Foreword

The 2002 Trade Policy Agenda and 2001 Annual Report of the President of the United States on

the Trade Agreements Program are submitted to the Congress pursuant to Section 163 of the

Trade Act of 1974, as amended (19 U.S.C. 2213). The document includes, in Chapter II, the

Annual Report on the World Trade Organization as required by Sections 122 and 124 of the

Uruguay Round Agreements Act. In addition, the report also includes an annex listing trade

agreements entered into by the United States since 1984.

The Office of the United States Trade Representative (USTR) is responsible for the preparation

of this report, which was written by USTR staff. The Office of the U.S. Trade Representative

gratefully acknowledges the contributions of the Environmental Protection Agency, the

Departments of Agriculture, Commerce, Health and Human Services, Justice, Labor, and State.

March 2002

Assistant U.S. Trade Representative for Policy Coordination:

Carmen Suro-Bredie

Project Director:

 Don Eiss

Project Advisor:

Tarik Gause

Production Assistant:

Gloria D. Blue
i

TABLE OF CONTENTS

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

THE PRESIDENT’S TRADE POLICY AGENDA 

I. Overview and the 2002 Agenda ............ ............ ............ ............ . 1

THE PRESIDENT’S 2001 ANNUAL REPORT 

ON THE TRADE AGREEMENTS PROGRAM

II. World Trade Organization ............ ............ ............ ............ ... 12

A. The WTO’s Fourth Ministerial Conference in Doha ............ ............ 12

B. Built-In Agenda Negotiations in Agriculture and Services ............ ....... 15

C. Dispute Settlement Body ............ ............ ............ ........... 19

1. The Dispute Settlement Understanding ............ ............ ...... 19

2. Dispute Settlement Activity in 2001 ............ ............ ......... 21

a. Disputes Brought by the United States ............ ............ 21

b. Disputes Brought Against the United States ............ ........ 28

Implementation of the WTO Agreements ............ ............ ............ ... 36

A. General Council Activities ............ ............ ............ ......... 36

B. Council for Trade in Goods ............ ............ ............ ........ 38

1. Committee on Agriculture ............ ............ ............ .... 40

2. Committee on Antidumping Practices ............ ............ ....... 41

3. Committee on Customs Valuation ............ ............ .......... 44

4 Committee on Import Licensing ............ ............ ............ 46

5. Committee on Market Access ............ ............ ............ . . 47

6. Committee on Rules of Origin ............ ............ ............ . 49

7. Committee on Safeguards ............ ............ ............ ..... 51

8. Committee on Sanitary and Phytosanitary Measures ............ ........ 53

9. Committee on Subsidies and Countervailing Measures ............ ...... 55

10. Committee on Technical Barriers to Trade ............ ............ ... 63

11. Committee on Trade-Related Investment Measures ............ ......... 66

12. Textiles Monitoring Body ............ ............ ............ ..... 67

13. Working Party on State Trading ............ ............ ............ 69

C. Council for Trade in Services ............ ............ ............ ....... 70

1. Agreement on Basic Telecommunications Services ............ ......... 71

2. Agreement and Committee on Trade in Financial Services ............ ... 72

3. Working Party on Domestic Regulation ............ ............ ...... 73

4. Working Party on GATS Rules ............ ............ ............ 74

5. Committee on Specific Commitments ............ ............ ....... 74

D. Council on Trade-Related Aspects of Intellectual Property Rights ............ 75

E. Other General Council Bodies/Activities ............ ............ ......... 83

1. Trade Policy Review Body ............ ............ ............ .... 83

2. Committee on Trade and Environment ............ ............ ....... 84

3. Committee on Trade and Development ............ ............ ...... 85
ii

4. Committee on Balance of Payments Restrictions ............ ........... 87

5. Committee on Budget, Finance, and Administration ............ ........ 87

6. Committee on Regional Trade Agreements ............ ............ ... 90

7. Accessions to the World Trade Organization ............ ............ . . 91

8. Working Group on Trade and Competition Policy ............ .......... 93

9. Working Group on Transparency in Government Procurement ............ 95

10. Working Group on Trade and Investment ............ ............ .... 96

11. Trade Facilitation ............ ............ ............ ........... 97

F. Plurilateral Agreements ............ ............ ............ ........... 98

1. Committee on the Expansion of Trade in Information Technology Products . 98

2. Committee on Government Procurement ............ ............ ..... 99

3. Committee on Trade in Civil Aircraft ............ ............ ...... 100

III. Regional Negotiations ............ ............ ............ ............ ....... 102

A. Free Trade Area of the Americas ............ ............ ............ ... 102

B. North American Free Trade Agreement ............ ............ ......... 104

1. Tariffs ............ ............ ............ ............ ....... 105

2. Investment ............ ............ ............ ............ .... 105

3. Rules of Origin ............ ............ ............ ............ 105

4. Mechanisms to Implement the Agreement ............ ............ ... 105

5. NAFTA and Labor ............ ............ ............ ......... 106

6. NAFTA and the Environment ............ ............ ............ . 106

C. Asia Pacific Economic Cooperation ............ ............ ............ . 107

1. Leadership in the Multilateral Trading System ............ ........... 108

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

and Facilitation ............ ............ ............ ............ 108

3. Free Trade Agreements ............ ............ ............ ...... 112

IV. Bilateral Negotiations ............ ............ ............ ............ ....... 114

A. The Americas ............ ............ ............ ............ ....... 114

1. Canada ............ ............ ............ ............ ...... 114

a. Softwood Lumber ............ ............ ............ ... 114

b. Agriculture ............ ............ ............ ......... 114

c. Intellectual Property Rights ............ ............ ........ 115

2. Mexico ............ ............ ............ ............ ...... 115

a. Intellectual Property Rights ............ ............ ........ 116

b. Agriculture ............ ............ ............ ......... 116

c. Telecommunications ............ ............ ............ . 117

3. Brazil and Southern Cone ............ ............ ............ .... 117

a. Mercosur ............ ............ ............ .......... 117

b. Argentina ............ ............ ............ .......... 117

c. Brazil ............ ............ ............ ............ . 118

d. Paraguay ............ ............ ............ ........... 119

e. Uruguay ............ ............ ............ ........... 119

f. Chile ............ ............ ............ ............ . . 119

4. The Andean Community ............ ............ ............ ..... 120

a. Andean Trade Preferences Act ............ ............ ..... 120
iii

b. Intellectual Property Rights ............ ............ ........ 120

5. Central America and the Caribbean ............ ............ ........ 120

a. Caribbean Basin Initiative ............ ............ ......... 120

b. Central America ............ ............ ............ ..... 121

c. The Caribbean ............ ............ ............ ...... 122

B. Western Europe ............ ............ ............ ............ ..... 123

1. Transatlantic Economic Partnership ............ ............ ........ 124

2. Standards, Testing, Labeling, and Certification ............ ........... 125

3. Telecommunications ............ ............ ............ ........ 125

4. Aircraft ............ ............ ............ ............ ...... 126

5. Foreign Sales Corporation Tax Rules ............ ............ ....... 126

6. Ban on Growth Promoting Hormones in Meat Production ............ . . 127

7. Agricultural Biotechnology ............ ............ ............ . . 127

8. Veterinary Equivalence ............ ............ ............ ..... 127

9. Wine ............ ............ ............ ............ ........ 128

C. Central Europe and the Newly Independent States ............ ............ 128

1. Normal Trade Relations Status ............ ............ ............ 129

2. Intellectual Property Rights ............ ............ ............ . . 129

a. Ukraine ............ ............ ............ ........... 130

b. Hungary, Slovenia, and Poland ............ ............ ..... 130

c. The Russian Federation ............ ............ ........... 130

3. Generalized System of Preferences ............ ............ ........ 131

4. The Southeast Europe Trade Preference Act ............ ............ . 132

5. WTO Accession ............ ............ ............ ........... 132

6. Bilateral Trade Agreements and Bilateral Investment Treaties ........... 132

7. EU Association Agreements and EU Membership ............ ......... 133

8. Country Specific Issues ............ ............ ............ ..... 134

a. Russia: Product Standards, Testing, Labeling and Certification ... 134

b. Russia: WTO Accession ............ ............ .......... 134

c. Russia: Aircraft Market Access ............ ............ .... 135

d. The Czech Republic and Slovakia: Waiver of Tariffs ............ 135

e. Romania: Minimum Reference Prices ............ ........... 135

f. Poland: Tariff Reductions ............ ............ ......... 135

D. Asia and the Pacific ............ ............ ............ ............ . . 136

1. Australia and New Zealand ............ ............ ............ . . 138

2. The Association of Southeast Asian Nations ............ ............ . 138

a. Indonesia ............ ............ ............ .......... 139

i. General ............ ............ ............ ..... 139

ii. Intellectual Property Rights ............ ............ . 139

b. Malaysia ............ ............ ............ ........... 140

i. Investment and Services ............ ............ .... 140

ii. Tariffs ............ ............ ............ ...... 140

iii. Local Content-Related Investment Incentives ........... 140

iv. Intellectual Property Rights ............ ............ . 140

c. Philippines ............ ............ ............ ......... 141

i. Market Access Issues ............ ............ ...... 141

ii. Intellectual Property Rights ............ ............ . 141
iv

iii. Customs ............ ............ ............ .... 141

iv. Local Content-Related Incentives ............ ......... 141

d. Singapore ............ ............ ............ .......... 141

e. Thailand ............ ............ ............ ........... 142

i. Intellectual Property Rights ............ ............ . 142

ii. Market Access Issues ............ ............ ...... 142

f. Cambodia ............ ............ ............ .......... 142

g. Normalization of Trade Relations with Vietnam and Laos ........ 143

i. Vietnam ............ ............ ............ ..... 143

ii. Laos ............ ............ ............ ........ 144

3. Republic of Korea ............ ............ ............ .......... 144

a. Macroeconomics and Trade ............ ............ ........ 144

b. OECD ............ ............ ............ ............ . 145

c. Motor Vehicles ............ ............ ............ ..... 145

d. Steel ............ ............ ............ ............ . . 146

e. Pharmaceuticals ............ ............ ............ ..... 146

f. Intellectual Property Rights ............ ............ ........ 146

g. Telecommunications ............ ............ ............ . 147

h. Financial Services ............ ............ ............ ... 147

i. Government Support for Semiconductor Production and Export ... 148

j. Screen Quotas ............ ............ ............ ...... 148

k. Bilateral Investment Treaty ............ ............ ........ 148

l. Cosmeceuticals ............ ............ ............ ..... 148

m. Agriculture ............ ............ ............ ......... 149

n. Import Clearance Procedures, Food Standards, and Labeling ...... 151

4. India ............ ............ ............ ............ ........ 151

a. General ............ ............ ............ ............ 151

b. Trade Dialogue ............ ............ ............ ..... 151

c. WTO Balance of Payments Case ............ ............ .... 151

d. Intellectual Property Rights and the WTO TRIPS Mail Box ...... 152

e. Auto TRIMS ............ ............ ............ ....... 152

f. GSP ............ ............ ............ ............ . . 153

g. Reference Pricing ............ ............ ............ .... 153

h. Other Import Barriers ............ ............ ............ 153

5. People’s Republic of China ............ ............ ............ . . 153

a. WTO Accession ............ ............ ............ ..... 154

b. Agriculture ............ ............ ............ ......... 158

c. Intellectual Property Rights ............ ............ ........ 159

d. 1992 Market Access Agreement ............ ............ .... 160

e. Satellite Launch Services ............ ............ .......... 161

6. Japan ............ ............ ............ ............ ........ 161

a. Regulatory Reform ............ ............ ............ . . 163

i. Sectoral Regulatory Reform ............ ............ . 164

ii. Structural Regulatory Reform ............ ............ 169

b. Bilateral Consultations ............ ............ ........... 173

i. Insurance ............ ............ ............ .... 173

ii. Autos and Auto Parts ............ ............ ...... 173
v

iii. Government Procurement ............ ............ ... 174

iv. Investment ............ ............ ............ ... 176

c. Sectoral Issues ............ ............ ............ ...... 176

i. Agriculture ............ ............ ............ . . 176

ii. Steel ............ ............ ............ ....... 177

 iii. Flat Glass ............ ............ ............ ... 177

d. Multilateral/WTO Disputes and Settlements ............ ....... 178

7. Taiwan ............ ............ ............ ............ ...... 178

a. Agriculture and Industrial Quotas ............ ............ ... 179

b. Intellectual Property Rights ............ ............ ........ 179

c. Telecommunications ............ ............ ............ . 179

d. Government Procurement ............ ............ ......... 180

8. Hong Kong (Special Administrative Region) ............ ............ . 180

 a. Intellectual Property Rights ............ ............ ........ 180

b. Telecommunications ............ ............ ............ . 180

E. Mediterranean/Middle East ............ ............ ............ ....... 180

1. U.S.-Jordan Free Trade Agreement ............ ............ ........ 180

2. Qualifying Industrial Zones ............ ............ ............ . . 181

3. Trade and Investment Framework Agreements ............ ........... 181

4. WTO Accessions ............ ............ ............ .......... 181

5. Intellectual Property Rights ............ ............ ............ . . 182

F. Africa ............ ............ ............ ............ ............ . 182

1. Implementing the African Growth and Opportunity Act ............ .... 182

2. Promoting Economic Reform, Growth and Development ............ ... 183

3. Expanding Bilateral and Regional Trade and Investment Relationships .... 184

4. Facilitating Sub-Saharan Africa’s Integration into the Multilateral Trading . 185

System

V. Other Multilateral Activities ............ ............ ............ ............ . 187

A. Trade and the Environment ............ ............ ............ ....... 187

1. Multilateral Fora ............ ............ ............ ........... 188

2. The NAFTA ............ ............ ............ ............ . . 188

3. The Western Hemisphere ............ ............ ............ .... 189

4. Other Issues ............ ............ ............ ............ ... 190

B. Trade and Labor ............ ............ ............ ............ .... 190

1. Multilateral Efforts ............ ............ ............ ......... 190

2. Regional Activities ............ ............ ............ ......... 191

3. Bilateral Activities ............ ............ ............ ......... 191

C. Organization for Economic Cooperation and Development ............ ..... 192

1. Work Program ............ ............ ............ ............ . 193

2. Competition Policy and Trade ............ ............ ............ 193

5. Development and Trade ............ ............ ............ ..... 193

4. Criminalization and Non-tax-deductibility of Bribery

of Foreign Public Officials ............ ............ ............ ... 194

5. Dialogue with Non-OECD Members ............ ............ ....... 194

6. Environment and Trade ............ ............ ............ ..... 195

7. Export Credits ............ ............ ............ ............ . 195
vi

8. Investment ............ ............ ............ ............ .... 196

9. Labor and Trade ............ ............ ............ ........... 196

10. Regional Economic Integration ............ ............ ........... 197

11. Regulatory Reform ............ ............ ............ ......... 197

12. Services ............ ............ ............ ............ ...... 198

13. Shipbuilding ............ ............ ............ ............ . . 198

14. Steel ............ ............ ............ ............ ........ 199

D. Semiconductor Agreement ............ ............ ............ ........ 199

E. Steel Trade Policy ............ ............ ............ ............ ... 200

VI. Trade Enforcement Activities ............ ............ ............ ............ 202

A. Enforcing U.S. Trade Agreements ............ ............ ............ . . 202

1. WTO Dispute Settlement ............ ............ ............ .... 203

2. Other Monitoring and Enforcement Activities ............ ............ 204

a. Subsidies Enforcement ............ ............ ........... 204

b. Monitoring Foreign Antidumping and Countervailing Duty Actions 205

B. U.S. Trade Laws ............ ............ ............ ............ ..... 206

1. Section 301 ............ ............ ............ ............ ... 206

2. Super 301 ............ ............ ............ ............ .... 209

3. Special 301 ............ ............ ............ ............ ... 210

a. 2001 Special 301 Review Announcements ............ ........ 210

b. Intellectual Property and Health Policy ............ ........... 211

c. Implementation of Special 301 ............ ............ ..... 212

d. Ongoing Initiatives ............ ............ ............ . . 213

4. Telecommunications – Section 1377 Reviews ............ ............ 214

5. Government Procurement ............ ............ ............ .... 216

6. Antidumping Actions ............ ............ ............ ....... 217

7. Countervailing Duty Actions ............ ............ ............ . 218

8. Unfair Import Practices (Section 337) ............ ............ ...... 218

9. Safeguard Actions (Section 201) ............ ............ .......... 219

10. Trade Adjustment Assistance ............ ............ ............ . 220

a. Assistance for Workers ............ ............ ........... 220

b. Assistance for Firms and Industries ............ ............ . . 221

VII. Trade Policy Development ............ ............ ............ ............ ... 223

A. Congressional Affairs ............ ............ ............ ............ 223

B. Private Sector Advisory System and Intergovernmental Affairs ............ . 224

1. The Advisory Committee System ............ ............ .......... 224

a. President’s Advisory Committee on Trade Policy and Negotiations . 224

b. Policy Advisory Committees ............ ............ ....... 225

c. Sectoral, Functional and Technical Committees ............ .... 225

2. State and Local Government Relations ............ ............ ..... 225

a. State Point of Contact System ............ ............ ....... 225

b. Intergovernmental Policy Advisory Committee ............ ..... 226

c. Meetings of State and Local Associations ............ ......... 226

d. Consultations Regarding Specific Trade Issues ............ ..... 226

3. Public and Private Sector Outreach ............ ............ ......... 226
vii

C. Policy Coordination ............ ............ ............ ............ . . 228

Annex I: U.S. Trade in 2001

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

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

III. Services Trade ............ ............ ............ ............ . . 9

IV. The U.S. Trade Deficit ............ ............ ............ ....... 12

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
vii

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

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

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

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

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

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

MERCOSUL/MERCOSUR ................. Southern Common Market

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

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

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
THE 2002 AGENDA 1

I. Overview and 

 the 2002 Agenda

At the start of last year, the global trading system

was under stress. The nations of the world had

failed to launch new global trade negotiations in

Seattle in 1999, the effort to bring China and

Taiwan into the World Trade Organization

(WTO) had stalled, and Congress had not granted

the President trade negotiating authority since it

lapsed in 1994. Numerous contentious trade

disputes loomed large and the benefits of trade

had been diminished in the public debate. The

momentum for trade liberalization had lost energy.

Against this backdrop, and with the help of the

Congress, President Bush pressed an activist

strategy to regain momentum on trade. As he

explained: “Our goal is to ignite a new era of

global economic growth through a world trading

system that is dramatically more open and more

free.” By doing so, we can improve the job

opportunities, incomes, productivity, purchasing

choices, and family budgets of America’s workers,

farmers, ranchers, small businesspersons, and

entrepreneurs. 

The President has promoted the agenda for trade

liberalization on multiple fronts: globally,

regionally, and with individual nations. This

strategy creates a competition in liberalization

with the United States as the central driving force. 

It enhances America's leadership by strengthening

our economic ties, leverage, and influence around

the world.

The Executive-Congressional Partnership:

Trade Promotion Authority

The Constitution vests the Congress with the

authority “To regulate commerce with foreign

nations.” It also extends the powers to the

President to conduct relations with other

countries. These two grants need to be reconciled

effectively. 

After 150 years of contentious Congressional

trade debates over tariffs, culminating in the

disastrous experience of the Smoot-Hawley bill,

the Congress tried a different approach in 1934:

The Reciprocal Trade Agreements Act, which

created a new partnership between the Congress

and the Executive Branch to lower barriers to

trade. 

This partnership has been the foundation of

America’s economic and trade leadership ever

since. In 2001, the Bush Administration honored

this rich tradition by working hand-in-hand with

the Congress to open markets; we will build on

this relationship in the year ahead. Frequent,

substantive consultation is the hallmark of an

effective trade policy. It helps to ensure that the

Executive Branch and the Congress work together

to achieve America’s trade objectives. 

A Congressional grant of Trade Promotion

Authority (TPA) would strengthen and guide the

Executive-Congressional partnership, as it creates

and formalizes new consultative mechanisms

throughout the trade negotiation process. In 2001,

the House of Representatives passed TPA

legislation and the Senate Finance Committee

gave a strong bipartisan endorsement to a similar
2 TRADE POLICY AGENDA

bill, 18-3.

We are pressing for prompt completion of

Congressional action on TPA in 2002. By

enacting TPA after a seven-year lapse of

authority, Congress can promote America's global

leadership and give the President the tools he

needs to strike the best trade agreements for

America's farmers, ranchers, workers, families,

and consumers. The revival of this trade authority

– which prior Congresses granted to the previous

five Presidents – will also contribute to our

economic recovery by enhancing our ability to

open the world's markets for U.S. exports and

lowering the costs of supplies for American

families and businesses. 

For all of its benefits, trade can also lead to

adjustment challenges. For this reason, the Bush

Administration strongly supports reauthorization

of Trade Adjustment Assistance (TAA) programs,

which provide assistance for workers who lose

their jobs because of trade. The Administration

wants to work with Congress to improve the

programs to make them more effective. 

In particular, the Administration would like to

consolidate TAA and NAFTA-TAA; ensure more

rapid processing of petitions and delivery of

services; and better coordinate federal agencies

and local authorities to improve delivery of all

federal assistance to communities and individuals

affected by trade. Our primary objective is getting

people back to work as quickly as possible, and

we will work with Congress to help create better

incentives for reemployment. We also want to

address concerns over limitations on the “shift-inproduction” benefits provided by current

programs. And we would like to work with

Congress to address other areas that may not be

adequately addressed at present.

We look forward to working closely with

Congress in 2002 to create new opportunities for

our workers, farmers, and businesses, and to

create a more stable, prosperous world economy

through increased trade.

Seizing the Global Initiative

A. Launching New Global Trade

Negotiations

In 2001, the United States played a leading role in

the launch of new global trade negotiations at

Doha in November, overcoming the obstacles that

plagued the prior effort in Seattle. We benefited

greatly from the Congressional consultations and

guidance we received in advance of the Doha

meeting. I am particularly appreciative of the

personal involvement, before and after Doha, of

Chairman Thomas and Representative Rangel and

Chairman Baucus and Senator Grassley, as well as

Representative Levin’s extra effort to join us in

Doha and discuss events on the scene.

The new WTO negotiating mandate lays the

groundwork for an ambitious trade liberalization

agenda in key sectors, particularly agriculture,

manufacturing, and services, targeted for

completion by 2005. 

In agriculture, to achieve a program of

fundamental reform, we committed 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 tradedistorting domestic support. 

In manufacturing, we secured a negotiating

mandate to reduce or eliminate tariff and nontariff barriers on industrial products, ensuring that

the United States can pursue a variety of tariff

liberalization initiatives, such as landmark

agreements like the Information Technology

Agreement (ITA). The mandate is comprehensive

– no sectors or products are excluded from the

outset for any WTO Member. 

And in services, the Doha Declaration sets a

rigorous timetable for the pursuit of open markets

in a number of key sectors for the United States,

including telecommunications, financial services,

audio-visual, express delivery, and other

distribution services.
THE 2002 AGENDA 3

Many U.S. groups assisted us in the preparation of

these negotiating mandates, and we are delighted

by their strong statements of support after Doha. 

They have emphasized the interconnection of this

work with economic recovery in America and

around the globe. 

At Doha, we also made significant progress in a

number of other areas, some of which are

discussed later:

• The review of WTO rules 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, enabling us to pursue an

affirmative agenda against the increasing

use of these laws against U.S. exporters

while also addressing the underlying

trade-distorting practices.

• WTO Members adopted a political

declaration that highlights provisions in

the TRIPs agreement that provide

Members with the flexibility to address

public health emergencies, such as

epidemics of HIV/AIDS, tuberculosis and

malaria. 

• The Doha Declaration includes a mandate

to launch negotiations aimed at

eliminating environmentally harmful fish

subsidies and increasing market access for

environmental goods and services. The

agreement also includes an important new

mandate to enhance the mutual

supportiveness of multilateral

environmental agreements (MEAs) and

the WTO rules by strengthening the

relationship between the two,

institutionally and substantively.

• In the area of electronic commerce, the

declaration ensures that the WTO will

remain active in this important and

dynamic area through the continuation of

its work program, while extending the

ongoing moratorium on imposing customs

duties on electronic transmissions. This

work program will provide an opportunity

for the United States to continue its efforts

to press other countries to avoid

unnecessary measures that would impede

the growth of electronic commerce. 

• The declaration includes an agreement

providing for developing enhanced

transparency in WTO Member

government procurement procedures. 

This program should lead to improved

disciplines in government purchases,

making an important contribution to

combating corruption and more efficient

use of taxpayers’ money.

• The declaration calls for negotiations on

new WTO rules to facilitate trade by

making procedures at international

borders more transparent and efficient.

• The declaration states a commitment to

enhance cooperation between the WTO

and the International Labor Organization

(ILO). 

To help maintain the momentum after the Doha

agreement, the WTO economies agreed that

Mexico will chair the WTO ministerial in 2003. 

As the incoming chair, Mexico can assist in

promoting the pace of the new negotiations. 

One of the important WTO entities in the months

ahead will be the Trade Negotiations Committee

(TNC). That committee took a number of useful

steps at its initial meeting on February 1. It

appointed the WTO Director-General to chair the

committee’s work (in an ex-officio capacity) until

the January 2005 deadline set for the completion

of the negotiations. This helps ensure the

committee will receive the necessary attention at

the WTO’s highest level. And the TNC adopted a

structure for the negotiations that will help the

negotiating process move forward in an orderly

fashion. 
4 TRADE POLICY AGENDA

As we move forward, the United States will place

special emphasis on our 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. We

will work with the WTO and others to provide the

tools and training needed to help these nations

participate more actively in the global trading

system. In particular, we will encourage

developed nations, multilateral development

banks, and other international institutions – such

as UNCTAD and the World Intellectual Property

Organization – to supply technical assistance to

build the capacity of poorer countries to engage

effectively in the negotiation and implementation

of trade agreements. By providing such support,

we will be helping these nations to integrate with

the global economy – a key part of the strategy for

economic development – while also strengthening

the rules-based trading system.

B. Completing the Accession of China and

Taiwan to the WTO

Last year, the United States also played a key role

in breaking through logjams to complete the

historic accessions of China (after a 15-year

effort) and Taiwan (after a 9-year effort) to the

WTO. This achievement built on the work of four

U.S. Administrations. Throughout 2001, we

solved the multilateral issues concerning

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. 

These agreements integrate two of the world's

largest economies into the rules of the WTO

trading system and provide U.S. exporters with

expanded access in growing markets ranging from

automobiles and telecommunications to

agriculture and chemicals. As a result, the

President certified the requirements set by

Congress through the leadership of Chairman

Baucus and Senator Grassley as well as Chairmen

Thomas and Representatives Crane, Rangel, and

Levin in the passage of the legislation extending

Permanent Normal Trade Relations to China.

In 2002, the Bush Administration will work

closely with other countries, as well as a private

sector network we are interconnecting, to monitor

China’s and Taiwan’s compliance. 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 with our businesses and with China

and Taiwan to address problems and take action if

necessary. 

C. 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 contribute to this new relationship, in 2002 we

will continue our intensified effort to assist

Russia’s preparations to join the WTO. President

Putin has made WTO membership and integration

into the global trading system a top priority; we

will support Russia as it promotes reforms, further

establishes the rule of law in the economy, and

adheres to WTO commitments for a more open

economy. This effort needs to include action by

the Duma to establish a fully effective legal

infrastructure for a market economy. 

It is our expectation that the WTO will prepare a

first draft Working Party report on Russia’s

accession in the first quarter of this year. We will

work with Minister Gref – in cooperation with the

EU and our other WTO counterparts – to address

any gaps. Throughout this process, we look

forward to consulting closely with the Congress. 

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
THE 2002 AGENDA 5

Germany 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

U.S. Government will continue consulting closely

with various groups on the protection of freedom

of religion and other human rights in conjunction

with this action. 

While some are inclined to keep the JacksonVanik law in reserve as we negotiate Russia’s

accession to the WTO, this course would continue

to place Russia’s trade relations with us in a

different category, and would work against U.S.

commercial and foreign policy interests. The

Russians acknowledge they must abide by the

WTO’s rules, and we and 143 other economies

will insist on that course as their WTO

negotiations proceed. Working closely with the

Congress, we will stress the need for Russia to

offer fair market access – for example in

agriculture – but we should do so according to the

rules to which we maintain Russia should adhere.

Congress exercises substantial oversight in these

negotiations through existing consultation

provisions.

Pressing Regional Initiatives: The Free Trade

Area of the Americas

In April 2001, at the Quebec City Summit, the

President inaugurated a reinvigorated push for free

trade throughout the Americas. A number of

Members of Congress joined him to express their

support and represent important perspectives. 

At Quebec City, the leaders of 34 democracies of

the Western Hemisphere agreed to proceed with

detailed draft negotiating texts and to complete

work no later than January 2005. Once

implemented, the FTAA will be the largest free

trade zone in the world. 

The United States and its FTAA partners are

working commitedly toward this goal. By May of

this year, we will launch market access

negotiations on agriculture, industrial goods,

services, investment, and government

procurement. In October, trade ministers will

meet in Quito to review the revised negotiating

texts and to determine next steps. Upon the close

of the Quito meeting, the United States and Brazil

will begin a co-chairmanship of the FTAA

process, providing an opportunity for cooperation

with a key partner and economic power as the

pace of negotiations accelerates. 

Throughout the year ahead, we will also persist in

our efforts to make the public case for NAFTA's

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, by demonstrating how free trade

between developed and developing countries can

boost prosperity, economic stability, productive

integration, and the development of civil society.

Moving Forward: Bilateral Trade Agreements

In 2001, the Congress approved the U.S.-Jordan

Free Trade Agreement with broad support,

establishing America’s third free trade zone, and

our first with an Arab country. The Congress also

passed the Bilateral Trade Agreement with

Vietnam, achieving a principal goal of America’s

decade-long agenda to normalize relations with

our former foe. Many Members of Congress, such

as Senator Kerry, played key roles in the

development of these agreements, and then

shepherded the final packages to successful

passage.

In 2002, we intend to complete free trade

agreements with Chile and Singapore. Each of

these agreements offer increased opportunities for

U.S. businesses, farmers, and workers and will

send a message to the world that the United States

will press ahead with those that are committed to

open markets – whether in the Western

Hemisphere, across the Pacific, or beyond the

Atlantic. As we move these FTA negotiations

toward completion in the months ahead, we want

to work closely with the Congress, and the Senate

Finance and House Ways & Means Committees in

particular, so we can determine how best to
6 TRADE POLICY AGENDA

address the concerns and interests of the Congress

and the American people.

In 2002, working with the Congress, we also hope

to initiate talks on new bilateral free trade

agreements. These agreements can open up a new

front for free trade. They can create models of

success that help reformers, break new ground for

liberalization in changing or emerging sectors

(e.g. biotech, high tech – including IPR-related

sectors – and services), build friendly coalitions to

promote trade objectives in other contexts (e.g.

biotech, SPS topics), add to America’s trade

leverage globally, underpin links with other

nations, and energize and expand the support for

trade. New trade agreements also present fresh

opportunities to find common ground at home, and

with our trading partners, on the nexus among

trade, growth, and improved environmental and

working conditions.

Our aim is to achieve free trade agreements with a

mix of developed and developing nations in all

regions of the world. As the President announced

in January, and as Congress urged in the

Caribbean Basin Trade Partnership Act, we want

to explore a free trade agreement with the

countries of Central America. Many Members of

Congress have expressed strong support for an

FTA with Australia. We have begun discussions

with Australia to determine how best to move

forward towards this goal, recognizing the need in

particular to work on agricultural issues. The

Africa Growth and Opportunity Act (AGOA) also

urges us to advance the negotiations of FTAs with

sub-Saharan Africa. We have begun preliminary

discussions with the Southern African Customs

Union toward this end.

We are weighing these and other possibilities to

extend free trade. We look forward to discussing

these matters with the Congress, and the Senate

Finance and House Ways & Means Committees in

particular, and seek continued input on these or

other possible FTAs. It is our intent to press the

goals in the Trade Promotion bills passed by the

House and the Finance Committee. 

Working with Developing Nations: Preferential

Trade Agreements 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.” 

We urge the Congress to reauthorize and expand

the Andean Trade Preference Act (ATPA) – a

vital program for the four Andean developing

country democracies on the front lines of the fight

against narcotics production and trafficking. 

ATPA was enacted in 1991, and its expiration

after ten years has caused real hardship for

friendly countries with little margin to spare. 

We also urge Congress to reauthorize the expired

Generalized System of Preferences (GSP), a 26-

year old U.S. program to promote economic

growth in 123 developing nations and 19

territories by providing duty-free treatment for

certain exports to the United States. The

expiration of GSP access on September 30 –

shortly after September 11 – raised hardship and

anxieties among developing nations that are

seeking to alleviate conditions that serve as

breeding grounds for those whose purpose is

destruction, not construction and production.

Last year, we began the important implementation

of the far-sighted African Growth and Opportunity

Act, which Congress enacted in May 2000. 

AGOA extends duty-free and quota-free access to

the U.S. market for nearly all goods produced in

the 35 eligible beneficiary nations of sub-Saharan

Africa. In 2001, the United States lifted all duties

on eligible apparel products exported from 12

AGOA nations to the United States. The

Administration is fully committed to AGOA’s use

and expansion. It opens the door for African
THE 2002 AGENDA 7

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. Indeed, we

support prompt Congressional action on

legislation that will clarify and strengthen current

provisions in the AGOA. In mid-February, I

traveled to Kenya, South Africa, and Botswana to

listen and learn more about Africa’s needs, while

conveying America’s support for Africa’s

economic and political reforms and our interest in

greater trade.

Through AGOA and other preferential trading

ties, such as the Caribbean Basin Trade

Partnership Act, we will support efforts to build

the capacity of developing countries to take part in

trade negotiations, implement complex trade

agreements, and use trade as an engine of

economic growth. The United States devoted

more than $555 million in trade-related capacitybuilding assistance to developing countries during

fiscal 2001 – more than any other single country. 

We will continue to work with other agencies of

the U.S. Government, such as AID, and with

multilateral and regional institutions, such as the

World Bank, the Inter-American Development

Bank, the African Development Bank, and the

WTO to help developing nations to board the ship

of trade so as to reach the shore of prosperity,

opportunity, jobs, better health, the rule of law,

and political reform. 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 are

benefitting American producers, exporters, and

consumers. Sectors which have been affected

include entertainment (motion picture and

television programming), high-technology

(software and telecommunications) and

agriculture (bananas, soybeans, lamb, rice, pork,

beef, dried beans, stone fruit, fresh fruits and

vegetables, processed foods, citrus, nuts, stuffed

molasses, and wheat gluten).

In 2002, we will seek to resolve favorably other

trade disputes in a way that best serves America's

interests. Among the most prominent cases are:

softwood lumber with Canada; beef with the

European Union; the Foreign Sales Corporation

WTO case brought by the EU; and sweeteners

with Mexico. In the FSC case, the executive

branch will need to consult and work closely with

the Congress to determine an approach that will

help avoid large trade retaliation against U.S.

exporters and the risks of spiraling conflict.

We plan a special effort around the world to

address technology regulations and science and

health measures that impede farm exports and the

productive development of agriculture. 

Biotechnology holds out tremendous potential for

the developing world. It can increase food

security and food production through higher yields

and the reduction of fertilizer and insecticide

inputs. New discoveries will add vitamins to

foods, and counter malnutrition and disease.

Trade Laws Against Unfair Practices

Given America's relative openness, strong,

effective laws against unfair practices are crucial

toward maintaining domestic support for trade. 

This Administration has used and continues to

back the use of these laws. 

In Doha, working closely with the Commerce

Department, we stressed and pressed this point

vigorously. We then advanced an affirmative U.S.

agenda, targeting the increasing misuse of these

laws, particularly by developing countries, to

block U.S. exports. During 1995-2000, there were

81 investigations by 17 countries of U.S.
8 TRADE POLICY AGENDA

exporters. Chemical, steel, and other metal

producers are the most frequently hit U.S.

industries, although U.S. farm products are

increasingly targeted. At present, there are over

60 orders against American companies in effect. 

The new negotiations launched at Doha will help

us address significant shortcomings in foreign

anti-dumping and countervailing duty procedures

by improving transparency and due process. 

Finally, the Doha Declaration makes clear that

trade remedy laws are essential tools and should

not be undermined. We won agreement that the

new negotiations will preserve the concepts,

principles, and effectiveness of the international

provisions on which we rely, as well as the

instruments we use. Moreover, the United States

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.

The Importance of Safeguards

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.

The Bush Administration has pursued innovative

approaches with safeguards. For example, while

ending the safeguards for our wheat gluten and

lamb industries last year, we also provided them

with additional financial assistance over a period

of 2-3 years. The effect has been to assist them in

their transitions to competitiveness, while also

helping to insulate our exporters from trade

retaliation. The European Union agreed to lift its

duties on U.S. corn gluten imports as part of our

action on wheat gluten. 

In June, the Administration requested a safeguards

investigation by the U.S. International Trade

Commission into whether increased imports were

causing serious injury to the U.S. steel industry. 

The President’s request was one part of a larger

U.S. global steel initiative that also included the

launch of new negotiations with our trading

partners to eliminate inefficient excess capacity in

the world’s steel industry and to enhance

international discipline over subsidies and other

measures that distort markets.

On December 19, the International Trade

Commission issued a report containing its

recommendations. A plurality of the

commissioners recommended various remedies for

many of the steel product categories. The

Administration has been reviewing the ITC’s

recommendations, as well as the views of a

diverse collection of steel companies, labor

unions, steel consumers, port authorities, and

exporters. We recently received supplementary

information from the ITC pursuant to an

Administration request. We welcome continued

input from the Congress as the President decides

on a course of action.

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. 

The trade system also needs to be alert to other

challenges. Poor countries cannot succeed with

economic reform and growth if they are

eviscerated by pandemics. From its first days, this

Administration recognized this economic, health,

and social reality. We stressed that the

international WTO Agreement on Intellectual

Property (the TRIPs accord) contains flexibilities

for developing nations to obtain access to critical

medicines to help address public health

emergencies, such as HIV/AIDS, tuberculosis, and

malaria. The Administration played a key
THE 2002 AGENDA 9

coalition-building role – working closely with

African nations and Brazil, as well as

pharmaceutical companies – to develop a special

political declaration at Doha that affirms these

flexibilities.

Flexibility on the implementation of intellectual

property protection, and lower-priced medicines,

must be part of a larger global response to health

pandemics, involving education, prevention, care,

training, and treatment. The United States is the

largest bilateral donor of funds for HIV/AIDS,

tuberculosis, and malaria assistance, providing

over $1 billion per year on related research,

prevention, care, and treatment programs, much of

which helps to address developing country

problems. The United States was the first

contributor, and remains the largest, at $500

million, toward the international “Global Fund to

Fight AIDS, TB and Malaria,” which will allocate

its first grants in April.

We are also stressing that the promotion of the

flexibilities within the TRIPS accord must be

compatible with the crucial protection of

intellectual property. Effective protection of

intellectual property is critical for developing

nations, because we need to find and develop

cures for diseases that ravage their societies. 

