the market in another 3-4 years. Local producers still rely on data

submitted by drug inventors in registering their generic copies. The U.S. Government continues to urge

Turkey to adopt data exclusivity retroactive to January 2000, when Turkey’s TRIPS obligations came into

effect.

Qualifying Industrial Zones (QIZs): In January 2002, President Bush offered to make Turkey eligible for

Qualifying Industrial Zones (QIZs), which would permit products manufactured within such QIZs to enter

the United States duty-free. At the U.S.-Turkey Economic Partnership Commission (EPC) meeting in

February, and at the U.S.-Turkey Trade and Investment Framework Agreement (TIFA) Council meeting in

April, U.S. delegations presented the Turkish government with information on the QIZ program,

requesting that the Turkish side in return provide basic information on how it foresaw utilizing the

program. In Fall 2002, the Administration submitted draft legislation to Congress to amend current QIZ

legislation to permit Turkish participation in the initiative. Although the legislation passed the U.S. House

of Representatives, the Senate was unable to act prior to adjournment. We anticipate the new Congress

will take up the QIZ legislation early in 2003.
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D. Russia, Central Europe and the Newly Independent States

Overview

Over the past decade, the United States has been actively supporting political and economic reforms in

Central Europe (Poland, Hungary, Slovenia, the Czech Republic, Slovakia, Romania, Bulgaria, Estonia,

Latvia, Lithuania, Croatia, Albania, Bosnia-Herzegovina, the Former Yugoslav Republic of Macedonia,

and Serbia-Montenegro) and the Newly Independent States (NIS) (Russia, Ukraine, Armenia, Azerbaijan,

Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, and Uzbekistan). 

The U.S. Government has been striving to construct a framework for the development of strong trade and

investment links between the United States and Central Europe and the NIS. This approach has been

pressed on both bilateral and multilateral fronts. Bilaterally, the United States has negotiated trade

agreements to extend Normal Trade Relations (formerly referred to as “most-favored nation” or “MFN”)

tariff treatment to these countries and to enhance intellectual property rights protection. The United States

also has extended Generalized System of Preferences (GSP) benefits to eligible countries and negotiated

bilateral investment treaties (BITs) to guarantee compensation for expropriation, transfers in convertible

currency, and the use of appropriate dispute settlement procedures. Multilaterally, the United States has

encouraged accession to the WTO as an important method of supporting economic reform. Now that

much of this framework is in place, USTR and its interagency colleagues are working to ensure that

Central Europe and the NIS satisfy their bilateral and multilateral trade obligations, as well as comply with

U.S. trade laws and regulations, such as those governing eligibility for participation in the GSP program. 

2002 Activities

1. Normal Trade Relations Status

Russia, Ukraine, and seven of the other NIS republics within the region receive conditional NTR tariff

treatment pursuant to the provisions of Title IV of the Trade Act of 1974, also known as the Jackson-Vanik

amendment. As part of U.S. sanctions policy related to the conflict in Southeast Europe, the United States

revoked NTR from Serbia-Montenegro (now the Federal Republic of Yugoslavia) in 1992. While certain

sanctions against Serbia-Montenegro were lifted in 1996 pursuant to the peace accords negotiated in

Dayton, Ohio, NTR tariff treatment has not yet been restored.

Under the Jackson-Vanik amendment, the President is required to deny NTR tariff treatment to any

non-market economy that was not eligible for such treatment in 1974 and that the President determines

denies or seriously restricts or burdens its citizens’ right to emigrate. This provision is subject to waiver, if

the President determines that such a waiver will substantially promote the legislation’s objectives. 

Alternatively, the President can determine that an affected country complies fully with the legislation’s

emigration requirements and report on this status semi-annually. Affected countries must also have a trade

agreement with the United States, including certain specified elements, in order to obtain conditional NTR

status.

The President has determined that Russia, Ukraine and all of the other NIS republics, with the exception of

Belarus, are in full compliance with the emigration requirements. Belarus, on the other hand, receives

NTR tariff treatment under an annual waiver, as Congress must enact a law to terminate application of

Title IV to a country. In 2000, pursuant to specific legislation, the President terminated application of

Title IV to the Kyrgyz Republic, Albania and Georgia. These countries now receive full NTR treatment. 

The Administration is currently consulting with the Congress and interested stakeholders with a view to
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removing Russia and the remaining NIS republics (except Belarus) from the coverage of Title IV

provisions.

If a country is still subject to Jackson-Vanik at the time of its accession to the WTO, the United States has

invoked the “non-application” provisions of the WTO. In such cases, the United States and the other

country in effect have no “WTO relations.” This situation, among other things, prevents the United States

from bringing a WTO dispute based on a country’s violation of the WTO or of commitments the country

undertook as part of its WTO accession package. (See Chapter II for further information).

2. Intellectual Property Rights

Since the United States has concluded bilateral agreements covering intellectual property rights (IPR)

protection throughout Central Europe and the NIS, USTR concentrates principally on ensuring compliance

by these countries with their IPR obligations. In 2000, the transitional period granted developing countries

and formerly centrally planned economies for compliance with the WTO’s Agreement on Trade-Related

Aspects of Intellectual Property Rights (TRIPS Agreement) expired. Accordingly, USTR has conducted a

close examination of compliance of WTO Members in the region with the TRIPS Agreement. The U.S.

Government has cooperated with and provided technical assistance to the countries in the region to help

improve the level of IPR protection. Much of USTR’s focus in the region is on improving enforcement of

existing IPR legislation. Copyright and trademark piracy has been a widespread and serious problem

throughout much of Central Europe and the NIS. Customs and law enforcement authorities in the region

are making slow progress in upgrading these countries’ enforcement efforts, but continued close

monitoring and technical assistance are still warranted. 

Three IPR issues in the region merit special mention:

a. Ukraine – Optical Media Piracy

Ukraine has become the leading producer and exporter of pirated compact discs (CDs) in Europe. U.S.

industry estimated that in 1999 pirates exported over 35 million pirated CDs to Europe and elsewhere,

which represented over $200 million in lost revenues. In June 2000, Ukrainian President Kuchma

committed to a plan of action to stop the unauthorized production of CDs and to enact legislation to outlaw

such piracy by November 1, 2000. However, due to the failure of Ukraine to pass an adequate optical disc

media licensing law , USTR designated Ukraine a Priority Foreign Country in March 2000 and initiated a

Special 301 investigation. In August 2001, USTR withdrew GSP beneficiary status from Ukraine. On

December 11, 2001, USTR announced that the U.S. Government would impose 100 percent duties on a list

of 23 Ukrainian products with an annual trade value of approximately $75 million contingent upon the

outcome of a vote on an optical media licensing law in the Ukrainian Parliament scheduled for December

13, 2001. As Ukraine failed to adopt the optical media licensing law, USTR announced on December 20,

2001 that the sanctions would take effect January 23, 2002. Those sanctions currently remain in effect.

b. Hungary, Slovenia, and Poland – Protection of Confidential Data

USTR places a high priority on protecting the confidential data submitted by pharmaceutical firms to

health authorities in order to obtain marketing approval. Data exclusivity is an important issue in U.S.

relations with the countries of Central Europe, because at present many pharmaceutical products of U.S.

firms do not yet enjoy product patent protection in these countries. Many foreign pharmaceuticals, at best,

receive process patents, a relatively weak form of protection. For those drugs without product patent

protection, limits on other producer’s use of data supporting marketing approval can take on special
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importance. Accordingly, USTR has pressed the Central European countries - especially Hungary and

Slovenia with their large generic drug industries - to limit use of data submitted in connection with

obtaining marketing approval. In December 2001, Poland restored the three-year period of data

exclusivity which it earlier had had in place by amending a newer law which would have eliminated

protection for confidential test data. In 2002, Slovenia passed legislation which provides such protection

in conformity with the TRIPS Agreement. Hungary is scheduled to put limited protection on use of data

into place in January 2003, in order to comply with EU directives. 

c. The Russian Federation – Widespread Piracy

In April 2002, Russia was again placed on the Special 301 “Priority Watch List” because of deficiencies in

both the protection and enforcement of IPR. Later in 2002, Russia revised several IPR laws, including

those on the protection of trademarks, integrated circuits and plant varieties. Revisions to several other

IPR laws, including the copyright law, remain under consideration in the Duma. Notably, enforcement of

IPR remains a pervasive problem. The prosecution and adjudication of intellectual property cases remains

weak and sporadic; there is a lack of transparency, and a failure to impose deterrent penalties. Russia’s

Customs administration also needs significant strengthening. Piracy of U.S. films, videos, sound

recordings, and computer software is a growing problem. In October 2002, as a result of U.S. efforts to

work with the Government of Russia to address the growing optical media piracy problem, the

Government of Russia established an inter-ministerial task force, headed by Russian Prime Minister

Kasyanov, to combat optical media piracy. Since October the Russian government has taken some steps to

remedy this problem, including raids on several of the illegal plants in operation which resulted in the

confiscation of 250,000 pirated CDs, DVDs and videos. We remain concerned about this issue and

continue to urge adoption of effective measures to address optical media piracy, including adoption of an

optical media law.

3. Generalized System of Preferences

Under the U.S. Government’s GSP program, developing countries are eligible to receive duty-free access

to the U.S. market for many items, if it is determined that these countries meet certain statutory criteria. 

All of the Central European countries (other than Slovenia and the Federal Republic of Yugoslavia) and

most of the NIS (Armenia, Georgia, Moldova, Kazakhstan, the Kyrgyz Republic, Russia and Uzbekistan)

participate in the GSP program. Azerbaijan, Tajikistan and Turkmenistan have never requested to be

designated as a country eligible to receive the benefits of the GSP program. Belarus’s GSP benefits were

suspended in 2000 due to worker rights violations. 

 

In 1997, the Government of Russia petitioned the United States for duty-free treatment under the GSP

program for exports of both unwrought titanium and wrought titanium. On July 1, 1998, the President

granted the request on wrought titanium. The petition on unwrought titanium was left pending based on

the situation in the U.S. titanium industry at that time. Three petitions on titanium were submitted during

the 2001-2002 GSP Annual Product Review. The GSP interagency committee will announce its decision

on whether to accept or deny review of these petitions in early 2003. 

In order to receive GSP benefits under the U.S. statute, beneficiary countries must provide for adequate

and effective protection and enforcement of intellectual property rights. USTR has conducted reviews,

based on petitions from the U.S. copyright industry, of several countries’ eligibility to receive GSP

benefits on this basis, namely Ukraine, Armenia, Moldova, Kazakhstan, Russia and Uzbekistan. In late

2000, based on significant improvement in Moldova’s intellectual property rights regime, the U.S.

copyright industry withdrew its petition with respect to Moldova. In August 2001, USTR withdrew GSP
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beneficiary status from Ukraine (see subsection on Ukraine -Optical Media Piracy above). The reviews of

Armenia, Kazakhstan, Russia and Uzbekistan remain ongoing.

The GSP statute provides that a country may not receive GSP benefits if it affords preferential treatment to

the products of a developed country, other than the United States, that has a significant adverse effect on

U.S. commerce. Based in part on this legislative requirement, the U.S. Government has been consulting

with several Central European countries concerning those countries’ granting, pursuant to their

Association Agreements with the EU, of preferential tariffs to EU exporters vis-a-vis U.S. exporters (see

section on EU Association Agreements below). 

4. WTO Accession

Prior to the end of 2002, virtually all of the Central European countries (Poland, Hungary, the Czech

Republic, Slovakia, Romania, Albania, Slovenia, Croatia, Latvia, Lithuania and Estonia) and three NIS

countries (the Kyrgyz Republic, Georgia, and Moldova) had become members of the WTO. In 2002 the

terms of accession for both Armenia and the Former Yugoslav Republic of Macedonia were approved by

the WTO General Council, and these countries are expected to become WTO members in early 2003

following ratification in these country’s respective parliaments. 

 

WTO accession working parties have been established for an additional seven NIS countries (the Russian

Federation, Ukraine, Azerbaijan, Belarus, Kazakhstan, Tajikistan and Uzbekistan) and two Central

European states (Bosnia-Herzegovina, and the Federal Republic of Yugoslavia). Of the NIS,

Turkmenistan has not yet applied for observer status or membership in the WTO.

The United States supports accession to the WTO on commercial terms and on the basis of a new

Member’s implementation of WTO provisions immediately upon accession. The United States has

provided technical assistance, in the form of short- and long-term advisors, to many of the countries in the

region in support of the WTO accession process. (See Chapter II for further information on accessions).

Russia’s WTO accession was particularly active in 2002. Russia indicated an interest in accelerating the

negotiations and has taken steps to put in place new and amended laws and regulations to bring it into

conformity with WTO provisions. Since Russia applied for membership, the United States has strongly

supported Russia’s efforts to join the GATT 1947 and then the WTO, through active participation in the

WTO Working Party established to conduct the negotiations and through technical assistance on how to

move Russia’s trade regime into conformity with WTO rules. In a series of Working Party meetings

through December 2002, Russia continued to describe its trade regime, with WTO delegations noting

specific aspects of the trade regime that require further legislative action to become compatible with the

WTO. The United States and Russia also continued bilateral discussions on Russia’s offers on goods and

services market access throughout 2002. 

WTO-based reforms to Russia’s trade regime will strengthen its ongoing efforts for broader-based marketoriented economic reform and can help Russia integrate more smoothly into the global economy. 

Adopting WTO provisions will give Russia a world-class framework for intellectual property protection,

customs duties and procedures, and application of other requirements to imports that will encourage

increased investment and economic growth. Completion of the accession negotiations will depend on how

rapidly Russia implements WTO rules and moves to conclude negotiations on goods and services with

current WTO members.
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5. Bilateral Trade Agreements and Bilateral Investment Treaties

The United States has some form of bilateral trade agreement with all of the Central European and NIS

countries. In addition to these general trade agreements, the United States has concluded a variety of trade

agreements concerning specific product areas with various Central European countries and the NIS, such

as those regarding firearms with Russia, textiles with Romania and Macedonia, customs valuation with

Romania, and poultry with Poland and Russia.

In Central Europe, the United States has Bilateral Investment Treaties (BITs) in force with Albania,

Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, and Croatia. Of the

NIS, the United States currently has BITs in force with seven countries (Armenia, Azerbaijan, Georgia,

Kazakhstan, the Kyrgyz Republic, Moldova, and Ukraine) and has signed BITs with three others (Russia,

Belarus, and Uzbekistan) for which the formal process of ratification has not been completed. 

6. EU Association Agreements

The United States has been strongly supportive of the integration of the Central European countries into

Western Europe. Ten Central European countries (Poland, Hungary, Slovenia, the Czech Republic,

Slovakia, Romania, Bulgaria, Estonia, Latvia, and Lithuania) have concluded Association Agreements

(often called “Europe Agreements”) with the EU which are meant to set the stage for eventual EU

membership. The Europe Agreements provide for the reduction to zero of virtually all tariff rates on

industrial products and preferential rates and quotas for many agricultural products. In 2000, the EU and

all the candidate countries, as a follow-on to the Association Agreements, agreed to reduce their mutual

tariff rates to zero for the vast majority of each other’s agricultural products. The candidate countries’

most-favored nation (MFN) tariff rates on industrial goods are generally higher than comparable EU rates

while the MFN rates on agricultural goods are usually lower than EU rates. Consequently, U.S. exporters

often face relatively high Central European MFN tariff rates on industrial goods in contrast with the zero

or preferential rates faced by EU exporters. Much of this tariff differential problem with respect to

industrial goods will disappear when the candidate countries formally join the EU (See Western Europe

section above) and adopt generally low EU industrial tariff rates.

Until these countries’ accession to the EU, the United States has been consulting with the Central

European countries to address the tariff differential problem: 

a. Poland – Tariff Reductions: In 2001, the United States and Poland concluded a comprehensive

trade package designed to lower tariffs on key U.S. exports to Poland. The agreement, which was

implemented by Poland in September 2002, creates a bilateral working group where these issues

can be addressed. The industrial products for which tariff reductions were negotiated include:

certain chemicals and chemical products, beauty products, personal deodorants and antiperspirants,

gas turbines, centrifuge filters, machines for the preparation of food or drink, fiber optic cables,

tractors, large engine autos and auto parts, certain medical supplies, and measuring instruments. 

With respect to agricultural products, Poland agreed to lower tariffs on grapefruit, non-sparkling

wine, and almonds. Poland also agreed to an independent peer review of its phytosanitary

measure on ragweed. In exchange for Poland’s commitments, the United States expressed its

intention to continue support for Poland’s participation in the U.S. Generalized System of

Preferences (GSP) program.

b. Hungary – Tariff Reductions: The United States and Hungary signed a comprehensive trade

agreement in January 2002 which lowered tariffs on key U.S. exports to Hungary effective April
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2002. The industrial products for which tariff reductions were negotiated include: steam and gas

turbines, large engine autos and auto and tractor parts, automatic data processing machines, office

machine parts, beauty products, various chemicals, plastics, medical instruments and equipment,

laser disks, and telephone equipment. Hungary also agreed to lower tariffs on almonds and

pecans, grapefruit, and bovine semen. In light of Hungary's commitments, the United States

agreed to continue its support for Hungary's participation in the GSP program.

c. The Czech Republic and Slovakia – Waiver of Tariffs on Civil Aircraft and Parts: The Czech

Republic and Slovakia, which have a customs union, impose a 4.8 percent tariff rate on large civil

aircraft and parts from U.S. exporters, but allow duty-free access to their markets for EU exporters. 

This tariff differential posed a major impediment to the ability of U.S. firms to compete against

EU firms for large aircraft tenders in the Czech/Slovak market. In late 2000, the Czech Republic

and Slovakia, in response to U.S. Government requests, agreed to waive 2001 tariffs on large civil

aircraft and key parts. This waiver was renewed for 2002 and has been renewed for 2003. 

In October 2002, USTR began discussions with Romania on a similar tariff reduction agreement.

To facilitate trade with EU accession candidate countries, the EU is concluding Protocols to the Europe

Agreements on Conformity Assessment and Acceptance of Industrial Products (called "PECAs"). The first

PECAs, which entered into force with Hungary and the Czech Republic in 2001, eliminated the need for

further product testing and certification of EU-origin products in designated product sectors. During 2002,

the United States continued to press its concerns, both bilaterally and in the WTO, that the rule of origin

provision in the agreements with Hungary and the Czech Republic unjustifiably discriminates against nonEU origin products and is inconsistent with WTO obligations. The European Union is now proceeding to

remove this origin provision from its existing PECAs. New PECAs, without the problematic rule of origin

provision, entered into force with Latvia and Lithuania in 2002. We will continue to monitor this issue.

7. Country Specific Issues

The United States continued to encounter a number of country specific trade issues in the region, which

were not described above. The major items are discussed below.

a. Russia – Market Access for Poultry 

The United States was actively engaged with the Russian government throughout 2002 to ensure that U.S.

poultry producers continue to maintain access to the Russian market. Following intense discussions in the

wake of the Russian government’s temporary ban on U.S. poultry exports in March 2002, the United

States signed a protocol with the Russian government that led to the resumption of trade flows. This

protocol established a framework for closer cooperation between U.S. and Russian veterinary officials and

provided for improved certification and testing procedures. Following the negotiation of this protocol, the

United States began intensive negotiations with Russia on a new veterinary certificate for U.S. poultry

exports which was finalized in August 2002. The United States continues to monitor Russia’s

implementation of the new certification and testing requirements. 

b. Russia – Product Standards, Testing, Labeling and Certification

U.S. companies still cite product certification requirements as a principal obstacle to U.S. trade and

investment in Russia. In the context of Russia’s WTO accession negotiations, we continue to urge Russia

to bring its standards and certification regime into compliance with international practice. The Russian
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government is now attempting to put in place the necessary legal and administrative framework to

establish standards procedures and processes for certification and licensing of products in Russia in order

to better align with WTO rules.

There has been some movement to eliminate duplication among regulatory agencies and to clarify

categories of products subject to certification. However, businesses are still experiencing difficulties in

getting product approvals in key sectors. Manufacturer declaration of conformity is now feasible under

Russian law, but is not yet widely used. In 1998, the Russian State Committee on Standards adopted a

new nomenclature of goods subject to mandatory certification, effective January 1, 1999, and the Russian

government has been moving to revise problematic legislation, as provided under its Technical Barriers to

Trade action plan.

Certification is a particularly costly and prolonged procedure in the case of telecommunications

equipment. In many sectors, type certification or self-certification by manufacturers is currently not

possible. Veterinary certification is often arbitrary and needs to be more transparent and based on science. 

Russian phytosanitary import requirements for certain planting seeds (notably corn, soybeans and

sunflowers) appear to lack scientific basis and have blocked imports from the United States. Discussions

to ease or eliminate burdensome Russian requirements are ongoing.

c. Russia – Aircraft Market Access

The United States and Russia concluded a joint Memorandum of Understanding (MOU) in 1996 which

was designed to address U.S. concerns about access to the Russian civil aircraft market and the application

of international trade rules to the Russian aircraft sector. Under the MOU, the Russian Federation

confirmed that it will become a signatory to the WTO Agreement on Trade in Civil Aircraft, although thus

far Russia has refused to make this commitment in its WTO accession negotiations. In the interim, before

Russia accepts its full international trade obligations, the MOU also commits the Russian Federation to

provide fair and reasonable access for foreign aircraft to its market. Russia agreed to take specific steps,

such as the granting of tariff waivers and the reduction of tariffs, to enable its airlines to meet their needs

for U.S. and other non-Russian aircraft on a non-discriminatory basis. In 2002, Russia announced a

decision to reallocate existing tariff waivers in favor of Airbus. We continue to press the Russian

government to join the WTO Agreement on Trade in Civil Aircraft as soon as possible and to take

immediately other steps, including increasing the limited number of tariff-waivers currently available, to

facilitate increased market access for U.S. aircraft.

E. Mediterranean/Middle East

Overview

U.S. trade relations with the countries of Northern Africa and the Middle East, while to date relatively

modest, have considerable potential value in terms of both U.S. commercial and foreign policy interests. 

The events of September 11, 2001 highlighted the importance of supporting peace and stability in the

region by fostering economic development. The U.S.-Jordan Free Trade Agreement (FTA), the U.S.-Israel

Free Trade Agreement, the U.S. commitment to negotiate a Free Trade Agreement with Morocco, together

with the Trade and Investment Framework Agreements (TIFAs) established with several countries in the

region, provide the context for our bilateral trade policy discussions with these countries, which are aimed

at increasing U.S. exports to the region and assisting in the development of intra-regional trade.
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2002 Activities

1. Morocco Free Trade Agreement

In April of 2002 President Bush and King Mohammed VI agreed to pursue a Free Trade Agreement (FTA)

between the United States and Morocco. On October 1, 2002, USTR Zoellick notified Congress that trade

negotiations would be initiated with the Moroccans in January of 2003. The FTA with Morocco will be

comprehensive and is part of the Administration’s effort to promote more open and prosperous Muslim

societies. The FTA will support the significant economic and political reforms underway in Morocco, and

create improved commercial and market opportunities for U.S. exports to Morocco by reducing and

eliminating trade barriers. USTR Zoellick has had consultations with Congress on the FTA, and in

November 2002, public hearings were held. In response to a notice in The Federal Register, 37 written

submissions were submitted regarding the matters to be addressed. USTR is pursuing an aggressive

negotiation schedule, and negotiations are expected to be finished by the end of calendar year 2003. 

2. Egypt

In June 2002 USTR Zoellick traveled to Cairo in the first visit by a U.S. Trade Representative to Egypt. 

His visit underscored the importance the United States attaches to expanding bilateral trade and investment

ties with this key Middle East partner. USTR Zoellick’s trip to Egypt complemented efforts by the two

countries throughout the year to use the U.S.-Egypt Trade and Investment Framework Agreement (TIFA)

to strengthen the U.S.-Egyptian economic relationship and promote Egypt's economic reform program. 

At the October 2002 meeting of the U.S.-Egypt TIFA Council, the two governments agreed to form four

working groups to facilitate rapid progress on priority trade and investment issues in the areas of Customs

Administration and Reform, Government Procurement, Sanitary and Phytosanitary Issues Related to

Agricultural Trade, and Agricultural Tariff and Trade issues. They also discussed expanded U.S.-Egypt

cooperation on issues related to the Doha Development Agenda. In addition, the two sides reviewed recent

progress in Egypt's on-going economic reform program in which the United States plays a major role

through assistance by the U.S. Agency for International Development. Resolution of problems affecting

U.S. firms and investors in Egypt also continues to be a key focus of U.S. efforts in the TIFA process. 

3. Israel

The United States and Israel held four formal rounds of negotiations throughout 2002 on a new bilateral

agreement on trade in agricultural products. This new agreement would succeed the 1996 Agriculture

Agreement which expired at the end of 2001 and was extended through 2002. At the time this report went

to press, the two sides had not yet concluded a new agreement. The United States and Israel have

undertaken negotiations on agricultural trade to address problems arising from the two sides’ disagreement

as to whether or not the 1985 U.S.-Israel Free Trade Agreement permits either party to apply restrictions

on bilateral trade in this area.

4. Jordan – Implementing the Free Trade Agreement

The United States and Jordan cooperated in 2002 to help their business communities take advantage of the

opportunities afforded by the U.S.-Jordan Free Trade Agreement (FTA) which went into effect in

December 2001. These efforts included the first U.S.-Jordan Joint Committee meeting held under the FTA

in December 2002 in Washington. The FTA established the Joint Committee to bring together senior U.S.

and Jordanian officials to discuss and act on ways to further boost bilateral trade and investment.
312002 estimates are annualized based on 11 months’ data.

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The FTA will eliminate nearly all tariffs on industrial goods and farm products within 10 years, as well as

commercial barriers to bilateral trade in goods and services originating in the United States and Jordan. 

The FTA includes, for the first time ever in the text of a trade agreement, substantive provisions on

electronic commerce. Other provisions address intellectual property rights protection, balance of

payments, rules of origin, safeguards, labor, environment, and procedural matters such as consultations and

dispute settlement. Because the United States already has an up-to-date Bilateral Investment Treaty with

Jordan, the FTA does not include an investment chapter.

While the FTA is key part of part of the U.S.-Jordan economic relationship, it is just one component of an

extensive U.S.-Jordanian collaboration in economic relations. Close economic cooperation between the

two countries began in earnest with joint efforts on Jordan’s accession to the World Trade Organization

(WTO) in 2000. The United States and Jordan continue to work together closely in the WTO, particularly

on issues of special concern to developing nations. The United State’s efforts to support Jordan’s rapid

and successful WTO accession were followed on the bilateral front by the conclusion of the U.S.-Jordan

Trade and Investment Framework Agreement and a Bilateral Investment Treaty. Qualifying Industrial

Zones (QIZs) are another important example of successful U.S.-Jordanian efforts to boost Jordan’s

economic growth and promote peace in the Middle East.

These measures have played a significant role in boosting U.S.-Jordanian economic ties. In 1998, Jordan’s

goods exports to the United States totaled only $16 million. By 2002 U.S. goods imports had increased to

an estimated $414 million, an 81 percent increase ($185 million) from 2001. In 2002 U.S. goods exports

to Jordan were an estimated $420 million, up 24 percent ($81 million) from 200131. 

5. Jordan – Qualifying Industrial Zones

Qualifying Industrial Zones (QIZs) continue to be a bright spot in Jordanian economic performance. 

Eleven Qualifying Industrial Zones (QIZ) have been established in Jordan since 1998. They played an

important role in helping to boost Jordan’s exports to the United States from $18 million in 1998 to a

projected $400 million in 2002. Jordan estimates that QIZs have created up to 15,000 jobs. Peak QIZ

employment is forecast at 40,000 to 45,000. Investment in the establishment of QIZs is approximately $85

million to $100 million, which is expected to grow to $180 to $200 million when all projects are

completed. 

In 2001, USTR designated the eleventh QIZ in Jordan, the Zarqa Industrial Zone. Five QIZs were

designated in 2000: The Investors and Eastern Arab for Industrial and Real Estate Investments Company

Ltd. (Mushatta International Complex), El Zay Ready Wear Manufacturing Company Duty-Free Area, Al

Qastal Industrial Zone, Aqaba Industrial Estate, and Industry and Information Technology Park Company

(Jordan CyberCity Company). Four QIZs were designated in 1999, Al-Tajamouat Industrial City, AdDulayl Industrial Park, Al-Kerak Industrial Estate, and Gateway Projects Industrial Zone. The first QIZ in

Jordan, Irbid, opened in 1998.

QIZs are established pursuant to legislation passed by the Congress in October 1996, authorizing the

President to proclaim elimination of duties on articles produced in the West Bank, Gaza Strip, and

qualifying industrial zones in Israel and Jordan and Israel and Egypt. To date all QIZs have been

established in Jordan. 
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The steady growth of QIZs testifies to the economic potential of regional economic integration. In

addition to the competitive benefit of duty-free status for QIZ exports to the United States, QIZs

increasingly offer participating companies the advantages of modern infrastructure and strong export

expertise and linkages. This evolution should serve to increase the economic benefits of QIZs.

6. Trade and Investment Framework Agreements

In 2002, the United States concluded Trade and Investment Framework Agreements (TIFAs) with Bahrain

and Tunisia. TIFAs previously have been previously negotiated with Egypt, Jordan, Turkey, Morocco,

and Algeria. Each TIFA establishes a bilateral Trade and Investment Council that enables USTR-chaired

representatives to meet directly with their counterparts regularly to discuss specific trade and investment

matters and to negotiate the removal of impediments and barriers to trade and investment.

7. WTO Accession

Negotiations on the accession to the WTO of Saudi Arabia and Algeria continued in 2002, and the 

first WTO Working Group on Lebanese WTO accession was held. The United States supports accession

to the WTO on the basis of a new Member’s implementation of WTO provisions immediately upon

accession and of a new Member’s commercially meaningful market access commitments for U.S. goods,

services, and agricultural products. 

8. Intellectual Property Rights

Protection of intellectual property rights remains a leading priority in the Middle East region. Egypt, Israel

and Lebanon are on the Special 301 Priority Watch List, while Kuwait, Qatar, Turkey and Saudi Arabia

are on the Watch List. An out-of-cycle review (OCR) was initiated for Israel in 2002 to further assess

progress in its efforts to improve enforcement of copyright and trademark rights.

F. Asia and the Pacific

Overview

The Asia-Pacific region has witnessed a dramatic expansion of trade and economic growth over the past

decade. This growth is largely the result of the commitment of the regional governments to economic

reform and liberalization. While there is clearly additional work to be done in opening markets in Asia

and the Pacific, significant progress has been made. The commitment of regional leaders in the Asia

Pacific Economic Cooperation (APEC) forum to move forward toward free and open regional trade and

investment has been an important factor in spurring this regional trend (see Chapter III for information on

APEC). In addition, the Administration is committed to further opening markets of interest to American

farmers, ranchers, manufacturers, and services providers and to the implementation of bilateral and

multilateral agreements, including those protecting intellectual property, which is critical to U.S. exporters

in high-technology, entertainment and other key sectors. 

Highlights of the achievements in this region during 2002 include:

• Conclusion of the Singapore FTA. In January 2003, the United States and Singapore reached

agreement on an FTA, the first comprehensive agreement between the United States and an Asian

nation. The FTA’s provisions cover not only goods and services, but customs procedures and

cooperation, investment, competition policy, intellectual property rights, electronic commerce,
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transparency, labor and environment. The agreement with the United States’ 11th largest trading

partner is expected to eliminate trade barriers between the two countries and spur bilateral trade

and investment. The agreement also will serve as a benchmark for possible free trade agreements

with other countries in Southeast Asia. More detailed discussion regarding the negotiation of this

agreement appears in Chapter IV, Section A.

• Announcement of the Enterprise for ASEAN Initiative. In October 2002, President Bush

announced the Enterprise for ASEAN Initiative (EAI), a new initiative intended to further build

U.S.-ASEAN trade ties. Under the EAI, the United States offered the prospect of bilateral FTAs

with ASEAN countries that are committed to the economic reforms and openness inherent in an

FTA with the United States.

• Launch of the U.S.-Australia Free Trade Agreement. In November 2002, the United States

launched FTA negotiations with Australia. The United States expects an FTA with Australia to

boost trade in both goods and services and enhance employment opportunities in both countries. 

Such and agreement will enhance commercial ties and address barriers that U.S. exporters face. 

The United States also sees the FTA negotiations as helping to further deepen the already close

cooperation between the United States and Australia in the WTO. 

2002 Activities

The United States announced major new regional and bilateral trade initiatives in the Asia Pacific region in

2002 to expand opportunities for U.S. industry, farmers, and ranchers. The United States pursued bilateral

FTAs and undertook other bilateral work to strengthen trade ties with the Asia Pacific region and eliminate

barriers faced by U.S. exporters in this region, began work on the EAI, and continued efforts with APEC

Members to implement the Shanghai Accord, a series of specific commitments to ensure APEC reaches its

free trade and investment goals. These initiatives are intended to complement our global trade priorities,

particularly the successful conclusion of the Doha Development Agenda. 

1. Australia

a. Free Trade Agreement

On November 13, 2002, the Administration notified Congress of its intent to launch FTA negotiations with

Australia. In its notification letter, the Administration noted that the increased access to Australia’s market

that an FTA would provide would further boost trade in both goods and services, enhancing employment

opportunities in both countries. An FTA also would encourage additional foreign investment flows

between the United States and Australia, adding to the many jobs that the already significant investment

flows between the two countries currently support. Moreover, the discussion of an FTA with Australia has

strengthened our WTO partnership as well as the U.S. position in global trade negotiations. Australia was

the first strong supporter of the United States WTO agriculture proposal made in July 2002. The United

States expects the FTA negotiations to provide the opportunity for further cooperation on agriculture and

other issues the United States is seeking to resolve through the WTO Doha Development Agenda

negotiations, as well as deepen the broader ties between our countries and strengthen the foundation of our

security relationship. 
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b. Bilateral Issues

The United States held extensive and detailed discussions with Australia on sanitary and phytosanitary

(SPS) issues over the past year. The two sides made progress on specific issues, including opening the

Australian market to U.S. table grapes. The two sides agreed that SPS measures must be based on science

and be fully transparent. The Australian government implemented a new administrative framework in

early 2002 to enhance the transparency of its SPS regime. Nonetheless, the United States continues to

have concerns about the stringency of Australia’s SPS regime, and the two sides agreed to continue

discussion of SPS measures in parallel with the FTA negotiations. 

2. New Zealand

The United States held a Trade and Investment Framework Agreement (TIFA) meeting with New Zealand

in May, during which the two sides discussed the range of outstanding bilateral trade issues between them. 

Progress was made on several sanitary and phytosanitary (SPS) issues, including table grapes and pork,

although the United States continues to have concerns about the stringency of New Zealand’s SPS regime. 

The United States raised concerns about New Zealand’s biotechnology labeling regime, its two-year

moratorium on the release of genetically-modified organisms, and its approval process for biotechnology

seeds. The U.S. Government also noted longstanding concerns on intellectual property, including parallel

imports and trademarks, and pharmaceutical issues. The United States will continue working with New

Zealand under the TIFA to address bilateral trade issues, as well as in APEC and the WTO to advance our

common trade interests.

3. The Association of Southeast Asian Nations (ASEAN)

President Bush announced a major new initiative, the Enterprise for ASEAN Initiative (EAI), in October

2002 to strengthen U.S. trade and investment ties with ASEAN both as a region and bilaterally. With twoway trade of nearly $120 billion annually, the ten-member ASEAN group already is the United States’

fifth largest trading partner collectively. The new initiative is intended to further enhance the already

close U.S. relationship with this strategic and commercially important region. With the ASEAN countries

anticipating solid future economic growth and their population of 500 million, the United States

anticipates significant opportunities for U.S. companies, particularly agricultural exporters. For ASEAN,

this initiative will help boost trade and redirect investment back to the ASEAN region. 

Under the EAI, the United States offered the prospect of bilateral free trade agreements with ASEAN

countries that are committed to the economic reforms and openness inherent in an FTA with the United

States. Any potential FTA partner must be a WTO member and have a TIFA with the United States. The

United States already had TIFAs with Indonesia and Philippines and signed TIFAs with Thailand in

October and Brunei Darussalam in December. The U.S. Government sees progress in addressing bilateral

issues under these TIFAs as important to laying the groundwork for entering FTA negotiations with the

confidence that they can be concluded successfully. The U.S. goal is to create a network of bilateral FTAs

with ASEAN countries.

Under the EAI, the United States also committed to support the efforts of the three ASEAN members that

do not yet belong to the WTO to complete their accessions successfully. The United States offered to

assist countries needing help to develop the capacity to participate in and implement FTAs, as well as to

connect openness and trade liberalization to other reforms.
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In November 2002, the United States and ASEAN trade ministers met to discuss the EAI in greater detail. 

The ministers agreed to intensify their efforts to make progress under the initiative (as well as the U.S.-

ASEAN work program established in April 2002) including efforts on intellectual property rights, customs

and trade facilitation, biotechnology, standards, agriculture, human resource development and capacity

building, small and medium enterprises, and information and communications technology. 

a. Indonesia

i. General

The United States has worked to bolster its trade and investment relationship with Indonesia, seeking to

help strengthen Indonesia’s economy and encourage liberalization and other economic reforms that would

generate additional trade and foreign investment. The United States and Indonesia held their fourth Trade

and Investment Council meeting under the bilateral TIFA in Bali in November, 2002, during which the

trade ministers discussed the range of outstanding issues affecting U.S.-Indonesian trade. The United

States urged Indonesia to eliminate its ban on poultry parts and new regulations impeding exports of

textiles to Indonesia. The two sides also discussed ways to improve Indonesia’s investment climate and

facilitate trade, including capacity building. They discussed the need to hold regular consultations under

the TIFA to resolve bilateral issues and other steps to help lay the groundwork for a free trade agreement,

as envisioned by the Enterprise for ASEAN Initiative. Indonesia is the United States’ 26th largest trading

partner, with $13 billion in two-way trade.

ii. Intellectual Property Rights (IPR)

On IPR, the U.S. Government reiterated longstanding concerns and urged Indonesia to take steps to

strengthen its IPR regime. USTR placed Indonesia on the Special 301 Priority Watch List in April 2001

because of concerns over increased optical media piracy and weaknesses in Indonesia’s IPR enforcement. 

To help Indonesia address these concerns, the U.S. Government in May 2002 provided Indonesia with an

IPR Action Plan. In July, the Indonesian government passed a new copyright law, which took some initial

steps in areas of concern to the United States, including circumvention of technological protection

measures and penalties for corporate end-user piracy, as well as regulations on optical disc production. 

However, the legislation failed to address other areas of concern, particularly deficiencies related to

enforcement. U.S. industry estimates that the weak IPR environment in Indonesia resulted in $188 million

in losses last year. The U.S. Government will continue to work with Indonesia under the TIFA to achieve

progress on IPR issues.

b. Malaysia

i. General

During 2002, the United States and Malaysia consulted, including at the ministerial level, on their trade

relationship and ways to enhance cooperation in regional and multilateral fora. The United States will

continue to encourage Malaysia to further open and liberalize its economy, which is heavily tradedependent. Malaysia is the United States’ 12th largest trading partner, with $32 billion in two-way trade. 

ii. Intellectual Property Rights

Malaysia has made strides in strengthening its IPR regime, including determined efforts to eliminate

optical media piracy. It passed strong copyright legislation and increased its resources aimed at copyright
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enforcement. Although progress has been steady, Malaysia remained on the Special 301 Watch List in

April 2002 because of continuing concerns over its failure to fully implement all provisions of the Optical

Disk Act and the inability to establish a climate of deterrence by prosecuting IPR offenders and imposing

deterrent penalties. U.S. industry estimates that the deficiencies in Malaysia’s IPR regime cost it $316

million last year. The U.S. Government will continue to work with Malaysia to further strengthen its IPR

environment. 

iii. Automotive Measures

Malaysia continues to promote the development of domestic automobile manufacturers under its "national

automobile" program through high tariffs, quotas, and other measures. In addition, it maintains local

content requirements on investment in the auto sector. As required by the WTO Agreement on

Trade-Related Investment Measures, Malaysia was scheduled to eliminate its incentives for local

production by January 1, 2000, but it received an extension to December 2003 to phase out these

measures. Malaysia also received a delay from its ASEAN partners to lower tariffs in this sector as it

committed to do under the ASEAN Free Trade Area (AFTA). The United States will continue to urge

Malaysia to eliminate measures that protect its auto industry, which undermine the benefits the heavily

trade-dependent country stands to gain from further liberalization, as well as investor confidence and the

success of AFTA. 

c. Philippines

i. General

The United States sought to further enhance its trade and investment relationship with the Philippines in

2002, urging additional trade liberalization and facilitation and other steps to encourage trade and

investment. The United States and the Philippines held a Trade and Investment Council (TIC) meeting

under the bilateral TIFA in November, during which the trade ministers discussed the range of outstanding

U.S.-Philippines trade. The two sides agreed on the need for regular consultations under the TIFA to

resolve bilateral issues and to consider other steps to help lay the groundwork for a free trade agreement,

as envisioned by the Enterprise for ASEAN Initiative. The Philippines is the United States’ 23th largest

trading partner, with $19 billion in two-way trade.

ii. Intellectual Property Rights

The Philippines intensified its efforts to strengthen IPR protection in the last year, including measures to

stop imports of pirated products and increase the number of raids, resulting in the seizure and destruction

of millions of dollars worth of pirated products. However, the Philippines so far has failed to pass an

optical media law that would curb the still rampant pirate production of optical media or to pass legislation

on electronic commerce piracy. Moreover, while it has increased the number of raids, the Philippines has

been slow to prosecute IPR offenders and reluctant to impose deterrent penalties. U.S. industry estimates

that the weak IPR environment in the Philippines resulted in $116 million in losses in 2001. 

To help the Philippines strengthen its IPR regime, the U.S. Government in August 2002 provided it with

an IPR Action Plan that included specific steps on judicial, legislative and regulatory, and enforcement

issues. The Philippines has made limited progress in implementing these recommendations. The U.S. and

Philippines trade ministers discussed U.S. IPR concerns during the November 2002 TIC meeting, and the

U.S. Government reiterated its offer to provide the Philippines support in this area. The United States will
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hold an out-of-cycle review in early 2003 to assess the Philippines’ progress in strengthening its IPR

regime. 

iii. Sanitary and Phytosanitary (SPS) Issues

The Philippines proposed a new requirement of quarterly mandatory third-party inspections of meat and

dairy production facilities overseas. The measures, if implemented as proposed, would disrupt U.S. meat

and dairy exports to the Philippines, estimated at $56 million. The United States, EU, Canada, Australia,

and New Zealand raised objections to this proposed regulation at a meeting of the WTO SPS Committee in

Geneva on November 7, 2002. In addition, U.S. and Philippine trade ministers discussed the issue at their

November 20, 2002, TIC meeting. The measure originally was to be implemented on January 1, 2003. 

The Philippines announced in early December 2002 that the requirement will be implemented on April 1,

2003, and it will be conducted biannually in the first year and annually thereafter. The U.S. Government

will continue to urge the Philippines not to implement this requirement. 

iv. Automotive Sector

The Philippines is revising its auto excise tax system to a value-based structure. The U.S. Government

supports this change, but has expressed concerns to the Philippine government about certain details of the

proposal. In addition, the United States has raised serious concerns about proposals the Philippines

reportedly is considering to significantly raise import duties on automobiles to help develop its automotive

industry. Such increases would raise questions about previous Philippines announcements that tariff

reductions in this sector would occur in 2004. The U.S. Government will continue to monitor this issue

closely.

d. Singapore

In November 2000, the United States and Singapore announced the launch of negotiations for a bilateral 

Free Trade Agreement (FTA), which concluded in early 2003. Discussion of U.S.-Singapore trade issues

had been handled in the context of these negotiations (see U.S.-Singapore FTA). 

e. Thailand

i. General

The United States sought to bolster its trade ties with Thailand in 2002, signing a Trade and

Investment Framework Agreement (TIFA) in October. The two sides agreed to hold a first Trade and

Investment Council meeting in February 2003 in order to resolve outstanding bilateral issues and consider

other steps to help lay the groundwork for a free trade agreement, as envisioned by the Enterprise for

ASEAN Initiative. Thailand is the United States’ 19th largest trading partner with $21 billion in two-way

trade.

ii. Intellectual Property Rights

Thailand heightened its efforts to strengthen its IPR regime in 2002, including new legislation and

stepped-up enforcement efforts, resulting in some improvements, but significant and sustained progress is

still needed. On March 1, the Thai Parliament passed a Trade Secrets Act; the U.S. Government has

concerns about some provisions of this measure. In addition, the Thai government drafted an Optical Disk

Plant Control Act, which is intended to enhance the authority and capabilities of enforcement authorities to
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take action against pirate optical disk producers. The Thai government has committed to introduce the bill

into Parliament in 2003; however, key provisions remain under debate and timely passage of a strong law

remains uncertain. There appears little chance that the Thai government will amend its copyright law to

deal with electronic commerce piracy, despite indications earlier in the year that it would do so. 

Weak and uncoordinated enforcement efforts, resource limitations, and corruption and other problems led

to continued increases in IPR piracy. U.S. industry estimates losses due to piracy at over $130 million last

year. Thailand has acknowledged the gravity of the piracy situation and in December, a Memorandum of

Understanding (MOU) on the Cooperation of the Relevant Government Agencies on the Enforcement of

IPR was signed by 13 government agencies. In this MOU, Thailand called on agencies to intensify and

further cooperate in their enforcement efforts and consider other measures to curb piracy. The U.S.

Government will closely monitor the results of this new effort and will conduct an out-of-cycle review in

early 2003 to assess Thailand’s progress in strengthening its IPR regime. 

iii. Customs

Thailand’s customs rules and procedures are non-transparent and inconsistently applied, serving as a

serious barrier to trade. A customs valuation law passed in 2000 has alleviated to some degree our

longstanding problems in this area, but implementation has been uneven, and discretionary application of

minimum import prices in lieu of transaction values continues. Thailand’s customs procedures cause

undue and costly processing delays. The system continues to involve excessive paperwork and formalities,

and lacks coordination between custom and other import regulating agencies as well as modern,

computerized processes. Moreover, the appellate process for customs determinations is non-transparent

and ineffective. The U.S. Government will continue to monitor Thailand’s implementation of its customs

valuation law and urge it to improve its customs regime.

 

iv. Market Access

Thailand maintains relatively high tariffs and a complicated tariff regime, which serve to protect

Thailand’s agricultural, automotive, alcoholic beverage, textile, and electronics industries. While it

continues to reduce selected duties in line with its WTO and ASEAN Free Trade Area commitments, it is

behind schedule in implementing its own tariff reduction goals. U.S. industry also has faced tariff

reclassifications, including of motion pictures, that raise duties to prohibitive levels. Tariff-rate quotas and

arbitrarily applied phytosanitary standards serve as constraints to the import of certain agricultural

products. In addition, Thailand has implemented non-transparent price controls on some products,

including pharmaceuticals, which impede market access. Thailand’s uneven application of Buy Thai

policies has also has hurt U.S. bidders. The U.S. Government will continue to raise its serious concerns

over these issues with the Thai government.

f. Cambodia

On December 31, 2001, the United States and Cambodia reached agreement extending the Bilateral Textile

Agreement for an additional three years, through December 31, 2004. In the renewed agreement, the quota

for most textile exports from Cambodia in 2002 was 15 percent higher than in 2001. This increase

reflected the normal quota increase of 6 percent as well as a 9 percent increase in recognition of

Cambodia's progress in reforming labor conditions in textile factories and ensuring that these conditions

were in "substantial compliance" with internationally recognized labor standards and provisions of

Cambodia's labor law. The increase followed recent formal U.S.- Cambodian labor consultations. The
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International Labor Organization also has two projects underway assisting Cambodia in the

implementation of its labor law.

As in the original agreement, Cambodia is eligible for future additional quota increases if working

conditions in the garment industry substantially comply with internationally recognized core labor

standards. The U.S. and Cambodian Governments have agreed to increase this potential quota reward for

full compliance from 14 percent to 18 percent. Following two rounds of consultations on labor issues in

2002, Cambodia was granted a 12 percent increase in all of its quotas pursuant to the Agreement.

g. Normalization of Trade Relations with Vietnam and Laos

i. Vietnam

On July 13, 2000, the United States and Vietnam signed an historic bilateral trade agreement (BTA),

concluding a four-year negotiation to normalize trade relations. Upon implementation, the BTA granted

Vietnam "Normal Trade Relations" (NTR) status, that is, the same low tariffs that the United States applies

to imports from nearly every other country. The BTA also committed Vietnam to sweeping economic

reforms, which created trade and investment opportunities for both U.S. and Vietnamese companies, and

will lay the foundation for a new U.S. relationship with Vietnam.

At present, for Vietnam to receive NTR status, a bilateral trade agreement must be completed and

approved by Congress, and the President must "waive" the "Jackson-Vanik" provision, indicating that

Vietnam is making sufficient progress on the issue of free emigration. Since 1998, the President has

granted a Jackson-Vanik waiver for Vietnam. Thus, completion of the BTA and its subsequent approval

by Congress have cleared the way for Vietnam to receive annually renewed (as opposed to permanent)

NTR treatment from the United States.

On June 8, 2001, President Bush signed Proclamation 7449 and transmitted the BTA to Congress on that

date for its approval. In the proclamation, the President directed the USTR to publish notice of the

effective date of the BTA. Congress approved the BTA on October 3, 2001 and the President signed the

legislation approving the BTA on October 16, 2001. The National Assembly of Vietnam approved the

resolution ratifying the BTA on November 28, 2001 and the President of Vietnam signed the legislation on

December 4, 2001. 

On December 10, 2001, U.S. Trade Representative Robert B. Zoellick and Vu Khoan, Minister of Trade of

the Socialist Republic of Vietnam, exchanged written notices of acceptance, implementing the BTA. 

Thus, in accordance with the terms of the BTA, NTR tariff treatment for products of Vietnam became

effective on December 10, 2001. 

The first meeting of the Joint Committee established by the BTA was convened at vice-ministerial level on

May 6, 2002, in Hanoi, during which the two sides assessed progress toward implementation of the BTA. 

While applauding Vietnam’s commitment to economic reform, the United States underscored the

importance of Vietnam moving quickly to meet the timetables contained in the BTA for implementation. 

The two countries also discussed Vietnam’s pursuit of WTO membership and the negotiation of a textile

agreement. The next meeting of the Joint Committee will be held in the first quarter of 2003 and will

review the first year of implementation of the BTA. 
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ii. Laos

In 1997, the United States completed a comprehensive bilateral trade agreement with Laos aimed at

normalizing trade relations. Laos, unlike Vietnam, is not covered by the “Jackson-Vanik” provisions of

U.S. trade law. As with the Vietnam agreement, the Laos agreement requires separate legislation enabling

the President to grant normal trade relations status to Laos once formal acceptance of the agreement is

completed. 

3. Republic of Korea

a. Macroeconomics and Trade

At the end of 1997, Korea experienced a financial crisis brought on by a major mismatch in the maturity

structure of its external assets and liabilities. The crisis, and the IMF stabilization program that followed

which included credit from the IMF, the World Bank, and the Asian Development Bank, resulted in

significant restructuring of the Korean economy.

While the Korean government still maintains a majority ownership in several of the largest commercial

banks in Korea and a significant stake in a number of others, the government has made progress on

implementing some of its reform commitments during the past five years. Key reforms were carried out in

the financial sector, through the rationalization and recapitalization of its banks, and by consolidation of

the regulatory authority over the financial sector in a new, independent Financial Supervisory

Commission. The fiscal, monetary, and restructuring policies laid out by the Administration of President

Kim Dae Jung have contributed to a resumption of foreign and domestic consumer confidence in Korea's

economy. In 2001 Korea’s economy grew about 2.6 percent, despite the global downturn, and in 2002

grew approximately 6 percent. However, Korean authorities are seeking to further strengthen commercial

bank balance sheets and restructure merchant banks, investment trust companies and the insurance

industry. 

The United States and Korea consult regularly on a variety of trade issues. Meetings held on a quarterly

basis serve as the primary forum for bilateral discussion. During quarterly trade meetings held in 2002, the

United States and Korea focused on addressing issues in the following areas: automotive,

telecommunications, pharmaceuticals, intellectual property rights, and agriculture. The United States and

Korea also continue to cooperate effectively in regional and multilateral fora. These cooperative efforts

helped lead to the successful launch of new multilateral trade negotiations at the Doha Ministerial in

November 2001 and subsequent movement forward on a number of Doha Development Agenda issues.

b. Motor Vehicles

On October 20, 1998, the United States and Korea concluded a Memorandum of Understanding (MOU) to

improve market access for foreign motor vehicles. This MOU followed USTR identification of Korean

barriers to motor vehicles as a priority foreign country practice under Section 301. Under this MOU,

Korea agreed to: (1) bind in the WTO its 80 percent applied tariff rate at 8 percent; (2) lower some of its

motor-vehicle-related taxes and to eliminate others, thereby substantially reducing the tax burden on motor

vehicle owners; (3) streamline its standards and certification procedures and adopt a manufacturer driven

self-certification system by 2002; (4) establish a new mortgage mechanism to make it easier to purchase

motor vehicles in Korea; and (5) continue to actively and expeditiously address instances of anti-import

activity and to proactively educate Korean citizens on the benefits of free trade and competition. As a

result of the measures the Korean government committed to in the 1998 MOU, the USTR terminated a
174

Section 301 investigation and began monitoring the Korean government’s implementation of these

measures through formal reviews. 

During the 2002 MOU reviews, held in January, April, August and November, the United States and

Korea assessed progress under the agreement and discussed additional steps Korea will take to implement

this agreement. The Korean government has implemented many of the specific provisions of the MOU. 

However, the U.S. Government remains concerned about the lack of more substantial import penetration in

the Korean automotive market. Despite a notable increase in U.S. vehicle sales in Korea in 2002, the share

of foreign vehicles in the Korean market is approximately one percent as a result of continued high taxes

and tariffs, anti-import sentiments among many Korean consumers, and ROKG positions vis-a-vis several

important standards and certification issues. 

Over the last year, the United States has made specific proposals for addressing these concerns and

achieving further progress under the agreement. At the most recent MOU review, held in November, U.S.

proposals focused on addressing a tax classification issue related to U.S. pickup truck imports and

improving transparency in the implementation of Korea’s self-certification system for motor vehicle safety

and environmental regulations. The U.S. Government also made specific proposals to address outstanding

standards and certification issues, simplification of automotive taxes, overly high automotive tariffs and

the need for further Korean government action to improve the generally negative perception of foreign

vehicles among Korean citizens. 

In November 2001, the Korean government reduced one auto-related consumption tax which had a

positive effect on foreign auto sales. With the U.S. Government and U.S. industry joining a number of

domestic voices calling for the extension of this reduction, the ROKG continued this useful program 

through August 2002 (extended from the original June cut-off date). The Korean government also

announced that it plans to simplify and reduce this tax, with the modification set to be introduced in

January 2004. The U.S. Government views this as one step forward in Korea’s fulfillment of the

automotive MOU commitment to “steadily reduce the tax burden on motor vehicle owner in the ROK in a

way that advances the objectives of this MOU.” Further, while negative consumer perception of foreign

products remains the single most significant barrier to foreign vehicle sales, the Korean Government has

taken a few steps in this area. The Korean government completed the purchase of 50 U.S. produced cars

for its Police Agency fleet, and committed to a similar purchase in 2003. Nonetheless, it has refused to

consider lowering tariffs outside of the Doha WTO negotiations, despite its own study that showed that

tariff reductions would lead to significant increases in foreign car sales.

c. Steel

A discussion of the overall situation facing the steel industry in the United States and the initiatives of the

Administration during 2002, including those affecting Korea, is contained in Chapter V of this report.

d. Pharmaceuticals

Over the past year U.S. concerns regarding pharmaceuticals trade relate mainly to the pricing of innovative

pharmaceuticals under Korea's national health insurance reimbursement system. In 1999 and 2000, the

Korean government took a number of positive steps to address U.S. concerns in this sector, and since then

the U.S. Government has been closely monitoring Korea’s implementation of these changes. In 2002 the

Korean government began backing away from its previous actions and commitments. 
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The U.S. Government has three distinct concerns regarding Korean government actions related to

pharmaceutical pricing: (1) The change from an Actual Transaction Pricing (ATP) to a Lowest Transaction

Pricing (LTP) system. In August 2002, Korea adopted a ministerial ordinance establishing LTP. The

United States had urged Korea to take steps to ensure the full implementation and enforcement of the ATP

system whereby both imported and domestically manufactured pharmaceuticals are reimbursed without

hospital margins. Korea announced in August 2002 plans to discard the ATP system and adopt on a

one-year trial basis an LTP system in which the reimbursement price of a drug will be based on the lowest

transaction price from the previous quarter rather than the actual transaction price. This change to LTP

will likely lower the reimbursement prices for U.S.-made drugs. The U.S. Government has strongly urged

Korea to ensure that any changes to its pricing system do not undermine its previous commitments on this

issue or lead to a distortion of the incentives needed to promote innovation and the availability of

innovative pharmaceutical products. The U.S. Government has therefore urged Korea to seek meaningful

discussions with stakeholders including U.S. industry, which can provide valuable input on pricing. 

Korea’s failure to state how it will handle companies’ appeals of government pricing decisions is also of

concern. 

(2) Re-Pricing: As of January 1, 2003, patented and bio-equivalent generic drugs will be subject to price

changes – cuts, in seemingly all cases – while non-bio-equivalent generics will not be subject to the price

cuts. The proposed scheme appears discriminatory in that it will force proportionally larger price cuts on

innovative, patented drugs (the specialty of U.S. and other foreign pharmaceutical companies) than on

generic drugs (the specialty of Korean companies). The U.S. Government is closely examining these cuts

and is continuing to press Korea to fully consult with all relevant stakeholders before taking any further

steps.

(3) Adoption of a Reference Pricing System: In October 2002, Korea proposed a plan for the adoption of

reference pricing, a system whereby the health ministry groups drugs into various categories and sets

reimbursement prices for the group rather than taking into account distinct differences among drugs. 