Furthermore, the local protection of intellectual

property rights establishes the foundation for an

attractive investment climate for industries of the

future. Indeed, as developing countries have

implemented the intellectual property protections

in TRIPs, they have begun to benefit from

increased technology transfer and investment –

two key factors in long-term economic growth.

There are other areas where we are working to

ensure our trade policies are supportive of related

meritorious purposes. USTR has worked closely

with Members of Congress on legislation that

would support international efforts to stop trade in

“conflict diamonds” (diamonds traded by rebel

movements to finance conflict aimed at

undermining elected governments). The bill

approved by the U.S. House of Representatives in

late November achieves this objective consistent

with our international obligations. We will

continue to work with other agencies and the

Senate sponsors of the legislation to resolve any

remaining issues and to help bring the 

Kimberley Process (the international negotiations

aimed at preventing trade in conflict diamonds) to

a successful conclusion. 

A Cleaner Environment and Better Working

Conditions

Free trade promotes free markets, economic

growth, and higher incomes. And as countries

grow wealthier their citizens demand higher labor

and environmental standards. Furthermore,

governments have more resources and incentives

to promote and enforce such standards. 

In 2001, we charted progress on incorporating

labor and environmental concerns into U.S. trade

policy. The U.S.-Jordan Free Trade Agreement is

the first U.S. free trade accord to include

enforceable environmental and labor obligations

in the body of the agreement. The Administration

also affirmed an executive order, and its

implementing guidelines, for conducting

environmental reviews of trade agreements. As

part of this policy, USTR is conducting

environmental reviews of the U.S.-Chile and U.S.-

Singapore free trade agreements, the Free Trade

Area of the Americas, and the WTO’s new

negotiating agenda. 

The House and Senate Trade Promotion Authority

bills contain provisions that will incorporate labor

and environmental concerns into U.S. trade

negotiations. We are drawing on this guidance –

and would welcome additional insights – as we

are pursuing these topics in our current trade

negotiations. Similarly, we are conducting

discussions with NGOs and the business

community to ascertain how we can address

concerns posed about investment provisions in

trade agreements. Working with our NAFTA

partners last July, we agreed to increased

transparency in investment disputes, and we

issued additional binding interpretations for
10 TRADE POLICY AGENDA

NAFTA panels that define more precisely the

basis for their reviews.

As noted earlier, the United States played a

leading role in forging the compromise to

incorporate environmental concerns into the new

global trade negotiations. We continue to stress to

our trading partners the critical importance of

proceeding creatively and positively on this Doha

agenda. We can take practical steps that

demonstrate that good environmental policies and

sound economics can be mutually supportive. In

addition, we should create a healthy “network”

between multilateral environmental agreements

(MEAs) and the WTO, enhancing institutional

cooperation and fostering compatible, supportive

regimes. If we succeed, this precedent may be

helpful in interconnecting the WTO with other

specialized organizations, such as the ILO on

labor policies and the WHO on health issues. 

The Bush Administration has a sound track record

of using our trade preference programs, and our

trade negotiations, to improve working conditions

in the context of trade liberalization. In May, the

Guatemalan Congress enacted a significant

package of reforms to the country’s labor law

following a U.S. review of the country’s labor

practices conducted under the Generalized System

of Preferences program. In December, the United

States and Cambodia extended our Bilateral

Textile Agreement, including an increase in the

quota for textile exports from Cambodia in

recognition of Cambodia’s progress in reforming

labor conditions in factories over the past three

years. And in our negotiations for free trade

agreements with Chile and Singapore, in

accordance with the objectives in the TPA

legislation, we will seek a meaningful set of

cooperative provisions that will affirm labor and

environmental standards and projects, while

promoting open markets.

We know the importance of these topics for many

Members of Congress, and we want to work to

explore new approaches that break through old

stereotypes. Some are concerned about a “race to

the bottom,” although others point to the benefits

of trade and openness in spurring growth,

productivity, higher incomes, and enhanced

scrutiny of working and environmental conditions.

Some stress the need to safeguard America’s

sovereign rights in setting our own standards,

while others want to deploy trade agreements to

compel others to negotiate 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 TPA bills Congress has

forged to bridge the differences, build a stronger

consensus, and make a real, positive difference

around the world.

Conclusion: Challenges on the Trade Horizon

The United States has made considerable progress

on the trade agenda in the past year, but still must

do more to catch up with our trading partners. 

The European Union now has 29 regional and

bilateral free trade or special customs agreements,

22 of which it negotiated in the past decade, and is

in the process of negotiating with 12 more

countries. Mexico sped past the United States

after NAFTA to complete eight free trade

agreements with 28 countries. Japan has

completed a free trade agreement with Singapore

and is exploring options with the ASEAN nations,

Canada, Mexico, Korea, and Chile. Even China,

just into the WTO, is pursuing an FTA with the

ASEAN countries. 

Altogether, there are 130 regional free trade and

customs agreements in the world; the United

States is a party to only three. There are 30 free

trade agreements in the Western Hemisphere; the

United States is a party to only one. In recent

years, when the rules of trade have been set, the

United States has frequently not been at the

negotiating table.

In addition, there is a constant threat of markets

closing and barriers rising. During periods of

economic downturn and uncertainty, it is most

important to affirm the drive toward free trade. In

the past, governments have often resorted to
THE 2002 AGENDA 11

protectionism in short-sighted attempts to shield

their local industries from competition. In the

face of these challenges, we must be even more

vigilant in order to move ahead. 

Opening markets, and liberalizing commerce,

injects fresh dynamism and energy into the U.S.

economy. Open trade cuts taxes on businesses

and consumers. For example, NAFTA and the

Uruguay Round agreements have resulted in

higher incomes and lower prices for goods, with

benefits amounting to $1,300 to $2,000 a year for

the average American family of four. 

There is even more to be gained. A University of

Michigan study has reported that new global trade

negotiations focused on tariff reductions on

industrial and agricultural products could deliver

an additional annual benefit of nearly $2,500 for

American families.

We will continue to make this case for the benefits

of trade. Expanded trade – imports as well as

exports – improves our well being. Exports

accounted for 25 percent of U.S. economic growth

from 1990-2000 and support an estimated 12

million jobs; these jobs are estimated to pay 13 to

18 percent more than other jobs. Trade also

promotes more competitive businesses, as well as

more choices of goods and inputs, with lower prices.

A free and open trading system is critical to a

number of sectors of the U.S. economy. In U.S.

agriculture, for example, one in three acres are

planted for export and nearly 25 percent of gross

cash sales are generated by exports. The value of

U.S. exports of agricultural products is expected

to be $54.5 billion this year. U.S. farmers and

ranchers are 2.5 times more reliant on trade than

the rest of the economy.

Last year, the Administration and the Congress

together restored America’s trade policy

leadership all around the globe. There is no doubt

the United States is back at the free trade table. In

the year ahead, the Bush Administration will work

in close consultation with the Congress to build on

this leadership through the ongoing

implementation of an activist agenda that seeks to

vanquish the barriers to free trade and magnify the

opportunities for growth and prosperity. By

opening new markets, together we will be

contributing to the enhancement of democracy,

liberty, security, innovation, political coalitions,

economic growth, and openness in the United

States and throughout the world.

Robert B. Zoellick

United States Trade Representative

March 1, 2002
57 WORLD TRADE ORGANIZATION

Peru, and Tunisia.6 As for CVD measures,

seven WTO Members notified CVD actions

taken during the latter half of 2000, whereas

seven Members also notified actions taken in the

first half of 2001. The Committee reviewed

actions taken by Argentina, Australia, Canada,

the EU, Peru, South Africa and the United

States. With respect to subsidy notifications,

the Committee continued its examination of new

and full notifications submitted for 1998, as well

as updating notifications submitted for 1999 and

2000. The table contained in Annex II of this

report shows the WTO Members whose subsidy

notifications were reviewed by the Committee in

2001.

As of January 1, 2002, when Membership in the

WTO had reached 144, only 50 Members had

submitted new and full subsidy notifications for

1998, while 43 and 35 Members, respectively,

had submitted updating notifications for the

1999 and 2000 periods. Notably, 41 Members

have never made a subsidy notification to the

WTO.

In view of the ongoing difficulties experienced

by Members, including the United States, in

meeting the Agreement’s subsidy notification

obligations, the Committee took several actions

in 2001 aimed at improving the situation. At the

end of 2000, the Working Party on Subsidy

Notifications was reconvened to take a fresh

look at the notification problems confronting

Members and develop possible long-term

solutions for the Committee’s consideration. 

Following a questionnaire to Members

circulated by the Secretariat inquiring about the

specific problems faced in making notifications

and several informal meetings in the spring of

2001, a three-prong strategy was agreed upon 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. 

Examination of the format for a subsidy

notification constitutes the second prong of the

strategy –the effort began in 2001 and will

continue into 2002. The third prong is the

organization of a subsidy notification seminar in

the fall 2002, coinciding with the regular

Committee meeting, for government officials

from developing countries responsible for

notification.

An important action was taken by the

Committee in 2001 with respect to the

frequency and nature of subsidy notifications. 

Under Article 26 of the Agreement, “new and

full notifications” are submitted every third

year; while “updating notifications” are

submitted in intervening years. At a special

meeting held in May 2001, the Committee

recognized that most Members were having

significant difficulties in making their

notifications, primarily due to resource

constraints. Importantly, Members indicated

that the effort and resources required to prepare

the annual updating notifications are essentially

equal to those required for new and full

notifications. Generally, Members expressed

their belief that their resources would be best

utilized by devoting maximum effort to

submitting new and full notifications, every two

years, and by de-emphasizing the review of the

annual updating notifications. Under this new

approach, Members can concentrate their

resources in alternating years, first on making

their own new and full notifications, and then on

reviewing other Members’ notifications. It is

expected that this approach will have the effect

of increasing transparency, which is the

objective of the notification obligation under the

Agreement.

Implementation Issues: Over the course of 2001

and especially during the period just prior to the

Fourth Ministerial Conference, the Committee

held numerous informal and formal meetings to

discuss several implementation issues. Pursuant

to various General Council decisions, the

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. 
2001 ANNUAL REPORT 58

Committee held extensive discussions on five

general topics:

C determining “export competitiveness”

under Articles 27.5 and 27.6 of the

Agreement, including the possibility of

extending the period for establishing

export competitiveness; 

C special procedures, under Article 27.4

of the Agreement, for small exporter

developing countries seeking an

extension of the transition period for the

phase-out of export subsidies; 

C the appropriate methodology for

calculating the permissible level for

rebates of indirect taxes and import

duties on exported products under

Annex I of the Agreement;

C a general review of the Agreement’s

provisions regarding countervailing duty

investigations; and, 

C the methodology for the calculation of

the GNP per capita threshold delineated

in Annex VII of the Agreement for the

designation of certain developing

countries entitled to particular types of

“special and differential treatment”

under the Agreement.

1. Determining “Export Competitiveness”

under Article 27.5 and 27.6

Under Article 27.2 developing countries not

listed in Annex VII of the Agreement must

phase-out their export subsidies no later than

January 1, 2003. Notwithstanding this

provision, Article 27.5 and 27.6 of the

Agreement provide that a developing country

which has reached 3.25 percent of world trade

in a given product over two consecutive years

must accelerate the phase-out of its export

subsidies on that product. The product scope is

defined as a section heading of the Harmonized

System nomenclature. Application of this

provision can be triggered either by a

notification made by the developing country or a

computation done by the WTO Secretariat at the

request of another Member.

Many developing countries sought: (1) an

extension of the period for establishing export

competitiveness under Article 27.6 from two to

five years; and, (2) a mechanism to allow

developing countries that have achieved export

competitiveness to resume export subsidization

if exports fall below the level of export

competitiveness. An expansion of the countries

eligible for the special and differential treatment

provided to Annex VII countries and a

broadening of the product scope for the

determination of export competitiveness were

also sought.

Despite extensive discussions, the Committee

was unable to agree on whether the two-year

period could be effectively extended in some

manner without violating the express terms of

the Agreement, or whether, the two-year period

could be calculated on an alternative basis, such

as a multi-year rolling average. As to the

mechanism for the resumption of export

subsidization after export competitiveness is

lost, numerous issues remained unresolved as to

the terms under which a resumption could be

authorized. Nor was agreement reached

regarding the appropriate level of aggregation

under the Harmonized System nomenclature

when defining the product scope and the

expansion of the countries eligible for the

special and differential treatment provided to

Annex VII countries under the Agreement. This

implementation proposal was not considered at

the Fourth Ministerial Conference.

2. Special Article 27.4 procedures for

small exporter developing countries

As noted above, the Agreement requires

developing countries to eliminate their export

subsidies by January 1, 2003. Article 27.4 of

the Agreement allows for an extension of this

deadline on a year-to-year basis if a request is

made to the Subsidies Committee by December

31, 2001. The Committee must then decide
59 WORLD TRADE ORGANIZATION

whether an extension is justified based on

relevant “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.7 If the Committee does not

affirmatively sanction a continuation, the export

subsidies must be phased out within two years.

Two developing-country proposals were made

that would have permanently grandfathered the

export subsidy programs of developing

countries under certain conditions. One of the

conditions proposed was that the exports of the

developing country represent a small share of

total world exports. Several countries, including

the United States, objected to the proposed

permanent exemption from the Agreement’s

export subsidy disciplines. Nonetheless, in an

attempt to try and address the concerns of small

exporter developing countries, a special

procedure was discussed within the context of

Article 27.4 of the Agreement 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. While the Committee could not

reach a consensus on all the particular

provisions of the extension procedure –such as

the length of the extension –based on the

Committee’s work, the Committee chairman

made a recommendation to the General Council

which substantially formed the basis of the

procedure agreed upon as part of the

implementation decision taken at the Fourth

Ministerial Conference. Members meeting all

the qualifications for the agreed upon special

procedures will be eligible for a five-year

extension of the transition period, in addition to

the two years referred to under Article 27.4.

8

 To

date, Barbados, Belize, Costa Rica, El Salvador,

Guatemala, Honduras, Jamaica, Kenya, Panama,

Papua New Guinea, St. Kitts and Nevis, and

St.Vincents, have applied for the special

procedures under Article 27.4. The Committee

will conduct a detailed review of all extension

requests in 2002. 

3. The appropriate methodology for the

calculation of the rebate of indirect

taxes and import duties

Under the Agreement’s export subsidy rules,

countries are permitted to rebate certain indirect

taxes (e.g., sales taxes) and import duties on

inputs used in the production process and

physically incorporated in an exported product. 

The Committee considered two implementation

proposals with respect to this issue. The first

was a request that countries be permitted to

calculate the level of the rebate on an

“aggregate” or “generalized” basis rather than

on a product- or company-specific basis. Under

such an approach, a particular rebate level

would be established on an industry-wide basis

and the same rate applied to each company in

the industry. Due primarily to serious

reservations – expressed by the United States

and other developed country Members – that

any aggregate methodology for calculating the

rebate could result in an excessive rebate, no

consensus within the Committee was reached.

The second proposal related to the question of

whether indirect taxes and import duties on

capital equipment used in the production of

exports could be included when calculating the

amount of the rebate. As noted above, under the

7

 Any extension granted by the Committee

would only preclude a W TO 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. 

8

 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.
2001 ANNUAL REPORT 60

Agreement indirect taxes and import duties on

inputs consumed in the production process can

be rebated when a product is exported. 

However, the phrase “inputs consumed in the

production process” as defined in the

Agreement does not specifically include capital

equipment. Due to the clarity of the language in

the Agreement many countries, including the

United States, voiced concern that this was not

an issue of implementation and that adoption of

this proposal would effectively constitute an

amendment or authoritative interpretation of the

Agreement – neither of which the Committee is

empowered to do. Other countries expressed

doubts as to how the rebate could be accurately

and transparently calculated. Consequently, no

consensus was reached on this issue.

4. Review of the provisions of the

Agreement regarding countervailing

duty investigations

The General Council referred this topic to the

Committee on August 2, 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

Council that the Committee continue to consider

these issues. This recommendation was adopted

as part of the implementation decision adopted

at the Fourth Ministerial Conference. 

In December of 2001, the Committee met and

adopted a plan to examine and discuss the two

previously submitted papers. The Committee

must report to the General Council by July 31,

2002. In light of the anticipated rules

negotiations, it is unclear the extent to which the

Committee is the appropriate forum for

addressing some of the proposals, especially

those which affect the rights and obligations of

countries under the existing Agreement.

5. The methodology for the calculation of

the per capita GNP threshold in Annex

VII of the Agreement

Annex VII of the Agreement identifies certain

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 applies in

countervailing duty investigations of imports

from these countries, although this standard

expires at the end of 2002.9 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).10 A country

automatically “graduates” from Annex VII(b)

status when its per capita GNP rises above the

$1,000 threshold. When a country crosses this

threshold it becomes subject to the subsidy

disciplines of other developing countries.

9

 This de minimis for Annex VII countries is

3 percent, compared with the 2 percent for other

developing countries.

10 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 an apparent technical

error made in the initial compilation of this list and

pursuant to a General Council decision, Honduras

was formally added to Annex VII(b) on January 20,

2001.
61 WORLD TRADE ORGANIZATION

Since the adoption of the Agreement in 1995,

the de facto interpretation by the Committee of

the $1,000 threshold has been current (i.e.,

nominal or inflated) dollars. The concern with

this interpretation, however, was that a country

could graduate from Annex VII on the basis of

inflation alone, rather than on the basis of real

economic growth. The possible use of a $1000

constant 1990 dollar threshold was first raised

as part of the preparatory process for the Third

Ministerial Conference in Seattle, and at that

time some work on different possible

methodologies for deriving GNP per capita in

constant 1990 US dollars was developed.

11

In October 2001, the Chairman of the General

Council requested that the Committee take up

the question of the methodology for calculation

of the $1000 threshold in constant 1990

US dollars. 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:

. . . 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.12

Pursuant to this decision, the Committee will reexamine the methodology proposed by the

Chairman of the Committee in the course of

2002.13

6. Financial Support by the Government of

Korea for Hynix Semiconductor 

At the two formal meetings of the Committee in

2001, the United States made statements

expressing serious concerns regarding the

continued financial support which various

Korean government authorities have been

providing to Hynix Semiconductor, Inc. This

support has had the effect of shielding Hynix

from market discipline and exacerbating the

already distressed state of the global

semiconductor market. At the May 2001

11 While some Members were concerned

that they might graduate from Annex VII due, in part,

to inflation, other countries were concerned that use

of constant 1990 dollars might result in their being

closer to Annex VII graduation relative to their

position calculated using nominal dollars.

12 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.

13 In addition to the subsidy-related

implementation issues noted above, the Fourth

Ministerial Conference agreed to three other

proposals which were not discussed by the

Committee. The first permits a Member whose GNP

per capita income rose above $1000 and graduated

from Annex VII to be re-included if its GNP per

capita income falls back below $1000. The second

reaffirms the rights of least-developed countries to

provide export subsidies and to have an eight-year

phase-out period for export subsidies after export

competitiveness is reached with respect to a particular

product. The third takes note of a proposal to treat

certain types of subsidies provided by developing

countries as non-actionable and urges Members to

exercise due restraint with respect to challenging such

measures. 
2001 ANNUAL REPORT 62

meeting, Korean officials attempted to assure

the United States that: (1) Hynix benefits from

no government-subsidized support; and, (2) the

special government-orchestrated measures,

which Korea claims are intended to compensate

for an underdeveloped capital market, would be

of limited duration.

At the time of the November meeting, the

United States again expressed concern regarding

the variety and magnitude of government

support for Hynix as a result of the adverse

trade effects likely to result. The Korean

government’s financial and other support has

enabled Hynix to maintain capacity and

production at uneconomic levels, contributing

significantly to the global supply/demand

imbalance for DRAM semiconductors. Given

the continued state ownership in many of

Hynix’s creditors, and the historical record of

government influence over the allocation of

credit in the Korean economy, the United States

expressed its view to the Committee that it is

critical for the Korean authorities to

demonstrate unequivocally their commitment to

the stated policy of non-interference in the

commercial judgment of banks and other

financial institutions with respect to the future

of Hynix. In conclusion, the United States

urged the Korean authorities to take immediate,

transparent and affirmative steps to assure that

the Korean government will not provide any

additional subsidies to Hynix and that the

creditors of Hynix will not be pressured or

influenced by the government into taking any

decisions that cannot be justified solely on

commercial terms. At the November meeting,

the EU made an equally strong statement while

Japan and Singapore raised concerns as well. 

7. Export Credits 

At the May meeting, Brazil made a statement

regarding the Agreement’s provisions on export

financing. Brazil’s concerns stemmed from its

participation in aircraft dispute settlement

proceedings. Brazil made four basic points

regarding export credits. First, the existing

provisions of the Agreement – items (j) and (k)

of the Illustrative List of export subsidies found

in Annex I of the Agreement – covering export

credit guarantees and export credits are

insufficient to deal with the diversity of

mechanisms utilized in the market today and are

potentially unfair to developing countries. 

Second, the manner in which the OECD

Arrangement on Guidelines for Officially

Supported Export Credits was incorporated into

the Agreement allows participants of that

Arrangement to effectively alter the Agreement

without the participation of other Members. 

Third, the use of the so-called “market

window,” pursuant to which a participant of the

OECD Arrangement may depart from the OECD

rules by claiming that it is operating as a private

entity, is “virtually unchallengeable” and

generally unavailable to developing countries. 

Fourth, the Appellate Body’s definition and

interpretation of the de facto export subsidies

provisions in the Agreement was overly narrow

and insufficient to discipline such subsidies.

In a related matter, the Committee received a

communication from the OECD that was

distributed at the May meeting. In this

communication, the Participants to the

Arrangement on Guidelines for Officially

Supported Exports Credits decided to publish

the country risk classifications that were used

for the Premium Agreement of the Arrangement

and made these classifications available on their

website. The OECD also requested the

Secretariat to make available to any requesting

Member the full text of the Export Credit

Arrangement and the Premium Agreement,

unless the Committee believed that it might be

more useful simply to circulate these to all

Members of the Committee. In addition, in

informal discussions between the WTO

Secretariat, as observer to the Participants

Group on the Export Credits Arrangement, and

the OECD Secretariat, the possibility was

discussed that representatives of the OECD

Secretariat make a factual presentation on the

operation of the Arrangement for interested

Members.
63 WORLD TRADE ORGANIZATION

8. 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. One PGE member, Mr. A.

V. Ganesan of India, resigned his membership,

effective May 18, 2000, prior to the end of his

term. At a special meeting in February 2001,

the Committee elected Professor Okan Aktan to

replace Mr. Ganesan, for the remainder of Mr.

Ganesan’s term, which expires in 2002. At its

May 2001 regular meeting, the Committee

elected Mr. Jorge Castro Bernieri to replace Mr.

Gary Horlick, whose term expired in 2001.

Prospects for 2002

In 2002, the Subsidies Committee will continue

its attention to implementation issues in a

variety of respects. First, as noted above, 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, 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. 

As noted above, as a direct result of the decision

taken at the Fourth Ministerial Conference, the

Committee will continue its examination of the

provisions of the Agreement regarding

countervailing duty investigations and report to

the General Council by July 31, 2002. Finally,

the United States will actively review the

normal and special extension requests made

under Article 27.4 of the Agreement to ensure

the close adherence to the provisions of the

Agreement and the agreed upon procedures for

small exporter developing countries.

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. 
2001 ANNUAL REPORT 64

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

The TBT Committee14 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, and standards of U.S. private

standards-developing organizations and foreign

national and standardizing bodies. The inquiry

point responds to all 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. On questions concerning standards

and technical regulations for agricultural

products, including SPS measures, the NIST

refers requests for information 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. 

14 Participation in the Committee is open to

all WTO Members. Certain non-WTO Member

governments also participate, in accordance with

guidance agreed 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.
65 WORLD TRADE ORGANIZATION

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).15 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

available to the public on the WTO’s website.

Major Issues in 2001

The TBT Committee met three times in 2001. 

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 United States

compiled information on the range of

notifications under the TBT Agreement

(G/TBT/W/115), as well as the Agreement on

Sanitary and Phytosanitary Measures (SPS)

(G/SPS/GEN/186), to emphasize to WTO

Members that the provisions of both agreements

were relevant to international trade in bioengineered products.

The Committee conducted its sixth Annual

Review of the Implementation and Operation of

the Agreement based on background

documentation contained in G/TBT/10, and its

Sixth 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 WTO TBT

Standards Code Directory (Sixth Edition),

G/TBT/CS/1/Add.5 and G/TBT/CS/2/Rev.7. 

Decisions and recommendations adopted by the

Committee are contained in G/TBT/1/Rev.7.

A Special Meeting on Procedures for

Information Exchange was held in conjunction

with the Committee’s second meeting in order

to give Members the opportunity to discuss

issues relating to information exchange and to

ensure a focused review of how well

notification procedures under the Agreement are

functioning.

Follow-up to the Second Triennial Review of the

Agreement: The primary focus of the

Committee in 2001 was the work program

arising from its Second Triennial Review (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, in 2001 priority

attention was given to technical assistance and

the implementation needs of developing

countries, as well as trade effects resulting from

mandatory labeling requirements.

Technical Assistance: In the Second Triennial

Review, the Committee recognized the

importance of ensuring that solutions were

15

 Before 2000, the numbering of

notifications of proposed technical regulations and

conformity assessment procedures read:

“G/TBT/Notif./...” (followed by a number).
2001 ANNUAL REPORT 66

targeted at the specific priorities and needs

identified by individual or groups of developingcountry Members. This called for effective

coordination at the national level between

authorities, agencies, and other interested parties

to identify and assess priority infrastructure

needs of a specific Member. The Committee

recognized the need for coordination and

cooperation between donor Members and

organizations, and between the Committee,

other relevant WTO bodies, and other 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, work

was begun to develop a survey both to elicit the

needs of developing countries and to target

assistance provided by donors. The Committee

agreed to assess progress made in the context of

the Third Triennial Review.

Labeling: The Committee intensified its

exchange of information on issues associated

with mandatory labeling requirements, noting

the frequency with which specific concerns

regarding 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. 

Prospects for 2002

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 and the Committee has been a useful

forum for Members to raise concerns and

facilitate bilateral resolution of specific

concerns. In 2002, the United States expects

continued attention to issues relating to

technical assistance and implementation of the

Agreement by developing-country Members in

particular. Priority will be given to enhancing

the awareness of Committee Members regarding

the trade impediments which can result from

mandatory labeling requirements, the relevance

of existing trade disciplines, and the need for

good regulatory practice in the development and

adoption of technical regulations.

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

obligations to treat imports no less favorably

than domestically produced products, or the

GATT Article XI obligation not to impose

quantitative restrictions on imports. The

Agreement thus expressly requires elimination

of measures such as those that require or

provide benefits for the incorporation of local

inputs or “local content requirements” in the

manufacturing process, or measures that restrict

a firm’s imports to an amount related to its

exports or related to the amount of foreign

exchange a firm earns (“trade balancing

requirements”). It also includes an illustrative

list of measures that violate its requirements. 

The Agreement requires that any such measures

existing as of the date of entry into force of the

WTO (January 1, 1995) be notified and

eventually eliminated. Developed countries

were required to bring notified measures into

conformity by January 1, 1997. Developing

countries had until January 1, 2000 unless

additional time was granted by the Council for

Trade in Goods (CTG), and least-developed

countries have until January 1, 2002.

Major Issues in 2001

The TRIMS Committee held no meetings this

year. As was the case last year, the key TRIMS

issues related to Article 5.3, which outlines the

process for granting an extension of the

transition periods for developing countries, and

Article 9, which describes a mandated review of
67 WORLD TRADE ORGANIZATION

the Agreement, were both required topics for

discussion in the Council for Trade in Goods

(CTG), rather than in the TRIMS Committee

(see separate section on the CTG). 

The Committee did produce two documents this

year. The first was on notifications under

Article 6.2 of the Agreement. Under Article

6.2, Members with non-conforming TRIMS

must provide a notification to the WTO

regarding the publications in which information

on such measures can be found. The other

document was Part I of a report drafted by the

WTO Secretariat and UNCTAD on the impact

of TRIMS for developing countries. This

portion of the report describes definitions of

performance requirements found in various

agreements as well as the disciplines applied to

such measures. The United States is still

reviewing the report and has not yet commented

on it. Part II of the report, which is not yet

available, will focus specifically on developing

country experiences with TRIMS. 

Prospects for 2002

Once both portions of the report on the impact

of TRIMS have been drafted, consensus in the

CTG on the scope of the work to be undertaken

in response to the Article 9 mandate may be

possible which may invigorate discussions in

the TRIMS Committee. Absent such a mandate,

work in the TRIMS Committee will be limited. 

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 2001, TMB

membership was composed of appointees and

alternates from the United States, the EU, Japan,

Canada/Norway, Switzerland/Turkey, Brazil,

Thailand, Pakistan/Macau, India/Egypt, and

Hong Kong/Republic of Korea. Upon its

accession in December 2001, China assumed

membership on the TMB. 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, time-limited 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

Agreement on Textiles and Clothing in a

manner in 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 it has “integrated” a product, a WTO

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
2001 ANNUAL REPORT 68

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 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 5.7 percent in 1995 and 7.3

percent in 2001. 

Article 5 of the ATC requires that Members

cooperate to prevent circumvention of quotas by

illegal transshipment or other means. The

United States actively worked with trading

partners to improve cooperation and information

sharing, and concluded a new agreement with

Hong Kong to this end. The United States also

established a Textile Transshipment Task Force

at the U.S. Customs Service to improve

enforcement of textile quotas at U.S. borders

and has tightened enforcement actions vis-a-vis

other trading partners where an improved

bilateral agreement was not possible. 

Major Issues in 2001

Safeguard Restraints: A special three-year

safeguard is provided in the ATC to control

surges in uncontrolled imports that cause or

threaten to cause serious damage to domestic

industry. Actions taken under the safeguard are

automatically reviewed by the TMB. In 2001,

the TMB reviewed a safeguard action taken by

Poland on synthetic fiber imports from

Romania. The TMB found that Poland had not

demonstrated serious damage or actual threat

thereof with respect to these imports.

Notifications and Other Issues: 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’s report

on the implementation of the second stage of the

ATC covering the years 1998-2001 appears as

document G/L/459.

Prospects for 2002

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. 
69 WORLD TRADE ORGANIZATION

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; e.g., 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,”

agreement was reached in the Uruguay Round

on “The Understanding on the Interpretation of

Article XVII.” It provides a working definition

of a state trading enterprise and instructs

Members to notify the Working Party of all

firms in their territory that fall within the agreed

definition, whether or not such entities have

imported or exported goods.

A WTO Working Party was established to

review the notifications of state trading

enterprises, and their adequacy, and 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, for the first time,

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

exclusion 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 state

trading enterprises could capriciously raise

import duties and/or 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 nonagricultural products. All agricultural tariffs

(including tariff-rate quotas) are now bound. 

While further work is needed on the

administration of tariff-rate quotas, bindings do

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 2001

New and full notifications were first required in

1995 and, subsequently, every third year

thereafter, while updating notifications are to be

made in the intervening years, indicating any

changes. As of October 2001, 25 Members

submitted new and full notifications for 2001. 

In 1998, the previous period requiring full

notification by Members, 45 Members

submitted new and full notifications. In the

intervening period, 34 Members submitted

updating notifications for 2000, and

39 Members submitted updating notifications

for 1999.

The Working Party held one formal meeting in

October 2001 to review Member notifications. 

During the meeting, the Working Party reviewed

57 notifications, including the 25 new and full

notifications. At the meeting, the Chairman

made statements concerning the need for timely

compliance with notification requirements.
2001 ANNUAL REPORT 70

Prospects for 2002

As part of the mandated agricultural

negotiations already underway, several countries

have identified issues to be addressed in

negotiations related directly to measures used by

state trading enterprises, such as in tariff-rate

quota administration or export competition. 

Several countries have called for stricter

disciplines on privileges enjoyed by state

trading enterprises. The United States has

tabled a proposal, to be further discussed in

2002, that calls for the development of new

disciplines on agricultural export state trading

enterprises that would ensure export

transactions are non-discriminatory and

transparent. Specifically, disciplines should be

established that eliminate exclusive rights of

single desk exporters and importers, strengthen

notification requirements, and eliminate the use

of government funds or guarantees to finance

potential operational deficits or to otherwise

insulate 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. In anticipation of more

expanded negotiations during the year, the

Working Party also will intensify efforts to

improve the notification record.

C. 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.

Major Issues in 2001

The major activity of the Council this year

consisted of the Built-In-Agenda (BIA)

negotiations described at the beginning of this

chapter. In addition to the BIA, the CTS is

conducting two previously agreed reviews.

The air transport review, required in the GATS

Annex on Air Transport Services, began in late

2000 and continued in 2001. 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.” 

While a small number of countries have

advocated changes to the current exclusion, the

United States has taken the position that to date

bilateral and plurilateral venues outside the

WTO have proven to be effective in promoting

liberalization in this important sector. In

October 2001, the United States submitted a

written statement presenting these views

(available at http://docsonline.wto.org:80/

DDFDocuments/t/S/C/W198.doc).

The second review, regarding the status of basic

telecommunications accounting rates under

GATS MFN provisions, was provided for in the

course of the 1997 basic telecommunications

negotiations and continued through 2001. 

During that review, some Members requested

that those seeking to retain a “gentleman's

agreement” not to bring a dispute on accounting

rates on MFN grounds explain why there is a

need to retain this agreement. The United States

supports a more thorough examination of why
71 WORLD TRADE ORGANIZATION

Members need to retain such an agreement,

particularly in light of increased competition in

the telecommunications sector. 

Separately, at the initiative of the United States,

the CTS took steps to ensure that preferential

free trade agreements are reviewed for their

consistency with countries’ GATS obligations. 

In 2001, the CTS decided to refer nine such

agreements to the WTO Committee on Regional

Trade Agreements for review.

Prospects for 2002

The air transport review will continue in 2002. 

The main work of the CTS, however, will be

related to the WTO services negotiations

described at the beginning of this chapter.

1. Agreement on Basic

Telecommunications Services

Status

The WTO Agreement on Basic

Telecommunication Services, which came into

force in February 1998, opened over 95 percent

of the world telecommunications market, by

revenue, to varying levels of competition. The

range of services and technologies covered by

the Agreement ranges from submarine cables to

satellite systems, from broadband data to

cellular services, to business networks based on

the Internet. The majority of WTO Members

have made regulatory as well as market access

commitments, ensuring adherence to a

multilateral framework for promoting

competition in this sector. The Philippines, and

Papua New Guinea made commitments that

have yet to be ratified. Brazil’s offer was

contingent on expected improvements, details of

which, however, were not accepted by other

WTO Members. 

Through the Agreement on Basic

Telecommunications, the United States has

largely succeeded in shaping an international

consensus that telecommunications monopolies

must be replaced with competitive markets for

any economy to enjoy the benefits of the digital

economy.

Accordingly, WTO Members around the world

are rewriting rules to permit effective

competition and to promote the growth of new

markets. The results continue to promote

growth: usage of telecommunications networks

has increased as prices have dropped, fueling

new services and introducing new efficiencies

throughout economies. With demand for

advanced services, including the Internet, new

entrants willing to innovate with different

technologies are creating markets that would

never have developed had control of other

nations’ networks remained in the hands of

monopolists.

As a result of this Agreement, U.S. firms have

invested billions of dollars abroad, extending

their networks, bringing down the cost of

communications for U.S. consumers and

businesses, and laying the infrastructure for

global electronic commerce. The experience

U.S. firms have gained in developing

competitive markets in the United States has

provided an enormous advantage in these newly

opened markets, allowing them to bring to these

markets the same innovation and efficiency U.S.

consumers have long enjoyed. Opening foreign

markets has had immediate benefits for U.S.

consumers and businesses as well. Prices for

calls to many competitive markets now differ

little from domestic long-distance prices.

In addition to fueling growth in new services,

market liberalization has stimulated a boom in

equipment sales. U.S. manufacturers have been

major beneficiaries in the growth of a global

market for telecommunications equipment, with

U.S. equipment exports in 2000 increasing 23

percent over the previous year to $28 billion. 

This spending is largely dedicated to investment

in new networks, or upgrades to existing

networks, driven by competitive pressures.
2001 ANNUAL REPORT 72

Major issues in 2001

Governments have recognized the value of

reducing the governmental role in the supply of

telecommunications services, and have

continued to divest shares in government-owned

operators – including in Germany, Greece,

Israel, Japan, Korea, Norway and Taiwan. This

trend is expected to continue. Governments

have also taken significant steps to increase

market access opportunities through procompetitive regulatory initiatives, including the

unbundling directive in the EU and

establishment of dominant carrier regulation in

Japan. Newly-acceding WTO Members, such as

China also brought into force broad-based

telecommunications commitments in 2001.

Prospects for 2002

The global investment needs in the

telecommunications sector, and U.S. firms’

interest in meeting this demand show no sign of

abating. Demand for high-capacity (broadband)

services on wireline networks and the

development of advanced wireless services (e.g.

so-called Third Generation services) ensure that

competitive opportunities, and the importance of

the Agreement as a framework for ensuring

market access, will increase. 

Given the recent trend in unilateral

liberalization, prospects are good that the WTO

services negotiations now underway will expand

existing commitments to cover a broader range

of telecommunications sub-sectors with fewer

market access limitations. In regions that were

previously not a major market focus (e.g., in

developing countries) there is substantial room

for improved commitments.

2. Agreement and Committee on Trade

in Financial Services

Status 

The Committee on Trade in Financial Services

(CTFS) met four times in 2001. It serves as a

forum for discussion of important issues related

to WTO Members’ existing liberalization

commitments and for technical approaches

regarding further liberalization.

Major Issues in 2001

Several WTO Members reported on

developments under their financial services

regimes. The United States provided

information on the processes it follows to ensure

transparency in its development and application

of financial services regulations. The United

States encouraged other countries to provide

similar information on their national regimes for

development of regulations. 

The United States also worked with other

trading partners to maintain pressure on those

few countries that have not ratified their

commitments under the 1997 Financial Services

Agreement - the Fifth Protocol to the GATS - to

do so as quickly as possible and to provide

status reports of progress underway. In October,

2001, the Dominican Republic notified that it

had completed its domestic ratification

procedures. The United States expects that the

Dominican Republic will complete the

procedures necessary to accept the Fifth

Protocol in the near future. Six countries –

Bolivia, Brazil, Jamaica, Poland, the Philippines

and Uruguay – have not yet ratified their

commitments or accepted the Protocol. 

Progress was reported by the majority of these

six countries. 

Prospects for 2002

Work of the CTFS will continue to pick up pace

in 2002. The CTFS will enable WTO Members

to hold substantive discussions of some of the

issues raised in negotiating proposals tabled in

financial services. 
73 WORLD TRADE ORGANIZATION

3. 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 do not constitute

unnecessary barriers to trade in services.” A

1994 Ministerial Decision had 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/english/news_e/pres97_e/pr73_e.

htm and www.wto.org/english/news_e/ pres98

_e/pr118_e.htm, respectively.)

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. 

Major Issues in 2001

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 more trade

restrictive than necessary to fulfill legitimate

objectives for the full range of service sectors. 

The United States has taken a deliberate

approach in this second area and has supported

discussion first of problems or restrictions for

which new disciplines would be appropriate.

To continue work on professional services,

Members agreed to solicit views on the

accountancy disciplines from their relevant

domestic professional bodies, addressing

whether those other professions would favor use

of the accountancy disciplines 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 reviewed a list of

international professional organizations,

compiled by the Secretariat from Member

submissions, and are considering whether the

organizations listed are the appropriate ones to

consult regarding the applicability of the

accountancy disciplines to those professions.

Prospects for 2002

The Working Party will continue discussion of

possible regulatory disciplines, both horizontal

and sector-specific, 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
2001 ANNUAL REPORT 74

interested U.S. constituencies to consider their

applicability to other professions. 

4. 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 2001

Of the three issues, the GATS established a

deadline only for safeguards. In 2000, this

deadline was again extended, to March 2002,

reflecting the continuing disagreement among

WTO Members on both the desirability and

feasibility of a safeguards provision similar to

the WTO provisions for goods.

Discussions were more focused in 2001 than in

previous years, benefitting from submissions by

ASEAN, Canada, Mexico, Mauritius, Argentina,

and Chile, Switzerland, and Costa Rica. The

United States also submitted a paper arguing

that for safeguards to be desirable in the services

context they would need to be shown to promote

liberalization of services trade. In the first part

of the year, discussion among Members focused

on feasibility of safeguards, and addressed

concepts including domestic industry, acquired

rights, modal application of safeguards,

situations justifying safeguards, and indicators

and criteria to determine injury and causality. In

its submission, the United States argued that a

case for the desirability of safeguards has not

been made and needs to be discussed. 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 negotiating in 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. Discussion was limited

in this area due to the Working Party’s increased

focus on safeguards resulting from the March

2002 deadline. 

Prospects for 2002

Information-gathering and discussion of all

three issues will continue. The continuing sharp

divergence of views on safeguards may result in

a decision to extend the negotiating deadline

once again. 

5. 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 country

schedules in sectors for which there is no

sectoral body, currently all sectors except

financial services.

Major Issues in 2001

The Committee concluded its work on revising

scheduling guidelines. These guidelines, which

originally were developed by the GATT

Secretariat for use in scheduling country

commitments during the Uruguay Round, are

intended to improve transparency and

consistency of new commitments. The CTS

formally adopted the revised guidelines in

March 2001.

The Committee also continued work on

improving classification of services in

individual sectors for which problems have been
75 WORLD TRADE ORGANIZATION

identified. The United States has advocated

changes in express delivery services, energy

services, environmental services, and legal

services and has made submissions in each of

these areas.

At the end of 2001, the Committee decided to

begin work on procedures for consolidation of

country schedules; these procedures will be

important in light of new market access and

national treatment expected in the current GATS

negotiations.

Prospects for 2002

Work will continue on technical issues in

support of the ongoing negotiations.

D. 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. Minimum standards

are established by the TRIPS Agreement for the

enforcement of intellectual property rights in

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. In

addition, the TRIPS Agreement is the first

multilateral intellectual property agreement that

is enforceable between governments through

WTO dispute settlement provisions.

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. However, some obligations are

phased in based on a country’s level of

development. Developed country Members

were required to implement by January 1, 1996;

developing-country Members generally had to

implement by January 1, 2000; and

least-developed country Members must

implement by January 1, 2006. However, based

on a proposal made by the United States,

Ministers agreed in Doha to change the

implementation date for least-developed

Members with respect to certain obligations

related to pharmaceutical products to 2016 as

part of the Declaration on the TRIPS Agreement

and Public Health. Several specific obligations

became effective on January 1, 1995, including

a general “standstill” obligation, and, with

respect to Members that do not provide patent

protection for pharmaceuticals and agricultural

chemicals, an obligation to provide a patent

“mailbox” in which to file applications for such

inventions to preserve a filing date, and an

obligation to provide exclusive marketing rights

systems. 

TRIPS Council: 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 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 2001

In 2001, the TRIPS Council held four formal

meetings, including several “special discussion”

sessions on the issue of intellectual property and

access to medicines. In addition to continuing

its work reviewing the implementation of the
2001 ANNUAL REPORT 76

Agreement by developing countries and newly

acceding Members, the Council’s work in 2001

focused on defining the TRIPS issues to be

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 2001

devoted much of its time to reviewing the

Agreement’s implementation by developingcountry Members and newly acceding Members

as well as to providing assistance to developingcountry 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 that 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 about how

individual Member’s had implemented their

obligations. 

During 2001, laws of the following 50 Members

were reviewed: in April - Bolivia, Cameroon,

Congo, Grenada, Guyana, Jordan, Namibia,

Papua New Guinea, Saint Lucia, Suriname,

Venezuela; in June - Albania, Argentina,

Bahrain, Botswana, Costa Rica, Cote d'Ivoire,

Croatia and St. Kitts and Nevis; in July -

Dominica, Dominican Republic, Egypt, Fiji,

Georgia, Honduras, Jamaica, Kenya, Mauritius,

Morocco, Nicaragua, Oman, The Philippines

and United Arab Emirates; in November -

Antigua and Barbuda, Barbados, Brazil, Brunei

Darussalam, Cuba, Gabon, Ghana, India,

Lithuania, Malaysia, Pakistan, Sri Lanka,

Thailand, Tunisia, Uruguay and Zimbabwe.

Intellectual Property and Access to Medicines:

Health activists and certain WTO Members

have expressed concern about the relationship

between access to essential drugs in low-income

countries and the obligations under the TRIPS

Agreement related to pharmaceuticals,

particularly in the dire circumstances of the

HIV/AIDS epidemic in sub-Saharan Africa. 

Patents are widely acknowledged as providing

the incentive for investment in research and

development (R&D) to bring new and more

effective pharmaceutical products to market;

although there is no cure for HIV/AIDS at

present, there is hope that research efforts

currently under way will yield results. 

However, critics have expressed concern that by

requiring developing countries to provide

pharmaceutical patent protection, TRIPS

enables pharmaceutical companies to charge

high prices for essential drugs thereby limiting

their availability in low-income markets. 

These concerns have been expressed despite the

fact that TRIPS does not require least-developed

Members to provide patent protection until 2006

and developing countries, including Egypt and

India, enjoy a transition from the deadline of

January 1, 2000 to January 1, 2005. Such

concerns also failed to take into account the

extent to which essential drugs are patentprotected in markets hardest hit by pandemics

such as HIV/AIDS. For example, during the

course of the 2001, researchers at Harvard

University published a study specifically aimed

at uncovering the extent to which antiretroviral

drugs used to treat HIV/AIDS were patented in

Africa, the continent hardest hit by the

pandemic. The report concluded, inter alia, that

“anti-retroviral drugs are patented in few

African countries.... We conclude that a variety

of de facto barriers are more responsible for
77 WORLD TRADE ORGANIZATION

impeding access to antiretroviral treatment,

including but not limited to the poverty of

African countries, the high cost of antiretroviral

treatment, national regulatory requirements for

medicines, tariffs and sales taxes, and, above all,

a lack of sufficient international financial aid to

fund anti-retroviral treatment.”

 

This issue has emerged in the wider context of a

campaign to provide better access to essential

drugs for the treatment of health and related

problems in needy populations. The

Accelerating Access Initiative was launched by

UNICEF, UNFPA, WHO, the World Bank, and

the UNAIDS Secretariat in May 2000, on the

basis of offers by five pharmaceutical

manufacturers to supply anti-retroviral drugs at

reduced prices for use in developing countries;

other manufacturers have since responded to the

Access initiative. 

In June 2001, a Special Session of the General

Assembly on HIV/AIDS endorsed the Global

Fund to fight HIV/AIDS, malaria, and

tuberculosis in developing countries. The Global

Fund had been announced earlier in the year by

the Secretary-General of the UN. The United

States was the founding donor to this unique and

distinctive approach to combating the nearly six

million deaths each year attributed to these

diseases.

The United States has taken a leadership role in

responding to the global challenge of the

HIV/AIDS pandemic. The United States is the

largest bilateral donor of funds for HIV/AIDS

assistance, in support of HIV/AIDS prevention

and care and treatment programs in developing

countries. In addition, the US invests over $2

billion per year on HIV/AIDS research. The

United States was the first contributor, to the

new “Global Fund to fight AIDS, Tuberculosis,

and Malaria” with an initial contribution of

$200 million.

However, because of the concerns expressed

about the WTO TRIPS Agreement, the United

States has also taken a leadership role in trying

to address these concerns, through discussions

in the TRIPS Council and other fora.

Following a request from Zimbabwe on behalf

of the African Group, the United States was the

first WTO Member to agree that the Council

should take up the issue of "Intellectual Property

and Access to Medicines." The objective of

these discussions was to enable Members to

discern more clearly the relationship between

the TRIPS Agreement and the public policy

objective of affordable access to patentprotected essential drugs, and to identify an

agenda of points requiring further discussion; 

this included clarification of the Agreement's

flexibility provisions so as to minimize the

potential for disputes.

The United States supported this discussion in

the hope that through this dialogue, Members

would come to appreciate the important role the

TRIPS Agreement plays in stimulating

development and commercialization of new lifesaving drugs. The United States also hoped that

this dialogue would result in a clearer

understanding of existing flexibility in the

Agreement which enables Members to ensure

that such drugs are available to their citizens,

particularly those that are unable to afford basic

medical care. The United States consistently

expressed the view that TRIPS strikes the proper

balance between these two objectives. We

expressed concern that some have quite

incorrectly blamed the Agreement for health

crises or claimed that it stands in the way of

resolving such crises. Quite the contrary,

Members have the ability under the Agreement

to implement their obligations in a way that

fully supports their national health care

objectives. On the other hand, without the

economic incentives provided by patent

systems, there would be far fewer drugs

available for the treatment and cure of lifethreatening diseases and conditions and

distribution of those that did exist would be far

more limited.

The United States expressed its commitment to

strong intellectual property protection but also
2001 ANNUAL REPORT 78

to ensuring Members are able to use the

flexibility in the TRIPS Agreement where

necessary to meet their health care objectives. In

February 2001, the Bush Administration

reaffirmed the commitment of the United States

to a flexible approach on health and intellectual

property. Under this policy, we have informed

WTO Members that, as they take steps to

address major health crises, such as the

HIV/AIDS crisis in sub-Saharan Africa and

elsewhere, the United States would raise no

objection if Members availed themselves of the

flexibility afforded by the WTO TRIPS

Agreement.

While supportive of the use of the flexibility in

the TRIPS Agreement, the United States

recognizes that a comprehensive approach is

needed to serious health problems. The TRIPS

Agreement – its obligations and flexibility – is

at most one element of the equation. To deal

with serious health problems, countries need to

stress education and prevention as well as care

and treatment if health crises are to be

eliminated. Health experts inform us that the

cost of drugs is only one of many important

issues that must be addressed in any health

crisis. Effective drug treatment necessitates

urgent action to strengthen health management

systems particularly directed to drug distribution

and patient monitoring. Appropriate drug

selection policies and standard treatment

guidelines; training of care providers at all

levels; adequate laboratory support to diagnose

and monitor complex therapies; and systems for

ensuring that the right drugs are used for the

right purpose and in the right amount are all

required to address the HIV/AIDS crisis.

We must recognize that even if enough drugs to

treat every single HIV positive person were

provided, free of charge, an adequate

infrastructure to deliver them and monitor their

use does not appear to exist in many areas most

in need. To ensure that healthcare is available,

particularly to those unable to afford basic

medical care, according to health experts, each

country must also develop its medical and

public health infrastructure, increase the

resources allocated to health care, and take other

appropriate steps. The Director General of the

World Health Organization, Dr. Brundtland, has

made the following statements about the key

factors to improve access to medicines: “We

have heard quite clearly that the price of drugs

matters, it matters to poor people, and it matters

to poor countries. But little progress will be

possible without a significant investment in

building effective health systems... just making

drugs available - even at no cost - does not

guarantee that they will be utilized. All other

pieces of the picture have to be in place as well:

the distribution systems, the partnerships

between public and private providers; the

agreements between governments and

development agencies; and clear and explicit

goals and objectives.”

Ultimately, the special discussions in the TRIPS

Council, and further work on the issue of

intellectual property and public health in Doha,

Qatar, resulted in WTO Ministers adopting the

Declaration on the TRIPS Agreement and Public

Health.

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 leastdeveloped Members of the WTO, in particular

those resulting from HIV/AIDS, tuberculosis

and malaria. 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 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. 

The United States is pleased that this

Declaration reflects and confirms our profound
79 WORLD TRADE ORGANIZATION

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 is committed to working with

the international community to ensure that

additional funding and resources are made

available to the least-developed and developingcountry Members to assist them in addressing

their public health care problems.

Several important points need to be emphasized

about the Doha Decision:

• The Declaration recognizes and

confirms the important link that exists

between the protection of intellectual

property rights and the continued

development and availability of

medicines, in particular those used to

treat HIV/AIDS and other pandemics,

such as tuberculosis and malaria. 

• Pursuant to the TRIPS Agreement,

measures may be taken to protect public

health. The Declaration does not alter

the requirement in Article 8 that such

measures must be consistent with the

provisions of the Agreement. 

• The TRIPS Agreement is governed by

the customary rules of interpretation of

international agreements as reflected in

public international law. 

• Pursuant to Article 6 of the TRIPS

Agreement, Members' exhaustion

(parallel import) regimes may not be

subject to challenge under WTO dispute

settlement procedures. Ministers have

not altered Members' rights and

obligations under the TRIPS Agreement

with respect to exhaustion of

intellectual property rights. Measures

that are inconsistent with TRIPS

requirements concerning the exclusive

right to authorize importation can be

challenged under national or other

international legal procedures. 

• Members may define grounds for

granting a compulsory license. 

Members remain obligated by the terms

of the TRIPS Agreement with respect to

their use of compulsory licensing,

including the provisions that prohibit

discrimination based on whether the

patented product is imported or

domestically produced. 

• Ministers have recognized the complex

issues associated with the ability of

least-developed Members that lack

domestic manufacturing capacity to

make use of the flexibilities in the

TRIPS Agreement. Ministers have

directed the TRIPS Council to

undertake work in this area and report to

the General Council. We note that one

issue to be evaluated in this process is

that developers of new pharmaceutical

products frequently do not seek

intellectual property protection in

countries that lack domestic

manufacturing capacity.

Finally, in recognition of the special challenges

facing the least-developed Members, Ministers

adopted a U.S. proposal to direct the TRIPS

Council to take the necessary action pursuant to

Article 66.1 of the TRIPS Agreement to extend

until 1 January 2016 the transition period under

Sections 5 and 7 of Part II of the TRIPS

Agreement and enforcement of those sections

with respect to pharmaceutical products for

least-developed country Members.

TRIPS-related WTO Dispute Settlement Cases: 

During the year, the United States continued to

pursue consultations on enforcement issues with

a number of developed countries, including
2001 ANNUAL REPORT 80

Denmark regarding its failure to provide

provisional relief in civil enforcement

proceedings, the European Communities, for its

failure to provide TRIPS-consistent protection

of geographical indications, Greece regarding its

failure to take appropriate action to stop

television broadcast piracy in that country, and

Ireland for its failure to implement a TRIPSconsistent copyright law. As a result of

Ireland’s enactment of needed amendments to

its copyright law, the United States and Ireland

announced resolution of the WTO case brought

by the United States over Ireland’s failure to

amend its copyright law to comply with the

TRIPS Agreement on November 6, 2000, and

the new law became effective on January 1,

2001. On March 20, 2001, the Danish

Parliament approved legislation making civil ex

parte searches available. The legislation was

signed into law on March 28, 2001. The WTO

Appellate Body decided in favor of the United

States in a dispute with Canada regarding the

term of protection for patents applied for prior

to October 1, 1989, and recommended that

Canada implement the recommendations of the

dispute settlement panel within a reasonable

time. As no agreement was reached regarding

what was reasonable, the United States asked an

arbitrator to determine the reasonable period of

time for Canada to comply, and on February 28,

2001, the arbitrator determined that the deadline

for compliance would be August 12, 2001. 

Effective July 12, 2001, Canada announced that

it had enacted an amendment to its Patent Act to

bring it into conformity with its obligations

under the TRIPS Agreement. On March 22,

2001, the United States and Greece formally

notified the WTO of the resolution of the

dispute settlement case regarding television

piracy. This was possible due to the sharp

decline in the level of television piracy in

Greece, passage of new legislation providing for

the immediate closure of infringing stations,

closure of several stations that had pirated U.S.

films, and the issuance of the first criminal

convictions for television piracy in Greece.

Also during the year, the United States

continued consultations with Argentina

regarding patent and data protection issues.

Consultations continued with Brazil regarding a

provision in its patent law providing for patent

owners to manufacture their products in Brazil

in order to maintain full patent rights. On June

25, 2001, the USTR announced that the United

States and Brazil had agreed to transfer their

disagreement over this provision from formal

WTO litigation to a newly created bilateral

consultative mechanism. Under the terms of the

Agreement, Brazil would consult with the

United States before granting any compulsory

licenses and the complaint was withdrawn.

There are a number of other WTO Members that

likewise appear not to be in compliance with

their TRIPS obligations. The United States, for

this reason, is still considering possible dispute

settlement cases against India, Australia, the

Dominican Republic, Egypt, Hungary, Israel,

the Philippines and Uruguay. We will continue

to consult with all 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: During 2000 and

2001, the Council has continued negotiations

under Article 23.4 on a multilateral system for

notification and registration of geographical

indications for wines and spirits intended to

facilitate protection of such indications. In

1999, the European Union submitted a proposal

for such a system under which Members would

notify the WTO of their geographical

indications and other Members would have one

year in which to oppose any such notified

geographical indications. If not opposed, the

notified geographical indications would be

registered and all WTO Members would be

required to provide protection as required under

Article 23. The United States, Canada, Chile

and Japan introduced an alternative proposal

under which Members would notify their

geographical indications for wines and spirits

for incorporation in a register available to all
81 WORLD TRADE ORGANIZATION

Members on the WTO website. Under this

proposal, Members choosing to participate in

the system would agree to consult the

notifications made on the website when making

decisions regarding registration of related

trademarks or otherwise providing protection for

geographical indications for wines and spirits. 

Implementation of this proposal would not place

obligations on Members beyond those already

provided under the TRIPS Agreement or place

undue burdens on the WTO Secretariat. In

2000, the European Communities introduced a

revision of its original proposal and Hungary

introduced a proposal for a formal opposition

system. Discussion on the proposals continued

during the 2001 meetings. The United States

continues to support the “collective” proposal

that it sponsored along with Canada, Chile and

Japan. Other delegations including Argentina,

Australia, Brazil, Korea, Mexico, and New

Zealand, have also expressed support for the

U.S. approach. The United States will

aggressively pursue additional support for its

approach to the multilateral register in 2002 in

light of the direction from Ministers in the Doha

Ministerial Declaration to complete negotiations

by the Fifth Ministerial Conference.

A review of the implementation of the

application of the TRIPS provisions on

geographical indications pursuant to Article

24.2 of the Agreement continues on the agenda.

At each of the 2001 TRIPS Council meetings,

the United States urged those Members that

have not yet provided information on their

regimes for the protection of geographical

indications to do so. The United States also

supported a proposal by New Zealand in 2000

that the Council conduct the review by

addressing each article of the TRIPS Agreement

covering geographical indications in light of the

experience of Members. Some Members have

sought to use the review to initiate negotiations

to expand “enhanced” geographical indication

protection under Article 23 for products other

than wines and spirits. The United States,

supported by several other Members, opposed

efforts to initiate further negotiations in this

area, noting that the Agreement provides no

mandate for such negotiations. 

The Doha Ministerial Declaration did not

provide a mandate for such negotiations. 

However, the Declaration does direct the TRIPS

Council to discuss issues related to extension of

Article 23-level protection to geographical

indications for products other than wines and

spirits and report to the Trade Negotiations

Committee by the end of 2002 for appropriate

action.

Review of Current Exceptions to Patentability

for Plants and Animals: TRIPS Article 27.3(b)

authorizes Members to except plants and

animals and biological processes from

patenability, but not micro-organisms and nonbiological and microbiological processes. In

1999, the TRIPS Council initiated a review of

this Article as called for under the Agreement

and, because of the interest expressed by some

Members, discussion of this Article continued

through 2000 and 2001. In 1999, the Secretariat

prepared a synoptic table of information

provided by those Members that were already

obligated to implement the provisions. The

synoptic table facilitated the review by

permitting Members’ practices to be compared

easily. This portion of the review revealed that

there was considerable uniformity in the

practices of the Members that have implemented

their obligations. 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, has 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 United

States again called for developing-country

Members to provide this same information so

that the Council will have a more complete

picture if the discussion of this article is to

continue. Regrettably, some 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
2001 ANNUAL REPORT 82

the TRIPS Agreement and the Convention on

Biological Diversity (CBD), and traditional

knowledge. 

While maintaining the view that these issues are

beyond the scope of the review of Article

27.3(b), and that the discussion should focus on

relevant information regarding Members’

implementation of the provision, the United

States has responded by providing two papers

expressing views on these topics in 2000 and an

additional paper in 2001 outlining a contract

method by which those Members that are also

Parties to the CBD might implement their

obligations under the latter agreement. An

additional paper is being prepared for the first

meeting of the TRIPS Council in 2002,

describing the contracts used by the National

Cancer Institute when it collects plants outside

the United States.

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, the protection

of traditional knowledge and folklore.

Non-violation: Throughout the year, some WTO

Members continued to raise questions regarding

the operation of non-violation nullification and

impairment complaints in the context of the

TRIPS Agreement and called for the Council to

define the appropriate “scope and modalities”

for addressing such complaints. They argued

that the possibility of such complaints, now that

the moratorium on such cases has expired,

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.

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.

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 on-line

environment. The United States will continue to

support discussion of the application of the

TRIPS Agreement in the digital environment.

Further Reviews of the TRIPS Agreement: 

Article 71.1 calls for a review of the

implementation of the Agreement, beginning in

2000. The Council currently is considering how

the review should best be conducted in light of

the Council’s other work. The Doha Ministerial

Declaration states 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.

Prospects for 2002 

In 2002, the TRIPS Council will continue to

focus on its built-in agenda as well as the

additional mandates established in Doha. The

TRIPS Council will issue a report to the Trade

Negotiations Committee by the end of 2002 on a

number of issues, including compulsory

licensing, geographical indications, the

relationship with the CBD, traditional

knowledge and folklore as well as other relevant

new developments.

While the review of developing-country

Members’ implementation was to have been

completed in 2001, follow up of some countries

was not completed and was rescheduled for

2002. Reviews yet to be completed are for: 

Albania, Antigua and Barbuda, Barbados,

Botswana, Brazil, Brunei Darussalam,

Cameroon, Congo, Côte d'Ivoire, Cuba, Egypt,
83 WORLD TRADE ORGANIZATION

Fiji, Gabon, Ghana, Grenada, Guyana, India,

Kenya, Lithuania, Malaysia, Mauritius,

Namibia, Oman, Pakistan, the Philippines, Saint

Kitts and Nevis, Sri Lanka, Suriname, Thailand,

Tunisia, the United Arab Emirates, Uruguay,

and Zimbabwe.

U.S. objectives for 2002 continue to be: 

• 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 participate actively in the review of

formal notifications of intellectual

property laws and regulations to ensure

their consistency with TRIPS

obligations by Members;

• to ensure that no weakening of the

Agreement occurs; and

• to develop further Members’ views on

the relationship between the TRIPS

Agreement and electronic commerce.

E. Other General Council Bodies/Activities

1. 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 has served as a valuable resource for

improving transparency in WTO Members’

trade and investment regimes and in ensuring

their 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 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 subject Member. This report is

accompanied by the report of the country under

review. Together the reports are subsequently

discussed by WTO Members in the TPRB at a

session at which representatives of the country

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

smaller countries have found the preparations

for the review 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 on

the WTO’s web site at www.wto.org. 

Major Issues in 2001

During 2001, the TPRB conducted 15 policy

reviews: Brunei, Cameroon, Costa Rica, Czech

Republic, Gabon, Ghana, Macau, Madagascar,

Malaysia, Mauritius, Mozambique, Slovak

Republic, Uganda, the United States and the

WTO Members of the Organization of East

Caribbean States.

Five countries were reviewed for the first time,

including two least-developed countries,

Madagascar and Mozambique. As of December

2001, 150 reviews have been conducted since

the formation of the TPR. These reviews

covered 84 of the 128 Members, counting the

European Union as one, and represent 83

percent of world merchandise trade. The

increased importance of least-developed country

reviews has led to 11 such reviews since 1998.

Despite the importance of the TPRM, questions

continue to be raised about the ever-increasing
2001 ANNUAL REPORT 84

amount of resources needed to conduct the

reviews. For many developing and leastdeveloped 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 Members countries. In

the coming year the United States will give

some additional attention to the question of

resources for the TPRM and potential

improvements. 

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. 

Prospects for 2002

The TPRM is an important tool for monitoring

and surveillance, in addition to encouraging

WTO Members to meet their WTO obligations

and to maintain or expand trade liberalization

measures. The program for 2002 contains

provisions to conduct reviews of 17 Members:

Australia, Barbados, the Dominican Republic,

the European Union, Guatemala, Haiti, Hong

Kong-China, India, Japan, Malawi, Mauritania,

Mexico, Pakistan, Slovenia, South Africa,

Venezuela, and Zambia.

2. 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. The mandate of the CTE is to

make appropriate recommendations to the

Ministerial Conference as to whether, and if so

what, changes are needed in the rules of the

multilateral trading system to foster positive

interaction between trade and environment

measures and to avoid protectionist measures. 

At the Fourth WTO ministerial meeting in

Doha, Qatar, Members agreed to an enhanced

role for the CTE including serving as a forum

for identifying and debating environmental

issues in connection with the negotiations and

increasing the focus on certain items of its

agenda (see below).

Major Issues in 2001

The CTE met three times in 2001. The United

States contributed to the Committee’s

deliberations by, inter alia, working to build a

consensus that important trade and

environmental benefits can be achieved by

addressing fisheries subsidies that contribute to

overfishing, and through the liberalization of

trade in environmental goods and services. 

Multilateral Environmental Agreements

(MEAs): The CTE continued to help enhance

WTO Members’ understanding of the trade

provisions of MEAs by holding information
85 WORLD TRADE ORGANIZATION

exchanges with representatives from a number

of MEA Secretariats, who briefed Committee

Members on recent developments in their

respective agreements. In June 2001, the CTE

held an information session that focused on the

compliance and dispute settlement provisions in

MEAs and the WTO. The Secretariats of the

WTO and the UN Environmental Programme

(UNEP), in close cooperation with MEA

Secretariats, jointly prepared a background

paper for the meeting. These discussions helped

inform the decision of WTO Members at Doha

to begin negotiations on ways to enhance

cooperation between the WTO and MEA

Secretariats, and to explore further the

relationship between existing WTO rules and

specific MEA trade obligations, as applied

among parties to the MEA in question.

Market Access: The CTE continued its work on

the environmental implications of reducing or

eliminating trade-distorting measures. This

work reflected a broad degree of consensus that

trade liberalization, in conjunction with

appropriate environmental policies, can yield

environmental benefits. As mentioned above,

the CTE continued to discuss in depth the

potential environmental benefits of reducing or

eliminating fisheries subsidies. The CTE also

continued discussions of the benefits of

improving market access for environmental

services and goods and the environmental

implications of agricultural and services trade

liberalization and liberalization in other sectors

such as energy.

TRIPS: The CTE continued its discussions of

the relationship between the TRIPS Agreement

and the environment. 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 has made clear its view that there is no

incompatibility between WTO Agreements and

the CBD.

Relations with NGOs/Transparency/

Environmental Reviews: In 2001, the United

States, joined by several other Members,

continued to emphasize the need for further

work to develop adequate mechanisms for

involving NGOs in the work of the WTO and to

improve transparency, including through

providing adequate public access to documents. 

The United States also continued to stress the

usefulness of environmental assessments in

helping to assure that trade and environmental

policies are mutually supportive. The United

States conducts reviews of major trade

agreements to which it is a party pursuant to

Executive Order 13141 (1999) and encourages

Members to perform reviews of their own

agreements.

Prospects for 2002

As a result of new negotiations launched at

Doha, the CTE is expected to play a key role on

such items as enhancing cooperation between

the WTO and MEA Secretariats. The

Committee is also instructed to pay particular

attention to the effect of environmental

measures on market access, the relevant

provisions of the TRIPS Agreement, and

labeling requirements for environmental

purposes. The Committee will prepare a report

to the Fifth Ministerial Conference in 2003 with

recommendations, including on potential

negotiations. More generally, the CTE will

serve as a forum for identifying and discussing

environmental implications of the new

negotiations launched at Doha, to help assure

that the negotiations appropriately reflect the

objective of sustainable development.

3. Committee on Trade and

Development

Status

The Committee on Trade and Development

(CTD) was established in 1965 to strengthen the

GATT’s role in the economic development of

less-developed GATT Contracting Parties. In

the WTO, the Committee on Trade and
2001 ANNUAL REPORT 86

Development is a subsidiary body of the

General Council. The Committee provides

developing countries, who comprise two-thirds

of the WTO’s Membership, an opportunity to

focus on 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. Among subjects the Committee

has discussed are the benefits of trade

liberalization to development prospects, the role

of technical assistance and capacity building in

this effort and electronic commerce, pursuant to

the 1998 Ministerial decision on electronic

commerce.

Major Issues in 2001

The Committee held five formal meetings and

two seminars in 2001. The Committee’s work

focused on the following areas: review of the

special provisions in the Multilateral Trading

Agreements and related Ministerial Decisions in

favor of developing-country Members (in

particular least-developed countries); 

participation of developing countries in world

trade, implementation of WTO agreements,

technical cooperation and training, concerns and

problems of small economies, development

dimensions of electronic commerce, market

access for least-developed countries, and the

generalized system of preferences. The

Committee seminars focused on technology,

trade and development, and government

facilitation of electronic commerce for

development. 

The Committee also discussed the nature of the

WTO’s role in technical assistance and how to

collaborate effectively with other international

and national agencies in providing and

monitoring such assistance. At the Committee

meeting in November, the United States

submitted a report on U.S. Government

initiatives to build trade-related capacity in

developing and transition countries. The report

provides details on the $1.3 billion worth of

trade-related capacity building the United States

has provided during the last three years. The

report can be viewed at http://www.usaid.gov/

economic_growth/trade report. (The U.S.

Government also has developed a trade-related

capacity building database available online at

http://qesdb.cdie.org/tcb/index.html.)

Sub-Committee on Least-Developed Countries: 

The Committee on Trade and Development has

a sub-committee that focuses on the leastdeveloped countries. At the 1996 Singapore

Ministerial Meeting, Members agreed to a Plan

of Action to foster an integrated approach to

trade-related technical assistance activities for

the least-developed countries and to improve

their overall capacity to respond to the

challenges and opportunities offered by the

trading system. The result was the Integrated

Framework for Trade-related Technical

Assistance (“Integrated Framework”) that seeks

to coordinate the trade assistance programs of

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). In addition, least-developed countries

can invite other multilateral and bilateral

development partners to participate in the

Integrated Framework process. In 2001, the

Sub-Committee on Least-Developed Countries

of the Committee on Trade and Development

continued to focus its work on the Integrated

Framework, communicating with and providing

views to the Inter-Agency Working Group

which includes representatives from the six core

international organizations on the arrangements

for the Integrated Framework. In January 2001,

the Sub-Committee held a seminar on the Policy

Relevance of Mainstreaming Trade into Country

Development Strategies. In February, the SubCommittee adopted a proposal for an Integrated

Framework pilot scheme and in May the SubCommittee was informed of the selection of the

first three Integrated Framework pilot project

countries: Madagascar, Mauritania, and

Cambodia. 
87 WORLD TRADE ORGANIZATION

Prospects for 2002

The Committee on Trade and Development,

which is scheduled to meet four times in 2002,

will continue its function as the forum for

discussion of development issues within the

WTO. Particular emphasis is likely to be placed

on special and differential treatment, the

participation of developing countries in the

multilateral trading system, electronic

commerce, technical cooperation, and the UN

Conference on Financing for Development. The

Committee will host a seminar on electronic

commerce in April.

The Sub-Committee on Least-Developed

Countries will meet three times in 2002. It will

continue to focus on the special needs of and

opportunities available to the least-developed

countries and the Integrated Framework. This

year, the Sub-Committee will hold two different

seminars on the Integrated Framework and

WTO Trade Policy Reviews.

4. 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 BOP

consultations. 

Major Issues in 2001

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. At its

December 2000 meeting, the Committee

approved a phase-out plan submitted by

Bangladesh to eliminate all of its balance-ofpayments restraints on certain textiles in four

tranches by January 2005. In July 2001, the

Committee held additional consultations with

Bangladesh. In consultations in December

2001, Bangladesh informed the Committee that

it would be willing to eliminate its restrictions

on the import of sugar by July 1, 2005, and

would try to justify its ban on non-iodized salt

under Article XX. For the remaining three

products subject to import restrictions,

Bangladesh indicated that it would be

submitting a notification in the near future on

how it intends to deal with these products. In

January and February 2001 Pakistan, notified

the BOP Committee that it had removed the

restrictions on netting fabrics, special woven

fabrics, knitted clothing and non-knitted

clothing in accordance with the second tranche

of its phase-out plan. In late December 2001,

BOP Committee announced that Pakistan had

informed it that it had removed the remaining

import restrictions on woven fabrics and bed

linens, fully implementing its balance of

payments restrictions phase-out plan.

Prospects for 2002

The Committee will consult with Bangladesh in

January 2002 and as necessary with other

countries maintaining BOP-related restrictions

during the year. Additionally, 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 see

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 also
2001 ANNUAL REPORT 88

continue to rely upon its close cooperation with

the IMF.

5. 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 United States is an active participant

in the Budget Committee. 

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. 

For the 2002 budget, the U.S. assessment rate is

15.723 percent of the total assessment, or Swiss

Francs (CHF) 22,342,383 (about $14 million). 

Details on the WTO’s budget required by

Section 124 of the URAA are provided in

Annex II.

Major Issues in 2001

In 2001, the launch of the new round of

negotiations in Doha and the capacity building

needs of developing countries were the major

issues facing the Budget Committee. Other

issues of significance in 2001 included

implementing a new performance-based pay

system, reviewing a Swiss proposal to provide

additional facilities for the WTO, and the first

contribution received under the WTO’s new

guidelines governing the acceptance of

contributions from non-governmental

organizations.

Agreed Budget for 2002: After considerable

discussion to ensure that the organization would

be able to meet the technical assistance and

capacity building needs of developing countries

agreed during the launch of the new round at

Doha, the Committee proposed, and the General

Council approved, a 2002 budget for the WTO

Secretariat and Appellate Body of CHF

143,129,850 (approximately $88 million). 

The discussions within the Budget Committee

focused primarily on meeting the call in the

Doha Ministerial declaration for stable and

predictable funding for trade capacity-related

technical assistance and cooperative programs

for developing countries. Previously, there had

been significant debate within the Committee

over whether the resources needed to meet the

technical assistance needs of developingcountry Members should be brought onto the

regular budget, funded by Members’

contributions. In 2001, the United States and a

number of other Members opposed funding all

of the technical assistance and capacity building

expenses from the regular budget for both

systemic and budgetary reasons. (Historically, a

portion of the staffing for technical assistance

programs was provided by the WTO Secretariat

out of the budget. The variable expenses of

these programs–mostly for facilities,

interpretation and non-Secretariat travel–are

funded primarily by donations of individual

developed countries, including contributions by

the United States of $600,000 in November

2000 and $1.0 million in May 2001). 

The agreed 2002 budget package provides for

increased technical assistance and additional

financing for the International Trade Center. 

The budget resolution also creates the Doha

Development Agenda Trust Fund, which will be

financed by voluntary contributions. WTO

Members agreed to double the number of 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. The

training program is funded out of the regular

WTO budget. Another element of the budget

package will provide technical assistance for

developing countries that do not have offices in
89 WORLD TRADE ORGANIZATION

Geneva to represent them at the World Trade

Organization. These efforts will assist countries

that have the greatest difficulty in participating

in WTO activities.

The Doha Development Agenda Trust Fund,

with a target endowment level of CHF

15,000,000 (about $9 million), will allow the

WTO to meet the trade capacity development

commitments in the Doha Declaration and will

absorb previous trust funds, including the

Technical Assistance Global Trust Fund. A

pledging conference in the first quarter of 2002

will kick off efforts to reach the target

endowment for the Doha Fund, which will have

a CHF 1,000,000 buffer account to ensure that

programs will not be disrupted due to temporary

shortfalls in the receipt of pledged contributions. 

The Doha Fund will operate with specific

targets tied to identified benchmarks and will be

jointly supervised by the Committee on Trade

and Development and the Budget Committee. 

For the year 2002, it was agreed that up to CHF

480,000 from the new trust fund can be used to

fund a symposium with non-governmental

organizations (NGOs).

WTO Members agreed to increase the staffing

of the organization by eight people to address

higher workloads, including in several areas

related to the launch of the new round. The

positions are to be allocated in the following

divisions: three in the Training Institute, one in

Economic Research and Analysis, one in

Statistics, one in the Human Resources, one in

Trade Policy Review, and one to be determined. 

The WTO Secretariat will also be redeploying

five positions within the organization. 

As a result of the budget agreement, the United

States assessment for 2002 is CHF 22,342,383

(about $14 million). The U.S. contribution

accounts for 15.723 percent of the total

assessments of WTO Members, which are based

on the share of WTO Members’ trade in goods,

services, and intellectual property. In 2001, the

Committee adopted a new methodology based

on the average trade of each Member over a

five-year period. To assure uniformity, the fifth

year corresponds to the year that is two years

before the particular budget year. Therefore,

assessments for 2002 are based on average trade

in the years 1996-2000, inclusive. At the end of

2001, the accumulated arrears of the United

States to the WTO amounted to CHF 3,205,232

(nearly two million dollars).

Performance Award Program: In 2001, the

WTO developed performance benchmarks and

trained supervisors in performance assessment

to implement the performance-based pay system

introduced in 2000 at the insistence of the

United States and a number of other countries. 

The performance-based system replaced the

practice of staff receiving salary increases based

solely on the length of time that they have

served. Salary increases are now granted only if

an employee’s performance had been evaluated

as satisfactory and bonuses reward outstanding

performance.

Building Facilities: The Budget Committee

considered 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. 

However, 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.
2001 ANNUAL REPORT 90

Prospects for 2002

In 2002, the Budget Committee will work

closely with the Committee on Trade and

Development to develop a program of technical

cooperation for 2003 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 to look closely at an

independent consultant’s report on staffing

levels and potential reorganization of the WTO

Secretariat, which was completed at the very

end of 2001 and therefore not able to be fully

reviewed by the Committee. Further work will

be accomplished in the area of performancebased budgeting. 

6. 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.

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 less

comprehensive agreements between or among

developing countries. The Uruguay Round

added two more provisions: Article V of the

General Agreement on Trade in Services

(GATS), which governs the services-related

aspects of FTAs and CUs; and the

Understanding on the Interpretation of Article

XXIV, which clarifies and enhances the

requirements of GATT Article XXIV.