Interested parties, including physicians, patients, pharmacists, and pharmaceutical makers expressed

opposition to reference pricing at a November 2002 public hearing. The U.S. Government also opposes

the reference pricing plan because it discriminates against the most effective and innovative drugs. These

drugs tend to be relatively expensive (due to high research and development costs) and represent a high

proportion of U.S.-made products in the Korean market. Reference pricing also limits the affordability of

innovative medicines for low- and middle-income patients. This fosters the creation of a two-tier health

system consisting of the relatively wealthy, who can buy the most advanced, effective drugs, and patients

who cannot afford the additional co-payment for these drugs. Korea has not made a final determination on

whether to adopt reference pricing.

The U.S. Government raised these issues on numerous occasions during trade consultations with Korea in

2002 and will continue to closely monitor developments in this sector. Of particular interest will be the

extent to which the Ministry of Health and Welfare fully involves all relevant stakeholders, including U.S.

industry, as it develops and implements new plans.

e. Intellectual Property Rights

In 2000, USTR placed Korea on the Special 301 Priority Watch List as a result of serious concerns over

legal protection and enforcement of intellectual property rights (IPR). Based on commitments made in

April 2002 bilateral trade meetings, USTR downgraded Korea to the Watch List in 2002. To date, some

progress has been made by the ROKG toward fulfilling its April 2002 commitments; however, more needs

to be done, including passage of legislation granting the Korean Standing Inspection Team (a key body
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charged with investigating software piracy) police powers and provision of additional data to the U.S.

Government by the ROKG on its IPR enforcement efforts. Further, new enforcement concerns have arisen

concerning authorization of the distribution of U.S. films in Korea without the permission of the U.S.

copyright owner. The U.S. Government continues to monitor developments related to these issues in

Korea closely. 

In 2002, the Korean government submitted amendments to the Copyright Act of Korea. These

amendments have not yet passed the Korean National Assembly. The U.S. Government remains

concerned about outstanding issues in the Copyright Act, such as the lack of a transmission right for sound

recordings and a reciprocity provision for database protection that will hurt U.S. database producers. The

Korean government has not been willing to make changes to this set of amendments before they pass the

National Assembly. In 2002, the Korean government also put forward amendments to the Computer

Programs Protection Act, which addressed some U.S. Government concerns. These amendments

successfully passed the National Assembly in late 2002. The U.S. Government has raised these and other

inadequacies in Korean copyright laws, including the failure to protect temporary copies, insufficient

protection against the circumvention of technological protection measures, and the failure to provide full

protection for pre-existing copyrighted works as required under the TRIPS Agreement in detail with Korea

on numerous occasions in 2002. The U.S. Government will continue to work with the Korean government

to ensure its full compliance with its WTO obligations, including those on protection of copyrights. 

Resolution of these issues will be key to concluding a Bilateral Investment Treaty (BIT).

f. Telecommunications

Standard-Setting: Increasing Korean government intervention in the private sector, including in its

selection of technologies, continued to be of significant concern to the U.S. Government in 2002. This

governmental influence on the choice of sources of equipment and technologies is often apparent in the

licensing process for operators and in localization policies for procurement. The Korean government may

use its influence directly but often works indirectly through industry associations and quasi-governmental

commissions or other entities. As a result, some U.S. firms with leading-edge technologies have continued

to encounter resistance to their efforts to introduce new software and technologies to the market, and some

U.S. firms that formerly had a dominant market share have lost significant market share to Korean firms in

the past few years. By limiting competition in the Korean telecommunications market, the Korean

government is hampering the ability of Korean firms to develop state-of-the-art, globally competitive

products as well as Korea’s goal of becoming an economic hub in Northeast Asia. 

A key new concern for U.S. industry and the U.S. Government that has been the focus of a number of

bilateral meetings in 2002 relates to Korea’s pursuit of domestically-created standards in the telecom

sector which the Korean government has suggested that it intends to make mandatory . Of prime interest

were developments related to the “wireless internet platform for interoperability (“WIPI”) standard for

mobile phone applications. The U.S. Government has a number of concerns related to the ROKG’s plans

related to WIPI, including: inappropriate government involvement in the creation, standardization and

deployment of WIP; recent actions taken by the ROKG to discourage Korean telecommunications service

providers from subscribing to competing foreign standards; overly-restrictive WIPI specifications which

appear to be designed to keep competing foreign systems out of the market; and plans to make the standard

mandatory without proper notification to, and consultation in, the WTO. The Korean government has also

announced plans to reallocate the 2.3 gigahertz spectrum to a new wireless Internet system and appears to

be planning to mandate a new standard in this area as well. The U.S. Government has repeatedly

expressed its expectation that Korea, in launching any new telecommunications standards, will fulfill its

bilateral and multilateral obligations and that all efforts will be made to avoid creating unnecessary
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obstacles to international trade in the telecommunications sector. In this vein, the U.S. Government was

pleased when in November 2002, the ROKG announced that it would not make any decisions on whether

to make WIPI mandatory until it had fully consulted bilaterally and within the WTO.

Korea Telecom (KT) Privatization: On April 23, 2002 the ROKG officially requested that Korea Telecom

(KT) be removed from coverage under the 1997 U.S.-Korea bilateral procurement agreement following the

complete diverstiture of ROKG shares in the company, which took place in June 2002. Korea has made a

similar request to WTO Members to remove KT from coverage under the WTO General Procurement

Agreement (GPA).

In response, the U.S. Government has informed the Korean government that KT would remain covered

under the bilateral agreement and the GPA until the United States and other interested governments,

including Canada and the European Union, agree that all ROKG control and influence over the company

have ceased (the GPA standard for removal from coverage) and that KT is behaving like a fully privatized

company. Consultations on the matter continue.

g. Financial Services

As a condition in the IMF stabilization package, Korea agreed to bind its OECD commitments on financial

services market access in the WTO. In January 1999, Korea provided WTO Members with a revised and

somewhat improved schedule of financial services commitments that entered into force as of September

1999. The U.S. Government will continue to work with Korea to bring about more liberal treatment of

foreign financial services providers.

h. Government Support for Semiconductor Production and Export

The U.S. Government continued to express strong concerns about instances of possible Korean

subsidization of semiconductor production and export that could adversely affect U.S. trade interests. In

particular, the U.S. Government raised concerns about the support by the Korean government of Hyundai

Electronics, Ltd. (now, Hynix Semiconductor, Inc.), Korea’s second largest semiconductor manufacturer. 

In late 2002, a new Hynix bailout package was accepted by Hynix creditors which included: a hefty debt

forgiveness package in the form of a three-year-plus payback moratorium on 3 trillion Korean won of debt;

a significant reductions in interest on the 3 trillion Korean won principal (from 6.7 percent to 3.2 percent);

and a new 1.9 trillion Korean won debt-to-equity swap. This action comes after a series of steps taken to

help the company in 2001 which included a $4 billion bailout instigated by the partially state-owned Korea

Exchange Bank (KEB) and another $7 billion debt restructuring package and approximately $500 million

in new loans organized by KEB in late 2001.

The U.S. Government has raised its concerns on this issue in a number of fora and has noted Korea’s

obligations under the Subsidies Agreement not to provide subsidies that may cause adverse effects to other

WTO Members. The U.S. Government will continue to press Korea to fulfill its international obligations

and to move forward with genuine structural reform of its financial sector.

i. Cinema Screen Quotas

Korean Law requires that domestic films be shown in each cinema for a minimum number of days per

year. Current law requires that Korean films be shown 146 days of the year, with a potential discretionary

reduction to 106 days. The Korean National Assembly adopted a resolution on December 8, 2000, stating

that the screen quota system must not be abolished until the domestic market share for Korean films
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maintains a 40 percent level. Although domestic films “maintained” a market share close to 50 percent in

2001 and 2002, there has been very little progress on the issue. In early 2002, hopes were raised that the

issue could be resolved in time for President Bush’s state visit to Korea. However, this effort was

apparently blocked by a lack of flexibility on the part of the various Korean stakeholders and did not

occur.

j. Bilateral Investment Treaty

Since 1998, the U.S. Government has sought to negotiate a bilateral investment treaty (BIT) with Korea

aimed at securing Korean commitments on a balanced and open investment regime and providing

protections for U.S. investors in Korea. Negotiations in 1999 made progress on Korean commitments to

liberalize investment restrictions in a number of sectors, but several issues remained unresolved, including

greater access for U.S. investors in telecommunication services, liberalization of the screen quota system,

and resolution of IPR issues, specifically, with respect to retroactive copyright protection for pre-existing

works and sound recordings. By 2001, both sides agreed that, without resolution of these issues it was not

productive to continue negotiations. (See Screen Quotas).

 

k. Cosmeceuticals

The Korean Cosmetic Products Act, which became effective in July 2000, separates cosmetic products

from cosmeceuticals or cosmetics with a function, such as sun screen, wrinkle cream or skin whiteners. 

The new regulations govern the sale and promotion of cosmeceuticals and require that these products be

labeled as cosmeceuticals and not include claims that are beyond proven efficacy. In 2002, the Korean

government took some steps to reform the approval process for marketing new cosmetics in Korea. 

However, the United States continues to have serious concerns related to this system, including the

continued slow pace of approvals, and believes that Korea should simplify its cosmetics regulations and

harmonize them with other cosmetics exporters such as the United States, the European Union, and Japan.

l. Agriculture

Implementation of the Biosafety Protocol: On March 28, 2001, the Ministry of Commerce, Industry, and

Energy (MOCIE) issued legislation (the so called "LMO Act") to implement Korea's interpretation of the

Cartagena Biosafety protocol. In June 2002, MOCIE announced a proposed Presidential Decree and

Ministerial Ordinance to the LMO Act. However, these have not been notified to the WTO as required by

the SPS Agreement. The U.S. Government has expressed concern that Korea's plans for implementation

of the Biosafety Protocol, which will lead to mandatory environmental risk assessments of biotech crops,

could disrupt an estimated $520 million in U.S. exports to Korea. The United States has urged Korea to

make every effort to implement a regulatory approach to biotechnology that is rigorously based on science,

transparent and predictable. Moreover, as Korea develops and implements new regulations, the United

States has pressed Korea to fully involve all stakeholders, avoid duplication and adhere to international

commitments.

Mandatory Food Safety Assessment: Under the Food Safety Act, issued by Korea's Ministry of Health and

Welfare (MHW), the Korea Food and Drug Administration (KFDA) was given the authority to conduct

mandatory safety assessments to evaluate biotechnology applications intended for human consumption. 

The Act, which was passed in August 2002, provides for an 18 month (grace) period during which

technology firms must file and have completed applications for safety assessment. U.S. officials have

urged their Korean counterparts to consult with both local and foreign industry to address concerns prior to

finalizing the implementing regulations so as to avoid trade disruptions.
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Additional U.S. Concerns Regarding Korea's Biotech Regulations: (1) biotechnology labeling

requirements, and (2) special advertising requirements for biotech products. Related to biotechnology

labeling requirements, after lengthy negotiations with the United States Korea finally permitted acceptance

of a notarized self-declaration in-lieu-of the full, identity preserved (IP) documentation that was originally

required. In response to U.S. concerns related to labeling requirements for fresh potatoes, Ministry of

Agriculture and Forestry (MAF) officials have indicated that U.S. fresh potatoes will be exempt from

biotechnology labeling requirements and will require no extra documentation as long as potatoes that are a

product of biotechnology are not produced in the United States. Concerning biotech advertisement

requirements, U.S. officials have pressed Korea to eliminate this non-science based requirement on the

grounds that it duplicates existing labeling requirements and creates an unfounded negative perception of

biotechnology products among consumers.

Organic Shipment Documentation Requirements: Absence of clearly written guidelines for documents

that are required for organic foods often caused detention at Korean ports. While KFDA headquarters

agreed to accept certain types of documents from exporters of organic foods, this list was not provided to

port inspectors in writing which caused a number of detentions of quarantine inspection at port. The U.S.

Government continues to work toward resolution of this issue.

Rice: Since the Uruguay Round Agreement on Agriculture went into effect, the United States has sold rice

to Korea during two years (40,000 MT out of a TRQ of 171,023 MT in CY2002 and 30,000 MT, out of the

142,520 MT TRQ in CY2001). Such sales were only possible when Korea agreed to hold tenders for U.S.

#1 grade medium rice. However, all rice including U.S. rice that is imported under the TRQ has severe

restrictions on how it may be marketed. Currently, none of the rice imported under the TRQ is being sold

to the general public for direct consumption. The United States has pressed Korea to eliminate restrictions

on how the rice TRQ is administered. 

Alcoholic Beverages Labeling: On October 1, 2002, the National Tax Service (NTS) of Korea

implemented a regulation requiring that all alcoholic beverages, except canned liquor products, to be

labeled to indicate where the product is to be sold. NTS now requires four different types of labels, and

liquors for home use and discount stores must have a warning that states "not allowed to be sold in

restaurants and bars" on the main label or supplementary label. Importers have serious concerns related to

the additional cost associated with the new labeling requirements. The U.S. Government has urged Korea

to allow less restrictive means of applying the usage label (i.e. stickers). The National Tax Service has

agreed to continue to work with interested industry representatives and the U.S. Government to resolve

this issue.

U.S. officials have also expressed concerns regarding Korea's customs classification of citrus pulp pellets,

tariff rate quota administration for oranges, and prohibitively high tariff rates on croaker fish. After U.S.

officials raised concerns regarding Korea's restrictions on the use of whey in fermented milk and

prohibition against freezing meat sold as "fresh" or "chilled," Korea changed its regulations to address the

issues.

m. Import Clearance Procedures, Food Standards, and Labeling

After WTO dispute settlement consultations with the United States between 1995 and 1999, the Korean

Government revised its import clearance procedures to harmonize them with international practice

including: (1) expediting clearance for fresh fruits and vegetables; (2) instituting a new sampling, testing,

and inspection regime; (3) eliminating some non-science-based phytosanitary requirements; and (4)

beginning revisions of food related regulations. However, additional work will be needed to bring Korea's
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food related regulations into conformity with international standards, specifically those related to limited

classification of food categories and burdensome testing requirements.

U.S. firms continue to experience problems with import clearance in Korea associated with FSIS health

certificates and non-science based and excessive criteria for heat treatment for meat products. USDA

officials plan to hold discussions with the Korean Government on these concerns in early 2003. On the

positive side, Korea's plant quarantine requirements were improved in 2002 to recognize industry

fumigation practices for shelled walnuts. However, Korean's phytosanitary and sanitary certification

requirements still continue to limit market access for a variety of products due to delays in Korea's review

of documentation on pest mitigation provided by the United States. 

In early 2002, U.S. fruit and grain exporters experienced delays in quarantine inspection with extra testing

costs due to a policy change in the "same company, same product" treatment. Same company, same

product treatment allows exemptions from laboratory tests if the same company had previously passed

tests for the same product in an earlier shipment. In January 2002, the KFDA added 12 new chemicals to

their list of chemicals subject to simultaneous residue testing and required all products to be tested

(including products with same company, same product status from earlier tests). Those

companies/products which passed the new test regained same company, same product status. However,

re-testing will be required if KFDA adds additional chemicals to their list of chemicals subject to

simultaneous residue testing.

The U.S. Government is also concerned about the extended clearance time resulting from the new

chemical tests and the cost associated with the tests (over US$1,000 for each simultaneous multi-residue

test). KFDA Headquarters maintained that same company, same product status will have to be renewed

whenever there is a change in the chemical test requirements or standards. Since KFDA makes such

changes at least once or twice each year, the new policy will burden traders with additional testing costs

and extended clearance times.

In December 2002, MHW announced a proposed Ministerial Ordinance related to the Food Sanitation Act. 

This proposal includes a significant change to the current import inspection system to limit the same

company same product status up to three years for processed food and one year for fresh produce. Along

with KFDA’s policy on renewal of the same company same product status whenever there is a change in

test requirements or standards, this proposal will add excessive burdens to imported agriculture and food

products when finalized. The U.S. Government will continue to work with the ROKG to address these

concerns.

4. India

a. General

The United States and India continued their efforts to developing a constructive long-term trade

relationship. Important events during the year included a U.S. success in its WTO challenge to India’s

automotive TRIMS regime and elimination of the measures in question. However, India continues to limit

market access in various areas, including through high taxes and tariffs, minimum reference prices on steel

and other products and onerous labelling requirements. 
181

b. Trade Dialogue

USTR Zoellick and Indian Minister of Trade and Industry Murasoli Maran agreed in August 2001 to

operationalize the United States-India Trade Policy Working Group (TPWG) at the Ministerial level. The

TPWG will facilitate regular consultations on the range of trade issues between the United States and

India. The ministers also agreed that their respective staffs would meet periodically to discuss trade issues

of mutual interest. To that end, TPSC agencies, led by USTR, met with their Indian counterparts, led by

the Ministry of Commerce, three times by video conference during 2002. Participants covered the full

range of trade issues during these discussions. 

c. Auto TRIMS

The United States considers India’s measures affecting trade and investment in the motor vehicle sector to

be inconsistent with India’s obligations under Articles III and XI of the GATT and Article 2 of the

Agreement on Trade-Related Investment Measures. Indian policies require manufacturing firms in the

motor vehicle sector to achieve specified levels of local content; to achieve a neutralization of foreign

exchange by balancing the value of certain imports with the value of exports of cars and components over

a stated period, and to limit imports to a value based on the previous year’s exports.

In June 1999, the United States requested consultations with the Government of India pursuant to the

WTO Dispute Settlement Understanding (DSU), and these consultations were held on July 20, 1999. The

United States and the EU requested panels, which subsequently were merged. On December 21, 2001, the

final panel report was released, confirming that WTO Members cannot impose local content requirements

or trade balancing requirements on companies doing business in their countries, thus rejecting India’s

defense of its regime. 

India appealed the panel’s report on January 31, 2002, but later dropped the appeal before the Appellate

Body could rule. The United States and India agreed on a short period for India to implement the panel’s

findings. In September 2002, India implemented the panel’s decision by removing the offending

measures. 

d. Intellectual Property Rights

As a signatory to the Uruguay Round of GATT trade negotiations, India was required to comply with most

of the obligations of the TRIPS Agreement by January 1, 2000, and must introduce a comprehensive

patent system for pharmaceuticals and agricultural chemicals no later than 2005. The Indian Government

has announced its intention to conform fully with the IPR-related requirements of the Uruguay Round. In

December 1999, Parliament successfully passed three IPR related bills: the Copyrights Amendment Bill,

the Trademark Bill, and the Geographic Indicators Bill. While the copyright law is generally compliant

with the TRIPS Agreement, the 1999 amendments undermine TRIPS requirements concerning protection

for computer programs. In 1999, the Parliament failed to amend the Patents Act and, thus, apparently

failed to meet fully its WTO TRIPS obligations by the January 1, 2000 deadline. The Patents Act was

originally expected to pass the Parliament in July 2000, and subsequently in November. Finally, in June

2002, Parliament passed legislation amending the Patents Act. 

While the new legislation recognizes some of the shortcomings of the 1970 Patents Act, the legislation

contains numerous deficiencies and fails to comply with both the letter and spirit of the TRIPs Agreement. 

Most notably, the following problems pose significant concerns: numerous categories of inventions are not

patentable; lack of protection for product-by-process inventions; failure to address the abusive government
182

use and revocation provisions present in the 1970 Act; failure to comply with all of the safeguard of

Article 31 of the TRIPs Agreement when granting compulsory licenses; and failure to recognize

importation as satisfying the "working" requirement. Moreover, the law adds a new requirement to

patentability, i.e., disclosure of the source and geographical origin of biological material used in an

invention. To the extent that these types of requirements are unrelated to obtaining patent protection, they

serve no legitimate purpose in a patent system and impose unnecessary burdens on patent applicants. 

e. Reference Pricing

In August 2001, following allegations of under invoicing by vegetable oil importers, the Government of

India imposed reference prices on imports of palm oil and palm products. In September 2002, India added

soybean oil to its fixed reference price regime and in December 2002, raised the reference price to a level

that substantially exceeds world prices for vegetable oils. The applied tariff for crude soybean oil was

already at the WTO bound rate of 45 percent. Given fluctuations of world market prices, the effective tariff

for crude soybean oil has exceeded India’s tariff binding. The Indian Finance Ministry amends the

reference price for soybean oil only when the world market price fluctuates above or below 10 percent of

the reference price. 

f. Export Subsidies

The Government of India supports producers of wheat (since October 2000) and rice (since April 2001) via

the administration of a minimum support price-purchase program. Increased price supports (known as the

“procurement price”), coupled with India’s decision to raise the sales prices of wheat and rice to

consumers through the public distribution system, has resulted in record level government-held stocks. 

The sale of government-held stocks of these products for export, at prices significantly lower than the

domestic price, contradicts India’s WTO commitments. U.S. exporters of wheat and rice are likely to be

displaced in markets such as South East Asia and the Middle East where imports are highly sensitive to

price. 

5. Pakistan

In 2002, the United States began a dialogue with Pakistan on the issues affecting our trade and investment

relationship. On December 10-12, 2002, the United States held an initial meeting of the U.S.-Pakistan

Working Group. The Working Group provided an opportunity to exchange views on the Doha

Development Agenda and to clarify issues of concern to both governments. 

Further, both sides were able to air their concerns regarding the full range of trade and investment issues

affecting both of our markets. Areas of discussion, clarification, and need for further work included tariff

bindings, agricultural export subsidies, trade-related investment measures, and intellectual property rights,

especially optical piracy. In the context of our bilateral agenda, the two sides exchanged views on

cooperation with a view to enhancing bilateral trade, including by helping Pakistan expand its export base. 

6. Afghanistan

A Trade Task Force, chaired by the State Department, was created to develop an Afghan Trade Initiative. 

This Initiative is designed to produce economic results in the near-term. 

Effective June 6, 2002, the United States restored Normal Trade Relations (NTR) tariff treatment to the

products of Afghanistan. NTR treatment had been revoked in 1986.
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Soon after receiving NTR, the Bush Administration initiated an expedited review of a request from

Afghanistan to be designated as a beneficiary under the U.S. Generalized System of Preferences (GSP). 

This required public comment and a finding that Afghanistan met the statutory designation requirements. 

On January 10, 2003, President Bush signed a proclamation designating Afghanistan a least developed

beneficiary developing country. This will allow approximately 5,700 products from Afghanistan to enter

the United States on a duty-free basis.

This GSP designation marked another important step in Afghanistan’s return to the world trading system. 

It will provide increased opportunities for trade that will help Afghanistan build an economy that can offer

its citizens a more prosperous future.

The Administration strongly supported in the last Congress, and presently supports in the current

Congress, a legislative effort to remove the statutory exclusion of hand-made rugs from the list of articles

eligible for duty-free treatment under the GSP. Hand-made rugs have been among Afghanistan’s principal

exports. 

7. People’s Republic of China

For much of the past two decades, the People’s Republic of China (China) had been gradually transitioning

toward a market economy from what in the late 1970's was a strict command economy. As part of its

accession to the World Trade Organization (WTO), which became effective on December 11, 2001, China

was required by the United States and other WTO members to agree to accelerate this process of market

reform in order to comply with WTO requirements. Accordingly, China's WTO accession agreement

embodies a set of extensive and far-reaching commitments on the part of China to change its trade regime,

at all levels of government. Given the breadth and complexity of these commitments, assessing China's

WTO compliance efforts is not a simple task. 

Overall, during the first year of its WTO membership, China made significant progress in implementing its

WTO commitments, although much is left to do. Progress was made both in making many of the required

systemic changes and in implementing specific commitments. At the same time, serious concerns arose in

some areas, where implementation had not yet occurred or was inadequate.

As expected, the principal focus of China's first year of WTO membership was on its framework of laws

and regulations governing trade in goods and services, at both the central and local levels. China's trade

ministry, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), reports that the central

government has reviewed more than 2,500 trade-related laws and regulations for WTO consistency. By

mid-2002, it had reportedly repealed 830 of these laws and regulations and amended 325 more. It had also

reportedly drafted and adopted 118 new laws and regulations. Similar reviews are taking place at the local

level, although the local governments are generally not as far along in their review process, in part because

of the need to give effect to changes made by the central government. At the same time, some localities,

particularly those in China's eastern provinces, are much further along in their review process than others.

Beginning early in 2002, China also devoted considerable resources to the restructuring of the various

government ministries and agencies with a role in overseeing trade in goods and services. Some of these

changes were mandated by China's accession agreement, while others were undertaken by China to

facilitate its compliance with WTO rules. 

Another significant focus for China during the past year involved education and training. China embarked

on an extensive campaign to teach central and local government officials and state-owned enterprise
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managers about both the requirements and the benefits of WTO membership, with the goal of facilitating

China's WTO compliance. The United States and other WTO members, along with many private sector

groups, contributed substantial technical assistance and capacity building resources to this effort.

As a general matter, China took positive steps to implement many of its specific WTO commitments

during the past year. It made required tariff reductions, notably for information technology products,

chemicals, autos and auto parts, wood and paper products, and many agricultural goods, including beef,

dairy products and citrus, among others. When discrepancies between committed and implemented rates

were reported, China usually made necessary adjustments. China also began the process of removing

numerous non-tariff trade barriers that had affected a range of industries, from chemicals to scientific

equipment, and it continued to improve its standards regime. For the most part, these steps were managed

without serious incident, and market access for U.S. products in the affected sectors has generally

improved. In addition, although not without problems, China took the necessary legal steps to allow for

increased market access for foreign service suppliers in a variety of sectors, including financial services,

telecommunications, audio-visual services, tourism and travel-related services, constructions and

engineering services, educational services and environmental services. 

While the efforts of China's leadership to implement China's WTO commitments should be recognized, the

Administration also found a number of causes for serious concern during China's first year of WTO

membership. 

One area of cross-cutting concern involved transparency. In particular, China implemented its

commitment to greater transparency in the adoption and operation of new laws and regulations unevenly at

best. While some ministries and agencies did take steps to improve opportunities for public comment on

draft laws and regulations, and to provide appropriate WTO enquiry points, the Administration found

China's overall effort to be plagued by uncertainty and a lack of uniformity. The Administration is

committed to seeking improvements in China's efforts in this area.

Apart from this systemic concern, three other areas generated significant problems and warrant continued

U.S. scrutiny – agriculture, intellectual property rights and services. 

The area of agriculture proved to be especially contentious between the United States and China. While

concerns over market access for U.S. agriculture products are not unique to China, particularly serious

problems were encountered on many fronts, including China's regulation of agricultural goods made with

biotechnology, the administration of China's tariff-rate quota (TRQ) system for bulk agricultural

commodities, the application of sanitary and phytosanitary measures and inspection requirements. The

United States and China were able to make progress toward resolving some of these problems, particularly

with regard to biotechnology. Other problems remain unresolved, however, with the most troublesome

being China's inadequate implementation of its TRQ commitments. 

In the area of intellectual property rights (IPR), China did make significant improvements to its framework

of laws and regulations. However, the lack of effective IPR enforcement remained a major challenge. If

significant improvements are to be achieved on this front, China will have to devote considerable resources

and political will to this problem, and there will continue to be a need for sustained efforts from the United

States and other WTO members.

Meanwhile, concerns arose in many services sectors due to transparency problems and China's use of

prudential requirements that exceeded international norms. In addition, Chinese regulators imposed

particularly problematic restrictions in the insurance sector, where transparency issues, excessive
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capitalization requirements and restrictions on branching combined to present unique difficulties, and in

the express delivery sector, where existing rights were placed in jeopardy. Nevertheless, progress was

made in 2002 toward resolving the concerns associated with these two sectors. 

China's compliance problems are occasionally generated by a lack of coordination among relevant

ministries in the Chinese government. Another source of compliance problems has been a lack of effective

or uniform application of China's WTO commitments at local and provincial levels. China is taking steps

to address both of these concerns, through more effective inter-ministerial mechanisms at the national

level, and through a more concerted effort to reinforce the importance of WTO-consistency with

sub-national authorities. In other cases, however, compliance problems involve entrenched domestic

Chinese interests that may be seeking to minimize their exposure to foreign competition, circumstances

that require particular vigilance by the Administration and the private sector.

When confronted with compliance problems in 2002, the Administration used all available and appropriate

means to obtain China's full compliance, including intervention at the highest levels of government. The

Administration worked closely with the affected U.S. industries on compliance concerns, and utilized

bilateral channels through multiple agencies, at all levels, to press these concerns. The Administration also

initiated a regular dialogue on compliance issues between USTR and China's lead trade agency, MOFTEC,

with the goal of bringing all involved Chinese ministries and agencies together when the resolution of

particular problems warrants it. Where possible, the Administration also multilateralized its enforcement

efforts, by working with like-minded WTO members on an ad hoc basis, whenever particular issues have

had an adverse impact beyond the United States.

Despite the compliance problems that arose over the course of the past year, most U.S. industry

representatives remain enthusiastic about the actual and potential benefits from China's WTO membership. 

They understand that the institutional, legal and regulatory changes demanded of China by its accession

agreement are extraordinary and far-reaching and are complicated further by China’s highly decentralized

administrative structure. At the same time, they want to see China comply fully with its WTO

commitments, as does the Administration. The United States, working with fellow WTO members, will

use all means at its disposal to ensure that China achieves full implementation.

For a more detailed discussion of trade-related issues involving China in 2002, see USTR's 2002 Report to

Congress on China's WTO Compliance, issued on December 11, 2002.

8. Japan

In 2002, the United States continued to place a high premium on promoting structural and regulatory

reform in Japan, improving market access for U.S. goods and services, and supporting the adoption and

successful implementation of pro-competitive policies throughout the Japanese economy. The United

States welcomed Prime Minister Koizumi’s unwavering commitment to “structural reforms without

sanctuaries” and his continuing efforts to “implement bold regulatory reform across sectors.” Nonetheless,

the Japanese economy is still underperforming in part because of the non-performing loans problem and

deflation. Growth is also being significantly hampered by structural rigidities, excessive regulation, and

market access barriers. Over the past year, the U.S. Government has therefore been working with the

Government of Japan to develop and implement concrete measures to further open and deregulate Japan’s

markets. These measures will help Japan revitalize its economy and generate sustainable economic growth

in the medium and long-term. 
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The United States also utilized a wide range of regional and multilateral fora in 2002 to advance its trade

agenda with Japan. The United States is working to ensure that our trade priorities in these fora, including

on agriculture and services, are well coordinated with our bilateral agenda so that the various initiatives are

mutually reinforcing and complementary.

Overview of Accomplishments in 2002

U.S.-Japan Economic Partnership for Growth

The United States promoted much-needed regulatory reforms and obtained improved access for U.S.

goods and services in a number of areas in Japan in 2002. In addition, under the U.S.-Japan Economic

Partnership for Growth (“the Partnership”), the United States continued to work with Japan to promote

sustainable growth by addressing such issues as sound macroeconomic policies, structural and regulatory

reform, financial and corporate restructuring, foreign direct investment, and open markets. The United

States and Japan also addressed new and lingering trade issues in a variety of sectors while regulatory and

structural reform remains of paramount importance. 

The following provides a brief update on each component of the Partnership along with progress achieved

in 2002:

Subcabinet Economic Dialogue: Co-chaired by the NSC/NEC and Japan’s Ministry of Foreign Affairs

(MOFA), the “Subcabinet” sets the tone and direction of the Partnership, with Deputy/Vice Ministerial

level officials meeting on an annual basis to discuss a broad range of bilateral, regional, and multilateral

issues. Recommendations from these meetings are given to the respective Governments for use in

developing policy. At the meeting of the Subcabinet in May 2002 in Japan, participants covered a range of

issues, including the problem of non-performing loans in Japan, bilateral cooperation on terrorist

financing, and regional economic relations. The next meeting of the Subcabinet is expected to convene in

the spring of 2003, coincident with the 2003 annual meeting of the Private Sector/Government

Commission, which is described below.

Private Sector/Government Commission: The “Commission” is designed to integrate the U.S. and

Japanese private sectors more fully into the economic work of the two Governments. Private sector

delegates from Japan and the United States meet annually with the Subcabinet to discuss issues of key

importance to both countries. The Commission convened its inaugural meeting in May 2002, addressing

the topic “Creating an Environment for Sustainable Growth: Raising Productivity and Corporate

Revitalization.” That meeting provided the private sector the opportunity to draft recommendations for

consideration by both Governments, including the need to more aggressively address Japan’s nonperforming loan problem, improve corporate governance, and speed deregulation in key sectors. The

Commission convened a followup meeting in November 2002, which provided an opportunity for the

Governments to respond to the recommendations put forward in May.

Regulatory Reform and Competition Policy Initiative: Co-chaired by USTR and MOFA, the “Regulatory

Reform Initiative” aims to promote economic growth and open markets by focusing on sectoral and crosssectoral issues related to regulatory reform and competition policy. Under this Initiative, the United States

has made a concerted effort to focus on issues that the Koizumi Administration has identified as important

areas for reform, such as information technologies, telecommunications, medical devices and

pharmaceuticals, energy, and competition policy. Throughout 2002, Working Groups and a High-Level

Officials Group met to discuss reform proposals that culminated in the First Report to the Leaders, which
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was conveyed to President Bush and Prime Minister Koizumi on June 25, 2002. It detailed numerous

regulatory reform measures that Japan had implemented or would implement. 

Investment Initiative: The Investment Initiative addresses laws, regulations, policies, and other measures

intended to improve the climate for foreign direct investment (FDI). Led by the U.S. Department of State

and Japan's Ministry of Economy, Trade, and Industry (METI), the Investment Initiative meets regularly to

resolve investment issues and prepare a joint report for the Leaders' summit. Key topics being discussed

this year include the role investment can play in addressing demographic changes, promotion of mergers

and acquisitions, and facilitating labor and land policy reforms. The Initiative includes co-sponsored

investment promotion seminars in both countries to bring about better understanding and support for FDI

from regional government and business leaders. During the talks, the U.S. private sector is given an

opportunity to actively participate and directly present their investment concerns to the Government of

Japan.

Financial Dialogue: The Financial Dialogue serves as a forum for the U.S. Department of Treasury,

Japan's Ministry of Finance (MOF) and the Financial Services Agency (FSA) to exchange information on

key macroeconomic and financial sector issues, including non-performing loans. The Financial Dialogue

met in Tokyo in October 2002, and future meetings will be held annually.

Trade Forum: The Trade Forum, which is led by USTR and MOFA, was created to foster focused and

substantive discussion on a wide-range of sectoral trade issues of interest and concern to both

Governments. It also serves as an "early warning" mechanism to facilitate resolution of emerging trade

problems. Issues raised at the first meeting of the Trade Forum, in July 2002 in Tokyo, included

agriculture, public works, flat glass and transportation issues. The Trade Forum meets at least once a year. 

a. Regulatory Reform and Competition Policy Initiative

Under the Regulatory Reform and Competition Policy Initiative (“Regulatory Reform Initiative”) the

United States and Japan issued the First Report to the Leaders wherein Japan agreed to undertake a myriad

of important regulatory reform measures. Notable achievements were made in various sectors, including

telecommunications, information technologies, energy, medical devices and pharmaceuticals, and financial

services. Significant progress was also made in key areas such as competition policy, transparency and

other government practices, legal system reform, revision of Japan's Commercial Code, and distribution.

Building on the success of the inaugural year of the Regulatory Reform Initiative, the United States

presented Japan on October 23, 2002 with 45 pages of recommendations, which called on Japan to adopt

sweeping regulatory reforms. Consistent with the overall objective of the Partnership, these

recommendations include reform measures intended both to open markets and help Japan return to

sustainable growth. Furthermore, the United States made a concentrated effort to focus on issues that

Japan has identified as priorities for reform.

The October 2002 recommendations presented to Japan are acting as the basis for bilateral discussions in a

High-level Officials Group and the various Working Groups. These discussions will in turn serve as the

basis for a second annual report to the President and Prime Minister in mid-2003 detailing the progress

made under this Initiative, including specific measures to be taken by each Government.

Highlights of the First Report to the Leaders and key reform recommendations submitted in October are as

follows: 
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i. Sectoral Regulatory Reform

Telecommunications: The establishment of a pro-competitive telecommunications services market in

Japan is the primary focus of the United States in pursuing regulatory reform for this sector. However,

Japan's telecommunications regulator, the Ministry of Public Management, Home Affairs, Posts and

Telecommunications (MPHPT), continues to defer to the interests of NTT at the expense of business and

residential users and the promotion of competition in the telecommunications services market. In this

environment, the inability of competitive telecommunications carriers to make inroads into NTT’s control

of 98 percent of subscriber lines and 58 percent of mobile customers continues to impair the introduction

of innovative, low-cost services to business and residential users in Japan's $145 billion

telecommunications market, which is one of the world’s largest.

The June 2002 First Report to the Leaders highlighted measures taken by Japan to implement several 2001

legislative reforms intended to promote further competition in this sector. These measures included the

introduction of asymmetric regulation to eliminate anticompetitive behavior in the mobile services market

and other improvements to regulation over essential wireline facilities. In May 2002, Japan classified NTT

DoCoMo as a carrier with market power and committed to ensure that the price of interconnection with

DoCoMo's designated facilities be cost-oriented. The Telecommunications Business Dispute Settlement

Commission created under the 2001 reforms issued an administrative judgment in October 2002

supporting the right of a particular wireline carrier to set retail rates for calls from its network to a

DoCoMo customer. MPHPT, which previously opposed such a right, supported the finding and agreed to

study how to set interconnection rates for mobile services. As a result, there is now an opportunity for

wireline originating carriers to overturn a longstanding discriminatory practice of price-setting. Japan

completed its two-year study on pro-competitive reforms in August 2002. The final report advocated

measures to promote the opening of the telecommunications network, stronger policies for consumer

support, and the introduction of a new framework for competition policy which eliminates the outdated

and cumbersome classification of carriers by whether they own or lease facilities. 

In the First Report to Leaders, Japan also committed to recalculate rates for interconnection to NTT East

and West networks with a view to further reductions of those rates and the removal of non-traffic sensitive

costs from the rates paid by competitors to NTT. Work to revise the interconnection costing model was

concluded in the first quarter of 2002, and in August an advisory panel provided guidance for calculating

cost-oriented rates. The United States and Japan discussed in October and December 2002 the extent of

the progress to be expected pending final decisions on several issues. Japan also pledged to continue

efforts to facilitate access to rights of way for carriers by maintaining guidelines for non-discriminatory,

cost-based access to poles, ducts and conduits; relaxing restrictions on attaching cables to poles and on

road construction; and improving cooperation with local authorities. 

In the October 2002 Regulatory Reform submission, the United States urged Japan to complete the process

of instituting and implementing a pro-competitive regime. In recommendations toward this goal, the

United States suggested that Japan promote transparency and strengthen regulatory independence by

separating regulatory functions from ministry control and allowing fully private ownership of NTT. In

addition, the United States suggested Japan exercise oversight over industry organizations with quasiregulatory functions. The United States also asked Japan to deregulate competitive carriers and to

implement dominant carrier regulation and competition safeguards. In keeping with dominant carrier

regulation, the United States called on Japan to correct problems which raise the payments competitors

make for interconnection to the NTT network to a level considerably above cost, for non-discriminatory

access to basic NTT services, and to ensure competitive rates for interconnection to the wireless network. 

The United States also proposed that the two countries work together to identify and explore ways to
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address issues of mutual concern related to the promotion of advanced technologies and services. The first

meeting of the Telecommunications Working Group took place in November 2002 to discuss the U.S.

recommendations. 

Information Technologies: The primary objective of the Information Technologies (IT) Working Group

under the Regulatory Reform Initiative is to work with Japan to establish a vibrant and competitive IT

sector which can benefit both our economies, as well as provide global leadership in this area. Although

Japan’s electronic commerce market is one of the largest in the world, its tremendous potential for growth

remains unfulfilled because the IT sector is burdened by regulatory and other barriers. Japan has taken

significant steps towards, and continues to make progress on, realizing its ambitious plan to become a

global leader in IT. Even so, the Japanese government itself has recognized through the “2002 e-Japan

Priority Policy Program” that legal and other barriers persist which hinder growth in the IT sector. As

Japan responds to the challenges that lie ahead in this pivotal sector, the U.S. Government is working with

Japan to establish a regulatory framework that ensures competition, promotes innovation, allows private

sector-led regulation where appropriate, and protects intellectual property rights in the digital age. 

Establishing such a framework will promote the development of IT-related businesses and electronic

commerce, and thus provide significant opportunities for U.S. firms and their leading technology products

and services in a market that is expected to reach nearly $125 billion by 2005.

Through the first IT Working Group meeting under the Regulatory Reform Initiative, the United States

raised and discussed key recommendations submitted in October 2001 to address IT sectoral issues and

concerns with Japan. These recommendations focused on protecting intellectual property, increasing user

confidence in electronic commerce, and reinforcing the leadership role of the private sector in IT, as well

as on proposals for cooperative efforts in the areas of electronic education, the promotion of electronic

commerce and IT in the private sector, and network security. In response to the discussions related to

these recommendations, Japan agreed to take significant steps to promote growth in the IT sector. 

The specific measures Japan has taken are summarized in the June 2002 First Report to the Leaders under

the Regulatory Reform Initiative. Among the major highlights of the Report are the three “e-initiatives”

which the United States and Japan agreed to work on in the areas of electronic commerce, e-government,

and cybersecurity. In recognizing the importance of establishing global leadership in these important

areas, the United States and Japan agreed to work together to recognize and support important principles

and objectives in the multilateral framework for liberalizing trade of digital products, to promote the

expansion of e-government services, and to strengthen cyber-security by cooperating to facilitate broader

acceptance and use of the Council of Europe Convention on Cybercrime.

With regard to strengthening the protection of intellectual property in the digital age, Japan ratified and

acceded to the WIPO Performances and Phonograms Treaty (WPPT), which protects performances and

sound recordings online. This will significantly strengthen protection of intellectual property rights on the

Internet. In addition, Japan recognized that “temporary storage” of digital content (such as software and

music held in the random-access memory, or RAM, of a computer) may be a reproduction so that the right

holder’s reproduction rights are preserved. Japan also took steps to increase user confidence in electronic

commerce by confirming that all technologies for secured electronic signatures will be treated equally, that

electronic records will have the same legal effect as written documents, and that certification providers do

not have to be accredited by the government. Japan reinforced the leadership role of the private sector by

agreeing to support the development of private sector self-regulatory mechanisms for online consumer

protection and management of personal data. In addition, Japan recognized the important role of egovernment in expanding the use of electronic commerce by accelerating the use of interactive online

procurement in both central and local governments. This was one of several measures to improve the
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openness, fairness, and transparency for government procurement of information systems. Japan also

agreed to cooperate with the U.S. Government in the areas of e-education, network security, and the

promotion of IT and electronic commerce technologies for start-ups and small firms.

Building on these accomplishments and the progress achieved over the past year, the United States made

several recommendations in the October 2002 Regulatory Reform submission to reinvigorate Japan’s IT

sector. These recommendations included removing regulatory and other barriers, strengthening the

protection of digital content, promoting the use of electronic commerce in the public and private sectors,

and expanding IT procurement opportunities. An overarching objective of this year’s IT Working Group,

incorporated throughout the specific recommendations, is to promote and expand private-sector input and

the use of public comment opportunities in the Japanese policy-making and regulatory processes. Specific

recommendations include removing existing barriers that impede business-to-business and business-toconsumer electronic commerce, and allowing non-attorneys to provide mediation and arbitration services

for profit. With regard to strengthening the protection of intellectual property, the United States made

several recommendations to extend Japan’s terms of copyright protection, strengthen the enforcement

system against infringement and provide security for commerce in the digital age. To promote the use of

electronic commerce, the United States has urged Japan to support private sector self-regulatory

mechanisms for privacy and alternative dispute resolution, as well as to ensure that laws governing

electronic transactions are technology-neutral. The United States has also called on Japan to support fair

and open procedures for e-government and e-education procurement by ensuring transparency, efficiency,

security, and private sector-led innovation. The United States conveyed and discussed these

recommendations in detail during the first round of talks of the IT Working Group, which took place in

December 2002.

Energy: Dominated by ten regional utilities, Japan's energy market is the third largest in the world after

the United States and China. Through continued regulatory reform, Japan aims to increase efficiency in its

power sector and reduce its energy prices, still the highest among OECD members. Since the March 2000

liberalization of one-third of its electricity market (which has yielded little new entry by competitors),

Japan gradually has been moving toward another phase of reform to further its goals of increased

efficiency and lower prices. A truly competitive Japanese energy sector would not only spur economic

growth domestically, but also would expand opportunities for U.S. firms to produce, sell and trade energy

products and services in Japan's electricity and gas markets. In addition, regulatory reform will help

generate new opportunities for U.S. firms to export to the electricity generation equipment market.

During the inaugural year of the Regulatory Reform Initiative, the United States urged Japan to take bolder

steps to promote a regulatory and competitive environment in both its wholesale and retail energy sectors. 

This would enable Japan to achieve its goals of reducing electricity costs to internationally competitive

levels, encouraging innovation and efficiency, and increasing the share of natural gas in its primary energy

supply. The United States also called on Japan to remove impediments that discourage market entry.

Toward addressing these problems, Japan agreed in the First Report to the Leaders to work actively to

establish important principles and objectives for reforming the electricity sector, such as ensuring that the

electricity network guarantees transparent and fair competition; considering the establishment of a

wholesale power exchange over a broad geographic market; and examining existing transmission capacity

and interregional transmission links to facilitate power transactions nationwide. Other principles and

objectives included in the Report were establishing a retail market environment where consumers can

choose from multiple suppliers through competition, and clarifying a plan and schedule for expanded retail

choice.
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Similarly, the Report includes important objectives for reforming the gas sector, such as creating an

efficient, transparent, fair, and competitive gas market, fostering third-party usage of gas infrastructure,

and promoting incentives for investing in gas infrastructure. Also included were principles and objectives

for promoting construction and interconnection of gas pipelines, fostering transparency measures to

enhance third-party usage of pipelines and Liquified Natural Gas (LNG) terminals, and expanding the

scope of retail liberalization in the gas sector.

In addition, to promote competition in the electricity sector and to clarify the conduct by incumbent

utilities and other enterprises that may contravene the Antimonopoly Act or the Electricity Utilities

Industry Law, the Japan Fair Trade Commission and METI agreed in the Report to review their joint

Guidelines on Fair Transaction and issue new guidelines in 2002. Those guidelines were finalized in July

2002.

In October 2002, the United States made numerous energy sector recommendations under the Regulatory

Reform Initiative. Initial Energy Working Group meetings were held in mid-November 2002 in Tokyo to

discuss the recommendations, which refined and reinforced the reform principles and objectives detailed in

the First Report to the Leaders.

Consistent with this year’s discussions, the Electricity Industry Subcommittee issued a draft report on

electricity sector reform in December 2002. This draft report was open to public comment. METI has said

the final version of this report will serve as a basis for reform legislation. Key elements of the draft plan

include: (1) establishing a neutral body to set transmission and distribution rules; (2) securing fairness and

transparency of transmission and distribution systems through information firewalls, monitoring, and

prevention of cross-subsidization; (3) reviewing the transmission pancaking system; (4) preparing for a

nationwide wholesale power exchange; (5) organizing and strengthening the governmental structure

responsible for market monitoring and dispute resolution; and (6) setting forth a plan and schedule for

expanded retail choice.

Regarding gas sector reform, the Urban Heat Subcommittee issued a draft report, which was also released

in December 2002 and open to public comment. Like the electricity report, the final version will serve as a

basis for legislation to reform the gas sector. Key elements of the draft report include: (1) taking special

measures to increase pipeline investment incentives and promote interconnection of pipeline networks; (2)

securing fair and transparent competition between the gas companies that maintain and operate the

network and other companies that use the pipelines; (3) taking necessary measures to separate accounts

and prohibit discriminatory treatment towards certain businesses to which gas companies supply gas; (4)

promoting third-party usage of LNG terminals by, for example, establishing rules for resolving disputes

over negotiations; (5) setting forth a plan and schedule for expanded retail liberalization; and (6)

developing guidelines and establishing a neutral and fair system for conducting market monitoring and

dispute resolution.

These reforms are designed to foster Japan's economic recovery, help U.S. firms compete in the Japanese

electricity and gas markets, and create new opportunities for competitively priced, high-quality exports to

the Japanese market for electrical generation equipment. The United States welcomes Japan's current

undertaking to embark on another round of reform in the electricity and gas sectors.

Medical Devices and Pharmaceuticals: Continued over-regulation, inefficiencies, and an over-emphasis

on short-term budget savings have slowed the introduction of innovative and cost-effective products into

Japan’s medical device and pharmaceutical markets. Increasing the availability of these products is key to
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helping Japan meet the challenge of providing increased quality health care to its aging population while

containing overall health care costs.

In the First Report to the Leaders, Japan agreed to take numerous concrete deregulation measures that are

critical to ensuring that the steady stream of innovative medical devices and drugs being developed by U.S.

firms gain timely access to the Japanese market.

Severe fiscal pressure on Japan's national healthcare system led Japan to implement various pricing

reforms, including price cuts on medical devices, pharmaceuticals and doctors' technical fees, and

increases to patients' premium payments and co-payments. The United States actively engaged Japan at all

levels to ensure that Japan did not implement these steps in manners that arbitrarily targeted U.S. products

for price reductions. As a result, the overall adverse impact of medical device and pharmaceutical pricing

reforms was less than anticipated. However, there is still significant opportunity for Japan to reform its

pricing systems to better recognize and reward the value of innovative medical devices and

pharmaceuticals. This matter will continue to be addressed within the context of Japan’s ongoing

comprehensive healthcare reform process.

Although pricing issues were a source of trade friction, progress was made in resolving issues relating to

the regulatory approval of medical devices and pharmaceuticals. Japan took steps to harmonize its

application review and approval processes and improve and expand the use of foreign clinical data. These

steps are critical to enhancing the transparency and consistency of regulatory approvals, which are helping

to reduce approval times, lessen burdens on applicants, and expedite patient access to new treatments. The

Pharmaceutical Affairs Law, which governs the entire regulatory system for medical devices, is being

revised for the first time in more than 40 years. In addition, the regulatory bodies that conduct product

reviews and regulate clinical trials are being restructured into one agency that will oversee the regulation

of medical devices and pharmaceuticals from development to final market approval. These steps are

expected to further improve the speed and efficiency of Japan’s regulatory system.

Building on these steps, the United States in its October 2002 Regulatory Reform Initiative submission

proposed that Japan: (1) establish a Prime Minister's council on comprehensive healthcare reform that

would provide meaningful access for all stakeholders, including foreign industries, to present and discuss

ideas; (2) ensure that innovative medical devices and pharmaceuticals are introduced into the healthcare

system in a timely manner, and that such products receive appropriate evaluations in a transparent and

predictable pricing process; (3) continue to reform the regulatory systems for medical devices and

pharmaceuticals to ensure faster, more efficient product approvals that give maximum consideration to

common international practices; and (4) ensure that the pricing process for biological products (medical

devices and pharmaceuticals) reflects the investment costs needed to meet the regulatory requirements of

such products, and that treatment of such products takes place in a nondiscriminatory, science-based

manner. The United States elaborated on these recommendations at the first meeting of the Medical

Devices and Pharmaceuticals Working Group, which met in November 2002 in Washington, D.C.

Financial Services The Government of Japan has implemented the majority of its "Big Bang" financial

deregulation initiative, which aimed to make Tokyo's financial markets "free, fair and global" by allowing

new financial products, increasing competition within and between financial industry segments, and

enhancing accounting and disclosure standards. "Big Bang" liberalization has substantially improved the

ability of foreign financial service providers to reach customers in most segments of the Japanese financial

system.
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In January 2002, rules governing Money Management Funds (MMFs) were improved, although an

exception from mark-to-market valuation still remains. Legislation eliminating the requirement for

physical certificates for Japanese government bonds and corporate debentures passed the Diet in June 2002

and is set to be implemented effective January 6, 2003. This follows legislative action to eliminate a

similar requirement for commercial paper that took effect in April 2002. Banks were granted limited entry

into the insurance business in April 2001 (initially non-life only). Further restrictions were lifted in

October 2002, including allowing bank sales of variable annuities.

In mid-August 2002, the Financial Services Agency (FSA) announced a package of securities market

reforms, including the possible submission to the January 2003 ordinary Diet session of legislation to

reduce minimum capital requirements for securities companies, investment trust management companies,

and investment advisory companies in order to facilitate new entry. The FSA also seeks to introduce a

sales agent system to permit certified public accountants, licensed tax accountants, and financial planners

to sell corporate stocks to investors as an agent of a security brokerage house. The FSA package included

permission for banks and securities firms to share business space beginning mid-September 2002 and the

relaxation of restrictions on discretionary execution of customer orders by securities firms. The GOJ has

also promised reform of government financial institutions to avoid competition with the private sector.

The United States welcomes Japan's progress in increasing the efficiency and competitiveness of its

financial markets. In its October 2001 submission, the United States put forward proposals to support

further opening and development of the Japanese financial markets, which will allow Japan to take full

advantage of international financial expertise and support future Japanese growth. These include: (1)

permitting postal financial institutions to employ investment advisory companies on terms similar to those 

for public pensions; (2) granting regulatory approval to prototype plans for defined contribution (DC)

pensions; (3) increasing the DC pension plan contribution limits; (4) permitting multiple classes of shares

for investment trusts; (5) further improving rules governing MMFs; (6) revising the E-Notification Law to

include lenders subject to the Moneylending Business Law; (7) working closely with the private financial

services community to review current reporting and record-keeping requirements; and (8) subjecting any

legislative action for the financial services activities proposed for the Postal Public Corporation (to be

created April 2003) to full public notice and comment.

These issues were discussed on December 12, 2002 in the second meeting of the U.S.-Japan Financial

Services Working Group, a component of the Financial Dialogue of the U.S.-Japan Economic Partnership

for Growth.

For information on deregulation in the insurance sector, please see the Insurance entry under “Existing

Bilateral Agreements.”

ii. Structural Regulatory Reform

Competition Law and Policy: A key goal of our regulatory reform efforts is to ensure that steps to

deregulate and introduce competition into Japan’s economy are not undone by anticompetitive actions by

firms and trade associations resistant to such steps. An active and strong antitrust enforcement policy in

Japan is needed to restrain anticompetitive behavior, including by incumbent firms in once heavily

regulated sectors.

In the First Report to the Leaders under the Regulatory Reform Initiative, Japan agreed to review the status

of the Japan Fair Trade Commission (JFTC) with a view to ensuring its independence and neutrality from

other regulatory agencies, and to increase the JFTC’s staff levels by more than 6 percent to 607 people. To
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strengthen the JFTC’s enforcement effectiveness, the Antimonopoly Act (AMA) was amended in May

2002 to increase five-fold the maximum criminal fine for corporate offenders and to expand the JFTC’s

power to issue cease-and-desist orders with respect to AMA violations by trade associations and violations

of the AMA’s international contract prohibitions. The JFTC agreed to devote a sizable portion of its staff

to monitor markets undergoing deregulation, and MPHPT and METI committed to work with JFTC to

promote competition in the telecommunications and energy sectors, respectively. With respect to

measures to combat bid rigging, Japan enacted legislation to address the problem of so called bureaucratled bid rigging. That legislation empowers the JFTC to require corrective measures by government

ministries and agencies in which complicity by government officials has been found. In addition, Ministry

of Land, Infrastructure, and Transport (MLIT) agreed to prepare and publish on its website a bid rigging

countermeasures booklet for use by central government, local government and quasi-governmental

commissioning entities.

In its October 2002 Regulatory Reform submission, the United States recommended that Japan introduce

legislation to make the JFTC an independent agency under the Cabinet Office. The submission also called

on Japan to increase the budget and staff of the JFTC substantially, and to establish an office within the

JFTC composed of graduate-school level economists to provide economic analysis and expertise to the

JFTC’s enforcement and competition advocacy activities. The United States urged Japan to strengthen the

JFTC’s investigative and enforcement powers, including by giving the JFTC criminal investigation

powers, substantially increasing administrative surcharge levels and making cartel activity per se illegal. 

The United States also recommended that Japan take further measures to address prolific bid rigging,

including instituting procedures for collecting overcharges from bid rigging and assisting citizen lawsuits

aimed at recovering overcharges suffered by local governments as a result of bid rigging. The submission

urged that the Government of Japan actively solicit and fully consider the JFTC’s views before

implementing plans for deregulation in the energy and telecommunications sectors and for the

restructuring and privatization of public corporations and other public entities. These recommendations

were discussed in detail at a meeting of the Cross-Sectoral Working Group in November 2002.

Transparency and Other Government Practices: Despite improvements in recent years, Japan’s

regulatory system continues to lack the transparency and accountability necessary to ensure that all entities

have the same access to government information and the policymaking process. Reforms that increase the

transparency of the regulatory process and make the bureaucracy more accountable help curb burdensome

discretionary powers of the bureaucracy and shift power to the general public. Such reforms also help

level the playing field for foreign firms, reducing the special advantages traditionally enjoyed by Japan’s

domestic firms. 

In 2002, Japan took several steps to increase the transparency and accountability of its regulatory system. 

As detailed in the First Report to the Leaders, Japan implemented an information disclosure law in October

2002 that provides the public the right to request the disclosure of information held by Independent

Administrative Institutions (dokuritsu gyosei hojin), public corporations (tokushu hojin), and similar

entities. Japan is also taking active steps to increase the use of the “No Action Letter” (NAL) system. 

That system allows businesses to submit inquiries to ministries and agencies on the interpretation and

application of laws and ordinances. The ministries and agencies respond in writing to inquiries and make

their responses public. In addition, Japan implemented a Government Policy Evaluation Act in April

2002 aimed at enhancing the effectiveness of its policy evaluation system and government accountability.

Building on these measures, the United States recommended in its October 2002 submission that Japan

undertake additional improvements in its regulatory system to support its reform efforts and ensure that all

partners have the same access to government information and the policymaking process. The United
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States urged Japan to: (1) improve the effectiveness of the Public Comment Procedures (PCP) by

establishing a centralized system that would allow parties to find solicitations of public comments in one

location, requiring a minimum 30-day comment period, and strengthening the PCP from being mere

guidelines to being a law; (2) ensure that establishment of Special Zones for Structural Reform is done in a

transparent, non-discriminatory manner, with a focus being placed on encouraging market entry and an

understanding that successful measures used in the zones should be applied on a national basis as

expeditiously as possible; (3) take steps to facilitate public input into draft legislation while it is being

developed by the government before it is submitted to the Diet; and (4) ensure that the process to

restructure and privatize public corporations is transparent and that the private sector has opportunities to

provide input. Further discussions on transparency issues took place in mid-November 2002 during the

inaugural meeting of the Cross-Sectoral Working Group.