FTAs and CUs, both exceptions to the principle

of MFN treatment, are allowed in the WTO if

certain requirements are met. First,

substantially all of the trade between the parties

to the agreement must be covered by the

agreement, i.e., tariffs and other restrictions on

trade must be eliminated on substantially all

trade. 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 WTO Members and begin

negotiations to compensate other Members for

exceeding their WTO bindings with market

access concessions. A similar compensation

agreement exists for services.

Major Issues in 2001

Examination of Reports: The Committee held

three formal meetings during 2001. The

Committee examined 107 agreements, referring

94 of them to the Council on Trade in Goods

and 13 agreements to the Council for Trade in

Services.16 The Committee has a backlog of

16 A list of all regional trade agreements

notified to the GATT/WTO and in force is included

in the appendix to this chapter.
91 WORLD TRADE ORGANIZATION

draft reports, for which Members do not agree

on the nature of appropriate conclusions. 

Throughout 2001, the Committee held extensive

consultations in attempt to resolve Members’

differences. At the same time, the Committee

considered 20 biennial reports on regional

agreements notified under the Article XXIV of

GATT 1947. 

Systemic Issues: At the direction of the CRTA,

the Secretariat undertook two horizontal surveys

of crosscutting measures to assist the Committee

in its understanding of the impact of regional

trade agreements on the multilateral trading

system. The two studies, on product coverage

and rules of origin, will be discussed by the

Committee in 2002.

Prospects for 2002

The Doha Declaration calls for clarifying and

improving rules for regional trade agreements. 

The Committee may play a role in these new

negotiations, the exact structure of which will be

decided in early 2002. In the meantime, the

Committee will continue to address all aspects

of its mandate, in particular reviewing the new

regional trade agreements being notified to the

WTO and attempting to clear the backlog of

reports. Further discussions on improving the

review process and the systemic effects of

regional agreements will likely be major issues

in the coming year, particularly in the context of

the horizontal studies already undertaken by the

Secretariat. The Committee also plans to hold a

seminar engaging the academic community in a

discussion of regionalism in early spring in

order to increase its understanding of the impact

of regional trade agreements on the multilateral

trading system.

7. Accessions to the World Trade

Organization

Status

The year 2001 saw the completion of over

fifteen years of negotiations for the WTO

Membership of the People’s Republic of China. 

Three other long-term accession applicants,

Lithuania, Moldova, and Taiwan (officially

known in the WTO as the Separate Customs

Territory of Taiwan, Pengu, Kinmen, and

Matsu, or Chinese Taipei) also completed the

accession process in 2001, bringing total WTO

Membership to 144 as of January 1, 2002. In

addition, there are twenty-eight other accession

applicants with established Working Parties, and

Ethiopia and Sao Tome and Principe participate

as observers. 

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. After accepting an application, the

WTO General Council establishes a Working

Party to review information on the applicant’s

trade regime and conduct the negotiations. 

Accession negotiations are time consuming and

technically complex. They involve a detailed

review of an applicant’s entire trade regime by

the Working Party. Applicants must be

prepared to make legislative changes to

implement WTO institutional and regulatory

requirements, to eliminate existing WTOinconsistent measures, and to make specific

commitments on market access for goods and

services. 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. 

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
2001 ANNUAL REPORT 92

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 contain 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

General Council approval, accession applicants

normally submit the package to their domestic

authorities for ratification. Thirty days after the

instrument of ratification is received in Geneva,

accession to the WTO occurs. 

At the end of 2001, thirty-one applications for

WTO Membership were pending, up from 29 at

the beginning of the year, and Membership in

the WTO remains an economic, and political,

priority for a number of governments. In

addition to the four new Members whose

parliaments ratified the results of their

negotiations, Vanuatu’s Working Party adopted

the terms of its accession in October, the first

time since the WTO was established that a leastdeveloped country (LDC) had reached this

stage. The package awaits acceptance by

Vanuatu and the General Council to complete

the process. 

The General Council accepted new accession

applications from The Bahamas, Tajikistan, and

Yugoslavia during 2001. Applications from

Syria and Libya were tabled late in the year. Of

the twenty-eight applicants with Working

Parties established, all but seven have submitted

initial descriptions of their trade regimes, in

effect activating the accession process. 

Azerbaijan, Cambodia, Samoa, Tonga, Sudan

and Uzbekistan all provided comprehensive

information on their trade regimes, and

Cambodia and Tonga initiated negotiations with

their first Working Party meetings. Working

Party meetings and/or bilateral market access

negotiations were also held with Armenia,

Belarus, China, Kazakhstan, Macedonia,

Moldova, Russia, Tonga, Ukraine, Taiwan, and

Vanuatu. The chart included in the Annex to

this section reports the current status of each

accession negotiation. 

Major Issues in 2001

Intensive work to complete the accessions of

China, Chinese Taipei, and Vanuatu and to

make progress on those of Russia and

Macedonia, took up most of the attention given

by WTO Members to individual accessions in

2001.17 The accession negotiations of Ukraine,

Kazakhstan, and Armenia also intensified

during 2001, either in terms of market access

negotiations on goods and services or in terms

of legislative implementation.

Members also attempted to respond to criticism

leveled by the informal group of developing

countries during 1999 and 2000 that the

accession process was too burdensome for some

applicants. During 2001, they sought ways to

simplify and streamline the accession process,

especially for the nine least-developed country

(LDC) applicants with extremely low levels of

income and economic development, and others,

such as WTO observers Ethiopia and Sao Tome

and Principe, that might apply for Membership

in the future. Members generally recognized the

unique problems facing LDCs applying for

WTO accession, i.e., lack of human resources to

conduct the negotiations, infrastructure

deficiencies, and a general lack of capacity to

implement WTO provisions without technical

assistance from the WTO and its Members. 

At the time the accession package of Moldova

was approved, the United States invoked the

non-application provisions of the WTO

Agreement contained in Article XIII with

respect to that country, bringing to five the

number of times since the establishment of the

WTO in 1995 that this step has been

17 For further information on the results of

the WTO accession negotiations with China and

Taiwan to the WTO, please consult Chapter IV.
93 WORLD TRADE ORGANIZATION

necessary.18 Invoking Article XIII 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 limitations,

prevents the United States from bringing a WTO

dispute based on a violation of the WTO or the

country’s commitments in its accession package.

Prospects for 2002

As the new round of multilateral negotiations

gets underway, work in the WTO will

increasingly be focused in that direction, and

day-to-day work in the organization and dispute

settlement cases will also require WTO

Members’ attention. As a consequence, in

addition to continuing efforts to promote

progress in the accessions of LDCs, emphasis

will center on accession applicants that

demonstrate a willingness to implement WTO

provisions and reach agreement with WTO

Members on market access issues. 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, and to

support a high standard of implementation of

WTO provisions by both new and current

Members. The United States has also pledged

to increase its efforts to promote trade capacity

building among least-developed countries,

including those seeking accession to the WTO.

Armenia, Macedonia, Russia, and Vanuatu are

the most advanced in the accession process. In

addition, Algeria and Kazakstan have resumed

active negotiations after a lengthy hiatus,

declaring WTO accession a priority for their

countries, and will press to intensify

negotiations during 2002. Six additional

applicants at the very beginning of the accession

process, including three additional leastdeveloped countries, have circulated initial

documentation and will expect to launch

Working Party reviews of their trade regimes

this year. Finally, the expectation remains that

additional countries currently outside the WTO

system will seek to initiate accession

negotiations.

8. Working Group on Trade and

Competition Policy

Status

In 2002, the WTO Working Group on the

Interaction between Trade and Competition

Policy (Working Group) enters its sixth 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

18 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, and Georgia were

approved by the WTO General Council in 1996,

1998, and 1999, respectively. Congress subsequently

authorized the President to grant them permanent

NTR, and the United States withdrew its invocation

of non-application in the WTO for these countries. 

19 In addition to Moldova, eight of the

remaining 28 WTO accession applicants with active

Working Parties are covered by Title IV. They are:

Armenia, Azerbaijan, Belarus, Kazakhstan, Russia,

Ukraine, Uzbekistan, and Vietnam. The

Administration recently proposed that Armenia,

Azerbaijan, Kazakhstan, Moldova, Russia, Ukraine,

and Uzbekistan be granted permanent NTR. For

further information on this issue, please consult

Chapter IV. For further information on granting

permanent NTR to China, please consult Chapter IV.
2001 ANNUAL REPORT 94

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 in 2001.

In Paragraph 23 of the November 2001 Doha

Ministerial Declaration, the Ministers agreed

that “negotiations regarding competition policy

would 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 up to the Fifth

Session will focus on the clarification of: core

principles, including transparency, nondiscrimination and procedural fairness, and

provisions on hardcore cartels; modalities for

voluntary cooperation; and support for

progressive reinforcement of competition

institutions in developing countries through

capacity building. The Ministerial Declaration

also 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 in response to

these needs.

Major Issues in 2001

The Working Group held three meetings in

2001, in March, July and September. 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, the World Bank and UNCTAD. As

noted, in December 1998, the General Council

set a focused framework for study by the

Working Group, which continued to set the

parameters of the Working Group’s work in

2001. These parameters were: (i) the relevance

of fundamental WTO principles of national

treatment, transparency and most-favored-nation

treatment to competition policy, and vice-versa;

(ii) approaches to promoting cooperation and

communication among Members, including in

the field of technical cooperation; and (iii) the

contribution of competition policy to achieving

the objectives of the WTO, including the

promotion of international trade.

Beyond these three broad areas of focus, the

Working Group also took account of some

suggestions developed by the Working Group

Chairman, Professor Frédéric Jenny of France,

in the course of informal consultations with

Members. These suggestions were that the

Working Group:

• continue placing emphasis on

addressing the concerns that had been

expressed by some developing-country

Members regarding both the general

impact of implementing competition

policy on their national economies and

the particular implications that a

multilateral framework on competition

policy might have for developmentrelated policies and programs;

• continue exploring the implications,

modalities and potential benefits of

enhanced international cooperation,

including in the WTO, in regard to the

subject-matter of trade and competition

policy; and 

• continue focusing on the issue of

capacity building in the area of

competition law and policy. 

Twenty written submissions were contributed by

a total of 16 Members (counting the EU and its

15 Member States as one contributor). These

submissions ranged across the three areas of

focus set by the General Council, but the

majority of them addressed issues arising under

the rubric of “approaches to promoting

cooperation and communication among

Members, including in the field of technical

cooperation.” The United States made two

submissions to the Working Group in 2001: the
95 WORLD TRADE ORGANIZATION

first (which had previously circulated as an

advance copy for the Working Group’s meeting

in October 2000) addressed “The Role of

Competition Advocacy,” while the second

addressed “Administering a Competition Law

and Policy: The Mechanics of Setting and

Pursuing Policy Goals with Finite Resources.”

Prospects for 2002

The work of the Working Group in 2002 will

focus on the clarification of the topics specified

in the Ministerial Declaration (i.e., core

principles, hardcore cartels, voluntary

cooperation, and capacity building). Meetings

of the Working Group are already scheduled for

March and July, and a further meeting in

September also has been discussed. 

9. Working Group on Transparency in

Government Procurement

Status

Building on the progress to date 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 efforts 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 2001

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 2001, discussions in the Working Group

focused on the important benefits to all WTO

Members of concluding a multilateral

Agreement in this area. Many delegations

stressed that incorporating predictable standards

of transparency in government procurement into

the rules-based international trading system

would not only facilitate commercial

development and the integration of all Member

economies into the global trading system, but

could also contribute to Members’ efforts to

ensure the most efficient possible use of scarce

public resources. Some developing-country

delegations noted that computer-based

information and communications technologies
2001 ANNUAL REPORT 96

can provide a cost-effective way for all

governments to achieve their transparency

objectives.

Prospects for 2002

Pursuant to the Doha Ministerial Declaration,

the United States will work with other WTO

Members to push for progress on a number of

key issues relating to modalities for negotiations

on an Agreement on Transparency in

Government Procurement, including: 1)

potential capacity building needs related to the

substance of the negotiations; 2) the appropriate

scope and coverage of an Agreement; and 3) the

appropriate application of WTO dispute

settlement procedures to such an Agreement.

10. Working Group on Trade and

Investment

Status

The Working Group on Trade and Investment

(WGTI), which was originally established by

the Singapore Ministerial Declaration in 1996,

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 and has approved an extension of its

initial two-year mandate until the next

Ministerial in 2003. During this time, the

WGTI has been tasked to focus on several

investment issues including scope and

definition, transparency, non-discrimination,

development provisions, exceptions and dispute

settlement. Following this period, negotiations

will occur “on the basis of a decision to be

taken, by explicit consensus, at that Session on

modalities of negotiations.” 

The WGTI provides an opportunity for the

United States and other countries to present the

benefits they derive from open investment

policies and programs and to advance

international understanding of these benefits. It

is also a valuable forum in which to dispel

misconceptions about investment liberalization,

such as the concern in some developing

countries that foreign investment marginalizes

domestic firms. To date, the group has analyzed

the full range of investment agreement models

currently in use, and considered the implications

of the differences. The group assessed the

advantages and disadvantages of the variety of

approaches, including as they affected economic

development. The United States believes that

the WGTI’s work significantly raises other

countries’ understanding of investment rules. 

Major Issues in 2001

The WGTI met three times in 2001. Drawing

from the checklist of issues developed during

the initial two years of its work, and relying on

written submissions from Members, the WTO

Secretariat and multilateral bodies such as the

OECD and UNCTAD, the WGTI reviewed three

broad subject areas. The first was the

implications of trade and investment for

facilitating economic development and growth,

including the following subtopics: the

relationship between balance of payments and

FDI with a focus on mergers and acquisitions,

portfolio investment, and the advantages of

multilateral investment rules. The second topic

was the economic relationship between trade

and investment, where investment incentives

and FDI flows and technology transfer were

addressed. Finally, the Working Group took

stock of and analyzed existing international

instruments and activities regarding trade and

investment, focusing on investment seminars

outside of the WTO.

Prospects for 2002

With a renewed mandate for the WGTI, and the

prospects of negotiations to begin following the

next Ministerial, it is expected that the work in

this body will take on renewed importance. 

Members looking to include specific topics on

the negotiating agenda will need to begin

developing a consensus, given that the content

of negotiations remains a decision to be made by

Ministers in 2003. 
97 WORLD TRADE ORGANIZATION

11. Trade Facilitation

Status

The 1996 Singapore Ministerial Declaration

requested the Council for Trade in Goods “to

undertake exploratory and analytical work,

drawing on the work of other relevant

international organizations, on the simplification

of trade procedures in order to assess the scope

for WTO rules in this area.” The Council

continued its work under this mandate in 2001,

leading up to the Doha Ministerial, where an

ambitious and focused program was established

for new work to be undertaken, leading up to the

Fifth Ministerial in 2003. At Doha, it was

agreed that negotiations on Trade Facilitation

will take place after the Fifth Ministerial, based

upon a decision to be taken at that Ministerial

on modalities of negotiations.

Major Issues in 2001

In 2001, the Council for Trade in Goods met

several times in informal session, continuing its

analysis of various ‘national experience’

submissions, and exploring potential current

"gaps" within the parameters of relevant WTO

rules. Emerging in 2001 was a significant level

of interest by many Members to add to the

Trade Facilitation agenda those issues

pertaining to the transit of goods through

territories– a matter of particular importance to

several ‘land-locked’ countries. In addition, a

key event in 2001 was a comprehensive two-day

“WTO Workshop on Technical Assistance and

Capacity Building in Trade Facilitation,”

featuring speakers from both donor and

recipient countries, international organizations

actively involved in trade capacity building, and

the private sector.

As the year progressed, there continued to be

some resistance exhibited on the part of certain

developing-country Members toward

commencing negotiations on Trade Facilitation. 

However, many developing countries joined the

United States and other Members in supporting

a view that the development of a rules-based

environment for conducting trade transactions

would be an important element for securing

continued growth in the economic output of all

WTO Members. There was no disagreement

among Members that systemic reforms related

to increased transparency and efficiency in the

conduct of border transactions would diminish

corruption, while providing an additional benefit

of enhancing administrative capabilities that

ensure effective compliance with customsrelated 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 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 2002

As reflected in the Doha Declaration, the United

States and all other Members are challenged in

the area of Trade Facilitation to move beyond

the previous Singapore Ministerial analytical

mandate and undertake an ambitious work

agenda leading up to the Fifth Ministerial. The

Council on Trade in Goods will not only review,

but also undertake as appropriate to “clarify and

improve” relevant aspects of GATT Article V

(“Freedom of Transit”), GATT Article VIII

(“Fees and Formalities Connected with

Importation and Exportation”), and GATT

Article X (“Publication and Administration of

Trade Regulations”). At the same time,

Members will identify trade facilitation needs

and priorities of Members, while concurrently

taking up the challenge of ensuring adequate

technical assistance and support for capacity

building in this area. The United States and

other leading Members will move aggressively

toward advancing the Doha Trade Facilitation

agenda, in order to ensure that the work is

effectively positioned at the Fifth Ministerial for
2001 ANNUAL REPORT 98

completing negotiations in the three-year time

frame of the overall Doha negotiating work

program.

The United States views work in this area as

ultimately leading to one of the most important

systemic negotiations to be undertaken by the

WTO. The future WTO negotiations in the area

of Trade Facilitation are a “win-win”

opportunity, given the important linkages

between a rules-based trade transaction

environment and a stable economic

infrastructure. The United States will continue

to advance ongoing complementary initiatives

involving existing Agreements, such as with

regard to implementation of the WTO

Agreement on Customs Valuation. The United

States will also be working with key Members

to ensure the technical assistance is demanddriven and is effective in bringing about

concrete measurable results that will translate

into increased trade and investment

opportunities for all Members.

F. Plurilateral Agreements

1. Committee on the Expansion of

Trade in Information Technology

Products

Status

The landmark agreement to eliminate tariffs by

January 1, 2000 on a wide range of information

technology products, generally known as the

Information Technology Agreement, or ITA,

was concluded at the WTO’s first Ministerial

Conference at Singapore in December 1996.

The ITA has 57 participants representing over

95 percent of trade in the $600 billion-plus

global market for information technology

products. 20 The agreement covers computers

and computer equipment, semiconductors and

integrated circuits, computer software products,

set-top boxes, telecommunications equipment,

semiconductor manufacturing equipment and

computer-based analytical instruments.

Major Issues in 2001

The WTO Committee of ITA Participants held

four formal meetings in 2001, during which the

Committee reviewed implementation status. 

Although developed country participants

implemented duty-free treatment for these

products on January 1, 2000, some limited

staging of tariff reductions for individual

products up to 2005 for developing countries

was granted on a country-by-country basis. 

Pursuant to the provisions of the Singapore

Ministerial declaration establishing the ITA, the

Committee continued its work to address

divergent classification of information

technology products. Building on the work

done in 1999 and 2000, substantial progress was

made in 2001 on reaching agreed classifications

for many products. A list of products where

agreement was not possible was forwarded to

the World Customs Organization for their

consideration. 

As a result of the approval of the Non-Tariff

Measures (NTM) Work Program in late 2000,

the Committee began work in 2001 by

identifying NTMs which impede trade in ITA

products. On this issue there have been nine

submissions from participants to date. The

Committee is in the process of examining the

economic and development impact of such

measures on trade in ITA products and the

benefits which would accrue to participants

20 ITA participants are: Albania, Australia,

Bulgaria, Canada, Costa Rica, Croatia, Cyprus, Czech

Republic, El Salvador, Estonia, European

Communities (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. China and Armenia

have indicated their intention to join the ITA. 
99 WORLD TRADE ORGANIZATION

from addressing their undue trade-distorting

effects. 

Prospects for 2002

The Committee’s decision to establish a work

program on non-tariff measures effectively

demonstrates how the WTO provides a dynamic

mechanism that is responsive to the everchanging nature of the information technology

sector. ITA participants have already identified

a number of non-tariff measures that act as

unnecessary impediments to trade. The

Committee intends to bring together industry

representatives and government regulators in

2002 to consider how these impediments can be

removed. 

Throughout 2002 the Committee will continue

to undertake its mandated work, including

reviewing possibilities for product expansion

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 it 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

current membership is: the United States, the

member states of the European Union (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,

Jordan, the Kyrgyz Republic, Latvia, Oman,

Panama, and Slovenia are in the process of

negotiating GPA accession.

Major Issues in 2001

In Article XXIV:7 of the GPA, the Parties

agreed to conduct further negotiations with a

view to improving both the text of the

Agreement and its market access coverage. The

Parties have since agreed that, as part of the

review, the Committee should take into account

the objective of promoting expanded

membership of the GPA by making it more

accessible to non-members.

 

With these objectives in mind, the United States

has taken the lead in advocating significant

streamlining of some 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 should be

carefully analyzed in view of the ongoing

modernization of the Parties’ procurement

systems and technologies. 

As provided for in the GPA, the Committee

continued the process of monitoring members’

implementing legislation. In 2001, it completed

its review of the implementing legislation of

Canada, Hong Kong China, Israel, Japan,

Liechtenstein, Norway, Singapore and the

United States. 

Prospects for 2002

In 2002, the Committee will continue its review

and analysis of the text of the GPA, focusing on

proposals by the United States and other Parties

aimed at “streamlining” the Agreement’s
2001 ANNUAL REPORT 100

procedural requirements. It will also consider

proposals that have been made with respect to

potential negotiations to further expand the

Agreement’s market access coverage. The

Committee will review the implementing

legislation of Iceland and the Netherlands with

respect to Aruba, which will complete the

review for all the current GPA Parties.

3. Committee on Trade in Civil Aircraft

Status

The Agreement on Trade in Civil Aircraft

(Aircraft Agreement), was concluded in 1979 as

part of the Tokyo Round of multilateral trade

negotiations. Although the Aircraft Agreement

was not renegotiated during the Uruguay Round,

it remains fully in force and is included in

Annex 4 to the WTO Agreement as a

plurilateral trade agreement.

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 PNTR 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, including:

Government-directed procurement actions and

mandatory subcontracts: The Agreement

provides that purchasers of civil aircraft

(including parts, subassemblies, and engines)

will be free to select suppliers on the basis of

commercial considerations and governments

will not require purchases from a particular

source.

Sales-related inducements: The Agreement

states that governments are to avoid attaching

political or economic inducements (positive or

negative linkages to government actions) as an

incentive to the sale or lease of civil aircraft.

Certification requirements: The Agreement

provides that civil aircraft certification

requirements and specifications on operating

and maintenance procedures will be governed,

as between Signatories, by the provisions of the

Agreement on Technical Barriers to Trade.

Under Article II.3 of the Marrakesh Agreement,

the Aircraft Agreement is part of the WTO

Agreement, however only for those Members

who have accepted it and not for all WTO

Members. As of December 31, 2001, there were

29 Signatories to the Aircraft Agreement: 

Bulgaria, Canada, the European Communities,

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 and the United

States. Although Albania and Croatia have

committed to become parties upon accession to

the WTO, which occurred in 2001, neither has

accepted the Agreement. Chinese Taipei, which

became a WTO Member on January 1, 2002,

also became a Signatory to the Aircraft

Agreement on that date. Oman agreed to

become a party within three years of accession. 

Those WTO Members with observer status in

the Committee are: Argentina, Australia,

Bangladesh, Brazil, Cameroon, China, Chinese

Taipei, Colombia, the Czech Republic, Finland,

Gabon, Ghana, Hungary, India, Indonesia,

Israel, Korea, Mauritius, Nigeria, Oman, Poland,

Singapore, the Slovak Republic, Sri Lanka,

Trinidad and Tobago, Tunisia and Turkey. In

addition two WTO accession candidates, the

Russian Federation and Saudi Arabia, have

observer status in the Committee. The IMF and

UNCTAD are also observers.

Major Issues in 2001

The Aircraft Committee, permanently

established under the Aircraft Agreement,

affords the Signatories an opportunity to consult

on the operation of the Agreement, to propose

amendments to the Agreement and to resolve

any disputes. During 2001, the full Committee
101 WORLD TRADE ORGANIZATION

formally convened twice and also met once

informally in conjunction with a meeting of the

Technical Sub-Committee reviewing the

Agreement’s Annex. The Committee agreed to

open a new Protocol (2001) for acceptance by

the Signatories that revises the Agreement’s

Annex of aircraft items to be accorded duty-free

treatment to bring them into accord with

changes to the international Harmonized

Commodity Description and Coding System. 

The Committee also agreed to recommend

interim application of duty-free treatment for

ground maintenance simulators, a product not

currently within the defined coverage of the

Agreement. 

In addition, the Committee discussed various

aircraft-related trade matters including:

conforming the language in the Agreement to

the WTO; end-use customs administration

including a proposal to define “civil” aircraft by

initial certification rather than by registration;

and, statistical reporting of trade data. The

United States also raised certain activities by

other Signatories that might result in trade

barriers or market distortions, such as the failure

by France to promptly certify large civil aircraft

at full seating capacity, European Union support

for large civil aircraft development and

marketing, Belgian government exchange rate

guarantees for aircraft component

manufacturers, and European Union regulations

restricting the operation of aircraft, otherwise

compliant with International Civil Aviation

Organization Stage III noise standards. 

Prospects for 2002

The United States will continue to seek to

conform the Aircraft Agreement with the new

WTO framework while maintaining the existing

balance of rights and obligations. The United

States will also continue to make it a high

priority for countries with aircraft industries that

are seeking membership in the WTO to become

a Signatory to the existing 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 members of the

Agreement in order to foster non-discriminatory

and efficient selection processes for aircraft

products based solely upon product quality,

price, and delivery.
2001 ANNUAL REPORT 102

III. Regional Negotiations

A. Free Trade Area of the Americas

In 2001, the United States and the other Free

Trade Area of the Americas (FTAA) nations

continued to make substantial progress in

negotiations toward creation of the FTAA. The

FTAA will create the largest free trade area in the

world, with 800 million people. American

workers, farmers, consumers and businesses will

benefit from increased access to Latin American

markets and a greater variety of products available

here.

The negotiations are being guided by general

principles and objectives approved by leaders of

the 34 democratically-elected FTAA countries. 

Among the most important principles are that the

FTAA should improve upon WTO rules and

disciplines wherever possible and appropriate, and

that the outcome of the negotiations will be a

“single undertaking,” in the sense that signatories

to the final FTAA agreement will have to accept

all parts of it – they cannot pick and choose

among the obligations. Among the most

important objectives are to eliminate progressively

tariffs and non-tariff barriers, as well as other

measures with equivalent effects, which restrict

trade; to eliminate agricultural export subsidies

affecting trade in the hemisphere; to bring under

greater discipline trade-distorting practices for

agricultural products, including those that have

effects equivalent to agricultural export subsidies;

to liberalize trade in services to achieve

hemispheric free trade under conditions of

certainty and transparency; to ensure adequate and

effective protection of intellectual property rights,

taking into account changes in technology; to

establish a fair and transparent legal framework

for investment and related capital flows; to pursue

mutually supportive economic and environmental

policies, as was agreed at the 1994 Miami Summit

of the Americas; and to observe and promote

worker rights, as Trade Ministers agreed at the

1998 Trade Ministerial in San Jose, Costa Rica.

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/AD/CVD) and the non-negotiating

groups and committees (the Technical Committee

on Institutional Issues, the Consultative Group on

Smaller Economies, the Joint Government-Private

Sector Committee of Experts on Electronic

Commerce and the Committee of Government

Representatives on the Participation of Civil

Society). The FTAA Administrative Secretariat,

which facilitates the negotiations, moved to

Panama City, Panama in February 2001 from its

previous site in Miami, Florida where it had been

located since May 1998. Panama will continue to

host the Secretariat until March 2003, when the

Secretariat will move to Mexico, as agreed in the

San Jose Ministerial Declaration. 

FTAA Trade Ministers met for the sixth time in

Buenos Aires, Argentina on April 7, 2001 to

review negotiators’ work to date and provide

guidance for the next phase of negotiations. The

ministerial meeting was followed by the Summit

of the Americas meeting in Quebec, Canada -- the

first multilateral summit meeting attended by

President Bush -- where the hemisphere’s leaders

confirmed the FTAA as a key component of the

hemisphere’s economic development and

integration.

Ministers made several important decisions in

Buenos Aires, including agreeing that negotiations

for creation of the FTAA will be concluded no

later than January 2005, and that the Agreement

will enter into force no later than December 2005. 
103 REGIONAL NEGOTIATIONS

Ministers also agreed that Negotiating Groups

with market access components (market access,

agriculture, services, investment, and government

procurement) would start the market access phase

of their negotiations by May 15, 2002. During

2001 these negotiating groups worked toward

agreement on the “modalities” (ground rules) for

the market access negotiations, while they and

other negotiating groups and non-negotiating

groups continued to work on creating disciplines

and obligations to open trade throughout the

hemisphere. 

At the Buenos Aires meeting, Ministers created

the Technical Committee on Institutional Issues

(TCI). The TCI’s mandate is to develop the

overall structure of the FTAA Agreement,

including issues not covered in other chapters of

the text, such as institutional mechanisms,

transparency, and general provisions, which will

apply to the entire Agreement. During 2001 the

TCI discussed the treatment of these themes in the

Agreement and has started considering proposals

for text development.

To improve the transparency of the FTAA process

and to build broader public understanding of and

support for the FTAA, in April 2001 the Ministers

made the unprecedented decision to make public

the draft FTAA agreement. The nine negotiating

groups presented Ministers with their negotiating

texts - which make up the preliminary draft

consolidated text of the FTAA Agreement. The

text was subsequently translated into the four

official languages of the FTAA – English,

Spanish, French, and Portuguese – and is now

available on the USTR website (www.ustr.gov)

and the official FTAA website (www.ftaaalca.org) in all four languages. Ministers

instructed each of the nine FTAA negotiating

groups to continue to work towards consensus by

removing brackets in the draft chapters of the

Agreement to the maximum extent possible.

Subsequent to the release of the draft text and

recognizing the need for open communication

with the public, the FTAA Committee of

Government Representatives on the Participation

of Civil Society issued an Open Invitation for

comment on all aspects of the FTAA negotiations,

including the publicly released draft texts, on

November 1, 2001. Information on the Open

Invitation can be found on both the USTR and

FTAA websites. The Civil Society Committee

has invited the public to comment on the FTAA

negotiations previously (November 1998 and

April 2000) in order for the Committee to present

the full range of views to Ministers before each

Ministerial meeting. Submissions to the Third

Open Invitation will be reflected in the

Committee’s report to Ministers in Quito, Ecuador

in October 2002. To ensure that the negotiators

hear the opinions of those submitting comments as

well, the FTAA Civil Society Committee is

overseeing the timely delivery of all submissions

to the negotiators.

In addition to agreeing to place this most recent

invitation on the FTAA website, countries pledged

to use national mechanisms to disseminate the

invitation further. In July 2001, immediately after

the draft text was released, USTR issued a Federal

Register Notice to solicit comments on the FTAA

draft text and other components of the

negotiations, and did so again in November 2001

to publicize the issuance of the Civil Society

Committee’s Third Open Invitation. USTR also

issued a press release and letters to trade advisory

committees alerting the public to the Open

Invitation. USTR also regularly briefed members

of the statutory Advisory Committees and others

in several public meetings.

The 1998 Santiago Summit of the Americas

Declaration stated that the participants in the

FTAA process are to “take into account the

differences in the levels of development and size

of the economies in the Americas, in order to

create opportunities for the full participation by all

countries.” This pledge has been repeated in

subsequent Ministerial Declarations. In

September 2001, at their ninth meeting in

Managua, Nicaragua, FTAA Vice Ministers

developed guidelines on the treatment of

differences in the levels of development and size. 

The guidelines, based on input from the FTAA
2001 ANNUAL REPORT 104

Consultative Group on Smaller Economies,

provide the negotiating groups a flexible series of

principles aimed at promoting the participation of

smaller and less developed countries in the FTAA

process. The guidelines include a process for

considering specific proposals on technical

assistance and capacity building, and will help

ensure the full participation of all countries in the

construction and benefits of the FTAA. 

Following the Buenos Aires Ministerial, the

United States assumed chairmanship of the FTAA

Negotiating Group on Intellectual Property Rights. 

Other governments throughout the hemisphere

share the responsibility for leading the

negotiations. During 2001, the following

countries or groups of countries chaired FTAA

entities: Argentina (Market Access), Guatemala

(Agriculture), Costa Rica (Government

Procurement), Mexico (Investment), Colombia

(Competition Policy), CARICOM (Services),

Paraguay (Dispute Settlement) and Peru

(Subsidies/Andtidumping/Countervailing Duties). 

Also during 2001, Brazil chaired the Technical

Committee on Institutional Issues, Bolivia chaired

the Consultative Group on Smaller Economies,

Canada chaired the Joint Government-Private

Sector Committee of Experts on Electronic

Commerce and the Dominican Republic chaired

the Committee of Government Representatives on

the Participation of Civil Society. 

As agreed at the 1998 San Jose Ministerial

meeting, Ecuador assumed the chairmanship of

the FTAA process in May 2001, and will continue

to chair meetings of FTAA Vice Ministers (Trade

Negotiations Committee) and Ministers until

October 2002. Beginning in November 2002, the

United States and Brazil will assume the cochairmanship of the FTAA process. 

B. North American Free Trade Agreement 

Overview

On January 1, 1994, the North American Free

Trade Agreement 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 most 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.

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 more than doubled

between 1993 and 2000, significantly higher than

export growth of 52 percent for the rest of the

world over the same period.

Trade among the three NAFTA Parties has soared

during the first seven years of the Agreement, and

continues to set new records. Total U.S. exports

to our NAFTA partners more than doubled, to

$266.3 billion. Total U.S. exports to Canada, our

largest trading partner, climbed nearly 78 percent

since the NAFTA entered into force. U.S.

merchandise exports to Mexico have more than

doubled from pre-NAFTA levels. As a result,

Mexico became our second largest single-country

trading partner in 1999. Exports to our two North

American trading partners, combined, account for

approximately 34 percent of our global exports. 

Jobs supported by goods exports to NAFTA

countries increased by 45 percent, from an

estimated 2.0 million in 1993 to an estimated 2.9

million in 2000.
105 REGIONAL NEGOTIATIONS

Elements of NAFTA

1. Tariffs

Following procedures set out in the NAFTA, the

United States, Canada and Mexico concluded a

fourth NAFTA accelerated tariff elimination

exercise on January 1, 2002. The early

elimination of tariffs on a variety of products

affected nearly $24 billion in trade. The items

identified for accelerated tariff elimination were

selected based on requests by consumers,

producers and traders who are eager to take

advantage of the benefits of free trade throughout

North America. Under this agreement, the United

States and Mexico eliminated tariffs on a number

of rubber and plastic footwear items, while

Mexico matched current U.S. duty-free treatment

on additional manufactured goods including motor

vehicles, electric and electronic goods, and

pharmaceuticals. Mexico and Canada eliminated

tariffs between their two countries on a parallel

package of goods.

2. Investment

The NAFTA provides comprehensive disciplines

to ensure that U.S. investors in Mexico and

Canada are provided with certain basic

protections, including nondiscriminatory

treatment, freedom from certain performance

requirements (such as requirements for local

content or for the transfer of technology to

competitors), free transfer of funds related to

investments, and expropriation only in conformity

with international law.

During its July 2001 meeting in Washington, the

NAFTA Free Trade Commission reviewed the

operation of Chapter 11 of the NAFTA and issued

interpretations of certain Chapter 11 provisions. 

These interpretations included a clarification of

the correct interpretation of the NAFTA provision

requiring treatment in accordance with customary

international law for investments of investors of

other Parties (thereby also correcting

misinterpretations of that provision by certain

arbitral tribunals). The Commission also agreed

to make accessible to the public, in a timely

manner, documents submitted to, or issued by,

Chapter 11 tribunals, subject to redaction of

confidential business information; information

which is privileged or otherwise protected from

disclosure under a Party's domestic law; and

information which the Party must withhold

pursuant to the relevant arbitral rules. These

interpretations contribute to the proper and

transparent operation of the Chapter 11 dispute

settlement process and to the proper and

responsible participation of the disputing parties

in such proceedings. The Commission also

directed experts to continue their work examining

the implementation and operation of Chapter 11,

including developing recommendations as

appropriate.

3. Rules of Origin

In 2001, the NAFTA Parties agreed on technical

changes to the NAFTA Rules of Origin to bring

the rules of origin into conformity with changes in

the Harmonized System nomenclature that were

adopted by the World Customs Organization. 

These changes will take effect in 2002.

4. Mechanisms to Implement 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 July 2001 in Washington, DC. 

The ministers reviewed the operation of the

NAFTA Work Program, and the progress made

thus far by the more than 25 NAFTA committees,

working groups and other subsidiary entities. The

Commission agreed to increase the rate of

compensation paid to dispute settlement panelists,

which had not been adjusted since the NAFTA

entered into force. The ministers also agreed to

cooperate in other trade fora, including the FTAA,
2001 ANNUAL REPORT 106

APEC, and the WTO.

5. 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 an unprecedented trilateral work

program in the areas of industrial relations (i.e.,

the right to organize and bargain collectively),

occupational safety and health, employment and

training and child labor and gender initiatives.

Each NAFTA Party also has 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 of a Ministerial Council and an

administrative Secretariat.

Under the NAALC and various NAO procedural

guidelines, citizens of any NAFTA signatory 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 response to

one such submission, the U.S. NAO released a

report in April 2001 on occupational safety and

health issues at certain manufacturing facilities in

Mexico.

The Parties have held numerous trilateral

conferences, seminars, and technical exchanges to

share information and make improvements in

many critical areas. Conferences held in 2001

addressed issues related to migrant workers, the

rights to organize and bargain collectively, and

workplace violence. By addressing issues of labor

rights, the NAALC has contributed to

transparency and public dialogue on labor issues.

6. 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: a) the Council made up of the

environmental ministers from the United States,

Canada, and Mexico; b) the Joint Public Advisory

Committee made up of five private citizens from

each of the NAFTA countries; and c) the

Secretariat made up of professional staff, located

in Montreal, Canada.

The 2002-2004 Program Plan, approved in

December 2001, is centered around four core

program areas: Environment, Economy and Trade;

Conservation of Biodiversity; Pollutants and

Health; and Law and Policy. Within these areas, a

number of programs are set out to further the

objectives of the NAAEC. Throughout the course

of implementing its annual program plan, the CEC

has acquired a wealth of regional information and

policy expertise in a wide range of cooperative

program areas including: trade in sustainable

agricultural products; the banning of dangerous

chemicals like DDT in North America;

development of environmental management

system guidelines for businesses; and a strategy to

conserve wildlife and natural ecosystems in North

America.

Finally, the NAAEC 10(6) Environment and

Trade Officials Working Group is currently

discussing a number of issues, including how the

three NAFTA Parties use precaution in making

regulatory decisions, environmental assessments

of trade liberalization, and the environmental

effects of trade in electricity. 