Legal Services and Judicial System Reform: The creation of a legal environment in Japan that supports

regulatory and structural reform and that meets the needs of international business is a critical element of

successful regulatory reform in Japan. Of particular concern has been a number of outmoded restrictions

on the delivery of international legal services in Japan that interfere with the ability of foreign lawyers to

practice in Japan in an effective manner.

In 2002, Japan took some important steps toward modernizing its legal system. Most significant was the

adoption by the Japanese Cabinet of a Program for Promoting Justice System Reform in March 2002,

which set out the timetable for introducing legislation to implement Japan’s plans for judicial system

reform. These plans include introduction of legislation in early 2003 to, among other things, liberalize

restrictions on partnership and employment relationships between Japanese and foreign lawyers, reduce by

50 percent the time required to complete court trials and modernize Japan’s arbitration law to improve the

legal framework for domestic and international commercial arbitration.

In its October 2002 submission, the United States urged Japan to implement wide-ranging measures to

liberalize restrictions on the practice of law by foreign lawyers in Japan. These recommendations include

eliminating all prohibitions against freedom of association between Japanese and foreign lawyers; allowing

foreign lawyers to form professional corporations and to establish branch offices throughout Japan, just as

Japanese lawyers are currently permitted to do; and eliminating needless restrictions and requirements, and

unnecessary delays, on foreign lawyers desiring to practice in Japan as foreign legal consultants. The

United States also urged Japan to act expeditiously in implementing measures to ensure effective judicial

oversight of administrative agencies. The United States strongly advocated the adoption of these

recommendations during the November 2002 meeting of the Cross-Sectoral Working Group. 

Commercial Law: Reform of Japan’s commercial law is important for introducing necessary flexibility

into the organization, management and capital structure of Japanese companies and to facilitate merger and

acquisition activities by both foreign and domestic firms in Japan. The Japanese economy will also benefit

from additional measures to improve corporate governance, since good corporate governance systems will

encourage increased productivity and economically sound business decisions as management strives to

maximize shareholder value.

In 2002, Japan made substantial revisions to its Commercial Code that will introduce greater flexibility to

the capital structure of Japanese corporations and strengthen corporate governance mechanisms. 

Specifically, Japan’s Commercial Code was amended to liberalize substantially restrictions on the issuance

of stock options; permit companies to issue tracking stock and shares with limited voting rights; eliminate

the requirement that foreign companies must set up a branch office in Japan; and provide companies the

option of adopting an American-style executive committee (audit, nominating and compensation
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committee) system, composed of at least a majority of outside directors, as an alternative to appointing

statutory auditors. Japan also undertook to examine the possible introduction of modern merger

techniques, such as triangular mergers and cash mergers, into its commercial law.

The United States has commended Japan’s broad-ranging reforms of its commercial law. In its October

2002 Regulatory Reform submission, the United States encouraged Japan to build on these reforms by

taking further measures to improve commercial law and corporate governance in Japan. Specifically, the

United States recommended that, while it is examining the general introduction of modern merger

techniques into its commercial law, Japan revise the Industry Revitalization Law to permit firms seeking to

restructure to use such merger techniques immediately. The United States also urged Japan to improve

corporate governance by requiring pension fund managers to vote proxies for the benefit of fund

beneficiaries and by providing for increased disclosure on a more timely basis of information necessary for

shareholders to exercise their voting rights in an effective manner. These recommendations were

discussed in more detail at a meeting of the Cross-Sectoral Working Group in November 2002. 

Distribution: Japan's rigid and inefficient distribution and customs systems restrict market access for

imported products and undermine the competitiveness of foreign-made products. With regard to customs,

the United States continues to urge Japan to modernize clearance procedures to fully open its market to

imported goods. The demand for the rapid delivery of goods and information has produced a number of

new industries, including the express carrier industry, that are now seen as vital for the smooth

development of the global economy. It is important therefore, to minimize the regulations, procedures,

and costs that could inhibit the free exchange of goods and information through the express carrier

industry. While more remains to be done, the Japanese government has implemented several measures and

provided a number of assurances in the context of the Regulatory Reform Initiative that will enhance the

ability of U.S. express carriers to provide an efficient, speedy exchange of goods and information to

benefit the Japanese economy. 

In the First Report to the Leaders, the Japanese agreed to consult with U.S. express carriers before deciding

on measures to be adopted to replace the current temporary fee structure employed by the Nippon

Automated Customs Clearance System (NACCS) Center; to undertake to use the Public Comment

Procedure whenever the Air-NACCS fee structure is revised in the future; to ensure that the NACCS

Center will in the future provide information to the public about its operations in a timely fashion when

requested to do so; to implement the Pre-Arrival Examination System for import cargoes (the system that

allows the instant issuance of import permits for air cargo upon arrival) and the manifest declaration

system for express consignments of a certain value; and to continue to simplify Japan's customs

procedures.

Our reform recommendations to the Government of Japan in October 2002 recognized that Japan has

implemented, and plans to implement, additional positive measures to simplify and automate customs

processing, but contained several further recommendations dealing with customs clearance. The

submission again recommended raising the de minimis level for customs duties from 10,000 yen to 30,000

yen. To promote financially healthy airline and air-freight industries, the submission recommended that

Japan formulate the level of landing fees in an open and transparent manner, using internationally accepted

accounting standards, and base those fees on the actual cost of providing services. The U.S. Government

continues to monitor progress on customs processing procedures and the fair and uniform implementation

of the Large Store Location Law. In November 2002, the Cross-Sectoral Working Group met to discuss

these and other issues. 
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b. Bilateral Consultations

i. Insurance

Under the 1994 and 1996 bilateral insurance agreements, Japan took significant steps to deregulate its

insurance market. These steps included sweeping measures that resulted in meaningful improvements in

the product approval process, greater use of direct sales of insurance products, and a diversification of

allowable product offerings. As a result, U.S. insurance companies continue to visibly and substantially

increase their presence in both the life and non-life insurance sectors in Japan. This progress

notwithstanding, issues of concern to U.S. insurers remain. Prominent among these in 2002 were the

future funding of the Life Insurance Policyholder Protection Corporation (PPC) and competitive concerns

related to Kampo, Japan’s postal insurance entity.

Bilateral consultations under the two insurance agreements were held in Washington, D.C. in August 2002. 

As has been customary in past years, the National Association of Insurance Commissioners participated in

the talks as part of the long standing effort to promote U.S.-Japan regulator-to-regulator discussions. The

talks covered a broad range of issues that had been highlighted by U.S. industry as key areas of concern. 

The United States raised the issue of future funding for the Life Insurance Policyholder Protection

Corporation (PPC). U.S. life insurers remain concerned that additional industry contributions to the PPC

will be imposed following expiration of the Government of Japan’s funding commitment to the PPC in

March 2003. Private sector insurers, foreign and domestic, already face a mandate to provide 560 billion

yen to the PPC. Failures of several Japanese insurers have expended approximately 538 billion yen of this

amount. Given the serious financial implications of any additional PPC contributions, the United States

urged the Japanese Financial Services Agency (FSA) to deliberate this matter in a transparent manner that

afforded interested parties the opportunity to air their views and concerns. While noting the essential role

of the PPC in ensuring consumer protection and market stability, the United States expressed the need for a

sustainable and equitable funding decision that fairly allocates costs among industry, the government and

policyholders. The FSA committed to “consulting” with industry, but did not commit to a formal

transparent process in this matter, citing no legal requirement to do so. The FSA subsequently did hold

meetings on this issue with private insurers but private sector representatives generally noted that these

discussions typically did not include substantive two-way dialogue. Near the end of 2002, it appeared as if

progress was being made towards a resolution of this issue. It remained unclear, however, if any such

resolution would ultimately receive Diet approval. Until a resolution is reached, the U.S. Government will

continue to monitor developments and raise this issue as necessary in bilateral and multilateral meeting and

fora.

The United States again raised concerns regarding future plans for the postal financial institutions – the

postal insurance system (Kampo) and the postal savings system (Yucho) – which currently fall under the

purview of MPHPT but will be transferred to a Postal Public Corporation in April 2003. There has been

longstanding concern over the effect these institutions have on the efficient operation of Japan’s financial

market. As such, the new Corporation provides an important opportunity for the Government of Japan to

take concrete steps to address key transparency and competition issues related to these services. The U.S.

Government put forward concrete recommendations regarding the transfer in its October 2002 Regulatory

Reform submission to Japan. These recommendations included ensuring transparency throughout the

process, requiring the postal financial institutions to operate under the same standards as its private sector

competitors, and prohibiting these institutions from underwriting any new insurance products or

originating any new non-principal-guaranteed investment products. As the April 2003 creation of the

Postal Public Corporation draws near, the United States will closely follow the development of
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implementing rules and regulations that will govern this new entity to assess both the extent to which

public comment procedures are used and their competitive affects on the financial services sector. 

The United States and Japan discussed the FSA’s implementation of recommendations to streamline

Japan's product approval process and increase needed personnel and technical resources. In addition, the

United States emphasized its concerns about the case agent system and restrictions on foreign currency

investment assets. The two countries also addressed a number of new issues that have arisen as Japan

continues to restructure its financial system, such as the implementation and supervision of Japan’s new

pension system, the expansion of sales of insurance by banks, and the possible reduction of guaranteed

interest rates by insurers. 

Over the past year, the Government of Japan has taken some steps to increase transparency in its decisionmaking processes related to the insurance sector, including use of public comment procedures by the FSA

and MPHPT. For example, the United States welcomed efforts made by the FSA to involve interested

parties in the development of “know your customer” guidelines. U.S industry representatives have

generally commented favorably on the willingness of Japanese officials to meet with them. As noted

previously, however, on some key issues, FSA’s unwillingness to engage in substantive dialogue has the

effect of leaving insurers in the dark on regulatory matters of great importance. 

The next annual consultations are scheduled to be held mid-2003, at which time the United States

anticipates a full discussion on a wide range of issues.

ii. Autos and Auto Parts

Improving access to the Japanese auto and auto parts markets remains an important objective of the Bush

Administration. While there has been a trend toward closer integration as well as important technological

advancements in the global automotive industry over the past several years, the effect of these changes on

market access and competition in this sector remains unclear. Unfortunately, Japan’s lingering economic

slump, limited market access, and weak competitive environment have continued to disproportionately

hurt foreign vehicle and auto parts manufacturers in Japan. The United States remains disappointed that,

after rising steadily in 1995 and 1996, sales of North American made vehicles have fallen for the last six

years, with sales in 2002 expected to be substantially less than in 1994. In an effort to contend with these

economic conditions and position themselves to better compete in the future, U.S. auto companies have

continued to consolidate distribution networks and rethink corporate strategies. The auto parts sector also

remains problematic: the U.S. auto parts trade deficit with Japan increased from a record level of $9.5

billion in 1997 to an estimated $11.2 billion in 2002. 

In order to address barriers in and improve U.S. companies’ access to the domestic Japanese automotive

market and Japanese auto plants in the United States, the United States and Japan established a new

Automotive Consultative Group (ACG) in October 2001. The ACG will serve as the focal point for

addressing lingering as well as new, emerging issues in this key sector of both countries’ economies. 

More specifically, the group will assess trends in the industry based on a series of trade and economic data

on autos and automotive parts to be provided by both countries and work to identify areas in which

specific action can be taken by Japan to address U.S. concerns. This would include further deregulation

(particularly with respect to the automotive parts aftermarket), increased transparency in rules and

regulations governing this sector, and more rigorous application of Japanese competition laws. The group

will meet at least annually and will be co-chaired by the Department of Commerce and USTR on the U.S.

side, and METI and the Ministry of Land, Infrastructure and Transport on the Japanese side. The first

meeting took place in January 2003.
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In addition to meetings under the ACG, the United States is continuing to address cross-cutting issues

impacting the automotive sector under the Partnership, announced by President Bush and Prime Minister

Koizumi in June 2001. This includes expanding opportunities for foreign investment, increasing

transparency, and promoting corporate restructuring in the Japanese economy.

iii. Government Procurement

Construction/Public Works: The U.S. share of Japan's $210 billion public works market has consistently

remained well below one percent – a troubling fact given the competitiveness of U.S. design/consulting

and construction firms throughout the rest of the world. Discriminatory practices in Japan’s public works

sector continue despite the existence of the 1994 U.S.-Japan Public Works Agreement, under which Japan

is obligated to use open and competitive procedures for procurements valued at or above the thresholds

established in the WTO Agreement on Government Procurement. These problematic practices include

failure to address rampant bid-rigging, use of discriminatory qualification and evaluation criteria,

unreasonable restrictions on the formation of joint ventures, and the structuring of individual procurements

so they fall below thresholds established in international agreements. The United States is very concerned

with these practices, which seriously impede U.S. companies' ability to participate in Japan's public works

sector. 

During the Trade Forum in July 2002, the United States urged Japan to eliminate the obstacles that prevent

U.S. companies' full and fair participation in its public works sector. In addition, the United States

welcomed Japan's decision to address a long-standing U.S. concern regarding joint ventures for design

projects by allowing design firms to conduct “design architect” work as joint venture members. The

United States also encouraged Japan to include U.S. firms in Construction Management, Urban Renewal,

and Private Finance Initiative projects. In October 2002, Japanese private sector organizations hosted the

fourth U.S.-Japan Construction Cooperation Forum (CCF), which focused on facilitating the formation of

joint ventures between U.S. and Japanese design/consulting and construction companies for Urban

Renewal projects.

iv. Investment

Changing Japanese attitudes toward inward foreign direct investment (FDI), depressed asset values, and

improvement in the regulatory environment enabled U.S. and other foreign firms to continue to gain

significant new footholds in the Japanese economy, mostly through mergers and acquisitions. As a result,

although FDI in Japan remains the lowest among OECD countries, investment has been rising over recent

years. The banking/insurance and telecommunications sectors showed particularly high growth rates. 

FDI in JFY 2000 in banking/insurance increased by more than 100 percent over JFY 1999 levels to

approximately $9.2 billion and telecommunications showed healthy growth with FDI inflows of

approximately $6.7 billion. U.S. direct investment into Japan mirrored these changes with increases in

investment flows up to approximately $9.2 billion in JFY 2000, mostly due to transactions in the financial

sector. More recently, however, FDI into Japan has slumped, as a result of continuing economic problems

in Japan and a slowing global economy. In JFY 2001 (which ended March 2002), total FDI plunged to

$17.3 billion (Yen 2.2 trillion), down 39.5 percent from the level of JFY 2000.

U.S. investment also shrank significantly to $5.1 billion. During the first half of JFY 2002 (April to

September 2002) as well, this downward trend continued, as total FDI fell almost 60 percent from the level

of the same period a year ago. 

Japanese and foreign businesses continue to be significantly affected by the implementation of several

recent legal changes. The Securities Exchange Law, for example, now mandates consolidated and
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market-value accounting for listed firms and the new bankruptcy law (Civil Reconstruction Law)

encourages business reorganization, including spin-offs, rather than forced liquidation of assets. In

addition, the concept of corporate governance, such as the role of boards of directors, is changing in ways

that bode well for increased investments, mergers and acquisitions. Amendments to the Commercial Law

passed by the Diet in May 2002, will allow, starting April 2003, large-scale corporations to choose either

Japan's traditional statutory auditor system or executive committee system (i.e., U.S.-style corporate

governance). In another promising development, METI plans to submit a bill amending the Industrial

Revitalization Law (IRL) to the next ordinary Diet session, scheduled to convene in mid-January 2003. 

The bill would introduce triangular mergers, which allow the use of foreign parent company stock as

merger consideration, for those companies covered by the IRL.

Nevertheless, government and business observers from both countries recognize that much more remains

to be done and the U.S. and Japanese Governments have agreed to continue to consult on investment

issues. The U.S.-Japan Investment Initiative, under the Economic Partnership for Growth, sets forth a

framework for bilateral discussions on investment that highlights and resolves possible impediments. The

Initiative meets regularly throughout the year and an annual report is given to the leaders on the year's

accomplishments. During the talks, the U.S. private sector is given an opportunity to actively participate

and directly present their investment concerns to the Government of Japan.

v. Housing/Wood Products

With just under 1.2 million housing starts in 2001, Japan’s home building materials market is second in

size to only that of the United States. Estimates of the size of the home building materials markets range

upward of $62 billion, not including materials going into the repair and remodeling market. According to

the U.S. Department of Commerce, imports of building materials from the United States for use in the

residential construction market decreased in 2001, because of continued weakness in the Japanese housing

market. The housing market in Japan is expected to remain weak for the foreseeable future given that the

number of dwellings exceeds the number of households.

Discussions over the past several years under the auspices of the U.S.-Japan Enhanced Initiative on

Deregulation and Competition Policy (EI) have led to a number of significant changes, including

amendment of the Building Standard Law to make it performance-based, approval of three-story, multifamily, wood-frame construction in urban areas, recognition of U.S. grademarked lumber, and amendment

to the Japanese Agricultural Standards (JAS) Law to allow foreign testing organizations to function on an

equal footing with their Japanese counterparts. The Ministry of Agriculture, Forestry and Fisheries

announced on March 6, 2002, that it was recognizing the grading systems of certain wood products-related

organizations in the United States as being equivalent to those of JAS, a prerequisite for U.S. testing

organizations applying to function as registered certification organizations.

Discussions during the last year of the Initiative focused on ways to stimulate sales of existing homes, to

expand the residential repair and remodeling market for U.S. building products. Unlike the new

construction market, the repair and remodeling market is an area that is expected to experience strong

growth (5 percent or more annually) over the remainder of the decade. Sales of existing homes in Japan

are currently only a fraction (less than 15 percent) of existing home sales in the United States.

Restrictions on building size and designs, and products continue to constrain the use of some foreign

building products and systems that are commonly used in the United States and elsewhere, thereby limiting

choice for consumers and artificially inflating housing costs. The United States continues to have serious

reservations about the transparency and basis of certain testing methodologies for evaluating fire
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resistance; discussions are ongoing. The United States has also notes the need for Japan to ensure that

guidelines for volatile organic emission levels be developed through a transparent process and be based

upon sound science.

As part of the Fourth Joint Status Report, the United States and Japan agreed that future discussions on

wood/building products related issues would be under the auspices of the Wood Products Subcommittee

and its two technical committees, the Building Experts Committee and JAS Technical Committee. (These

committees were set up under the terms of the 1990 U.S.-Japan Wood Products Agreement). The Wood

Products Subcommittee met in Tokyo in April 2002, and the Building Experts Committee and the JAS

Technical Committees met in Seattle in September 2002. The discussions were deemed productive.

c. Sectoral Issues

i. Agriculture

Japan remains the United States’ largest export market for food and agriculture products. Despite this,

Japan maintains many barriers to imports of these products. 

Rice: The United States has expressed ongoing concerns over the U.S. market share of Japan’s overall rice

imports in recent years. Although U.S. market share in Japan’s Simultaneous Buy-Sell (SBS) tenders

showed some improvement in 2002, the Japanese were slow to fill the entire SBS allocation. At the end of

2002, it was still unclear how the Japanese would allocate 36,000 metric tons of the SBS portion that had

gone unallocated. (SBS tenders are conducted by the Japanese Food Agency and are designed to allow

Japanese rice wholesalers and retailers to purchase high value, identity-preserved rice from foreign

suppliers for retail sale, and as such are desired by the U.S. rice industry). The United States will closely

follow the remaining SBS tenders in Japan’s fiscal year (April-March) to ensure that Japan fulfills its rice

commitments and will continue to press Japan for increased access to its rice market.

The U.S. Government has also been concerned about the increasing percentage of low-quality broken rice

in Japanese tenders of U.S. rice in recent years. Recent levels of broken rice imports from U.S. firms (17

percent -18 percent) exceed what the industry would view as a normal broken percentage of around 11

percent. However, in 2002, the percentage of broken rice purchased from the United States decreased

compared to 2001. As with the U.S. market share of imported rice, the United States will also continue to

press Japan to lower the percentage of low-value broken rice in Japanese tenders.

Beef Safeguard Measure: The United States is very concerned over indications that Japan will increase

tariffs on beef next year through imposition of an emergency beef tariff measure. Japan is the United

States’ number one beef export market, purchasing over $1.2 billion worth of U.S. beef in 2001. While the

U.S. acknowledges the technical trigger for imposing this measure, the United States considers its use

under the existing circumstances to be improper. The U.S. position is that such measures were intended to

aid domestic producers confronted with import surges; however, this is not the case in Japan where beef

imports are merely recovering from severely depressed levels following the 2001 Bovine Spongiform

Encephalopathy (BSE) scare. Imposition of this safeguard will threaten this recovery and harm not only

U.S. beef producers but also a full range of Japanese beef consumers, including the food service, grocery,

and restaurant industries. 

In August 2002, the United States urged Japan to take the necessary steps to prevent the measure from

being imposed. Consequently, the issue was raised in official correspondence and in a series of bilateral

and multilateral meetings and fora. A final decision by Japan, through legislation, is expected in early
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2003. Regardless of the outcome on this legislation, the United States will continue to urge Japan to

suspend this measure for the coming fiscal year.

Sanitary and Phytosanitary Measures: Japan’s use of sanitary and phytosanitary measures continues to

create many barriers to U.S. food and agricultural goods. The United States is increasingly concerned that

these measures are being imposed despite their inconsistency with international standards and in the

absence of supportive science. 

A prime example of this is Japan’s fumigation requirement on U.S. fruits and vegetables for 10 species of

cosmopolitan pests. These are pests that are widely distributed in Japan and are not under official control. 

The fumigation requirement is particularly detrimental to the quality of these products, many of which

sometimes do not survive fumigation and must be destroyed. In addition to some forward movement with

the United States and Japan entering into discussions on a pre-clearance protocol for lettuce, the United

States has raised this issue in the WTO Committee on the Sanitary and Phytosanitary Measures. 

Throughout 2002, Japan placed a series of nationwide bans on all U.S. poultry and egg products (cooked

and uncooked) because of reports of low pathogenic avian influenza (LPAI). LPAI is a globally

ubiquitous disease, and the International Office of Epizootics (the international standard setting body for

animal health) has determined that it is not a reportable and actionable poultry disease. Following

intervention by the United States, Japan lifted its national bans but maintained a series of state-wide, or in

some cases, geographic bans. As of the end of 2002, Japan had eliminated all of the LPAI bans.

The United States continues to work with Japan to resolve this and all other SPS concerns in appropriate

bilateral and multilateral meetings. In addition, the United States will monitor closely Japan’s planned

creation of a Food Safety Agency and will take every opportunity to ensure that this agency operates in a

manner consistent with Japan’s trade commitments and promotes WTO consistent policies that are based

on sound science.

Organic Food: In March 2002, the United States reached an equivalence agreement with Japan to facilitate

the export of all U.S. organic products to Japan, currently valued at over $100 million. This equivalence

agreement became effective April 1, 2002. The equivalence agreement is facilitating the export of U.S.

organic product to Japan as a result of Japan’s acceptance of the USDA organic standards, accreditation

procedures and conformity assessment requirements.

ii. Steel

Steel issues are detailed in Chapter V, “Other Multilateral Activities.”

iii. Flat Glass

Barriers to U.S. flat glass sales in Japan persist, in contrast to the high market shares U.S. flat glass

manufacturers have gained in other industrialized economies. Japan's three domestic producers constitute

an oligopoly that exerts tight control over distribution channels by, for example, maintaining extensive

equity and financial ties to distributors. In addition, Japanese flat glass manufacturers adjust prices,

capacity and product mix at virtually the same time, contributing to a lack of competition in the market.

The United States has engaged Japan in discussions of these concerns in various bilateral fora over the past

decade, most recently in the 2002 Trade Forum under the U.S.-Japan Partnership for Economic Growth. 

During the Trade Forum discussion, the U.S. Government highlighted the continuing problems that
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prevent market entry, including the need for a stronger Japan Fair Trade Commission and tighter

enforcement of rules against anticompetitive behavior. The U.S. Government also has highlighted the

need to modify regulations that would facilitate use of energy efficient glass in Japan. 

The United States continues to urge Japan to take steps to promote competition in and access to its glass

market. The United States also continues to work with U.S. industry on ways to improve market access

and enhance competition in this sector.

9. Taiwan

Taiwan became a member of the WTO on January 1, 2002. Taiwan’s accession to the WTO has increased

access over the past year for a broad range of U.S. goods and services, including agricultural exports. 

Highlights of Taiwan’s WTO commitments include:

• Tariffs on industrial goods were reduced to less than 5 percent on average; 

• Tariffs on construction and agriculture equipment, wood (except plywood), paper and paper

products, furniture, distilled spirits, certain steel products, civil aircraft, dolls, toys and games were

reduced to zero (some upon accession, most by 2004); 

• Agricultural tariffs fell to 12 percent on average, with most of these reductions taking place upon

accession; 

• Taiwan’s state trading monopoly on tobacco and alcohol was eliminated; 

• Taiwan has increased foreign access to a number of service sectors, including professional services

(architects, accountants, lawyers), audiovisual services, express delivery services, advertising,

computer services, construction, wholesale and retail distribution, franchising, and environmental

services; and

• Taiwan has the obligation to adhere to the WTO TRIPS Agreement to protect intellectual property

rights.

However, we continued to work with the Taiwan government this past year to address shortcomings in

several areas related to its WTO commitments, including increasing market access for agricultural goods,

improving intellectual property rights (IPR) protection, further opening Taiwan’s telecommunications

services market, and ensuring market access for pharmaceuticals. 

a. Agriculture

At the beginning of 2002, Taiwan was late in fully implementing the tariff-rate and market access quotas

on rice, chicken, pork, fish, and other products specified in their WTO commitments. Tariff-rate quotas

on chicken, pork, fish and other products for 2003 were announced as planned in the Fall of 2002. 

The Taiwan government’s management of its rice import system was particularly troublesome this past

year and required several substantive discussions to ensure access for U.S. suppliers. Further, Taiwan

agreed as a condition of its accession to the WTO to consult with the United States and other interested

WTO members regarding its plans for management of rice imports beyond 2002. Following numerous

attempts to hold substantive discussions this past year, the Taiwan government finally agreed to meet in

November 2002. As 2002 came to a close, the United States continued efforts to ensure timely and full

implementation of Taiwan’s commitments on rice imports for 2003. 
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b. Intellectual Property Rights

The level of intellectual property (IP) piracy in Taiwan remains at a very high level. Minimal progress

was made in strengthening its intellectual property rights protection regime during the past year. U.S.

concerns were serious enough to warrant continued placement of Taiwan on the Special 301 Priority

Watch List for the second year in a row. Although the Taiwan authorities declared 2002 to be the “action

year for IPR protection,”continued pirating of optical media, failure to shut down counterfeit and IPRinfringing facilities, and the export of pirated and counterfeit goods overseas led the United States to urge

the Taiwan government to further improve its enforcement and legal framework for IPR protection. 

Taiwan is in the process of modifying its copyright law in response to U.S. concerns. Proposed

amendments, which will require legislative approval, define public transmission and include Internetrelated provisions, such as technological protection measures and electronic copyright for the management

of information. U.S. Government and industry have expressed concerns that the latest drafts of these

amendments may not adequately protect IPR in Taiwan if the authorities exempt some infringements from

“public offence” status, thus requiring private complaints before law enforcement can initiate action

against violators. 

We will continue to monitor Taiwan’s progress in combating its high IP piracy rates, focusing in particular

on whether the Taiwan government aggressively enforces its laws, takes active measures to crack-down on

pirate activities, and makes other efforts to reduce all types of IPR violations. We also look forward to

working with the Taiwan government on further amendments to its copyright law to conform with existing

international IPR norms. 

c. Telecommunications

Taiwan committed as part of its WTO accession to fully open its telecommunications services market, with

the exception of certain foreign equity limitations and board membership requirements. To date, the

Taiwan government has not implemented the legal regime or licensing criteria to provide new licenses for

local, domestic long distance, and international services despite repeated requests from the United States to

fulfill these commitments. 

The Taiwan government permitted the direct sale of fiber-optic submarine cable capacity to the four

existing fixed-line license holders and other telecommunications businesses, including Internet Service

Providers, in February 2002. While international submarine cable firms will be permitted to build their

own backhaul facilities, or links from the cable landing site to network providers, they are limited to only

one gateway.

Taiwan is in the process of developing new criteria regarding the issuance of new fixed-line

telecommunications licenses, including those for domestic long-distance and international services,

expected to be issued in March 2003. DGT plans to issue licenses not only for long-distance and

international services but also for comprehensive networks and city call services. Capital requirements for

comprehensive network services, city-call services and long-distance/or international services will be NTD

16 billion, NTD 12 billion and NTD 2 billion, respectively. Comprehensive fixed-line licensees will

require a build-up of 400,000 lines but 60,000 lines will be sufficient for initiating basic services. We will

continue to monitor whether such requirements are hindering Taiwan’s progress toward full market

opening of its telecommunications sector in a WTO-consistent manner. 
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d. Pharmaceuticals

Taiwan’s pharmaceutical registration process continues to slow market entry for new drugs that have

already been approved in other industrial countries. During 2002, Taiwan’s Department of Health

implemented a new requirement for firms to submit validation data as part of the registration and approval

process for both new drugs and those already on the market. We continued to work closely with the

Taiwan governmentas 2002 came to a close to ensure market access for U.S. firms. 

10. Hong Kong (Special Administrative Region)

a. Intellectual Property Rights

Hong Kong continued enforcement actions during the past year to address piracy of copyrighted works. 

Hong Kong people are growing increasingly aware of the importance of IPR to their own industries,

notably movies and toys. The unauthorized copying of computer programs, movies, music, television

programs, and music remains illegal; but in June 2001, Hong Kong’s Legislative Council (LegCo)

suspended the criminal provision for unauthorized copying of publications. The Hong Kong government

was preparing an amendment at the end of 2002 to refine the "fair use" rules for copyright publications and

create new provisions to crack down on illicit copy shops. Another amendment currently being considered

by LegCo will liberalize the parallel importation of computer software, while maintaining criminal

penalties for such imports of “entertainment” copyrighted products like movies and music. The U.S.

industry has expressed some concern about the adequacy of new legislation and continues to push for even

stronger enforcement. We will continue to monitor this situation and other anti-piracy efforts closely.

b. Telecommunications

Hong Kong will complete its liberalization of local fixed telecommunications network services (FTNS) on

January 1, 2003. Some U.S. companies are considering applying for licenses, but remain concerned about

how interaction with the incumbent service provider (PCCW/HKT) will be regulated. Potential new

entrants are also concerned that they would be disadvantaged in comparison with the incumbent. We will

continue to closely monitor developments in this sector. 

G. Africa

1. Overview

The United States enjoys a strong trade and investment relationship with the 48 countries of sub-Saharan

Africa. Two-way trade between the United States and sub-Saharan Africa totaled $19.6 billion in the first

ten months of 2002, down 21 percent from the same period in 2001, largely as a result of the weakness in

the global economy. Sub-Saharan Africa is home to more than one-tenth of the world’s population,

supplies 14 percent of U.S. crude oil imports, and represents the largest regional bloc of WTO Members

(38 countries). African Members of the WTO played an important role in the launch of the Doha

Development Agenda in November 2001.

In February 2002, USTR Zoellick traveled to Kenya, South Africa, and Botswana – the first-ever visit to

Africa by a sitting U.S. Trade Representative. During the stop in Kenya, he co-chaired the first meeting of

the U.S.-COMESA Trade and Investment Council. In South Africa, he met with trade ministers from the

sub-region and explored possible negotiations on a free trade agreement with the five member countries of

the Southern African Customs Union (SACU). In November 2002, Zoellick notified Congress of the
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President’s intent to negotiate such an agreement with SACU. This would be the first U.S. free trade

agreement with sub-Saharan African countries. Formal negotiations are expected to begin in the second

quarter of calendar year 2003.

The African Growth and Opportunity Act (AGOA) is the centerpiece of U.S. trade policy for this

important region and is helping to achieve key Administration objectives in sub-Saharan Africa, including

promoting economic reform, growth and development; expanding bilateral and regional trade and

investment relationships; and facilitating the region’s full integration into the multilateral trading system. 

Meeting these objectives will open new markets for U.S. exports and create healthier economies and

improved governance in sub-Saharan Africa. Significant progress was made in each of these areas in 2002

and plans are proceeding to continue this work in 2003. The Trade Act of 2002 contained several notable

enhancements of AGOA.

2. Proposed Free Trade Agreement with Southern Africa

In November 2002, U.S. Trade Representative Zoellick notified Congress of the President’s intent to

initiate a free trade agreement (FTA) with the five member countries of the Southern African Customs

Union (SACU): Botswana, Lesotho, Namibia, South Africa and Swaziland. In pursuing this FTA, the

Administration is responding to Congress’ direction, as expressed in the African Growth and Opportunity

Act, to initiate negotiations with interested beneficiary countries to serve as the catalyst for increasing

trade and investment between the United States and sub-Saharan Africa. The negotiations -- addressing

trade topics such as market access, investment, services and intellectual property rights -- are scheduled to

begin in the second quarter of 2003. 

U.S. Trade Representative Zoellick first discussed the possibility of a U.S.-SACU FTA in meetings with

SACU member country trade ministers during his February 2002 visit to South Africa. In October 2002,

SACU Ministers formally communicated to USTR Zoellick their intent to pursue FTA negotiations with

the United States. After notifying Congress of the President’s intent to negotiate an FTA with SACU, in

accordance with the provisions of the Trade Act of 2002, Zoellick requested the International Trade

Commission to prepare a report on the probable economic effects of an FTA. USTR consulted with

Congress and the private sector and also solicited public comment on the prospective FTA. More than a

dozen business associations and NGOs testified at a December 16, 2002 public hearing convened by

USTR on the planned negotiations. Several more organizations submitted written comments. These

consultations demonstrated broad support for a prospective FTA and helped to identify priorities for the

negotiations.

This FTA is a vital part of the Administration’s broader effort to drive global trade liberalization, to create

new commercial opportunities for U.S. companies, farmers and workers in fast growing regions of the

world, and to draw developing countries into the mainstream of the global economy. It offers a chance to

craft a groundbreaking agreement that will serve as a model for similar efforts in the developing world. 

The SACU countries are strong economic reformers and leading AGOA beneficiaries. They have seen the

positive role that trade can play in promoting economic growth and development and are now taking an

important step toward deeper commercial engagement with the United States. 

Through an FTA with SACU, U.S. businesses will gain preferential access to their largest export market in

sub-Saharan Africa, worth more than $3.1 billion in 2001. An agreement will also help to address

longstanding regulatory barriers in the region and to level the playing field in sectors where U.S. exporters

were disadvantaged by the European Union’s free trade agreement with South Africa. By building on the

success of AGOA, the SACU countries would secure the kind of guaranteed market access that supports
32 The AGOA-eligible countries are Benin, Botswana, Cameroon, Cape Verde, Central African Republic,

Chad, Republic of Congo, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Gabon, Ghana,

Guinea, Guinea-Bissau, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia,

Niger, Nigeria, Rwanda, São Tomé and Principe, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland,

Tanzania, The Gambia, Uganda and Zambia. Cote d’Ivoire became eligible in May 2002 after an interim eligibility

review recommended by the AGOA Implementation Committee in December 2001.

33 The Presidential proclamation formally adding these two new countries to the list of AGOA beneficiaries

is expected to be issued in early 2003. 

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long-term investment and economic prosperity. The FTA would also reinforce ongoing regional economic

reforms and lower the perceived risk of doing business in southern Africa. 

3. Implementing the African Growth and Opportunity Act

AGOA, which is authorized through September 30, 2008, provides powerful incentives for economic

growth in one of the poorest regions of the world by granting quota- and duty-free access to the $10 trillion

U.S. market for nearly 6,500 products. The Act also institutionalizes a process for strengthening U.S. trade

relations with sub-Saharan African countries by establishing an annual ministerial-level forum with

AGOA-eligible countries co-hosted by the U.S. Trade Representative and the Secretaries of State,

Treasury and Commerce. 

The Trade Act of 2002 included several enhancements to AGOA, including 1) a doubling of the annual

quantitative limit on apparel produced in the region from regional fabric; 2) the extension of lesser

developed country benefits to Botswana and Namibia, allowing producers there to use third-country fabric

in qualifying apparel; 3) the inclusion of knit-to-shape apparel in the list of goods eligible for quota- and

duty-free treatment under AGOA; and 4) correction of a technical definition for the use of fine merino

wool.

The second U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum was held in Mauritius on

January 15-17, 2003. U.S. Trade Representative Zoellick led the U.S. Government delegation, which

included senior-level officials from the Departments of State, Treasury, Commerce, Agriculture, the U.S.

Agency for International Development, the National Security Council, and several other agencies. 

Ministerial delegations from almost all AGOA-eligible countries also participated. The Forum provided

an opportunity for participants to discuss strategies for promoting regional economic reforms and

strengthening U.S.-sub-Saharan African trade and investment ties. Parallel forums involving the private

sector and non-governmental organizations from the United States and sub-Saharan Africa were also held

in Mauritius at the same time. The first Trade and Economic Cooperation Forum was held in Washington,

DC on October 29-30, 2001. 

AGOA requires the President to determine annually whether sub-Saharan African countries are, or should

remain, eligible for benefits based on their continued progress in meeting criteria set out in the Act. The

Assistant USTR for Africa chairs the interagency AGOA Implementation Subcommittee responsible for

advising the USTR on country eligibility. Based on the U.S. Trade Representative’s recommendation the

President determined in December 2002 that 38 countries32 meet the Act’s requirements for eligibility,

including all 36 countries previously eligible and two additional countries, the Democratic Republic of the

Congo and The Gambia.33 In addition, in October 2002, USTR determined that implementation of AGOA

benefits could begin for Sierra Leone. Previously, Sierra Leone had been eligible for AGOA, but
34 The other 12 countries eligible for textile and apparel benefits are Botswana, Ethiopia, Kenya, Lesotho,

Madagascar, Malawi, Mauritius, Namibia, South Africa, Swaziland, Uganda, and Zambia. 

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implementation of its benefits was delayed while the country made the transition from civil war, and

government authority was re-established throughout the country. 

Under AGOA, eligible countries may also receive preferential quota- and duty-free treatment for certain

textile and apparel articles if they have instituted customs measures to prevent illegal transshipment. In

2002, USTR approved submissions for AGOA textile and apparel benefits from six additional countries --

Cameroon, Cape Verde, Ghana, Mozambique, Tanzania, and Senegal -- bringing to 18 the number of

countries eligible for such benefits.34 Of these, four countries have been approved for duty and quota-free

treatment for handmade, hand-loomed, or folklore articles (Botswana, Lesotho, Kenya, and Malawi).

As part of its ongoing AGOA implementation efforts, USTR has coordinated more than 20 regional and

national technical assistance seminars on AGOA across sub-Saharan Africa. These seminars, designed to

help ensure that the sub-Saharan African public and private sectors are equipped to fully utilize AGOA

benefits, have been organized in conjunction with U.S. Customs, USAID and the Departments of State and

Commerce. In 2002, USTR and the Commercial Law Development Program of the Department of

Commerce conducted four highly successful regional AGOA seminars in Cameroon, Ghana, Senegal, and

Uganda. Over two thousand public and private sector participants from more than 30 African countries

participated in these two-day seminars led by government and private sector experts from the United

States. USTR also worked closely with the Overseas Private Investment Corporation, the U.S. ExportImport Bank and the U.S. Trade and Development Agency, which continue to provide technical assistance,

loans, and guarantees to address regional infrastructure and supply-side constraints. 

The Administration recognizes that outreach to the private sector, civil society, and to African

governments is critical to the success of AGOA. Accordingly, USTR and other U.S. agencies have made

outreach -- on both sides of the Atlantic -- a priority in their efforts to implement AGOA. In the region,

outreach efforts have included seminars, speaker programs, media programs, and information

dissemination. In the United States, outreach has included extensive briefings and consultations with the

African diplomatic corps, the private sector, and leading non-governmental organizations, including an

AGOA Business Roundtable hosted by the Department of State on November 7, 2002. AGOA was a

major theme of USTR Zoellick’s February 2002 visit to Kenya, South Africa, and Botswana, the first ever

visit to sub-Saharan Africa by a sitting U.S. Trade Representative. USTR and other members of the

interagency AGOA Implementation Subcommittee have also produced a matrix of steps involved in

AGOA implementation and a comprehensive AGOA Implementation Guide, and continue to maintain a

website dedicated to disseminating AGOA information (www.agoa.gov). 

4. Promoting Economic Reform, Growth and Development

Since being signed into law in May 2000, AGOA has prompted important economic and social reforms

across sub-Saharan Africa and delivered new jobs and opportunities for economic growth and

development to the region. AGOA’s eligibility requirements create incentives for countries to reform their

economies and create an environment conducive to increased trade and investment. To receive benefits,

countries must demonstrate the existence of, or progress toward establishing, a market-based economy, the

rule of law, reduction or elimination of barriers to trade and investment, policies to reduce poverty, and

systems to combat corruption and protection of worker rights. These criteria represent global best
35The members of WAEMU are Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal,

and Togo.

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practices to attract and maintain trade and investment, are essential for the transfer of technology, and help

to promote competition and to increase exports. 

In 2002, the United States again consulted extensively with sub-Saharan African countries on AGOA

eligibility requirements. As a result of these consultations, many eligible countries are implementing

needed reforms, including measures to combat corruption, accelerate privatization, deregulate key

industries, promote more open trade, and strengthen intellectual property and labor law protections. Many

countries have ratified ILO Convention 182 on the elimination of the worst forms of child labor, and

several are working to change, or have changed, laws on child trafficking and/or worker rights. 

By bringing increased investment to, and creating new jobs in, sub-Saharan African countries, AGOA is

also demonstrating how trade can benefit developing countries. For example, in the last two years,

Lesotho has seen the opening of eleven new factories and the expansion of eight additional ones, resulting

in the creation of at least 15,000 new jobs attributable to AGOA. In Malawi, an estimated 4,350 jobs have

been created. A planned $20 million foreign investment in a Ugandan mill will employ 500 people and

benefit local agricultural producers. In South Africa, AGOA exports directly and indirectly support

approximately 38,000 jobs. 

While most U.S. imports continued to be in the energy sector, AGOA has begun to encourage the

diversification of the U.S.-African trading relationship. For example, in the first ten months of 2002, the

value of non-fuel goods imported under AGOA (not including GSP) increased by 125 percent, to $1.3

billion. During the same period, imports of textile and apparel articles under AGOA increased 164

percent; leather product and hides increased 449 percent; and imports of automobiles and parts grew by

more than 123 percent.

5. Expanding Bilateral and Regional Trade and Investment Relationships

AGOA successes are helping to strengthen and expand U.S. bilateral and regional trade and investment ties

with sub-Saharan Africa. Growing interest in trade with the United States led to negotiation of a new

Trade and Investment Framework Agreement (TIFA) with the eight-member West African Economic and

Monetary Union (WAEMU)35. The U.S.-WAEMU TIFA was signed in April 2002 and the first TIFA

Council meeting was subsequently held in Dakar, Senegal in July 2002. Among the topics discussed at

this meeting were implementation of AGOA, obstacles to increased US-WAEMU agricultural trade, issues

in the WTO and trade capacity building activities. In June 2002, USTR and USAID convened a seminar in

Washington, DC on regional integration in WAEMU. Forty officials from WAEMU and its member

countries participated, along with an equal number of U.S. Government officials.

The U.S.-WAEMU TIFA followed the conclusion of a similar agreement with the twenty-country

Common Market for Eastern and Southern Africa (COMESA) in October 2001. U.S. Trade

Representative Zoellick co-chaired the first meeting of the U.S.-COMESA TIFA Council during his visit

to Nairobi in February 2002. Most of the discussion at this meeting revolved around ways to strengthen

implementation of AGOA.

Two other TIFA Council meetings were held in 2002: with Nigeria in June and with Ghana in July. 

Topics discussed at these meetings included AGOA, issues related to the WTO Doha Development

Agenda, commercial disputes, challenges related to trade financing, and trade capacity building needs. 
210

AGOA successes are also creating new commercial opportunities for U.S. exporters, as African exporters

explore new input sources in the United States. Although the global recession contributed to a 17 percent

decrease in U.S. exports to sub-Saharan Africa in the first ten months of 2002, the multi-year trend remains

positive. U.S. exports to the region increased in 2001 and 2000 and, in the first ten months of 2002, were

7 percent higher than in the comparable period in 1999. Through the third quarter of 2002, South Africa

was the largest regional consumer of U.S. exports, followed by Nigeria, Angola, Kenya, Ghana,

Cameroon, and Chad.

a. South Africa

The United States and South Africa enjoy a broad and mutually beneficial trade and investment

relationship. The weakening of the global economy contributed to a 15 percent decrease in two-way trade,

to $5.4 billion in the first ten months of 2002, down from $6.4 billion during the same period in 2001. 

Nonetheless, during the same period, U.S. imports from South Africa under AGOA and related GSP

provisions increased by 41 percent, led by increases in motor vehicles, apparel, and agricultural goods. 

South Africa is the largest U.S. supplier of non-fuel AGOA-eligible products (including GSP items), with

sales worth more than $1 billion in the first ten months of 2002. Other leading imports include platinum

group metals, diamonds, machinery, chemicals and apparel. Leading U.S. exports to South Africa include

aircraft, computers and components, integrated circuits, television and radio parts, and medical equipment. 

South Africa is a valued partner in the WTO, and the United States continues to consult closely with the

South African government on issues related to the Doha Development Agenda.

As with many diverse and vibrant bilateral trading relationships, certain disputes have arisen between the

United States and South Africa. These include concerns related to South Africa’s December 2000

antidumping order against imports of certain U.S. poultry products, as well as ongoing problems related to

South Africa’s basic telecommunications monopoly, Telkom, and its failure to provide facilities necessary

for U.S. value-added network services (VANS) providers to operate and expand. USTR held extensive

discussions with the South African government in 2002, including during the February visit to South

Africa of Ambassador Zoellick, in an effort to resolve both of these disputes. The United States is the

largest source of new foreign investment in South Africa since the country’s 1994 transition to democracy. 

More than 900 U.S. companies and more than 400 U.S. subsidiaries and franchises are operating in South

Africa.

b. Nigeria

Nigeria is the United States’ largest trading partner in sub-Saharan Africa, based primarily on the high

level of U.S. petroleum imports from Nigeria. Total two-way trade was valued at $5.7 billion in the first

ten months of 2002, a 35 percent decline over the same period in 2001, due to the weakening in the global

economy and lower demand for oil imports. Nigeria was the United States’ fifth largest supplier of

petroleum and the fifth largest purchaser of U.S. wheat in 2001. Nigeria is seeking to utilize AGOA to

diversify its export base, especially in the area of manufactured goods. Nigerian exports to the United

States under AGOA, including its GSP provisions, were valued at $4.3 billion during the first ten months

of 2002, a 13 percent decline over the same period in 2001, largely due to the decrease in the value of oil

exports. The United States is the largest foreign investor in Nigeria, with significant oil interests. 

The United States is working closely with the Government of Nigeria, through the U.S.-Nigeria TIFA and

other initiatives, to promote expanded trade and investment and a more diversified economy. At the June

2002 U.S.-Nigeria TIFA Council meeting, the United States and Nigeria pledged to work together on

critical issues such as the Doha Development Agenda, AGOA implementation, and trade capacity
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building. The United States is concerned about the government of Nigeria's use of protective import bans

on certain products, including sorghum, millet, wheat flour, bulk vegetable oil, and some printed fabrics. 

The United States is also concerned about significant recent tariff increases on various products, including

rice and meats. 

c. Ghana 

Total two-way trade between Ghana and the United States was valued at $254 million in the first ten

months of 2002, a 27 percent decrease over the same period in 2001. Ghana is the sixth largest subSaharan African market for U.S. goods. The leading U.S. exports to Ghana are heavy equipment and

machinery, building materials, and agricultural products. U.S. imports from Ghana are primarily cocoa,

mineral fuel, and timber. Ghana was approved for AGOA’s textile and apparel benefits in March 2002,

the first country in West Africa to gain this certification. As of September 2002, U.S. imports from Ghana

under AGOA, including its GSP provisions, were valued at $32 million, down 21 percent from the same

period in 2001. 

Ghana and the United States enjoy a long standing commercial relationship despite occasional disputes

involving U.S. companies. A number of commercial issues have been resolved or addressed within the

U.S.-Ghana TIFA. The July 2002 U.S.-Ghana TIFA Council meeting included discussions on outstanding

commercial disputes, WTO issues, AGOA implementation, and trade capacity building. 

d. Other Countries and Regions

The Administration plans to continue ongoing efforts to strengthen bilateral trade and investment ties

throughout sub-Saharan Africa and to promote regional economic integration through work with the

African Union, the Economic Community of West African States, the Economic and Monetary

Community of Central Africa, WAEMU, COMESA and SADC. 

6. Facilitating Sub-Saharan Africa’s Integration Into the Multilateral Trading System

AGOA has also helped to promote sub-Saharan Africa’s integration into the multilateral trading system

and to encourage support for the new round of global trade negotiations in a region that accounts for more

than a quarter of WTO membership. U.S. consultation and collaboration with African Members of the

WTO played an important part in the successful launch of the Doha Development Agenda in November

2001. This close working relationship between the United States and African Members continued in 2002

as the negotiations under the Doha Development Agenda began in earnest. In particular, the United States

consulted with African countries on topics related to WTO negotiations on agriculture, trade in services,

and TRIPS. Many African countries took a special interest in the U.S. proposal on agriculture, particularly

the elements calling for the phase-out and eventual elimination of export subsidies and trade-distorting

domestic support. African countries are also playing a more active role in the request and offer process in

the trade in services negotiations. Finally, African countries played a leading role in the TRIPS Council

negotiations on a mechanism to allow Member countries, especially in the developing world, to use

compulsory licensing of pharmaceuticals to respond to serious health crises related to HIV/AIDS, malaria,

tuberculosis and other epidemics. At the U.S.-Sub-Saharan Africa Trade and Economic Cooperation

Forum in January 2003, U.S. Trade Representative Zoellick co-chaired a Roundtable with African trade

ministers on WTO issues.
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V. Other Multilateral Activities

The United States pursues its trade and trade-related interests in a wide range of other international fora. 

In addition to opening new trade opportunities, such efforts focus on establishing an infrastructure for

international trade that is transparent, predictable and efficient, and prevents corrupt practices and other

impediments to expanded trade and sustainable economic growth and prosperity. These efforts also are

aimed at ensuring that U.S. strategies and objectives relating to international trade, environment, labor and

other trade-related interests are balanced and mutually supportive.

A. Trade and the Environment

The U.S. Government has been very active in promoting a trade policy agenda that pursues economic

growth in the broader context of sustainable development, integrating economic, social, and environmental

policies. To help ensure that trade and environmental policies are mutually supportive, the Bush

Administration announced in April 2001 that it would continue the policy of conducting environmental

reviews of trade agreements under Executive Order 13141 (1999) and implementing guidelines. The

Order and implementing guidelines require careful assessment and consideration of the environmental

impacts of trade agreements, including detailed written reviews of environmentally significant trade

agreements. The reviews are the product of rigorous interagency consultations. During 2002, as part of

the review policy, USTR continued its work on the environmental reviews of FTAs under negotiation with

Chile and Singapore. Draft reviews of both agreements have now been issued. The review process made

important contributions to the negotiations and to the content of the final agreements. USTR also

continued its work on an environmental review of the WTO Doha Development Agenda negotiations and

an environmental review of the Free Trade Area of the Americas (FTAA). 

Following the successful conclusion of the fourth WTO Ministerial Conference in Doha, Qatar (November

2001), the U.S. Government took an active role in the WTO Committee on Trade and Environment (CTE)

to put into effect the WTO’s commitment to sustainable development and to the simultaneous

advancement of trade, environment, and development interests.

At the World Summit for Sustainable Development, concluded in Johannesburg, South Africa in

September 2002, the United States worked to ensure that the benefits of participation in the global trading

system were recognized as important means to achieving sustainable development. The resulting

document, the Johannesburg Plan of Implementation, also encourages countries to take positive steps to

make trade and environment policies mutually supportive, through actions such as conducting

environmental reviews of trade agreements and the reduction of environmentally harmful subsidies.

The U.S. Congress specified certain objectives with respect to trade and environment in the Trade Act of

2002, and USTR took these into account in coordinating interagency development of positions. In

addition, USTR has participated both in multilateral and regional economic fora and in international

environmental agreements, in conjunction with other U.S. agencies. USTR also has worked bilaterally

with U.S. trading partners to avert or minimize potential trade frictions arising from foreign and U.S.

environmental regulations.
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1. Trade Act of 2002 (TPA) Guidance on Environment

TPA recognizes the important linkages between trade and environmental policies and provides that

negotiations pursuant to TPA should ensure that their mutual supportiveness is promoted. TPA addresses

trade and environment objectives in three different areas: overall trade negotiating objectives, principal

negotiating objectives and promotion of certain priorities. 

With respect to overall negotiating objectives, TPA refers to promoting trade and environment policies that

are mutually supportive. It also provides that USTR seek provisions in trade agreements in which the

Parties will strive to ensure that they do not weaken or reduce the protections afforded in domestic

environmental laws as an encouragement for trade. 

Principal trade negotiating objectives in TPA cover a broad array of linkages between trade and

environmental policies, all of which are related to the overall objective of mutual supportiveness. These

objectives include: (1) ensuring that a party does not fail to effectively enforce its environmental laws in a

manner affecting trade between the United States and that Party; (2) recognizing that a party to a trade

agreement is effectively enforcing its environmental laws if a course of action or inaction reflects a

reasonable exercise of discretion or results from a bona fide decision regarding allocation of resources, and

that no retaliation may be authorized based on the exercise of these rights or the right to establish domestic

levels of environmental protection; (3) strengthening the capacity of U.S. trading partners to protect the

environment through the promotion of sustainable development; (4) reducing or eliminating government

practices and policies that unduly threaten sustainable development; (5) seeking market access for U.S.

environmental technologies, goods, and services; and (6) ensuring that environmental, health, and safety

policies and practices of parties to trade agreements do not arbitrarily or unjustifiably discriminate against

U.S. exports or serve as disguised barriers to trade.

Finally, TPA specifies several priorities related to the environment and establishes a number of related

reporting requirements. These include: (1) seeking to establish consultative mechanisms among parties to

trade agreements to strengthen the capacity of U.S. trading partners to develop and implement standards

for the protection of the environment and human health based on sound science, and reporting to the

House Ways and Means Committee and the Senate Committee on Finance on the control and operation of

such mechanisms; (2) conducting environmental reviews of future trade and investment agreements

consistent with Executive Order 13141 and its relevant guidelines, and reporting to the two Committees on

the results of such reviews; and (3) continuing to promote consideration of multilateral environmental

agreements and consulting with parties to such agreements regarding the consistency of any such

agreement that includes trade measures with existing exceptions under Article XX of the GATT 1994.

2. Multilateral Fora

As described in more detail in the WTO section of this report, the United States was active on all aspects

of the Doha trade and environment agenda. The United States coordinated effectively with other WTO

Members in seeking new disciplines on fisheries subsidies through negotiations in the Rules Negotiating

Group. In the Committee on Trade and Environment in special session, the United States pressed ahead on

new approaches to increase communication and coordination between WTO bodies and secretariats of

multilateral environmental agreements (MEAs). The United States also identified increased market access

for environmental goods and services as an effective means to enhance access to environmental

technologies around the world. With respect to the Doha trade and environment agenda that does not

specifically involve negotiations, the United States played an active role, particularly in emphasizing the

importance of capacity-building, including with respect to environmental reviews of trade negotiations,
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and of the role of the CTE in regular session in discussing the environmental implications of all areas

under negotiation in the Doha Development Agenda.

USTR co-chairs U.S. participation in the OECD Joint Working Party on Trade and Environment (JWPTE),

which met two times in 2002 to continue its analysis of the effects of environmental policies on trade and

the effects of trade policies on the environment. These activities are discussed further in the OECD section

of this report (Chapter V, Section C).

USTR participates in U.S. policymaking regarding the implementation of various multilateral

environmental agreements to ensure that the activities of these organizations are compatible with both U.S.

environmental and trade policy objectives. Examples include the Convention on International Trade in

Endangered Species of Wild Fauna and Flora, the Montreal Protocol on Substances that Deplete the Ozone

Layer, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their

Disposal, the United Nations Framework Convention on Climate Change, international fisheries

management schemes, and the recently concluded Cartegna Protocol on Biosafety and Stockholm

Convention on Persistent Organic Pollutants. USTR also continues to be involved in the trade-related

aspects of international forest deliberations, including in the newly-formed permanent United Nations’

Forum on Forests – the successor to the Commission on Sustainable Development’s ad hoc

Intergovernmental Forum on Forests – and in the International Tropical Timber Organization. In addition,

USTR participates in international negotiations to develop a Framework Convention on Tobacco Control,

under the auspices of the World Health Organization, and advises on trade-related tobacco issues.

3. The North American Free Trade Agreement (NAFTA)

USTR continues to work actively with the agencies that lead U.S. participation in the institutions created

by the NAFTA environmental side agreements, the North American Agreement on Environmental

Cooperation (NAAEC) and the border environmental infrastructure agreement. These institutions were

designed to ensure that expanded North American trade does not take place at the expense of the

environment. The Border Environment Cooperation Commission and the North American Development

Bank develop and finance needed environmental infrastructure projects along the U.S.-Mexico border. 

The Commission for Environmental Cooperation (CEC), governed by the trilateral Ministerial-level

Council that implements the NAAEC, continues its efforts on numerous fronts and devotes a significant

portion of its annual work program to trade and environment issues. The CEC work program encompasses

four broad areas: environment, economy, and trade; conservation of biodiversity; pollutants and health;

and law and policy. The projects in the annual work program are designed to deepen cooperation among

the Parties by furthering environmental sustainability in open markets and stewardship of the North

American environment. For example, under the Children’s Health and the Environment project, the

United States, Mexico and Canada work together to identify the interrelationship between environmental

quality and the health of children. At its 2001 meeting, the CEC Council agreed to initiate work in the

area of sustainable watershed management, and in 2002, the CEC conducted a series of workshops, with a

view developing a long term strategy for the CEC in this area. In 2002, the CEC held a workshop to

outline and assess North American experiences in conducting environmental reviews of trade agreements,

and released a compilation of papers from a CEC symposium on the environmental effects of the NAFTA. 

The CEC also decided to conduct a 10-year review of the NAFTA, the NAAEC, and the work of the CEC. 

In 2002, USTR also participated in the NAFTA 10(6) group (named after the provision of the NAAEC

addressing CEC cooperation with the NAFTA itself). The 10(6) group is composed of senior trade and
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environment officials from all three NAFTA governments, and meets to discuss issues of common

concern. 

In May 2002, the NAFTA Free Trade Commission reviewed the operation of Chapter 11 of the NAFTA

and directed investment experts from Canada, Mexico, and the United States to continue their work

examining the implementation and operation of Chapter 11. (Chapter 11 sets out each government's

obligations with respect to investors from other NAFTA countries and their investments in its territory). 

The operation of Chapter 11 and the cases that have been brought under its investor-state dispute

settlement procedures have given rise to issues that the NAFTA investment experts group has begun to

discuss with a view to ensuring the effective and proper implementation of the Chapter. USTR and other

executive agencies have worked with their Mexican and Canadian counterparts in this group and will

continue to do so over the course of 2003.

4. The Western Hemisphere

To provide direction in striving for mutually supportive trade liberalization and environmental policies, as

was agreed at the 1994 Miami Summit of the Americas and the 2002 Quito Trade Ministerial, U.S.

negotiators worked over the past year within the framework of the FTAA negotiating groups to identify

and pursue relevant trade-related environmental issues. Complementary environmental elements in the

overall Summit of the Americas Plans of Action are intended to further regional cooperation. 

The United States also has continued to support efforts by the FTAA Civil Society Committee to expand

opportunities for two-way communication with members of civil society throughout the Hemisphere, and

carefully considered civil society’s submissions to that Committee on the full range of issues, including

environmental concerns.

5. Bilateral Activities

In the negotiation of FTAs with Chile and Singapore, the United States achieved environment text that

fully incorporated Congressional guidance on TPA. The environment chapters in both agreements include

core commitments by each Party to effectively enforce environmental laws, provide for high levels of

environmental protection, and to not weaken or reduce environmental laws to encourage trade or attract

investment. The FTAs also provide a robust consultative process for implementing the environmental

provisions, including transparency provisions and opportunities for public involvement, and an agreement

to pursue environmental cooperative activities. If either Party fails to implement the obligation to

effectively enforce its environmental laws, the other Party can promote compliance through innovative

dispute settlement procedures, including the use of either fines or trade remedies. 

B. Trade and Labor

Because the trade policy agenda of the U.S. Government includes a strong commitment to improving labor

standards and protecting the rights of workers, the Bush Administration welcomed the bipartisan

consensus in TPA to help assure that trade and labor policies are mutually supportive and reinforcing. In

keeping with TPA guidance, USTR worked cooperatively with other USG agencies in multilateral,

regional and bilateral fora to promote respect for core labor standards, including the abolition of the worst

forms of child labor.

Expanded trade benefits all Americans through lower prices and greater choices among imports. Many

American workers benefit from expanded employment opportunities created by trade liberalization. 
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However, some American workers in sectors adversely affected by trade flows may experience periods of

job displacement. Because such workers should be fairly compensated and given the resources such as

training or re-training to adjust to new jobs, the reauthorization of, and significant improvements to, the

system of Trade Adjustment Assistance (TAA) was also an integral part of the Administration’s

international trade agenda during 2002.

1. Trade Act of 2002 (TPA) Guidance on Trade and Labor

The importance of the linkages between trade and labor is underscored by the fact that TPA has laborrelated clauses in three sections of the legislation: overall trade negotiating objectives; principal

negotiating objectives; and the promotion of certain priorities to address U.S. competitiveness in the global

economy.

The labor-related overall U.S. trade negotiating objectives are threefold. First, to promote respect for

worker rights and the rights of children consistent with the core labor standards of the International Labor

Organization (ILO). TPA defines core labor standards as: (1) the right of association; (2) the right to

organize and bargain collectively; (3) a prohibition on the use of forced or compulsory labor; (4) a

minimum age for the employment of children; and (5) acceptable conditions of work with respect to

minimum wages, hours of work, and occupational safety and health. Secondly, to strive to ensure that

parties to trade agreements do not weaken or reduce the protections of domestic labor laws as an

encouragement for trade. And finally, to promote the universal ratification and full compliance with ILO

Convention 182 – which the United States has ratified – concerning the elimination of the worst forms of

child labor.

The principal trade negotiating objectives in TPA include, most importantly for labor, the provision that a

party to a trade agreement with the United States should not fail to effectively enforce its labor laws in a

manner affecting trade. TPA recognizes that the United States and its trading partners retain the sovereign

right to establish domestic labor laws, and to exercise discretion with respect to regulatory and compliance

matters, and to make resource allocation decisions with respect to labor law enforcement. To strengthen

the capacity of our trading partners to promote respect for core labor standards is an additional principal

negotiating objective, as is to ensure that labor, health or safety policies and practices of our trading

partners do not arbitrarily or unjustifiably discriminate against American exports or serve as disguised

trade barriers. A final principal negotiating objective is to seek commitments by parties to trade

agreements to vigorously enforce their laws prohibiting the worst forms of child labor.

In addition to seeking greater cooperation between the WTO and the ILO, other labor-related priorities in

TPA include the establishment of consultative mechanisms among parties to trade agreements to

strengthen their capacity to promote respect for core labor standards and compliance with ILO Convention

182. The Department of Labor is charged with consulting with any country seeking a trade agreement

with the United States concerning that country’s labor laws, and providing technical assistance if needed. 

Finally, TPA mandates a series of labor-related reviews and reports to Congress in connection with the

negotiation of new trade agreements. These include an employment impact review of future trade

agreements, the procedures for which are to be modeled after the Executive Order establishing

environmental impact reviews of trade agreements. A meaningful labor rights report, and a report

describing the extent to which there are laws governing exploitative child labor, are also required for each

of the countries with whom we are negotiating. 
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2. Multilateral Efforts

At the WTO Ministerial meetings in Singapore (1996) and Seattle (1999), the United States was among a

group of countries supporting the creation of a WTO working party to examine the interrelationships

between trade and labor standards. At the 2001 Doha WTO Ministerial, we supported a similar proposal

which was put forth by the EU, but a vocal group of developing countries adamantly opposed this

proposal. The text of the Doha Ministerial Declaration, adopted by consensus, therefore includes the

following: “We affirm our declaration made at the Singapore Ministerial Conference regarding

internationally recognized core labor standards. We take note of work underway in the International Labor

Organization (ILO) on the social dimensions of globalization.”

The work underway at the ILO referenced in the WTO Doha Declaration is that which is being done by the

Working Party on the Social Dimensions of Globalization of the ILO’s Governing Body. The ILO is

unique among international organizations in that it has a tripartite (Government, employer and worker

representatives) membership in all of its committees and constituent bodies. Thus the Working Party on

the Social Dimensions of Globalization has a representative not only of the U.S. Government, but also the

U.S. Council for International Business and the AFL-CIO. As a further extension of this work, the ILO

created a “World Commission on the Social Dimension of Globalization.” During 2002 the United States

Trade Representative met with both the Director-General of the ILO and the President of Finland, who cochairs the World Commission, to discuss its work and to encourage greater policy coherence and

cooperation between the WTO and the ILO.

The United States remains the largest donor to the work of the ILO. The United States has been

particularly supportive of two ILO initiatives: the International Program on the Elimination of Child Labor

(IPEC), and work to implement the 1998 ILO Declaration on Fundamental Principles and Rights at Work. 

Recognizing that all child labor will never be eliminated until poverty is eliminated, IPEC/ILO efforts have

focused on the means to eliminate the worst forms of child labor, including child prostitution and

pornography, forced or bonded child labor, and work in hazardous or unhealthy conditions. 

3. Regional Activities

The Declaration and Plan of Action of the Third Summit of the Americas, held in Quebec City, Canada,

charged the Inter-American Conference of Ministers of Labor (IACML) with addressing the labor

dimensions of economic integration and globalization. A USTR official therefore joined the Departments

of Labor and State on the U.S. Delegation to a meeting of the IACML working group on the labor

dimensions of the Summit of the Americas process, including the Free Trade Area of the Americas

(FTAA). A second working group focuses on capacity-building of Labor Ministries, including improving

the ability of Ministries to effectively promote the ILO Declaration on Fundamental Principles and Rights

at Work. Each of these working groups will involve the ILO, the Organization of American States, the

Inter-American Development Bank, the UN’s Economic Commission for Latin America and the Caribbean

and the Trade Union Technical Advisory Committee in their work. The November 2002 FTAA Quito

Ministerial Declaration not only renewed the commitment to observe the ILO Declaration, but also asked

the IACML working group on the Summit of the Americas process for a report on its work regarding

globalization related to employment and labor.

Other regional trade and labor activities carried out under NAFTA/NAALC and the OECD are noted in

those sections of this report.
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4. Bilateral Activities 

The most significant bilateral activities involving the interaction of trade and labor policies came in the

context of negotiations of FTAs with Chile and Singapore. In each of these negotiations, the United States

negotiated labor text that fully incorporated Congressional guidance regarding all of the negotiating

objectives for trade and labor contained in TPA. In each of these FTAs the parties reaffirm their

obligations as ILO members and commit to strive to ensure that core labor standards, including the ILO

Declaration on Fundamental Principles and Rights at Work and ILO Convention 182 concerning the

worst forms of child labor, are recognized and protected by domestic labor laws. Each Party is also

obligated to effectively enforce its labor laws, subject to the discretionary authority spelled out in TPA. 

Cooperation and consultations are the preferred means to achieve these labor objectives and assure

compliance with all obligations. However, if a dispute settlement panel were to find that a party had failed

to enforce its labor laws in a manner affecting trade, and the offending party failed to comply, that party

could be subject to either fines or, as a last resort, trade remedies designed to promote compliance. 

Our bilateral textile agreement with Cambodia has a unique aspect in that import quotas for several of the

categories of textiles and apparel covered by the agreement may be increased dependent upon the efforts of

the government to effectively enforce its domestic labor laws and protect the fundamental rights of

Cambodian workers. With funds provided by the U.S. Department of Labor, the ILO monitors working

conditions in Cambodian enterprises and reports on the results of that monitoring. Based upon ILO

monitoring reports and two field visits, at the end of 2002 the U.S. Government approved a 12 percent

increase in quota levels for next year.

A final aspect of trade and labor bilateral activities relates to the worker rights provisions of U.S. trade

preference programs. Near the end of 2002, USTR reveived petitions requesting that GSP trade

preferences be withdrawn from several countries for alleged non-compliance with internationally

recognized worker rights. It is important to note that the receipt and review of such petitions had been

suspended from the expiration of the GSP program in October, 2001, until Congress renewed the GSP

program as part of the Trade Act of 2002. As the year ended, these new petitions were being reviewed by

an inter-agency committee chaired by USTR. 

C. Organization for Economic Cooperation and Development 

The Organization for Economic Cooperation and Development (OECD) is a 30-member forum for

discussion of economic and social issues. The OECD membership includes the United States, Canada,

Mexico, the countries of Western Europe, Japan, Australia, New Zealand, the Czech Republic, Korea,

Hungary, Poland and Slovakia. Argentina and Russia have formally applied to join. The OECD 

conducts wide-ranging outreach activities to non-members and business and civil society, in particular

through its series of “Global Forum” events held around the world each year. Non-members may also

apply to participate as observers of committees for which they meet “major player” and “mutual benefit”

criteria. The OECD carries out a number of regional and bilateral cooperation programs. Its Russia

program, for instance, supports Russia’s efforts to establish a market economy and eventual membership in

the OECD.

The OECD was founded in 1960 as the successor to the Organization for European Economic

Cooperation, which oversaw European participation in the Marshall Plan. Its fundamental objective is “to

achieve the highest sustainable economic growth and employment and a rising standard of living in

member countries while maintaining financial stability and thus to contribute to the world economy.” This

objective is pursued through in-depth analysis of economic problems confronting the developed market
219

economies and the development of cooperative solutions to many of these problems. Through a nonbinding peer review process and/or the negotiation of recommendations or binding agreements, members

work together on issues not adequately addressed in other fora. In the past, analysis of issues in the OECD

often has been instrumental in forging a consensus among OECD countries to pursue specific negotiating

goals in other international fora such as the World Trade Organization (WTO). 

1. Work Program

In 2002, the OECD Trade Committee, through its subsidiary Working Party and its joint working groups

on environment, competition and agriculture, continued to address a number of issues of significance to

the mulilateral trading system. The Committee and the trade-related work of other OECD bodies have

become more diverse, dealing with traditional trade issues as well as those which have been traditionally

within the purview of domestic policy discussions. The Trade Homepage on the OECD website

(www.oecd.org/trade) contains up-to-date information on published analytical work and other trade-related

activities. The major analytical project completed under the Trade Committee during 2002 was a tenchapter study on "Regional Trade Agreements and the Multilateral Trading System." With an eye on the

needs of WTO negotiators in Geneva, additional work addressed GATT Articles VIII and X in the context

of WTO discussions on trade facilitation, agriculture policies in OECD countries, and services-related

topics such as managing request-offer negotiations under the GATS, quantifying costs to national welfare

of barriers to services trade, and labor mobility and the GATS. Other analytical work covered nonautomatic import licensing, a survey of non-tariff measures in the information and communication

technology sector, the trade policy implications of the new economy, standards-related barriers in the

telecommunications sector, transparency in government procurement, and a consultant's report on the

impact of the September 11, 2001 terrorist attacks on international trading and transport activities. 

2. Competition Policy and Trade

The Joint Group on Trade and Competition (JG) continued work on issues at the intersection of trade and

competition policy with the aim of providing an improved analytical foundation for the consideration of

this topic in the OECD as well as in other fora, such as the WTO. This forum has helped to promote

mutual understanding and interaction between the trade and antitrust “cultures,” as well as better clarity

and coherence of approaches toward issues of common interest. The JG renewed its mandate for two years

and met three times in 2002. The JG reviewed Secretariat papers on the potential application of the

principles of transparency, non-discrimination, and procedural fairness to competition law concerns, on the

possible use of peer review in a multilateral framework on competition policy, and on competition

provisions of various regional trading agreements.

3. The OECD Anti-Bribery Convention: Deterring Bribery of Foreign Public Officials

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business

Transactions entered into force in February 1999. The Convention was adopted by the 29 members of the

OECD and five non-members in 1997. The non-members were Argentina, Brazil, Chile, Bulgaria, and

Slovakia (now an OECD member). In summer 2001, Slovenia, also a non-member, became the thirty-fifth

country to sign the Convention. The Convention requires the parties to criminalize bribery of foreign

public officials in executive, legislative, and judicial branches, levy dissuasive penalties on those who

bribe, and implement adequate accounting procedures to make it harder to hide illegal payments. Thirtyfour of the 35 signatories have adopted legislation to implement the Convention. 
220

Prior to the entry into force of the Convention, the United States was alone in criminalizing the bribery of

foreign public officials. As a result, U.S. firms have lost international contracts allegedly worth billions of

dollars every year due to bribery payments to corrupt officials. Such payments also distort investment and

procurement decisions in developing countries, undermine the rule of law and create an unpredictable

environment for business. 

The signatories to the Convention commenced the second phase of peer monitoring - the evaluation of

enforcement - in November 2001. By the end of 2002, four countries had been reviewed under Phase 2:

Finland, the United States, Iceland and Germany. The United States successfully pressed for an

accelerated Phase 2 monitoring schedule and OECD budget funds to support it. The Working Group on

Bribery will undertake five country reviews in 2003, and seven country reviews in 2004, with the goal of

completing the first 35 country cycle in 2007. The OECD Convention Parties also continue to study

whether the Convention’s coverage should be expanded to include several related issues (bribery of

foreign public officials as a predicate offense for money laundering, the role of foreign subsidiaries and

offshore financial centers in bribery transactions, and the bribery of foreign political parties and

candidates). 

4. Dialogue with Non-OECD Members

The OECD has continued its contacts with non-member countries to encourage the integration of

developing and transitional economies into the multilateral trade regime, such as the Central and Eastern

European Countries, the Newly Independent States of the Former Soviet Union (NIS), and the Dynamic

Non-Member Economies or “DNMEs” (leading developing economies in Asia and South America).

At the May 2002 Ministerial Council Meeting, the OECD invited a number of key non-member trading

partners to its trade-related discussions, and also initiated a dialogue with the African member countries of

NEPAD. Argentina, Brazil, Chile and Hong Kong remain active non-member observers of the Trade

Committee and its Working Party. As part of its series of Global Forum on Trade events, the OECD

invited non-members to discussions of the "Singapore Issues" in Hong Kong in June 2002 and on

"Developing Country Market Access Concerns with Environmental Measures" in New Delhi in November

2002.

Under the ongoing trade policy dialogue with transition economies, the OECD held two informal Working

Party meetings in June and November 2002. The first focused on Russia's integration into the global

trading system and on services liberalization in the Baltic States. The second built on the ongoing work on

the Baltic States' experience to take a look at the economic and regulatory environment for trade in

services across a full range of transition economies. Russian Deputy Minister for Economic Development

and Trade Medvedkov was invited to participate in a special Trade Committee discussion in October of

Russia's current economic situation and the status of its WTO accession. 

The Trade Committee's fourth informal consultation with civil society organizations took place in October

2002. Discussion centered on two themes: "The Multilateral Trading System and Sustainable

Development: Finding Common ground for Shared Objectives," and "Domestic Regulation in a

Multilateral Context: a Right, an Obligation, a Necessity?" A number of U.S. members both of the

OECD's Business and Industry Advisory Committee and of the U.S. Government's Technical Advisory

Committees participated in the consultation.
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5. Environment and Trade 

The OECD Joint Working Party on Trade and Environment (JWPTE) met two times in 2002 to continue

its analysis of the effects of environmental policies on trade and the effects of trade policies on the

environment. During the year, the JWPTE undertook important work on the development dimension of

trade and environment, building upon the development initiatives agreed upon at Doha. The work

consisted of 24 case studies of how developed country environmental measures may affect developing

country exports, followed by a workshop soliciting developing country views that was held in New Delhi,

India, in November 2002. The JWPTE will seek to identify lessons learned from the case studies and the

workshop early next year, and review existing practices in OECD countries to address developing country

concerns. The JWPTE also began work on environmental goods and services to support the Doha

negotiating agenda, including work on how changing environmental policy needs in developing countries

are affecting trade in this sector. 

6. Export Credits

The OECD Arrangement on Guidelines for Officially Supported Export Credits places limitations on the

terms and conditions of government supported export credit financing so that competition among exporters

is based on the price and quality of the goods and services being exported, rather than on the terms of 

government-supported financing. It also limits the ability of governments to tie their foreign aid to

procurement of goods and services from their own countries (tied aid). The Participants to the

Arrangement, a standalone policy-level body of the OECD, are responsible for implementing the 24 year

old Arrangement and for negotiating further disciplines to reduce subsidies in official export credit

support.

The OECD tied aid rules have dramatically reduced tied aid and redirected aid from capital projects, where

it had trade-distorting effects, toward rural and social sector projects. Tied aid levels were nearly $10

billion in 1991 before the rules were adopted, but were reduced to approximately $3.5 billion in 2001. 

Data for the first half of 2002 indicates that a further decline is expected to less than $3 billion. 

In 2002, Participants accepted a U.S. proposal to merge and update two agreements that banned tied aid in

Central and Eastern Europe (CEE) and key countries of the former Soviet Union (FSU), respectively, and

formally incorporated the new agreement into the Arrangement. The new agreement keeps these newlyopened markets free from the trade-distorting effects of tied aid until such time as per capita income levels

increase and render these markets ineligible for tied aid under the tied aid rules. The inclusion of the new

agreement in the Arrangement eliminates the temporary nature of the FSU agreement, which had to be

renewed annually by consensus. The new agreement will now be a permanent fixture of the tied aid rules,

and took effect on January 1, 2003.

Participants also continued their consideration in 2002 of a U.S. proposal to apply the tied aid disciplines

to untied aid. Untied aid is a form of aid financing that is not currently subject to multilateral disciplines

but which can have trade-distorting effects. Furthermore, because untied aid is not governed in any way, it

is a vehicle through which other Participants can circumvent existing anti-trade distortion disciplines by

simply declaring their aid to be untied. Japan is the largest provider of untied aid, in addition to tied aid. 

In 2002, the Trade Promotion Coordinating Committee recommended the use of the tied aid War Chest to

combat trade-distorting untied aid and to seek an OECD agreement to discipline untied aid. 

The Arrangement is saving U.S. taxpayers about $800 million annually in reduced appropriations because

Ex-Im Bank (the U.S. export credit agency) no longer has to offer loans with low interest rates and long
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repayment terms in order to compete. In addition, the "level playing field" created by the Arrangement's

tied aid disciplines has allowed U.S. exporters to increase their exports by about $1 billion a year. These

exports would have cost taxpayers about $300 million in annual appropriations to Ex-Im Bank if the

United States had to create its own tied aid program in order to compete. 

Participants are addressing a number of other issues, including a review of market window behavior. 

Market windows are quasi-governmental financial institutions that support national exports and yet are

unbound by multilateral rules. In 2002, Congress requested that the Administration negotiate disciplines

for market windows and report on the status of those negotiations in 2004.

One of the biggest challenges to face Participants in 2002, and which will continue in 2003, is the attempt

by some developing countries to move export credit matters from the OECD to the WTO. However, the

subsidy reductions in the Arrangement could not have been negotiated in a consensus forum that included

those countries that benefit from subsidies. Therefore, Participants began a concerted effort to assure that

the Arrangement rules equitably address the trade finance needs of both least developed countries and

OECD members. This includes the task of redrafting the Arrangement to address specific issues and

principles that have been identified by the WTO as providing benefits to OECD countries. 

In 2002, members of the Working Group on Export Credits and Credit Guarantees (ECG) (except the

United States and Turkey) continued to refine their environmental practices and gain experience through

voluntary implementation of “Common Approaches.” Common Approaches is the name of the last draft

OECD agreement intended to develop common procedures and practices for export credit agencies (ECAs)

to follow when addressing the environmental factors associated with the projects that ECAs consider

financing. The United States did not sign onto Common Approaches in 2001, believing it to be

inadequate, so the agreement did not formally take effect. However, several ECAs have reported

significant improvements in their environmental practices since voluntary implementation began. The

Common Approaches agreement will be reviewed in its entirety in late 2003. 

7. Investment

The United States places a high priority on international investment issues in the OECD. The Committee

on International Investment and Multinational Enterprises (CIME) plays a leading role within the OECD

on the OECD Declaration on International Investment and Multinational Enterprises, of which the

Guidelines for Multinational Enterprises are a part. The CIME held the second annual meeting in 2002 of

National Contact Points (NCPs), the government agencies designated by each OECD Member country to

monitor implementation of the Guidelines within their territory. The NCP annual meeting provided an

opportunity to review the second year of implementation activity under the revised Guidelines. The

meeting confirmed that the visibility and user recognition of the Guidelines have increased, with

government, business entities, labor unions, NGOs and other civil society leaders referring to or using the

Guidelines as an instrument for the promotion of appropriate business conduct. The NCPs also identified

several areas requiring further consideration, including: NCP procedural questions; scope of application of

the Guidelines; and the relationship between specific inquiries brought before NCPs; and other legal or

administrative processes. The 2002 OECD Roundtable on Corporate Responsibility, held in conjunction

with the annual meeting of the NCPs, dealt with the issue of supply chain management and the relationship

of the Guidelines to the supply chain. 

CIME published a study on the "Benefits and Costs of Foreign Direct Investment for Development" and

completed another research project that assessed the usefulness of investment incentives to be used by

national policy-makers as they decide on measures of incentives for foreign direct investments. This
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project, which was designed to help governments make decisions on the use of investment incentive

measures, produced a checklist that can help policymakers assess the costs and benefits of incentives, and

which provides operational criteria for their efficient design. The Committee also undertook extensive

work relating to the Doha Development Agenda, including preparation of a paper on the relationship

between bilateral investment treaties, regional agreements and multilateral investment disciplines, and

another paper on transparency. 

The United States contributed to a working paper to the CIME describing the U.S. understanding of the

meaning of the general treatment and expropriation obligations in international investment agreements. 

The purpose of the U.S. paper was to help clarify the content of these obligations for arbitrators, investors,

and the international community. The OECD expanded its outreach on investment issues to non-members,

including on-going work with Russia and China (e.g. follow-up work with Russia on implementation of

the OECD Russia Investment Survey policy recommendations; a comprehensive FDI Policy Study on

China, and the 2002 Global Forum on International investment on “Attracting FDI for Development,” held

in Shanghai, China). A 2002 OECD Ministerial Declaration on “Attracting Investment to South East

Europe” was signed by all the countries of South East Europe, complimenting and strengthening the

monitoring instruments of the Investment Compact. Israel and Slovenia announced that they would adhere

to the Declaration on International Investment and Multinational Enterprises.

8. Labor and Trade

In 1996, the OECD released a report on “Trade, Employment, and Labor Standards,” which examined the

relationship between core labor standards and economic development and trade. These core labor

standards are: freedom of association, collective bargaining, elimination of exploitative forms of child

labor, prohibition of forced labor, and non-discrimination in employment. The report concluded that a

mutually reinforcing relationship exists between core labor standards and trade liberalization. It refuted

the long-standing argument that adherence to such standards negatively affects the economic performance

of developing countries; indeed, it reinforces long-term development prospects. In May 1999, the OECD

Trade Committee asked the Secretariat to prepare an update of the 1996 report, which would review

factual developments and summarize relevant economic literature since the report was issued. The 124-

page updated report was approved and presented to the International Labor Organization’s Working Party

on the Social Dimension of Globalization. It can be purchased and downloaded from the OECD’s online

book store ( www.oecd.org).

The Trade Union Advisory Committee (TUAC) to the OECD, which is made up of national trade union

organizations from OECD member countries and has played a consultative role to the OECD since 1962,

held two informal consultations with the OECD Trade Committee in 2002, in April and October. TUAC

provided the Committee with informal notes and supporting documents prepared by the international labor

movement on the social dimension of globalization, in particular an ICFTU analysis of the WTO’s Doha

Declaration. TUAC urged the trade committee to give a clear message to OECD Ministers that there is a

need to better address the concerns of trade unions to ensure support for the multilateral trading system. In

their final communique following the OECD Ministerial in May 2002, OECD members pledged to

continue to consult with non-members, business, labor and civil society, and to seek to contribute

constructively to the work of the ILO World Commission on the Social Dimension of Globalization. 
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9. Regional Economic Integration

At the request of the Trade Committee, its Working Party undertook a ten-chapter study on "Regional

Trade Agreements and the Multilateral Trading System." The consolidated report was published at the

end of 2002. The study compares rule-making provisions in RTAs with those in the WTO and finds that

RTA provisions frequently "go beyond" the WTO, for example in their country coverage, by including

novel or more far-reaching provisions, by using a negative list approach, or by mandating adhesion to

international accords. The report also concludes that certain consequences of RTA activity in the ten

areas studied can be seen as contributing to the case for a strengthened multilateral framework, in light of

the negative effect which the patchwork of RTAs can have on non-members of those agreements and on

transaction costs for business. At the same time, the report concludes that regional approaches can

complement the multilateral system. In fact, there are a number of features of regional agreements which

might usefully be drawn upon in seeking a stronger multilateral framework.

10. Regulatory Reform

Since 1998, the OECD Trade Committee has contributed to OECD work on domestic regulatory

governance on the basis of country reviews of regulatory reform efforts. The United States has supported

this on the grounds that targeted regulatory reforms, e.g. transparency, can benefit domestic and foreign

stakeholders alike by improving the quality of regulation and enhancing market openness.

The Trade Committee’s work on regulatory reform has two aspects: country reviews and product

standards. In conducting country reviews, the Committee evaluates regulatory reform efforts in light of

six principles of market openness: transparency and openness of decision-making, non-discrimination,

avoidance of unnecessary trade restrictions, use of internationally harmonized measures where

available/appropriate, recognition of the equivalence of other countries’ procedures for conformity

assessment where appropriate, and application of competition principles.

The Trade Committee has reviewed sixteen country studies (for the United States, Japan, Mexico, the

Netherlands, Korea, Spain, Denmark, Hungary, Greece, Italy, Ireland, the Czech Republic, the United

Kingdom, Poland, Canada and Turkey). In 2002 it reviewed a paper synthesizing findings of these

studies and studies of two additional countries (Finland and Norway).

In June 2002, the Trade Committee Working Party reviewed a paper on “regulation of services traded

electronically”. In addition, in September 2002, the OECD released a study entitled “Non-tariff

measures in the Information and Communications Technology Sector: a Survey”.

11. Services 

Work in the OECD on trade in services has continued to provide analysis and background relevant to the

WTO negotiations, with emphasis on issues of importance to developing countries in the negotiations. 

The Secretariat has produced an effective guide for governments to expand their domestic consultations

on services trade issues, both within the government (e.g., through increased inter-ministerial discussions)

and with non-governmental constituencies. The guide, "Managing request-offer negotiations under the

GATS," was published in June 2002.

The Secretariat also has been working on reports analyzing the role of individuals as service suppliers

(called "mode four" in the GATS) in trade in services and their treatment in trade agreements.
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A third "services experts" meeting, at which OECD and developing-country services negotiators

participated, was held in 2002, with regulatory issues a focus of discussion.

12. Steel 

Pursuant to the President’s Initiative on Steel announced on June 5, 2001, the United States has been

engaged in efforts over the past year within the framework of the OECD High Level Process on Steel to

address overcapacity in the global steel sector and the market-distorting practices that have contributed to

excess, inefficient steel capacity. High Level delegates have convened on five occasions since the

inception of the process in September 2001, and two subsidiary committees were created last year and

tasked with assessing on a more probing basis the respective issues of overcapacity and market-distorting

practices. These bodies, known as the Disciplines Study Group and the Capacity Working Group, held

two meetings each in 2002.

At the most recent High Level meeting, in December 2002, participating delegations took stock of the

work completed by the subsidiary bodies and agreed on a series of follow-on steps. With respect to

disciplining market-distorting practices, participants decided to begin work immediately to develop the

elements of an agreement for reducing or eliminating trade-distorting subsidies in steel. In addition, they

agreed to explore undertaking a voluntary commitment to refrain from introducing new subsidy programs

that may maintain or enhance steel capacity. Moreover, where practicable and without compromising the

priority work on subsidies, they indicated that they might pursue efforts at a later stage to address other

distortions in the global steel market. It was determined that the work on subsidies should proceed on an

expedited basis in the Disciplines Study Group, and be concluded in 2003, with consideration to be given

to how the results of this work might be fed into the WTO framework. 

With regards to efforts to evaluate progress in reducing excess capacity, the High Level Process initiated

in 2002 a rigorous semi-annual peer review system in which participants submit and subsequently review

data on the current status of their respective steel industries, including information on the closure of steel

capacity. The High Level Group has identified 140 million tons of capacity that could be closed during

the period 1998 through 2005 based on present market conditions. In addition to adopting improvements

in reporting and review procedures that should enable participants to obtain a better understanding of

current conditions in the global steel market, the Capacity Working Group will also evaluate the

feasibility of options for assisting steel plant closures. While the feasibility study of options to facilitate

plant closure is intended to be completed this year, the peer review process for tracking industry

restructuring will continue beyond 2003 so long as participants consider it useful.

13. Developing Countries

In 2002, the Trade Committee worked with the OECD Development Assistance Committee to bring all

recent OECD work together in a way which can help trade negotiators, particularly from developing

countries. The end product is a CD-Rom "Tool Kit" for wide global distribution, including through

member governments, that addresses the broad range of issues under the Doha Development Agenda

(DDA). It currently contains more than 40 analytical OECD publications and reports on DDA-relevant

trade policy issues and video presentations from the June 2002 OECD Global Forum in Hong Kong on

"The Development Dimensions of the Singapore Issues." Free updates are available through a link on the

OECD Trade Homepage.

With support from the United States, the OECD also established a joint trade capacity building database

with the WTO in 2002. The database identifies trade-related technical assistance and capacity building
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efforts of multilateral agencies and national governments within the context of the DDA. This

information is critical to documenting assistance and assessing responsiveness to developing country

needs. All multilateral and bilateral donors contributed to the compilation of information. The database

indicates that the United States is the largest bilateral donor, accounting for 57 percent of bilateral trade

capacity building and 37 percent of both bilateral and multilateral support reported to the WTO/OECD. 

The information from the database is being widely distributed among donors and developing country

trade officials to coordinate more effectively trade-related technical assistance activities worldwide.

D. Semiconductor Agreement

On June 10, 1999, the United States, Japan, Korea and the European Commission announced a 

multilateral Joint Statement on Semiconductors designed to ensure fair and open global trade in

semiconductors. Chinese Taipei subsequently endorsed the objectives of the Joint Statement and became

the fifth party. The 1999 Joint Statement on Semiconductors reflects over a decade of progress under

three previous semiconductor agreements toward opening up the Japanese market to foreign

semiconductors, improving cooperation between Japanese users and foreign semiconductor suppliers, and

eliminating tariffs in the top five semiconductor producers (the United States, Japan, Korea, the European

Union, and Chinese Taipei).

The 1999 Joint Statement includes the essential elements of the 1996 accord such as regular meetings

among governments and between governments and industry representatives.

In May 2002, industry CEOs representing all five parties held their third World Semiconductor Council

(WSC) meeting under the 1999 Joint Statement. The WSC was created under the 1996 Joint Statement to

provide a forum for industry representatives to discuss and engage in cooperation concerning global

issues such as standardization, environmental concerns, worker health and safety, intellectual property

rights, trade and investment liberalization, and worldwide market development. Membership in the WSC

requires governments of national/regional industry associations to have eliminated semiconductor tariffs,

or committed to eliminate these tariffs expeditiously. 

The 1999 Joint Statement also requires that governments and other authorities meet at least once a year to

receive and discuss the recommendations of the WSC regarding policies that may affect the future

outlook and competitive conditions within the global semiconductor industry. The third such meeting

was held in September 2002, and was hosted by Japan. At that meeting, the WSC recommended that

government authorities pursue the following policies: promotion of open and competitive markets around

the world; protection of intellectual property rights; non-discrimination for foreign products in all

markets; improved rules on investment and an end to investment restrictions tied to technology transfer

requirements; expanded participation in the Information Technology Agreement (ITA); revitalization of

efforts to conclude ITA II; adoption of a growth-promoting, transparent, technology-neutral, nondiscriminatory and market-oriented approach to electronic commerce; a permanent customs duty

moratorium on electronic commerce transactions; elimination of tariffs and non-tariff measures applied to

information technology products and services, and a pledge not to impose new non-tariff measures (such

as excessively restrictive standards or licensing); restraint from imposing local establishment

requirements or placing special tariffs or local taxes on electronic commerce, including levies; and

adoption of environmental regulations that are both the least trade restrictive possible and based on

scientific assessments of the risks posed by the targeted materials and their likely substitutes. The WSC

remains fully engaged in a multi-billion dollar effort to find safe alternatives to replace, wherever

possible, the very small amounts of lead found in semiconductors. The WSC has also invited China to

become a party to the Joint Statement. China is expected to become the second-largest market for
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semiconductors within a decade. The United States will host the next meeting of governments and other

authorities in November 2003.

Foreign market share in the Japanese market has averaged over 30 percent for the five years ending with

the fourth quarter 2001 – a major achievement for U.S. trade policy. 

E. Steel Trade Policy

In 2002, the Administration continued to implement the President’s comprehensive strategy to respond to

the challenges facing the United States steel industry. This strategy, announced on June 5, 2001, is

designed to restore market forces to world steel markets and to eliminate practices that harm the U.S. steel

industry and its workers.

The Administration=s initiative contains three elements. First, the President directed the United States

Trade Representative to request the initiation of an investigation of injury to the steel industry by the

International Trade Commission under Section 201 of the Trade Act of 1974. Second, the President

directed the United States Trade Representative, in cooperation with the Secretaries of Commerce and

Treasury, to initiate negotiations with our trading partners to eliminate inefficient excess capacity in the

steel industry worldwide. Finally, the President directed the United States Trade Representative, together

with the Secretaries of Commerce and Treasury, to initiate negotiations on the rules that will govern steel

trade in the future, so as to eliminate the underlying market-distorting subsidies that led to current

conditions.

On March 5, 2002, in response to a unanimous finding by the U.S. International Trade Commission

(USITC) that imports were a substantial cause of serious injury to the U.S. steel industry, the President

announced his decision to impose additional tariffs of between 8 percent and 30 percent on imports of

certain steel products.

The steel safeguard measures are the most comprehensive remedies ever imposed under Section 201. The

President’s decision to temporarily impose tariffs on imports will provide appropriate relief to those parts

of the U.S. steel industry that have been most damaged by import surges. 

The Section 201 action on steel is temporary. Tariffs will be phased out over a three year period, during

which time U.S. steelmakers are expected to further restructure, reduce excess capacity and increase

productivity -- a process that the USTR and the Department of Commerce are monitoring closely. 

In formulating the safeguard measures, the Administration has taken steps to minimize the impact of steel

safeguards on steel consumers and our trading partners. For example, the Section 201 remedy exempts

steel imports from our North American Free Trade Agreement and FTA partners. Most steel imports

from developing countries were also excluded from the increased tariffs.

In recognition of the needs of American consumers who rely on certain types of steel that are not

sufficiently available domestically, the President instructed the USTR to determine whether specific types

of steel could be excluded from the tariffs without undermining the effectiveness of the safeguard

measure. During the summer of 2002, the USTR and the Department of Commerce reviewed several

thousand product exclusion requests filed by steel consumers and importers, and excluded over 700

specific steel products from the Section 201 remedy. In December 2002, the USTR and the Department

of Commerce began reviewing a second round of exclusion requests that will be concluded in March

2003.
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Regarding the other elements of the Administration’s steel strategy, significant progress was made in the

discussions at the OECD regarding inefficient excess capacity and establishing greater disciplines on

subsidies and other market distorting practices affecting the global steel trade. (See steel discussion in the

preceding section of activities of the OECD).
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VI. Trade Enforcement Activities

A. Enforcing U.S. Trade Agreements

1. Overview

USTR coordinates the Administration’s active monitoring of foreign government compliance with trade

agreements and pursues enforcement actions, using dispute settlement procedures and applying the full

range of U.S. trade laws when necessary. Vigorous enforcement efforts by relevant agencies, including

the Department of Commerce, help ensure that these agreements yield the maximum advantage in terms

of ensuring market access for Americans, advancing the rule of law internationally, and creating a fair,

open, and predictable trading environment. In the broad sense, ensuring full implementation of U.S. trade

agreements is one of the Administration’s strategic priorities. We seek to achieve this goal through a

variety of means, including:

• Asserting U.S. rights through the mechanisms in the World Trade Organization (WTO),

including the stronger dispute settlement mechanism created in the Uruguay Round, and the

WTO Bodies and Committees charged with monitoring implementation and with surveillance of

agreements and disciplines;

• Vigorously monitoring and enforcing bilateral agreements;

• Invoking U.S. trade laws in conjunction with bilateral and WTO mechanisms to promote

compliance;

• Providing technical assistance to trading partners, especially in developing countries, to ensure

that key agreements like the Agreement on Basic Telecommunications and the Agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS) are implemented on schedule; and

• Promoting U.S. interests under the NAFTA through NAFTA’s trilateral work program, tariff

acceleration, and use, or threat of use, of NAFTA’s dispute settlement mechanism, including

using its labor and environmental side agreements to promote fairness for workers and effective

environmental protection.

Through vigorous application of U.S. trade laws and active use of WTO dispute settlement procedures,

the United States has effectively opened foreign markets to U.S. goods and services. The United States

also has used the incentive of preferential access to the U.S. market to encourage improvements in

workers’ rights and reform of intellectual property laws and practices in other countries. These

enforcement efforts have resulted in major benefits for U.S. firms, farmers, and workers.

To ensure the enforcement of WTO agreements, the United States has been one of the world’s most

frequent users of WTO dispute settlement procedures. Since the establishment of the WTO, the United

States has filed 610 complaints at the WTO, thus far successfully concluding 35 of them by settling 19

cases favorably and prevailing on 16 others through litigation in WTO panels and the Appellate Body. 
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The United States has obtained favorable settlements and favorable panel rulings in virtually all sectors,

including manufacturing, intellectual property, agriculture, and services. These cases cover a number of

WTO agreements – involving rules on trade in goods, trade in services, and intellectual property

protection – and affect a wide range of sectors of the U.S. economy. 

Satisfactory settlements. Our hope in filing cases, of course, is to secure U.S. benefits rather than to

engage in prolonged litigation. Therefore, whenever possible we have sought to reach favorable

settlements that eliminate the foreign violation without having to resort to panel proceedings. We have

been able to achieve this preferred result in 19 of the 38 cases concluded so far, involving: Australia’s

ban on salmon imports; Belgium’s duties on rice imports; Brazil’s auto investment measures; Brazil’s

patent law; Denmark’s civil procedures for intellectual property enforcement; the EU’s market access for

grains; an EU import surcharge on corn gluten feed; Greece’s protection of copyrighted motion pictures

and television programs; Hungary’s agricultural export subsidies; Ireland’s protection of copyrights;

Japan’s protection of sound recordings; Korea’s shelf-life standards for beef and pork; Pakistan’s

protection of patents; the Philippines’ market access for pork and poultry; the Philippines’ auto regime;

Portugal’s protection of patents; Romania’s customs valuation regime; Sweden’s enforcement of

intellectual property rights; and Turkey’s box-office taxes on motion pictures.

Litigation successes. When our trading partners have not been willing to negotiate settlements, we have

pursued our cases to conclusion, prevailing in 16 cases so far, involving: Argentina’s tax and duties on

textiles, apparel, and footwear; Australia’s export subsidies on automotive leather; Canada’s barriers to

the sale and distribution of magazines; Canada’s export subsidies and an import barrier on dairy products;

Canada’s law protecting patents; the EU’s import barriers on bananas; the EU’s ban on imports of beef;

India’s import bans and other restrictions on 2,700 items; India’s protection of patents on pharmaceuticals

and agricultural chemicals; India’s and Indonesia’s measures that discriminated against imports of U.S.

automobiles; Japan’s restrictions affecting imports of apples, cherries, and other fruits; Japan’s and

Korea’s discriminatory taxes on distilled spirits; Korea’s beef imports; and Mexico’s antidumping duties

on high-fructose corn syrup.

USTR also works to ensure the most effective use of U.S. trade laws to complement its litigation strategy

and to address problems that are outside the scope of the WTO and NAFTA. USTR has effectively

applied Section 301 of the Trade Act of 1974 to address unfair foreign government measures, “Special

301” for intellectual property rights enforcement, “Super 301” for dealing with barriers that affect U.S.

exports with the greatest potential for growth, Section 1377 of the Omnibus Trade and Competitiveness

Act of 1988 for telecommunications trade problems, and Title VII of the 1988 Act to address problems in

foreign government procurement. The application of these trade law tools is described further below.

2. WTO Dispute Settlement

2002 Activities

In 2002, the United States filed four new complaints under WTO dispute settlement procedures involving

Japan’s phytosanitary restrictions on imports of apples, the European Communities’ provisional safeguard

on steel, Venezuela’s import licensing practices and Canada’s Wheat Board. The United States also

initiated panel proceedings on a case begun earlier involving Mexico’s telecommunications regime. 

The United States also received favorable WTO dispute panel rulings in 2002 in cases involving U.S.

exports of dairy products to Canada and U.S. exports of auto assemblies to India, and also reached an

agreement with Argentina resolving many of the issues raised in our dispute over aspects of its
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intellectual property regime. These cases, which are described in Chapter II, further demonstrate the

importance of the dispute settlement process in opening foreign markets and securing other countries’

compliance with their WTO obligations. Further information on WTO disputes to which the United

States is a party is available on the USTR website (www.ustr.gov/enforcement/index.shtml).

3. Other Monitoring and Enforcement Activities

a. Subsidies Enforcement

The WTO Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) establishes

multilateral disciplines on subsidies. Among its various disciplines, the Subsidies Agreement provides

remedies for subsidies affecting competition not only domestically, but also in the subsidizing

government’s market and in third country markets. Previously, the U.S. countervailing duty law was the

only practical mechanism for U.S. companies to address subsidized foreign competition. However, the

countervailing duty law focuses exclusively on the effects of foreign subsidized competition in the United

States. Although the procedures and remedies are different, the multilateral remedies of the Subsidies

Agreement provide an alternative tool to address distortive foreign subsidies that affect U.S. businesses in

an increasingly global market place. 

Section 281 of the Uruguay Round Agreements Act of 1994 (URAA) sets out the responsibilities of

USTR and the Department of Commerce (Commerce) in enforcing the United States’ rights in the WTO

under the Subsidies Agreement. USTR coordinates the development and implementation of overall U.S.

trade policy with respect to subsidy matters, represents the United States in the WTO, including the WTO

Committee on Subsidies and Countervailing Measures, and leads the interagency team on matters of

policy. The role of Commerce’s Import Administration (IA) is to enforce the countervailing duty law

and, in accordance with responsibilities assigned by the Congress in the URAA, to spearhead the

subsidies enforcement activities of the United States with respect to the disciplines embodied in the

Subsidies Agreement. The Import Administration’s Subsidies Enforcement Office (SEO) is the specific

office charged with carrying out these duties. 

The primary mandate of the SEO is to examine subsidy complaints and concerns raised by U.S. exporting

companies and to monitor foreign subsidy practices to determine whether they are impeding U.S. exports

to foreign markets and are inconsistent with the Subsidies Agreement. Once sufficient information about

a subsidy practice has been gathered to permit the matter to be reliably evaluated, USTR and Commerce

will confer with an interagency team to determine the most effective way to proceed. It is frequently

advantageous to pursue resolution of these problems through a combination of informal and formal

contacts, including, where warranted, dispute settlement action in the WTO. Remedies for violations of

the Subsidies Agreement may, under certain circumstances, involve the withdrawal of a subsidy program

or the elimination of the adverse effects of the program. 

During this past year, SEO staff have handled numerous inquiries and met with representatives of U.S.

industries concerned about the subsidization of foreign competitors. They have also deepened their

interaction and coordination with Import Administration’s Trade Remedy Compliance Staff (TRCS) to

identify, track and, where appropriate, address various foreign government policies, business practices

and trade trends that may contribute to the development of subsidy and other unfair trade problems. 

These efforts have been facilitated by the stationing of several TRCS officers overseas (e.g., China and

Korea), who help gather and verify the accuracy of information concerning foreign subsidy practices, and

can play a pivotal role in clarifying or resolving problems that otherwise might lead to harm to U.S.

commercial interests and unnecessary frictions with our trading partners.
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Meanwhile, the SEO's electronic subsidies database continues to fulfill the goal of providing the U.S.

trading community a centralized location to obtain information about the remedies available under the

Subsidies Agreement and much of the information that is needed to develop a countervailing duty case or

a WTO subsidies complaint. The website (http://ia.ita.doc.gov/esel/index.html) includes information on

all the foreign subsidy programs that have been investigated in U.S. countervailing duty cases since 1980,

covering more than 50 countries and over 2,000 government practices. This database is updated monthly

making information on subsidy programs investigated or reviewed quickly available to the public.

b. Monitoring Foreign Antidumping and Countervailing Duty Actions 

The WTO Agreement on Implementation of Article VI (Antidumping Agreement) and the WTO

Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) permit WTO Members to

impose antidumping or countervailing duties to offset injurious dumping or subsidization of products

exported from one Member country to another. The United States carefully monitors antidumping and

countervailing duty proceedings initiated against U.S. exporters to ensure that foreign antidumping and

countervailing duty actions are administered fairly and in full compliance with the WTO Agreements. 

To this end, the Department of Commerce tracks foreign antidumping and countervailing duty actions

involving U.S. exporters and gathers information collected from U.S. embassies worldwide, enabling

U.S. companies and U.S. Government agencies to watch other Members’ administration of antidumping

and countervailing duty actions involving U.S. companies. Information about foreign antidumping and

countervailing duty actions affecting U.S. exports is accessible to the public via the Department of

Commerce’s Import Administration website (http://ia.ita.doc.gov/foradcvd/index.html). The deployment

of IA officers to certain overseas locations, as noted above, has contributed importantly to the

Administration’s efforts to monitor the application of foreign trade remedy laws with respect to U.S.

exports. 

Based in part on this monitoring activity, senior U.S. officials have met and raised concerns on several

occasions with Mexican officials over the past year concerning certain aspects of Mexico’s antidumping

measures affecting U.S. exports of beef, rice and apples. We continue to monitor the status of those

proceedings closely, and are considering whether further steps to clarify or resolve our concerns in those

cases may be appropriate. Among other antidumping investigations of U.S. goods that were closely

monitored in the past year are Canada’s investigation of tomatoes (suspended in June 2002 on the basis of

an undertaking reached with the U.S. exporters), the European Union’s investigation of acetate yarn

(terminated in December 2002 on the basis of a no injury finding), and China’s ongoing investigations of

art paper and toluene diisocyanate.

Members must notify on an ongoing basis without delay their preliminary and final determinations to the

WTO. Twice a year, WTO Members must also notify the WTO of all antidumping and countervailing

duty actions they have taken during the preceding six-month period. The actions are identified in semiannual reports submitted for discussion in meetings of the relevant WTO committees. Finally, Members

are required to notify the WTO of changes in their antidumping and countervailing duty laws and

regulations. These notifications are accessible through the USTR and Import Administration website

“links” to the WTO’s website.
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B. U.S. Trade Laws

1. Section 301

Section 301 of the Trade Act of 1974, as amended (the Trade Act), is the principal U.S. statute for

addressing foreign unfair practices affecting U.S. exports of goods or services. Section 301 may be used

to enforce U.S. rights under bilateral and multilateral trade agreements and also may be used to respond to

unreasonable, unjustifiable, or discriminatory foreign government practices that burden or restrict U.S.

commerce. For example, Section 301 may be used to obtain increased market access for U.S. goods and

services, to provide more equitable conditions for U.S. investment abroad, and to obtain more effective

protection worldwide for U.S. intellectual property.

The USTR has initiated 121 investigations pursuant to Section 301 since the statute was first enacted in

1974. 

a. Operation of the Statute

The Section 301 provisions of the Trade Act provide a domestic procedure whereby interested persons

may petition the USTR to investigate a foreign government policy or practice and take appropriate action. 

The USTR also may self-initiate an investigation. In each investigation the USTR must seek

consultations with the foreign government whose acts, policies, or practices are under investigation. If

the consultations do not result in a settlement and the investigation involves a trade agreement, Section

303 of the Trade Act requires the USTR to use the dispute settlement procedures that are available under

that agreement. 

If the matter is not resolved by the conclusion of the investigation, Section 304 of the Trade Act requires

the USTR to determine whether the practices in question deny U.S. rights under a trade agreement or

whether they are unjustifiable, unreasonable, or discriminatory and burden or restrict U.S. commerce. If

the practices are determined to violate a trade agreement or to be unjustifiable, the USTR must take

action. If the practices are determined to be unreasonable or discriminatory and to burden or restrict U.S.

commerce, the USTR must determine whether action is appropriate and, if so, what action to take. The

time period for making these determinations varies according to the type of practices alleged. 

Investigations of alleged violations of trade agreements with dispute settlement procedures must be

concluded within the earlier of 18 months after initiation or 30 days after the conclusion of dispute

settlement proceedings, whereas investigations of alleged unreasonable, discriminatory, or unjustifiable

practices (other than the failure to provide adequate and effective protection of intellectual property

rights) must be decided within 12 months.

The range of actions that may be taken under Section 301 is broad and encompasses any action that is

within the power of the President with respect to trade in goods or services or with respect to any other

area of pertinent relations with a foreign country. Specifically, the USTR may: (1) suspend trade

agreement concessions; (2) impose duties or other import restrictions; (3) impose fees or restrictions on

services; (4) enter into agreements with the subject country to eliminate the offending practice or to

provide compensatory benefits for the United States; and/or (5) restrict service sector authorizations. 

After a Section 301 investigation is concluded, the USTR is required to monitor a foreign country’s

implementation of any agreements entered into, or measures undertaken, to resolve a matter that was the

subject of the investigation. If the foreign country fails to comply with an agreement or the USTR
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considers that the country fails to implement a WTO dispute panel recommendation, the USTR must

determine what further action to take under Section 301. 

During 2002, there were new or ongoing actions or other major developments in the following

Section 301 investigations. (For a description of WTO dispute settlement procedures related to

Section 301 investigations, see Chapter II).

b. Intellectual Property Laws and Practices of the Government of Ukraine (301-121)

On March 12, 2001, the Trade Representative identified Ukraine as a priority foreign country under

section 182 of the Trade Act (known as Special 301 – see below), and simultaneously initiated a

Section 301 investigation of the intellectual property laws and practices of the Government of Ukraine. 

The priority foreign country identification was based on: (1) deficiencies in Ukraine's acts, policies and

practices regarding the protection of intellectual property rights, including the lack of effective action

enforcing intellectual property rights, as evidenced by high levels of compact disc piracy; and (2) the

failure of the Government of Ukraine to enact adequate and effective intellectual property legislation

addressing optical media piracy. 

The United States consulted repeatedly with the Government of Ukraine regarding the matters under

investigation. However, the Government of Ukraine made very little progress in addressing two key

issues: its failure to use existing law enforcement tools to stop optical media piracy, and its failure to

adopt an optical media licensing regime. On August 2, 2001, the USTR determined that the acts, 

policies and practices of Ukraine with respect to the protection of intellectual property rights were

unreasonable and burdened or restricted U.S. commerce, and were thus actionable under Section 301(b). 

The USTR determined that appropriate and feasible action in response included the suspension of

duty-free treatment accorded to the products of Ukraine under the GSP program, effective with respect to

goods entered on or after August 24, 2001. The USTR also announced that further action could include

the imposition of prohibitive duties on certain Ukrainian products, and the office of the USTR sought

public comment on a preliminary product list. On December 11, 2001, the USTR determined that

appropriate additional action included the imposition of 100 percent duties on a list of 23 Ukrainian

products with an annual trade value of approximately $75 million. The increased duties went into effect

on January 23, 2002. 

Consultations with the Government of Ukraine continued, but Ukraine failed to take the steps needed to

stop high levels of optical media piracy. Accordingly, the suspension of GSP benefits and increased

duties on certain Ukrainian products remained in effect throughout 2002. 

c. Wheat Trading Practices of the Canadian Wheat Board (301-120)

On October 23, 2000, the USTR initiated an investigation in response to a petition filed by the North

Dakota Wheat Commission (NDWC) to determine whether certain acts, policies, or practices of the

Government of Canada and the Canadian Wheat Board (CWB) with respect to wheat trading are

unreasonable and burden or restrict U.S. commerce. The CWB is a state-trading enterprise with sole

control over the purchase and export of western Canadian wheat for human consumption. According to

the petition, certain elements of the wheat trading system established by the Government of Canada

provide the CWB with pricing flexibility not available to private wheat traders, and the CWB exploits this

flexibility by engaging in certain allegedly unreasonable wheat trading practices. The petition asserted

that such practices have harmed U.S. wheat farmers by causing U.S. wheat to lose market share in the
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United States and particular third-country markets by reducing the sales prices obtained by U.S. wheat

farmers, and by causing unsold wheat stocks in the United States to increase. 

On March 30, 2001, the USTR requested that the International Trade Commission (ITC) conduct an

investigation, pursuant to section 332 of the Tariff Act of 1930, in order to obtain information and

analysis pertinent to the Section 301 investigation of the CWB. On September 24, 2001, the petitioner

requested that the USTR delay a decision on the actionability of CWB practices until January 22, 2002. 

The USTR granted the request. 

The ITC issued a confidential version of its Section 332 report on November 1, 2001, and a public

version on December 21, 2001. On December 21, 2001, the Office of the USTR issued a notice in the

Federal Register inviting public comment on Canadian wheat marketing practices, as well as on any other

issues raised in the petition, the ITC report, or in other submissions to USTR. The USTR extended the

investigation until February 15, 2002 to allow adequate time to review and consider the additional

comments received in response to the notice. 

On February 15, 2002, the USTR announced his findings that the acts, policies and practices of the

Government of Canada and the CWB with regard to wheat trading are unreasonable and burden or restrict

U.S. commerce. The USTR further announced that the Administration would pursue multiple avenues to

seek relief for U.S. wheat farmers from the wheat trading practices of the Government of Canada and the

CWB: (1) USTR would examine taking a possible WTO dispute settlement case against Canada with

regard to the wheat trading practices of the Government of Canada and the CWB; (2) the Administration

would work with the North Dakota Wheat Commission and the U.S. wheat industry to examine the

possibility of filing U.S. countervailing duty and antidumping petitions; (3) USTR would work with U.S.

farmers to identify specific impediments to U.S. wheat entering Canada and would present these to the

Canadians so as to ensure the possibility of fair, two-way trade; and (4) the Administration would

vigorously pursue comprehensive and meaningful reform of monopoly state trading enterprises in the

WTO agriculture negotiations. 

The Administration actively pursued these initiatives throughout the remainder of 2002. In WTO

negotiations, the United States continued to place a priority on the reform of agricultural state-trading

enterprises. For example, the United States succeeded in making this issue the first agenda item in the

June 2002 meeting of the WTO agricultural talks, and has obtained the support of other important

delegations. On market access, the United States held bilateral consultations with Canadian officials on

reducing the Canadian trade barriers that restrict exports of U.S. wheat to Canada, and has identified

specific Canadian transportation and distribution policies that serve as market access barriers. With

respect to potential countervailing duty and antidumping duty investigations, wheat industry

representatives consulted with Department of Commerce officials, and on September 13, 2002, industry

representatives filed antidumping and countervailing duty petitions. Finally, with respect to the possible

WTO challenge, USTR developed a legal challenge to Canadian marketing practices and market access

barriers, and filed a consultation request in the WTO on December 17, 2002. 

d. EC - Measures Concerning Meat and Meat Products (Hormones) (301-62a)

An EC directive prohibits the import of animals, and meat from animals, to which certain hormones had

been administered (the “hormone ban”). This measure has the effect of banning nearly all imports of beef

and beef products from the United States. A WTO panel and the Appellate Body found that the hormone

ban was inconsistent with the EC’s WTO obligations because the ban was not based on scientific

evidence, a risk assessment, or relevant international standards. Under WTO procedures, the EC was to
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have come into compliance with its obligations by May 13, 1999, but failed to do so. Accordingly, in

May 1999 the United States requested authorization from the DSB to suspend the application to the EC,

and Member States thereof, of tariff concessions and related obligations under the GATT. The EC did

not contest that it had failed to comply with its WTO obligations but objected to the level of suspension

proposed by the United States. 