In November 1993, Mexico and the United States

agreed on arrangements to help border

communities with environmental infrastructure

projects, in furtherance of the goals of the NAFTA

and the NAAEC. During the September 2001
107 REGIONAL NEGOTIATIONS

State Visit of Mexican President Vicente Fox, the

United States and Mexico agreed to strengthen the

Border Environment Cooperation Commission

(BECC) and the North American Development

Bank (NADB), to allow them to better address

priorities in the border area. The two institutions

are currently working with close to 100

communities along the Mexico-U.S. border.

Since their creation, the institutions have been

instrumental in the development of over 30

projects, now complete or under construction,

with an aggregate cost of nearly $1 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 eight 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.

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 56 percent. In 2001, twoway trade with APEC members totaled $1.3

trillion, a decline of 6.6 percent from 2000.

It was at Blake Island that APEC Leaders first

expressed their collective desire to move toward

an “Asia Pacific community” of economies. In

particular:

< 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 conclusion of

the Information Technology Agreement

(ITA) 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; and
2001 ANNUAL REPORT 108

< 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.

2001 Activities

APEC Trade Ministers and Leaders reaffirmed the

importance of moving forward to launch

multilateral trade negotiations at Doha, stressing

the region’s continued commitment to trade

expansion and market opening. Though APEC

economies continued to open their markets in

2001 (see the APEC 2001 Economic Outlook, and

the 2001 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 that the

Round could be launched and the world trading

system would move beyond inconclusive results

of the 1999 WTO Ministerial in Seattle.

Important activity took place at all APEC levels in

2001 to give effect to APEC’s vision of free and

open regional trade and investment, from the

Leaders and Ministerial agreements to the work of

Senior Officials and the Committee on 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 specific steps with the adoption of

the Shanghai Accord to advance its own

work program of regional trade and

investment liberalization and facilitation;

and

< discussed the numerous sub-regional trade

agreements in the Asia Pacific region,

underscoring the need for their

consistency with APEC’s architecture,

goals and principles.

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. APEC Trade Ministers meeting in

Shanghai in June 2001 – a time when the

prospects for a launch of the new WTO Round

were still uncertain – adopted a very strong

statement supporting the launch of a new WTO

Round at the upcoming WTO Ministerial

Conference in Doha, Qatar. APEC Ministers and

Leaders built upon this outcome when they met in

October in Shanghai, where they gave their

unanimous support to the launch of the new

Round, unified by the tragic September 11 events

in the United States and the need for real

multilateral commitment in the face of the

worldwide economic downturn.

To continue building confidence in the WTO,

APEC Ministers and Leaders also emphasized the

importance of the many APEC activities

undertaken in 2001 to provide capacity building

assistance under the APEC Strategic Plan, created

in 2000 to help developing APEC economies

implement their existing WTO obligations. 

Ministers and Leaders called for APEC to

continue developing new assistance programs

under the Strategic Plan and implement them on

an accelerated basis.

2. Advancement of APEC’s Work on

Trade and Investment Liberalization

and Facilitation

By adopting the Shanghai Accord, originally

proposed by the United States, APEC Leaders

took an important step to ensure that APEC

achieves its free and open trade and investment

goals in the region. During his trip to Shanghai,
109 REGIONAL NEGOTIATIONS

President Bush stated, "Together, we must meet

the Bogor goals -- including free trade for every

nation in this region by 2020. The Shanghai

Accord we will sign ... gives us new and useful

tools to enhance trade and investment."

In the Shanghai Accord, Leaders agreed to:

< anchor the new economy by further

liberalizing services, intellectual property,

and tariff regimes;

< implement transparency principles in

economic governance that ensure good

government; and

< eliminate red tape in a way that facilitates

trade and moves to reduce transaction

costs by 5 percent over the next 5 years.

The Shanghai Accord also contains substantive

changes to APEC procedures by calling for:

< “Pathfinder Initiatives” which enable a

small group of countries to pilot

initiatives, even though not all countries

can initially participate; and 

< meaningful peer review of each Member’s

progress toward the Bogor Goals to

ensure that APEC economies stay on

track. 

APEC work on trade and investment liberalization

and facilitation is overseen by the Committee on

Trade and Investment (CTI) and its sub-fora,

which the United States chaired in 2000 and 2001. 

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, nontariff 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 2001, Ministers endorsed the CTI’s

improvements to the OAA Part I, a review

directed by Ministers in 2000. This new work

product ensures that the OAA remains APEC’s

roadmap for achieving free and open trade and

investment in the region. As of 2001, APEC

economies are now supposed to present their

Individual Action Plans (IAPs) in electronic

template form - the “e-IAP.” IAPs were originally

developed as an annual reporting tool to provide

APEC economies with mutual pressure to institute

trade liberalizing measures on their own accord,

and e-IAPs were agreed in 2000 to further

encourage this trend. The United States

successfully completed its first e-IAP in 2001, and

it reflects the relatively open, market-driven nature

of the U.S. economy (e-IAPs can be viewed at

www.apecsec.org.sg). 

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 2001 in

China: Beijing, 15-16 February; Shenzhen 30-31

May; and Dalian 20-21 August. In addition, the

following CTI sub-fora met:

• Market Access Group (MAG) – Beijing, 17-

19 February; Shenzhen, 27-28 May; and

Dalian, 17-18 August;

• Group on Services (GOS) – Beijing, 17-18

February; Shenzhen 27-28 May; and Dalian,

18-19 August;

• Investment Experts’ Group (IEG) – Cheju,

Republic of Korea, 23-24 March; Shenzhen

26-27 May; and Dalian 16-17 August;

• Sub-Committee on Standards and

Conformance (SCSC) – Beijing, 17-18

February; Shenzhen 28-29 May; and Dalian,

18-19 August;

• Sub-Committee on Customs Procedures

(SCCP) – Beijing 17-20 February; and

Shanghai, 16-19 August;
2001 ANNUAL REPORT 110

• Intellectual Property Rights Experts’ Group

(IPEG) – Sydney, Australia, 20-21 March; and

Taichung, Chinese Taipei, 16-17 July;

• Competition Policy/Deregulation Workshop –

Shenzhen, 27-28 May;

• Government Procurement Experts’ Group

(GPEG) – Beijing, 17-18 February; and

Dalian, 18-19 August;

• Informal Experts’ Group on the Mobility of

Business People (IEGBM) - Beijing, 17-18

February; Shenzhen, 27-28 May; and Dalian

17-19 August;

• Informal Group on Implementation of WTO

Obligations and Rules of Origin - Beijing,

February; Shenzhen, 28 May; and Dalian, 18,

August.

Progress on Collective Action Plans

Among other things, the CTI and its sub-fora are

responsible for implementing APEC’s “Collective

Action Plans” 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 2001, 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 2001 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 of the CTI Sub-fora are outlined 

below:

The Sub-Committee on Standards and

Conformance (SCSC), contributed to the launch

of a pilot of the DeclareNet, an internet businessto-government(B2G) website for exchange of

conformance information between regulatory

authorities and manufacturers which also

functions as a regulatory tool for surveillance. It

also endorsed a proposal that APEC-based

information technology companies and

Information Technology Industry Council (ITI)

members work to co-develop, with interested

member economies, a road map to facilitate the

implementation of the work program on trade

facilitation in information technology products. 

The SCSC also streamlined its work program

through rationalization of its agenda and better

coordination with other groups. 

The Sub-Committee on Customs Procedures

(SCCP) completed several comprehensive multiyear technical assistance programs aimed at

assisting member in implementing the SCCP

collection action plan. It endorsed a framework

for assessing and evaluating members’

implementation of the collective action plan, and

implemented a set of SCCP trade facilitation

recommendations.

The Market Access Group (MAG) intensified its

work on tariffs and non-tariff measures (NTMs),

agreeing to a “Typology of Possible NTMs

Identified under EVSL Sectors and Fora/Sub-Fora

to Address Them.” As part of a Trade Policy

Dialogue on NTMs, it invited experts from the

Pacific Economic Cooperation Council and the

United States International Trade Commission to

present papers on their work on NTMs. The

Group also published a report entitled “APEC

Economies: Breaking Down the Barriers” that

highlights efficient and effective administrative

procedures to facilitate the flow of goods and

services across borders, and which some APEC

economies already have implemented in certain

sectors. MAG reviewed and agreed on a new term

of reference to provide clearer guidance on the

roles and functions of the group, and elevated into

new collective actions the points contained in a

paper the Group did last year entitled “Discussed

Ideas for Future NTMs Work Program.”

The Group on Services (GOS) completed Phase II

of the Development of the Menu of Options for

Voluntary Liberalization, Facilitation and
111 REGIONAL NEGOTIATIONS

Promotion of Ecotech in Services Trade and

Investment. As part of the updating of the Osaka

Action Agenda mandated by Leaders, Leaders

accepted GOS’ recommendation for a new

objective. According to this objective, economies

all agree to achieve free and open trade and

investment in the APEC region by “providing, in

regulated sectors, for the fair and transparent

development, adoption and application of

regulations and regulatory procedures for trade in

services.” The GOS also considered

recommendations on trade in education services,

and finalized a report entitled “Firm Expatriation

Policy and Practices in Services Trade: The

Gender Dimension.”

The Intellectual Property Experts’ Group (IPEG)

endorsed a new collective action plan on

intellectual property rights, and held a

government/industry workshop on IP enforcement

in the APEC region to exchange information on

enforcement issues between the private and public

sectors. The Group also conducted a symposium

to share knowledge and exchange views on

effective patent commercialization and successful

technology transfer in the context of intellectual

property systems. 

The Workshop on Competition Policy and

Deregulation (CPD) considered effective ways to

implement the APEC Principles on Competition

and Regulatory Reform. Of particular note are the

CPD’s joint activities with the OECD to foster

regulatory reform in the region. During 2001

APEC, through the CPD and together with the

OECD, held two of the three events planned for

this cooperative effort. The opening conference

“Foundations for Sustainable Growth: Progress

and Challenges in Regulatory Reform” was held

in February, and the first follow-up workshop was

held in September. As part of the mandated

updating of the Osaka Action Agenda, Leaders

accepted the CPD’s recommendation for new

guidelines according to which economies agreed

to “enforce competition policies and/or laws to

ensure protection of the competitive process and

promotion of consumer welfare, innovation,

economic efficiency and open markets,” and to

“disclose any pro-competitive efforts undertaken

(e.g., enactment of competition laws, whether

comprehensive or sectoral).”

The Government Procurement Experts’ Group

(GPEG) focused its work on continuing the agreed

process of voluntary review and reporting by

member economies on the consistency of their

government procurement regimes with the APEC

Non-Binding Principles on Government

Procurement adopted in 1999. Reporting by

member economies on the consistency of their

regimes with transparency principles is nearing

completion. Member economies are beginning

presentations on their e-procurement systems with

a view to providing "lessons learned" to those

economies which have yet to initiate eprocurement.

The Informal Experts’ Group on Mobility of

Business People (IEGBM) endorsed the “Business

Mobility Standards: A Key to Building Capacity”

paper which provides a framework for developing

effective capacity building strategies that support

regional travel facilitation. As part of this

capacity building strategy, it endorsed a document

examination standards paper and training

packages to assist implementation of effective and

speedy document examination regimes. IEGBM

also secured APEC funding approval to develop

professional and efficient service standards, and to

conduct a multilateral trial of the “Advance

Passenger Processing” system, a standard for

border processing. The Group approved in

principle, on a best endeavors basis, the adoption

of a 30-day standard for completion of the

temporary residency processing of specialists. It

also developed a website on business mobility to

facilitate dialogue and continued to maintain the

APEC Business Travel Handbook website.

The Informal Group on Implementation of WTO

Obligations and Rules of Origin developed twelve

lead projects under the APEC Strategic Plan on

WTO capacity building. These projects were

funded by APEC’s TILF (Trade and Investment

Liberalization and Facilitation) fund to assist

developing APEC economies to implement their
2001 ANNUAL REPORT 112

WTO obligations.

Work on the “EVSL” Sectors

The CTI continued to monitor and advance the

work to address non-tariff measures, facilitate

trade, and conduct economic and technical

cooperation in each of the sectors selected by

APEC Leaders for “early voluntary

liberalization.” Further progress has been

achieved in some areas, including chemicals,

autos, and medical equipment. 

Key among these was the launch of an APEC

Chemical Dialogue, in which senior government

and industry representatives will meet regularly to

discuss issues affecting the competitiveness of the

chemical industry in the Asia-Pacific region. The

Chemical Dialogue will focus on issues affecting

non-tariff measures, trade facilitation, and

economic and technical cooperation. In 2001,

terms of reference for this Dialogue were

developed, including the creation of a Steering

Group to support the Dialogue’s work. An initial

Steering Group was held in August 2001, at which

time industry identified a regional effort to adopt

and implement the Globally Harmonized System

of classification and labeling as its top priority. 

Preparations are now underway for the holding of

the first Chemical Dialogue in Mexico around the

time of the Meeting of APEC Trade Ministers in

May 2002. 

In addition, the third meeting of the APEC

Automotive Dialogue was held successfully on 3-5

April 2001 in Bangkok with more than 200

participants from industry and government. The

Dialogue adopted an “Information Technology

Manifesto” which incorporates a forward-looking

action agenda and a set of “Principles of

Technical Regulation Harmonization.” In

addition, the Automotive Dialogue has

reorganized into Working Groups, a format which

will increase the Dialogue’s responsiveness to

industry recommendations. An active work

program is underway, including a potential link to

the WTO round, peer review activity, increased

efforts to involve developing economies in global

harmonization work, and a series of customs

seminars.

In the area of medical equipment, funding was

approved for a follow-up seminar to the Seminar

for Government Regulators on Harmonization of

Medical Equipment Regulation that was held in

Singapore in March 2000. The U.S. Government

is now working with the medical equipment

industry to organize this seminar, which is

scheduled for May 2002. The seminar will provide

an opportunity for participants to exchange views

on the status and benefits of global harmonization

of regulations for medical equipment and promote

broader participation in international efforts to

develop consensus-based standards for medical

technical regulation. Such harmonization would

improve the competitiveness of the industry,

create more open and transparent regulatory

systems, reduce trade frictions, and help to ensure

rapid patient access to the latest medical

innovations – which will improve the quality of

care and reduce costs.

3. Free Trade Agreements

Noting the increasing number of free trade

agreements being either studied, negotiated, or

concluded among countries in the APEC region,

APEC officials conducted several discussions in

2001 to exchange views on these developments,

and the effect they may have on regional and

multilateral efforts to free trade, including at a

trade policy forum session of the CTI in Shenzhen

in May. At the suggestion of the United States

and Chile, interested members held an informal

session in Dalian in August to discuss in more

depth the various free trade agreements that

members are currently negotiating or have

recently completed. 

In November, APEC Leaders noted the

information exchanges undertaken, and agreed

that regional and bilateral trade agreements should

serve as building blocks for multilateral

liberalization in the WTO. They stated that it is

essential for such agreements to be consistent with

WTO rules and disciplines, and in line with APEC
113 REGIONAL NEGOTIATIONS

architecture and supportive of APEC goals and

principles. 
2002 ANNUAL REPORT 114

IV. Bilateral Negotiations

A. 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

2000, the stock of U.S. foreign direct investment

in Canada was $126.4 billion, an increase of 13.8

percent from 1999. In 2000, the stock of

Canadian direct foreign investment in the United

States was $100.8 billion, an increase of 31.7

percent.

a. Softwood Lumber

On April 2, 2001, one day after the expiration of

the 1996 U.S.-Canada Softwood Lumber

Agreement, the Coalition for Fair Lumber Imports

filed both antidumping and countervailing duty

petitions. Affirmative preliminary determinations

by the Department of Commerce ("Commerce") in

both its countervailing duty and antidumping

investigations resulted in provisional import duties

being imposed on Canadian softwood lumber

imports based on a net countervailable subsidy

rate of 19.31 percent and an antidumping rate of

5.94 to 19.24 percent. Commerce's final

determinations in the investigations are scheduled

for late March 2002. 

In August 2001, the United States received a

request for WTO consultations from Canada

regarding Commerce's preliminary countervailing

duty determination. A WTO panel was

established on December 5, 2001.

In July, 2001, Canada agreed to a constructive

dialogue on softwood lumber issues. Federal and

provincial officials have participated in this

discussion to determine whether the United States

and Canada can find a durable solution as an

alternative to the litigation. The United States

continues to seek a solution to the underlying

concerns of this long-standing trade issue. 

Discussions with Canadian federal and provincial

officials include reforms in provincial pricing

practices, tenure systems, and mandated

requirements. 

b. Agriculture

Canada is the United States’ second largest market

for food and agricultural exports. For fiscal year

2001 (October 2000 - September 2001), U.S.

agricultural exports to Canada grew by 6.5 percent

to $8 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 2001, the CCA and PSAG met

twice on issues covering livestock, grain, seed,

and horticulture trade, as well as pesticide and

animal drug regulations. 

As a result of the ROU, U.S. feeder cattle exports

from eight states to Canada continued to increase

at a record pace in 2001 and are expected to set

another record in 2002. Grain transshipped

through Canada under an ROU program also

continued to accelerate reaching 1 million tons in

2001.

Despite these accomplishments, 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
115 BILATERAL NEGOTIATIONS

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. USTR is scheduled to make a final

determination on the 301 petition in February

2002.

On a related but separate track, the United States

is seeking reforms to state trading enterprises as

part of the WTO agricultural negotiations. The

U.S. proposal calls for the end of exclusive 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.

In April 1999, the United States successfully

challenged Canada’s subsidized dairy industry. A

WTO panel found that the Canadian government,

through its government-managed provincial

marketing boards, was subsidizing the price of

exported milk 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-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 is concerned that the new measures

appear to duplicate most of the elements of the

export subsidies which they replace, 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. As a result, on December 18, the United

States requested another compliance review panel

in order to consider additional information. The

compliance review panel is expected to issue a

decision in spring 2002.

c. Intellectual Property Rights

The United States initiated a dispute on May 6,

1999 arguing that the Canadian Patent Act was

inconsistent with the TRIPS Agreement as it did

not provide for a patent term of at least 20 years

from the date of application for all patents in

existence on the date that Canada was obligated to

comply with TRIPS. On September 18, 2000, the

Appellate Body affirmed that Canada’s law failed

to provide the patent term guaranteed by TRIPS. 

The DSB adopted the reports of the panel and

Appellate Body on October 12, 2000. The United

States asked an arbitrator to determine the

reasonable period of time for Canada to comply,

and on February 28, 2001, the arbitrator

determined that the deadline for compliance

would be August 12, 2001. Effective July 12,

2001, Canada announced that it had enacted an

amendment to its Patent Act to bring it into

conformity with its obligations under the TRIPS

Agreement.

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 more than 144 percent

through 2001. The potential of trade with Mexico

is just beginning to be tapped, while the benefits

to workers, consumers, farmers and firms are
2002 ANNUAL REPORT 116

increasingly apparent. The NAFTA, now in its

ninth 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. On January 1,

2002, the results of the Fourth NAFTA

Accelerated Tariff Elimination Agreement were

implemented, which eliminated duties on U.S.

exports valued at $25 billion ahead of schedule.

The United States has continued to seek improved

access to the Mexican market in several other

areas.

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 the U.S. copyright industries and

the closure of legitimate copyright industry-related

businesses in Mexico. Despite significant raiding

efforts, only a small percentage of arrests have

resulted in court decisions and deterrent penalties.

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. Mexico is

currently the United States’ third largest

agricultural export market. For fiscal year 2001

(October 2000-September 2001), U.S. agricultural

exports to Mexico grew by 15.4 percent to $7.3

billion, the highest value ever, with value-added

consumer agricultural products surging 30 percent

to an all-time high.

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 our favor. 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.

In other agricultural sectors, the United States and

Mexico continue to seek to resolve a dispute over

the NAFTA’s sugar provisions. In May 2001, the

United States and Mexico reached agreement to

improve Mexico’s administration of its tariff rate

quota on U.S. dry bean exports ensuring the

United States’ full access under the NAFTA to the

Mexican dry bean market. Following WTO

consultations with the United States regarding

Mexico’s antidumping investigation of U.S.

slaughter hog imports from the United States, 

Mexico self-initiated a review of the dumping

order. A preliminary resolution was issued in

June 2001, and a final resolution is expected soon. 

On April 28, 2000, Mexico announced final

antidumping duties on imports of U.S. beef

(boneless, bone-in and carcasses). The final

antidumping margins are, in many cases, lower

than those in the July 27, 1999 preliminary

determination, but remain a concern to the United

States. In June 2000, the Mexican Congress

passed a law that imported beef was to be

inspected in Mexico. Because Mexico does not

have sufficient facilities to handle the volume of

imports and trade would have been severely

disrupted, Mexico granted a delay on

implementation of the law until June 2002. 

In 2001, the Administration continued to address a

number of Mexican sanitary and phytosanitary

measures. Of particular note, in summer 2001, the

Administration negotiated a resolution to

phytosanitary measures impeding shipments of

California tree fruit. Working with affected

industries to address these and other problems as
117 BILATERAL NEGOTIATIONS

they arise will continue to be a high priority,

particularly given the importance of continued

growth in export opportunities for U.S.

agricultural producers.

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 a 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. The United States

expects to file a new request for establishment of a

WTO panel in early 2002 that specifically

addresses this issue.

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 on excepted

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.

b. Argentina

U.S. exports to Argentina were 4.0 billion in 2001,

and Argentina remained in the top 30 export

markets of the United States. Overall bilateral

trade was $7.0 billion, and the U.S. surplus

narrowed by $0.6 billion to $1.0 billion in 2001. 

A key factor in the Argentine economy is its trade

with Brazil, Argentina’s number one trading

partner. 

During 2001, the United States pursued resolution

of existing trade disputes, such as the dispute

involving Argentina’s inadequate patent and data

protection regimes.

Agriculture: After several years of technical

discussions, in January 2001, Argentina signed the

protocol allowing entry of U.S. exports of both inbone and boneless pork.

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. 

Grave concerns regarding Argentina’s IPR regime,

particularly with respect to patent protection, have

led USTR to maintain Argentina on the Special

301 “Priority Watch List” since April 1998. In

1997, the United States withdrew 50 percent of

Argentina’s benefits under the Generalized
2002 ANNUAL REPORT 118

System of Preferences (GSP) over this same issue,

and benefits will not be restored unless the

concerns of the United States are addressed

adequately. 

Despite U.S Government efforts, intellectual

property protection continued to deteriorate. 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 has engaged in a series

of consultations with Argentina in Geneva

throughout 2001. To date, the two countries have

been unable to find a fully satisfactory solution. 

Argentina’s copyright laws are currently under

review by the Executive Branch.

c. Brazil

The United States exported goods valued at $16.3

billion to Brazil in 2001. Brazil’s market accounts

for 27 percent of U.S. annual exports to Latin

America and the Caribbean excluding Mexico,

and 66 percent of U.S. goods exports to Mercosur. 

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

some of this legislation, including a local working

requirement and extensive exceptions to a

prohibition on parallel imports in the patent law. 

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. 

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 TRIMS-inconsistent (Trade-Related

Investment Measures) 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.
119 BILATERAL NEGOTIATIONS

Wheat: In March 2001, the United States and

Brazil reached agreement on a phytosanitary

protocol to allow entry of certain U.S. wheat

shipments.

d. Paraguay

With a population of just over five million,

Paraguay is one of the smaller U.S. markets in

Latin America. In 2001, the United States

exported only $401 million worth of goods to

Paraguay. 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 longer-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 implementation of the MOU.

e. Uruguay

With the smallest population of Mercosur (just

over three million), Uruguay nonetheless imported

over $417 million of goods from the United States

in 2001. 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.

f. Chile

Chile is our 32nd largest export market, purchasing

nearly $3.2 billion in U.S. exports in 2001. Chile

has been a recognized leader of economic reform

and trade liberalization in Latin America, with

real GDP growth averaging eight percent for the

decade prior to Chile’s economic slowdown in

1998-99. Chile’s real GDP grew by more than 3

percent in 2001. As a resource-based, exportdependent economy, Chile was seriously affected

by the global drop in commodity prices. In

addition, continued sluggishness in the economies

of Mercosur, particularly Argentina, a major

destination for Chilean exports, contributed to

slower Chilean growth in 2001.

Chile FTA

In December 1994, the United States, Canada and

Mexico announced their intention to negotiate

Chile’s accession to NAFTA. Several negotiating

rounds were held in 1995. However, Chile

withdrew from the negotiations due to concerns at

that time about the absence of fast track

negotiating authority. Chile subsequently

negotiated a bilateral FTA with Canada (Chile

already had a bilateral agreement with Mexico). 

In 1998, United States initiated the U.S.- Chile

Joint Commission on Trade and Investment,

which led to increasingly ambitious work

programs in areas including services, government

procurement, investment, environment, business

visas, norms and standards, labor, and civil

society. On November 29, 2000, the United States

and Chile announced their agreement to initiate
2002 ANNUAL REPORT 120

immediately negotiations for a U.S.-Chile Free

Trade Agreement. 

In 2001, there were eight negotiating rounds

towards a comprehensive bilateral free trade

treaty. Following the December round of talks,

both parties agreed to another round of talks in

January 2002 and committed to concluding the

agreement in early 2002. 

4. The Andean Community

The U.S. trade deficit with the Andean region

decreased from $17.8 billion in 2000 to $12.9

billion in 2001. U.S. goods exports to the region

were up 4.6 percent in 2001, totaling $12.7 billion. 

The Andean Community originated as the Andean

Pact in 1969, with Bolivia, Colombia, Ecuador,

Peru and Venezuela as its members. However, it

was only in the 1990s that the Andean Pact’s

commitment to form a customs union took on

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 in addition to meetings of Trade

Ministers, and creation of a General Secretariat of

the Andean Community mandated to act as the

group’s executive body.

a. Andean Trade Preference Act

The Andean Trade Preference Act (ATPA) of

1991 authorized the President to provide reducedduty or duty-free treatment to most imports from

Bolivia, Colombia, Ecuador and Peru. It was

intended to help the four beneficiary countries

expand economic alternatives in their fight against

drug production and trafficking. The

Administration strongly supports renewal of the

ATPA and expansion of the program to additional

products. During November 2001, the U.S. House

of Representatives approved a bill for ATPA

expansion and renewal, and the Senate Finance

Committee approved its version of the bill. 

Unfortunately, the original ATPA program

expired on December 4, 2001, before a new

program was in place. The Administration

remains firmly committed to working with

Congress to achieve ATPA renewal and expansion

as soon as possible.

b. Intellectual Property Rights

In the area of intellectual property, the Andean

Community countries have developed common

disciplines with legal effect throughout the

Community. The U.S. Government is in the

process of analyzing the revised legislation with

regard to WTO TRIPS compatibility. Of

particular concern is an Andean Tribunal decision

calling on Peru to invalidate a pharmaceutical

patent on the basis that it represented a "second

use" innovation. Both the U.S. pharmaceutical

and agrochemical industries are also concerned

that Andean laws are not sufficiently explicit

regarding the confidentiality of data submitted in

conjunction with applications for marketing

approval. 

During 2001 Ecuador was removed from the

Special 301 Watch List, while the other four

Andean countries are on the Watch List. In

general, piracy levels in the region are high and

while enforcement efforts have improved

somewhat, they remain inadequate.

5. Central America and the Caribbean

a. Caribbean Basin Initiative (CBI)

The trade programs known collectively 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. Initially launched in 1983 through the

Caribbean Basin Economic Recovery Act, and

substantially expanded in 2000 through the U.S.-

Caribbean Basin Trade Partnership Act (CBTPA),

the CBI currently provides 24 beneficiary

countries with duty-free access to the U.S. market

for most goods. In 2001, U.S. imports from the

CBI region totaled $21.2 billion, with U.S. exports
121 BILATERAL NEGOTIATIONS

amounting to $21.2 billion.

Ongoing implementation of the CBTPA was an

important Administration objective for the

Caribbean Basin region during 2001. The CBTPA

provided expanded preferential treatment for a

range of products, including certain apparel,

which had previously been excluded from CBI

coverage. As of late 2001, it was clear that these

new provisions were being used extensively by

CBI countries and U.S. importers, with nearly 25

percent of total U.S. imports from the CBI region

entering under the enhanced preference

provisions. At the same time, it has been apparent

that implementation of the CBTPA has been

characterized by certain challenges, particularly

with respect to the application of statutory

provisions in the technical rules governing imports

under the new preferences. 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.

The Administration also continued during 2001 to

engage with CBI beneficiary countries in

connection with the policy objectives established

as eligibility criteria under the CBI statutes. In the

March-May period, the U.S. conducted a focused

review of labor practices in Guatemala, linked to

that country’s eligibility under both the CBI and

Generalized System of Preferences programs. 

During the course of the review, Guatemala

enacted important reforms to its labor laws,

engaged directly with a special mission of the

International Labor Organization, and committed

to stronger efforts to enforce labor law provisions. 

The U.S. review was suspended in May 2001 with

positive note of these actions; the U.S. also

indicated that it would continue to monitor closely

labor practices in Guatemala. In July 2001, the

U.S. also participated in bilateral consultations

with the governments of El Salvador, Honduras,

and Nicaragua regarding labor practices. 

In December 2001, USTR released its 4th Report

to Congress on the Operation of the Caribbean

Basin Economic Recovery Act. This biennial

report summarizes the main provisions of the

Caribbean Basin Initiative, reviews regional and

bilateral trade trends under the CBI programs, and

reflects an overview of the performance of

beneficiary countries with respect to the CBI

eligibility factors. The report is available on-line

at www.ustr.gov.

b. Central America

The United States remains Central America’s

principal trading partner. The Central American

Common Market (CACM) consists of Costa Rica,

El Salvador, Guatemala, Honduras and Nicaragua,

and provides duty-free trade for most products

traded among these countries. Panama, which has

observer status, and Belize participate in CACM

summits but not in regional trade integration

efforts. As a group, the countries of the CACM

exported a total of $9.1 billion of goods to the

United States in 2001, importing $11.1 billion of

U.S. goods. The CACM is an internal market of

33 million people with a combined GDP of over

$50 billion. GDP per capita varies widely within

the Central American region, with the relatively

developed service-oriented economy of Panama

registering an estimated $2,316 per capita. At the

other extreme, Nicaraguan GDP per capita was

only $517. Furthermore, these figures do not

capture the broad disparities of income evident

within most Central American countries.

During 2001, the CACM countries publicly

expressed an interest in pursuing free trade

negotiations with the United States. In September,

USTR convened a meeting with representatives of

these countries to explore ways of deepening trade

policy engagement between the United States and

Central America. That meeting produced an

agreement to pursue a series of technical

workshops on trade policy issues, which will

continue into mid-2002. 

In December, the Administration convened a

meeting of the U.S.-Panama Trade and Investment

Council, with the aim of exploring Panama’s

interest in expanding its bilateral trade
2002 ANNUAL REPORT 122

relationship with the United States.

Central American countries continued during

2001 to pursue a range of bilateral and regional

trade agreements. Costa Rica signed a free trade

agreement with Canada in April, and negotiations

between Canada and the other CACM members

countries (El Salvador, Guatemala, Honduras, and

Nicaragua) began late in the year. Negotiations

for a Panama-CACM free trade agreement led to

conclusion of work on common disciplines, with

work continuing on negotiation of related market

access provisions. In several Central American

countries, work continued towards ratification of

previously-negotiated agreements with Chile,

Mexico, and the Dominican Republic. 

All of the countries of the region are participating

in the Free Trade Area of the Americas (FTAA)

negotiations. Central American countries take an

active role in the negotiating process. In the May

2001 to October 2002 phase of negotiations,

Guatemala chairs the Negotiating Group on

Agriculture, Costa Rica chairs the Negotiating

Group on Government Procurement, and

Nicaragua serves as Vice Chair of the

Consultative Group on Smaller Economies.

During the course of 2001, the United States

consulted regularly with Central American trade

officials, including in the context of the FTAA

and Summit of the Americas processes. The

United States Trade Representative met with his

counterparts from the region at the April 2001

FTAA Ministerial in Buenos Aires, and held

additional, individual meetings with the region’s

trade ministers throughout the year. 

Agriculture

Tariff and non-tariff barriers to U.S. agricultural

exports are among the biggest U.S. trade policy

concerns in Central America. Several countries in

the region, including Costa Rica, Nicaragua and

Panama, have recently raised tariffs on

agricultural products, although they are still within

WTO-bound rates. Panama’s practices with

respect to issuance of sanitary and phytosanitary

licensing, often linked to local buying

requirements, have been a matter of concern; the

United States has pursued these concerns with the

Government of Panama, and some improvement

was seen by the end of 2001.

Intellectual Property Rights (IPR)

In general, the legal framework for protection of

intellectual property has improved in Central

America in recent years, although concerns

remain, particularly in the area of enforcement. 

Enforcement-related issues were the principal

factor leading to USTR’s placement of Costa Rica

on the Special 301 Priority Watch List in 2001. 

Both El Salvador and Honduras, however, are

considering a number of TRIPS-conforming

amendments to their respective IPR legal

frameworks, while in 2001 Guatemala appointed a

specialized prosecutor for intellectual property

matters.

c. The Caribbean

CARICOM: Countries in the Caribbean region

include members of the Caribbean Community

and Common Market (CARICOM) and the

Dominican Republic. Current members of

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 has been limited. 

CARICOM countries have played an active role in

the FTAA process, which has provided an

opportunity for frequent bilateral interaction

between U.S. and Caribbean trade officials. 

During the May 2001 to October 2002 phase of

the FTAA negotiations, Bahamas is chairing the

Negotiating Group on Services, and Dominican

Republic chairs the FTAA Committee of

Government Representatives on the Participation

of Civil Society. 
123 BILATERAL NEGOTIATIONS

Agriculture

The Caribbean countries, Barbados and the

Dominican Republic in particular, have made

significant advances in lowering tariffs in advance

of their WTO reduction schedule. However, many

countries, including Trinidad and Tobago, the

Bahamas, Jamaica, and Barbados have increased

the use of non-tariff barriers such as arbitrary

customs valuation, domestic absorption

requirements and discretionary import licensing

practices to stem the flow of imports and make up

for lost government revenues due to lower tariffs.

Other Caribbean Countries

The Dominican Republic, the largest beneficiary

of the Caribbean Basin Initiative program, does

not belong to any regional trade association, but

has increased cooperation with both Central

America and CARICOM. In July 2001, the

Dominican government implemented its

commitments under the WTO Customs Valuation

Agreement. The United States has expressed

concerns about the Dominican Republic’s

Industrial Property law which appears to fall short

of certain basic requirements of the WTO TRIPS

Agreement, and the U.S. and Dominican

governments have engaged in consultations on

these issues. The U.S. has also raised concerns

regarding possibly discriminatory effects of

certain excise tax increases implemented by the

Dominican Republic in late 2000. 

B. Western Europe

Overview

The U.S. economic relationship (measured as

trade plus investment) with Western Europe is the

largest and most complex on earth. Due to the

size and nature of the transatlantic economic

relationship, serious trade issues inevitably arise

on occasion. Sometimes small in dollar terms,

especially compared with the overall value of

transatlantic commerce, these issues can take on

significant importance as potential precedents for

broader U.S. trade policies.

From its origins in the 1950s, the EU 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 $165.1 billion in 2000,

second only to Canada. Since 1994, U.S. goods

exports to the EU have increased 53 percent.

The other major trade group within Western

Europe is the European Free Trade Association

(EFTA), which, through 1994, included Austria,

Finland, Iceland, Liechtenstein, Norway, Sweden,

and Switzerland (Austria, Finland, and Sweden

ceased EFTA membership upon their accession to

the EU). Formed in 1960, EFTA provides for the

elimination of tariffs on manufactured goods and

select agricultural products that originate in, and

are traded among, its Member States.

In late 1991, the EFTA countries and the EU

formed the European Economic Area (EEA),

designed to strengthen significantly the free trade

agreement already in place between the two

groups. Switzerland rejected the EEA in a

referendum at the end of 1992. A revised EEA

(excluding Switzerland) took effect on January 1,

1994. In practice, the EEA involves adoption by

the EFTA signatories of approximately 70 percent

of EU legislation.

2001 Activities

In 2001, the EU intensified its efforts to deepen

the economic and political integration of its

Member States. The pace of additional Western

European integrative 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, 1999 launched in earnest the EMU

program, the most prominent feature being the
2002 ANNUAL REPORT 124

introduction of the new European single currency

(the “euro”), which replaced national currencies in

participating Member States on January 1, 2002. 

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 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

November 1998, the EU formally launched

substantive accession negotiations with six

“first-tier” candidate countries: Poland, the Czech

Republic, Hungary, Slovenia, Estonia and Cyprus. 

In late 1999, the EU declared it also would begin

formal negotiations for accession with Slovakia,

Romania, Bulgaria, Lithuania, Latvia, and Malta

(Turkey remains an accession candidate, with no

EU commitment to commence formal

negotiations). Important institutional questions

associated with EU enlargement still need to be

resolved before enlargement can take place. No

firm target has been set for completing any of the

accession negotiations and some candidate states

have expressed concern that the process could last

for a number of years. 

In 2001, USTR devoted 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. As part of our ongoing

dialogue with the European Union under the

Transatlantic Economic Partnership (TEP) during

2001, we negotiated a Mutual Recognition

Agreement (MRA) on marine equipment and are

nearing completion on guidelines for more

effective transatlantic regulatory cooperation and

transparency. We have resolved the long-standing

bananas dispute and continued efforts to reach an

understanding with the EU that would lead to EU

compliance with the WTO dispute settlement

ruling on beef, as well as other bilateral trade

problems. In addition, with respect to the WTO

ruling in the Foreign Sales Corporation (FSC)

case, we will work to resolve the situation and to

ensure that this issue does not seriously damage

our overall bilateral relationship.

USTR activity on a bilateral basis with respect to

the EFTA states in 2001 was modest, though the

EFTA EEA states have continued to make

inquiries concerning possibilities for further

regulatory cooperation. 

1. 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, which seeks to deepen and systematize

the cooperation in the trade field launched under

the New Transatlantic Agenda process begun in

1995. In 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 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.

Public Dialogues: Important companions to the

Transatlantic Economic Partnership initiative are
125 BILATERAL NEGOTIATIONS

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 – the

Transatlantic Labor Dialogue (TALD), the

Transatlantic Consumer Dialogue (TACD), and

the Transatlantic Environment Dialogue (TAED)

– start 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. The

dialogues have forwarded recommendations

related to trade policy issues to governments on

both sides of the Atlantic.

2. Standards, Testing, Labeling, and

Certification

A process of harmonization of technical

regulations and product standards is underway

within the EU. Given assessments that EU

legislation covering regulated products eventually

may affect half of all U.S. exports to Europe, EU

legislation and standardization work in the

regulated areas is of considerable importance. 

Although there have been improvements in some

respects, a number of problems related to this

evolving EU-wide regulatory process continue to

cause concerns for U.S. exporters. Among these

concerns are: inadequate transparency in the EU

rulemaking process; lags in the development of

EU standards and harmonized legislation for

regulated areas; inconsistent application and

interpretation by Member States of the legislation

that is in place; overlap among directives dealing

with specific product areas; gray areas among the

scope of various directives; and unclear or

unnecessary marking and labeling requirements

for these regulated products before they can be

placed on the market. 