On July 12, 1999, WTO arbitrators determined that the level of nullification or impairment suffered by

the United States as a result of the EC’s WTO-inconsistent hormone ban was $116.8 million per year. 

Accordingly, on July 26, 1999, the DSB authorized the United States to suspend the application to the

European Communities and its Member States of tariff concessions and related obligations under the

GATT covering trade up to $116.8 million per year. In a notice published in July 1999, the USTR

announced that the United States was exercising this authorization by imposing 100 percent ad valorem

duties on certain products of certain EC Member States. The increased duties remained in place

throughout 2002. While talks have continued with the aim of reaching a mutually satisfactory solution to

the dispute, no resolution has been reached. 

2. Special 301

During the past year, the United States continued to implement vigorously the Special 301 program,

resulting in continued substantial improvement in the global intellectual property environment. 

Publication of the Special 301 lists indicates those trading partners whose intellectual property protection

regimes most concern the United States, and alerts those considering trade or investment relationships

with such countries that their intellectual property rights may not be adequately protected.

Pursuant to Section 182 of the Trade Act of 1974, as amended by the Omnibus Trade and

Competitiveness Act of 1988 and the Uruguay Round Agreements Act of 1994, under Special 301

provisions, USTR must identify those countries that deny adequate and effective protection for

intellectual property rights (IPR) or deny fair and equitable market access for persons that rely on

intellectual property protection. Countries that have the most onerous or egregious acts, policies or

practices and whose acts, policies or practices have the greatest adverse impact (actual or potential) on the

relevant U.S. products must be designated as "Priority Foreign Countries.” 

Priority Foreign Countries are potentially subject to an investigation under the Section 301 provisions of

the Trade Act of 1974. USTR may not designate a country as a Priority Foreign Country if it is entering

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

provide adequate and effective protection of IPR.

USTR must decide whether to identify countries each year within 30 days after issuance of the National

Trade Estimate Report. In addition, USTR may identify a trading partner as a Priority Foreign Country or

remove such identification whenever warranted. 

USTR has created a "Priority Watch List" and "Watch List" under Special 301 provisions. Placement of a

trading partner on the Priority Watch List or Watch List indicates that particular problems exist in that

country with respect to IPR protection, enforcement or market access for persons relying on intellectual

property. Countries placed on the Priority Watch List are the focus of increased bilateral attention

concerning the problem areas. 
237

a. 2002 Special 301 Review Announcements

On April 30, 2002, the United States Trade Representative announced the results of the 2002 "Special

301" annual review which examined in detail the adequacy and effectiveness of intellectual property

protection in more than 70 countries. Under the Special 301 provisions of the Trade Act of 1974, as

amended, USTR identified 51 trading partners that deny adequate and effective protection of intellectual

property or deny fair and equitable market access to United States artists and industries that rely upon

intellectual property protection.

Because of its persistent failure to take effective action against significant levels of optical media piracy

and its failure to implement intellectual property laws that provide adequate and effective protection to

right holders, on January 23, 2002, the United States imposed $75 million in sanctions on Ukrainian

products. Ukraine’s continuing status as a Priority Foreign Country could jeopardize Ukraine’s efforts to

join the WTO and seriously undermine its efforts to attract trade and investment. The United States

continues to encourage Ukraine to combat piracy and to enact the necessary intellectual property rights

legislation and regulations. 

Paraguay and China were designated for "Section 306 monitoring" to ensure both countries comply with

the commitments made to the United States under bilateral intellectual property agreements. Special

concern was expressed that Paraguay’s efforts have not been sufficient in recent months, and further

consultations will be scheduled. 

In 2002, USTR placed 15 trading partners on the “Priority Watch List”: Argentina, Brazil, Colombia, the

Dominican Republic, Egypt, the European Union, Hungary, India, Indonesia, Israel, Lebanon, the

Philippines, Russia, Taiwan and Uruguay. Thirty-three trading partners were placed on the "Watch List." 

At the same time, USTR announced “out-of-cycle” reviews (OCR) for “Priority Watch List” countries

Indonesia, Israel, and the Philippines, and for “Watch List” countries the Bahamas, Costa Rica, Poland,

and Thailand. An OCR was also scheduled for Mexico. 

b. Intellectual Property and Health Policy 

In announcing the results of the 2002 Special 301 review, Ambassador Zoellick reiterated that USTR

would not change the present approach to health-related intellectual property issues. That is to say,

consistent with the United States' protection of intellectual property, we remain committed to working

with countries to develop workable programs to prevent and treat HIV/AIDS, malaria, tuberculosis and

other epidemics.

We have informed countries that, as they take steps to address a major health crisis, like the HIV/AIDS

crisis in sub-Saharan Africa, they should be able to avail themselves of the flexibilities afforded by the

TRIPS Agreement, provided that any steps they take comply with the provisions of the Agreement. The

Declaration on the TRIPS Agreement and Public Health agreed upon at the WTO Doha Ministerial in

November 2001 and the Administration's December 20, 2002 announcement of a moratorium on dispute

settlement are a reflection of this commitment. A more detailed discussion of the moratorium is in

Section G of Chapter II relating to the Council on Trade-Related Aspects of Intellectual Property Rights. 

The U. S. Government also remains committed to a policy of promoting intellectual property protection,

including for pharmaceutical patents, because of intellectual property rights' critical role in the rapid

innovation, development, and commercialization of effective and safe drug therapies. Financial incentives

are needed to develop new medications. No one benefits if research on such products is discouraged. 
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c. Implementation of Special 301

While piracy and counterfeiting problems persist in many countries, progress has occurred in other

countries. Significant positive developments are highlighted below:

• On January 1, 2002, Taiwan became a member of the WTO and obligated itself to comply fully

with the TRIPS Agreement on that date, and amended its patent law to provide the TRIPS

Agreement term of protection for patents granted before January 21, 1994;

• In January 2002, the Philippine Supreme Court issued new rules giving courts the authority to

order the seizure of pirated material without notice to the suspected infringer, as required by

TRIPS Article 50; 

• The Czech government adopted a comprehensive new regulation, effective January 1, 2002, on

the use of software in government offices;

• In January 2002, amendments to Moldova’s Customs Code came into force, providing ex officio

authority for customs officials to seize material at the border as required by the TRIPS

Agreement; 

• The Government of Paraguay impounded 12.6 million blank CDs in early February 2002 and

charged the importers with tax evasion; 

• On February 7, 2002, Costa Rica’s Public Ministry appointed 12 specialized “Link Prosecutors”

to provide priority handling of intellectual property cases in Costa Rica; 

• The Costa Rican government signed a government software decree on February 21, 2002, which

requires all ministries to conduct inventories and audits by December 15, 2002, and to come into

full compliance no later than July 15, 2003; 

• Jamaica formed a new Intellectual Property Office (JIPO) in February 2002, consolidating the

administration of Jamaican copyright, trademark and patent laws; 

•

• Peru signed and published the WIPO Performances and Phonograms Treaty on March 2, 2002;

• On March 27, 2002, the UAE made written commitments to provide comprehensive protection for

U.S. pharmaceuticals including extending data exclusivity protection, providing joint review by

Heath-Finance Ministry officials, and allowing USG review of a draft patent law for TRIPS

compliance;

• In March 2002, Japan announced that it will interpret temporary copying as violating copyright

laws; 

• Poland and Slovenia reinstated data exclusivity protection in April 2002; 

• In May 2002, India enacted a second set of amendments to its 1970 Patent Act to address a

number of TRIPS issues;
239

• The United States and Argentina notified the partial settlement of WTO dispute settlement

procedure on May 31, 2002;

• In June 2002, Egypt passed an intellectual property law to implement its TRIPS obligations in a

number of areas;

• During the summer, Thailand passed a trade secrets act, and in November 2002 the Thai Senate

passed a geographical indications bill;

• In September 2002, Colombia issued a decree concerning data exclusivity protection;

• By October 2002, Qatar had passed copyright, trademark, and industrial design laws to implement

its TRIPs obligations; 

• On November 19, 2002, the United States and Singapore reached agreement in substance on a

Free Trade Agreement that requires enhanced intellectual property rights protection in Singapore;

and 

• On December 11, 2002, the United States and Chile announced that they had reached agreement

on the substance of a Free Trade Agreement that includes stronger provisions on the protection

and enforcement of intellectual property rights than any previous Free Trade Agreement.

d. Ongoing Initiatives

i. Internet Piracy and the WIPO Copyright Treaties

Despite the promise that the Internet holds for innovative and creative industries, it is also creates

significant challenges, as it serves as an extremely efficient global distribution network for pirated

products. An important first step in the fight against Internet piracy was achieved at the World Intellectual

Property Organization (WIPO), when it concluded two copyright treaties in 1996: the WIPO Copyright

Treaty (WCT), and the WIPO Performances and Phonograms Treaty (WPPT), referred to as the WIPO

Internet Treaties. These Treaties represent the consensus view of the world community that the vital

framework of protection under existing treaties, including the TRIPS Agreement, should be supplemented

to eliminate any remaining gaps in copyright protection on the Internet that could impede the development

of electronic commerce. These treaties clarify exclusive rights in the on-line environment and specifically

prohibit devices and services intended to circumvent technological protection measures for copyrighted

works. As such, they represent the current state of international copyright law and provide the critical

foundation needed to enable electronic commerce to flourish and to combat Internet piracy. 

Because of their importance, the United States has been encouraging countries to ratify and implement the

WIPO Internet Treaties, both in informal consultations and in the context of the negotiation of free trade

agreements. Both Treaties came into effect in early 2002, the WCT on March 6 and the WPPT on May

20, when the required number of ratifications were deposited in Geneva with WIPO. We continue to

work internationally to promote ratification of these Treaties by other trading partners. 

The United States notes improvements in Japan’s protection of copyright and related rights through its

recognition of the need to protect temporary copies of works and phonograms. Unfortunately, Japan has

also enacted an Internet service provider liability law that fails to provide the necessary protections to

rights holders. The United States has urged Japan to improve this situation by adopting implementing
240

regulations that provide the necessary incentives for service providers to work with rights holders to

remove infringing material expeditiously, and to provide rights holders the ability to learn the identity of

accused online infringers.

ii. Other Initiatives Regarding Internet Piracy

The United States is seeking to incorporate the highest standards of protection for intellectual property

into appropriate bilateral and regional trade agreements that are negotiated. The United States has already

had its first success in this effort by incorporating the standards of the WIPO Internet Treaties as

substantive obligations in our FTA with Jordan. The Jordan FTA laid the foundation for pursuing this

goal in the free trade agreements with Chile and Singapore as well as the Free Trade Area of the Americas

(FTAA), and other FTAs in which negotiations have just begun. Moreover, U.S. proposals in these

negotiations will further update copyright and enforcement obligations to reflect the technological

challenges faced today as well as those that may exist at the time negotiations are concluded several years

from now.

iii. Implementation of the WTO TRIPS Agreement

One of the most significant achievements of the Uruguay Round was the negotiation of the TRIPS

Agreement, which requires all WTO Members to provide certain minimum standards of protection for

patents, copyrights, trademarks, trade secrets, geographical indications and other forms of intellectual

property. The Agreement also requires countries to provide effective enforcement of these rights. The

TRIPS Agreement is the first broadly-subscribed multilateral intellectual property agreement that is

enforceable between governments, allowing them to resolve disputes through the WTO’s dispute

settlement mechanism. 

Developed countries were required to fully implement TRIPS as of January 1, 1996, while developing

countries were given a transition period – until January 1, 2000 – to implement the Agreement’s

provisions. Ensuring that developing countries are in full compliance with the Agreement now that this

transition period has come to an end is one of this Administration’s highest priorities with respect to

intellectual property rights. With respect to least developed countries, and with respect to the protection

of pharmaceuticals and agriculture chemicals in certain developing countries, even longer transitions are

provided.

Progress continues to be made by developing countries toward full implementation of their TRIPS

obligations. Nevertheless, certain countries are still in the process of finalizing implementing legislation

and establishing adequate enforcement mechanisms. Every year the U.S. Government provides extensive

technical assistance and training on the implementation of the TRIPS Agreement, as well as other

international intellectual property agreements, to a large number of U.S. trading partners. Technical

assistance involves review of, and drafting assistance on, laws concerning intellectual property and

enforcement. Training programs usually cover the substantive provisions of the TRIPS Agreement, as

well as enforcement. The United States will continue to work with these countries and expects further

progress in the near term to complete the TRIPS implementation process. Absent such progress, the

United States will consider other options to ensure implementation, including through WTO dispute

settlement proceedings. 
241

iv. Controlling Optical Media Production

To address existing and prevent future piratical activity, over the past year some U.S. trading partners,

such as Malaysia and Taiwan, have taken important steps toward implementing, or have committed to

adopt, much needed controls on optical media production. The United States awaits news of aggressive

enforcement of these laws. Other trading partners that are in urgent need of such controls, however,

including Ukraine, Thailand, Indonesia, Pakistan, the Philippines, and Russia, have not made sufficient

progress in this regard. 

Governments such as those of China, Hong Kong and Macau that implemented optical media controls in

previous years have clearly demonstrated their commitment to continue to enforce these measures. The

effectiveness of such measures is underscored by the direct experience of these governments in

successfully reducing pirate production of optical media. The United States continues to urge its trading

partners facing the challenge of pirate optical media production within their borders, or the threat of such

production developing, to adopt similar controls, or aggressively enforce existing regulations, in the

coming year. USTR is concerned, however, about recent reports of increased piracy and counterfeiting in

Bulgaria, which had been a model in its region for taking the necessary steps to tackle optical media

piracy, including the enactment of optical media controls. Particularly troubling are reports that the CD

plant licensing laws might be revised in such a manner so as to undermine, not improve, their

effectiveness. USTR will closely monitor the situation and look to the Government of Bulgaria to

maintain strong optical disk (OD) regulations. 

v. Government Use of Software 

In October 1998, the United States announced a new Executive Order directing U.S. Government agencies

to maintain appropriate, effective procedures to ensure legitimate use of software. In addition, USTR was

directed to undertake an initiative to work with other governments, particularly those in need of

modernizing their software management systems or about which concerns have been expressed, regarding

inappropriate government use of illegal software. 

The United States has achieved considerable progress under this initiative. Countries that have issued

decrees mandating the use of only authorized software by government ministries include Bolivia, China,

Chile, Colombia, Costa Rica, the Czech Republic, Ireland, Israel, Jordan, Paraguay, Thailand, France, the

U.K., Spain, Greece, Turkey, Hungary, Korea, Hong Kong, Macau, Lebanon, Taiwan and the Philippines. 

USTR has noted its pleasure that these governments have recognized the importance of setting an example

in this area and its expectation that these decrees will be fully implemented. The United States looks

forward to the adoption of similar decrees, with effective and transparent procedures that ensure legitimate

use of software, by additional governments prior to the conclusion of the Special 301 review in April

2003.

3. Telecommunications - Section 1377 Reviews

Section 1377 of the Omnibus Trade and Competitiveness Act of 1988 requires USTR to review, by March

31 of each year, the operation and effectiveness of U.S. telecommunications trade agreements. The

purpose of the Section 1377 review is to determine whether any act, policy, or practice of a foreign

country that has entered into a telecommunications-related agreement with the United States (1) is not in

compliance with the terms of the agreement or (2) otherwise denies, within the context of the agreement,

mutually advantageous market opportunities to telecommunications products and services of U.S. firms in

that country. 
242

The 2002 Section 1377 review focused on the following practices as a matter of priority: (1) mobile

wireless interconnection rates in the European Union (EU) Member States and Japan; (2) provisioning and

pricing of leased telecom lines in EU Member States and Switzerland; and (3) interconnection and other

competitive concerns in Mexico. USTR also announced that it would monitor other telecommunications

trade practices in Australia, Brazil, China, Colombia, India, Japan, Peru, and South Africa. While these

represented broad market access concerns that were vigorously addressed, Mexico was the only case

where a record of violating trade commitments was considered strong enough to initiate a formal trade

complaint. 

On mobile wireless interconnection, USTR identified growing evidence that wireless operators in the EU

and Japan were charging wireline telecommunications carriers wholesale rates to “interconnect” their calls

at rates that were significantly above cost. Reductions of such rates in Japan in 2002 and recent efforts by

some European regulators to investigate these rates is encouraging, and USTR will continue to monitor

these actions. 

On the provisioning and pricing of leased lines, USTR noted that U.S. companies face serious difficulties

throughout the EU in obtaining leased lines from former monopolies on a timely basis and at reasonable

and non-discriminatory rates. The EU and Switzerland have commitments in the WTO to ensure basic

telecom providers have access to and use of leased lines on reasonable and non-discriminatory terms and

conditions. In Germany, the regulator instituted provisioning guidelines that have helped alleviate this

problem. However, the regulator’s action was stayed by the German courts pending judicial review. On

the whole, this issue continues to plague a number of EU Member States and Switzerland, and USTR will

continue to monitor regulatory actions that these countries may take to remedy allegedly anticompetitive

practices by the incumbent. 

Other issues identified this year include: complaints that Australia’s regulator has not acted impartially

toward competitors to Telstra, Australia’s 50.1 percent government-owned telecom operator; China’s

lagging efforts to establish an independent regulator; Colombia’s failure to permit licensing of additional

international operators; India’s weak enforcement powers granted to the telecom regulator, and the

conflicts of interest arising out of the Government of India’s ownership interest in India’s telecom

operators; Japan’s unjustified hike of key wireline interconnection rates and its continued failure to

ensure the independence of the regulator; and transparency of regulatory processes and independence of

the regulator in Peru. Finally, South Africa continues to be plagued by an uncertain regulatory

environment, and one that appears to favor the state-owned monopoly supplier of basic

telecommunications services.

Mexico

USTR requested the establishment of a WTO dispute settlement panel to examine claims that Mexico has

failed to ensure that: (1) Telmex (Mexico’s major supplier of telecommunications) provides U.S. telecom

companies interconnection for international calls at “cost-oriented” rates and reasonable terms and

conditions; and (2) U.S. companies can send their calls into and out of Mexico over leased lines. Failure

to address these issues has kept rates for completing calls into Mexico at monopoly levels which are over

double actual cost, restricting bilateral telecommunications traffic and imposing an undue burden on

businesses and consumers in both the United States and Mexico. The WTO dispute settlement panel was

established and held its first hearing in the case in December 2002, and is expected to rule on the U.S.

complaint by mid-2003. 
243

4. Government Procurement

As noted in Chapter IV, the United States is a signatory of the Agreement on Government Procurement. 

The NAFTA , as well as the recently negotiated Free Trade Agreements with Singapore and Chile also

include provisions on government procurement. The United States monitors our trading partners’

compliance with these agreements and can enforce its rights under these agreements through dispute

settlement. We can also pursue issues related to government procurement in proceedings under section

301.

5. Antidumping Actions

Under the antidumping law, duties are imposed on imported merchandise when the Department of

Commerce determines that the merchandise is being dumped (sold at "less than fair value" (LTFV)) and

the U.S. International Trade Commission determines that there is material injury or threat of material

injury to the domestic industry, or material retardation of the establishment of an industry, "by reason of"

those imports. The antidumping law’s provisions are incorporated in Title VII of the Tariff Act of 1930

and have been substantially amended by the l979, 1984, and 1988 trade acts as well as by the 1994

Uruguay Round Agreements Act.

An antidumping investigation starts when a U.S. industry, or an entity filing on its behalf, submits a

petition alleging with respect to certain imports the dumping and injury elements described above. If the

petition meets the minimum requirements for filing, Commerce initiates an antidumping investigation. 

Commerce also may initiate an investigation on its own motion.

After initiation, the USITC decides, generally within 45 days of the filing of the petition, whether there is

a "reasonable indication" of material injury or threat of material injury to a domestic industry, or material

retardation of an industry’s establishment, "by reason of" the LTFV imports. If this preliminary

determination by the USITC is negative, the investigation is terminated; if it is affirmative, the case shifts

back to Commerce for preliminary and final inquiries into the alleged LTFV sales into the U.S. market. If

Commerce’s preliminary determination is affirmative, Commerce will direct U.S. Customs to suspend

liquidation of entries and require importers to post a bond equal to the estimated weighted average

dumping margin.

If Commerce’s final determination of LTFV sales is negative, the investigation is terminated. If

affirmative, the USITC makes a final injury determination. If the USITC determines that there is material

injury or threat of material injury, or material retardation of an industry’s establishment, by reason of the

LTFV imports, an antidumping order is issued. If the USITC’s final injury determination is negative, the

investigation is terminated and the Customs bonds released.

Upon request of an interested party, Commerce conducts annual reviews of dumping margins pursuant to

Section 751 of the Tariff Act of 1930. Section 751 also provides for Commerce and USITC review in

cases of changed circumstances and periodic review in conformity with the five-year "sunset" provisions

of the U.S. antidumping law and the WTO antidumping agreement.

Most antidumping determinations may be appealed to the U.S. Court of International Trade, with further

judicial review possible in the U.S. Court of Appeals for the Federal Circuit. For certain investigations

involving Canadian or Mexican merchandise, appeals may be made to a binational panel established under

the NAFTA.
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The numbers of antidumping investigations initiated in and since 1986 are as follows: 83 in 1986; 16 in

1987; 42 in 1988; 24 in 1989; 35 in 1990; 66 in 1991; 84 in 1992; 37 in 1993; 51 in 1994; 14 in 1995; 21

in 1996; 15 in 1997; 36 in 1998; 46 in 1999; 45 in 2000; 57 in 2001; and 35 in 2002. The numbers of

antidumping orders (not including suspension agreements) imposed in and since 1986 are: 26 in 1986; 53

in 1987; 12 in 1988; 24 in 1989; 14 in 1990; 19 in 1991; 16 in 1992; 42 in 1993; 16 in 1994; 24 in 1995; 9

in 1996; 7 in 1997; 9 in 1998; 19 in 1999; 20 in 2000; 30 in 2001; and 36 in 2002. Under its sunset

review procedures, Commerce revoked 120 antidumping duty orders and continued 13 orders in 2000;

revoked 4 antidumping duty orders and continued 3 orders in 2001; and revoked 6 antidumping duty

orders and continued 2 orders in 2002.

6. Countervailing Duty Actions

The U.S. countervailing duty (CVD) law dates back to late 19th century legislation authorizing the

imposition of CVDs on subsidized sugar imports. The current CVD provisions are contained in Title VII

of the Tariff Act of 1930. As with the antidumping law, the USITC and the Department of Commerce

jointly administer the CVD law.

The CVD law’s purpose is to offset certain foreign government subsidies benefitting imports into the

United States. CVD procedures under Title VII are very similar to antidumping procedures, and CVD

determinations by Commerce and the USITC are subject to the same system of judicial review as are

antidumping determinations. Commerce normally initiates investigations based upon a petition submitted

by a representative of the interested party(ies). The USITC is responsible for investigating material injury

issues. The USITC must make a preliminary finding of a reasonable indication of material injury or threat

of material injury, or material retardation of an industry’s establishment, by reason of the imports subject

to investigation. If the USITC’s preliminary determination is negative, the investigation terminates;

otherwise, Commerce issues preliminary and final determinations on subsidization. If Commerce’s final

determination of subsidization is affirmative, the USITC proceeds with its final injury determination.

The number of CVD investigations initiated in and since 1986 are: twenty-eight in 1986; eight in 1987;

seventeen in 1988; seven in 1989; seven in 1990; eleven in 1991; twenty-two in 1992; five in 1993; seven

in 1994; two in 1995; one in 1996; six in 1997; eleven in 1998; ten in 1999; seven in 2000; and eighteen

in 2001. The number of CVD orders imposed in and since 1986 are: thirteen in 1986; fourteen in 1987;

seven in 1988; six in 1989; two in 1990; two in 1991; four in 1992; sixteen in 1993; one in 1994; two in

1995; two in 1996; none in 1997; one in 1998; six in 1999; six in 2000, and six in 2001. In 2001,

Commerce conducted sunset reviews of five of its outstanding countervailing measures, all five measures

were continued as a result of the review. In the first six months of 2002, from January 1 to June 30, 1

CVD investigation was initiated and no sunset reviews were initiated. 

7. Unfair Import Practices (Section 337)

Section 337 of the Tariff Act of 1930 makes it unlawful to engage in unfair acts or unfair methods of

competition in the importation or sale of imported goods. Most Section 337 investigations concern

alleged infringement of intellectual property rights, usually involving U.S. patents.

The USITC conducts Section 337 investigations through adjudicatory proceedings under the

Administrative Procedure Act. The proceedings normally involve an evidentiary hearing before a USITC

administrative law judge who issues an Initial Determination that is subject to review by the Commission. 

If the USITC finds a violation, it can order that imported infringing goods be excluded from the United

States and/or issue cease and desist orders requiring firms to stop unlawful conduct in the United States,
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such as the sale or other distribution of imported goods in the United States. Many Section 337

investigations are terminated after the parties reach settlement agreements or agree to the entry of consent

orders.

In cases in which the USITC finds a violation of Section 337, it must decide whether certain public

interest factors nevertheless preclude the issuance of a remedial order. Such public interest considerations

include an order’s effect on the public health and welfare, U.S. consumers, and the production of similar

U.S. products.

If the USITC issues a remedial order, it transmits the order, determination, and supporting documentation

to the President for policy review. Importation of the subject goods may continue during this review

process, if the importer pays a bond set by the USITC. If the President does not disapprove the USITC’s

action within 60 days, the USITC’s order becomes final. Section 337 determinations are subject to

judicial review in the U.S. Court of Appeals for the Federal Circuit with possible appeal to the U.S.

Supreme Court.

The USITC also is authorized to issue temporary exclusion or cease and desist orders prior to completion

of an investigation if the USITC determines that there is reason to believe a violation of Section 337

exists.

In 2002, the USITC instituted 17 new Section 337 investigations and two ancillary proceedings (one of

which concerned the enforcement of a section 337 order and the other concerned a bond forfeiture). 

During the year, the USITC issued five limited exclusion orders and four cease and desist orders covering

imports from foreign firms, as follows: Inv. No. 337-TA-473, Certain Video Game Systems, Accessories,

and Components Thereof (limited exclusion order and cease and desist order); Inv. No. 337-TA-450,

Certain Integrated Circuits, Processes for Making Same and Products Containing Same (limited

exclusion order); Inv. No. 337-TA-449, Abrasive Products Made Using a Process for Making Powder

Preforms and Products Containing Same (limited exclusion order and cease and desist order); Inv. No.

337-TA-448, Certain Oscillating Sprinklers, Sprinkler Components, and Nozzles (limited exclusion

order); and Inv. No. 337-TA-446, Certain Ink Jet Print Cartridges and Components Thereof (limited

exclusion order and two cease and desist orders). A limited exclusion order covers only certain imports

from particular named sources (as contrasted with a general exclusion order, which covers certain

products from all sources). The President permitted all but one limited exclusion order and one cease and

desist order to go into effect during 2002; those two remaining orders were before the President for review

as of December 31, 2002.

a. Section 201

Section 201 of the Trade Act of 1974 provides a procedure whereby the President may grant temporary

import relief if increased imports are a substantial cause of serious injury or the threat of serious injury.

Relief may be granted for an initial period of up to four years, with the possibility of extending the relief

to a maximum of eight years. Import relief is designed to redress the injury and to facilitate positive

adjustment by the domestic industry and may consist of increased tariffs, quantitative restrictions, or other

forms of relief. Section 201 also authorizes the President to grant provisional relief in cases involving

"critical circumstances" or certain perishable agricultural products.

For an industry to obtain relief under Section 201, the United States International Trade Commission

(USITC) must first determine that a product is being imported into the United States in such increased

quantities as to be a substantial cause (a cause which is important and not less than any other cause) of
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serious injury, or the threat thereof, to the U.S. industry producing a like or directly competitive product. 

If the USITC makes an affirmative injury determination (or is equally divided on injury) and recommends

a remedy to the President, the President may provide relief either in the amount recommended by the

USITC or in such other amount as he finds appropriate. The criteria for import relief in Section 201 are

based on Article XIX of the GATT 1994 – the so-called "escape clause" – and the WTO Agreement on

Safeguards.

As of January 1, 2003, the United States had three safeguard measures in place on imported steel

products: (1) certain steel wire rod (wire rod); (2) circular welded carbon quality line pipe (line pipe); (3)

certain carbon flat-rolled steel, including carbon and alloy steel slabs (slabs), plate (including cut-to-length

plate and clad plate), hot-rolled steel (including plate in coils), cold-rolled steel (other than grain-oriented

electrical steel), corrosion-resistant and other coated steel (collectively, certain flat steel); (4) carbon and

alloy hot-rolled bar and light shapes (hot-rolled bar); (5) carbon and alloy cold-finished bar (cold-finished

bar); (6) carbon and alloy rebar (rebar); (7) carbon and alloy welded tubular products (other than oil

country tubular goods) (certain tubular products); (8) carbon and alloy flanges, fittings, and tool joints

(carbon and alloy fittings); (9) stainless steel bar and light shapes (stainless steel bar); and (10) stainless

steel rod, carbon and alloy tin mill products (tin mill products) and stainless steel wire. 

Effective March 1, 2000, the President imposed a tariff-rate quota (TRQ) on imports of wire rod from all

countries except Canada and Mexico. Absent an extension, the measure will expire on March 1, 2003. 

Effective November 24, 2001, the President revised the wire rod safeguard measure to allot the TRQ

among four categories of supplier countries. The allotments were based on import shares for a

representative historic period.

Also effective March 1, 2000, the President imposed a duty increase on imports of line pipe from all

countries except Canada and Mexico. The first 9,000 short tons of line pipe imported into the United

States annually from each country is exempted from this increase in duty. Absent an extension, the

measure will expire on March 1, 2003. Pursuant to an agreement reached with Korea, the 9,000 ton

exclusion applicable to Korea was replaced with a tariff-rate quota, effective September 1, 2002.

Effective March 20, 2002, the President imposed a safeguard measure on certain flat steel in the form of a

TRQ on slabs and a tariff on other certain flat steel. At the same time, the President imposed tariffs on

hot-rolled bar, cold-finished bar, rebar, certain tubular products, carbon and alloy fittings, stainless steel

bar, stainless steel rod, tin mill products, and stainless steel wire (collectively, the “steel safeguard

measures”). Absent an extension, the measures will expire on March 21, 2005. Subsequent to the

effective date of the measure, USTR granted requests made by U.S. consumers, U.S. importers, and

foreign producers that certain products be excluded from these safeguard measures.

On February 15, 2002, the WTO Appellate Body issued a report finding that the safeguard measure on

line pipe was inconsistent with the Safeguards Agreement and GATT 1994 in that it was based on a

finding of serious injury that did not comply with the Safeguards Agreement prohibition on attributing to

imports injury caused by other factors. This report, and an earlier panel report finding that the line pipe

safeguard measure was a TRQ inconsistent with Article XIII of GATT 1994, were adopted on March 8,

2002.

In July, 2002, the WTO formed a dispute settlement panel to consider claims brought by the European

Communities, Japan, Korea, China, Switzerland, Norway, New Zealand, and Brazil that the steel

safeguard measures taken on March 20, 2002 were inconsistent with WTO rules. The panel should issue

its report sometime in the second quarter of 2003.
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b. Section 421

The terms of China’s accession to the WTO include a unique, China-specific safeguard mechanism. The

mechanism allows a WTO member to limit increasing imports from China that disrupt or threaten to

disrupt its market, if China does not agree to take action to remedy or prevent the disruption. The

mechanism applies to all industrial and agricultural goods and will be available until December 11, 2013.

Section 421 of the Trade Act of 1974, as amended by the U.S.-China Relations Act of 2000, implements

this safeguard mechanism in U.S. law. For an industry to obtain relief under Section 421, the United

States International Trade Commission (ITC) must first make a determination that products of China are

being imported into the United States in such increased quantities or under such conditions as to cause or

threaten to cause market disruption to the domestic producers of like or directly competitive products. 

The statute directs that if the ITC makes an affirmative determination, the President shall provide import

relief, unless the President determines that provision of relief is not in the national economic interest of the

United States or, in extraordinary cases, that the taking of action would cause serious harm to the national

security of the United States. 

China’s terms of accession also permit a WTO Member to limit imports where a China-specific safeguard

measure imposed by another Member causes or threatens to cause significant diversions of trade into its

market. The trade diversion provision is implemented in U.S. law by Section 421a of the Trade Act of

1974.

On August 19, 2002, based on a Section 421 petition filed by Motion Systems Corporation, the ITC

instituted an investigation to determine whether imports of pedestal actuators from China are causing or

threatening to cause market disruption. The ITC made an affirmative determination on October 18, 2002,

and transmitted a report on its determination, as well as its remedy proposals, to the President and USTR

on November 7, 2002. Under the statute, the President effectively has 70 days from receipt of the ITC

report to take action, if any.

On November 27, 2002, three U.S. companies filed a Section 421 petition and the ITC instituted an

investigation to determine whether imports of certain steel wire garment hangers from China are causing

or threatening to cause market disruption. The ITC is required to make a determination no later than 60

days after the date on which the petition was filed.

c. China Textile Safeguard

The terms for China’s accession to the WTO also include a special textiles safeguard, which is available

for WTO members to use until December 31, 2008. This safeguard covers all products subject to the

WTO Agreement on Textiles and Clothing as of January 1, 1995. On August 30, 2002, the Chairman of

the interagency Committee for the Implementation of Textile Agreements (CITA) received a letter from

the American Textile Manufacturers Institute (ATMI) requesting that CITA invoke this special textile

safeguard with respect to certain product categories. USTR, as a member of CITA, is monitoring import

data related to these products, and is working to develop procedures consistent with U.S. safeguards laws

to implement this special textiles safeguard.
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8. Trade Adjustment Assistance

a. Assistance for Workers

The Trade Adjustment Assistance (TAA) program for workers, established under Title II, chapter 2, of the

Trade Act of 1974, as amended, provides assistance for workers affected by foreign trade. Available

assistance includes job retraining, trade readjustment allowances (TRA), job search, relocation, a health

insurance tax credit, and other re-employment services. The program was most recently amended by the

Trade Adjustment Assistance Reform Act of 2002 (TAA Reform Act) enacted on August 6, 2002. 

The TAA Reform Act expanded the TAA program and repealed the North American Free Trade

Agreement Transitional Adjustment Assistance (NAFTA-TAA) program. The TAA Reform Act also

raised the statutory cap on funds that may be allocated to the States for training from $110 million to $220

million per year. Workers covered under certifications issued pursuant to NAFTA-TAA petitions filed on

or before November 3, 2002, will continue to be covered under the provisions of the NAFTA-TAA

program that were in effect on September 30, 2001. Amendments to the TAA program apply to petitions

for adjustment assistance that are filed on or after November 4, 2002. 

The TAA Reform Act expanded eligibility for the TAA program. For workers to be eligible to apply for

TAA, the Secretary of Labor must certify that: (1) increased imports contributed importantly to a decline

in sales or production and to a layoff or threat of a layoff; or (2) there has been a shift in production to a

country with a free or preferential trade agreement with the United States; or (3) there has been a shift in

production outside the United States and there has been or is likely to be an increase in imports of like or

directly competitive articles; or (4) loss of business as a supplier or downstream producer for a TAA

certified firm contributed importantly to worker layoffs. The latter is to cover certain secondarily-affected

workers. 

The U.S. Department of Labor administers the TAA program through the Employment and Training

Administration (ETA). Workers certified as eligible to apply for adjustment assistance may apply for

TAA benefits and services at the nearest state One Stop Career Center or office of the State Workforce

Agency. In order to be eligible for TRA, workers must be enrolled in approved training within eight

weeks of the issuance of the DOL certification or within 16 weeks of the worker’s most recent qualifying

separation (whichever is later) or must have successfully completed approved training. A State may

waive this requirement under six specific conditions. 

The TAA Reform Act created a program of health coverage tax credits (HCTC) for certain trade-impacted

workers and others. Covered individuals may be eligible to receive a tax credit equal to 65percent of the

amount they paid for qualifying coverage under qualified health insurance. The tax credit may be claimed

at the end of the year, or, beginning in August 2003, a qualified individual may receive the credit in the

form of monthly advance payments to the health insurance provider. 

Fact-finding investigations were instituted for 2,375 TAA petitions in fiscal year (FY) 2002. In FY 2002,

1,614 certifications were issued covering an estimated 232,898 workers, whereas 993 petitions covering

an estimated 96,197 workers resulted in denials of eligibility to apply. Fact-finding investigations were

instituted for 2,339 NAFTA-TAA petitions in FY 2002. In FY 2002, 745 NAFTA-TAA certifications

were issued covering an estimated 112,093 workers whereas 696 NAFTA-TAA petitions covering an

estimated 76,231 workers resulted in denials of eligibility to apply.
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b. Assistance for Firms and Industries

The Planning and Development Assistance Division of the Department of Commerce's Economic

Development Administration (EDA) administers the TAA program for firms and industries. This program

is authorized by Title II, Chapter 3, of the Trade Act of 1974, as amended, and was extended by the Trade

Act of 2002 through September 30, 2007.

Under the firms and industries TAA program, EDA funds a network of 12 Trade Adjustment Assistance

Centers (TAACs). These TAACs are sponsored by nonprofit organizations, institutions of higher

education, and a state agency. In FY 2002, EDA provided $ 10.5 million in funding to the TAACs.

TAACs assist firms in completing petitions for certification of eligibility. To be certified as eligible to

apply for TAA, a firm must show that increased imports of articles like or directly competitive with those

produced by the firm contributed importantly to declines in its sales, production, or both, and to the

separation or threat of separation of a significant portion of the firm's workers.

In FY 2002, EDA certified 170 firms under the TAA program. Once EDA has certified a firm, the TAAC

assists the firm in assessing its competitive situation and in developing an adjustment proposal. The

adjustment proposal must show that the firm is aware of its strengths and weaknesses and must present a

clear and rational strategy for achieving economic recovery. EDA's Adjustment Proposal Review

Committee (APRC) must approve the firm's adjustment proposal. During FY 2002, the APRC approved

141 adjustment proposals from certified firms. 

After the adjustment proposal is approved by the APRC, the firm may request technical assistance from

the TAAC to implement its strategy. Using funds provided by the TAA program, the TAAC

contracts with consultants to provide the technical assistance identified in the firm's proposal. The firm

must typically pay 50 percent of the cost of each consultant contract, and the maximum amount of

technical assistance available to a firm under the TAA program is $75,000. Common types of technical

assistance that firms request include the development of marketing materials, the identification of new

products for the firm to produce, and the identification of appropriate management information systems. 

The legislation authorizes EDA to provide funding to trade associations and other organizations

representing trade-injured industries to undertake technical assistance activities, which will generally

benefit all firms in that industry. Since FY 1996, however, EDA has used the available program resources

to support the TAAC network, which provides technical assistance to individual trade-injured firms. 

The Emergency Steel Loan Guarantee Act of 1999 created the Emergency Steel Loan Guarantee Board. 

The board is authorized to provide loan guarantees to steel companies in amounts for up to 95 percent of

the loan principal. The program has been structured to fulfill the two objectives of the legislation: to

assist steel firms injured by the import crises and to protect government funds by guaranteeing only sound

loans. In December 2001, the Emergency Steel Loan Guarantee Board approved a $42 million loan

guarantee.

9. Generalized System of Preferences

The Generalized System of Preferences (GSP) is a program that grants duty-free treatment to specified

products that are imported from more than 140 designated developing countries and territories. The

program began in 1976, when the United States joined 19 other industrialized in granting tariff

preferences to promote the economic growth of developing countries through trade expansion. Currently,
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more than 4,000 products or product categories (defined at the eight-digit level in the Harmonized Tariff

Schedule of the United States) are eligible for duty-free entry from countries designated as beneficiaries

under GSP. In 1997, an additional 1,783 products were made duty-free under GSP for countries

designated as least developed beneficiary developing countries (LDBDCs).

The premise of GSP is that the creation of trade opportunities for developing countries is an effective,

cost-efficient way of encouraging broad-based economic development and a key means of sustaining the

momentum behind economic reform and liberalization. In its current form, GSP is designed to integrate

developing countries into the international trading system in a manner commensurate with their

development. The program achieves these ends by making it easier for exporters from developing

economies to compete in the U.S. market with exporters from industrialized nations while at the same

time excluding from duty-free treatment under GSP those products determined by the President to be

“import-sensitive.” The value of duty-free imports in 2001 was approximately $15.7 billion.

In addition, the GSP program works to encourage beneficiaries to eliminate or reduce significant barriers

to trade in goods, services, and investment, to afford all workers internationally recognized worker rights,

and to provide adequate and effective means for foreign nationals to secure, exercise, and enforce property

rights, including intellectual property rights.

An important attribute of the GSP program is its ability to adapt, product by product, to changing market

conditions and the changing needs of producers, workers, exporters, importers and consumers. 

Modifications can be made in the list of articles eligible for duty-free treatment by means of an annual

review. The process begins with a Federal Register Notice requesting the submission of petitions for

modifications in the list of eligible articles. For those petitions that are accepted, public hearings are held,

a U.S. International Trade Commission study of the “probable economic impact” of granting the petition

is prepared, and all relevant materials are reviewed by the GSP interagency committee. Following

completion of the review, the President announces his decision on which petitions are granted.

The program was originally authorized for ten years and subsequently reauthorized for eight years. For

several years thereafter, Congress renewed the program for only brief periods of one or two years. The

GSP program has lapsed temporarily several times – September 30, 1994; July 31, 1995; May 31, 1997;

June 30, 1998; July 1, 1999; and September 30, 2001. Each time it was reauthorized after a delay and

applied retroactively to the previous expiration date, thus maintaining the continuity of the program

benefits. The program was most recently reauthorized on August 6, 2002; it will expire again on

December 31, 2006.

Due to the GSP program’s expiration on September 30, 2001, the 2001 annual review was postponed, and

the 2002 annual review was never initiated. To restart the annual review process, the President issued a

proclamation in August, 2002, restoring GSP benefits to Argentina for certain products for which

Argentina had lost eligibility in prior years because it exceeded the competitive need limitations; in 2001,

trade fell below the competitive need limitations. Also in August 2002, a notice published in the Federal

Register announced a special review of other product petitions filed by Argentina in 2001, as well as

product petitions from the Philippines and Turkey that were filed in 2001. In November 2002, a second

notice in the Federal Register announced a schedule of dates for conducting the 2002 annual review, and

announced that the remaining petitions filed for the postponed 2001 annual review would be decided on

the same schedule as the petitions filed for the 2002 annual review. Because the GSP benefits for

beneficiaries of the African Growth and Opportunity Act (AGOA) did not expire, a review for two

product petitions was held. On January 10, 2003, the President granted a petition to add a product to the
251

list of products eligible for duty-free treatment under the GSP when imported from AGOA beneficiary

countries; a second petition is pending further review.
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VII. Trade Policy Development

A. Trade Capacity Building

The United States is a world leader in helping developing countries benefit from trade liberalization and a

growing volume of global trade opportunities. President Bush’s 2001 International Trade Agenda

emphasized the priority to “help developing countries and emerging markets begin the process of

integrating themselves into the world trading system.” Trade capacity building activities implemented by

a broad range of U.S. Government agencies assist developing and transition economies to participate in

and benefit from expanding global trade. USTR seeks to bring together other agencies – U.S. Agency for

International Development, Department of Labor, Trade and Development Agency, Environmental

Protection Agency, Department of Commerce, Department of Agriculture, and Department of

Transportation, among others – in our efforts to ensure comprehensive and coordinated trade capacity

building assistance. USTR created the Office for Trade Capacity Building in April 2002 to coordinate

such efforts associated with trade negotiations, the implementation of trade agreements and improving the

capability of countries to better participate in the international trading system.

This section reviews trade capacity building efforts with respect to the FTAA, Central America, and

Africa. Capacity building with respect to the WTO is discussed under the activities of the WTO

Committee on Trade and Development in Chapter II of this report.

1. FTAA-Hemispheric Cooperation Program

The United States won endorsement at the Quito FTAA Meeting of Trade Ministers on November 1, 2002

for a comprehensive trade capacity building program to help small and developing countries in the

Western Hemisphere to fully benefit from the FTAA. Countries seeking trade-related technical assistance

will prepare, with the help of USAID and the Inter-American Development Bank (IDB), strategies

identifying needs in three areas: participation in negotiations, implementation of FTAA commitments, and

economic adjustment relating to the FTAA. Technical assistance could include:

• Training for government officials, such as customs officers, environmental analysts, bank

regulators, patent and copyright officials, food safety inspectors, and trade policy analysts; 

• Programs that foster trade policy coordination among government agencies and that identify ways

to make such trade agencies more effective and transparent; 

• Programs to establish or improve statistical and analytical institutions, similar to the U.S.

International Trade Commission. Such agencies or institutions would provide impartial and

transparent information to governments and civil society on trade policy issues; 

• Programs for business development, such as identifying new market opportunities for small and

medium size companies; and 

• Programs to assist governments with regulatory reform in areas such as revenue systems,

environmental protection, or competition policy. 

These strategies will also help integrate trade into countries' overall development efforts and into their

development programs with the IDB and the World Bank. 
253

Working with other agencies, USTR intends to work actively with the private sector and foundations to

bring additional resources and creativity to the Hemispheric Cooperation Program. For example,

proposed roundtable sessions will bring together public and private donors to identify the best possible

programs, from both private and public sources, to meet the needs identified in each country's trade

capacity building strategy. 

2. Central America

USTR has been working with Central American countries to develop their own National Trade Capacity

Building Strategies. Through these strategies, nations would identify their trade capacity building needs,

to which the U.S. Government, international institutions, corporations, and non-governmental

organizations are now mobilized to respond. By the launch of the negotiations for an FTA on January 8,

2003, over 50 projects had been identified to assist participating Central American nations, including

funds for computers and travel, projects to help increase citizen input into trade negotiations, assistance to

strengthen science-based food safety inspection systems, and programs to promote cleaner production

methods. The President's 2003 budget request includes $47 million in U.S. capacity building assistance

for the region - a 74 percent increase. USTR has established a trade capacity building group that will meet

in parallel with the five negotiating groups to continue this important work throughout 2003. Each

country’s National Strategy may be found on the USTR website (http://www.ustr.gov). 

3. Africa

a. African Growth and Opportunity Act (AGOA)

The United States continues to work with sub-Saharan African countries to ensure that governments from

the region have the capacity to participate effectively in WTO negotiations and to implement the results. 

The Administration has developed a comprehensive strategy for delivering WTO-related technical

assistance to the region based on needs identified by African governments, and is cooperating with other

bilateral and multilateral donors on implementation. 

In 2002, USAID inaugurated a new, multi-year trade capacity building initiative entitled Trade for African

Development and Enterprise (TRADE). A central element of TRADE is the establishment of Regional

Hubs for Global Competitiveness in Botswana, Kenya, and Ghana. Each hub will be staffed with a cadre

of technical experts that will provide technical support on WTO issues, AGOA implementation, private

sector development, and other trade topics. The Botswana Hub was launched in June 2002; the Kenya

Hub began operations in October 2002; and the Ghana Hub is to open in early 2003. USTR and USAID

also worked with the WTO on a U.S.-sponsored regional workshop on agriculture and services held in

Accra, Ghana in August 2002, which was attended by representatives of 13 West and Central African

countries. A similar workshop for Southern and Eastern African countries will be held in Johannesburg,

South Africa in February 2003. These efforts build on a solid track record of delivering trade capacity

assistance to developing countries in sub-Saharan Africa and beyond. In FY 2002, the United States

invested $105 million to trade capacity building programs in sub-Saharan Africa, a 65 percent increase

over FY 2001. From FY 1999 through FY 2002, the United States provided a total of $345 million in

trade capacity building programs in the region. 

b. FTA Negotiations

Trade capacity building technical assistance will be a fundamental element of bilateral cooperation in

support of an FTA with SACU. Through the U.S. Agency for International Development, the United
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States has identified initial funding to help the SACU countries prepare for and participate in the

negotiations, implement commitments, and take advantage of trade opportunities. This effort will build

on the longstanding U.S. commitment to trade capacity building in southern Africa and across the

developing world. 

B. Congressional Affairs

In 2002, the Administration worked closely with the 107th Congress to complete action on critical trade

legislation.

In May, the Senate considered and passed legislation to provide Trade Promotion Authority, thereby

enabling the President to effectively negotiate trade agreements that best serve America’s farmers,

workers, businesses and consumers. In July, the House and Senate passed the conference report

accompanying the Trade Act of 2002 which included Trade Promotion Authority. The legislation was

sent to the President and signed into law in August.

The Trade Act of 2002 included other important legislative items in addition to Trade Promotion

Authority:

• The Andean Trade Preference Act was expanded and reauthorized through 2008; 

• The Africa Growth and Opportunity Act was amended to extend benefits to certain apparel

products; and, 

• The Generalized System of Preferences was reauthorized through 2006.

USTR consulted closely with Congress as final agreements were reached regarding the US-Chile Free

Trade Agreement and the US-Singapore Free Trade Agreement. 

USTR consulted closely with Congress on the Administration’s intent to initiate negotiations regarding

three new Free Trade Agreements: US-Central America Free Trade Agreement, US-Southern Africa

Customs Union (SACU) Free Trade Agreement, and US-Australia Free Trade Agreement.

USTR also consulted closely with Congress regarding ongoing negotiations regarding the WTO Doha

Agenda and the Free Trade Area of the Americas.

USTR consulted closely with Congress regarding a number of trade-related issues, including Steel 201

investigation, Canadian softwood lumber, Foreign Sales Corporation, conflict diamonds, China WTO

accession and compliance with WTO rulings regarding the 1916 Act and Irish Music Licensing. 

USTR also developed guidelines to assure the timely exchange of information with the newly created 

Congressional Oversight Group. 

C. Private Sector Advisory System and Intergovernmental Affairs

USTR’s Office of Intergovernmental Affairs and Public Liaison (IAPL) administers the federal trade

advisory committee system and provides outreach to, and facilitates dialogue with, state and local 

governments, the business and agricultural communities, labor, environmental, consumer, and other

domestic groups on trade policy issues.
255

First, the advisory committee system, established by the U.S. Congress in 1974, falls under the auspices of

IAPL. The advisory committee system was created to ensure that U.S. trade policy and trade negotiating

objectives adequately reflect U.S. public and private sector interests. The advisory committee system

consists of 33 advisory committees, with a total membership of up to 1,000 advisors. It is managed by

IAPL, often in cooperation with other agencies including the Departments of Agriculture, Commerce,

Defense, and Labor, and the Environmental Protection Agency.

Second, IAPL also has been designated as the NAFTA and WTO State Coordinator. As such, the office

serves as the liaison to all state and local governments on the implementation of the NAFTA and the

WTO, and other trade issues of interest.

Finally, IAPL also coordinates USTR’s outreach to the public and private sector through notification of

USTR Federal Register Notices soliciting written comments from the public, consulting with and briefing

interested constituencies, holding public hearings, and meeting frequently with a broad spectrum of

groups at their request.

1. The Advisory Committee System

The advisory committees provide information and advice with respect to U.S. negotiating objectives and

bargaining positions before entering into trade agreements, on the operation of any trade agreement once

entered into, and on other matters arising in connection with the development, implementation, and

administration of U.S. trade policy.

The system consists of 33 advisory committees, with a total membership of up to 1,000 advisors. 

(Currently, there are approximately 700 advisors). Recommendations for candidates for committee

membership are collected from a number of sources including Members of Congress, associations and

organizations, publications, other federal agencies, and individuals who have demonstrated an interest or

expertise in U.S. trade policy. Membership selection is based on qualifications, geography, and the needs

of the specific committee. Members pay for their own travel and other related expenses.

The system is arranged in three tiers: the President’s Advisory Committee for Trade Policy and

Negotiations (ACTPN); six policy advisory committees; and 26 technical, sectoral, and functional

advisory committees. Additional information can be found on the USTR website

(http://www.ustr.gov/outreach/advise.shtml).

Private sector advice is both a critical and integral part of the trade policy process. USTR already

maintains an ongoing dialogue with interested private sector parties on trade agenda issues. The advisory

committee system is unique, however, since the committees meet on a regular basis, and receive sensitive

information about ongoing trade negotiations and other trade policy issues and developments. Committee

members are required to have a security clearance.

a. President’s Advisory Committee on Trade Policy and Negotiations

The President’s Advisory Committee for Trade Policy and Negotiations (ACTPN) consists of no more

than 45 members broadly representative of key economic sectors affected by trade. The President

appoints ACTPN members for two-year renewable terms. The 1974 Trade Act requires that membership

broadly represent key economic sectors affected by trade. The ACTPN is the highest tier committee in the

system that examines U.S. trade policy and agreements from the broad context of the overall national

interest.
256

b. Policy Advisory Committees

At the second tier, the members of the six policy advisory committees are appointed by the USTR alone or

in conjunction with other Cabinet officers. Those managed solely by USTR are the Intergovernmental

Policy Advisory Committee (IGPAC) and the Trade Advisory Committee on Africa (TACA). Those

policy advisory committees managed jointly with the Departments of Agriculture, Labor, and the

Environmental Protection Agency are, respectively, the Agricultural Policy Advisory Committee (APAC),

Labor Policy Advisory Committee (LAC), and Trade and Environment Policy Advisory Committee

(TEPAC). Members serve two-year renewable terms or until the committee’s charter expires. Each

committee provides advice based upon the perspective of its specific area.

c. Sectoral, Functional and Technical Committees

At the third tier, the 26 sectoral, functional, and technical advisory committees are organized in two areas:

industry and agriculture. Representatives are appointed jointly by the USTR and the Secretaries of

Commerce and Agriculture, respectively. Each sectoral or technical committee represents a specific

sector or commodity group (such as textiles, or grains and oilseeds) and provides specific technical advice

concerning the effect that trade policy decisions may have on its sector. Presently, there are five

agricultural technical committees co-chaired by USTR and Agriculture. There are 17 industry sector

committees co-chaired by USTR and Commerce. The four functional advisory committees, co-chaired by

USTR and Commerce, provide cross-sectoral advice on customs, standards, intellectual property issues,

and electronic commerce.

2. State and Local Government Relations

With the passage of the NAFTA in 1993, and the Uruguay Round Agreements Act in 1994, which

implements WTO obligations in the United States, the United States created expanded consultative

procedures between federal trade officials and state and local governments. Under both agreements,

USTR’s Office of IAPL is designated as the “Coordinator for State Matters.” IAPL carries out the

functions of informing the states on an ongoing basis of trade-related matters that directly relate to or that

may have a direct effect on them. IAPL also serves as a liaison point in the Executive Branch for state

and local governments and federal agencies to transmit information to interested state and local

governments, and relay advice and information from the states on trade-related matters. This is

accomplished through a number of mechanisms:

a. State Point of Contact System

For day-to-day communications, USTR created a State Single Point of Contact (SPOC) system. The

Governor’s office in each State designates a single contact point to disseminate information received from

USTR to relevant state and local offices, and assist in relaying specific information and advice from the

states to USTR on trade-related matters. The SPOC network ensures that state governments are promptly

informed of Administration trade initiatives so their companies and workers may take full advantage of 

increased foreign market access and reduced trade barriers. It also enables USTR to consult with states

and localities directly on trade matters which affect them. SPOCs regularly receive USTR press releases,

Federal Register notices, and other pertinent information.
257

b. Intergovernmental Policy Advisory Committee

For advice from states and localities on trade policy matters, USTR has established an Intergovernmental

Policy Advisory Committee on Trade (IGPAC). It is one of the six policy advisory committees discussed

above. The IGPAC is comprised entirely of state and local officials. Appointed on a bipartisan basis, the

committee makes recommendations to the Trade Representative and the Administration on trade policy

matters. IGPAC’s membership includes governors, mayors, state legislators, attorneys general, and

county officials. The IGPAC also meets at the staff liaisons level, and includes representatives from the

National Governors’ Association (NGA), National Conference of State Legislatures (NCSL), National

Association of Attorneys General (NAAG), Council of State Governments (CSG), National Association of

Counties (NACo), and National League of Cities (NLC). In 2002, IGPAC was briefed and consulted on

trade priorities of interest to states and localities, including Trade Promotion Authority; government

procurement, services, and investment issues in the WTO, FTAA, Chile FTA, and Singapore FTA

negotiations. 

c. Meetings of State and Local Associations

USTR officials participate frequently in meetings of state and local government associations to apprise

them of relevant trade policy issues and solicit their views. Associations include the National Governors’

Association (NGA), Western Governors’ Association (WGA), National Conference of State Legislatures

(NCSL), Council of State Governments (CSG), National Association of Counties (NACo), U.S.

Conference of Mayors (USCM), National League of Cities (NLC), and other associations. 

d. Consultations Regarding Specific Trade Issues

USTR initiates consultations with particular states and localities on issues arising under the WTO and

NAFTA agreements, and frequently responds to requests for information from state and local

governments. Topics of interest included the WTO Government Procurement Agreement; WTO services

issues; Free Trade Area of the Americas, Chile FTA and Singapore FTA negotiations; NAFTA investment

issues, NAFTA transportation issues, and agricultural trade with Canada, Mexico, and others.

3. Public and Private Sector Outreach

It is important to recognize that the advisory committee system is but one of a variety of mechanisms

through which the Administration obtains advice from interested groups and organizations on the

development of U.S. trade policy. In formulating specific U.S. objectives in major trade negotiations,

USTR also routinely solicits written comments from the public via Federal Register notices, consults with

and briefs interested constituencies, holds public hearings, and meets with a broad spectrum of private

sector and non-governmental groups.

a. 2002 Outreach Efforts

The 2002 trade agenda provided many opportunities for USTR to conduct outreach to, and consultations

with, diverse trade policy stakeholders including the advisory committees, state and local governments,

private sector and non-governmental groups.
258

i. Trade Promotion Authority

In 2002, USTR conducted outreach to advisory committees, business and agricultural communities,

environmental, consumer, and labor organizations, Hispanic groups, and state and local associations and

representatives regarding Trade Promotion Authority. IAPL assisted in the preparation of fact sheets and

materials on TPA for broad dissemination to the public, highlighting the economic impact and benefits of

TPA and increased trade for individual states and economic sectors.

ii. World Trade Organization

Throughout 2002, IAPL worked on public outreach related to multilateral trade negotiations launched in

2001 at the WTO Ministerial in Doha, Qatar. This included the solicitation of comments from the public

on important WTO issues such as services, agriculture, and market access negotiations. 

iii. Free Trade Area of the Americas

USTR briefed and facilitated consultations with advisory committees and other stakeholders on the FTAA

agenda leading up to the FTAA Ministerial in Quito, and subsequent meetings of the Trade Negotiations

Committee. USTR organized public briefings in advance of the Ministerial, and conducted several taped

webcasts with daily updates from the negotiating site in Quito. In addition, USTR officials met with

representatives of business and civil society groups in Quito, and participated in discussions with them on

issues under review at the Ministerial. USTR facilitated the public dissemination of the draft text of the 

FTAA on its website on the same day the Ministerial concluded, continuing a precedent set by Ministers

at the FTAA meeting in Buenos Aires in 2001. USTR also participated in a first-ever civil society forum

on the FTAA in Merida, Mexico, took note of recommendations made by the Americas Business Forum in

Quito, met with and received recommendations from civil society groups in Quito, issued invitations for

public comment from the FTAA civil society committee, and briefed advisors and the public regarding the

ongoing negotiations.

iv. China Accession to the WTO 

USTR briefed and facilitated consultations with advisory committees and other stakeholders on issues

related to China’s implementation of its WTO obligations.

v. Bilateral Trade Agreements

USTR briefed and facilitated consultations with advisory committees and other stakeholders on

Congressional approval of the U.S.-Jordan FTA, the U.S.-Vietnam bilateral trade agreement, and on the

negotiations to conclude free trade agreements with Singapore and Chile. This included daily

teleconference briefings on the progress of bilateral negotiations with Chile, issuing public fact sheets on

the agreements with Chile and Singapore, and making materials widely available on the USTR website. 

vi. Monitoring and Compliance Activities

USTR briefed and facilitated consultations with advisors and other stakeholders on disputes including the

European Community beef hormones import restrictions; the case brought by the EU against the U.S.

Foreign Sales Corporation; and other items. Other issues of interest to advisors and domestic groups

included the protection of U.S. intellectual property rights; agriculture and biotechnology issues.
259

vii. Sectoral Initiatives

USTR, in coordination with other federal agencies, facilitated briefings and consultations with advisors

and other stakeholders on the Bush Administration’s Multilateral Steel Initiative.

viii. Public Trade Education

USTR continues its efforts to promote and educate the public on trade issues. USTR has participated in

education efforts regarding the range of trade activities and benefits through speeches, publications, and

briefings. In 2002, USTR launched a new e-mail service, called Trade Facts, to update interested parties

on important U.S. trade initiatives. This service provides USTR press releases, fact sheets and

background information to advisors and to the general public. USTR’s Internet homepage serves as a

vehicle to communicate to the public. USTR continued to use recorded webcasts to update the public

from the FTAA Ministerial in Quito, Ecuador, and used teleconference briefings for updates on other

negotiations. During 2002, IAPL assisted in efforts to extensively revise the USTR website, including

improving the organization of the website and adding buttons and links to make the site more userfriendly. The USTR internet address is http://www.ustr.gov.

b. Improving the Advisory Committee System

In 2002, the General Accounting Office completed a review of the trade advisory committee system. The

report found that the system makes important contributions to U.S. trade policy formulation, and that

advisors had a high level of satisfaction with the system. The report did include a number of

recommendations to make this system more effective. In response, USTR convened an inter-agency

working group to make a number of improvements to the system, which will be implemented in 2003. 

These include:

• New procedures and guidelines to ensure that advisory committee input is sought on a continual

and timely basis;

• Taking steps to make consultations with advisory committees more meaningful;

• Additional steps to make sure that committee advice is considered and that committees receive

substantive feedback on how agencies respond to their advice;

• Specific steps to increase outreach efforts to fill gaps in committee composition and membership;

• Streamlining the appointment and nomination process;

• Providing sufficient technological resources, and using new technologies, to improve outreach to

advisors; and

• Launching an assessment to update the committee system to make it more relevant to the current

structure of the U.S. economy.

D. Policy Coordination

USTR leads the Executive Branch in the development of policy on trade and trade-related investment. 

Under the Trade Expansion Act of 1962, the Congress established an interagency trade policy mechanism
260

to assist with the implementation of these responsibilities. This organization, as it has evolved, consists of

three tiers of committees that constitute the principal mechanism for developing and coordinating U.S.

Government positions on international trade and trade-related investment issues. 

The Trade Policy Review Group (TPRG) and the Trade Policy Staff Committee (TPSC), administered and

chaired by USTR, are the subcabinet interagency trade policy coordination groups that are central to this

process. The TPSC is the first line operating group, with representation at the senior civil servant level. 

Supporting the TPSC are more than 80 subcommittees responsible for specialized areas. The TPSC

regularly seeks advice from the public on its policy decisions and negotiations through Federal Register

notices and public hearings. In the past year, the TPSC held nine public hearings on the following

proposals: U.S.-Singapore Free Trade Agreement (April 1,2002); Free Trade Area of the Americas

(September 9-10, 2002); China’s Compliance with WTO Commitments (September 18, 2002); WTO

Market Access offers including industrial goods (October 21, 2002), Agriculture (October 24, 2002) and

Services (November 6, 2002); U.S.- Central America Free Trade Agreement (November 19, 2002); U.S.-

Morocco Free Trade Agreement (November 21, 2002); and a Free Trade Agreement between the United

States and the Southern African Customs Union (December 16, 2002). The transcripts of these hearings

are available on www.ustr.gov/outreach/transcripts/index.htm

Through the interagency process, USTR assigns responsibility for issue analysis to members of the

appropriate TPSC subcommittee or task force. Conclusions and recommendations of this group are then

presented to the full TPSC and serve as the basis for reaching interagency consensus. If agreement is not

reached in the TPSC, or if particularly significant policy questions are being considered, issues are

referred by the TPRG (Deputy USTR/Under Secretary level). 

Member agencies of the TPSC and the TPRG consist of the Departments of Commerce, Agriculture,

State, Treasury, Labor, Justice, Defense, Interior, Transportation, Energy, and Health and Human

Services, the Environmental Protection Agency, the Office of Management and Budget, the Council of

Economic Advisers, the Council on Environmental Quality, the International Development Cooperation

Agency, the National Economic Council, and the National Security Council. The United States

International Trade Commission is a non-voting member of the TPSC and an observer at TPRG meetings. 

Representatives of other agencies also may be invited to attend meetings depending on the specific issues

discussed. 

The final tier of the interagency trade policy mechanism is the joint National Security/National Economic

Council, composed of members of the Cabinet. The NSC/NEC Deputies Committee considers decision

memoranda from the TPRG, usually in preparation for Cabinet-level deliberation. 

During the interagency review stage, advice is sought from the private sector advisory committees, the

public and from Congress. Also, while virtually all issues are developed and formulated through the

interagency process, USTR advice, in some cases, may differ from that of the interagency committees.

Once policy decisions are made, USTR assumes responsibility for directing the implementation of those

decisions. Where desirable or appropriate, USTR may delegate the responsibility for implementation to

other agencies.
1

 Earnings on foreign investment are considered trade because they are conceptually the payment made to foreign

residents for the service rendered by the use of foreign capital. Beyond the overview section, however, this chapter

deals with goods and services trade, excluding foreign investment earnings. All trade values are nominal unless

otherwise indicated.

2

 In this Chapter, 2002 is estimated based on partial year data (January-November).

3

 Goods trade excluding intra-EU trade.

4

 Trade in goods and services alone has increased 21-fold since 1970 and 55 percent since 1994. 

1

U.S. Trade in 2002

I. 2002 Overview

U.S. trade (exports and imports of goods and services, and the receipt and payment of earnings on foreign

investment)1 declined by 4 percent in 2002 to a value of approximately $2.9 trillion.2 This was the second

consecutive annual decline in trade (down 8.5 percent in 2001). Prior to 2001, 1982 marked the last year

where trade declined (down 3 percent). The decline in trade in 2002 largely reflected the slower growth

of the U.S. economy and a slowdown in a number of trade partners’ economies. U.S. trade of goods and

services and U.S. trade of goods alone exhibited similar declines, down 1 percent and 3 percent

respectively. U.S. trade in services, however, increased, up 5 percent in the past year. Exports of goods

and services, and earnings on investment declined by 7 percent, and imports of goods and services, and

payments on investment declined by 1 percent in 2002. 

Despite the trade decline in 2002, the United States remained the largest trading nation in the world for

both exports and imports of goods and services. The United States accounts for roughly 20 percent of

world goods trade and for roughly 16 percent of world services trade.3 The value of trade has increased

22-fold since 1970, and 54 percent since 1994, the year before the start of the Uruguay Round

implementation (figure 1).4 U.S. trade expansion was more rapid in the 1970-2002 period than the

growth of the overall U.S. economy, in both nominal and real terms. In nominal terms, trade has grown

at an annual average rate of 10.1 percent per year since 1970, compared to U.S. gross domestic product

(GDP) whose average annual growth over the same period was 7.4 percent. In real terms, the average

annual growth in trade was double the pace of GDP growth, 6.2 percent versus 3.1 percent. 
2

 Total exports + imports

 Source: U.S. Department of Commerce.

The value of trade in goods and services, including earnings and payments on investment, was 28 percent

of the value of U.S. GDP in 2002 (figure 2). This represented a decline from the corresponding figure in

2001 (30 percent) and from its high point in 2000 (34 percent) but was still above the ratio in 1994 (27

percent), and 1970 (13 percent). For goods and services, excluding investment earnings and payments,

U.S. trade represented 22.9 percent of the value of GDP in 2002, down from 24 percent in 2001 and from

its high of 26 percent in 2000, but still up from 22 percent in 1994, and 11 percent in 1970. 

This growth in trade has occurred in both U.S. exports and imports. U.S. exports of goods and services

(including investment earnings) in 2002 are 18-fold greater than 1970 and 38 percent greater than 1994. 

U.S. imports of goods and services are 27-fold greater than 1970 and 70 percent greater than 1994. 

With the value of U.S. exports declining more than imports, the total deficit on goods and services trade

(excluding earnings and payments on foreign investment) increased by approximately $65 billion from

$358 billion in 2001 (3.6 percent of GDP) to $423 billion in 2002 (4.1 percent of GDP). The U.S. deficit

in goods trade alone increased by $43 billion from $427 billion in 2001 (4.2 percent of GDP) to $470

billion in 2002 (4.5% of GDP). The services trade surplus declined from $69 billion in 2001 (0.7 percent

of GDP) to $47 billion in 2002 (0.5 percent of GDP). 
3

 Total exports + imports as a percentage of the value of U.S. GDP

 Source: U.S. Department of Commerce.

 

II. Goods Trade

A. Export Growth

U.S. goods exports decreased by 5 percent in 2002, as compared to the 7 percent decrease in the

preceding year. Manufacturing exports accounted for 88 percent of total goods exports, high technology

exports, a subset of manufacturing exports, accounted for 26 percent. Agriculture exports accounted for

8 percent of total goods exports (table 1). 

Except for autos and auto parts, the value of each major end-use category for goods exports declined in

2002, with the largest decline in capital goods, down 10 percent. Since 1994, exports of capital goods

and consumer goods have each risen roughly 40 percent, and autos and auto parts have increased 36

percent. Manufacturing exports, of which capital goods and high technology products are

subcomponents, increased 40 percent since 1994 and this growth was more pronounced in advanced

technology products, which increased 47 percent over the period. 
4

Table 1:

U.S. Goods Exports

Exports:

1999 2000 2001 2002* 01-02* 94-02*

Billions of Dollars Percent Change

Total (BOP basis) 684.0 772.0 718.8 680.1 -5.4 35.2

 Food, feeds, and beverages 46.0 47.9 49.4 49.2 -0.5 17.2

 Industrial supplies and materials 147.5 172.6 160.1 155.4 -2.9 28.0

 Capital goods, except autos 310.8 356.9 321.7 290.4 -9.7 41.7

 Autos and auto parts 75.3 80.4 75.4 78.4 3.9 35.7

 Consumer goods 80.9 89.4 88.3 84.4 -4.4 40.8

 Other 35.3 34.8 34.1 33.3 -2.4 25.7

 Addendum: Agriculture 48.2 52.0 55.2 54.3 -1.6 17.3

 Addendum: Manufacturing 611.8 689.5 640.2 604.0 -5.7 40.1

 Addendum: High technology 200.3 227.4 199.6 177.9 -10.9 47.3

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Balance of Payments Basis for Total, Census Basis for

Sectors.
5

* Annualized based on January-November 2002 data

Source: U.S. Department of Commerce, Census Basis.

Table 2:

U.S. Goods Exports to Selected Countries/Regions

Exports to:

1999 2000 2001 2002* 01-02* 94-02*

Billions of Dollars Percent Change

Canada 166.6 178.9 163.4 159.7 -2.3 39.6

European Union 151.8 165.1 158.8 143.5 -9.6 33.1

Japan 57.5 64.9 57.5 51.2 -11.0 -4.4

Mexico 86.9 111.3 101.3 97.2 -4.1 91.1

China 13.1 16.2 19.2 22.2 15.5 138.6

Pacific Rim, except Japan and China 103.2 121.5 104.8 104.7 -0.1 23.1

Latin America, except Mexico 55.2 59.3 58.2 51.3 -11.7 23.1

Addendum: High Income Countries 406.3 442.9 411.6 384.6 -6.6 28.4
6

Addendum: Low to Middle Income

 Countries

289.1 338.7 317.3 305.2 -3.8 43.4

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Census Basis.

Exports of agricultural products have increased 17 percent since 1994. Of the $177 billion increase in

goods exports since 1994, capital goods accounted for 48 percent of the increase, industrial materials and

supplies accounted for 19 percent and consumer goods accounted for 14 percent.

U.S. goods exports declined to nearly all major markets in 2002 (table 2). Of the top 25 country export

markets, exports to six markets increased: Australia (up 19 percent), Malaysia (up 14 percent), China (up

15 percent), Taiwan (up 1 percent), South Korea (up 0.6 percent), and Italy (up 0.5 percent). U.S.

exports declined 7 percent to high income countries and 4 percent to middle and low income countries. 

Since 1994, U.S. goods exports to low and middle income countries exhibited higher growth than that to

high income countries, 43 percent compared to 28 percent. However, excluding Mexico and China, U.S.

goods exports to middle and low income countries grew by just 22 percent. 

Goods exports to China continued to increase in 2002, up 16 percent, or $3 billion. Most of the U.S.

export growth to China was in capital goods, which were up 15 percent. Exports of capital goods and

industrial supplies accounted for 86 percent of U.S. exports to China. U.S. exports to China have more

than doubled since 1994.

U.S. exports to Latin America (excluding Mexico) were down 12 percent in 2002 or nearly $7 billion. 

U.S. exports to Latin America have increased by 23 percent since 1994.

Exports to our NAFTA partners declined 3 percent in 2002, but have increased 81 percent since 1993,

the year before NAFTA was implemented. Over 37 percent of aggregate U.S. goods exports went to

NAFTA countries in 2002, up from nearly 33 percent in 1993. 

U.S. exports to Canada declined by 2 percent in 2002. Canada is the largest U.S. export market,

accounting for 23 percent of U.S. exports. Growth areas of U.S. exports to Canada include autos and

auto parts (up 10 percent), food and beverages (up 7 percent), and consumer goods (up 2 percent), while

capital goods and industrial supplies exports decreased 13 percent and 3 percent, respectively. Overall,

U.S. exports to Canada are up by nearly 40 percent since 1994.

U.S. exports to Mexico, the second largest single country export market, declined by roughly 5 percent in

2002. Mexico accounted for 14 percent of U.S. exports. The decline in U.S. exports to Mexico marked

the second straight year of declining exports (down 9 percent in 2001). This decline was present

throughout all major categories, most notably capital goods, which declined by 7 percent. Since 1994,

however, U.S. exports to Mexico have increased 91 percent.

Export sales to Japan declined 11 percent in 2002. U.S. exports to Japan have declined in five of the past

six years. Japan continues to be mired in economic stagnation, and GDP for 2002 is estimated to decline

by 0.3 percent after an increase of 0.3 percent in 2001. Accordingly, U.S. exports to Japan are down in
7

all major categories except for autos and auto parts which were up 4 percent. Exports of consumer goods

and capital goods were down 18 percent and 16 percent, respectively. Since 1994, U.S. exports to Japan

are down 4 percent. 

Goods exports from the United States to the Asian Pacific Rim countries (excluding Japan and China)

were relatively flat, declining by 0.1 percent in 2002. Since 1994, U.S. exports to this region increased 23

percent. 

U.S. exports to the European Union were down nearly 10 percent in 2002. Exports grew in autos and

auto parts (up 5 percent) and foods and beverages (up 2 percent), but declined in capital goods (down 16

percent), industrial supplies (down 6 percent), and consumer goods (down 2 percent). In 2002, the EU

accounted for 21 percent of aggregate U.S. exports. Since 1994, U.S. exports to the EU have increased

by 33 percent.

B. Import Growth

U.S. goods imports increased 0.4 percent in 2002, after declining 6 percent in 2001 (table 3 and figure 4).

Manufacturing imports, accounting for 84 percent of total goods imports, increased 
8

Table 3:

U.S. Goods Imports

Imports:

1999 2000 2001 2002* 01-02* 94-02*

Billions of Dollars Percent Change

Total (BOP Basis) 1,030.

0

1,224.

4

1,145.

9

1,150.

4

0.4 72.0

 Food, feeds, and beverages 43.6 46.0 46.6 49.2 5.6 59.0

 Industrial supplies and materials 221.4 299.0 273.9 262.3 -4.2 61.8

 Capital goods, except autos 295.7 347.0 298.0 280.5 -5.9 52.1

 Autos and auto parts 179.0 195.9 189.8 202.8 6.9 71.5

 Consumer goods 241.9 281.8 284.3 303.3 6.7 107.3

 Other 43.0 48.3 48.4 49.3 1.9 131.9

 Addendum: Agriculture 36.7 39.2 39.5 41.6 5.1 60.2

 Addendum: Manufacturing 882.7 1,013.

5

950.7 963.3 1.3 72.9

 Addendum: High technology 181.2 222.1 195.2 193.6 -0.8 97.3

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Balance of Payments Basis for Total, Census Basis

for Sectors.
9

 * Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Census Basis.

Table 4:

U.S. Goods Imports from Selected Countries/Regions

Imports from:

1999 2000 2001 2002* 01-02* 94-02*

Billions of Dollars Percent Change

Canada 198.7 230.8 216.3 208.5 -3.6 62.4

European Union 195.2 220.0 220.1 222.1 0.9 85.9

Japan 130.9 146.5 126.5 119.0 -5.9 -0.2

Mexico 109.7 135.9 131.3 134.1 2.1 171.0

China 81.8 100.0 102.3 122.4 19.7 215.5

Pacific Rim, except Japan and China 147.1 171.5 147.3 145.2 -1.4 40.7

Latin America, except Mexico 58.5 73.3 67.4 68.4 1.5 77.8

Addendum: High Income Countries 552.8 630.7 595.3 581.7 -2.3 51.1
10

Addendum: Low to Middle Income

 Countries

471.9 587.3 545.7 563.9 3.3 102.6

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Census Basis.

slightly (1 percent) in 2002. High technology imports, a subset of manufacturing imports, declined by 1

percent in 2002. However, agriculture imports, accounting for 4 percent of total goods imports,

increased by 5 percent in 2002.

Considering goods imports in terms of major end use categories, capital goods and industrial supplies

imports were down roughly 6 percent and 4 percent, respectively, in 2002. Imports from the remaining

categories increased, including foods, feeds and beverages (up 6 percent), autos and auto parts (up 7

percent), consumer goods (up 7 percent) and other goods (up 2 percent). Consumer goods, capital goods

and industrial supplies accounted for 74 percent of U.S. imports in 2002. 

Since 1994, U.S. imports of consumer goods have more than doubled, while imports of autos and auto

parts, industrial supplies and materials, and capital goods have increased 72 percent, 62 percent, and 52

percent, respectively. In terms of high technology, overall manufacturing, and agriculture, imports have

increased by 97 percent, 73 percent, and 60 percent, respectively. Increases in manufacturing imports

accounted for a large share (84 percent) of the $482 billion increase in goods imports since 1994, with 32

percent of the increase attributed to consumer goods. 

On a regional basis, U.S. goods imports increased from China, Mexico, Latin America (excluding

Mexico) and the European Union, and declined from Canada, Japan, and Pacific Rim (excluding Japan

and China) (table 4). The larger changes in U.S. imports were from Japan (down 6 percent) and from

China (up 20 percent). Since 1994, the share of U.S. imports from low and middle income countries has

increased from 42 percent to 49 percent. These figures largely reflect imports from Mexico and China,

and excluding these countries, the share of U.S. imports from low and middle income countries actually

fell slightly from 29 percent to 27 percent. 

U.S. goods imports from the European Union, accounting for 19 percent of total U.S. imports, increased

by 1 percent in 2002. Increasing import categories included foods, feed and beverages (up 10 percent),

consumer goods (up 9 percent), and autos and auto parts (up 11 percent). Imports of capital goods

declined 10 percent. Imports from the EU have increased 86 percent since 1994.

Imports from our NAFTA partners declined 1 percent in 2002, but are up 127 percent since 1993, the

year prior to the implementation of NAFTA. NAFTA imports accounted for 30 percent of aggregate

U.S. goods imports in 2002, up from 27 percent in 1994. 

U.S. imports from Canada, the largest single country supplier of goods to the United States, accounting

for 18 percent of U.S. imports, declined by 4 percent in 2002 (the second consecutive annual decline

after a 6 percent decline in 2001). This decline was driven by a decrease in U.S. imports of capital goods

and industrial supplies, down 14 percent and 9 percent, respectively. However, imports of foods, feeds,
11

and beverages, and autos and auto parts were up 4 percent, and consumer goods imports were up 2

percent. U.S. imports from Canada have grown by 62 percent since 1994.

U.S. imports from Mexico, the second largest single country supplier of goods to the United States,

accounting for nearly 12 percent of U.S. imports, increased by 2 percent in 2002. U.S. imports of capital

goods declined by 3 percent in 2002, while imports of industrial supplies and autos and auto parts

increased 12 percent and 4 percent, respectively. Since 1994, U.S. imports from Mexico have grown 171

percent.

Imports from Japan declined 6 percent in 2002, and by 0.2 percent since 1994. Overall, Japan accounted

for a smaller share of U.S. goods imports in 2002 compared to 1994 (10 percent compared to 18 percent). 

U.S. imports from Japan declined in nearly all of the major end use categories in 2002: down 18 percent

in capital goods, 7 percent in industrial supplies, and 6 percent in consumer goods. The two categories

that exhibited growth in imports included autos and auto parts and food and beverages, up 8 percent and

3 percent, respectively. 

U.S. imports from China increased by 20 percent in 2002 and 216 percent since 1994. Eleven percent of

U.S. imports were sourced from China in 2002, up from 6 percent in 1994. U.S. imports from China are

primarily low value-added consumer goods, such as toys, footwear, apparel and some areas of consumer

electronics. Consumer goods made up 64 percent of U.S. imports from China in 2002. 

Imports from Latin America (excluding Mexico) remained relatively flat in 2002 (up 1.5 percent) and

increased 78 percent since 1994. Imports from the Pacific Rim (excluding Japan and China) also

remained relatively flat in 2002 (down 1 percent), but increased 41 percent since 1994. 

III. Services Trade

A. Export Growth

U.S. exports of services grew by 3 percent in 2002, and are up 43 percent since 1994. U.S. services

exports accounted for 30 percent of the level of U.S. goods and services exports in 2002, compared to 29

percent in 1994. 

The growth in U.S. services exports in 2002 was driven by the other private services category and

royalties and licensing fees, up $9.7 billion and $4.4 billion. Other private services and royalties and

licensing fees accounted for 41 percent and 15 percent, respectively, of total U.S. services exports, and

increased 9 percent and 11 percent, respectively, from the previous year. All other major services

categories exports declined.
12

Table 5:

U.S. Services Exports

Exports:

1999 2000 2001 2002* 01-02* 94-02*

Billions of Dollars Percent Change

Total (BOP basis) 273.2 292.2 279.3 287.7 3.0 43.1

 Travel 74.7 82.3 73.1 69.0 -5.6 18.1

 Passenger Fares 19.8 20.8 18.0 17.1 -5.2 0.4

 Other Transportation 26.9 30.1 28.3 28.0 -1.2 17.7

 Royalties and Licensing Fees 36.9 39.6 38.7 43.1 11.4 61.2

 Other Private Services 98.2 104.7 108.1 117.8 9.0 91.7

 Transfers under U.S. Military

 Sales Contracts

15.8 14.0 12.2 12.1 -1.0 -5.4

 U.S. Government Miscellaneous

 Services

0.9 0.8 0.8 0.8 -5.5 -11.4

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Balance of Payments Basis.
13

* Annualized based on January-November 2000 data

 Source: U.S. Department of Commerce, Balance of Payments Basis.

Since 1994, nearly all of the major services export categories have grown. Export growth has been led

by the other private services category (up 92 percent) and the royalties and licensing fees category (up 61

percent). The travel and other transportation categories each were up 18 percent. Of the $86.7 billion

increase in U.S. services exports between 1994 and 2002, the other private services category accounted

for 65 percent of the increase, the royalties and licensing fees category accounted for 19 percent of the

increase, and the travel services category accounted for 12 percent of the increase. 

Detailed sectoral breakdowns for exports of the other private services category are available only through

2001. In 2001, other private services exports totaled $108 billion. Of this, U.S. exports to business

related parties (to a foreign parent or affiliate) accounted for $36 billion, or 34 percent of total other

private services exports. For the remaining exports of other private services to unaffiliated parties, the

values of exports in 2001 were: business, professional and technical services, $26 billion; financial

services, $15 billion; education, $11 billion; insurance premiums, $9 billion; and telecommunications, $5

billion. 

Japan was the largest purchaser of U.S. private services exports in 2001, accounting for 12 percent of

total U.S. private services exports. The top 5 purchasers of U.S. services exports in 2001 were: Japan

($31 billion), the United Kingdom ($29 billion), Canada ($24 billion), Germany ($15 billion), and

Mexico ($15 billion).

Regionally, in 2001, the United States exported $73 billion to the Asia/Pacific Region ($43 billion

excluding Japan), $86 billion to the EU, $39 billion to NAFTA countries, and $26 billion to Latin

America (excluding Mexico).
14

B. Import Growth

Services imports by the United States increased in 2002 by 14 percent to $240 billion (table 6, figure 6). 

While services import growth was greater than export growth in 2002 (14 percent compared to 3 percent)

the United States remained a net exporter of services. Growth in U.S. imports of services in 2002 was

led by the other private services category (up 49 percent). The increase in this category accounted for

nearly 90 percent of the growth in services imports in 2002. 

The three of the six major services import categories that declined in 2002 were travel (down 3 percent),

passenger fares (down 8 percent), and other transportation (down 2 percent). Services imports grew 82

percent or $109 billion, since 1994. Since 1994, import of royalties and licensing fees were up 246

percent and other private services were up 167 percent. The other private services category accounted

for 48 percent of the increase, and the travel and royalties and licensing fees categories each accounted

for roughly 13 percent of the increase.
15

*Annualized based on January-November 2002 data

Source: U.S. Department of Commerce, Balance of Payments Basis.

Table 6:

U.S. Services Imports

Imports:

1999 2000 2001 2002* 01-02* 94-02*

Billions of Dollars Percent Change

Total (BOP basis) 189.4 218.5 210.4 240.4 14.3 82.3

 Travel 58.9 64.8 60.1 58.6 -2.5 33.8

 Passenger Fares 21.3 24.3 22.4 20.6 -8.3 57.4

 Other Transportation 34.1 41.6 38.8 38.0 -2.1 46.1

 Royalties and Licensing Fees 12.6 16.1 16.4 20.3 23.9 246.4

 Other Private Services 46.3 55.3 54.6 81.2 48.7 167.1

 Direct Defense Expenditures 13.3 13.6 15.2 19.6 28.7 91.4

 U.S. Government Miscellaneous

 Services

2.8 2.9 2.9 2.9 1.0 13.7

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Balance of Payments Basis.
16

As with exports, detailed sectoral breakdowns for imports of other private services are available only

through 2001. In 2001, other private services imports totaled $55 billion. Of this, U.S. imports from

business related parties (from a foreign parent or affiliate) accounted for $28 billion or 52 percent of total

other private service imports. For the remaining imports of other private services from unaffiliated

parties, the value of imports in 2001 were: insurance premiums, $40 billion; business professional and

technical services, $10 billion; telecommunications, $4 billion; financial services, $4 billion; and

education, $2 billion. 

In the import sector, the United Kingdom remained our largest supplier of private services, providing $23

billion to the United States in 2001. This accounted for 12% of total U.S. imports of private services in

2001. The United States imported $18 billion from Canada, our second largest supplier, and $17 billion

from Japan, our third largest supplier. Mexico and Bermuda were our fourth and fifth largest import

suppliers, each exporting $11 billion worth of services to the U.S., respectively, in 2001.

Regionally, the U.S. imported $66 billion of services from the EU, $49 billion from the Asia/Pacific

region ($32 billion excluding Japan), $29 billion from NAFTA, and $10 billion from Latin America

(excluding Mexico).

IV. The U.S. Trade Deficit

The U.S. goods and services deficit increased by $65 billion in 2002 to a level of $423 billion (table 7). 

The U.S. goods trade deficit alone increased by $43 billion to $470 billion in 2002. The services trade

surplus dropped from $69 billion in 2001 to $47 billion in 2002.

As a share of U.S. GDP, the goods and services trade deficit was 4.1 percent of GDP in 2002, an increase

of 0.5 percentage points from the 3.6 percent level in 2001 (table 8). The goods trade deficit was 4.5

percent of GDP in 2002, up from 4.2 percent in 2001. The services trade surplus was 0.5 percent of GDP

in 2002, down from 0.7 percent in 2001. 

The regional distribution of the goods trade deficit for the past 4 years is shown in table 9.
17

Table 7

U.S. Trade Balances with the World

Balance:

1999 2000 2001 2002*

Billions of Dollars

Goods and Services (BOP Basis) -262.2 -378.7 -358.3 -423.0

Goods (BOP Basis) -346.0 -452.4 -427.2 -470.3

Services (BOP Basis) 83.8 73.7 68.9 47.3

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Balance of Payments Basis for World.

Table 8

U.S. Trade Balances as a share of GDP

Share of GDP:

1999 2000 2001 2002*

Percent

Goods and Services (BOP Basis) -2.8 -3.9 –3.6 -4.1

Goods (BOP Basis) -3.7 -4.6 -4.2 -4.5

Services (BOP Basis) 0.9 0.8 0.7 0.5

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce.
18

Table 9

U.S. Goods Trade Balances with Selected Countries/Regions

Balance:

1999 2000 2001 2002*

Billions of Dollars

Canada -32.1 -51.9 -52.8 -48.8

European Union -43.4 -55.0 -61.3 -78.7

Japan -73.4 -81.6 -69.0 -67.8

Mexico -22.8 -24.6 -30.0 -36.9

China -68.7 -83.8 -83.1 -100.2

Pacific Rim, except Japan and

China

-43.9 -50.0 -42.6 -40.6

Latin America, except Mexico -3.3 -14.1 -9.2 -17.1

Addendum: High Income

Countries

-146.4 -187.8 -183.7 -197.1

Addendum: Low to Middle

Income

 Countries

-182.8 -248.6 -228.5 -258.7

* Annualized based on January-November 2002 data.

Source: U.S. Department of Commerce, Census Basis.
Background Information on the WTO

Doha Development Agenda

Doha Ministerial Declaration ........................................................... 1 

Doha Declaration on the TRIPs Agreement and Public Health ................................ 12 

Doha Declaration on Implementation-Related Issues and Concerns ............................ 14 

Institutional Issues

Membership of the WTO. ............................................................ 23

2002 WTO Budget Contributions ...................................................... 25 

2002 Budget for the WTO Secretariat ................................................... 28 

Waivers Currently in Force ........................................................... 30 

WTO Secretariat Personnel Statistics .................................................... 32 

WTO Accession Application and Status ................................................. 34 

Indicative List of Governmental and Non-Governmental Panelists ............................. 39 

Appellate Body Membership .......................................................... 59 

Where to Find More Information on the WTO ........................................... 62
1

WORLD TRADE

ORGANIZATION

WT/MIN(01)/DEC/1

20 November 2001

(01-5859)

MINISTERIAL CONFERENCE

Fourth Session

Doha, 9 - 14 November 2001

MINISTERIAL DECLARATION

Adopted on 14 November 2001

1. The multilateral trading system embodied in the World Trade Organization has contributed

significantly to economic growth, development and employment throughout the past fifty years. We are

determined, particularly in the light of the global economic slowdown, to maintain the process of reform and

liberalization of trade policies, thus ensuring that the system plays its full part in promoting recovery, growth

and development. We therefore strongly reaffirm the principles and objectives set out in the Marrakesh

Agreement Establishing the World Trade Organization, and pledge to reject the use of protectionism.

2. International trade can play a major role in the promotion of economic development and the

alleviation of poverty. We recognize the need for all our peoples to benefit from the increased opportunities

and welfare gains that the multilateral trading system generates. The majority of WTO Members are

developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted

in this Declaration. Recalling the Preamble to the Marrakesh Agreement, we shall continue to make positive

efforts designed to ensure that developing countries, and especially the least-developed among them, secure

a share in the growth of world trade commensurate with the needs of their economic development. In this

context, enhanced market access, balanced rules, and well targeted, sustainably financed technical assistance

and capacity-building programmes have important roles to play.

3. We recognize the particular vulnerability of the least-developed countries and the special structural

difficulties they face in the global economy. We are committed to addressing the marginalization of leastdeveloped countries in international trade and to improving their effective participation in the multilateral

trading system. We recall the commitments made by Ministers at our meetings in Marrakesh, Singapore and

Geneva, and by the international community at the Third UN Conference on Least-Developed Countries in

Brussels, to help least-developed countries secure beneficial and meaningful integration into the multilateral

trading system and the global economy. We are determined that the WTO will play its part in building

effectively on these commitments under the Work Programme we are establishing.
2

4. We stress our commitment to the WTO as the unique forum for global trade rule-making and

liberalization, while also recognizing that regional trade agreements can play an important role in promoting

the liberalization and expansion of trade and in fostering development.

5. We are aware that the challenges Members face in a rapidly changing international environment

cannot be addressed through measures taken in the trade field alone. We shall continue to work with the

Bretton Woods institutions for greater coherence in global economic policy-making.

6. We strongly reaffirm our commitment to the objective of sustainable development, as stated in the

Preamble to the Marrakesh Agreement. We are convinced that the aims of upholding and safeguarding an

open and non-discriminatory multilateral trading system, and acting for the protection of the environment and

the promotion of sustainable development can and must be mutually supportive. We take note of the efforts

by Members to conduct national environmental assessments of trade policies on a voluntary basis. We

recognize that under WTO rules no country should be prevented from taking measures for the protection of

human, animal or plant life or health, or of the environment at the levels it considers appropriate, subject to

the requirement that they are not applied in a manner which would constitute a means of arbitrary or

unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction

on international trade, and are otherwise in accordance with the provisions of the WTO Agreements. We

welcome the WTO's continued cooperation with UNEP and other inter-governmental environmental

organizations. We encourage efforts to promote cooperation between the WTO and relevant international

environmental and developmental organizations, especially in the lead-up to the World Summit on

Sustainable Development to be held in Johannesburg, South Africa, in September 2002.

7. We reaffirm the right of Members under the General Agreement on Trade in Services to regulate, and

to introduce new regulations on, the supply of services.

8. We reaffirm our declaration made at the Singapore Ministerial Conference regarding internationally

recognized core labour standards. We take note of work under way in the International Labour Organization

(ILO) on the social dimension of globalization.

9. We note with particular satisfaction that this Conference has completed the WTO accession

procedures for China and Chinese Taipei. We also welcome the accession as new Members, since our last

Session, of Albania, Croatia, Georgia, Jordan, Lithuania, Moldova and Oman, and note the extensive marketaccess commitments already made by these countries on accession. These accessions will greatly strengthen

the multilateral trading system, as will those of the 28 countries now negotiating their accession. We

therefore attach great importance to concluding accession proceedings as quickly as possible. In particular,

we are committed to accelerating the accession of least-developed countries.

10. Recognizing the challenges posed by an expanding WTO membership, we confirm our collective

responsibility to ensure internal transparency and the effective participation of all Members. While

emphasizing the intergovernmental character of the organization, we are committed to making the WTO’s

operations more transparent, including through more effective and prompt dissemination of information, and

to improve dialogue with the public. We shall therefore at the national and multilateral levels continue to

promote a better public understanding of the WTO and to communicate the benefits of a liberal, rules-based

multilateral trading system.

11. In view of these considerations, we hereby agree to undertake the broad and balanced Work

Programme set out below. This incorporates both an expanded negotiating agenda and other important

decisions and activities necessary to address the challenges facing the multilateral trading system.
3

WORK PROGRAMME

IMPLEMENTATION-RELATED ISSUES AND CONCERNS

12. We attach the utmost importance to the implementation-related issues and concerns raised by

Members and are determined to find appropriate solutions to them. In this connection, and having regard to

the General Council Decisions of 3 May and 15 December 2000, we further adopt the Decision on

Implementation-Related Issues and Concerns in document WT/MIN(01)/17 to address a number of

implementation problems faced by Members. We agree that negotiations on outstanding implementation

issues shall be an integral part of the Work Programme we are establishing, and that agreements reached at

an early stage in these negotiations shall be treated in accordance with the provisions of paragraph 47 below.

In this regard, we shall proceed as follows: (a) where we provide a specific negotiating mandate in this

Declaration, the relevant implementation issues shall be addressed under that mandate; (b) the other

outstanding implementation issues shall be addressed as a matter of priority by the relevant WTO bodies,

which shall report to the Trade Negotiations Committee, established under paragraph 46 below, by the end

of 2002 for appropriate action.

AGRICULTURE

13. We recognize the work already undertaken in the negotiations initiated in early 2000 under Article

20 of the Agreement on Agriculture, including the large number of negotiating proposals submitted on behalf

of a total of 121 Members. We recall the long-term objective referred to in the Agreement to establish a fair

and market-oriented trading system through a programme of fundamental reform encompassing strengthened

rules and specific commitments on support and protection in order to correct and prevent restrictions and

distortions in world agricultural markets. We reconfirm our commitment to this programme. Building on

the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to

comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view

to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.

We agree that special and differential treatment for developing countries shall be an integral part of all

elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and

as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable

developing countriesto effectively take account of their development needs, including food security and rural

development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by

Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for

in the Agreement on Agriculture.

14. Modalities for the further commitments, including provisions for special and differential treatment,

shall be established no later than 31 March 2003. Participants shall submit their comprehensive draft

Schedules based on these modalities no later than the date of the Fifth Session of the Ministerial Conference.

The negotiations, including with respect to rules and disciplines and related legal texts, shall be concluded

as part and at the date of conclusion of the negotiating agenda as a whole.

SERVICES
4

15. The negotiations on trade in services shall be conducted with a view to promoting the economic

growth of all trading partners and the development of developing and least-developed countries. We

recognize the work already undertaken in the negotiations, initiated in January 2000 under Article XIX of the

General Agreement on Trade in Services, and the large number of proposalssubmitted by Members on a wide

range of sectors and several horizontal issues, as well as on movement of natural persons. We reaffirm the

Guidelines and Procedures for the Negotiations adopted by the Council for Trade in Services on 28 March

2001 as the basis for continuing the negotiations, with a view to achieving the objectives of the General

Agreement on Trade in Services, asstipulated in the Preamble, Article IV and Article XIX of that Agreement.

Participants shall submit initial requests for specific commitments by 30 June 2002 and initial offers by 31

March 2003.

MARKET ACCESS FOR NON-AGRICULTURAL PRODUCTS

16. We agree to negotiations which shall aim, by modalities to be agreed, to reduce or as appropriate

eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as

well as non-tariff barriers, in particular on products of export interest to developing countries. Product

coverage shall be comprehensive and without a priori exclusions. The negotiations shall take fully into

account the special needs and interests of developing and least-developed country participants, including

through less than full reciprocity in reduction commitments, in accordance with the relevant provisions of

Article XXVIII bis of GATT 1994 and the provisions cited in paragraph 50 below. To this end, the modalities

to be agreed will include appropriate studies and capacity-building measures to assist least-developed

countries to participate effectively in the negotiations.

TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS

17. We stressthe importance we attach to implementation and interpretation of the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS Agreement) in a manner supportive of public health,

by promoting both access to existing medicines and research and development into new medicines and, in

this connection, are adopting a separate Declaration.

18. With a view to completing the work started in the Council for Trade-Related Aspects of Intellectual

Property Rights (Council for TRIPS) on the implementation of Article 23.4, we agree to negotiate the

establishment of a multilateral system of notification and registration of geographical indications for wines

and spirits by the Fifth Session of the Ministerial Conference. We note that issues related to the extension

of the protection of geographical indications provided for in Article 23 to products other than wines and

spirits will be addressed in the Council for TRIPS pursuant to paragraph 12 of this Declaration.

19. We instruct the Council for TRIPS, in pursuing its work programme including under the review of

Article 27.3(b), the review of the implementation of the TRIPS Agreement under Article 71.1 and the work

foreseen pursuant to paragraph 12 of this Declaration, to examine, inter alia, the relationship between the

TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and

folklore, and other relevant new developments raised by Members pursuant to Article 71.1. In undertaking

this work, the TRIPS Council shall be guided by the objectives and principles set out in Articles 7 and 8 of

the TRIPS Agreement and shall take fully into account the development dimension.
5

RELATIONSHIP BETWEEN TRADE AND INVESTMENT

20. Recognizing the case for a multilateral framework to secure transparent, stable and predictable

conditions for long-term cross-border investment, particularly foreign direct investment, that will contribute

to the expansion of trade, and the need for enhanced technical assistance and capacity-building in this area

as referred to in paragraph 21, we agree that negotiations will take place after the Fifth Session of the

Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on

modalities of negotiations. 

21. We recognize the needs of developing and least-developed countries for enhanced support for

technical assistance and capacity building in this area, including policy analysis and developmentso that they

may better evaluate the implications of closer multilateral cooperation for their development policies and

objectives, and human and institutional development. To this end, we shall work in cooperation with other

relevant intergovernmental organisations, includingUNCTAD, and through appropriate regional and bilateral

channels, to provide strengthened and adequately resourced assistance to respond to these needs.

22. In the period until the Fifth Session, further work in the Working Group on the Relationship Between

Trade and Investment will focus on the clarification of: scope and definition; transparency; nondiscrimination; modalities for pre-establishment commitments based on a GATS-type, positive list approach;

development provisions; exceptions and balance-of-payments safeguards; consultation and the settlement

of disputes between Members. Any framework should reflect in a balanced manner the interests of home and

host countries, and take due account of the development policies and objectives of host governments as well

as their right to regulate in the public interest. The special development, trade and financial needs of

developing and least-developed countries should be taken into account as an integral part of any framework,

which should enable Membersto undertake obligations and commitments commensurate with theirindividual

needs and circumstances. Due regard should be paid to other relevant WTO provisions. Account should be

taken, as appropriate, of existing bilateral and regional arrangements on investment.

INTERACTION BETWEEN TRADE AND COMPETITION POLICY

23. Recognizing the case for a multilateral framework to enhance the contribution of competition policy

to international trade and development, and the need for enhanced technical assistance and capacity-building

in this area as referred to in paragraph 24, we agree that negotiations will take place after the Fifth Session

of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on

modalities of negotiations.

24. We recognize the needs of developing and least-developed countries for enhanced support for

technical assistance and capacity building in this area, including policy analysis and developmentso that they

may better evaluate the implications of closer multilateral cooperation for their development policies and

objectives, and human and institutional development. To this end, we shall work in cooperation with other

relevant intergovernmental organisations, includingUNCTAD, and through appropriate regional and bilateral

channels, to provide strengthened and adequately resourced assistance to respond to these needs.

25. In the period until the Fifth Session, further work in the Working Group on the Interaction between

Trade and Competition Policy will focus on the clarification of: core principles, including transparency, nondiscrimination and procedural fairness, and provisions on hardcore cartels; modalities for voluntary
6

cooperation; and support for progressive reinforcement of competition institutions in developing countries

through capacity building. Full account shall be taken of the needs of developing and least-developed country

participants and appropriate flexibility provided to address them. 

TRANSPARENCY IN GOVERNMENT PROCUREMENT

26. Recognizing the case for a multilateral agreement on transparency in government procurement and

the need for enhanced technical assistance and capacity building in this area, we agree that negotiations will

take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by

explicit consensus, at that Session on modalities of negotiations. These negotiations will build on the progress

made in the Working Group on Transparency in Government Procurement by that time and take into account

participants' development priorities, especially those of least-developed country participants. Negotiations

shall be limited to the transparency aspects and therefore will not restrict the scope for countries to give

preferences to domestic supplies and suppliers. We commit ourselves to ensuring adequate technical

assistance and support for capacity building both during the negotiations and after their conclusion.

TRADE FACILITATION

27. Recognizing the case for further expediting the movement, release and clearance of goods, including

goods in transit, and the need for enhanced technical assistance and capacity building in this area, we agree

that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision

to be taken, by explicit consensus, at that Session on modalities of negotiations. In the period until the Fifth

Session, the Council for Trade in Goods shall review and as appropriate, clarify and improve relevant aspects

of Articles V, VIII and X of the GATT 1994 and identify the trade facilitation needs and priorities of

Members, in particular developing and least-developed countries. We commit ourselves to ensuring

adequate technical assistance and support for capacity building in this area.

WTO RULES

28. In the light of experience and of the increasing application of these instruments by Members, we

agree to negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation

of Article VI of the GATT 1994 and on Subsidies and Countervailing Measures, while preserving the basic

concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking

into account the needs of developing and least-developed participants. In the initial phase of the negotiations,

participants will indicate the provisions, including disciplines on trade distorting practices, that they seek to

clarify and improve in the subsequent phase. In the context of these negotiations, participants shall also aim

to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this

sector to developing countries. We note that fisheries subsidies are also referred to in paragraph 31.

29. We also agree to negotiations aimed at clarifying and improving disciplines and procedures under

the existing WTO provisions applying to regional trade agreements. The negotiations shall take into account

the developmental aspects of regional trade agreements.
7

DISPUTE SETTLEMENT UNDERSTANDING

30. We agree to negotiations on improvements and clarifications of the Dispute Settlement

Understanding. The negotiations should be based on the work done thus far as well as any additional

proposals by Members, and aim to agree on improvements and clarifications not later than May 2003, at

which time we will take steps to ensure that the results enter into force as soon as possible thereafter.

TRADE AND ENVIRONMENT

31. With a view to enhancing the mutual supportiveness of trade and environment, we agree to

negotiations, without prejudging their outcome, on:

(i) the relationship between existing WTO rules and specific trade obligations set out in

multilateral environmental agreements (MEAs). The negotiations shall be limited in scope

to the applicability of such existing WTO rules as among parties to the MEA in question.

The negotiations shall not prejudice the WTO rights of any Member that is not a party to the

MEA in question;

(ii) procedures for regular information exchange between MEA Secretariats and the relevant

WTO committees, and the criteria for the granting of observer status;

(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to

environmental goods and services.

We note that fisheries subsidies form part of the negotiations provided for in paragraph 28.

32. We instruct the Committee on Trade and Environment, in pursuing work on all items on its agenda

within its current terms of reference, to give particular attention to:

(i) the effect of environmental measures on market access, especially in relation to developing

countries, in particular the least-developed among them, and those situations in which the

elimination or reduction of trade restrictions and distortions would benefit trade, the

environment and development;

(ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property

Rights; and

(iii) labelling requirements for environmental purposes.

Work on these issues should include the identification of any need to clarify relevant WTO rules. The

Committee shall report to the Fifth Session of the Ministerial Conference, and make recommendations, where

appropriate, with respect to future action, including the desirability of negotiations. The outcome of this work

as well as the negotiations carried out under paragraph 31(i) and (ii) shall be compatible with the open and

non-discriminatory nature of the multilateral trading system, shall not add to or diminish the rights and

obligations of Members under existing WTO agreements, in particular the Agreement on the Application of
8

Sanitary and Phytosanitary Measures, nor alter the balance of these rights and obligations, and will take into

account the needs of developing and least-developed countries.

33. We recognize the importance of technical assistance and capacity building in the field of trade and

environment to developing countries, in particular the least-developed among them. We also encourage that

expertise and experience be shared with Members wishing to perform environmental reviews at the national

level. A report shall be prepared on these activities for the Fifth Session.

ELECTRONIC COMMERCE

34. We take note of the work which has been done in the General Council and other relevant bodiessince

the Ministerial Declaration of 20 May 1998 and agree to continue the Work Programme on Electronic

Commerce. The work to date demonstrates that electronic commerce creates new challenges and

opportunitiesfor trade for Members at allstages of development, and we recognize the importance of creating

and maintaining an environment which is favourable to the future development of electronic commerce. We

instruct the General Council to consider the most appropriate institutional arrangements for handling the

Work Programme, and to report on further progress to the Fifth Session of the Ministerial Conference. We

declare that Members will maintain their current practice of not imposing customs duties on electronic

transmissions until the Fifth Session.

SMALL ECONOMIES

35. We agree to a work programme, under the auspices of the General Council, to examine issuesrelating

to the trade of small economies. The objective of this work is to frame responses to the trade-related issues

identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and

not to create a sub-category of WTO Members. The General Council shall review the work programme and

make recommendations for action to the Fifth Session of the Ministerial Conference.

TRADE, DEBT AND FINANCE

36. We agree to an examination, in a Working Group under the auspices of the General Council, of the

relationship between trade, debt and finance, and of any possible recommendations on steps that might be

taken within the mandate and competence of the WTO to enhance the capacity of the multilateral trading

system to contribute to a durable solution to the problem of external indebtedness of developing and leastdeveloped countries, and to strengthen the coherence of international trade and financial policies, with a view

to safeguarding the multilateral trading system from the effects of financial and monetary instability. The

General Council shall report to the Fifth Session of the Ministerial Conference on progress in the

examination.

TRADE AND TRANSFER OF TECHNOLOGY 

37. We agree to an examination, in a Working Group under the auspices of the General Council, of the

relationship between trade and transfer of technology, and of any possible recommendations on steps that

might be taken within the mandate of the WTO to increase flows of technology to developing countries. The
9

General Council shall report to the Fifth Session of the Ministerial Conference on progress in the

examination.

TECHNICAL COOPERATION AND CAPACITY BUILDING

38. We confirm that technical cooperation and capacity building are core elements of the development

dimension of the multilateral trading system, and we welcome and endorse the New Strategy for WTO

Technical Cooperation for Capacity Building, Growth and Integration. We instruct the Secretariat, in

coordination with other relevant agencies, to support domestic efforts for mainstreaming trade into national

plans for economic development and strategies for poverty reduction. The delivery of WTO technical

assistance shall be designed to assist developing and least-developed countries and low-income countries in

transition to adjust to WTO rules and disciplines, implement obligations and exercise the rights of

membership, including drawing on the benefits of an open, rules-based multilateral trading system. Priority

shall also be accorded to small, vulnerable, and transition economies, as well as to Members and Observers

without representation in Geneva. We reaffirm our support for the valuable work of the International Trade

Centre, which should be enhanced.

39. We underscore the urgent necessity for the effective coordinated delivery of technical assistance with

bilateral donors, in the OECD Development Assistance Committee and relevant international and regional

intergovernmental institutions, within a coherent policy framework and timetable. In the coordinated delivery

of technical assistance, we instruct the Director-General to consult with the relevant agencies, bilateral donors

and beneficiaries, to identify ways of enhancing and rationalizing the Integrated Framework for TradeRelated Technical Assistance to Least-Developed Countries and the Joint Integrated Technical Assistance

Programme (JITAP).

40. We agree that there is a need for technical assistance to benefit from secure and predictable funding.

We therefore instruct the Committee on Budget, Finance and Administration to develop a plan for adoption

by the General Council in December 2001 that will ensure long-term funding for WTO technical assistance

at an overall level no lower than that of the current year and commensurate with the activities outlined above.

41. We have established firm commitments on technical cooperation and capacity building in various

paragraphs in this Ministerial Declaration. We reaffirm these specific commitments contained in paragraphs

16, 21, 24, 26, 27, 33, 38-40, 42 and 43, and also reaffirm the understanding in paragraph 2 on the important

role ofsustainably financed technical assistance and capacity-building programmes. We instruct the DirectorGeneral to report to the Fifth Session of the Ministerial Conference, with an interim report to the General

Council in December 2002 on the implementation and adequacy of these commitments in the identified

paragraphs.
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LEAST-DEVELOPED COUNTRIES

42. We acknowledge the seriousness of the concerns expressed by the least-developed countries (LDCs)

in the Zanzibar Declaration adopted by their Ministers in July 2001. We recognize that the integration of the

LDCs into the multilateral trading system requires meaningful market access, support for the diversification

of their production and export base, and trade-related technical assistance and capacity building. We agree

that the meaningful integration of LDCs into the trading system and the global economy will involve efforts

by all WTO Members. We commit ourselves to the objective of duty-free, quota-free market access for

products originating from LDCs. In this regard, we welcome the significant market access improvements by

WTO Members in advance of the Third UN Conference on LDCs (LDC-III), in Brussels, May 2001. We

further commit ourselves to consider additional measures for progressive improvements in market access for

LDCs. Accession of LDCs remains a priority for the Membership. We agree to work to facilitate and

accelerate negotiations with acceding LDCs. We instruct the Secretariat to reflect the priority we attach to

LDCs' accessions in the annual plans for technical assistance. We reaffirm the commitments we undertook

at LDC-III, and agree that the WTO should take into account, in designing its work programme for LDCs,

the trade-related elements of the Brussels Declaration and Programme of Action, consistent with the WTO's

mandate, adopted at LDC-III. We instruct the Sub-Committee for Least-Developed Countries to design such

a work programme and to report on the agreed work programme to the General Council at its first meeting

in 2002. 

43. We endorse the Integrated Framework for Trade-Related Technical Assistance to Least-Developed

Countries(IF) as a viable model for LDCs' trade development. We urge development partnersto significantly

increase contributions to the IF Trust Fund and WTO extra-budgetary trust funds in favour of LDCs. We

urge the core agencies, in coordination with development partners, to explore the enhancement of the IF with

a view to addressing the supply-side constraints of LDCs and the extension of the model to all LDCs,

following the review of the IF and the appraisal of the ongoing Pilot Scheme in selected LDCs. We request

the Director-General, following coordination with heads of the other agencies, to provide an interim report

to the General Council in December 2002 and a full report to the Fifth Session of the Ministerial Conference

on all issues affecting LDCs.

SPECIAL AND DIFFERENTIAL TREATMENT

44. We reaffirm that provisions for special and differential treatment are an integral part of the WTO

Agreements. We note the concerns expressed regarding their operation in addressing specific constraints

faced by developing countries, particularly least-developed countries. In that connection, we also note that

some Members have proposed a Framework Agreement on Special and Differential Treatment

(WT/GC/W/442). We therefore agree that all special and differential treatment provisions shall be reviewed

with a view to strengthening them and making them more precise, effective and operational. In this

connection, we endorse the work programme on special and differential treatment set out in the Decision on

Implementation-Related Issues and Concerns.

ORGANIZATION AND MANAGEMENT OF THE WORK PROGRAMME

45. The negotiations to be pursued under the terms of this Declaration shall be concluded not later than

1 January 2005. The Fifth Session of the Ministerial Conference will take stock of progress in the

negotiations, provide any necessary political guidance, and take decisions as necessary. When the results of

the negotiations in all areas have been established, a Special Session of the Ministerial Conference will be

held to take decisions regarding the adoption and implementation of those results.
11

46. The overall conduct of the negotiationsshall be supervised by a Trade Negotiations Committee under

the authority of the General Council. The Trade Negotiations Committee shall hold its first meeting not later

than 31 January 2002. It shall establish appropriate negotiating mechanisms as required and supervise the

progress of the negotiations.

47. With the exception of the improvements and clarifications of the Dispute Settlement Understanding,

the conduct, conclusion and entry into force of the outcome of the negotiations shall be treated as parts of a

single undertaking. However, agreements reached at an early stage may be implemented on a provisional or

a definitive basis. Early agreements shall be taken into account in assessing the overall balance of the

negotiations.

48. Negotiations shall be open to:

(i) all Members of the WTO; and

(ii) States and separate customs territories currently in the process of accession and those that

inform Members, at a regular meeting of the General Council, of their intention to negotiate

the terms of their membership and for whom an accession working party is established.

Decisions on the outcomes of the negotiations shall be taken only by WTO Members.

49. The negotiations shall be conducted in a transparent manner among participants, in order to facilitate

the effective participation of all. They shall be conducted with a view to ensuring benefits to all participants

and to achieving an overall balance in the outcome of the negotiations.

50. The negotiations and the other aspects of the Work Programme shall take fully into account the

principle ofspecial and differential treatment for developing and least-developed countries embodied in: Part

IV of the GATT 1994; the Decision of 28 November 1979 on Differential and More Favourable Treatment,

Reciprocity and Fuller Participation of Developing Countries; the Uruguay Round Decision on Measures

in Favour of Least-Developed Countries; and all other relevant WTO provisions.

51. The Committee on Trade and Development and the Committee on Trade and Environment shall,

within their respective mandates, each act as a forum to identify and debate developmental and environmental

aspects of the negotiations, in order to help achieve the objective of having sustainable development

appropriately reflected.

52. Those elements of the Work Programme which do not involve negotiations are also accorded a high

priority. They shall be pursued under the overall supervision of the General Council, which shall report on

progress to the Fifth Session of the Ministerial Conference.

_________
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WORLD TRADE

ORGANIZATION

WT/MIN(01)/DEC/2

20 November 2001

(01-5860)

MINISTERIAL CONFERENCE

Fourth Session

Doha, 9 - 14 November 2001

DECLARATION ON THE TRIPS AGREEMENT AND PUBLIC HEALTH

Adopted on 14 November 2001

1. We recognize the gravity of the public health problems afflicting many developing and leastdeveloped countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics.

2. We stressthe need for the WTO Agreement on Trade-Related Aspects of Intellectual PropertyRights

(TRIPS Agreement) to be part of the wider national and international action to address these problems.