In December 1998, the United States and the EU

began implementation of the U.S.-EU Mutual

Recognition Agreement (MRA) in sectors

representing more than $50 billion of annual twoway trade. The MRA is designed to reduce

duplicative conformity assessment procedures,

while maintaining our current high levels of

health, safety, and environmental protection. 

Once fully implemented, the MRA will permit

U.S. exporters to conduct required conformity

assessment procedures (such as product testing

and inspection) in the United States according to

EU requirements, and vice versa. The sectors

covered by the current MRA include: 

telecommunications and information technology

equipment; network and 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 recreational craft annex

entered the operational phase in June 2000, and

the telecommunications equipment and EMC

annexes entered the operational phase in January

2001.

Over the past year, the United States continued

work to enhance regulatory cooperation and

reduce unnecessary technical barriers to

transatlantic trade. Under the Transatlantic

Economic Partnership (TEP), the United States

and EU advanced our bilateral regulatory

cooperation workplan in 2001 by negotiating a

path-breaking MRA on marine equipment, which

should take effect in mid-2002. We also made

substantial progress on U.S.-EU guidelines for

effective regulatory cooperation and more

transparent regulatory procedures. These

guidelines will serve as a framework for pursuing

possible bilateral regulatory cooperation projects.

3. Telecommunications

Europe is in the process of implementing

wide-ranging liberalization and harmonization in

its telecommunications services market and is

undergoing a process to update its
2002 ANNUAL REPORT 126

telecommunications legislation. The EU and the

Member States, with limited exceptions,

committed to provide market access, national

treatment, and fair regulatory practices as part of

the WTO Basic Telecommunications Agreement. 

Greece, Ireland, Portugal, and Spain made

subsector-specific reservations in the WTO

agreement, mirroring derogations granted under

EU law that permit an extra one to five years

before the introduction of competition. Ireland

and Spain abandoned these derogations and, as of

January 1, 1999 and December 1, 1998

respectively, opened their markets to full

competition. Portugal and Greece abandoned

their derogations at the end of 2000.

The record of implementation under the

agreement so far is mixed. Many Member States

have licensed new entrants, and have taken steps

necessary to compel former monopolies to meet

pro-competitive obligations set forth in the WTO

Agreement. The European Commission proposed,

and the Council and Parliament approved, a

Regulation to make local loop unbundling

mandatory by January 1, 2001. However, some

governments have been slow to adopt or put in

place the legislative and regulatory mechanisms

necessary to implement EU directives. The

European Commission’s competition directorate

has taken an active stance in bringing actions for

noncompliance with EU directives in order to

compel implementation. In December 2001, the

European Commission decided to open legal

proceedings against Germany, Greece, and

Portugal for failing to open their local telephone

services fully to competition. 

The EU is also in the process of privatizing stateowned telecommunications firms, but in some

countries, this process has proceeded slowly.

About half the incumbent operators in EU

Member States continue to have government

ownership, including France, Germany, Austria,

Belgium, Luxembourg, Sweden, Finland, and

Greece.

The United States continues to work closely with

the EU to monitor how EU Member States are

addressing these issues.

4. Aircraft

In January 2001, the United States and the

European Union held consultations concerning the

potential provision of EU government financial

assistance for the Airbus A380 jetliner project and

other issues regarding trade in large civil aircraft. 

In April 2001, the European Commission provided

notification that seven Member States had made

commitments to provide government loans for part

of the development costs for the Airbus A380

aircraft. The United States reviewed the

transparency data provided by the EU and

requested supplemental information regarding the

terms and conditions of such financing to ensure

that it would be consistent with the EU’s

obligations under the 1992 U.S.-EU Agreement

Concerning the Application of the WTO

Agreement on Trade in Civil Aircraft and the

WTO Agreement on Subsidies and Countervailing

Measures. In January 2002, the EU and the

United States held another round of aircraft

consultations during which the U.S. sought

additional details on support for the A380.

5. Foreign Sales Corporation Tax Rules

Potentially the most damaging of the trade

disputes currently involving the U.S. 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 appeal in Spring 2000, but repealed the

FSC law and enacted new legislation in November

to correct the shortcomings identified in the

dispute. Though the United States and the EU

agreed in September 2000 on procedures that

would permit WTO legal review of the new

legislation, the EU nonetheless requested

permission ultimately to retaliate against up to $4

billion in U.S. exports should the new measure be

found inconsistent with WTO rules, as the EU

charged. On January 14, 2002, the WTO review

was completed, resulting in a finding that the new

legislation is WTO-inconsistent. In the U.S. view,

the EU’s WTO challenge does not arise out of
127 BILATERAL NEGOTIATIONS

substantive commercial problems identified by EU

businesses. To the extent that European industry

has spoken out on this issue, it has been to counsel

against escalation and confrontation and to urge a

reasonable settlement of the dispute.

6. Ban on Growth Promoting Hormones

in Meat Production

The EU continues to ban the import of U.S. beef

obtained from cattle treated with growthpromoting hormones. In 1996 the United States

challenged the EU ban on 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 the WTO rulings by the May 13, 1999

deadline. In July 1999, the United States applied

100 percent duties on $116.8 million of U.S.

imports from the EU after receiving WTO

authorization. The United States is currently

engaged in discussions with the EU on the

possibility of reducing the level of retaliation in

exchange for improved market access for U.S.

non-hormone treated beef.

7. Agricultural Biotechnology

a. Approvals Process for Agricultural

Biotechnology Products

In the past the EU approved several U.S.

agricultural biotech products. However, no U.S.

products have been approved since Member States

imposed a moratorium on the approval of

agricultural biotechnology products in June 1998,

resulting in the loss of $200 million in U.S.

exports of corn to the EU annually. Restarting the

approvals process is a high priority for the United

States in order to restore these exports. Although

European Commission officials made statements

suggesting the EU might restart the process in

2001, the moratorium remains in place, and the

Commission does not appear to have a strategy for

resolving this issue. Both sides agreed in 1998 to

establish a Biotechnology Group under the

Transatlantic Economic Partnership to identify

and address regulatory issues regarding the

approvals process. Initially, the activities of this

group served to increase understanding between

the Commission and the United States officials. 

However, there was little progress in 2001. The

U.S. Government continues to raise its concerns

regarding the failure of the EU to have a

functioning approval process.

b. European Commission Proposals on

Traceability and Labeling

In July 2001, the Commission issued proposals on

traceability and labeling of agricultural

biotechnology products. These proposals are

subject to a co-decision process involving the

European Parliament and the European Council,

which is expected to take at least 18 months. The

proposals cover a range of products, including

animal feed, with the potential of disrupting nearly

$4 billion in U.S. exports to the EU. The United

States has carefully reviewed the proposals and

considers them unworkable, overly expensive, and

subject to fraud. In addition, the U.S. does not

believe the proposals will enhance food safety. In

December 2001, the United States submitted

detailed comments to the Commission outlining

specific concerns about the proposals and seeking

clarification. The U.S. has offered to work with

the Commission, the Parliament, the Council, and

the Member States in developing a better

understanding of these proposals and avoiding

potential trade disruptions.

8. Veterinary Equivalence

As a part of the Single Market initiative in 1992,

the EU harmonized its animal and public health

standards among Member States. In harmonizing
2002 ANNUAL REPORT 128

these standards, the EU introduced new import

controls for animal and animal products that

threatened to disrupt U.S. exports to the EU. On

April 30, 1997, USDA announced that the United

States and the European Union had reached an

agreement on an overall framework for

recognizing each other’s veterinary inspection

systems as equivalent. The agreement is expected

to open new opportunities for red meat exports

and preserve most pre-existing trade in products

such as pet food, dairy and egg products. Without

this agreement, U.S. exports of some products,

including egg products and dairy products, would

have been blocked from the EU market unless

U.S. industries invested in costly adjustments to

their facilities to comply with each EU internal

market requirement. The agreement, which covers

$1 billion in U.S. animal and animal product

exports to the EU and a slightly larger value of EU

exports to the United States, was signed on July

20, 1999 and became effective on August 1. In

June 2001, the Joint Management Committee

created by the agreement met for the second time. 

Agreement was reached on establishing a

Technical Working Group on Foot and Mouth

Disease (FMD) which met for the first time in

October to discuss the FMD outbreak in the EU. 

The two parties received a status report from the

Technical Working Group on Audits and also

discussed plant listings, antimicrobial treatments

for poultry, regionalization and other issues of

concern.

While conditions for trading poultry and poultry

products will be less restrictive under the

agreement, U.S. poultry plants using certain

antimicrobial treatment are not able to ship to the

EU. The EU will not accept use of certain

antimicrobial treatments despite the fact that such

treatments are an important element in modern

poultry processing. The United States continues

to explore with the EU ways of resolving this

issue.

9. Wine

The U.S. and EU successfully launched wine

negotiations in 1999 following several years of

discussions concerning various market access

problems. The negotiations became possible

when, in response to U.S. insistence, the Council

in December 1998 approved an extension of the

existing derogations for U.S. wine making

practices for five years or until an agreement is

reached, whichever comes first. Commission and

U.S. negotiators met several times during 1999-

2001, most recently in June 2001, gaining

valuable information about each other’s regulatory

systems for wine that will help them achieve a

bilateral agreement. The United States continues

to be concerned about the EU’s requirements for

the review and approval of wine making practices,

and has questioned the EU’s export subsidies on

wine and domestic support programs benefitting

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, the

use of geographic indicators and certain other

terms on labels, and import certification. The

United States will continue to press the EU to give

U.S. wine makers equitable access to the EU wine

market. In late 2000 the EU Council agreed on

new guidelines for EC negotiators. Negotiations

are expected to accelerate in 2002.

C. Central Europe and the Newly Independent

States

Overview

In order to ensure a permanent end to the Cold

War, 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
129 BILATERAL NEGOTIATIONS

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 “mostfavored 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 strives 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. 

2001 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, the so-called

Jackson-Vanik amendment. As part of U.S.

sanctions policy related to the conflict in the

region, the President revoked NTR from SerbiaMontenegro (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 was not

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 semiannually. Affected countries must also have a

trade agreement with the United States, including

certain specified elements 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. 

Belarus continues to receive NTR tariff treatment

under annual waivers. 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. The

Administration is currently consulting with the

Congress and interested stakeholders with a view

to removing 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 do not have “WTO

relations” which, among other things, prevents the

United States from bringing a WTO dispute based

on a violation of the WTO or the country’s

commitments in its 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, today USTR concentrates principally on

ensuring compliance by these countries with their

international IPR obligations. In 2000, the

transitional period granted developing countries

and formerly centrally planned economies for

compliance with the WTO’s Agreement on TradeRelated Aspects of Intellectual Property Rights

(TRIPS Agreement) expired. Accordingly, USTR
2002 ANNUAL REPORT 130

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 and initiated a

Special 301 investigation. In August 2001, USTR

withdrew GSP beneficiary status from Ukraine

and published a preliminary sanctions list of

Ukrainian products. 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. 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.

b. Hungary, Slovenia, and Poland -

Protection of Confidential Test Data

USTR places a high priority on protecting the

confidential test data submitted by pharmaceutical

firms to health authorities in order to obtain

marketing approval. This test data typically

require millions of dollars and years of research to

develop, so innovators have a strong interest in

preventing potential copiers from being able to

rely on the data to obtain their marketing

approvals. USTR seeks to ensure that WTO

Members provide the protection of confidential

test data (so-called “data exclusivity”) specified in

Article 39.3 of the TRIPS Agreement. The United

States usually provides five years of exclusivity

for confidential test data, and the EU requires its

members to provide 6-10 years of exclusivity. 

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 there. Many foreign pharmaceuticals,

at best, receive process patents, a relatively weak

form of protection. Over the next five years, this

vestige of the transition from socialist economic

regulation will diminish in importance as new

products gain product patent protection. For those

drugs without product patent protection, however,

data exclusivity can take on special importance. 

Accordingly, USTR has pressed the Central

European countries - especially Hungary and

Slovenia with their large generic drug industries -

to provide data exclusivity. In September 2001,

Poland passed a law eliminating existing

protections for confidential test data until it

becomes an EU member, despite USTR

representations to the contrary. The United States

has raised objections to the law, and at the end of

2001, the Polish government was considering

legislation to modify the law.

c. The Russian Federation - Widespread

Piracy

Russia has enacted comprehensive laws to protect

IPR, but certain major deficiencies remain. Most

notably, enforcement of IPR remains a pervasive
131 BILATERAL NEGOTIATIONS

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 remains

pervasive. Russia has yet to provide protection, as

required by our 1990 bilateral trade agreement, to

pre-existing U.S. copyrighted works and sound

recordings still under protection in the United

States. Some U.S. companies have also had

difficulty registering well-known marks, and

trademark infringement is reportedly on the rise. 

In April 2001, Russia was again placed on the

Special 301 “Priority Watch List” because of

these and other problems. In 1998, the U.S.

Government began a U.S. Government-wide IP

law enforcement technical cooperation program

with Russia. Since 1998, this group has intensified

technical assistance on both enforcement and

WTO requirements. 

3. Generalized System of Preferences

Under the Generalized System of Preferences

(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 the Federal

Republic of Yugoslavia) and most of the NIS

participate in the GSP program. Azerbaijan,

Tajikistan and Turkmenistan have never requested

designation as a beneficiary under the U.S. GSP

program and, therefore, are not eligible to receive

benefits under the program. In 2001, Georgia was

added as a beneficiary developing country under

the GSP program. 

In 1997, the Government of Russia petitioned the

U.S. 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 “pended”

based on the situation in the U.S. titanium

industry. Since 1997, Russia has expressed a

continuing interest in a GSP designation for

unwrought titanium; however, the domestic

industry faces a situation of weakened demand

and depressed prices. Three petitions on titanium

were submitted during the 2001-2002 GSP Annual

Product Review. The GSP Sub-Committee will

decide to either accept or deny review of these

petitions once the GSP program is re-authorized in

2002. 

In 1997 the AFL/CIO petitioned USTR to remove

Belarus from eligibility for the GSP program due

to violation of worker rights. After conducting an

extensive review process, including public

hearings, and after affording the Government of

Belarus ample time to improve its worker rights

situation with no progress on this front, Belarus’s

GSP benefits were suspended in 2000. 

In 2000, USTR commenced reviews on the

continued eligibility of Ukraine, Armenia,

Moldova, Kazakhstan and Uzbekistan under the

U.S. GSP program, due to concerns that these

countries were not providing adequate and

effective protection of intellectual property rights

as required by the GSP statute and as agreed to in

the bilateral trade agreements that all of these

countries entered into with the United States in the

early 1990s. (See section on Intellectual Property

Rights above.) In late 2000, based on significant

improvement in Moldova’s intellectual property

rights regime since the initiation of the GSP

review process, the U.S. copyright industry, which

had petitioned USTR to conduct these reviews,

withdrew its petition with respect to Moldova. In

2000, the USG initiated bilateral consultations

with both Armenia and Uzbekistan designed to

improve the protection and enforcement of

intellectual property rights in these countries. In

August 2001, USTR withdrew GSP beneficiary

status from Ukraine. (See subsection on Ukraine -

Optical Media Piracy above.)

The U.S. GSP legislation contains a provision that

makes a country ineligible for GSP benefits if it

affords preferential treatment to the products of a

developed country, other than the United States,

which has a significant adverse effect on U.S.
2002 ANNUAL REPORT 132

commerce. The U.S. Government has been

consulting with the Central European countries

about addressing the problem of preferential

tariffs given EU exporters vis-a-vis U.S. exporters

pursuant to their Association Agreements with the

EU. In June 2001, USTR negotiated an agreement

with Poland under which Poland agreed to reduce

tariffs on key U.S. exports and the U.S. agreed to

support, consistent with U.S. laws, Poland’s

continued participation in the GSP program. (See

section on Country Specific Issues below.)

4. The Southeast Europe Trade

Preference Act

On November 12, 1999, the Administration

transmitted a draft bill, the “Southeast Europe

Trade Preference Act” (SETPA), to Congress for

its consideration. The SETPA would implement,

in part, the United States’ commitments to the

countries of Southeast Europe pursuant to the

Southeast Europe Trade Expansion Initiative

announced at the Sarajevo Summit in July 1999. 

The SETPA would promote economic

development and stability in Southeast Europe by

increasing access to the U.S. market and

facilitating regional investment. The SETPA,

which is patterned after the Andean Trade

Preference Act, would provide the authority to

establish duty-free treatment of certain imports

from Albania, Bosnia and Herzegovina, Bulgaria,

Croatia, the Former Yugoslav Republic of

Macedonia, Romania, Slovenia, and the territories

of Kosovo and Montenegro on the basis of

specified criteria. Duty-free treatment under the

SETPA would extend for a period of five years in

order to provide investors adequate time to take

advantage of the unilateral preferences that the

program offers.

5. WTO Accession

Prior to the end of 2001, 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. Armenia is expected to complete its

accession process in 2002.

 

WTO accession working parties have been

established for an additional eight NIS countries

(the Russian Federation (see section on Country

Specific Issues below), Ukraine, Armenia,

Azerbaijan, Belarus, Kazakhstan, Tajikistan and

Uzbekistan) and three Central European states

(Bosnia-Herzegovina, the Federal Republic of

Yugoslavia, and the Former Yugoslav Republic of

Macedonia). 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

implementation of WTO provisions. WTO 

accession and the adoption of WTO provisions

can be an important method of supporting

economic reform. The United States has provided

technical assistance, in the form of short- and

long-term advisors, to many of the countries in

support of the WTO accession process. (See

Chapter II for further information on accessions.)

6. 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 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,

Poland, Romania, Slovakia, and Croatia and has

signed a BIT with Lithuania, for which the formal

ratification process has not yet been completed. Of

the NIS, the United States currently has BITs in

force with seven countries (Armenia, Azerbaijan,
133 BILATERAL NEGOTIATIONS

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. The United States has held

consultations with Slovenia on a BIT, but

significant differences remain outstanding. After

bilateral discussions, Hungary opted not to

conclude a BIT with the United States.

7. EU Association Agreements and EU

Membership

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. These Europe

Agreements are meant to set the stage for eventual

EU membership. The EU is not expected to

accept new members before 2004, and many

predict that enlargement may take significantly

longer, especially for the less developed of the

candidate countries. 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

agreed to reduce their 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, and the rates on agricultural

goods are usually lower, than comparable EU

rates. Consequently, U.S. exporters often face

relatively high MFN tariff rates in contrast with

the zero or preferential rates borne by EU

exporters. Much of this tariff differential problem

with respect to industrial goods will dissipate

when the candidate countries join the EU and

adopt its generally low industrial tariff rates.

In the interim period prior to these countries’

accession to the EU, the United States has been

consulting with the Central European countries to

address this tariff differential problem. In 2001,

the United States held discussions with Poland,

the Czech Republic, and Hungary on this issue. 

Slovenia is implementing a plan to lower its high

MFN tariff rates on industrial products to the level

of the EU’s common external tariff rates over a

three-year period. The Czech Republic and

Slovakia renewed tariff waivers for 2002 for civil

aircraft and key parts. (See section on Country

Specific Issues below.)

 

As part of the accession process, the candidate

countries are harmonizing their laws and

regulations to those specified in the EU’s common

legislative regime, the “acquis communautaire.” 

Frequently, harmonization represents an

improvement over the existing regimes in the

candidate countries. In the case of audio-visual

policy, however, candidate countries must

harmonize their laws with the EU’s Broadcast

Directive, which establishes television broadcast

quotas for European and domestic production. 

This directive provides a country with flexibility

in implementing the quotas. In 2001, USTR

continued to work with the candidate countries to

encourage them to include the flexibility option in

their legislation. 

To facilitate trade with Hungary and the Czech

Republic, the EU concluded Protocols to the

Europe Agreements on Conformity Assessment

and Acceptance of Industrial Products (called

"PECAs") with these countries in 2000. These

first PECAs entered into force in 2001, and the

EU is negotiating PECAs with a number of other

EU candidate countries. The agreements

eliminate the need for further product testing and

certification of EU-origin products covered by the

PECAs. Products originating in countries not

party to the PECAs, including products tested and

certified to EU requirements, may not benefit

from these agreements. During 2001, the United

States raised concerns, both bilaterally and in the

WTO, that the rule of origin provision in these

agreements unjustifiably discriminates against

non-EU origin products and is inconsistent with

WTO obligations. The European Commission

proposed in late 2001 that the problematic origin
2002 ANNUAL REPORT 134

provision be dropped from these agreements. We

will continue to monitor this issue.

8. 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: 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 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.

b. Russia: WTO Accession

Russia has been an observer in the GATT and

WTO since 1990 (initially as the Soviet Union),

and formally applied for accession to the GATT

1947 in 1993. Its request for WTO accession has

been under discussion since 1995. The United

States has strongly supported Russia’s efforts to

join the GATT and 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 2000, Russia described its

trade regime and WTO delegations noted specific

aspects of the trade regime that require 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 2001. WTObased reforms to Russia’s trade regime will

strengthen its ongoing efforts for broader-based

market-oriented 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. Russia has

indicated an interest in accelerating the

negotiations and has taken steps to begin

development of new and amended laws and

regulations to bring it into conformity with WTO

provisions. 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.
135 BILATERAL NEGOTIATIONS

c. Russia: Aircraft Market Access

The United States and Russia concluded a joint

Memorandum of Understanding (MOU) in 1996,

which addresses 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. In

the interim before Russia accepts its full

international trade obligations, the MOU 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. 

Through 2001, Russian airlines have been able to

import over 20 non-Russian aircraft under the

MOU, the majority of which were of U.S.-origin. 

In accordance with the MOU, the Russian

Federation also lowered tariffs on aircraft from 30

to 20 percent. In October 2001, the Russian

Government announced that it planned to lower

the tariffs on certain aircraft parts to 5 percent. 

In 1998, the Russian Ministry of Economy issued

Resolution #716 which sets conditions for tariff

waivers on imported aircraft. The resolution,

among other things, required Russian airlines to

commit to the purchase or lease of Russian-made

aircraft in order to receive tariff reductions and

duty waivers for foreign-made aircraft

acquisitions. The United States urged the Russian

Federation to continue to grant duty waivers to

U.S. aircraft imports on a nondiscriminatory basis

as provided for in the MOU and to repeal

Resolution #716 in the process of moving its trade

regime toward conformity with WTO trade rules. 

In August 2001, the Russian Government repealed

Resolution #716 through successive legislation. 

The United States intends to monitor

developments in this area to achieve desired

market access.

d. 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 barrier posed a major

impediment to the ability of U.S. firms to compete

against EU firms for the over $2 billion worth of

aircraft tenders to be conducted in 2001. In late

2000, the Czech Republic and Slovakia, in

response to U.S. Government reports, agreed to

waive 2001 tariffs on large civil aircraft and key

parts. In 2001, this waiver was renewed for 2002.

e. Romania: Minimum Reference Prices

Romania had established minimum and maximum

prices for various imports, including poultry and

distilled spirits and had instituted burdensome

procedures for investigating import prices when

the invoice value falls below the minimum import

price. USTR concluded that this customs

valuation regime violated Romania’s WTO

obligations, especially those under the WTO

Agreement on Customs Valuation. The United

States initiated a WTO Dispute Settlement case in

2000 and a settlement of the matter occurred

through an exchange of letters in June 2001.

f. Poland: Tariff reductions

In 2001, the U.S. and Poland concluded a

comprehensive trade package designed to lower

tariffs on key U.S. exports to Poland by January

2002 and to establish a process for addressing

further the tariff differential that exists between

the duties applied by Poland on EU- and U.S.-

origin agricultural and industrial products and

other bilateral trade issues. The agreement creates

a bilateral working group where these issues can

be addressed. The industrial products for which

tariff reductions have been negotiated include:

certain chemicals and chemical products, beauty

products, personal deodorants and antiperspirants,

gas turbines, centrifuge filters, machines for the
2002 ANNUAL REPORT 136

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 begin the process of lowering tariffs by

January 2002 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.

D. Asia and the Pacific

Overview

The dramatic expansion of trade and economic

growth in the Asia Pacific region over the past

decade was due in large measure to the

progressive and steady opening of markets in the

region. While numerous barriers to trade in the

region still exist, significant progress was made in

the past decade in dismantling impediments to

trade. 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 has delivered results

in bilateral negotiations and consultations with

countries in the region, opening markets of

interest to American farmers, manufacturers, and

services providers, and protecting intellectual

property, which is critical to U.S. exporters in the

high-tech, entertainment and other key sectors.

Highlights of the achievements in this region

include:

< Effective Enforcement of Trade

Commitments through WTO Dispute

Settlement. The United States effectively

used the WTO Dispute Settlement

mechanism to ensure that countries in the

region implemented their multilateral

commitments. The United States

prevailed in a number of cases, which led

to the resolution of U.S. complaints

regarding Korea’s discriminatory import

regime for beef, the elimination of India’s

Balance of Payments (BOP) trade regime,

and confirmation that India’s local content

requirements in the automotive sector are

WTO inconsistent.

< A Series of Significant Market Opening

Agreements with Korea. Through a

combination of bilateral consultations, the

use of U.S. trade remedy law, and action

in the WTO, the United States has

concluded agreements with Korea, and

obtained commitments from its

government: (1) in 1990, 1993, and 2000,

to open its market for beef; (2) in 1995, to

reform its government mandated shelf-life

system, which had impeded the import of

meat products; (3) in 1995, to address

market access problems for trade in

passenger cars; (4) in 1998, to further

reduce trade barriers affecting passenger

vehicles and to render trade in minivans

and sport utility vehicles fairer; (5)

between 1995 and 1998, to revise Korean

import clearance procedures, thereby

expediting the import of several key U.S.

agricultural exports; (6) in 1998 and 1999,

to take steps to privatize the second

largest steel company in the world and to

get the Korean Government “out of the

steel business;” (7) in 1999, to reform its

pharmaceutical pricing and regulatory

policies, thereby making the drug

approval process in Korea faster and less

onerous; and (8) in 1996, an agreement,

and in 1997, a policy statement, to ensure

equal treatment for foreign goods,

services and intellectual property rights

protection in telecommunications.

< Normalization of Trade Relations with the

Countries of Indochina. As a result of the

Vietnam era conflict, Cambodia, Laos and

Vietnam were three of only seven
137 BILATERAL NEGOTIATIONS

countries in the world not to receive

normal trade relations (NTR) status from

the United States. In 1996, the United

States completed a bilateral trade

agreement with Cambodia granting it

NTR status; in 1997, a bilateral trade

agreement and a bilateral investment

treaty were concluded with Laos

(Congressional approval is still required

to grant NTR under the terms of this

agreement); and in July 2000, the United

States and Vietnam signed a bilateral

agreement granting NTR status to

Vietnam, with provisions covering market

access for goods and services, intellectual

property and investment issues. After

ratification by the U.S. Congress and the

National Assembly of Vietnam, the U.S. -

Vietnam agreement went into effect on

December 10, 2001.

< Significant Progress in Protecting

Intellectual Property Rights. Bilateral

consultations and negotiations with a

number of countries in the region resulted

in new commitments to protect

intellectual property. USTR’s efforts

highlight the difficulties in securing both

the appropriate legislation and

enforcement capabilities necessary to

protect substantially all forms of

intellectual property in Asia Pacific

markets. In 2000, Thailand enacted two

TRIPS-related laws (trademark

amendments and integrated circuits)

following extensive consultations with

USTR. The Malaysian Government

passed in 2001 landmark legislation to

reduce pirated optical media production

and export, and has begun implementation

of these measures. Korea amended its

Copyright Act to address some U.S.

concerns and implemented a Special

Enforcement Period at the direction of

President Kim to reduce software piracy.

< Enhanced Access for U.S. Agriculture and

Processed Food Exports. The United

States has vigilantly utilized WTO

procedures and bilateral consultations to

reduce Asian and Oceanic restrictions

which impede market opportunities for

U.S. agriculture and food exporters. In

addition to the agriculture-related WTO

disputes mentioned elsewhere, resolution

of India’s balance of payments restrictions

resulted in the elimination of quantitative

restrictions affecting a broad range of

agricultural and processed food products. 

In Southeast Asia, particularly during the

recent economic turmoil and currency

volatility, U.S. efforts concentrated on a

host of measures which threatened U.S.

agriculture exports, including: Philippine

arbitrary customs valuation practices;

Thai tariff adjustments and import

licensing restrictions; Malaysian food

standards and certification; and

Indonesian tariff adjustments and

monopolistic distribution channels.

< Ensuring that Responses to the Financial

Crisis are Market Opening. USTR

worked with Treasury and other agencies

to ensure that International Financial

Institutions (IFIs) stabilization programs

adopted by countries affected by the 1997-

1998 financial crisis (including Korea,

Indonesia and Thailand) worked to open

markets and expand competition. Many

aspects of these programs have a direct

bearing on trade, in areas such as

improved market access, transparency,

economic deregulation, attracting

investment, and allocating public and

private resources based on market

disciplines. The United States continues

to monitor the trade-related aspects of

these programs closely to ensure their

effective implementation.

< Restoring Market Opening Reforms. 

Following the 1997-98 financial crisis,

many Asian countries adopted much

needed reform programs, which were then

abandoned during the export boom of
2002 ANNUAL REPORT 138

1999-2000. In 2001, the Administration

pursued initiatives with many countries in

the regon, including Indonesia, Thailand

and the Philippines, to highlight the

continued need for market-opening

reforms. 

2001 Activities

The countries in the Asia Pacific region suffered

in 2001 from slumping demand worldwide,

particularly for key exports such as electronics

and information technology (IT) products. As a

result of the global downturn, no country in

ASEAN expects growth to exceed 3.3 percent for

2001-2.

The United States had a full agenda of specific

bilateral impediments that it sought to tackle in the

Asia Pacific region in 2001, as described below. 

It also continues to work regionally, primarily

through APEC, to foster concrete movement

toward more open markets, as described elsewhere

in this report. In addition, it is using the WTO

process – both in enforcing existing commitments

and in its future work program – to further drive

open markets and expand trade in a region that

accounts for over half of total U.S. exports. The

negotiation of a comprehensive U.S.-Singapore

Free Trade Agreement is intended to complement

both our regional and multilateral work by serving

as a significant step toward realization of APEC’s

“Bogor Vision,” under which APEC’s 21

members are working toward “free and open trade

in the Pacific” and by underscoring the benefits of

further trade liberalization.

1. Australia and New Zealand

Australia’s market for agricultural commodities

continues to be closed for some products due to

sanitary and phytosanitary measures. The U.S.

Government has made some progress toward

resolution of these issues in recent years. For

example, Australia’s longstanding import

prohibition of U.S. table grapes is advancing

toward resolution.

On November 14, 2001, President Bush signed a

proclamation to terminate the U.S. safeguard

action on lamb meat. The Australia/New Zealand

WTO dispute brought against the U.S. safeguard

measure was thereby closed.

On October 30, 2001, the New Zealand

Government announced that it will legislate a twoyear moratorium on the release of genetically

modified organisms, except those that provide

direct benefits to human or animal health. The

U.S. Government has expressed its concerns about

the imposition of this moratorium which appears

to be inconsistent with New Zealand's avowed

policy of regulating these products on a scientific

basis. The government did announce that it will

lift the 17-month moratorium on new genetically

modified field trials. It also intends to clarify its

expectation that all research must meet strict

safety standards by amending the Hazardous

Substances and New Organisms Act to require

specific mandatory conditions to be applied to any

research approval, which the New Zealand

Government claims is necessary to ensure that

appropriate environmental and health safeguards

are imposed.

2. The Association of Southeast Asian

Nations (ASEAN)

The trade and investment relationship between the

United States and the members of the Association

of Southeast Asian Nations is strong, mature, and

mutually beneficial despite the effects of the

global economic downturn. U.S. exports to

ASEAN in 2001 decreased by an estimated 6

percent (annualized based on the first 11 months

of 2001). The now ten-member ASEAN group –

comprising Brunei, Burma, Cambodia, Indonesia,

Laos, Malaysia, Philippines, Singapore, Thailand,

and Vietnam – collectively continues to be the

United States’ fifth largest trading partner. As

such, the United States has an important stake in

ASEAN’s economic recovery and is committed to

working closely with ASEAN as an institution,

and with ASEAN member countries individually,

to pursue and promote our mutual trade and

investment interests.
139 BILATERAL NEGOTIATIONS

In 2001, the Administration reinvigorated the

U.S.-ASEAN Trade Dialogue, a formal

mechanism to advance the trading relationship

between the U.S. and ASEAN group a whole. In

August, 2001, senior officials of ASEAN member

states and the U.S. Government met in Brunei to

reinitiate this mechanism.

While ASEAN’s gradual expansion over time has

added to the association’s diversity, it has also

posed new challenges, which manifest themselves

as more complicated decision-making and the lack

of ASEAN solidarity in other fora, such as APEC

and the WTO (in which some ASEAN members

do not participate). Tensions have also surfaced

in terms of individual member’s economic

difficulties and selective implementation of

trade-related initiatives undertaken within

ASEAN. In order to ensure that these

intra-ASEAN undertakings do not adversely affect

U.S. interests, we have stressed the importance

that such undertakings be consistent with WTO

rules, be taken in the spirit of APEC’s goals and

principles, and be faithfully implemented if

ASEAN hopes to attain its own developmental

goals and in order to promote a business and

investor-friendly environment.

In 1993, the then-seven members of ASEAN

created the ASEAN Free Trade Area (AFTA) as a

means to promote regional economic

competitiveness and prosperity. The objective of

AFTA is to promote trade among ASEAN

member countries by gradually eliminating

customs duties on intra-ASEAN trade of

qualifying products by 2005, with special

allowance for sensitive sectors. By agreement,

AFTA members decided to accelerate the

reduction of tariff cuts under AFTA from 2003 to

2005. Laos and Burma were admitted to ASEAN

as full members in July 1997, although these

countries have until 2008 to phase in obligations

under the AFTA. 

ASEAN continues efforts to implement and

expand the AFTA by including unprocessed

agricultural commodities in the tariff phase-out

scheme, and placing greater emphasis on the

elimination of non-tariff measures such as

customs surcharges and technical barriers to trade.

Members also continue to follow the 1999

"ASEAN Vision 2020" declaration in which

members resolved, among other things, to

continue with full implementation of AFTA, to

implement fully the ASEAN Investment Area by

2010, and to achieve the free flow of investment

by 2020. 

a. Indonesia

i. General

The Indonesian economy remains fragile and in

need of significant reforms including corporate

governance and the privatization of assets seized

by the state during the 1997-98 regional financial

crisis. Indonesia’s IMF program, initiated in

October 1997, was modified in each of the three

subsequent years as the economic situation

deteriorated. Concerns about the Indonesian

Government’s ability to follow through with these

reforms along with continuing political

uncertainty is weakening investor confidence and

adding to the serious problems faced by

Indonesia’s financial and corporate sectors. 

Despite the country’s tenuous economic situation,

the Administration sought to bolster the U.S.-

Indonesian trade relationship by convening a

Bilateral Trade and Investment Council in

September 2001. At that meeting, senior officials

met to address several long-standing trade issues

such as IPR and market access for U.S. poultry

products.

ii. Intellectual Property Rights

In April 2000, USTR removed Indonesia from the

Special 301 Priority Watch List, where it had been

since 1996, and placed it on the Watch List in

recognition of efforts made toward a more

effective IPR regime. The Indonesian

Government resubmitted draft legislation on trade

secrets, industrial designs, patents, trademarks and

copyrights in 2000, although this legislation has

yet to gain parliamentary approval. 
2002 ANNUAL REPORT 140

U.S. industry reports continuing problems with

IPR issues, including: software, book, video, and

VCD piracy; drug and apparel trademark

counterfeiting; audiovisual market access barriers;

inconsistent enforcement; and an ineffective legal

system. Indonesia’s amendments to the copyright,

patent and trademark laws would not appear to be

fully consistent with Indonesia’s WTO

obligations.

The U.S. Government has raised these issues with

Indonesia since 1998, when it presented Indonesia

with an IPR work plan (market access, enhanced

enforcement, WTO consistency of laws, special

juridical arrangements, legal use of software, and

increased protection of well-known marks in

several company-specific cases). Although the

Indonesian Government has yet to take sufficient

action on the proposed work plan, it has

acknowledged the need for improved enforcement

and a broad education program, in addition to the

need to bring its statutes into WTO conformity. 

The U.S. and Indonesian Governments have

agreed to work together under the auspices of the

bilateral Trade and Investment Council to achieve

progress on intellectual property issues in 2002.

b. Malaysia

i. Investment and Services

Malaysia maintains investment limits which

predate the mid-1990s financial crisis and which

adversely affect the local business and investment

climate. In general, Malaysian law requires that

business entities include a domestic partner with a

minimum 30 percent stake. Banking and other

financial services providers face foreign-held

equity restrictions, as do suppliers in the

wholesale/retail, distribution and multi-level

marketing, construction and legal services sectors. 

U.S. officials will continue to raise concerns over

investment restrictions in the distribution services

sector and will continue to monitor developments

on this issue.

ii. Tariffs

In 1997 and 1998, Malaysia raised tariffs on

certain goods from 0 percent in 1996 to current

levels of between 5 and 20 percent ad valorem –

still within its WTO-bound commitments. The

products affected include some types of heavy

machinery and construction equipment,

automobiles, motorcycles, and home appliances. 

Malaysia reduced tariffs for information

technology products covered by the Information

Technology Agreement (ITA), under which most

of its tariffs were bound at zero by 2000.

iii. Local Content-Related Investment

Incentives

Malaysia has taken a number of steps which

confer tax benefits, based on the amount of locally

produced parts or inputs utilized, in order to

promote the development of domestic automobile

manufacturers under its "national automobile"

program. As required by the WTO Agreement on

Trade-Related Investment Measures, Malaysia’s

various incentives for local production were to

have been eliminated by January 1, 2000. 

However, in late 1999, Malaysia notified WTO

members of its desire to obtain a two-year

extension of its auto-related measures. In October

2001, WTO members, including the United States,

reached an agreement with Malaysia to allow an

extension of these measures through December

2003.

iv. Intellectual Property Rights

USTR conducted a Special 301 out-of-cycle

review of Malaysia’s intellectual property

practices in September 2001 and decided to

remove Malaysia from the Priority Watch List

following the passage and initial implementation

of new optical disc (OD) legislation designed to

reduce pirated optical media production and

export. The United States will continue to

encourage the Malaysian Government to fully

implement the enforcement provisions of this

legislation.
141 BILATERAL NEGOTIATIONS

c. Philippines

i. Market Access Issues

In 2000, the Philippines passed a new safeguard

law. Although no action has been taken under this

law, the U.S. Government and U.S. industry have

serious concerns with its provisions. The

legislation does not give foreign producers a

meaningful opportunity to defend their interests. 

In addition, the prerequisites for imposition of

provisional relief appear to be lower than the

requirements contained in the WTO Safeguards

Agreement. The U.S. Government has raised its

concerns with the Philippine Government over

this law and will take appropriate steps, as

necessary, if the Philippine Government takes

safeguard actions against U.S. firms.

ii. Intellectual Property Rights

The protection of IPR continues to be hampered

by the lack of a political commitment from the

Philippine Government to implement existing

laws, to dedicate the necessary resources to law

enforcement, and to stress publicly the need for

consistent protection of intellectual property

rights. While a comprehensive 1997 law on IPR 

represented a significant step toward

implementation of the Philippines’ commitments

under the WTO TRIPS Agreement, several

provisions of the law remain of concern, including

provisions governing the circumstances under

which decompilation of software programs is

permissible, ex parte search and seizure, and

restrictions on technology licensing arrangements. 