3. We recognize that intellectual property protection isimportantfor the development of new medicines.

We also recognize the concerns about its effects on prices.

4. We agree that the TRIPS Agreement does not and should not prevent Membersfrom taking measures

to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm

that the Agreement can and should be interpreted and implemented in a mannersupportive of WTO Members'

right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions in the

TRIPS Agreement, which provide flexibility for this purpose.

5. Accordingly and in the light of paragraph 4 above, while maintaining our commitmentsin the TRIPS

Agreement, we recognize that these flexibilities include:

(a) In applying the customary rules of interpretation of public international law, each provision

of the TRIPS Agreement shall be read in the light of the object and purpose of the

Agreement as expressed, in particular, in its objectives and principles.
13

(b) Each Member has the right to grant compulsory licences and the freedom to determine the

grounds upon which such licences are granted.

(c) Each Member has the right to determine what constitutes a national emergency or other

circumstances of extreme urgency, it being understood that public health crises, including

those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a

national emergency or other circumstances of extreme urgency.

(d) The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of

intellectual property rights is to leave each Member free to establish its own regime for such

exhaustion without challenge, subject to the MFN and national treatment provisions of

Articles 3 and 4.

6. We recognize that WTO Members with insufficient or no manufacturing capacities in the

pharmaceuticalsector could face difficultiesin making effective use of compulsory licensing under the TRIPS

Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report

to the General Council before the end of 2002.

7. We reaffirm the commitment of developed-countryMembersto provide incentivesto their enterprises

and institutions to promote and encourage technology transfer to least-developed country Members pursuant

to Article 66.2. We also agree that the least-developed country Members will not be obliged, with respect

to pharmaceutical products, to implement or apply Sections 5 and 7 of Part II of the TRIPS Agreement or to

enforce rights provided for under these Sections until 1 January 2016, without prejudice to the right of leastdeveloped country Members to seek other extensions of the transition periods as provided for in Article 66.1

of the TRIPS Agreement. We instruct the Council for TRIPS to take the necessary action to give effect to

this pursuant to Article 66.1 of the TRIPS Agreement.
14

WORLD TRADE

ORGANIZATION

WT/MIN(01)/17

20 November 2001

(01-5858)

MINISTERIAL CONFERENCE

Fourth Session

Doha, 9 - 14 November 2001

IMPLEMENTATION-RELATED ISSUES AND CONCERNS

Decision of 14 November 2001

The Ministerial Conference,

Having regard to Articles IV.1, IV.5 and IX of the Marrakesh Agreement Establishing the World

Trade Organization (WTO);

Mindful of the importance that Members attach to the increased participation of developing countries

in the multilateral trading system, and of the need to ensure that the system responds fully to the needs and

interests of all participants;

Determined to take concrete action to address issues and concerns that have been raised by many

developing-country Members regarding the implementation of some WTO Agreements and Decisions,

including the difficulties and resource constraints that have been encountered in the implementation of

obligations in various areas;

Recalling the 3 May 2000 Decision of the General Council to meet in special sessions to address

outstanding implementation issues, and to assess the existing difficulties, identify ways needed to resolve

them, and take decisions for appropriate action not later than the Fourth Session of the Ministerial

Conference; 

Noting the actions taken by the General Council in pursuance of this mandate at its Special Sessions

in October and December 2000 (WT/L/384), as well as the review and further discussion undertaken at the

Special Sessions held in April, July and October 2001, including the referral of additional issues to relevant

WTO bodies or their chairpersons for further work; 

Noting also the reports on the issues referred to the General Council from subsidiary bodies and their

chairpersons and from the Director-General, and the discussions as well as the clarifications provided and
15

understandings reached on implementation issues in the intensive informal and formal meetings held under

this process since May 2000;

Decides as follows:

 1. General Agreement on Tariffs and Trade 1994 (GATT 1994)

1.1 Reaffirms that Article XVIII of the GATT 1994 is a special and differential treatment

provision for developing countries and that recourse to it should be less onerous than to

Article XII of the GATT 1994.

1.2 Noting the issues raised in the report of the Chairperson of the Committee on Market Access

(WT/GC/50) concerning the meaning to be given to the phrase "substantial interest" in

paragraph 2(d) of Article XIII of the GATT 1994, the Market Access Committee is directed

to give further consideration to the issue and make recommendations to the General Council

as expeditiously as possible but in any event not later than the end of 2002.

2. Agreement on Agriculture

2.1 Urges Members to exercise restraint in challenging measures notified under the green box

by developing countries to promote rural development and adequately address food security

concerns.

2.2 Takes note of the report of the Committee on Agriculture (G/AG/11) regarding the

implementation of the Decision on Measures Concerning the Possible Negative Effects of

the Reform Programme on Least-Developed and Net Food-Importing DevelopingCountries,

and approves the recommendations contained therein regarding (i) food aid; (ii) technical

and financial assistance in the context of aid programmes to improve agricultural

productivity and infrastructure; (iii) financing normal levels of commercial imports of basic

foodstuffs; and (iv) review of follow-up.

2.3 Takes note of the report of the Committee on Agriculture (G/AG/11) regarding the

implementation of Article 10.2 of the Agreement on Agriculture, and approves the

recommendations and reporting requirements contained therein.

2.4 Takes note of the report of the Committee on Agriculture (G/AG/11) regarding the

administration of tariff rate quotas and the submission by Members of addenda to their

notifications, and endorses the decision by the Committee to keep this matter under review.

3. Agreement on the Application of Sanitary and Phytosanitary Measures

3.1 Where the appropriate level of sanitary and phytosanitary protection allows scope for the

phased introduction of new sanitary and phytosanitary measures, the phrase "longer timeframe for compliance" referred to in Article 10.2 of the Agreement on the Application of
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Sanitary and Phytosanitary Measures, shall be understood to mean normally a period of not

less than 6 months. Where the appropriate level of sanitary and phytosanitary protection

does not allow scope for the phased introduction of a new measure, but specific problems

are identified by a Member, the Member applying the measure shall upon request enter into

consultations with the country with a view to finding a mutually satisfactory solution to the

problem while continuing to achieve the importing Member's appropriate level of protection.

3.2 Subject to the conditions specified in paragraph 2 of Annex B to the Agreement on the

Application of Sanitary and Phytosanitary Measures, the phrase "reasonable interval" shall

be understood to mean normally a period of not less than 6 months. It is understood that

timeframes for specific measures have to be considered in the context of the particular

circumstances of the measure and actions necessary to implement it. The entry into force

of measures which contribute to the liberalization of trade should not be unnecessarily

delayed.

3.3 Takes note of the Decision of the Committee on Sanitary and Phytosanitary Measures

(G/SPS/19) regarding equivalence, and instructsthe Committee to develop expeditiously the

specific programme to further the implementation of Article 4 of the Agreement on the

Application of Sanitary and Phytosanitary Measures.

3.4 Pursuant to the provisions of Article 12.7 of the Agreement on the Application of Sanitary

and Phytosanitary Measures, the Committee on Sanitary and Phytosanitary Measures is

instructed to review the operation and implementation of the Agreement on Sanitary and

Phytosanitary Measures at least once every four years.

3.5 (i) Takes note of the actions taken to date by the Director-General to facilitate the increased

participation of Members at different levels of development in the work of the relevant

international standard setting organizations as well as his efforts to coordinate with these

organizations and financial institutions in identifying SPS-related technical assistance needs

and how best to address them; and 

(ii) urges the Director-General to continue his cooperative efforts with these organizations

and institutions in this regard, including with a view to according priority to the effective

participation of least-developed countries and facilitating the provision of technical and

financial assistance for this purpose.

3.6 (i) Urges Members to provide, to the extent possible, the financial and technical assistance

necessary to enable least-developed countries to respond adequately to the introduction of

any new SPS measures which may have significant negative effects on their trade; and 

(ii) urges Members to ensure that technical assistance is provided to least-developed

countries with a view to responding to the special problems faced by them in implementing

the Agreement on the Application of Sanitary and Phytosanitary Measures.

4. Agreement on Textiles and Clothing

Reaffirms the commitment to full and faithful implementation of the Agreement on Textiles and

Clothing, and agrees:
17

4.1 that the provisions of the Agreement relating to the early integration of products and the

elimination of quota restrictions should be effectively utilised.

4.2 that Members will exercise particular consideration before initiating investigations in the

context of antidumping remedies on textile and clothing exports from developing countries

previously subject to quantitative restrictions under the Agreement for a period of two years

following full integration of this Agreement into the WTO.

4.3 that without prejudice to their rights and obligations, Members shall notify any changes in

their rules of origin concerning products falling under the coverage of the Agreement to the

Committee on Rules of Origin which may decide to examine them.

Requests the Council for Trade in Goods to examine the following proposals:

4.4 that when calculating the quota levels for small suppliers for the remaining years of the

Agreement, Members will apply the most favourable methodology available in respect of

those Members under the growth-on-growth provisions from the beginning of the

implementation period; extend the same treatment to least-developed countries; and, where

possible, eliminate quota restrictions on imports of such Members; 

4.5 that Members will calculate the quota levels for the remaining years of the Agreement with

respect to other restrained Members asif implementation of the growth-on-growth provision

for stage 3 had been advanced to 1 January 2000;

and make recommendations to the General Council by 31 July 2002 for appropriate action.

5. Agreement on Technical Barriers to Trade

5.1 Confirms the approach to technical assistance being developed by the Committee on

Technical Barriers to Trade, reflecting the results of the triennial review work in this area,

and mandates this work to continue.

5.2 Subject to the conditions specified in paragraph 12 of Article 2 of the Agreement on

Technical Barriers to Trade, the phrase "reasonable interval" shall be understood to mean

normally a period of not less than 6 months, except when this would be ineffective in

fulfilling the legitimate objectives pursued.

5.3 (i) Takes note of the actions taken to date by the Director-General to facilitate the increased

participation of Members at different levels of development in the work of the relevant

international standard setting organizations as well as his efforts to coordinate with these

organizations and financial institutionsin identifying TBT-related technical assistance needs

and how best to address them; and 
18

(ii) urges the Director-General to continue his cooperative efforts with these organizations

and institutions, including with a view to according priority to the effective participation of

least-developed countries and facilitating the provision of technical and financial assistance

for this purpose.

5.4 (i) Urges Members to provide, to the extent possible, the financial and technical assistance

necessary to enable least-developed countries to respond adequately to the introduction of

any new TBT measures which may have significant negative effects on their trade; and 

(ii) urges Members to ensure that technical assistance is provided to least-developed

countries with a view to responding to the special problems faced by them in implementing

the Agreement on Technical Barriers to Trade.

6. Agreement on Trade-Related Investment Measures

6.1 Takes note of the actions taken by the Council for Trade in Goods in regard to requests from

some developing-country Members for the extension of the five-year transitional period

provided for in Article 5.2 of Agreement on Trade-Related Investment Measures.

6.2 Urges the Council for Trade in Goods to consider positively requests that may be made by

least-developed countries under Article 5.3 of the TRIMs Agreement or Article IX.3 of the

WTO Agreement, as well as to take into consideration the particular circumstances of leastdeveloped countries when setting the terms and conditions including time-frames.

7. Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade 1994

7.1 Agrees that investigating authorities shall examine with special care any application for the

initiation of an anti-dumping investigation where an investigation of the same product from

the same Member resulted in a negative finding within the 365 days prior to the filing of the

application and that, unless this pre-initiation examination indicates that circumstances have

changed, the investigation shall not proceed.
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7.2 Recognizes that, while Article 15 of the Agreement on the Implementation of Article VI of

the General Agreement on Tariffs and Trade 1994 is a mandatory provision, the modalities

for its application would benefit from clarification. Accordingly, the Committee on AntiDumping Practices is instructed, through its working group on Implementation, to examine

this issue and to draw up appropriate recommendations within twelve months on how to

operationalize this provision.

7.3 Takes note that Article 5.8 of the Agreement on the Implementation of Article VI of the

General Agreement on Tariffs and Trade 1994 does not specify the time-frame to be used

in determining the volume of dumped imports, and that this lack of specificity creates

uncertainties in the implementation of the provision. The Committee on Anti-Dumping

Practices is instructed, through its working group on Implementation, to study this issue and

draw up recommendations within 12 months, with a view to ensuring the maximum possible

predictability and objectivity in the application of time frames.

7.4 Takes note that Article 18.6 of the Agreement on the Implementation of Article VI of the

General Agreement on Tariffs and Trade 1994 requires the Committee on Anti-Dumping

Practices to review annually the implementation and operation of the Agreement taking into

account the objectives thereof. The Committee on Anti-dumping Practices is instructed to

draw up guidelines for the improvement of annual reviews and to report its views and

recommendations to the General Council for subsequent decision within 12 months.

8. Agreement on the Implementation of Article VII of the General Agreement on Tariffs and Trade

1994

8.1 Takes note of the actions taken by the Committee on Customs Valuation in regard to the

requests from a number of developing-country Members for the extension of the five-year

transitional period provided for in Article 20.1 of Agreement on the Implementation of

Article VII of the General Agreement on Tariffs and Trade 1994.

8.2 Urges the Council for Trade in Goods to give positive consideration to requests that may be

made by least-developed country Members under paragraphs 1 and 2 of Annex III of the

Customs Valuation Agreement or under Article IX.3 of the WTO Agreement, as well as to

take into consideration the particular circumstances of least-developed countries when

setting the terms and conditions including time-frames.

8.3 Underlinesthe importance ofstrengthening cooperation between the customs administrations

of Members in the prevention of customs fraud. In this regard, it is agreed that, further to

the 1994 Ministerial Decision Regarding Cases Where Customs Administrations Have

Reasons to Doubt the Truth or Accuracy of the Declared Value, when the customs

administration of an importing Member has reasonable grounds to doubt the truth or

accuracy of the declared value, it may seek assistance from the customs administration of an

exporting Member on the value of the good concerned. In such cases, the exporting Member

shall offer cooperation and assistance, consistent with its domestic laws and procedures,

including furnishing information on the export value of the good concerned. Any

information provided in this context shall be treated in accordance with Article 10 of the
20

Customs Valuation Agreement. Furthermore, recognizing the legitimate concerns expressed

by the customs administrations of several importing Members on the accuracy of the

declared value, the Committee on Customs Valuation is directed to identify and assess

practical means to address such concerns, including the exchange of information on export

values and to report to the General Council by the end of 2002 at the latest.

 9. Agreement on Rules of Origin

9.1 Takes note of the report of the Committee on Rules of Origin (G/RO/48) regarding progress

on the harmonization work programme, and urges the Committee to complete its work by

the end of 2001.

9.2 Agrees that any interim arrangements on rules of origin implemented by Members in the

transitional period before the entry into force of the results of the harmonisation work

programme shall be consistent with the Agreement on Rules of Origin, particularly Articles

2 and 5 thereof. Without prejudice to Members' rights and obligations, such arrangements

may be examined by the Committee on Rules of Origin.

10. Agreement on Subsidies and Countervailing Measures

10.1 Agrees that Annex VII(b) to the Agreement on Subsidies and Countervailing Measures

includes the Members that are listed therein until their GNP per capita reaches US $1,000

in constant 1990 dollars for three consecutive years. This decision will enter into effect upon

the adoption by the Committee on Subsidies and Countervailing Measures of an appropriate

methodology for calculating constant 1990 dollars. If, however, the Committee on Subsidies

and Countervailing Measures does not reach a consensus agreement on an appropriate

methodology by 1 January 2003, the methodology proposed by the Chairman of the

Committee set forth in G/SCM/38, Appendix 2 shall be applied. A Member shall not leave

Annex VII(b) so long as its GNP per capita in current dollars has not reached US $1000

based upon the most recent data from the World Bank.

10.2 Takes note of the proposal to treat measures implemented by developing countries with a

view to achieving legitimate development goals, such as regional growth, technology

research and development funding, production diversification and development and

implementation of environmentally sound methods of production as non-actionable

subsidies, and agrees that this issue be addressed in accordance with paragraph 13 below.

During the course of the negotiations, Members are urged to exercise due restraint with

respect to challenging such measures.

10.3 Agrees that the Committee on Subsidies and Countervailing Measures shall continue its

review of the provisions of the Agreement on Subsidies and Countervailing Measures

regarding countervailing duty investigations and report to the General Council by 31 July

2002.

10.4 Agrees that if a Member has been excluded from the list in paragraph (b) of Annex VII to

the Agreement on Subsidies and Countervailing Measures, it shall be re-included in it when

its GNP per capita falls back below US$ 1,000.
21

10.5 Subject to the provisions of Articles 27.5 and 27.6, it is reaffirmed that least-developed

country Members are exempt from the prohibition on export subsidies set forth in Article

3.1(a) of the Agreement on Subsidies and Countervailing Measures, and thus have flexibility

to finance their exporters, consistent with their development needs. It is understood that the

eight-year period in Article 27.5 within which a least-developed country Member must phase

out its export subsidies in respect of a product in which it is export-competitive begins from

the date export competitiveness exists within the meaning of Article 27.6.

10.6 Having regard to the particular situation of certain developing-country Members, directs the

Committee on Subsidies and Countervailing Measures to extend the transition period, under

the rubric of Article 27.4 of the Agreement on Subsidies and Countervailing Measures, for

certain export subsidies provided by such Members, pursuant to the procedures set forth in

document G/SCM/39. Furthermore, when considering a request for an extension of the

transition period under the rubric of Article 27.4 of the Agreement on Subsidies and

Countervailing Measures, and in order to avoid that Members at similar stages of

development and having a similar order of magnitude of share in world trade are treated

differently in terms of receiving such extensions for the same eligible programmes and the

length of such extensions, directs the Committee to extend the transition period for those

developing countries, after taking into account the relative competitiveness in relation to

other developing-country Members who have requested extension of the transition period

following the procedures set forth in document G/SCM/39.

11. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

11.1 The TRIPS Council is directed to continue its examination of the scope and modalities for

complaints of the types provided for under subparagraphs 1(b) and 1(c) of Article XXIII of

GATT 1994 and make recommendations to the Fifth Session of the Ministerial Conference.

It is agreed that, in the meantime, Members will not initiate such complaints under the

TRIPS Agreement.

11.2 Reaffirming that the provisions of Article 66.2 of the TRIPS Agreement are mandatory, it

is agreed that the TRIPS Council shall put in place a mechanism for ensuring the monitoring

and full implementation of the obligations in question. To this end, developed-country

Members shall submit prior to the end of 2002 detailed reports on the functioning in practice

of the incentives provided to their enterprises for the transfer of technology in pursuance of

their commitments under Article 66.2. These submissions shall be subject to a review in the

TRIPS Council and information shall be updated by Members annually.
1

 BISD 26S/203.

2A list of these issues is compiled in document Job(01)/152/Rev.1.

22

12. Cross-cutting Issues

12.1 The Committee on Trade and Development is instructed: 

(i) to identify those special and differential treatment provisions that are already mandatory in

nature and those that are non-binding in character, to consider the legal and practical

implications for developed and developing Members of converting special and differential

treatment measures into mandatory provisions, to identify those that Members consider

should be made mandatory, and to report to the General Council with clear

recommendations for a decision by July 2002;

(ii) to examine additional ways in which special and differential treatment provisions can be

made more effective, to consider ways, including improved information flows, in which

developing countries, in particular the least-developed countries, may be assisted to make

best use ofspecial and differential treatment provisions, and to report to the General Council

with clear recommendations for a decision by July 2002; and 

(iii) to consider, in the context of the work programme adopted at the Fourth Session of the

Ministerial Conference, how special and differential treatment may be incorporated into the

architecture of WTO rules.

The work of the Committee on Trade and Development in this regard shall take fully into

consideration previous work undertaken as noted in WT/COMTD/W/77/Rev.1. It will also be

without prejudice to work in respect of implementation of WTO Agreements in the General Council

and in other Councils and Committees.

12.2 Reaffirms that preferences granted to developing countries pursuant to the Decision of the

Contracting Parties of 28 November 1979 ("Enabling Clause")1should be generalised, nonreciprocal and non-discriminatory.

13. Outstanding Implementation Issues2

Agrees that outstanding implementation issues be addressed in accordance with paragraph 12 of the

Ministerial Declaration (WT/MIN(01)/DEC/1).

14. Final Provisions

Requests the Director-General, consistent with paragraphs 38 to 43 of the Ministerial Declaration

(WT/MIN(01)/DEC/1), to ensure that WTO technical assistance focuses, on a priority basis, on assisting

developing countries to implement existing WTO obligations as well as on increasing their capacity to

participate more effectively in future multilateral trade negotiations. In carrying out this mandate, the WTO

Secretariat should cooperate more closely with international and regional intergovernmental organisations

so as to increase efficiency and synergies and avoid duplication of programmes. 

__________
23

MEMBERSHIP OF THE WORLD TRADE ORGANIZATION

as of January 1, 2003 (144 Members)

Government Entry into Force/ Government Entry into Force/

 Membership Membership

Albania September 8, 2000 Dominican Republic March 9, 1995

Angola November 23, 1996 Ecuador January 21, 1996

Antigua and Barbuda January 1, 1995 Egypt June 30, 1995

Argentina January 1, 1995 El Salvador May 7, 1995

Australia January 1, 1995 Estonia November 13, 1999

Austria January 1, 1995 European Union January 1, 1995

Bahrain January 1, 1995 Fiji January 14, 1996

Bangladesh January 1, 1995 Finland January 1, 1995

Barbados January 1, 1995 France January 1, 1995

Belgium January 1, 1995 Gabon January 1, 1995

Belize January 1, 1995 Georgia June 14, 2000

Benin February 22, 1996 Germany January 1, 1995

Bolivia September 12, 1995 Ghana January 1, 1995

Botswana May 31, 1995 Greece January 1, 1995

Brazil January 1, 1995 Grenada February 22, 1996

Brunei Darussalam January 1, 1995 Guatemala July 21, 1995

Bulgaria December 1, 1996 Guinea October 25, 1995

Burkina Faso June 3, 1995 Guinea Bissau May 31, 1995

Burundi July 23, 1995 Guyana January 1, 1995

Cameroon December 13, 1995 Haiti January 30, 1996

Canada January 1, 1995 Honduras January 1, 1995

Central African Republic May 31, 1995 Hong Kong, China January 1, 1995

Chad October 19, 1996 Hungary January 1, 1995

Chile January 1, 1995 Iceland January 1, 1995

China December 11, 2001 India January 1, 1995

Colombia April 30, 1995 Indonesia January 1, 1995

Congo March 27, 1997 Ireland January 1, 1995

Costa Rica January 1, 1995 Israel April 21, 1995

Côte d'Ivoire January 1, 1995 Italy January 1, 1995

Croatia November 30, 2000 Jamaica March 9, 1995

Cuba April 20, 1995 Japan January 1, 1995

Cyprus July 30, 1995 Jordan April 11, 2000

Czech Republic January 1, 1995 Kenya January 1, 1995

Democratic Republic of

the Congo

January 1, 1997 Korea, Republic of January 1, 1995

Denmark January 1, 1995 Kuwait January 1, 1995

Djibouti May 31, 1995 Kyrgyz Republic December 20, 1998

Dominica January 1, 1995 Latvia February 10, 1999
24

Government Entry into Force/ Government Entry into Force/

 Membership Membership

Lesotho May 31, 1995 Rwanda May 22, 1996

Liechtenstein September 1, 1995 Saint Kitts and Nevis February 21, 1996

Lithuania May 31, 2001 Saint Lucia January 1, 1995

Luxembourg January 1, 1995 Saint Vincent and the

Grenadines

January 1, 1995

Macao, China January 1, 1995 Senegal January 1, 1995

Madagascar November 17, 1995 Sierra Leone July 23, 1995

Malawi May 31, 1995 Singapore January 1, 1995

Malaysia January 1, 1995 Slovak Republic January 1, 1995

Maldives May 31, 1995 Slovenia July 30, 1995

Mali May 31, 1995 Solomon Islands July 26, 1996

Malta January 1, 1995 South Africa January 1, 1995

Mauritania May 31, 1995 Spain January 1, 1995

Mauritius January 1, 1995 Sri Lanka January 1, 1995

Moldova July 26, 2001 Suriname January 1, 1995

Mongolia January 29, 1997 Swaziland January 1, 1995

Morocco January 1, 1995 Sweden January 1, 1995

Mozambique August 26, 1995 Switzerland July 1, 1995

Myanmar January 1, 1995 Taiwan (referred to in the

WTO as Chinese Taipei)

January 1, 2002

Namibia January 1, 1995 Tanzania January 1, 1995

Netherlands - For the

Kingdom in Europe and

Netherlands Antilles 

January 1, 1995 Thailand January 1, 1995

New Zealand January 1, 1995 The Gambia October 23, 1996

Nicaragua September 3, 1995 Togo May 31, 1995

Niger December 13, 1996 Trinidad and Tobago March 1, 1995

Nigeria January 1, 1995 Mexico January 1, 1995

Norway January 1, 1995 Tunisia March 9, 1995

Oman November 9, 2000 Turkey March 26, 1995

Pakistan January 1, 1995 Uganda January 1, 1995

Panama September 6, 1997 United Arab Emirates April 10, 1996

Papua New Guinea June 9, 1996 United Kingdom January 1, 1995

Paraguay January 1, 1995 United States January 1, 1995

Peru January 1, 1995 Uruguay January 1, 1995

Philippines January 1, 1995 Venezuela January 1, 1995

Poland July 1, 1995 Zambia January 1, 1995

Portugal January 1, 1995 Zimbabwe March 5, 1995

Qatar January 13, 1996

Romania January 1, 1995
1

 - Interest earned in 2001 under the Early Payment Encouragement Scheme (L/6384) and to be deducted from the 2003 contribution.

25

SCALE OF CONTRIBUTIONS FOR 2003

(Minimum contribution of 0.015 per cent)

2002 2003 INTEREST 2003 NET

MEMBERS CONTRIBUTION CONTRIBUTION EARNED 1 CONTRIBUTION

CHF % CHF CHF CHF

Albania 21,315 0.015 23,070 165 22,905 

Angola 80,997 0.069 106,122 323 105,799 

Antigua and Barbuda 21,315 0.015 23,070 23,070 

Argentina 724,710 0.464 713,632 244 713,388 

Australia 1,730,778 1.143 1,757,934 18,200 1,739,734 

Austria 2,043,398 1.373 2,111,674 20,830 2,090,844 

Bahrain 96,628 0.069 106,122 987 105,135 

Bangladesh 149,205 0.106 163,028 163,028 

Barbados 28,420 0.020 30,760 190 30,570 

Belgium 3,812,543 2.671 4,107,998 34,283 4,073,715 

Belize 21,315 0.015 23,070 218 22,852 

Benin 21,315 0.015 23,070 91 22,979 

Bolivia 36,946 0.025 38,450 216 38,234 

Botswana 58,261 0.038 58,444 362 58,082 

Brazil 1,403,948 0.926 1,424,188 10,981 1,413,207 

Brunei Darussalam 62,524 0.041 63,058 552 62,506 

Bulgaria 133,574 0.094 144,572 591 143,981 

Burkina Faso 21,315 0.015 23,070 23,070 

Burundi 21,315 0.015 23,070 23,070 

Cameroon 38,367 0.025 38,450 426 38,024 

Canada 5,561,794 3.945 6,067,410 49,028 6,018,382 

Central African Republic 21,315 0.015 23,070 23,070 

Chad 21,315 0.015 23,070 23,070 

Chile 441,931 0.290 446,020 368 445,652 

China, People’s Republic of 4,224,633 3.155 4,852,390 4,852,390 

Colombia 331,093 0.211 324,518 385 324,133 

Congo 34,104 0.023 35,374 35,374 

Costa Rica 147,784 0.097 149,186 1,303 147,883 

Côte d’Ivoire 96,628 0.063 96,894 96,894 

Croatia 208,887 0.133 204,554 1,824 202,730 

Cuba 90,944 0.070 107,660 620 107,040 

Cyprus 90,944 0.061 93,818 575 93,243 

Czech Republic 726,131 0.499 767,462 7,817 759,645 

Democratic Republic of the Congo 34,104 0.016 24,608 24,608 

Denmark 1,347,108 0.951 1,462,638 13,013 1,449,625 

Djibouti 21,315 0.015 23,070 23,070 

Dominica 21,315 0.015 23,070 23,070 

Dominican Republic 177,625 0.128 196,864 196,864 

Ecuador 120,785 0.077 118,426 382 118,044 

Egypt 377,986 0.259 398,342 3,873 394,469 

El Salvador 82,418 0.059 90,742 390 90,352 

Estonia 89,523 0.064 98,432 888 97,544 
CHF % CHF CHF CHF

26

European Communities 0 0 0 

Fiji 22,736 0.015 23,070 256 22,814 

Finland 954,912 0.642 987,396 8,730 978,666 

France 7,873,761 5.272 8,108,336 49,907 8,058,429 

Gabon 48,314 0.034 52,292 52,292 

Gambia 21,315 0.015 23,070 23,070 

Georgia 21,315 0.015 23,070 130 22,940 

Germany 13,202,511 8.920 13,718,960 81,533 13,637,427 

Ghana 59,682 0.043 66,134 66,134 

Greece 441,931 0.411 632,118 1,685 630,433 

Grenada 21,315 0.015 23,070 175 22,895 

Guatemala 89,523 0.063 96,894 795 96,099 

Guinea 21,315 0.015 23,070 23,070 

Guinea-Bissau 21,315 0.015 23,070 23,070 

Guyana 21,315 0.015 23,070 23,070 

Haiti 21,315 0.015 23,070 142 22,928 

Honduras 55,419 0.039 59,982 139 59,843 

Hong Kong, China 4,753,245 3.166 4,869,308 52,655 4,816,653 

Hungary 586,873 0.417 641,346 5,487 635,859 

Iceland 63,945 0.045 69,210 643 68,567 

India 1,179,430 0.850 1,307,300 2,975 1,304,325 

Indonesia 1,180,851 0.774 1,190,412 1,190,412 

Ireland 1,621,361 1.201 1,847,138 13,993 1,833,145 

Israel 778,708 0.568 873,584 6,900 866,684 

Italy 6,262,347 4.136 6,361,168 47,290 6,313,878 

Jamaica 80,997 0.054 83,052 659 82,393 

Japan 9,419,809 6.359 9,780,142 72,459 9,707,683 

Jordan 93,786 0.061 93,818 823 92,995 

Kenya 66,787 0.044 67,672 507 67,165 

Korea, Republic of 3,383,401 2.367 3,640,446 32,981 3,607,465 

Kuwait 275,674 0.190 292,220 1,634 290,586 

Kyrgyz Republic 21,315 0.015 23,070 23,070 

Latvia 72,471 0.049 75,362 621 74,741 

Lesotho 21,315 0.015 23,070 173 22,897 

Liechtenstein 38,367 0.025 38,450 409 38,041 

Lithuania 117,943 0.076 116,888 224 116,664 

Luxembourg 422,037 0.345 530,610 2,598 528,012 

Macao, China 88,102 0.062 95,356 843 94,513 

Madagascar 21,315 0.015 23,070 202 22,868 

Malawi 21,315 0.015 23,070 23,070 

Malaysia 1,865,773 1.267 1,948,646 17,601 1,931,045 

Maldives 21,315 0.015 23,070 163 22,907 

Mali 21,315 0.015 23,070 23,070 

Malta 68,208 0.049 75,362 644 74,718 

Mauritania 21,315 0.015 23,070 23,070 

Mauritius 58,261 0.038 58,444 604 57,840 

Mexico 2,992,626 2.267 3,486,646 5,066 3,481,580 

Moldova 21,315 0.015 23,070 37 23,033 

Mongolia 21,315 0.015 23,070 147 22,923 

Morocco 227,360 0.156 239,928 1,504 238,424 

Mozambique 21,315 0.015 23,070 9 23,061 
CHF % CHF CHF CHF

27

Myanmar, Union of 45,472 0.032 49,216 383 48,833 

Namibia 41,209 0.027 41,526 250 41,276 

Netherlands, Kingdom of the 5,151,125 3.481 5,353,778 44,608 5,309,170 

New Zealand 377,986 0.243 373,734 3,677 370,057 

Nicaragua 28,420 0.020 30,760 265 30,495 

Niger 21,315 0.015 23,070 23,070 

Nigeria 289,884 0.190 292,220 279 291,941 

Norway 1,220,639 0.820 1,261,160 12,014 1,249,146 

Oman 140,679 0.105 161,490 1,089 160,401 

Pakistan 262,885 0.153 235,314 285 235,029 

Panama 176,204 0.114 175,332 1,674 173,658 

Papua New Guinea 46,893 0.031 47,678 503 47,175 

Paraguay 90,944 0.052 79,976 265 79,711 

Peru 194,677 0.126 193,788 29 193,759 

Philippines 892,388 0.553 850,514 850,514 

Poland 998,963 0.695 1,068,910 10,194 1,058,716 

Portugal 865,389 0.572 879,736 5,762 873,974 

Qatar 107,996 0.083 127,654 569 127,085 

Romania 241,570 0.167 256,846 1,730 255,116 

Rwanda 21,315 0.015 23,070 23,070 

Saint Lucia 21,315 0.015 23,070 36 23,034 

Senegal 32,683 0.022 33,836 352 33,484 

Sierra Leone 21,315 0.015 23,070 23,070 

Singapore 2,955,680 1.973 3,034,474 20,030 3,014,444 

Slovak Republic 291,305 0.198 304,524 3,112 301,412 

Slovenia 240,149 0.160 246,080 1,482 244,598 

Solomon Islands 21,315 0.015 23,070 23,070 

South Africa 740,341 0.481 739,778 8,288 731,490 

Spain 3,507,028 2.432 3,740,416 23,153 3,717,263 

Sri Lanka 134,995 0.094 144,572 832 143,740 

St. Kitts and Nevis 21,315 0.015 23,070 205 22,865 

St. Vincent and the Grenadines 21,315 0.015 23,070 23,070 

Suriname 21,315 0.015 23,070 23,070 

Swaziland 25,578 0.016 24,608 237 24,371 

Sweden 2,127,237 1.436 2,208,568 21,671 2,186,897 

Switzerland 2,182,656 1.464 2,251,632 22,906 2,228,726 

Chinese Taipei 2.031 3,123,678 3,123,678 

Tanzania 35,525 0.024 36,912 36,912 

Thailand 1,419,579 0.950 1,461,100 14,204 1,446,896 

Togo 21,315 0.015 23,070 23,070 

Trinidad and Tobago 63,945 0.041 63,058 487 62,571 

Tunisia 190,414 0.127 195,326 1,306 194,020 

Turkey 1,125,432 0.748 1,150,424 1,150,424 

Uganda 28,420 0.018 27,684 224 27,460 

United Arab Emirates 737,499 0.556 855,128 6,291 848,837 

United Kingdom of Great Britain

 and Northern Ireland

8,329,902 5.722 8,800,436 80.330 8,720,106 

United States of America 22,342,383 15.899 24,452,662 31,786 24,420,876 

Uruguay 90,944 0.058 89,204 5 89,199 

Venezuela 447,615 0.316 486,008 135 485,873 
CHF % CHF CHF CHF

28

Zambia 29,841 0.015 23,070 23,070 

Zimbabwe 48,314 0.045 69,210 69,210 

TOTAL 142,100,000 100.000 153,800,000 903,116 152,896,884 
29

2003 REVISED BUDGET FOR THE WTO SECRETARIAT
30

2003 BUDGET FOR THE APPELLATE BODY AND ITS SECRETARIAT
31

Waivers Currently in Force

The following waivers, granted under Article IX: 3 of the Agreement Establishing the World Trade

Organization, are currently in effect. Waivers granted for a period exceeding one year are reviewed annually

by the General Council. The General Council may extend, modify, or terminate a waiver as part of the annual

review process. The last review of multi-year waivers took place on December 20, 2001.

WTO Member/Waiver Valid Through Date Granted 

Cote d‘Ivoire - Customs Valuation: To allow minimum values for

the valuation for customs purposes of the goods listed in Annex I. 

January 1, 2003 July 8, 2002

Haiti - Customs Valuation: To allow a 3-year extension for the

application of the Customs Valuation Agreement.

January 30, 2003 December 20,

2001

El Salvador - Customs Valuation: Waiver was granted for the

Agreement on the Implementation of Article VII of GATT 1994 for

goods listed in Annex 1 and Annex 2.

March 7, 2003 

 (Annex 1) 

March 7, 2005

(Annex 2)

July 7, 2002

Harmonized System (HS) 1996 changes: Malaysia, Pakistan,

Panama, and Paraguay were granted individual waivers for the

introduction of HS 1996 changes to WTO Schedules of Tariff

Concessions.

April 30, 2003 May 13, 2002 

Dominican Republic - Customs Valuation: To allow the continued

use of minimum values for certain specified products.

July, 1 2003 December 20,

2001

Madagascar - Customs Valuation: To allow the continued use of

minimum values for certain specified products.

November 17, 2003 July 18, 2001

HS 2002 changes: A collective waiver was granted to Argentina,

Australia, Bulgaria, Canada, China, Croatia, Czech Republic,

Estonia, European Communities, Hungary, Iceland, India, Korea,

Latvia, Lithuania, Mexico, Nicaragua, Norway, Romania, Singapore,

Slovak Republic, Slovenia, Switzerland, Thailand, United States,

Uruguay and Hong Kong, and Macao, China for the introduction of

HS 2002 changes to WTO Schedules of Tariff Concessions.

December 31, 2003 December 11,

2002

Colombia - TRIMS: To allow continued use of certain trade related

investment measures.

December 31, 2003 December 20,

2001

Thailand - TRIMS: To allow continued use of certain trade related

investment measures.

December 31, 2003 July 31, 2001

Switzerland - Preferential Treatment for Albania and BosniaHerzegovina: To allow Switzerland to provide trade preferences.March 31, 2004 July 18, 2001

EC Transitional Regime: for the EC Autonomous Tariff Rate Quotas

on Imports of Bananas.

December 31, 2005 November 14,

2001
32

US - Caribbean Basin Economic Recovery Act: To allow the United

States to extend tariff preferences to eligible Caribbean countries

under CBERA.

December 31, 2005 November 15,

1995
33

WTO Member / Waiver Valid Through Date Granted 

Canada - CARIBCAN: To allow Canada to extend tariff preferences

to CARIBCAN nations.

December 31, 2006 October 14, 1996

Cuba - Article XV:6: To allow Cuba not to have a special exchange

arrangement, which is required for those WTO Members that are not

IMF members.

December 31, 2006 December 20,

2001

European Community - Western Balkans: To allow the EC to extend

tariff preferences to Albania, Bosnia-Herzegovina, Croatia, the

Federal Republic of Yugoslavia and the former Republic of

Macedonia.

December 31, 2006 December 8,

2000

Turkey -Bosnia: To allow Turkey to provide tariff preferences to

Bosnia-Herzegovina.

December 31, 2006 December 8,

2000

US - Former Trust Territory of the Pacific Islands: To allow the

United States to extend historical tariff preferences to the Mariana

Islands, Palau, the Marshall Islands and Micronesia.

December 31, 2006 October 14, 1996

ACP-EC Partnership Agreement: To allow waivers to Article I for the

maintenance of preferential trade between the EC and ACP

countries.

December 31, 2007 November 14,

2001

Preferential Tariff Treatment for Least Developed Countries: To allow

developing countries to extend unilateral tariff preferences to least

developed countries. 

June 30, 2009 June 15, 1999

LDC - Article 70.9 of the TRIPS Agreement with respect to

pharmaceutical products.

January 1, 2016 July 8, 2002
34

WTO SECRETARIAT PERSONNEL STATISTICS

Number of Staff Members by Job Category

Country Senior Professional Support Total

Argentina 5 3 8

Australia 8 3 11

Austria 3 2 5

Bangladesh 1 1

Barbados 1 1

Belgium 3 3

Benin 1 1

Bolivia 2 1 3

Brazil 1 3 2 6

Canada 25 3 28

Chile 2 4 6

China 3 3

Colombia 5 2 7

Congo 1 1

Costa Rica 1 1

Cote d'Ivoire 1 1

Cuba 1 1

Denmark 1 1 2

Ecuador 1 1

Egypt 5 5

Estonia 1 1

Finland 2 2 4

France 43 108 151

Germany 12 3 15

Ghana 3 3

Greece 4 4

Honduras 1 1

Hong Kong 1 1

Hungary 1 2 3

India 9 4 13

Ireland 3 8 11

Italy 11 4 15

Japan 2 2

Kenya 1 1

Korea, Republic of 2 2

Malawi 1 1

Malaysia 1 1 2

Mauritius 1 1

Mexico 5 5

Morocco 2 2

Netherlands 6 1 7

New Zealand 4 1 5

Nicaragua 1 1
35

Country Senior Professional Support Total

Nigeria 1 1

Norway 3 1 4

Pakistan 1 1

Paraguay 1 1

Peru 1 7 8

Philippines 8 8

Poland 3 2 5

Portugal 1 1 2

Romania 2 1 3

Senegal 1 1

South Africa 1 1

Spain 23 18 41

Sri Lanka 2 2 4

Sweden 3 2 5

Switzerland 20 15 35

Thailand 1 4 5

Tunisia 3 1 4

Turkey 3 3

United Kingdom 1 24 52 77

United States 1 20 3 24

Uruguay 5 4 9

Venezuela 3 3

Zambia 1 1

Zimbabwe 1 1

Total 6 318 269 593

Notes : Senior Management includes the Director General and Deputies Director General

Annual Average Salary

 Senior Management 224,886 CHF

 Professional Staff 129,006 CHF

 Support 85,959 CHF

Source : WTO Secretariat as of January 1, 2003
1

 “Applicant”column includes date the Working Party was formed. Pre-1995 dates indicate that the original WP was formed

under the GATT 1947, but was reformed as a WTO Working Party in 1995.

* Designates “least developed country” applicant.

36

WTO ACCESSION APPLICATIONS AND STATUS (as of 1-1-03)1

Applicant Status of Multilateral and Bilateral Work 

Algeria 

(1987)

GATT 1947 accession process never activated. Three Working Parties held during 2002

to review documentation. Initial goods and services market access offers circulated. Next

meeting to be scheduled after WP receives responses to questions and comments from

2002 meetings and revised goods and services offers.

Andorra 

(1997)

WP meeting on October 13, 1999 reviewed legislative implementation schedule and goods

and services market access offers. Awaiting information on legislative implementation

and circulation of revised market access offers.

Armenia

(1993)

Accession negotiations completed and accession package approved by December 2002

General Council. Awaiting parliamentary ratification.

Azerbaijan

(1997)

First WP meeting held June 2002 to review initial documentation. No market access offers

to date. 

Bahamas

(2001)

Application accepted at July 2001 General Council; has not yet submitted initial

documentation to activate the accession negotiations. 

Belarus 

(1993)

Second WP meeting scheduled for January 24 to review outstanding issues from March

2001 meeting and status of bilateral negotiations on goods and services market access.

Bosnia

Herzegovina

(1999)

Initial documentation submitted in October 2002. No market access offers to date. First

WP meeting anticipated in first half of 2003, after circulation of written responses to initial

questions and comments.

Bhutan *

(1999)

Application accepted at October 1999 General Council; has not yet submitted initial

documentation to activate the accession negotiations.

Cambodia *

(1995)

WP meeting on November 7, 2002. Next meeting in first quarter 2003 to review actions

plans for legislative implementation of WTO and status of market access negotiations.

U.S. has submitted detailed requests.

Cape Verde *

(2000)

Application accepted at July 2000 General Council; has not yet submitted initial

documentation to activate the accession negotiations. First WP meeting possible in 2003.

Iran Application for accession to the WTO circulated in September 1996; under consideration

in the General Council since July 2001.

Kazakhstan

(1996)

WP meeting held December 13, 2002. Legislative implementation remains incomplete,

and Kazakhstan has requested extensive transitions for implementation in key areas, e.g.,

customs fees, taxation, SPS, TRIMS, etc. Revised goods and services offers and updated

agenda for enactment of WTO legislation to be circulated prior to next WP meeting.

Laos *

(1998)

Initial documentation submitted in March 2001. No working party meetings or market

access offers to date.

Lebanon

(1999)

First WP meeting held October 14, 2002 to review initial documentation. No market

access offers to date.

Libya Application for accession to the WTO circulated in December 2001. No Council review to

date.

Former

Yugoslav

Republic of

Macedonia

(1995)

Accession negotiations completed and accession package approved by October 2002

General Council. Awaiting parliamentary ratification.
Applicant Status of Multilateral and Bilateral Work 

37

Nepal *

(1989)

Second WP meeting on September 11, 2002 reviewed status of legislative implementation

and sought additional information on WTO-inconsistent measures. Informal consultation

scheduled for February 2003 to discuss actions plans for implementation and status of

market access negotiations. U.S. has submitted detailed requests.

Russia 

(1993)

WP meetings held January 23-24, April 24-25, June 19-20, November 1, and December

15-17, 2002. Initial draft Working Party text circulated in March 2002. Intensive bilateral

and multilateral work on protocol, agriculture, and goods and services market access

during 2002 will continue during 2003 at WP meetings scheduled for January, March and

April 2003, and at other bilateral opportunities. Legislative implementation ongoing. 

Samoa *

(1998)

First WP meeting held March 12, 2002 to review initial documentation and initial market

access offers on goods and services. Further meetings likely during first half of 2003 to

consider action plans for WTO implementation and revised market access offers.

Saudi Arabia

(1993)

Last WP meeting and bilateral negotiations held in October 2000. Next WP meeting will

assess the status of legislative implementation and progress in market access negotiations

and review the draft WP report. Work on protocol issues and development of legislative

implementation schedule continues. 

Seychelles

(1995)

WP meeting held in March 1998 continued review of the foreign trade regime. Next WP

meeting to review status of legislative implementation. Further negotiations on goods and

services market access awaiting revised offers.

Sudan *

(1995)

Initial documentation circulated in January 1999 with additional information provided in

November 2000. No working party meetings or market access offers to date.

Syria Application for accession to the WTO first circulated in October 2001. No Council review

to date.

Taiwan

(Chinese

Taipei)

(1992)

Taiwan became the 144th Member of the WTO on January 1, 2002. 

Tajikistan 

(2001)

Application accepted at July 2001 General Council; has not yet submitted initial

documentation to activate the accession negotiations. 

Tonga 

(1995)

First WP meeting held April 26, 2001 to review initial documentation and initial market

access offers on goods and services. Further meetings likely during first half of 2003 to

consider action plans for WTO implementation and revised market access offers.

Ukraine

(1993)

WP meeting held June 25-26, 2002. Next meeting in February 2003 will review checklist

of issues and consider development of a draft WP report. Comprehensive revised goods

and services offers circulated in December 2001. Progress in market access impeded by

existence of persistent non-tariff barriers, e.g., in SPS, and lack of IPR protection. 

Bilateral discussions in March, June, and December 2002 focused on outstanding issues in

services and need for elimination of nontariff barriers to trade in goods.

Uzbekistan

(1995)

First WP meeting held July 17, 2002 to review initial documentation. No market access

offers to date.

Vanuatu *

(1995)

Formal WP meeting October 29, 2001 adopted the protocol package. General Council

approval delayed pending reconsideration of status by ni-Vanuatu Government.

Vietnam

(1995)

WP meeting on April 10, 2002 reviewed progress made by Vietnam since the last meeting,

in November 2000, in eliminating WTO inconsistent measures in place and plans for

legislative implementing of WTO provisions. Revised goods and services market access

offers expected prior to next WP meeting, expected in spring 2003.

Yemen *

(2000)

Initial documentation submitted in November 2002. No market access offers to date. First

WP meeting to be scheduled after circulation of written responses to initial questions and

comments.
Applicant Status of Multilateral and Bilateral Work 

38

Yugoslavia

(2001)

Initial documentation submitted in June 2002. No market access offers to date. First WP

meeting anticipated in first half of 2003, after circulation of written responses to initial

questions and comments.
1

 Curricula vitae containing more detailed information are available on request from the WTO Secretariat

(Council Division – Room 2025). The curricula vitae which have been submitted on diskette are also available

on the Document Dissemination Facility.

39

WORLD TRADE

ORGANIZATION

WT/DSB/19

29 March 2000

(00-1284)

INDICATIVE LIST OF GOVERNMENTAL AND

NON-GOVERNMENTAL PANELISTS

1. To assist in the selection of panelists, the DSU provides in Article 8.4 that the Secretariat shall

maintain an indicative list of governmental and non-governmental individuals.

2. In accordance with the proposals for the administration of the indicative list of panelists approved

by the DSB on 31 May 1995, the list should be completely updated every two years. For practical

purposes, the proposals for the administration of the indicative list approved by the DSB on 31 May 1995

are reproduced as an Annex to this document.

3. The attached is an updated consolidated list of governmental and non-governmental panelists.1

The list contains the names included in the previous indicative list (WT/DSB/17) circulated by the

Secretariat on 3 November 1999 and takes into account all the modifications made to that list by Members

in accordance with the requirement that the list should be updated every two years. The new names

approved by the DSB in the period between 28 October 1999 and 20 March 2000 are also included in the

attached list.
40

COUNTRY

NAME SECTORAL EXPERIENCE

AUSTRALIA ARNOTT, Mr. R.J. Trade in Goods

CHESTER, Mr. D.O. TRIPS

CHURCHE, Mr. M. Trade in Goods

GASCOINE, Mr. D.F. Trade in Goods

HAWES, Mr. D.C. Trade in Goods and Services

HIRD, Miss J.M. Trade in Goods

HUSSIN, Mr. P.A. Trade in Goods

MAY, Mr. P.H. Trade in Goods

O'CONNOR, Mr. P.R. Trade in Goods

SMITH, Mr. P.A. TRIPS

THOMSON, Mr. G.A. Trade in Goods and Services

WAINCYMER, Mr. J. Trade in Goods

YOUNG, Ms. E. Trade in Goods

CANADA BERNIER, Mr. I. Trade in Goods and Services

BRADFORD, Mr. M.V.M. Trade in Goods and Services

BROWN, Ms. C.A. Trade in Goods and Services; TRIPS

CLARK, Mr. P.J. Trade in Goods and Services

CLOSE, Ms. P. Trade in Goods

DE MESTRAL, Mr. A. Trade in Goods

EYTON, Mr. A.T. Trade in Goods

GHERSON, Mr. R. Trade in Goods

GOODWIN, Ms. K.M. Trade in Goods and Services; TRIPS

HALLIDAY, Mr. A.L. Trade in Goods and Services

HERMAN, Mr. L.L. Trade in Goods

HINES, Mr. W.R. Trade in Goods

MACMILLAN, Ms. K.E. Trade in Goods

MCRAE, Mr. D. Trade in Goods

OSTRY, Ms. S. Trade in Goods

RICHIE, Mr. G. Trade in Goods

THOMAS, Mr. J.C. Trade in Goods and Services

WINHAM, Mr. M.M. Trade in Goods
41

CHILE BIGGS, Mr. G. Trade in Goods

JARA, Mr. A. Trade in Goods and Services

MATUS, Mr. M. Trade in Goods

PEÑA, Ms. G. Trade in Goods

SAEZ, Mr. S. Trade in Goods and Services

SATELER, Mr. R. TRIPS

TIRONI, Mr. E. Trade in Goods

COLOMBIA CÁRDENAS, Mr. M.J. Trade in Goods and Services; TRIPS

IBARRA PARDO, Mr. G. Trade in Goods

JARAMILLO, Mr. F. Trade in Goods and Services

LEAL ANGARITA, Mr. M. Trade in Goods and Services

OROZCO JARAMILLO, Ms. C.Y. Trade in Goods

CUBA CABALLERO RODRÍGUEZ, Mr. E. Trade in Goods and Services

CZECH REP. JUNG, Mr. Z. Trade in Goods and Services

PALEÜKA, Mr. P. Trade in Goods and Services

PRAVDA, Mr. M. Trade in Goods

ŠRON-K, Mr. I. TRIPS

EGYPT ABOUL-ENEIN, Mr. M.I.M. Trade in Goods and Services

HATEM, Mr. S.A. Trade in Goods and Services

SHAHIN, Ms. M. Trade in Goods and Services; TRIPS

SHARAFELDIN, Mr. A. Trade in Goods; TRIPS

ZAHRAN, Mr. M.M. Trade in Goods and Services; TRIPS

EUROPEAN COMMUNITIES

AUSTRIA BENEDEK, Mr. W. Trade in Goods

MARTINS, Mr. R. Trade in Goods

REITERER, Mr. M.G.K. Trade in Goods and Services; TRIPS

WEISS, Mr. J.F. Trade in Goods and Services; TRIPS

ZEHETNER, Mr. F. Trade in Goods
42

EUROPEAN 

COMMUNITIES (cont'd)

BELGIUM DASSESSE, Mr. M.P.A. Trade in Goods and Services

DIDIER, Mr. P. Trade in Goods

VANDER SCHUEREN, Ms. P. Trade in Goods and Services

DENMARK BOESGAARD, Mr. H. Trade in Goods

FINLAND BERGHOLM, Mr. K.A. Trade in Goods

JULIN, Mr. J.K.J. Trade in Goods and Services

LUOTONEN, Mr. Y.K.D. Trade in Goods

PULLINEN, Mr. M.Y. Trade in Goods

RANTANEN, Mr. P.I. Trade in Goods

FRANCE ARMAIGNAC, Ms. M.-C. Trade in Services; TRIPS

BEAURAIN, Mr. C. Trade in Services

COMBALDIEU, Mr. J.C. TRIPS

DELLEUR, Mr. P. Trade in Services

JENNY, Mr. F.Y. Trade in Goods and Services; TRIPS

METZGER, Mr. J-M. Trade in Goods

GERMANY BARTH, Mr. D. Trade in Services

BARTKOWSKI, Mr. D.H.H. Trade in Services

DELBRÜCK, Mr. K. Trade in Goods

HILF, Mr. M. Trade in Goods and Services

MENG, Mr. W. Trade in Goods, TRIPS

MÖHLER, Mr. R. Trade in Goods

von MÜHLENDAHL, Mr. A. TRIPS

OPPERMANN, Mr. T. Trade in Goods; TRIPS

PETERSMANN, Mr. E-U Trade in Goods and Services; TRIPS

TANGERMANN, Mr. S. Trade in Goods

WITT, Mr. P.J. Trade in Goods

GREECE MYROGIANNIS, Mr. G. Trade in Goods

STANGOS, Mr. P.N. Trade in Goods and Services; TRIPS

EUROPEAN 

COMMUNITIES (cont'd)

IRELAND LONG, Mr. R. Trade in Goods; TRIPS

MATTHEWS, Mr. A.H. Trade in Goods

MOCKLER, Mr. T.F. Trade in Goods

ITALY GERBINO, Mr. M. Trade in Goods

GIARDINA, Mr. A. Trade in Goods and Services

SACERDOTI, Mr. G. Trade in Goods and Services
43

SCHIRATTI, Mr. G. Trade in Goods

NETHERLANDS BLOKKER, Mr. N.M. Trade in Goods

HOEKMAN, Mr. B.M. Trade in Goods and Services; TRIPS

van de LOCHT, Mr. P. Trade in Goods and Services

SPAIN CASTILLO URRUTIA, Mr. J.A. Trade in Goods

SWEDEN ANDERSSON, Mr. T.M. Trade in Goods

ANELL, Mr. L. Trade in Goods; TRIPS

FALLENIUS, Mr. C.H. Trade in Goods

HÅKANSSON, Mr. G.P.-O. Trade in Services

HOLGERSSON, Mr. J. Trade in Goods and Services

KLEEN, Mr. P. Trade in Goods

LINDSTRÖM, Mr. J.M. Trade in Goods

MANHUSEN, Mr. C. Trade in Goods and Services

RISINGGÅRD, Mr. A.B. Trade in Goods

RODIN, Mr. A. Trade in Goods; TRIPS

STÅLBERG, Mr. L.A. Trade in Goods

UNITED KINGDOM ARKELL, Mr. J. Trade in Services

CROFT, Mr. R.H.F. Trade in Services

HINDLEY, Mr. B.V. Trade in Goods and Services

JOHNSON, Mr. M.D.C. Trade in Goods

MUIR, Mr. T. Trade in Goods and Services; TRIPS

PLENDER, Mr. R. Trade in Goods

EUROPEAN

COMMUNITIES (cont'd)

UNITED KINGDOM (cont'd) ROBERTS, Mr. C.W. Trade in Goods and Services

TOULMIN, Mr. J.K. Trade in Services

HONG KONG, CHINA CARTLAND, Mr. M.D. Trade in Goods and Services

FOOTMAN, Mr. R. Trade in Goods and Services

LO, Mr. P.Y.F. Trade in Goods

MILLER, Mr. J.A. Trade in Goods and Services

SZE, Mr. M.C.C. Trade in Goods

HUNGARY FURULYÁS, Mr. F. Trade in Goods

LAKATOS, Mr. A. Trade in Goods and Services

ICELAND BJÖRGVINSSON, Mr. D.T. Trade in Goods and Services

JÓHANNSSON, Mr. E.M. Trade in Goods

SANDHOLT, Mr. B. Trade in Goods
44

INDIA AGARWAL, Mr. V.K. Trade in Goods; TRIPS

BHATTACHARYA, Mr. G.C. Trade in Goods

CHANDRASEKHAR, Mr. K.M Trade in Goods and Services; TRIPS

DAS, Mr. B.L. Trade in Goods

DASGUPTA, Mr. J. Trade in Goods

GANESAN, Mr. A.V. Trade in Goods, Services; TRIPS

GOYAL, Mr. A. Trade in Services

KUMAR, Mr. M. Trade in Goods and Services

MOHANTY, Mr. P.K. Trade in Goods

MUKERJI, Mr. A. Trade in Goods and Services; TRIPS

PRASAD, Ms. A. Trade in Goods and Services; TRIPS

RAI, Mr. P. TRIPS

RAMAKRISHNAN, Mr. N. Trade in Goods

RAO, Mr. P.S. Trade in Goods

REGE, Mr. N.V. Trade in Goods

SAJJANHAR, Mr. A. Trade in Goods

SHARMA, Mr. L. Trade in Goods and Services; TRIPS

INDIA (cont'd) VENUGOPAL, Mr. K. Trade in Goods; TRIPS

WATAL, Mrs. J. TRIPS

ZUTSHI, Mr. B.K. Trade in Goods and Services; TRIPS

ISRAEL ALTUVIA, Mr. M. Trade in Goods

GABAY, Mr. M. TRIPS

HARAN, Mr. E.F. Trade in Services

SEMADAR, Mr. M. Trade in Goods

SHATON, Mr. M. Trade in Goods and Services

TALBAR, Mr. M.A. Trade in Goods

WEILER, Mr. J. Trade in Goods

JAPAN ARAKI. Mr. I Trade in Goods and Services; TRIPS

ASAKURA, Mr. H. Trade in Goods

ISHIGURO, Mr. K. Trade in Goods and Services; TRIPS

IWASAWA, Mr. Y. Trade in Goods

KANDA, Mr. H. Trade in Services

KEMMOCHI, Mr. N. Trade in Goods and Services

KOTERA, Mr. A. Trade in Goods and Services

OHARA, Mr. Y. Trade in Goods; TRIPS

SHIMIZU, Mr. A. Trade in Goods

TAKASE, Mr. T. Trade in Goods and Services

TSURUOKA, Mr. K. Trade in Services

KOREA CHANG, Mr. S.W. Trade in Goods

CHO, Mr. D.Y. Trade in Goods and Services

CHO, Mr. T-U Trade in Goods

CHOI, Mr. B.I. Trade in Services
45

KIM, Mr. J.B. Trade in Goods

LEE, Mr. J. Trade in Goods

PARK, Mr. N. Trade in Goods

YUN, Mr. Y. G. Trade in Goods

MADAGASCAR ANDRIANARIVONY, Mr. M. Trade in Goods and Services; TRIPS

MAURITIUS BHUGLAH, Mr. A. Trade in Goods and Services

NEW ZEALAND ARMSTRONG, Mr. W.M.V. Trade in Goods; TRIPS

CARSON, Mr. C.B. Trade in Goods

FALCONER, Mr. C.D. Trade in Goods

FALCONER, Mr. W.J. Trade in Goods and Services; TRIPS

GROSER, Mr. T. Trade in Goods

HAMILTON, Mr. P.W Trade in Goods

HARVEY, Mr. M.W. Trade in Goods

HIGGIE, Ms. D.C. Trade in Goods

KENNEDY, Mr. P.D. Trade in Goods

MACEY, Mr. A. Trade in Goods; TRIPS

MCPHAIL, Mr. A.H. Trade in Goods

NOTTAGE, Mr. M.J. Trade in Goods

SLADE, Ms. M. Trade in Goods and Services; TRIPS

TRAINOR, Mr. M.J. Trade in Goods; TRIPS

WALKER, Mr. D.J. Trade in Goods and Services

WOODFIELD, Mr. E.A. Trade in Goods

NORWAY LILLERUD, Mr. K. Trade in Goods

LUNDBY, Mr. O. Trade in Goods and Services; TRIPS

SELAND, Mr. H.A. Trade in Goods and Services; TRIPS

TØNSETH, Mr. D. Trade in Goods and Services; TRIPS

PANAMA GONZALEZ, Mr. C.E. Trade in Goods and Services

POLAND PIETRAS, Mr. J. Trade in Services

QATAR MAKKI, Mr. F. Trade in Goods and Services

SRI LANKA JAYASEKERA, Mr. D. Trade in Goods; TRIPS

SWITZERLAND BALDI, Mr. M. Trade in Services

BLATTNER, Mr. N. Trade in Services

CHAMBOVEY, Mr. D. Trade in Goods

COTTIER, Mr. Th. Trade in Goods and Services; TRIPS

GETAZ, Mr. H.A. Trade in Services

SWITZERLAND (cont'd) HÄBERLI, Mr. C Trade in Goods

INEICHEN-FLEISCH, Ms. M.-G. Trade in Goods and Services
46

KRAFFT, Mr. —C. Trade in Goods

TRAN, Ms. T.T.-L. TRIPS

WASESCHA, Mr. L. Trade in Goods and Services; TRIPS

WEBER, Mr. R. Trade in Services

UNITED STATES BIRENBAUM, Mr. D.E. Trade in Goods

GORDON, Mr. M.W. Trade in Goods

GREENWALD, Mr. J.A. Trade in Goods; TRIPS

HUDEC, Mr. R.E. Trade in Goods and Services

KASSINGER, Mr. T.W. Trade in Goods and Services

KIRK, Mr. M.K. TRIPS

LICHTENSTEIN, Ms. C.C. Trade in Services

PARTAN, Mr. D.G. Trade in Goods

REYNA, Mr. J.V. Trade in Goods and Services

VERRILL, Jr. Mr. C.O. Trade in Goods

URUGUAY AMORÍN, Mr. C. Trade in Goods; TRIPS

ROSSELLI, Mr. A.O. Trade in Goods

VANERIO, Mr. G. Trade in Goods and Services

VENEZUELA ESCOBAR, Mr. J.B. Trade in Services

MARQUEZ, Mr. G. Trade in Services
47

ANNEX

Administration of the Indicative List

4. To assist in the selection of panelists, the DSU provides in Article 8.4 that the Secretariat shall

maintain an indicative list of qualified governmental and non-governmental individuals. Accordingly, the

Chairman of the DSB proposed at the 10 February meeting that WTO Members review the roster of nongovernmental panelists established on 30 November 1984 (BISD 31S/9) (hereinafter referred to as the

“1984 GATT Roster”) and submit nominations for the indicative list by mid-June 1995. On 14 March,

The United States delegation submitted an informal paper discussing, amongst other issues, what

information should accompany the nomination of individuals, and how names might be removed from the

list. The DSB further discussed the matter in informal consultations on 15 and 24 March, and at the DSB

meeting on 29 March. This note puts forward some proposals for the administration of the indicative list,

based on the previous discussions in the DSB.