The United States also continues to monitor

Philippine enforcement efforts and judicial

efficiency. As a result of these concerns, the U.S.

Government elevated the Philippines to the

Special 301 Priority Watch List in 2001.

iii. Customs

On March 31, 2000, the Philippine Government

ended a problematic pre-shipment inspection

services contract with Swiss Societe Generale De

Surveillance, but during 2001 an influential

minority in the Philippine business community

pressed the Philippine Government for a return to

this practice. The U.S. Government has expressed

its opposition to a return to a pre-shipment

inspection regime that does not strictly adhere to

the WTO Customs Valuation Agreement, and will

closely monitor further developments on this

issue.

iv. Local Content-Related Investment

Incentives

As required by the WTO Agreement on TradeRelated Investment Measures, the Philippines’

local content-related measures in the automobile

sector were slated for elimination by January 1,

2000. In October 1999, the Philippines requested

a five-year extension of these measures. After

extensive consultations with the Philippines, the

United States filed a dispute settlement case with

the WTO in 2000, and in October 2001, USTR

secured the Philippines’ agreement to submit to a

phase-out program that will eliminate localcontent requirements in its automobile sector by

June 30, 2003.

d. Singapore

In November 2000, the United States and

Singapore announced the launch of negotiations

for a U.S.-Singapore Free Trade Agreement

(FTA). This agreement is expected to have

significant commercial benefits, as Singapore is

our largest trading partner in Southeast Asia, with

two-way trade in goods and services totaling more

than $40 billion. In negotiating this agreement,

the United States is seeking to eliminate tariffs on

substantially all goods over time, obtain

substantial sectoral coverage in services, help

develop electronic commerce, protect intellectual

property rights (IPR), and achieve other bilateral

trade objectives. The agreement also will include

provisions on labor and the environment.

While the United States and Singapore are

discussing IPR in the context of the FTA

negotiations, this area has been a longstanding

concern for the United States. Singapore readily
2002 ANNUAL REPORT 142

acknowledges that enhanced IPR regulation and

enforcement is necessary to achieve its goal of

becoming a "knowledge-based economy." The

creation of mobile IPR units in 2000 has increased

the Singaporean Government’s ability to conduct

raids on major centers of distribution for pirated

products. In addition, the Government of

Singapore’s efforts to promote a "code of

conduct" for local manufacturers of optical disks

in order to improve the performance of its

domestic industry has helped to focus attention on

the growing problem of piracy of CDs, VCDs, and

CD-ROMs. The U.S. Government recognized this

progress in 2001 by removing Singapore from the

Special 301 Watch List.

e. Thailand

i. Intellectual Property Rights

In recent years, Thailand’s commitment to

effective IPR protection has been uneven, as

evidenced by growing piracy rates and

inconsistent coordination between enforcement

authorities. Despite some progress on the

legislative front in 2000, by the end of 2001, many

key statutes remained pending before the Thai

legislature, including promising legislation on

optical media piracy and the protection of

business trade data. Recognizing the increasing

problem of pirate optical media production in

Thailand, U.S. copyright industries petitioned

USTR in 2001 to suspend or remove Thailand’s

benefits under the Generalized System of

Preferences until such time as the Thai

Government moved to significantly improve IPR

protection. With the expiration of GSP at the end

of 2001, the industry request was suspended. At

such time as GSP is reauthorized, USTR will

further consider the request. The Thai

Government has begun to make progress, but

more remains to be done to ensure sustained

enforcement efforts.

ii. Market Access Issues

Thailand’s applied tariffs are generally higher

than many of its neighbors. As a signatory to the

Information Technology Agreement (ITA),

effective January 2000, Thailand eliminated tariffs

on 153 information technology-related products

pursuant to its obligations. The Thai Government,

however, continues to require that certificates of

origin accompany ITA products through Thai

Customs. Thailand is the only ITA member to

require such certification, a practice that appears

to violate the ITA Agreement. The U.S.

Government has repeatedly raised its serious

concerns about this practice 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 fifteen

percent higher than in 2001, a nine percent

increase in recognition of Cambodia's progress in

reforming labor conditions in textile factories over

the last three years, in addition to the normal

increase in quotas of six percent.

The nine percent increase for 2002 reflects

Cambodia's progress towards ensuring that

working conditions in its garment sector are in

"substantial compliance" with internationally

recognized labor standards and provisions of

Cambodia's labor law, and follows recent formal

U.S.- Cambodian labor consultations. The

International Labor Organization (ILO) also has

two projects underway assisting Cambodia with

the implementation of its labor law.

As in the original agreement, Cambodia will be

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 agreed to increase this

potential quota reward for full compliance from

14 to 18 percent. The United States and

Cambodia will keep working conditions in the 

Cambodian garment sector under ongoing review,
143 BILATERAL NEGOTIATIONS

and will conduct two rounds of labor 

consultations in 2002, as provided for in 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,

concluding a four-year negotiation to normalize

trade relations. Upon implementation, the

agreement grants 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 agreement

also commits Vietnam to sweeping economic

reforms, which will create trade and investment

opportunities for both U.S. and Vietnamese

companies, and will lay the foundation for a new

American relationship with Vietnam.

Under U.S. law, 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 this agreement, and its subsequent

approval by Congress has 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 Agreement

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

Agreement. Congress approved the Agreement on

October 3, 2001 and the President signed the

legislation approving the Agreement on October

16, 2001. The National Assembly of Vietnam

approved the resolution ratifying the Agreement

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 Agreement. Thus,

in accordance with the terms of the Agreement,

NTR tariff treatment for products of Vietnam

became effective on December 10, 2001. 

The trade agreement commits Vietnam to opening

its market and moving toward adoption of WTO

and international norms. The agreement has five

major sections:

1. Market Access for Agricultural and Industrial

Goods. Vietnam has made significant

commitments across a wide range of industries. It

will grant trading rights (the right to import and

export) to all Vietnamese and U.S. persons and

firms; lower tariffs on hundreds of categories of

industrial goods and farm products of interest to

U.S. exporters; phase-out all non-tariff measures;

and adhere to WTO standards in applying

customs, import licensing, state trading, technical

standards and sanitary and phytosanitary

measures.

2. Intellectual Property Rights. Vietnam will

adopt the WTO "TRIPS" standard for intellectual

property protection (e.g., in the area of copyrights,

patents, and trademarks) in 18 months or less, and

will take further measures in several other areas

not covered by the TRIPS Agreement (e.g.,

protection of satellite signals).

3. Market Access for Services. Vietnam will

allow U.S. persons and firms to enter its services

market in a broad array of areas, including

financial services (insurance and banking),

telecommunications services, distribution

services, audiovisual services, as well as other

sectors. These commitments are phased in,

typically within three to five years.

4. Investment. Vietnam will protect U.S.
2002 ANNUAL REPORT 144

investments from expropriation, eliminate its

"Trade Related Investment Measures," and phase

out its investment licensing regime for many

sectors, as well as modernize its investment

regime in other areas.

5. Transparency: Vietnam has agreed to adopt

a fully transparent regime in each of the four areas

above, by publishing all laws, regulations and

rules; submitting them for public comment in

advance; and giving U.S. citizens the right to

appeal rulings made with respect to all such laws

and regulations.

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 “JacksonVanik” 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, the IMF negotiated a

macroeconomic stabilization package with the

Korean Government when the value of the won

depreciated dramatically due to a large outflow of

foreign investment. The stabilization package for

Korea included credit from the IMF, the World

Bank, and the Asian Development Bank.

The stabilization plan focused on: (1)

restructuring the financial and corporate sectors to

make them more market-driven, efficient,

transparent, and open to foreign investment; and

(2) eliminating trade- and competition-distorting

policies. Korea's trade-related reforms included

early elimination of WTO-prohibited export and

domestic content subsidies and the import

diversification program (which prohibited many

Japanese imports) and a reduction in the number

of products subject to tariff adjustments, or

snapbacks. Korea also agreed to liberalize its

import licensing and certification procedures and

to bind its OECD financial services market access

commitments in the WTO. 

The Korean Government made progress on

implementing some of its reform commitments

during the past four years, particularly in the

financial sector, by rationalizing and recapitalizing

its banks, and by consolidating regulatory

authority over the financial sector in a new,

independent Financial Supervisory Commission.

However, 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. Korean authorities are

seeking to further strengthen commercial bank

balance sheets and restructure merchant banks,

investment trust companies and the insurance

industry. 

With respect to changes in corporate practices,

Korea is in the process of implementing

international standards on accounting practices,

including corporate activities on a consolidated

basis, and has provided for the appointment of

outside directors on corporate boards. The rights

of small shareholders have been strengthened,

while restrictions on foreign participation have

been eased and bankruptcy laws have been

strengthened. In 2001, the Korean Government

announced that it would relax restrictions on

corporate ownership and implemented the

Corporate Restructuring Promotion Act, both of

which have raised some concerns on the part of

foreign firms. 

Many of the systemic reforms that President Kim

Dae Jung laid out for Korea have yet to be

implemented. The U.S. Government has noted in

representations to the Korean Government that for

restructuring to be considered meaningful: (1) it

must yield efficient, market-driven companies;

and (2) the process through which it is carried out

must be open, transparent, and treat foreign

creditors equitably, and comport with Korea's

international obligations. 
145 BILATERAL NEGOTIATIONS

The fiscal, monetary, and restructuring policies

laid out by the Kim Administration have

contributed to a resumption of foreign and

domestic consumer confidence in Korea's

economy. In 2000, Korea’s economy grew by

more than 9 percent and growth in 2001 was about

2.6 percent, despite the global downturn. The

United States ran a bilateral trade deficit with

Korea of $12.5 billion in 2000, and the deficit in

2001 is expected to be higher.

Despite their differences over a wide range of

bilateral trade issues, the United States and Korea

cooperated effectively in regional and multilateral

fora. Their cooperative efforts helped lead to the

successful launch of new multilateral trade

negotiations at the Doha Ministerial in November.

b. OECD

In late 1996, the Korean National Assembly

ratified Korea’s accession to the OECD. Given

Korea’s membership in the OECD, the United

States expects Korea to implement its WTO

commitments and to negotiate in the new round of

multilateral trade negotiations as a developed

country, including in the area of agriculture.

 

In addition, the United States underscored the

need for Korean regulations and other rules, and

the officials who administer them, to reflect the

free and open trade and investment policy that

Korean President Kim Dae Jung has embraced. 

Among the specific areas of concern flagged by

the United States in this review were Korean

policies on motor vehicles, pharmaceuticals,

telecommunications, chaebol reform, import

clearance procedures, foreign equity restrictions,

and customs classification and border treatment. 

In September 2000, the OECD Trade Policy

Review Body reviewed Korea’s trade policies. 

The report noted the progress the Korean

Government had made over the past few years in

instituting market-based reforms, which helped

pave the way for the recovery of the Korean

economy following the financial crisis. However,

the United States and Korea’s other trading

partners highlighted areas where additional

progress is required. Among these were Korean

Government policies on privatization and chaebol

reform, motor vehicles, pharmaceuticals,

telecommunications, agriculture, intellectual

property protection, import clearance procedures,

foreign equity restrictions, subsidies, and labor

rules. 

c. 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 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 selfcertification 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 Section 301

investigation and began monitoring the Korean

Government’s implementation of these measures

through formal reviews. 

At the most recent MOU review, held in

September 2001, the United States and Korea held

consultations to assess the progress under the

agreement and to discuss additional steps Korea

will take to implement this agreement. While the

Korean Government has implemented many of the

specific provisions of the MOU, the U.S.

Government remains concerned about the lack of

substantial increases in market access for foreign

motor vehicles in Korea. The share of foreign

vehicles in the Korean market remains at well
2002 ANNUAL REPORT 146

under one percent as a result of high taxes and

tariffs, and continuing anti-import sentiments

among many Korean consumers, as well as

standards and certification issues.

The United States has made specific proposals for

addressing these concerns and achieving further

progress under the agreement. Among these were

proposals for Korean Government action to

improve the generally negative perception of

foreign vehicles among Korean citizens, which are

largely the result of successive Korean

Government policies that discouraged the

purchase of foreign autos. The U.S. Government

also made specific proposals on outstanding

standards and certification, financing, and tax and

tariff issues. 

In November 2001, the Korean Government

reduced one auto-related consumption tax through

June 2002, which may have a positive effect on

foreign auto sales. In addition, 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. President Kim publicly

urged Koreans to buy more foreign products,

including autos, and the Korean Government will

purchase 100 imported cars for its Police Agency

fleet over the next two years. Nonetheless, it has

refused to lower tariffs, despite its own study that

showed that doing so would lead to significant

increases in foreign car sales.

d. Steel

A discussion of the overall situation facing the

steel industry in the United States and the

initiatives of the Administration during 2001 is

contained in Chapter V of this report.

e. Pharmaceuticals

U.S. concerns regarding pharmaceuticals trade

relate to three baskets of issues: (1) listing and

pricing on Korea’s national health insurance

reimbursement schedule, and associated hospital

margins and administrative procedures that limit

the commercial distribution of foreign-made

pharmaceuticals; (2) protection of intellectual

property rights, particularly protection of clinical

data and patents; and (3) regulatory requirements,

particularly on acceptance of foreign and clinical

test data and approval of new drugs.

In 1999, the Korean Government took a number of

steps to address U.S. concerns in this sector. 

Since then, the U.S. Government has been closely

monitoring Korea’s implementation of these

changes. The United States has urged Korea to

take steps to ensure full implementation and

enforcement of the Actual Transaction Price

(ATP) system whereby both imported and

domestically-manufactured pharmaceuticals are

reimbursed without hospital margins (such

margins had previously benefitted only Koreanproduced drugs). The Korean Government has

recently suggested that it is considering changes to

the ATP system and other aspects of its

pharmaceutical pricing system. The U.S.

Government has strongly urged Korea to ensure

that any changes do not undermine the agreements

the two governments have reached on this issue or

lead to a distortion of the incentives needed to

promote innovation and the availability of

innovative pharmaceutical products.

To speed the introduction of innovative drugs into

Korea, the U.S. Government has underscored the

need for Korea to improve market access for

foreign pharmaceuticals by eliminating

requirements for redundant clinical test data in the

drug approval process. USTR also continues to

press Korea to implement international guidelines

by adopting tests for bio-equivalency that are

based on global scientific standards. In addition,

the U.S. Government continues to encourage

Korea to accept foreign clinical test data, and has

urged Korea to apply requirements for bridging

studies based on International Conference on

Harmonization (ICH) and global scientific studies.

f. Intellectual Property Rights

USTR placed Korea on the Special 301 Priority

Watch List in 2000 as a result of serious concerns
147 BILATERAL NEGOTIATIONS

over legal protection and enforcement of

intellectual property rights (IPR). While some

progress has been made, the U.S. Government and

U.S. industry remain concerned about

enforcement by the Korean Government of

Korea’s IPR laws. 

In 2000, the Korean National Assembly passed

amendments to laws on protection of copyrighted

works, including computer programs, which

addressed some U.S. Government concerns, but

outstanding issues remain. The U.S. Government

raised these issues in detail with Korea on

numerous occasions in 2001. It also raised the

failure to provide full protection for pre-existing

copyrighted works as required under the TRIPS

Agreement. 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 test data against

unfair commercial use and disclosure, and on

protection of copyrights. Issues related to Korea’s

WTO consistency must be resolved before

concluding a Bilateral Investment Treaty (BIT). 

The United States also continues to monitor

Korea’s implementation of an amendment to the

Pharmaceutical Affairs Act in January 2000,

which provides for the protection of data

submitted to the Korean Government when the

submitting company requests such protection. 

The U.S. Government also remains concerned

about the lack of coordination between the Korea

Food and Drug Administration (KFDA) and

intellectual property (KIPO) officials, which allow

products that infringe existing patents to be

approved for marketing. 

g. Telecommunications

The Korean Government raised foreign

investment limits in telecommunications services

companies (other than Korea Telecom) from 33

percent to 49 percent in April 1999, 18 months

sooner than its WTO commitment. The limit on

foreign investment in Korea Telecom was

increased from 20 percent to 33 percent in

September 1999, and the Korean Government

announced in September 2000 that it would ask

the Korean National Assembly to revise the

Telecommunications Business Act to increase the

foreign ownership ceiling to 49 percent. The

United States has urged Korea to eliminate all

investment restrictions in this sector, which limit

Korea’s ability to introduce the infrastructure

necessary to develop its telecommunications

sector. 

Continued Korean Government intervention in the

private sector's selection of technologies and

interference with private sector negotiations

involving foreign licensing and tecnology

transfers remained a U.S. concern in 2001. 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 encountered

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 over the past few years. By limiting

competition in the Korean telecommunications

market, the Korean Government also is hampering

the ability of Korean firms to develop state-of-theart, globally competitive products. The U.S.

Government will continue to raise these concerns

with the Korean Government. 

h. 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.
2002 ANNUAL REPORT 148

i. 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 early 2001, the state-run Korea Development

Bank (KDB) issued a special one-year bond

obligation and most of the seven firms which have

received benefits under the program have been

Hyundai affiliates, with the KDB purchases of

Hynix bonds totaling more than $700 million. In

May, Korean state-owned and state-controlled

banks and several investment trust companies

provided additional assistance to Hynix under a

complex refinancing agreement. In the fall, at the

instigation of the partially state-owned Korea

Exchange Bank (KEB), Hynix’s creditors agreed

to a new $4 billion bailout. Still later last year,

the KEB organized yet another $7 billion debt

restructuring package among Hynix creditors and

approximately $500 million in new loans. A

collection of investment trust companies also

apparently rolled over around $900 million in

loans for three years.

The U.S. Government raised its concerns on this

issue at the two regular meetings of the WTO

Subsidies Committee last year. It has drawn

Korea’s attention to its obligations under the

Subsidies Agreement not to provide subsidies that

may cause adverse effects to other WTO Members

and has pointed out the questionable consistency

of these interventions with the spirit of Korea’s

financial and market reform commitments. At the

second meeting, U.S. objections were echoed by

the European Union, while Japan and Singapore

also expressed interest and concern regarding the

situation. In addition, senior U.S. officials have

raised this issue in meetings with officials at the

highest levels of the Korean Government. By

year’s end, Micron had entered into talks with

Hynix to explore the possibilities of a merger or

buy-out arrangement that could result in the

rationalizing the two firms’ chipmaking

operations. The U.S. Government will continue to

watch the situation closely and, if no market-based

solution is found, will take appropriate action.

j. 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 or reduced until the

domestic market share for Korean films maintains

a 40-percent level. 

k. Bilateral Investment Treaty

In 2001, the U.S. Government sought further

progress in negotiations with Korea on a BIT

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 key issues

remain 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. 

l. 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
149 BILATERAL NEGOTIATIONS

efficacy. However, the new regulations are

extremely vague, and as a result, since their

implementation, only 18 U.S. products have been

approved for sale in Korea out of more than 600

applications. The U.S. Government has

repeatedly raised its concerns with Korea and both

the United States and the EU are considering next

steps to resolve this issue. 

m. Agriculture

Beef: To address longstanding impediments to

the entry and distribution of foreign beef, on

February 1, 1999, the U.S. Government requested

WTO dispute settlement consultations. Australia

also requested formation of a panel on Korea’s

beef measures and the U.S. and Australian panels

were eventually joined. Canada and New Zealand

participated in the panel process as third parties.

The U.S. complaint focused on Korea’s: (1)

requirements that imported beef be sold only in

specialized imported beef stores and Korean laws

and regulations restricting the resale and

distribution of imported beef by SBS supergroups, retailers, customers, and end-users; (2) a

discretionary import licensing regime; (3)

imposition of duties and charges in the form of a

markup, which is not provided for in Schedule

LX; and (4) failure to fulfill its WTO reduction

commitment for domestic support.

The United States prevailed in the case against

Korea, with the WTO panel concluding in July

2000 that Korea’s import regime for beef

discriminates against imports of beef from the

United States and other foreign countries. Korea

filed an appeal of the case in September; and in

December 2000 the Appellate Body report

affirmed the key findings of the WTO panel. In

September 2001, Korea passed legislation to bring

its measures into compliance with WTO rules. 

The U.S. Government is continuing to monitor

implementation of the new laws by central and

local government authorities.

In October 2000, the Korean Government passed a

rule of origin requiring that cattle must be in the

United States for at least six months prior to

slaughter in order to be considered U.S beef when

exported to Korea. The requirement was to go

into effect at the beginning of 2001. The U.S.

Government raised strong concerns about the new

requirement and its likely impact on U.S. beef

exports to Korea, a key market for U.S. beef

exporters. Korea agreed to delay implementation

of the new requirement for one year to study U.S.

concerns. On December 2001, the Korean

Government eliminated the residency requirement.

The U.S. Government has also sought changes to

Korean regulations prohibiting the freezing of

meat sold “fresh” or “chilled” or the thawing of

meats sold as “frozen.” Freezing of fresh or

chilled meat is commonly practiced in the United

States and many other markets to ensure product

wholesomeness, especially when the meat must be

transported lengthy distances, and U.S. regulations

allow for freezing of fresh or chilled beef as long

as the meat is properly labeled and appropriately

handled. The Korean Government is reviewing

U.S. regulations regarding this issue and actively

considering changes to its regulations. 

Rice: The Korean Government purchased U.S.

rice for the first time in 2001. In addition, in

December, the Ministry of Agriculture announced

a plan for the stabilization of the rice industry,

emphasizing compensation to farmers for shifting

production to alternative crops, an important first

step toward reform of Korea’s rice market. 

However, the Korean Government continues to

exercise full control over the purchase,

distribution, and end-use of imported rice. The

state trading enterprises that administer the WTOmandated minimum access program continue to

purchase only low-quality Asian rice, as Korean

law forbids the use of imported rice for purposes

other than industrial or processing uses, severely

impeding imports of high quality U.S. rice. 

Oranges: The Cheju Citrus Cooperative, a

Korean producer group, has controlled the

allocation of the in-quota quantity of Korea’s

orange tariff-rate quota (TRQ). In the past, Cheju
2002 ANNUAL REPORT 150

has filled the quota, with most of the imports

coming from the United States. During the past

three years, however, the quota was not filled. 

The United States will continue to actively engage

Korea on this issue to ensure its full compliance

with its WTO obligations on citrus.

Croaker: Korea’s application of prohibitively

high adjusted tariffs to croaker significantly limits

U.S. exports of the fish species to Korea, which is

the largest per capita consumer of croaker in the

world. Only joint ventures with Korean importers

(with a minimum of 49 percent Korean

ownership) are eligible to export croaker to Korea

at a zero tariff rate. Korea’s market for croaker

was closed until 1997, when the Government

introduced a 90 percent adjustment tariff. Since

1997, in accordance with the requirements of its

IMF stabilization package, the Korean

Government has reduced the number of items that

qualify for adjusted tariff protection. Of the

remaining 27 items, however, 14 are seafood

products, including croaker. 

The U.S. Government has urged Korea to

eliminate or reduce its tariff on croaker. The

Korean Government reduced the tariff by 10

percent each year for each of the last three years,

to 70 percent in early 2001. However, in late

2001, the Korean Government failed to include

further reductions for 2002. The United States

will continue to press Korea to phase out these

tariffs. 

Potato Preparations: The Korea Customs

Service’s (KCS) repeated misclassification and

change in border treatment of potato preparations

has hampered U.S. exports of these products to the

Korean market. Potato preparations should enter

Korea in the unrestricted HS heading 2005 with a

current applied tariff rate of 20 percent and a

bound rate of 31.5 percent. Instead, Korea has

been classifying these products in the more

restrictive HS heading 1105 (pure potato), with an

in-quota quantity of 60 metric tons and an overquota tariff rate in excess of 300 percent. The

U.S. Government will continue to urge Korea to

take steps to resolve this issue.

Agricultural Tariffs: In 1999, the U.S.

Government discovered a discrepancy between

Korea’s applied tariff rates on several agriculture

items – peanuts, popcorn, potato flour, potato

flakes, and wheat and soybean meal – and its

WTO bindings and tariff commitments made to

the United States in a 1993 U.S.-Korean Record of

Understanding and a February 1994 exchange of

letters. In February 1999, U.S. Embassy officials

in Seoul brought these discrepancies to the

attention of the Korean Government. The Korean

Government adjusted the in-quota tariff rates of

potato flour, potato flakes, and peanuts effective

January 1, 2000. The U.S. Government will

continue to press Korea to bring duties on the

remaining agricultural products into compliance

with Korea’s WTO and bilateral commitments.

Biotech Labeling Requirements: In July 2001,

the Korean Government began imposing new

mandatory biotech labeling and identity

preservation requirements for processed foods

containing soy or corn products, which are to be

extended to products containing potato products in

mid-2002. These requirements were probationary

until January 13, 2002, when the requirements

were to be finalized and penalties imposed for

non-compliance. 

According to U.S. industry, the requirements are

extremely burdensome and have disrupted U.S.

exports of processed foods. The U.S. and other

foreign governments have repeatedly raised

concerns about the new requirements, including

the documentation requirements, whether the

Korean Government has met its transparency and

notification obligations, and national treatment

and MFN issues.

The U.S. Government is continuing to urge the

Korean Government to consider whether the

requirements appear to be more burdensome than

necessary to achieve the goal of providing

consumers clear information. The U.S.

Government is continuing to urge the Korean

Government to amend the requirements and will

consider further action, as appropriate, to address

this issue.
151 BILATERAL NEGOTIATIONS

n. 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 by: (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; (4) beginning revisions of the

Korean Food and Food Additives Codes, for

example, by bringing Korean pesticide residue

level standards for citrus into conformity with

CODEX standards; and (5) requiring ingredient

listing by percentage for major, rather than all,

ingredients. In 2000, the KFDA issued revisions

to the Food Code, the Food Additives Code, and

Labeling Standards for Food. However,

additional work will be needed to bring Korea’s

Food and Food Additives Codes into conformity

with international standards, specifically those

related to chocolate and food additives.

U.S. firms continue to experience problems with

import clearance in Korea. The U.S. Government

has sought to expand access for a number of

cherry varieties to the Korean market, but the

Korean Government has provided no response to

U.S. proposals for mitigation measures. The

United States will continue to urge the Korean

Government to address this issue. However, the

Korean Government has initiated the domestic

legal process necessary to revise its regulations

and recognize U.S. industry fumigation for shelled

walnuts. Currently, U.S. walnut exporters are

required to conduct redundant fumigation on

walnuts, causing processing delays and

significantly raising costs. 

4. India

a. General

The U.S. and India continued to make progress in

developing a constructive long-term trade

relationship. To this end, in August 2001, U.S.

Trade Representative Robert B. Zoellick was the

first member of President Bush’s Cabinet and the

first USTR to visit India in more than ten years. 

Important events during the year included the

elimination of India’s remaining balance of

payment-related quantitative restrictions and a

U.S. victory in its WTO challenge to India’s

automotive TRIMS regime. However, India

continues to limit market access in various areas,

including through the application of soda ash

import restrictions, minimum reference prices on

steel products and onerous labelling requirements. 

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 (this had been established in the Clinton

Administration). The TPWG will facilitate regular

consultations on the range of trade issues between

the United States and India.

c. WTO Balance of Payments Case

The United States prevailed in its WTO challenge

to India’s Balance of Payments (BOP) trade

regime, leading India to eliminate bans, restrictive

licensing, and other quantitative restrictions (QRs)

on imports of industrial, textile, and agricultural

products for the first time in 50 years. In 1999,

BOP restrictions applied to approximately 15

percent of India’s tariff lines. Virtually all

consumer goods were affected, as were many

agricultural, textile, and petroleum-related

products.

In 1997, during India’s consultation with the

WTO Committee on Balance of Payments

Restrictions, the International Monetary Fund

stated that India no longer had a BOP crisis

necessitating recourse to the GATT BOP

exception. However, India insisted on at least six

years to remove the BOP QRs. Following

unsuccessful settlement talks with India, the

United States initiated dispute settlement

proceedings against India in 1997. The WTO

panel issued its final report in April 1999
2002 ANNUAL REPORT 152

affirming the U.S. contention that these measures

were inconsistent with India’s WTO

commitments. India appealed the decision but the

Appellate Body rejected India’s claim that its

balance of payments situation justified import

restrictions.

On December 28, 1999, the United States and

India reached an agreement to lift these

restrictions. Under the agreement, India

eliminated one-half, or 714, of its 1,429 QRs on

March 31, 2000. Restrictions on the remaining

715 items were eliminated by April 1, 2001. 

Eliminating these restrictions offers new market

access opportunities for U.S. producers in key

sectors such as textiles, agriculture, consumer

goods, and a wide variety of manufactured

products. India had previously reached

agreements with the EU, Japan, and other trading

partners to remove these restrictions by April

2003. The agreement with the United States

advanced that time table by two years.

d. Intellectual Property Rights and the

WTO TRIPS Mail Box

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 to 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 2000, but

remains mired in Committee nearly one year past

its original submission to Parliament. Even

should the bill eventually pass, several provisions

still appear to be inconsistent with the TRIPS

Agreement.

In April 1999, the United States and India

resolved the WTO dispute brought by the United

States regarding India’s implementation of

Articles 70.8 and 70.9 of the TRIPS Agreement. 

Through the enactment of the Patents

(Amendment) Act 1999 and its accompanying

regulations, India established a mechanism for the

filing of so-called "mailbox" patent applications

and a system for granting exclusive marketing

rights for pharmaceutical and agricultural

chemical products.

e. 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.

On 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.
153 BILATERAL NEGOTIATIONS

f. GSP 

In December 1998, the United States accepted the

petition of the American Natural Soda Ash

Corporation (ANSAC) to withdraw, suspend or

limit the application of GSP treatment to Indian

imports. The subcommittee accepted the petition

because of the lack of market access in the Indian

market stemming from the injunction of the Indian

Monopolies and Restrictive Trade Practices

Commission barring ANSAC imports. In India’s

FY1999-2000 budget, it raised the import tariff on

soda ash to 38.5 percent, the highest import tariff

on soda ash in the world. Coupled with other

excise taxes and charges, importers faced levies of

nearly 70 percent at the border. A public hearing

was held on March 23, 1999.

On February 28, 2001, as part of the FY2001-2002

budget, the Government of India announced a

reduction in the duty on soda ash to 20 percent. 

When coupled with reduced excise taxes and

charges, the aggregate border levy was reduced to

about 45 percent. Discussions between the U.S.

and Indian Government on the injunction barring

ANSAC imports (but not imports from individual

ANSAC members) continued in 2001 and are

ongoing.

g. Reference Pricing

In December 1998, three weeks after imposing

antidumping duties on certain steel products, the

Government of India established minimum

reference prices for certain other imported steel

products: hot-rolled steel coils, cold rolled steel

coils, hot-rolled sheets, and alloy steel bars and

rods. Under this regime, India prohibits the

import of these products when the import values

are below the established minimum price. India

had noted that the regime was adopted to

discourage dumping. U.S. industry is concerned

that this practice, which violates India’s

obligations under the Customs Valuation

Agreement, could divert imports to the United

States.

Minimum prices on steel were withdrawn on

January 1, 2000, for primary products but still

apply to secondary merchandise. In the spring of

2000, the Indian steel industry challenged the

Indian Government’s elimination of the regime

for primary products. The Supreme Court of India

reinstated the regime for these products while it

considers the petitioner’s claim. To date, the

Supreme Court has not issued a final decision and

the regime remains in place for both primary and

secondary products. The U.S. Government is

evaluating the appropriate response to this

situation.

h. Other Import Barriers

Throughout the year, USTR and the interagency

community worked with the U.S. Congress and

U.S. industry to address a variety of measures

which impede U.S.-India trade. These measures

include longstanding issues, including high tariff

and non-tariff barriers to the Indian market for

U.S. textile and agricultural products and other,

newer measures that have appeared as India has

eliminated its regime of BOP-related quantitative

restrictions. 

5. People’s Republic of China

Overview

Our China trade policy goals have been to open

China’s markets to American exports, support

Chinese domestic economic reform, and integrate

China into the Pacific and world economies. We

have used a variety of means to achieve these

goals, including commercially meaningful

agreements that create opportunities for

Americans. These efforts culminated in the

accession of China to the WTO in December

2001, which followed the formal approval of

China’s accession agreement by WTO Ministers

at Doha, Qatar, in November 2001, ending 15

years of often intense and difficult negotiations in

which the United States had taken a leading role

among WTO members. 

To realize the full benefits of China’s WTO

accession requires extensive monitoring and
2002 ANNUAL REPORT 154

enforcement. We have put into place a

comprehensive interagency monitoring effort and

are prepared to use our trade laws to secure

compliance, where necessary. China’s status as a

WTO member will provide new means and focus

for U.S. efforts. We will benefit from the

multilateral monitoring efforts mandated by

China’s terms of accession through which we will

be able to work with 142 other WTO members

instead of acting alone when addressing

compliance problems. We can also use WTO

dispute settlement where necessary. 

2001 Activities

In 2001, the United States played a key role in

negotiating the multilateral portion of China's

WTO accession, achieving important concessions

in areas of interest to U.S. firms. Upon China's

accession, an expert group was formed under the

TPSC in Washington and a WTO Coordination

Committee was established within the Mission in

Beijing to monitor China's implementation of its

commitments. The Departments of Commerce

and State continued to devote considerable

resources to building an understanding among the

Chinese of China's WTO obligations.

China’s accession to the WTO in December 2001

was facilitated by two key events, the historic

U.S.-China bilateral market access agreement

reached in November 1999 and the subsequent

enactment in October 2000 of legislation

permitting the grant of permanent normal trade

relations (PNTR) to China. Building upon a

record of bipartisan Congressional support for a

market-opening China trade policy, the PNTR

legislation authorized the President to terminate

application of Section 402 of the 1974 Trade Act

(the Jackson-Vanik Amendment), which had

mandated annual reviews of China’s receipt of

normal trade relations treatment, and to grant

China PNTR treatment if the President could

certify that the final terms of China’s accession

were at least equivalent to those agreed bilaterally

between the United States and China in November

1999. The President issued his report on

certification in November 2001, and his

subsequent proclamation granting PNTR status to

China became effective January 1, 2002.

a. WTO Accession

i. Background

In July of 1986, China applied for admission to

the General Agreement on Tariffs and Trade

(GATT 1947). The GATT formed a Working

Party in March of 1987, composed of all

interested GATT contracting parties, to examine

China’s application and negotiate terms for

China’s accession. For the next eight years,

negotiations were conducted under the auspices of

the GATT Working Party. Following the

formation of the WTO on January 1, 1995, a

WTO Working Party, composed of all interested

WTO members, took over the negotiations.

Like all GATT and WTO accession negotiations,

the negotiations with China had three basic

aspects. First, China provided information to the

Working Party regarding its trade regime. China

also updated this information periodically during

the 15 years of negotiations to reflect changes in

its trade regime. Second, each interested WTO

member negotiated bilaterally with China

regarding market access concessions and

commitments in the goods and services areas,

including, for example, the tariffs on industrial

and agricultural goods and the commitments that

China is making to open up its market to foreign

services suppliers. The most trade liberalizing of

the concessions and commitments obtained

through these bilateral negotiations were

consolidated into China’s Goods and Services

Schedules and now apply to all WTO members. 

Third, overlapping in time with these bilateral

negotiations, China engaged in multilateral

negotiations with Working Party members on the

rules that govern trade with China. The rules

commitments made by China in this area are set

forth in its Protocol of Accession and an

accompanying Report of the Working Party. 

With its accession to the WTO, China is

implementing significant changes to its trade
155 BILATERAL NEGOTIATIONS

regime, at all levels of government. Although it

has been gradually transitioning toward a market

economy from what had been a strict command

economy two decades ago, China has now taken

on the far-reaching obligations of the WTO, a

rules-based system that requires its members to

operate with openness and transparency and

stresses the central role of markets and private

enterprise. 

In order to accede to the WTO, China has

committed to undertake important systemic

reforms, which should facilitate business dealings. 

China has also committed to take concrete steps to

remove trade barriers and open its markets to

foreign companies and their exports from the first

day of accession in virtually every product sector

and for a wide range of services. Supporting these

steps, China has also committed to eliminate or

significantly reduce restrictions on the rights of

foreign companies to import and export goods and

to distribute goods within China, and it has further

committed to rectify numerous trade-distortive

industrial and agricultural policies.

The openness, accountability and changes

required by China’s commitments should

strengthen and accelerate the achievement of

China’s economic reform goals. China’s

ministries and agencies will transition out of their

old role of directing and controlling how and with

whom Chinese enterprises do business.

Increasingly, they will need to focus on the

implementation and enforcement of laws,

regulations and other measures that will help to

promote the smooth functioning of markets. 

Meanwhile, State-owned enterprises will face

greater accountability for their business decisions,

and together with other Chinese enterprises they

will face the full forces of global competition for

the first time.

ii. Systemic Reforms

China committed to implementing broad reforms

in the areas of transparency, notice and comment,

uniform application of laws and judicial review. 

Each of these reforms will strengthen the rule of

law in China and help to address practices that

have made it difficult for U.S. and other foreign

companies to do business in China.

iii. Adherence to Existing Multilateral

WTO Agreements

As a WTO member, China assumes the

obligations of more than 20 existing multilateral

WTO agreements covering all areas of trade, with

only minimal transition periods, where necessary. 

Consequently, China will be taking on the

obligations of the GATT, the WTO agreement that

lays down core principles, such as nondiscrimination and national treatment, that

constrain and guide national trade policies as well

as other WTO agreements, such as those

governing agriculture, sanitary and phytosanitary

measures, technical barriers to trade, trade-related

investment measures (TRIMS), trade-related

intellectual property rights (TRIPS), services

(GATS), subsidies, import licensing, rules of

origin, customs valuation and preshipment

inspection.

iv. China-Specific Trade-Liberalizing

Commitments

China’s accession agreement also includes

numerous China-specific trade-liberalizing

commitments. One of the most significant of

these commitments involves trading rights. Prior

to its accession, China restricted the number of

companies with trading rights, i.e, the right to

import and export goods, and the products that a

particular company can import or export. China

agreed to phase-in trading rights, so that all

enterprises in China and all foreign enterprises

and individuals will have full trading rights within

three years after accession.

Perhaps equally significant is China’s

commitment regarding distribution services. Prior

to its accession, China generally did not permit

foreign companies to distribute products through

wholesale and retail systems in China or to

provide related distribution services, such as

repair and maintenance services. China agreed to
2002 ANNUAL REPORT 156

phase-out these prohibitions over three years,

subject to limited exceptions.

China also committed to the phase-out of tradedistortive non-tariff measures (NTMs), such as

quotas and licenses, covering hundreds of

products. Most of these NTMs must be

eliminated upon accession, while the remainder of

them must be eliminated within three years after

accession. 