General DSU requirements

2. The DSU requires that the indicative list initially include “the roster of governmental and nongovernmental panelists established on 30 November 1984 (BISD 31S/9) and other rosters and indicative lists

established under any of the covered agreements, and shall retain names of persons on those rosters and

indicative lists at the time of entry into force of the WTO Agreement” (DSU 8.4). Additions to the

indicative list are to be made by Members who may “periodically suggest names of governmental and nongovernmental individuals for inclusion on the indicative list, providing relevant information on their

knowledge of international trade and of the sectors or subject matter of the covered agreements.” The names

“shall be added to the list upon approval by the DSB” (DSU 8.4).

Submission of information

3. As a minimum, the information to be submitted regarding each nomination should clearly reflect the

requirements of the DSU. These provide that the list “shall indicate specific areas of experience or expertise

of the individuals in the sectors or subject matter of the covered agreements” (DSU 8.4). The DSU also

requires that panelists be “well-qualified governmental and/or non-governmental individuals, including

persons who have served on or presented a case to a panel, served as a representative of a Member or of a

contracting party to GATT 1947 or as a representative to the Council or Committee of any covered

agreement or its predecessor agreement, or in the Secretariat, taught or published on international trade law

or policy, or served as a senior trade policy official of a Member” (DSU 8.1).

4. The basic information required for the indicative list could best be collected by use of a standardized

form. Such a form, which could be called a Summary Curriculum Vitae, would be filled out by all nominees

to ensure that relevant information is obtained. This would also permit information on the indicative list to

be stored in an electronic database, making the list easily updateable and readily available to Members and

the Secretariat. As well as supplying a completed Summary Curriculum Vitae form, persons proposed for

inclusion on the indicative list could also, if they wished, supply a full Curriculum Vitae. This would not,

however, be entered into the electronic part of the database.

Updating of indicative list

5. The DSU does not specifically provide for the regular updating of the indicative list. In order to

maintain the credibility of the list, it should however be completely updated every two years. Within the

first month of each two-year period, Members would forward updated Curricula Vitae of persons appearing

on the indicative list. At any time, Members would be free to modify the indicative list by proposing new

names for inclusion, or specifically requesting removal of names of persons proposed by the Member who

were no longer in a position to serve, or by updating the summary Curriculum Vitae. 
48

6. Names on the 1984 GATT Roster that are not specifically resubmitted, together with up-to-date

summary Curriculum Vitae, by a Member before 31 July 1995 would not appear after that date on the

indicative list. 

Other rosters

7. The Decision on Certain Dispute Settlement Procedures for the GATS (S/L/2 of 4 April 1995),

adopted by the Council for Trade in Services on 1 March 1995, provides for a special roster of panelists with

sectoral expertise. It states that "panels for disputes regarding sectoral matters shall have the necessary

expertise relevant to the specific services sectors which the dispute concerns." It directs the Secretariat to

maintain the roster and "develop procedures for its administration in consultation with the Chairman of the

Council." A working document (S/C/W/1 of 15 February 1995) noted by the Council for Trade in Services

states that “the roster to be established under the GATS pursuant to this Decision would form part of the

indicative list referred to in the DSU.” The specialized roster of panelists under the GATS should therefore

be integrated into the indicative list, taking care that the latter provides for a mention of any service sectoral

expertise of persons on the list.

8. A suggested format for the Summary Curriculum Vitae form for the purposes of maintaining the

Indicative List is attached as an Annex.
49

Summary Curriculum Vitae

for Persons Proposed for the Indicative List

1. Name: full name

2. Sectoral Experience

List here any particular sectors of expertise: (e.g. 

technical barriers, dumping, financial services, 

intellectual property, etc.)

3. Nationality(ies) all citizenships

4. Nominating Member: the nominating Member

5. Date of birth: full date of birth

6. Current occupations: year beginning, employer, title,

responsibilities

7. Post-secondary education year, degree, name of institution

8. Professional qualifications year, title

9. Trade-related experience in Geneva in 

the WTO/GATT system

a. Served as a panelist

b. Presented a case to a panel

c. Served as a representative of a contracting party or

member to a WTO or GATT body, or as an officer

thereof

d. Worked for the WTO or GATT Secretariat

year, dispute name, role as

chairperson/member

year, dispute name, representing

which party

year, body, role

year, title, activity

10. Other trade-related experience

a. Government trade work

b. Private sector trade work

year, employer, activity

year, employer, activity

11. Teaching and publications

a. Teaching in trade law and policy

b. Publications in trade law and policy

year, institution, course title

year, title, name of periodical/book,

author/editor (if book)

__________
1

 WT/DSB/19.

50

WORLD TRADE

ORGANIZATION

WT/DSB/19/Add.1

26 June 2001

(01-3178)

INDICATIVE LIST OF GOVERNMENTAL AND

NON-GOVERNMENTAL PANELISTS

Addendum

5. At its meetings on 18 May, 26 September, 23 October, 12 December 2000 and 1 February,

16 May and 20 June 2001, the Dispute Settlement Body approved the following names for inclusion on the

Indicative List of Governmental and Non-Governmental Panelists.1

COUNTRY

NAME SECTORAL EXPERIENCE

CÔTE D'IVOIRE GOSSET, Mme. M. Trade in Goods; TRIPS

EGYPT RIAD, Mr. T.F. Trade in Goods and Services; TRIPS

EUROPEAN COMMUNITIES

AUSTRIA WAAS, Mr. G. Trade in Goods and Services; TRIPS

BELGIUM VAN DER BORGHT, Mr. K. Trade in Goods

FRANCE PHAN VAN PHI, Mr. R. Trade in Goods

NETHERLANDS BRONCKERS, Mr. M. Trade in Goods and Services; TRIPS

ENGERING, Mr. F.A. Trade in Goods and Services

INDIA CHAUDHURI, Mr. S. Trade in Goods and Services

KAUSHIK, Mr. A. Trade in Goods; TRIPS

PRABHU, Mr. P.P. Trade in Goods; TRIPS

MAURITIUS BEEKARRY, Mr. N. Trade in Goods and Services

PERU DIEZ LIZARDO, Mr. J. Trade in Goods

TURKEY KAÇAR, Mr. B. Trade in Goods
51

__________

Note: The Permanent Mission of Chile has informed the Secretariat that the name of Ms. C.L. Guarda

should be removed from the Indicative List of Governmental and Non-Governmental Panelists

due to the fact that she joined the WTO Secretariat as Director of the Market Access Division.

Also, the Permanent Mission of India has informed the Secretariat that the name of Mr. A. V.

Ganesan should be removed from the Indicative List of Governmental and Non-Governmental

Panelists due to the fact that he was appointed as a member of the Appellate Body.
WORLD TRADE

ORGANIZATION

WT/DSB/W/187

26 February 2002

(02-0967)

Dispute Settlement Body

8 March 2002

PROPOSED NOMINATIONS FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

The following additional names have been proposed for inclusion on the Indicative List of

Governmental and Non-Governmental Panelists in accordance with Article 8.4 of the DSU.

_______________

COUNTRY NAME SECTORAL EXPERIENCE

BRAZIL ABREU, Mr. M. Trade in Goods and Services

ARAUJO, Mr. J.T. Trade in Goods

BARRAL, Mr. W.O. Trade in Goods

BASSO, Ms. M. Trade in Goods; TRIPS

LEMME, Ms. M.C. Trade in Goods

MAGALHÃES, Mr. J.C. Trade in Goods

MARCONINI, Mr. M. Trade in Services

MOTTA VEIGA, Mr. P.L.C. Trade in Goods and Services

MOURA ROCHA, Mr. B. Trade in Services

NAIDIN, Ms. L.C. Trade in Goods

OLIVEIRA FILHO, Mr. G.J. Trade in Goods

RIOS, Ms. S.M. Trade in Goods

SOARES, Mr. G.F. TRIPS

THORSTENSEN, Ms. V.H. Trade in Goods

EUROPEAN

COMMUNITIES

SPAIN DÍAZ MIER, Mr. M.Á. Trade in Services

LÓPEZ DE SILANES MARTÍNEZ Mr. J.P. Trade in Goods and Services

INDIA AGRAWAL, Mr. R.P. Trade in Goods and Services; TRIPS

__________

52
1Curricula Vitae containing more detailed information are available on request from the WTO Secretariat

(Council and TNC Division – Room 3105).

53

WORLD TRADE

ORGANIZATION

WT/DSB/W/191

8 May 2002

(02-2610)

Dispute Settlement Body

22 May 2002

PROPOSED NOMINATIONS FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

The following additional names have been proposed for inclusion on the Indicative List of

Governmental and Non-Governmental Panelists in accordance with Article 8.4 of the DSU.1

_______________

COUNTRY NAME SECTORAL EXPERIENCE

ARGENTINA NISCOVOLOS, Mr. L.P. Trade in Services

CUBA HERNÁNDEZ, Mr. A. Trade in Goods and Services

MARZIOTA DELGADO, Mr. E.A. Trade in Goods and Services

PAKISTAN NAYYAR, Mr. S.I.M. Trade in Goods and TRIPS

__________
WT/DSB/W/

Page 54

1Curricula Vitae containing more detailed information are available on request from the WTO

Secretariat (Council and TNC Division – Room 3105).

54

WORLD TRADE

ORGANIZATION

WT/DSB/W/196

14 June 2002

(02-3329)

Dispute Settlement Body

24 June 2002

PROPOSED NOMINATIONS FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

The following additional names have been proposed for inclusion on the Indicative List of

Governmental and Non-Governmental Panelists in accordance with Article 8.4 of the DSU.1

_______________

COUNTRY NAME SECTORAL EXPERIENCE

PANAMA FRANCIS LANUZA, Ms Y. Trade in Goods and Services

HARRIS ROTKIN, Mr N. Trade in Goods and Services

SALAZAR FONG, Ms D. Trade in Goods

UNITED STATES BROWN-WEISS, Ms E. Trade in Goods and Services

GANTZ, Mr D. Trade in Goods

HELFER, Ms R.T. Trade in Services

LAYTON, Mr D. Trade in Goods

McGINNIS, Mr J. Trade in Goods; TRIPS

SHERMAN, Mr S. Trade in Goods

__________
1Curricula Vitae containing more detailed information are available on request from the WTO

Secretariat (Council and Trade Negotiations Division – Room 3105).

55

WORLD TRADE

ORGANIZATION

WT/DSB/W/208

1 November 2002

(02-5999)

Dispute Settlement Body

11 November 2002

PROPOSED NOMINATIONS FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

The following additional names have been proposed for inclusion on the Indicative List of

Governmental and Non-Governmental Panelists in accordance with Article 8.4 of the DSU.1

_______________

COUNTRY NAME SECTORAL EXPERIENCE

CROATIA ŠARÑEVIÇ, Mr. P Trade in Goods and Services

EUROPEAN

COMMUNITIES

BELGIUM ZONNEKEYN, Mr. G.A. Trade in Goods

UNITED KINGDOM QURESHI, Mr. A.H. Trade in Goods

HONG KONG, CHINA CHEUNG, Mr. P.K.F. TRIPS

LEUNG, Ms. A.K.L. TRIPS

LITTLE, Mr. D. Trade in Goods and Services

SELBY, Mr. S.R. TRIPS

__________
WT/DSB/W/208

Page 56

1Curriculum Vitae containing more detailed information is available on request from the WTO

Secretariat (Council and Trade Negotiations Division – Room 3105).

56

WORLD TRADE

ORGANIZATION

WT/DSB/W/211

18 November 2002

(02-6380)

Dispute Settlement Body

28 November 2002

PROPOSED NOMINATION FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

The following name has been proposed for inclusion on the Indicative List of Governmental and

Non-Governmental Panelists in accordance with Article 8.4 of the DSU.1

_______________

COUNTRY NAME SECTORAL EXPERIENCE

URUGUAY WHITELAW, Mr. J.A. Trade in Goods

__________
1Curricula Vitae containing more detailed information are available on request from the WTO

Secretariat (Council and Trade Negotiations Division – Room 3105).

57

WORLD TRADE

ORGANIZATION

WT/DSB/W/215

9 December 2002

(02-6789)

Dispute Settlement Body

19 December 2002

PROPOSED NOMINATIONS FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

The following additional names have been proposed for inclusion on the Indicative List of

Governmental and Non-Governmental Panelists in accordance with Article 8.4 of the DSU.1

_______________

COUNTRY NAME SECTORAL EXPERIENCE

COLOMBIA OROZCO, Ms. A.M. Trade in Goods

BARBERI, Mr. F. Trade in Goods

ECUADOR CEVALLOS, Mr. A.P. Trade in Goods

NEW ZEALAND FARRELL, Mr. R. Trade in Goods

__________
58

WORLD TRADE ORGANIZATION

ORGANISATION MONDIALE DU COMMERCE

ORGANIZACIÓN MUNDIAL DEL COMERCIO

WT/DSB/W/215/Corr.1

12 December 2002

(02-6878)

Dispute Settlement Body

19 December 2002

PROPOSED NOMINATIONS FOR THE INDICATIVE LIST OF

GOVERNMENTAL AND NON-GOVERNMENTAL PANELISTS

Corrigendum

In the proposed nominations for the Indicative List of Governmental and Non-Governmental

Panelists (WT/DSB/W/215), the name under Ecuador should read as follows:

COUNTRY NAME SECTORAL EXPERIENCE

ECUADOR PINOARGOTE CEVALLOS, Mr. A. Trade in Goods

Organe de règlement des différends

19 décembre 2002

LISTE INDICATIVE DE PERSONNES AYANT OU NON DES ATTACHES

AVEC DES ADMINISTRATIONS NATIONALES APPELÉES À FAIRE

PARTIE DE GROUPES SPÉCIAUX - DÉSIGNATIONS PROPOSÉES

Corrigendum

Dans les désignations proposées pour la liste indicative de personnes ayant ou non des attaches

avec des administrations nationales appelées à faire partie de groupes spéciaux (WT/DSB/W/215), le nom

indiqué pour l'Équateur doit se lire comme suit:

PAYS NOM EXPÉRIENCE SECTORIELLE

ÉQUATEUR M. A. PINOARGOTE CEVALLOS Commerce des marchandises

Órgano de Solución de Diferencias

19 de diciembre de 2002

CANDIDATURAS PROPUESTAS PARA SU INCLUSIÓN EN LA LISTA INDICATIVA 

DE EXPERTOS GUBERNAMENTALES Y NO GUBERNAMENTALES 

QUE PUEDEN SER INTEGRANTES DE GRUPOS ESPECIALES

Corrigendum

En las candidaturas propuestas para su inclusión en la lista indicativa de expertos

gubernamentales y no gubernamentales que pueden ser integrantes de grupos especiales

(WT/DSB/W/215), el nombre correspondiente al epígrafe "Ecuador" debe ser el siguiente:

PAÍS NOMBRE EXPERIENCIA SECTORIAL

ECUADOR PINOARGOTE CEVALLOS, Sr. A. Comercio de Mercancías

__________
59

MEMBERSHIP OF THE WTO APPELLATE BODY

The membership of the WTO Appellate Body is as follows:

Mr. G M Abi-Saab (Egypt), Mr. James Bacchus (United States), 

Mr. A V Ganesan (India), Mr. Yasuhei Taniguchi (Japan),

Professor Luiz Olavo Baptisa, Mr. John S. Lockhart,

Professor Giorgio Sacerdoti.

BIOGRAPHICAL NOTES:

Georges Michel Abi-Saab

Born in Egypt on 3 June 1933, Georges Michel Abi-Saab is Professor of International Law at the

Graduate Institute of International Studies in Geneva, Honorary Professor at Cairo University’s Faculty of

Law, and a Member of the Institute of International Law. 

Mr Abi-Saab served as consultant to the Secretary-General of the United Nations for the preparation of

two reports on "Respect of Human Rights in Armed Conflicts" (1969 and 1970), and for the report on

"Progressive Development of Principles and Norms of International Law relating to the New International

Economic Order" (1984). He has also served as a Judge on the Appeals Chamber of the International

Criminal Tribunals for the former Yugoslavia and for Rwanda, and as a Member of the Administrative

Tribunal of the International Monetary Fund and of various international arbitral tribunals.

Mr Abi-Saab is the author of two courses at the Hague Academy of International Law, and of several

books and articles, including "International Crises and the Role of Law: The United Nations Operation in

the Congo 1960-1964" (Oxford University Press 1978).

James Bacchus

James Bacchus of the United States, born 1949, is an attorney who has been closely involved with

international trade matters in both his public and professional careers for more than twenty years.

During his tenure in the US Congress, where he served two terms of office in the House of

Representatives from 1991-1994, he was appointed to the ad hoc Trade Policy Coordinating Committee.

From 1979-1981, he had served as Special Assistant to the United States Trade Representative Reubin

Askew. Since leaving Congress in January 1995, Mr. Bacchus has returned to the Florida-based private

law firm of Greenberg Traurig where he began his legal career before he joined the USTR in 1979. He has

practiced widely in the areas of corporate banking and international law.

Mr. Bacchus' educational distinctions include Bachelor of Arts with High Honours in History, Vanderbilt

University, 1971; Master of Arts in History, Yale University, 1973 and Woodrow Wilson Fellow; and

Juris Doctor, Florida State University College of Law, 1978. He has been the Thomas P. Johnson

Distinguished Visiting Scholar at Rollins College in Florida, and remains an Adjunct Professor in the

Department of Politics at Rollins, where he teaches political philosophy and public policy on a variety of

issues including international trade.

Arumugamangalam Venkatachalam Ganesan

Born in India on 7 June 1935, Arumugamangalam Venkatachalam Ganesan served in the Government of

India for 34 years until his retirement on 30 June 1993. During his long career, he held various positions

in his Government and at the United Nations Headquarters in New York, including: Commerce Secretary

(1991-1993) in charge of India’s foreign trade policy and chief negotiator of India in the Uruguay Round;
60

Civil Aviation Secretary (1990-1991); Additional Secretary at the Ministry of Industry (1986-1989) in

charge of industrial policies, foreign investment in India, administration of India’s laws on patents,

designs and trade marks, closely associated with the TRIPS agenda in the Uruguay Round; and

Inter-Regional Adviser (1980-1985) at the United Nations Centre on Transnational Corporations in New

York.

Since his retirement from government service, Mr Ganesan has been active as a consultant for the UNDP

and for the private and public sectors in India. He was, until recently, a member of the Permanent Group

of Experts under the WTO Agreement on Subsidies and Countervailing Measures; a member of the Indian

Government's Trade Advisory Committee on multilateral trade negotiations; and a member of a WTO

dispute settlement panel examining the European Communities’ complaint against Section 110(5) of the

US Copyright Act.

Mr Ganesan has written numerous newspaper articles and monographs dealing with the Uruguay Round,

the WTO and the Seattle Ministerial Conference. He is the author of several papers on trade and

investment issues published by various UN agencies such as UNCTAD and UNIDO, and has contributed

to many books published in India concerning the Uruguay Round and intellectual property rights.

Yasuhei Taniguchi

Born in Japan on 26 December 1934, Yasuhei Taniguchi is Professor of Law at Tokyo Keizai University,

and an Attorney at Law in Tokyo. He has been a Visiting Professor at several universities, including:

University of Hong Kong; Georgetown University Law Center, Washington DC; Stanford Law School,

University of California; Murdoch University, Perth; University of Melbourne; Harvard Law School;

University of Paris XII; and New York University School of Law.

 Mr Taniguchi is affiliated to several legal institutions including the Japan Commercial Arbitration

Association; International Council for Commercial Arbitration; the American Law Institute; and the

Chartered Institute of Arbitrators. He has handled many international arbitration cases and is listed in the

arbitrators’ panel of the Japan Commercial Arbitration Association; the American Arbitration Association;

the Hong Kong International Arbitration Centre; the China International Economic and Trade

Arbitration Commission; and the Cairo Regional Centre of Commercial Arbitration.

He has written numerous books and articles in the fields of civil procedure, arbitration, judicial

system/legal profession, and comparative/international law. His publications have appeared in Japanese,

Chinese, English, French, Italian and German.

Luiz Olavo Baptista

Born in Brazil on 24 July 1938, Luiz Olavo Baptista is Professor of Law at the Department of

International Law, University of Sao Paulo Law School. He has been practising law for more than thirty

years as lawyer, counsel and arbitrator in Brazil and abroad, advising corporations, governments and

individuals.

Professor Baptista obtained Full Professorship of International Law in Sao Paulo University Law

School in 1993, and has written many books and articles concerning new and complex legal issues,

particularly those related to international business, trade and foreign investments.

Professor Baptista was one of the pioneers in studying international arbitration in Brazil, and has a

long experience in arbitration procedures in different jurisdictions. He participates as a member of the

arbitral corps of several associations, and has acted as advisor for Brazilian and international

organizations. He also has extensive experience in the issuance of legal opinions, structuring and

preparation of merger and acquisition and joint ventures agreements.
61

John S. Lockhart

Born in Australia on 2 October 1935, John S Lockhart has been Executive Director at the Asian

Development Bank in the Philippines since July 1999, working closely with developing member countries

on the development of programmes directed at poverty alleviation through the promotion of economic

growth. His other duties at the ADB include the development of law reform programmes and provision of

advice on legal questions, notably the interpretation of the ADB's Charter, international treaties and UN

instruments.

Prior to joining the ADB, Mr Lockhart served as Judicial Reform Specialist at the World Bank

focusing on strengthening legal and judicial institutions and working closely with developing countries

and economies in transition in their projects of judicial and legal reform.

Since graduating in law from the University of Sydney in 1958, Mr Lockhart's professional

experience has included: Judge, Federal Court of Australia (1978-1999); President of the Australian

Competition Tribunal (1982-1999); Deputy President of the Australian Copyright Tribunal (1981-1997);

and Queen's Counsel, Australia and the United Kingdom Privy Council (1973-1978).

Giorgio Sacerdoti

Born in France on 2 March 1943, Giorgio Sacerdoti has been Professor of International Law and

European Law at Bocconi University, Milan, Italy, since 1986.

Professor Sacerdoti has held various posts in the public sector including: Vice-Chairman of the

OECD Working Group on Bribery in International Business Transactions (since 1999); Panellist at the

International Centre for Settlement of Investment Disputes (since 1981); and Consultant to the Council of

Europe (1996), UNCTAD (1998-2000), World Bank (1999-2000) in matters related to international

investments, trade, bribery, development and good governance. In the private sector, he has often served

as arbitrator and chairman of arbitration tribunals and in ad hoc arbitration proceedings for the settlement

of international commercial disputes.

After graduating from the University of Milan with a law degree summa cum laude in 1965,

Professor Sacerdoti gained a Master in Comparative Law from Columbia University Law School as a

Fulbright Fellow in 1967. He was admitted to the Milan bar in 1969, and to the Supreme Court of Italy in

1979. He is a Member of the Committee on International Trade Law of the International Law Association.

Source: WTO Secretariat
62

Where to Find More Information on the WTO

Information about the WTO and trends in international trade is available to the public at the following Internet sites:

 The USTR home page: http://www.ustr.gov

 The WTO home page: http://www.wto.org

U.S. submissions are available electronically on the WTO website using the Document Dissemination Facility (DDF), which can retrieve

an electronic copy by the “document symbol”. Electronic copies of U.S. submissions are also available at the USTR website.

Examples of information available on the WTO home page include:

Descriptions of the Structure and Operations of the WTO, such as:

WTO Organizational Chart

Biographic backgrounds

Membership

General Council activities

WTO News, such as:

Status of dispute settlement cases

Press Releases on Appointments to WTO Bodies, Appellate Body

Reports and Panel Reports, and others

Schedules of future WTO meetings 

Summaries of Trade Policy Review Mechanism reports on

individual Members’ trade practices

Resources including Official Documents, such as:

Notifications required by the Uruguay Round Agreements

Working Procedures for Appellate Review

Special Studies on key WTO issues

On-line document database where one can find and download

official documents

Legal Texts of the WTO agreements

WTO Annual Reports

Community/Forums, such as:

Media

NGO’s

General public news and chat rooms

Trade Topics, such as:

Briefing Papers on WTO activities in individual sectors,

including goods, services, intellectual property, and other topics

Disputes and Dispute Reports

WTO publications may be ordered directly from the following

sources:

The World Trade Organization

 Publications Services

Centre William Rappard

Rue de Lausanne 154

CH - 1211 Geneva 21

Switzerland

tel:

 (41 22) 739-5208 

fax:

 (41 22) 739-5792

e-mail: publications@wto.org

Berman Associates

4611-F Assembly Drive

Lanham, Md. 20706-4391

tel:

800/274-4888

301/459-7666

fax:

301/459-0056
1

 Members with whom the United States maintains bilateral quota arrangements under the provisions of the

Agreement on Textiles and Clothing are: Bahrain, Bangladesh, Brazil, Bulgaria, Burma/Myanmar, Colombia, Costa

Rica, Czech Republic, Dominican Republic, Egypt, El Salvador, Fiji, Guatemala, Hong Kong/China, Hungary, India,

Indonesia, Jamaica, Kenya, Kuwait, Macau, Malaysia, Mauritius, Pakistan, Philippines, Poland, Qatar, Romania,

Singapore, Slovak Republic, Sri Lanka, Thailand, Turkey, United Arab Emirates and Uruguay.

1

LIST OF TRADE AGREEMENTS

I. Agreements That Have Entered Into Force

Following is a list of trade agreements entered into by the United States since 1984 and monitored by the

Office of the United States Trade Representative for compliance.

Multilateral Agreements

< Marrakesh Agreement Establishing the World Trade Organization (signed April 15, 1994) and

the Ministerial Decisions and Declarations adopted by the Uruguay Round Trade Negotiations

Committee on December 15, 1993

a. Multilateral Agreements on Trade in Goods

i. General Agreement on Tariffs and Trade 1994

ii. Agreement on Agriculture

iii. Agreement on the Application of Sanitary and Phytosanitary Measures

iv. Agreement on Textiles and Clothing1

v. Agreement on Technical Barriers to Trade

vi. Agreement on Trade-Related Investment Measures

vii. Agreement on Implementation of Article VI of the General Agreement on Tariffs

and Trade 1994

viii. Agreement on Implementation of Article VII of the General Agreement on

Tariffs and Trade 1994

ix. Agreement on Preshipment Inspection

x. Agreement on Rules of Origin

xi. Agreement on Import Licensing Procedures

xii. Agreement on Subsidies and Countervailing Measures

xiii. Agreement on Safeguards

xiv. Information Technology Agreement (ITA) (March 26, 1997)

b. General Agreement on Trade in Services

i. Basic Telecommunications Services Agreement (February 15, 1997)

ii. Financial Services Agreement (March 1, 1999)

c. Agreement on Trade-Related Aspects of Intellectual Property Rights

d. Plurilateral Trade Agreements
2

i. Agreement on Trade in Civil Aircraft (April 12, 1979; amended by protocol in

1986)

ii. Agreement on Government Procurement (April 15, 1994)

< International Tropical Timber Agreement (successor to the 1983 International Tropical Timber

Agreement; signed January 26, 1994; entered into force January 1, 1997)

< North American Free Trade Agreement (signed December 17, 1992; implementing legislation

signed December 8, 1993)

i. Agreement with Mexico and Canada to a first round of NAFTA Accelerated Tariff

Elimination (March 26, 1997)

ii Agreement with Mexico and Canada to a second round of NAFTA Accelerated Tariff

Elimination (July 27, 1998)

< Agreement with Mexico to a third round of NAFTA Accelerated Tariff Elimination

(November 29, 2000)

< Agreement with Mexico to a fourth round of NAFTA Accelerated Tariff Elimination

(December 5, 2001)

< Joint Statement Concerning Semiconductors by the European Commission and the Governments

of the United States, Japan, and Korea. (June 10, 1999)

< Asia Pacific Economic Cooperation (APEC) Mutual Recognition Arrangement for Conformity

Assessment of Telecommunication Agreement (June 5, 1998)

< Agreement on Mutual Acceptance of Oenological Practices (December 18, 2001) 

Bilateral Agreements

Albania

< Agreement on Bilateral Trade Relations (May 14, 1992)

< Bilateral Investment Treaty (January 4, 1998)

Argentina

< Private Courier Mail Agreement (May 25, 1989)

< Bilateral Investment Treaty (October 20, 1994)

Armenia

< Agreement on Bilateral Trade Relations (April 7, 1992)

< Bilateral Investment Treaty (March 29, 1996)
3

Australia

< Settlement on Leather Products Trade (November 25, 1996)

< Understanding on Automotive Leather Subsidies (June 20, 2000)

Azerbaijan

< Agreement on Bilateral Trade Relations (April 21, 1995)

< Bilateral Investment Treaty (August 2, 2001)

Bahrain

< Bilateral Investment Treaty (May 30, 2001)

Bangladesh

< Bilateral Investment Treaty (July 25, 1989)

Belarus

< Agreement on Bilateral Trade Relations (February 16, 1993)

< Agreement regarding Imports of Certain Fiberglass Fabric (February 17, 2000)

Bolivia

< Bilateral Investment Treaty (June 6, 2001) 

Brazil

< Memorandum of Understanding between the Government of Brazil and the Government of the

United States Concerning Trade Measures in the Automotive Sector (March 16, 1998)

Bulgaria

< Agreement on Trade Relations (November 22, 1991)

< Bilateral Investment Treaty (June 2, 1994)

< Agreement Concerning Intellectual Property Rights (July 6, 1994)

Cambodia

< Agreement Between the United States of America and the Kingdom of Cambodia on Trade

Relations and Intellectual Property Rights Protection (October 8, 1996)

< Agreement on Trade in Textiles and Textile Products (1999)
4

< Agreement on Trade in Textiles and Textile Products (January 1, 2002)

Cameroon

< Bilateral Investment Treaty (April 6, 1989)

Canada

< Agreement on Salmon & Herring (May 11, 1993)

< Agreement Regarding Tires (May 25, 1993)

< Memorandum of Understanding on Provincial Beer Marketing Practices (August 5, 1993)

< Agreement on Ultra-High Temperature Milk (September 1993)

< Agreement on Beer Market Access in Quebec and British Columbia Beer Antidumping Cases

(April 4, 1994)

< Agreement on Salmon & Herring (April 1994)

< Agreement on Barley Tariff-Rate Quota (September 8, 1997)

< Record of Understanding on Agriculture (December 1998)

< Agreement on Magazines (Periodicals) (May 1999)

< Agreement on Implementation of the WTO Decision on Canada’s Dairy Support Programs

(December 1999)

China

< Accord on Industrial and Technological Cooperation (January 12, 1984)

< Memorandum of Understanding on the Protection of Intellectual Property Rights (January 17,

1992)

< Memorandum of Understanding on Prohibiting Import and Export in Prison Labor Products

(June 18, 1992)

< Memorandum of Understanding Concerning Market Access (October 10, 1992)

< Agreement on Trade Relations Between the United States of America and the People’s Republic

of China (signed July 7, 1979; entered into force February 1, 1980; renewed February 1, 2001)

< Agreement on Providing Intellectual Property Rights Protection (February 26, 1995)

< Report on China’s Measures to Enforce Intellectual Property Protections and Other Measures

(June 17, 1996)
5

< Interim Agreement on Market Access for Foreign Financial Information Companies (Xinhua)

(October 24, 1997)

< Agreement to Strengthen Space Launch Trade Terms (October 27, 1997)

< Bilateral Agriculture Agreement (April 10, 1999)

Colombia

< Memorandum of Understanding on Trade in Bananas (January 9, 1996)

Congo, Democratic Republic of the (formerly Zaire)

< Bilateral Investment Treaty (July 28, 1989)

Congo, Republic of the

< Bilateral Investment Treaty (August 13, 1994)

Costa Rica

< Memorandum of Understanding on Trade in Bananas (January 9, 1996)

Croatia

< Memorandum of Understanding on Intellectual Property Rights (May 26, 1998)

< Bilateral Investment Treaty (June 20, 2001)

Czech Republic

< Agreement on Bilateral Trade Relations (April 12, 1990)

< Bilateral Investment Treaty (December 19, 1992)

Ecuador

< Agreement on Intellectual Property Rights Protection (October 15, 1993)

< Bilateral Investment Treaty (May 11, 1997)

Egypt

< Bilateral Investment Treaty (June 27, 1992)

Estonia

< Bilateral Investment Treaty (February 16, 1997)
6

European Union

< Wine Accord (July 1983)

< Agreement for the Conclusion of Negotiations Between the United States and the European

Community under GATT Article XXIV:6 (January 30, 1987)

< Agreement on Exports of Pasta with Settlement, Annex and Related Letter 

(September 15, 1987)

< Agreement on Canned Fruit (updated) (April 14, 1992)

< Agreement Concerning the Application of the GATT Agreement on Trade in Civil Aircraft (July

17, 1992)

< Agreement on Meat Inspection Standards (November 13, 1992)

< Corn Gluten Feed Exchange of Letters (December 4 and 8, 1992)

< Malt-Barley Sprouts Exchange of Letters (December 4 and 8, 1992)

< Oilseeds Agreement (December 4 and 8, 1992)

< Agreement on Recognition of Bourbon Whiskey and Tennessee Whisky as Distinctive U.S.

Products (March 28, 1994)

< Memorandum of Understanding on Government Procurement (April 15, 1994)

< Letter on Financial Services Confirming Assurances to Provide Full MFN and National

Treatment (July 14, 1995)

< Agreement on EU Grains Margin of Preference (signed July 22, 1996; retroactively effective

December 30, 1995)

< Exchange of Letters Concerning Implementation of the Marrakesh Agreement Establishing the

World Trade Organization and Related Matters (June 26, 1996)

< Exchange of Letters between the United States of America and the European Community on a

Settlement for Cereals and Rice, and Accompanying Exchange of Letters on Rice Prices (July

22, 1996)

< Agreement for the Conclusion of Negotiations between the United States of America and the

European Community under GATT Article XXIV:6, and Accompanying Exchange of Letters

(signed July 22, 1996; retroactively effective December 30, 1995)

< Tariff Initiative on Distilled Spirits (February 28, 1997)

< Agreement on Global Electronic Commerce (December 9, 1997)

< Agreed Minute on Humane Trapping Standards (December 18, 1997)
7

< Agreement on Mutual Recognition Between the United States of America and the European

Community (signed May 18, 1997; entered into force December 1, 1998)

< Agreement between the United States and the European Community on Sanitary Measure to

Protect Public and Animal Health in Trade in Live Animals and Animal Products (July 20, 1999)

< Understanding on Bananas (April 11, 2001)

< Agreement on the Mutual Acceptance of Oenological Practices (December 18, 2001)

Georgia

< Agreement on Bilateral Trade Relations (August 13, 1993)

< Bilateral Investment Treaty (August 17, 1997)

Grenada

< Bilateral Investment Treaty (March 3, 1989)

Honduras

< Memorandum of Understanding on Worker Rights (November 15, 1995)

< Bilateral Investment Treaty (July 11, 2001)

Hungary

< Agreement on Trade Relations (July 7, 1978)

< Agreement on Intellectual Property Rights Protection (September 29, 1993)

< Agreement on Comprehensive Trade Package on Tariff Reduction (April, 2002)

India

< Agreement Regarding Indian Import Policy for Motion Pictures (February 5, 1992)

< Reduction of Tariffs on In-Shell Almonds (May 27, 1992)

< Agreement on Intellectual Property Rights Protection (March 1993)

< Agreement on Import Restrictions (December 28, 1999)

< Agreement on Textile Tariff Bindings (September 15, 2000)

Indonesia

< Conditions for Market Access for Films and Videos into Indonesia (April 1992)
8

Israel

< U.S.-Israel Free Trade Agreement (August 19, 1985)

< U.S.-Israel Agreement on Trade in Agriculture (December 4, 1996)

< U.S.-Israel Agreement on Almonds and Certain Other Agricultural Trade Issues (November 30,

1997)

Jamaica

< Agreement on Intellectual Property (February 1994)

< Bilateral Investment Treaty (March 7, 1997)

Japan

< Market-Oriented Sector-Selective (MOSS) Agreement on Medical Equipment and

Pharmaceuticals (January 9, 1986)

< Exchange of Letters Regarding Tobacco (October 6, 1986)

< Science and Technology Agreement (June 20, 1988; extended June 16, 1993)

< Measures Concerning Cellular Telephone and Third Party Radio System Telecommunications

Issues (June 28, 1989)

< Procedures to Introduce Supercomputers (June 15, 1990)

< Measures Relating to Wood Products (June 15, 1990)

< Policies and Procedures Regarding Satellite Research and Development/Procurement (June 15,

1990)

< Policies and Procedures Regarding International Value-Added Network Services and Network

Channel Terminating Equipment (July 31, 1990)

< Joint Announcement on Amorphous Metals (September 21, 1990)

< Measures Further to 1990 Policies and Procedures regarding International Value-Added Network

Services (April 27, 1991)

< Measures Regarding International Value-Added Network Services Investigation Mechanisms

(June 25, 1991)

< U.S.-Japan Major Projects Arrangement (July 31, 1991; originally negotiated 1988)

< Measures Related to Japanese Public Sector Procurement of Computer Products and Services
9

(January 22, 1992)

< U.S.-Japan Framework for a New Economic Partnership (July 10, 1993)

< Exchange of Letters Regarding Apples (September 13, 1993)

< U.S.-Japan Public Works Agreement (January 18, 1994)

< Mutual Understanding on Intellectual Property Rights between the Japanese Patent Office and

the U.S. Patent and Trademark Office (January 20, 1994)

< Exchange of Letters Regarding Implementation of the Measures Regarding Cellular Telephone

and Third-Party Radio Systems (March 12, 1994)

< Rice (April 15, 1994)

< Harmonized Chemical Tariffs (April 15, 1994)

< Copper (April 15, 1994)

< Market Access (April 15, 1994)

< Actions to be Taken by the Japanese Patent Office and the U.S. Patents and Trademark Office

pursuant to the January 20, 1994, Mutual Understanding on Intellectual Property Rights (August

16, 1994)

< Measures by the Government of the United States and the Government of Japan Regarding

Insurance (October 11, 1994)

< Measures on Japanese Public Sector Procurement of Telecommunications Products and Services

(November 1, 1994)

< Measures Related to Japanese Public Sector Procurement of Medical Technology Products and

Services (November 1, 1994)

< Measures Regarding Financial Services (February 13, 1995)

< Policies and Measures Regarding Inward Direct Investment and Buyer-Supplier Relationships

(June 20, 1995)

< Exchange of Letters on Financial Services (July 26 and 27, 1995)

< Interim Understanding for the Continuation of Japan-U.S. Insurance Talks (September 30, 1996)

< U.S.-Japan Insurance Agreement (December 24, 1996)

< Japan’s Recognition of U.S.-Grademarked Lumber (January 13, 1997)

< Resolution of WTO dispute with Japan on Sound Recordings (January 13, 1997)
10

< National Policy Agency Procurement of VHF Radio Communications System (March 31, 1997)

< U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy (June 19, 1997)

< U.S.-Japan Agreement on Distilled Spirits (December 17, 1997)

< First Joint Status Report on Deregulation and Competition Policy (May 29, 1998)

< U.S.-Japan Joint Report on Investment (April 28, 1999)

< Second Joint Status Report on Deregulation and Competition Policy (May 3, 1999)

< U.S.-Japan Agreement on NTT Procurement Procedures (July 1, 1999)

< Third Joint Status Report on Deregulation and Competition Policy (July 19, 2000)

< Fourth Joint Status Report on Deregulation and Competition Policy (June 30, 2001)

< U.S.-Japan Economic Partnership for Growth (June 30, 2001)

< First Report to the Leaders on the U.S.-Japan Regulatory Reform and Competition Policy

Initiative (June 25, 2002)

Jordan

< Agreement Between U.S. and Hashemite Kingdom of Jordan on the Establishment of a Free

Trade Area (December 17, 2001)

Kazakstan

< Agreement on Bilateral Trade Relations (February 18, 1993)

< Bilateral Investment Treaty (January 12, 1994)

Korea

< Record of Understanding on Intellectual Property Rights (August 28, 1986)

< Agreement on Access of U.S. Firms to Korea's Insurance Markets (August 28, 1986)

< Record of Understanding Concerning Market Access for Cigarettes (May 27, 1988; amended

October 16, 1989)

< Agreement Concerning the Korean Capital Market Promotion Law (September 1, 1988)

< Agreement on the Importation and Distribution of Foreign Motion Pictures

 (December 30, 1988)

< Agreement on Market Access for Wine and Wine Products (January 18, 1989)
11

< Investment Agreement (May 19, 1989)

< Agreement on Liberalization of Agricultural Imports (May 25, 1989)

< Record of Understanding on Telecommunications (January 23, 1990)

< Record of Understanding on Telecommunications (February 15, 1990)

< Exchange of Letters Regarding the 1986 Intellectual Property Rights Agreement: Product

Pipeline Protection (February 22, 1990)

< Record of Understanding on Beef (March 21, 1990)

< Exchange of Letters on Beef (April 26 and 27, 1990)

< Agreement on Wine Access (December 19, 1990)

< Record of Understanding on Telecommunications (February 7, 1991)

< Agreement on International Value-Added Services (June 20, 1991)

< Understanding on Telecommunications (February 17, 1992)

< Exchange of Letters Relating to Korea Telecom Company's Procurement of AT&T Switches

(March 31, 1993)

< Beef Agreements (June 26, 1993; December 29, 1993)

< Record of Understanding on Agricultural Market Access in the Uruguay Round (December 13,

1993)

< Exchange of Letters on Telecommunications Issues Relating to Equipment Authorization and

Korea Telecom Company's Procurement (March 29, 1995)

< Agreement on Steel (July 14, 1995)

< Shelf-Life Agreement (July 20, 1995)

< Revised Cigarette Agreement (August 25, 1995)

< Memorandum of Understanding to Increase Market Access for Foreign Passenger Vehicles in

Korea (September 28, 1995)

< Exchange of Letters on Implementation of the 1992 Telecommunications Agreement (April 12,

1996)

< Korean Commitments on Trade in Telecommunications Goods and Services (July 23, 1997)

< Agreement on Korean Motor Vehicle Market (October 20, 1998)
12

< Exchange of Letters Regarding Tobacco Sector Related Issues (June 14, 2001)

< Exchange of Letters on Data Protection (March 12, 2002)

Kyrgyzstan

< Agreement on Bilateral Trade Relations (August 21, 1992)

< Bilateral Investment Treaty (January 12, 1994)

Laos

< Exchange of notes extending bilateral agreement on Trade in Textiles and Textile Products 

(August 4, 2000)

Latvia

< Agreement on Trade & Intellectual Property Rights Protection (January 20, 1995)

< Bilateral Investment Treaty (December 26, 1996)

Lithuania

< Bilateral Investment Treaty (November 22, 2001)

Macedonia

< Exchange of notes extending bilateral agreement on Trade in Textiles and Textile Products

 (June 2, 2000)

< Memorandum of Understanding Establishing Outward Processing Program (September 1999)

Mexico

< Agreement with Mexico on Tire Certification (March 8, 1996)

< Memorandum of Understanding Between the United States and Mexico Regarding Areas of Food

and Agriculture Trade (April 4, 2002)

Moldova

< Agreement on Bilateral Trade Relations (July 2, 1992)

< Bilateral Investment Treaty (November 25, 1994)

Mongolia

< Agreement on Bilateral Trade Relations (January 23, 1991)

< Bilateral Investment Treaty (January 1, 1997)
13

Morocco

< Bilateral Investment Treaty (May 29, 1991)

Nepal

< Exchange of notes extending bilateral agreement on Trade in Textiles and Textile Products (July

13, 2000)

Nicaragua

< Bilateral Intellectual Property Rights Agreement with Nicaragua (December 22, 1997)

Norway

< Agreement on Procurement of Toll Equipment (April 26, 1990)

Panama

< Bilateral Investment Treaty (May 30, 1991)

< Agreement on Bilateral Trade Relations (1994)

Paraguay

< Memorandum of Understanding on Intellectual Property Rights (November 17, 1998)

Peru

< Memorandum of Understanding on Intellectual Property Rights (May 23, 1997)

Philippines

< Protection and Enforcement of Intellectual Property Rights (April 6, 1993)

< Agreement regarding Pork and Poultry Meat (February 13, 1998)

Poland

< Business and Economic Treaty (August 6, 1994)

< Bilateral Investment Treaty (August 6, 1994)

< Agreement on Comprehensive Trade Package on Tariff Reduction (September, 2002)

Romania

< Agreement on Bilateral Trade Relations (April 3, 1992)
14

< Bilateral Investment Treaty (January 15, 1994)

< Memorandum of Understanding Establishing Outward Processing Program (September 1999)

Russia

< Trade Agreement Concerning Most Favored Nation and Nondiscriminatory Treatment (June 17,

1992)

< Joint Memorandum of Understanding on Market Access for Aircraft (January 30, 1996)

< Agreed Minutes regarding exports of poultry products from the United States to Russia (March

15, March 25, and March 29, 1996)

< Protocol of the Negotiations between the Experts of Russia and the United States of America on

the Issue of U.S. Poultry Meat Imports into the Russian Federation (March 31, 2002)

< Agreement on Russian Firearms & Ammunition (April 3, 1996)

< Exchange of notes extending bilateral agreement on Trade in Textiles and Textile Products

(December 15, 2000)

Senegal

< Bilateral Investment Treaty (October 25, 1990)

Singapore

< Agreement on Intellectual Property Rights Protection (April 27, 1987)

Slovakia

< Agreement on Bilateral Trade Relations (April 12, 1990)

< Bilateral Investment Treaty (December 19, 1992)

Sri Lanka

< Agreement on the Protection and Enforcement of Intellectual Property Rights 

(September 20, 1991)

< Bilateral Investment Treaty (May 1, 1993)

Suriname

< Agreement on Bilateral Trade Relations (1993)

Switzerland

< Exchange of Letters on Financial Services (November 9 and 27, 1995)
15

Taiwan

< Agreement on Customs Valuation (August 22, 1986)

< Agreement on Export Performance Requirements (August 1986)

< Agreement Concerning Beer, Wine, and Cigarettes (1987)

< Agreement on Turkeys and Turkey Parts (March 16, 1989)

< Agreement on Beef (June 18, 1990)

< Agreement on Intellectual Property Protection (June 5, 1992)

< Agreement on Intellectual Property Protection (Trademark) (April 1993)

< Agreement on Intellectual Property Protection (Copyright) (July 16, 1993)

< Agreement on Market Access (April 27, 1994)

< Telecommunications Liberalization by Taiwan (July 19, 1996)

< U.S.-Taiwan Medical Device Issue: List of Principles (September 30, 1996)

< Agreement on Market Access (February 20, 1998)

< Understanding on Government Procurement (August 23, 2001)

Tajikistan

< Agreement on Bilateral Trade Relations (November 24, 1993)

Thailand

< Agreement on Cigarette Imports (November 23, 1990)

< Agreement on Intellectual Property Protection and Enforcement (December 19, 1991)

< Agreement on Trade in Textiles and Textile Products (1997)

Trinidad and Tobago

< Agreement on Intellectual Property Protection and Enforcement (September 26, 1994)

< Bilateral Investment Treaty (December 26, 1996)

Tunisia
16

< Bilateral Investment Treaty (February 7, 1993)

Turkey

< Bilateral Investment Treaty (May 18, 1990)

< WTO Settlement Concerning Taxation of Foreign Film Revenues (July 14, 1997)

Turkmenistan

< Agreement on Bilateral Trade Relations (October 25, 1993)

Ukraine

< Agreement on Bilateral Trade Relations (June 23, 1992)

< Bilateral Investment Treaty (November 16, 1996)

< Agreement on Trade in Textiles and Textile Products (1997)

Uzbekistan

< Agreement on Bilateral Trade Relations (January 13, 1994)

Vietnam

< Agreement between the United States and Vietnam on Trade Relations (December 10, 2001) 

< Copyright Agreement (June 27, 1997)
17

II. Agreements That Have Been Negotiated But Have Not Yet

Entered Into Force

Following is a list of trade agreements concluded by the United States since 1984 that have not yet

entered into force.

Multilateral Agreements

< OECD Agreement on Shipbuilding (December 21, 1994; interested parties evaluating

implementing legislation)

< Inter-American Mutual Recognition Agreement for Conformity Assessment of

Telecommunications Equipment (October 29, 1999)

Bilateral Agreements

Belarus

< Bilateral Investment Treaty (signed January 15, 1994; pending exchange of instruments)

El Salvador

< Bilateral Investment Treaty (signed March 10, 1999; pending exchange of instruments)

Estonia

< Trade and Intellectual Property Rights Agreement (April 19, 1994; requires approval by Estonian

legislature)

Jordan

< Bilateral Investment Treaty (signed July 2, 1997; pending exchange of instruments)

Laos

< Bilateral Trade Agreement (initialed August 13, 1997)

Lithuania

< Trade and Intellectual Property Rights Agreement (April 26, 1994; requires approval by

Lithuanian legislature)

Nicaragua

< Bilateral Investment Treaty (signed July 1, 1995; pending ratification by both parties and

exchange of instruments of ratification.)
18

Russia

< Bilaterall Investment Treaty (signed June 17, 1992; pending approval by Russian Parliament and

exchange of instruments of ratification)

Uzbekistan

< Bilateral Investment Treaty (signed December 16, 1994; pending exchange of instruments)
19

III. Other Trade-Related Agreements and Declarations

Following is a list of other trade-related agreements and declarations negotiated by the Office of the

United States Trade Representative from January 1993 through February 2002. These documents

provide the framework for negotiations leading to future trade agreements or establish mechanisms for

structured dialogue in order to develop specific steps and strategies for addressing and resolving trade,

investment, intellectual property and other issues among the signatories.

Multilateral Agreements and Declarations

< Second Ministerial of the World Trade Organization, Ministerial Declaration on Global

Electronic Commerce (May 20, 1998)

< WTO Guidelines for the Negotiation of Mutual Recognition Agreements on Accountancy (May

29, 1997)

< Free Trade Area of the Americas

< Summit of the Americas Declaration and Action Plan (December 11, 1994)

< Joint Declaration of the Trade Ministers (June 30, 1995)

< Joint Declaration of the Trade Ministers (March 21, 1996)

< Joint Ministerial Declaration of Belo Horizonte (May 16, 1997)

< Joint Ministerial Declaration of San Jose (March 19, 1998)

< Summit of the Americas Declaration and Action Plan (April 19, 1998)

< Joint Declaration of Toronto (November 4, 1999)

< Joint Ministerial Declaration of Buenos Aires (April 7, 2001)

< Asia Pacific Economic Cooperation

< Declaration of Common Resolve (November 15, 1994)

< Declaration for Action (November 19, 1995)

< Declaration on an APEC Framework for Strengthening Economic Cooperation and

Development (November 22-23, 1996)

< Declaration on Connecting the APEC Community (November 25, 1997)

< Declaration on Strengthening the Foundations for Growth (November 18, 1998)

< Declaration: the Auckland Challenge (September 13, 1999)
20

< U.S.-Andean Community Trade and Investment Council Agreement (October 30, 1998)

< United States-Central American Regional Trade and Investment Framework Agreement (March

20, 1998)

Bilateral Agreements and Declarations

Algeria

< U.S.-Algeria Trade and Investment Framework Agreement (July 13, 2001)

Bahrain

< Trade and Investment Framework Agreement (July 18, 2002)

Brunei Darussalam

< Trade and Investment Framework Agreement (December 16, 2002)

Chile

< U.S.-Chile Joint Commission on Trade and Investment (May 19, 1998)

Common Market for Eastern and Southern Africa

< Trade and Investment Framework Agreement (October, 2001)

Egypt

< U.S.-Egypt Trade and Investment Framework Agreement (July 1, 1999)

European Union

< U.S.-EU Transatlantic Economic Partnership (May 18, 1998)

< U.S.-EU Joint Action Plan for the Transatlantic Economic Partnership (November 9, 1998)

Ghana

< U.S.-Ghana Trade and Investment Framework Agreement (February 26, 1999)

Indonesia

< U.S.-Indonesia Understanding on a Trade and Investment Council (1996)

Japan

< U.S.-Japan Joint Statement on the Bilateral Steel Dialogue (September 24, 1999)
21

Morocco

< U.S.-Morocco Trade and Investment Framework Agreement (March 16, 1995)

Nigeria

< U.S.-Nigeria Trade and Investment Framework Agreement (February 16, 2000)

Philippines

< Trade and Investment Framework Agreement (1989)

South Africa

< U.S.-South Africa Trade and Investment Framework Agreement (February 18, 1999)

Sri Lanka

< Trade and Investment Framework Agreement (July 25, 2002)

Taiwan

< Trade and Investment Framework Agreement (September 19, 1994)

Thailand

< Trade and Investment Framework Agreement (October 23, 2002)

Tunisia

< U.S.-Tunisia Trade and Investment Framework Agreement (October 2, 2002)

Turkey

< U.S.-Turkey Trade and Investment Framework Agreement (September 29, 1999)

Uruguay

< U.S.-Uruguay Bilateral and Commercial Trade Review (May 20, 1999)

West African Economic and Monetary Union

< Trade and Investment Framework Agreement (April 24, 2002)