China further committed to the elimination of

import monopolies maintained by State trading

enterprises in China on many industrial goods

upon accession. It must also provide full

information on the pricing mechanisms of state

trading enterprises, to limit the mark-up on goods

that they import in order to avoid trade distortions

and otherwise to ensure that their import

purchasing procedures are transparent and fully in

compliance with WTO rules.

China’s accession agreement includes many

provisions directly or indirectly addressing stateowned enterprises. China agreed that laws,

regulations and other measures relating to the

purchase and commercial sale and production of

goods or supply of services for commercial sale by

state-owned enterprises or for use in nongovernmental purposes are subject to WTO rules. 

China also agreed that state-owned enterprises

must make purchases and sales based solely on

commercial considerations, such as price, quality,

marketability and availability, and that the

government will not influence the commercial

decisions of state-owned enterprises. 

In an annex to its accession agreement, China

provided detailed information on the limited

number of products and services subject to price

control or government guidance pricing and the

procedures for establishing prices. China may not

use price controls to restrict the level of imports of

goods or services.

Finally, China committed to non-discrimination in

the treatment of enterprises within its special

economic areas.

v. Tariff Reductions

When China’s Goods Schedule went into effect

shortly after China acceded to the WTO, greatly

increased market access was realized by U.S. and

other foreign companies through cuts in China’s

tariffs on industrial and agricultural goods. 

Although these reductions generally take place

over a period of five years, in almost all instances

most of the reductions took place immediately on

January 1, 2002.

Tariffs on industrial goods of greatest importance

to U.S. businesses were reduced from a base

average of 25 percent (in 1997) to 7 percent. 

More specifically, China agreed to participate in

the Information Technology Agreement, which

requires the elimination of tariffs on computers,

semiconductors and other information technology

products. China’s elimination of these tariffs will

be completed by January 1, 2005. China also

agreed to implement tariff reductions on more

than two-thirds of the 1,100-plus products covered

by the WTO’s Chemical Tariff Harmonization

Agreement. In addition, tariffs on autos were to

be reduced from 80-100 percent to 25 percent (by

July 1, 2006), and tariffs on auto parts were to be

reduced from a base average of 23 percent to 9.5

percent (by January 1, 2006). Tariffs in the wood

and paper sectors were to be reduced from a 1997

average of 18 percent on wood and 15-25 percent

on paper to 5 percent and 7.5 percent,

respectively.

Tariffs on agricultural goods of greatest

importance to U.S. farmers were to be reduced

from a 1997 average of 31 percent to 14 percent.

vi. Services Commitments 

As set forth in China’s Services Schedule, China

committed to the substantial opening of a broad

range of services sectors through the elimination

of many existing limitations on market access, at

all levels of government, particularly in sectors of

importance to the United States, such as banking,

insurance, telecommunications and professional

services. Notably, these commitments represent
157 BILATERAL NEGOTIATIONS

only the minimum level of market access that

China will be expected to make available once it

becomes a WTO member. Nothing in China's

Services Schedule precludes the Chinese

government from applying more liberal measures

that would allow foreign companies to provide

services with even fewer limitations on market

access. 

vii. Enforceability

WTO members established a multilateral review

mechanism at the WTO of unprecedented scope

and authority. This so-called “Transitional

Review Mechanism” operates annually for 8 years

after China’s accession, with a final review in year

10. It requires China to provide detailed

information, to report to Washington on its

implementation efforts, and to give all WTO

members the opportunity to raise questions, in a

multilateral setting, about how China is complying

with its commitments before 16 subsidiary WTO

bodies, which report to the WTO’s General

Council. The General Council then conducts an

overall review each year and may issue

recommendations. 

Normal WTO dispute settlement procedures

remain available to enforce all of the rights of the

United States and other WTO members under the

WTO agreements, including with regard to the

commitments in China’s accession agreement.

viii. Safeguard Mechanisms

Even though the terms of China's accession

agreement are directed at the opening of China's

market to WTO members' industries, China's

accession agreement also includes several

safeguard mechanisms designed to prevent injury

that U.S. or other WTO members' industries and

workers might experience based on unfair trade

practices or import surges.

For 15 years after China’s accession to the WTO,

the United States and certain other WTO members

will continue to have the ability to utilize a special

non-market economy methodology for measuring

dumping in anti-dumping cases against Chinese

companies

China’s accession agreement also includes a

unique, China-specific safeguard provision

allowing a WTO member to restrain increasing

Chinese imports that disrupt its market. This

mechanism applies to all industrial and

agricultural products and will be available for 12

years after accession.

Additionally, the accession agreement includes a

special textiles safeguard, which will be available

for 7 years after accession (until December 31,

2008). This safeguard covers all products subject

to the WTO Agreement on Textiles and Clothing

as of January 1, 1995. 

Finally, the United States (and other WTO

members) will continue to have the rights under

WTO rules to maintain, for example, its export

control policies and to prevent the import of

Chinese goods made with prison labor.

ix. U.S. Monitoring and Enforcement

Efforts

Given China’s importance as a major trading

power and the breadth and complexity of China’s

WTO commitments, the U.S. Government

initiated a comprehensive and coordinated

interagency monitoring effort to ensure that China

complies with its commitments. As part of this

effort, the U.S. Government will be active on

several fronts. In China, State Department

economic officers, Foreign Commercial Service

officers, Foreign Agricultural Service officers and

Customs attaches will gather information and

work with U.S. companies and assist them in

doing business in China. In Washington, an

interagency team of experts, led by USTR,

drawing on the assistance of the U.S. Government

personnel in China as well as trade associations,

chambers of commerce, industry and agriculture

groups and individual companies, will closely

monitor China’s compliance efforts. In Geneva,

USTR and other concerned agencies will also be

active participants in the WTO’s annual
2002 ANNUAL REPORT 158

Transitional Review Mechanism.

Where the U.S. Government finds systemic

problems and potential WTO violations, it will act

quickly to resolve them through all available

mechanisms. It will use bilateral means, including

U.S. trade laws, the WTO’s multilateral

Transitional Review Mechanism and WTO

dispute settlement proceedings, as necessary. This

effort will be greatly enhanced by the placement

of overseas trade compliance officers from the

Commerce Department and other agencies in our

embassies in key trading partners.

b. Agriculture

China's WTO membership is a huge step forward

for the U.S. agricultural community in its long

sought objective to gain direct access to China's

market for U.S. agricultural products and, in

particular, its aim to remove China's remaining

unjustified sanitary and phytosanitary barriers. 

Previously, in 1992, China signed a bilateral

Memorandum of Understanding on Market Access

with the United States, agreeing to remove

unjustified technical barriers to imports of U.S.

agricultural commodities. Although China agreed

to address these issues within one year, access

issues for several products remains limited.

On April 10, 1999, just months before finalizing

their November 1999 bilateral WTO agreement,

the United States and China signed an Agreement

on U.S. - China Agricultural Cooperation (ACA),

which eliminated technical barriers in China to

imports of U.S. citrus, meat and poultry, wheat,

and other grains. The signing of this agreement

facilitated and greatly enhanced the strong

positive support for PNTR by the agricultural

community. While trade to China has increased

for U.S. citrus, grains, red meat and poultry under

the 1999 ACA, China's compliance with this

agreement has been inconsistent and U.S.

exporters still do not have the access envisioned in

the agreement. While China agreed to recognize

the U.S. inspection system for meat and poultry,

for example, it has erected new barriers to poultry

imports with new regulations (issued December 1,

2000), which it eventually revised and

republished in February 2001. China's regulatory

stance on poultry was primarily intended to deal

with a long-standing smuggling problem. But, the

result was to impose confusion and raise concerns

among traders. Most recently, in late 2001, China

insisted that imported U.S. chicken paws carry a

"Certificate of Wholesomeness" declaring them to

have been inspected and found fit for human

consumption by the Food Safety and Inspection

Service, requiring the U.S. poultry industry to

modify processing plant operations. 

In the 1999 ACA, China also agreed to remove

phytosanitary barriers to citrus exports from

Arizona, California, Florida and Texas over a

two-year phase-in period. While it implemented

the first tranche on schedule, China delayed

implementation for remaining counties in

California and Florida three months beyond the

October 2000 deadline, finally implementing the

agreement for those counties on January 18, 2001. 

 China has not responded to the February 2001

Animal and Plant Health Inspection Service’s

request to add five more counties (one in

California and four in Florida) to the export list

for China.

China also agreed to remove phytosanitary

barriers to wheat and other grains from the Pacific

Northwest beginning April 1999. In marketing

year 2000/2001, wheat shipments from the Pacific

Northwest totaled 233,000 tons, but China

periodically detained U.S. wheat shipments,

subjecting them to unwarranted special handling

requirements and other actions not consistent with

the ACA. As of November 2001, 142,000 tons of

sales have been made, 120,000 tons of which have

already been exported. No U.S. wheat is

currently detained. 

Bilateral negotiations on remaining sanitary and

phytosanitary issues continue, with barriers still in

place on plums, additional varieties of apples,

potatoes and pears.

With its accession to the WTO, China took on the

obligations of the WTO Agreement on
159 BILATERAL NEGOTIATIONS

Agriculture. China also made several additional

commitments that will help to rectify numerous

agricultural policies upon accession or after

limited transition periods. For example, China

committed to eliminate export subsidies upon

accession, and it has agreed to a cap for trade and

production-distorting domestic subsidies that is

lower than the cap permitted developing countries

and that includes the same elements that

developed countries use in determining whether

the cap has been reached. In addition, China

committed to implement tariff-rate quotas that

provide significant market access for bulk goods

of special importance to American farmers such as

grains, soy oil and cotton upon accession. China

also agreed to eliminate import monopolies

maintained by State trading enterprises on

agricultural goods such as wheat, rice and corn

and to permit non-State trading enterprises to

import them.

c. Intellectual Property Rights

For more than a decade, the United States and

China have engaged in detailed discussions

regarding the improvement of China’s protection

of intellectual property rights and market access

for products with intellectual property rights

protection. In January 1992, the United States and

China reached an agreement on improved

protection for U.S. inventions and copyrighted

works, including computer software and sound

recordings, trademarks, and trade secrets. This

Agreement focused principally on revisions to

China’s laws and membership in international

intellectual property rights agreements, including

the Berne Convention for the Protection of

Literary and Artistic Works, the Universal

Copyright Convention, the Geneva Phonogram

Convention, the Patent Cooperation Treaty, and

the Madrid Protocol on the Protection of Marks. 

Although China improved the legal framework for

intellectual property rights protection based on the

1992 bilateral agreement, enforcement of those

laws was seriously deficient. In 1995, the United

States and China reached a second agreement that

focused on intellectual property rights

enforcement and market access issues. 

Based on our 1995 IPR Agreement and the

Administration’s continuing bilateral efforts,

China has developed a basic infrastructure for the

protection and enforcement of intellectual

property rights. Implementation of our bilateral

intellectual property rights agreements provided a

basis for China’s commitment to implement the

WTO Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPS) upon

accession to the WTO. Additional improvements

to China’s laws and training of judges and

enforcement personnel are essential. U.S. and

Chinese rights-holders can seek administrative and

judicial remedies for infringement of their

intellectual property rights; however,

administrative sanctions need to be increased and

the threshold to initiate criminal investigations

needs to be lowered. China has formally issued a

decree to address the “end-user” computer

software piracy issue in connection with

government purchase and use of legitimate

software.

As a result of intensive bilateral implementation

and enforcement negotiations in 1996, China has

made further progress on enforcement of

intellectual property rights. For example, Chinese

authorities have shut down over 100 illegal CD,

CD-ROM and VCD production facilities. This

effort has changed China from an exporter of

pirated material to being the import target for

pirated product from other countries in the region. 

China also is improving customs enforcement of

intellectual property rights. Each year customs

authorities seize millions of pirated CDs, CDROMs and VCDs. Since the importation of

pirated product has been on the increase, we have

encouraged enhanced cooperation with regional

customs authorities, such as those in Hong Kong

and Macau, Vietnam and others, to stop this trade

in pirated product.

Under our bilateral agreements, market access for

computer software, motion pictures, videos and

sound recordings have improved. China has also
2002 ANNUAL REPORT 160

made further commitments on market access in

the context of our November 1999 bilateral WTO

agreement, which have now been incorporated

into China’s accession agreement.

i. Further Steps to Improve Protection

for IPR and Market Access

China’s last major revisions to its intellectual

property rights laws and regulations occurred after

the 1992 Bilateral Agreement. Based on its

experience in implementing its intellectual

property rights laws, Chinese authorities have

revised the copyright, patent and trademark laws

and are taking further steps necessary to comply

with the requirements of the TRIPS Agreement. 

The United States has also urged China to do a

comprehensive amendment to its copyright laws to

implement two copyright-related agreements

negotiated under the auspices of the World

Intellectual Property Organization (WIPO) that

China has signed but not yet ratified.

Chinese enforcement of copyrights and

trademarks is still uneven from province to

province. Guangdong province, for example, has

significantly increased sanctions against piracy

and counterfeiting. We are encouraging the

national government and/or the other provinces to

do likewise. Of concern is the unauthorized use of

software by private enterprises (end-user piracy). 

Piracy rates of entertainment software (game

compact discs) and other audiovisual products are

also very high. Although strong steps have been

taken to address the production of pirated

software, CDs and VCDs, far too many pirated

products remain available at the retail level. 

Trademark counterfeiting in China has worsened

considerably. During recent discussions we have

also raised the growing problem with trademark

counterfeiting, particularly in the area of

consumer goods, protection for unregistered wellknown trademarks and effective enforcement

against counterfeiters. In part to address these

concerns, the Chinese launched a nationwide anticounterfeiting campaign in October 2000. The

results are as yet inconclusive. 

Access for foreign sound recordings has

improved, but restrictions on distribution remain a

key concern. Although imports of foreign video

titles have increased rapidly, the Chinese still

impose an unofficial quota on foreign motion

pictures that are distributed on a revenue-sharing

basis. China maintains this limit through a stateowned import monopoly. 

China committed in its November 1999 bilateral

WTO agreement with the United States to

increase market access for the audiovisual sector,

and these commitments were subsequently

incorporated into China’s accession agreement. 

China will allow foreigners to distribute videos,

entertainment software and sound recordings

through joint ventures, and will allow the

importation of 20 motion pictures annually on a

revenue sharing basis.

ii. WTO Agreement on Trade-Related

Intellectual Property Rights

With its acceptance of the TRIPS Agreement

when it acceded to the WTO, China took on the

obligation to adhere to internationally accepted

norms to protect and enforce the intellectual

property rights of U.S. and other foreign

companies and individuals in China. In 2001, as

part of its efforts to comply with the TRIPS

Agreement, China was in the process of modifying

the full range of intellectual property laws and

regulations, including those relating to patents,

trademarks, trade secrets, integrated circuits and

copyrights. In addition, provisions in its accession

agreement require China to strengthen the

enforcement of these laws and regulations by its

courts and the responsible administrative agencies.

d. 1992 Market Access Agreement

The United States and China signed a

Memorandum of Understanding on Market Access

in 1992. This Agreement committed China to

changes in its import regime over a five-year

period, including increased transparency,

elimination of quotas and licenses, a guarantee

that no trade law or regulation could be enforced
161 BILATERAL NEGOTIATIONS

unless published, uniform application of trade

rules, elimination of import substitution policies,

and agreement that any sanitary and phytosanitary

measures would be based on sound science. 

While China phased-out formal measures, such as

certain quotas and licenses, serious problems

remained during 2001 as China continued to

restrict imports by retaining non-uniform

application of trade rules, import substitution

policies and use of sanitary and phytosanitary

(SPS) standards. 

China’s accession agreement includes these same

commitments as well as many additional ones.

Consequently, the commitments made by China in

the 1992 Memorandum of Understanding have

been, in effect, multilateralized, and therefore the

United States will no longer be alone in seeking

compliance from China.

e. Satellite Launch Services

The 1989 Bilateral Agreement on International

Trade in Commercial Launch Services with China

was extended in 1995 to cover the period through

2001. The Agreement was intended to balance the

interests of the U.S. satellite and commercial

space launch industries, while encouraging free

trade by allowing China to enter the international

market for commercial space launch services in a

fair and non-disruptive manner. The extended

Agreement continued quantitative and pricing

disciplines established under the earlier

Agreement. The Agreement also specifically

provided that nothing in the Agreement limited the

operation of U.S. export control laws.

In March 2001, the government of China hosted a

delegation from the United States for

consultations under the terms of the Agreement. 

The consultations included an exchange of

information on the commercial satellite launch

market and new developments in China's

commercial space program as well as a review of

the implementation of the Agreement. 

The Agreement expired, pursuant to its terms, on

December 31, 2001. No determination has been

made regarding any future arrangement with

China governing international trade in commercial

launch services. 

6. Japan

The United States redoubled its efforts in 2001 to

promote deregulation and structural reform,

improve market access for U.S. goods and

services, and support the adoption and successful

implementation of pro-competitive policies

throughout the Japanese economy. The United

States has been encouraged by positive trends in

corporate restructuring and Prime Minister

Koizumi’s determination to “promptly and

swiftly” carry out regulatory reform. Nonetheless,

the Japanese economy continues to underperform

largely as a result of structural rigidities, excessive

regulation, and market access barriers. Over the

past year, the U.S. Government and the

Government of Japan have addressed concrete

steps for Japan to further open and deregulate its

markets. These measures will help Japan

revitalize its economy and generate sustainable

economic growth in the medium and long-term. 

The United States also relied on a wide range of

regional and multilateral fora in 2001, including

the WTO and APEC, 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.

The highlights of our 2001 bilateral and

multilateral trade agenda with Japan follow.

Overview of Accomplishments in 2001

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 2001. The most significant step

forward was the launch of the U.S.-Japan
2002 ANNUAL REPORT 162

Economic Partnership for Growth (the

Partnership) by President Bush and Prime

Minister Koizumi in June 2001. The main

objective of the Partnership is to promote

sustainable growth in both countries by addressing

such issues as sound macroeconomic policies,

structural and regulatory reform, financial and

corporate restructuring, foreign direct investment,

and open markets. A key feature woven into the

various components of the Partnership is the

opportunity for the U.S. and Japanese private

sectors to be more fully integrated in our bilateral

economic work. This has been done to help

cultivate creative solutions to the economic and

trade challenges facing our two countries and

nurture stronger private-sector support for proreform policies. While regulatory and structural

reform remains of paramount importance, the

United States and Japan will also address new and

lingering trade issues in a variety of sectors. 

The following provides a brief description of each

component of the Partnership along with 2001

accomplishments:

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 first meeting in October

2001, participants covered a range of issues,

including the problem of non-performing loans in

Japan and bilateral cooperation on terrorism. The

next meeting is expected in early 2002, coincident

with the first meeting of the Private

Sector/Government Commission, which is

described below.

Private Sector/Government Commission: The

“Commission,” which is led by USTR and the

Department of Commerce, 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 will meet annually with the Subcabinet to

discuss issues of key importance to both countries. 

The first meeting will convene in early 2002 to

address the topic “Creating an Environment for

Sustainable Growth: Raising Productivity and

Corporate Revitalization” and will focus on

corporate restructuring. 

Regulatory Reform and Competition Policy

Initiative: Co-chaired by USTR and MOFA, the

“Regulatory Reform Initiative,” which is detailed

further in section 1 below, aims to promote

economic growth and open markets by focusing

on sectoral and cross-sectoral issues related to

regulatory reform and competition policy. In an

effort to create a new, constructive tone in the

U.S.-Japan bilateral trade and economic

relationship, the United States has made a

concerted effort to focus on issues that Prime

Minister Koizumi and his Administration have

identified as important areas for reform, such as

information technologies, telecommunications,

medical devices and pharmaceuticals, energy, and

competition policy. Working Groups met

throughout the fall of 2001, setting the stage for a

High-level Officials Group meeting in early 2002. 

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

Department of State and Japan’s Ministry of

Economy, Trade, and Industry (METI), the first

“Investment Group” met in October 2001 in

Washington just prior to the Subcabinet meeting. 

Key topics discussed included recent

developments related to FDI in the United States

and Japan, while investment issues to be taken up

in 2002 include mergers and acquisitions, and tax,

labor and land policy.

Financial Dialogue: The Financial Dialogue

serves as a forum for the 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. As
163 BILATERAL NEGOTIATIONS

appropriate, the report to the leaders under the

Regulatory Reform Initiative will include progress

in financial sector liberalization achieved under

this Dialogue. The first meeting was held in

November 2001 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, including those related to the

manufacturing, services, and agricultural sectors. 

It will also serve as an "early warning" mechanism

to facilitate resolution of emerging trade

problems. The first meeting of the Trade Forum,

which will meet at least annually, is expected to

take place in early 2002.

Fourth Joint Status Report

In June 2001, the United States and Japan issued

the Fourth Joint Status Report under the Enhanced

Initiative on Deregulation and Competition Policy

(the Enhanced Initiative), the precursor to the

Regulatory Reform Initiative. Japan agreed to a

number of important deregulation measures in the

report, and notable achievements were made in

various sectors, including telecommunications,

information technology, energy, medical devices

and pharmaceuticals, financial services, and

housing. Important 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. (The deregulation measures

undertaken in these sectors and areas are

highlighted in the Regulatory Reform section

below.) The two Governments affirmed in the

Fourth Joint Status Report their determination to

build upon the progress achieved under the

Enhanced Initiative through the Regulatory

Reform Initiative. 

Automotive Consultations

A third significant accomplishment in 2001 was

the creation of the Automotive Consultative

Group (ACG) 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 Bush Administration is

committed to addressing the U.S. auto and auto

parts industries’ concerns related to Japan, and the

ACG will serve as the focal point for addressing

lingering as well as 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. 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 is expected to take place in the

first half of 2002.

In addition to meetings under the Automotive

Consultative Group, the United States has

continued to address cross-cutting issues

impacting the automotive sector under the

Partnership. This has included expanding

opportunities for foreign investment, increasing

transparency, and promoting corporate

restructuring in the Japanese economy.

a. Regulatory Reform

A key component of the Partnership, the

Regulatory Reform and Competition Policy

Initiative, is designed to further deregulate the

economy, and to bolster competition and open

markets in Japan. It focuses on five key sectors:

telecommunications, information technologies,

energy, medical devices and pharmaceuticals, and

financial services. The Initiative also addresses

five important cross-cutting structural areas: 

competition policy, transparency and other

government practices, legal system and

infrastructure reform, commercial law, and

distribution.

In October 2001, the United States presented
2002 ANNUAL REPORT 164

Japan with 47 pages of recommendations under

the Initiative, which called on Japan to adopt bold

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. Further, to create a

more constructive tone in the U.S.-Japan bilateral

trade and economic relationship, the United States

made a concerted effort to focus on issues that

Japan has identified as priorities for reform. 

Another important feature of this Initiative is

integration of the private sector into the work of

the two Governments. Working Groups meeting

in November and December of 2001 included

presentations from private sector officials, who

offered their expertise, observations, and

recommendations on key issues. 

The October 2001 recommendations presented to

Japan will serve as the basis for bilateral

discussions over the coming year in a High-level

Officials Group and the various Working Groups

established under the Regulatory Reform

Initiative. These discussions will in turn serve as

the basis for an annual report to the President and

Prime Minister in 2002 specifying the progress

made under this Initiative, including specific

measures to be taken by each Government. 

As mentioned above, the Regulatory Reform

Initiative was preceded by the Enhanced Initiative

and the deregulation achievements obtained

during 2001 under the Enhanced Initiative were

included in a Fourth Joint Status Report. This

report was endorsed by President Bush and Prime

Minister Koizumi in June 2001. Highlights of

these achievements, together with key reform

recommendations submitted this year to Japan

under the Regulatory Reform Initiative are as

follows: 

i. Sectoral Regulatory Reform

Telecommunications: The inability of

competitive telecommunications carriers to

dislodge Nippon Telegraph and Telephone (NTT)

from its control of 99 percent of subscriber lines

and 60 percent of mobile customers has hampered

access by residential and business users to

innovative, low-cost services. The difficulties in

establishing new competitive services in turn have

restricted growth and investment in Japan’s $130

billion telecommunications market, the world’s

second largest. 

In the Fourth Joint Status report, Japan agreed to

implement effective dominant-carrier regulation in

all sectors of the telecommunications market in

order to ensure that NTT’s control does not

impede competition. Regulations to implement

“asymmetric regulation” over the mobile market

and other improvements to regulation over

essential wireline facilities enacted by the Diet in

June 2001 took effect in November. These

regulations added safeguards to prevent NTT from

discriminating against competitors in favor of

group companies, and will provide a basis for

corrective measures to ensure cost-based

interconnection to the network of the dominant

mobile carrier, NTT DoCoMo. The regulations

also will help competitors gain access to NTT’s

optical fiber, rights of way, switching offices, and

other facilities, as well as to wholesale rates for

services provided by NTT. The regulatory

reforms were supplemented by guidelines written

jointly by Japan’s telecommunications ministry

and the Japan Fair Trade Commission (JFTC) to

clarify anticompetitive and other behavior that is

proscribed by the Antimonopoly Act and the

Telecommunications Business Law. In addition,

Japan is developing guidelines to ensure that

market entry by NTT East and NTT West into

Internet or other services does not impair

competition. Japan also will eliminate

unnecessary regulations for carriers which do not

possess market power in order to promote

competitive services and new entrants. These

reforms ease the regulatory burden facing new

entrants by eliminating some filing tariffs and

contracts and shifting from an approval system to

a notification system for some filings. 

In the Fourth Joint Status Report, Japan also

agreed to ensure the fair, non-discriminatory and

transparent provision of access to rights of way for
165 BILATERAL NEGOTIATIONS

carriers, facilitating their ability to build out their

networks. Japan enacted some other measures to

ensure cost-based access to NTT’s fiber optic

cables. Further, Japan will continue to reduce

interconnection rates through the introduction of

an appropriate costing methodology, improve the

existing interconnection pricing model, and in the

case of mobile interconnection, ensure that tariffs

for NTT DoCoMo are publicly disclosed and

reflect costs. In addition, Japan will ensure that

any universal service funding mechanism is

limited to basic voice services, open to

competitors, and based on a cost model reflecting

an efficient operator. In recognition of the need

for an impartial dispute resolution function, Japan

also set up the structure for a commission to

handle disputes between carriers, which is a

positive step towards fully separating regulation

from the government’s industrial promotion

policies. These steps will clearly improve

opportunities for access by U.S. firms to Japan’s

telecommunications sector because they begin to

rebalance the overwhelming advantages NTT has

had in its monopoly position in favor of new

entrants, who have invested billions of dollars in

new networks but have had little success in

capturing significant market share. The added

flexibility new entrants will gain in quickly

introducing new services should accelerate

innovation and price competition which is

essential to stimulating overall growth in the

telecommunications, information technology, and

other key sectors.

In its October 2001 Regulatory Reform

submission, the United States urged Japan to build

on the progress achieved in the past year and

complete the process of instituting and

implementing a pro-competitive regime. The

United States provided several recommendations

to achieve this goal, including the establishment of

a strong, independent regulator, divestiture of the

government’s shares in NTT, and the

strengthening and implementation of dominant

carrier regulation. Moreover, the United States

called on Japan to continue reducing rates and to

correct a sometimes skewed pricing structure that

prevents new entrants from offering profitable

services over the NTT network, and to fully

evaluate whether a universal service subsidy

program is necessary. In addition, the United

States recommended that Japan eliminate

unnecessary filing and reporting requirements and

further facilitate access to infrastructure for

competitive carriers, as well as expand the resale

and unbundling of services and facilities to

promote new competitive services. The first

meeting of the Telecom Working Group took

place in December 2001. 

Information Technologies: Japan has recently

embarked on an ambitious plan to become a global

leader in information technologies (IT), which

includes plans to revise laws for the digital age

that will further facilitate electronic commerce. 

Even so, development of the Internet and

electronic commerce in Japan lags behind other

developed countries. As Japan responds to the

challenges that lie ahead in this pivotal sector, the

U.S. Government is working with Japan to

promote a thriving IT sector that will provide

significant opportunities for U.S. firms and their

leading technology products in a market that is

expected to reach nearly $136 billion by the end

of 2004. 

IT sectoral issues and problems were raised for the

first time in conjunction with the

Telecommunications Working Group under the

fourth year of the Enhanced Initiative on

Deregulation and Competition Policy, and in

expert-level talks which took place in March

2001. To promote growth in its IT sector, Japan

agreed in the Fourth Joint Status Report to take

steps to strengthen the protection of intellectual

property rights on the Internet by expeditiously

ratifying the WIPO Performances and Phonograms

Treaty, which would protect the rights of

performers and producers of phonograms online. 

In addition, Japan will continue discussions with

the U.S. Government to implement legislation in

Japan so as to adequately and effectively protect

copyright and related rights, and provide clear-cut

Internet Service Provider (ISP) liability rules, as

well as to ensure that temporary copies and

business method patents are adequately protected
2002 ANNUAL REPORT 166

under Japanese law. Moreover, Japan will

promote the growth of electronic commerce with

privacy legislation that protects personal

information and facilitates paperless transactions

by considering the amendment of existing laws

and regulations which hinder the development of

e-commerce. Japan also agreed in the Fourth Joint

Status Report to promote electronic government

procurement by creating a consolidated database

for that purpose and introducing electronic

bidding for public works projects. Japan also will

work closely with the U.S. Government on

network security issues. 

A separate IT Working Group was established

under the Regulatory Reform Initiative in June

2001. The primary focus of this working group is

to work with Japan to establish an environment

that will promote the development of IT-related

businesses and innovative information

technologies that can be utilized to spur growth in

other key sectors of the economy and help Japan

return to sustainable growth. In its October 2001

Regulatory Reform Initiative submission, the

United States made several recommendations

which 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 proposals for

cooperative efforts in the areas of electronic

education, the promotion of electronic commerce

and IT in the private sector, and network security.

Specifically, the United States called on Japan to

establish a legal framework that is appropriate for

the digital age and strengthens the protection of

intellectual property, particularly on the Internet,

including the need for clear-cut and balanced ISP

liability rules. Moreover, the United States made

several recommendations for online privacy,

consumer protection, and the facilitation of

electronic transactions, including in government,

which can spur greater use of IT and electronic

commerce in the private sector and increased use

of U.S. IT-related products and services. The

United States conveyed these recommendations in

detail during the first round of talks of the IT

Working Group, which took place in November

2001. 

Energy: With the highest energy prices in the

OECD, Japan has taken steps in recent years to

deregulate both its gas and electricity sectors. In

2000, for example, Japan opened 28 percent of its

electricity market to competition, permitting largelot customers to choose their electricity supplier. 

Despite these efforts to deregulate, the Japanese

electricity market remains dominated by 10

vertically integrated regional utilities. As of

August 2001, new entrants commanded a meager

0.39 percent of the newly liberalized portion of

the electricity market. The gas sector has seen

limited new entry as well. As a result, Japan’s

energy sector remains less efficient than it should

be, innovation has been stifled, and new entry by

domestic and foreign companies continues to be

minimal.

In the fourth year of the Enhanced 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, while 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. To address these

problems, Japan agreed in the Fourth Joint Status

Report to promote open access to its electricity

transmission grid by monitoring the transparency

and neutrality of wheeling services and by

conducting an audit of utility accounts to assess

whether wheeling tariffs are just and appropriate. 

In addition, Japan agreed to foster fair and

transparent treatment of new entrants’ requests for

transmission capacity expansion, and to facilitate

new entry into electricity and gas markets through

such means as consultations with potential market

entrants and studies of existing regulatory

requirements for siting new generating units,

transmission lines, gas pipelines and LNG

facilities. Japan also agreed to fully implement

and enforce measures intended to ensure fair,

open, and non-discriminatory access to its gas

transportation services. Furthermore, Japan said it

would actively enforce its Antimonopoly Act
167 BILATERAL NEGOTIATIONS

(AMA) and relevant guidelines to promote access

to electricity and gas markets, and conduct

evaluations of the progress of electricity and gas

market liberalization by 2003.

Building on progress achieved in the Fourth Joint

Status Report, the United States made numerous

energy sector recommendations in October 2001

under the Regulatory Reform Initiative. Initial

working-level meetings were held a month later in

Tokyo, where the United States recommended that

Japan adopt numerous reforms measures to further

liberalize its energy sector. The United States, for

example called on Japan to articulate concrete

measures to promote independence of the energy

sector regulatory authorities in METI and define

specific policy goals for the energy sector reform

process. The United States also recommended

that Japan take steps to promote equal access to

transmission and retail services for all market

participants, establish guidelines to determine the

need for transmission construction, and promote

construction between electricity service areas. In

addition, the United States suggested that Japan

expand transmission infrastructure in the gas

sector, and promote a competitive gas and LNG

market through unbundling and transparency of

usage charges and information.

These reforms are designed to foster Japan’s

economic recovery, help U.S. firms compete in the

Japanese electric and gas markets, and create new

opportunities for competitively priced, highquality exports to the Japanese market for

electrical generation equipment.

Medical Devices and Pharmaceuticals:

Continued over-regulation, inefficiencies, and a

misguided focus on short-term budget savings

have slowed the introduction of innovative and

cost-effective products into Japan’s medical

device, pharmaceutical, nutritional supplement,

and health care delivery sectors. Increasing the

availability of these products is key to helping

Japan meet the challenge of providing increased

quality health care to its aging population while

containing overall health care costs.

In the Fourth Joint Status Report, Japan agreed to

take twenty-four 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. Importantly, Japan agreed to

ensure that its reform of medical device and

pharmaceutical pricing systems would result in

appropriate valuations for innovative products. 

The U.S. Government is very concerned, however,

that severe fiscal and political pressures are

leading Japan to undertake pricing reforms that

will contravene its Enhanced Initiative

agreements. The United States is actively

engaging Japanese officials at all levels to ensure

that Japan does not implement reforms that

arbitrarily target U.S. products for price

reductions.

Although pricing issues have become a source of

trade friction, issues relating to the regulatory

approval of medical devices and pharmaceuticals

are moving forward. Consistent with its Enhanced

Initiative agreements, Japan has taken 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. Japan

also implemented a new system to allow

nutritional supplement manufacturers to make

health benefit claims. Lastly, Japan relaxed

regulations governing advertising by hospitals to

allow for more comprehensive service information

to be offered to patients.

Building on these steps, the United States in its

October 2001 Regulatory Reform Initiative

submission proposed that Japan: 1) introduce

competitive market forces and pursue structural

reforms by improving public access to medical

information and expanding the roles of private

companies in hospitals and nursing care facilities;

2) encourage the introduction of innovative

medical devices and pharmaceuticals and ensure

that these products receive timely and appropriate
2002 ANNUAL REPORT 168

valuations; 3) continue to expedite regulatory

approvals of medical devices and pharmaceuticals,

particularly for products that are available in other

countries; 4) continue to work within the

International Council on Harmonization process to

promote broader use of foreign clinical data and

facilitate more efficient utilization of Japan’s

clinical trial system; and 5) further deregulate the

sale of nutritional supplements. The United States

elaborated on these recommendations at the first

meeting of the Medical Devices and

Pharmaceuticals Working Group, which met in

November 2001. 

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.

In mid-2001, the Financial Services Agency (FSA)

announced a package of securities market reforms,

including the prohibition of broker churning. 

October brought the long-awaited introduction of

defined contribution pensions, the removal of the

ban on corporate holding of their own stock

acquired through buy-backs, and the introduction

of safe-harbor rules to reduce insider trading and

market manipulation. In April 2001 Japan

increased the access of investment advisory

companies to fund management of public pension

funds by allowing funds to be managed through a

direct, on-shore trust arrangement, and by

eliminating the requirement to convert investment

holdings to cash when changing fund managers. 

To improve the transparency and predictability of

the regulatory process, the FSA has initiated a

system of response to written inquiries, including

requests for published guidance and “no-action”

letters. Banks were granted limited entry into the

insurance business in April 2001, and further

removal of restrictions on banks' insurance

activities is under consideration. In January 2002,

the FSA will submit legislation eliminating the

requirement for physical certificates for Japanese

government bonds (JGBs) and corporate

debentures. This follows legislative action in

2001 to eliminate a similar requirement for

commercial paper effective April 2002. The FSA

has also announced its intention to allow

exchange-traded funds (ETFs) based on foreign

stock price indices.

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 through direct onshore trust

arrangements without the requirement to convert

asset positions into cash before changing asset

managers on terms similar to those now in use for

public pensions; (2) granting regulatory approval

to prototype plans for defined contribution

pensions; (3) eliminating the requirement for

physical certificates for privately placed fixed

income securities and investment trusts; (4)

permitting multiple classes of shares for

investment trusts; (5) requiring full mark-tomarket accounting for all investment trusts; (6)

revising the E-Notification Law to include lenders

subject to the Moneylending Business Law; and

(7) studying the feasibility of increasing electronic

record-keeping and notification.

These issues were discussed in November 2001 in

the inaugural meeting of the U.S.-Japan Financial

Services Working Group. The Working Group is

one component 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.”
169 BILATERAL NEGOTIATIONS

Housing: Japan’s $40 billion home building

materials market is the second-largest in the

world. Numerous restrictions on building size

and design and the traditional emphasis on new

housing versus maintenance and renovation have

impeded market access for foreign building

products and systems designs, limiting choice for

consumers, and driving up housing costs.

In the Fourth Joint Status Report, Japan agreed to

address these problems through several measures. 

Specifically, Japan will cooperate with the private

sector to create a standard appraisal system for

resale housing that accurately reflects the value of

maintenance and renovation. Japan also will

remove or significantly limit key financial

disincentives associated with the purchase of used

homes, such as permitting longer repayment

periods for higher quality resale detached homes

and extending the reduction from five percent to

three-tenths percent for registration taxes on sales

of existing homes. In addition, Japan pledged to

cooperate and work with the U.S. Government to

obtain recognition of the equivalency of the U.S.

standards system for grading and certifying wood

products, and to accept that Oriented Strand Board

is functionally equivalent to plywood. Moreover,

Japan will also continue to review with the United

States its implementation of performance-based

building codes through various bilateral fora. 

This particular on-going review will address

serious U.S. concerns about Japan’s use of

performance criteria, transparency and testing

methodologies, which impede the use in Japan of

building materials and systems commonly used in

the United States and elsewhere.

In June 2001 the United States and Japan also

agreed in the Fourth Joint Status Report to

continue future technical discussions on issues

related to performance-based codes,

implementation of test methodologies and

procedures in evaluating fire resistance and other

housing/wood product-related issues in the Wood

Products Subcommittee, the Building Experts

Committee, and Japanese Agricultural Standards

(JAS) Technical Committee. The Building

Experts Committee and the JAS Technical

Committees met in Ottawa in September 2001 and

discussed progress in implementing a number of

measures announced in the Fourth Joint Status

Report related to housing/wood products,

including Japan's implementation of performancebased building codes. In October 2001, the U.S.

Government held additional discussions with the

relevant Japanese ministries on this issue and on

the issue of equivalency for the U.S. standards

system for grading and certifying wood products. 

Subsequently, the U.S. Government submitted to

the Ministry of Agriculture, Forestry and Fisheries

(MAFF) the remaining information necessary for

MAFF to make a positive determination on the

United States’ request for equivalency.

The next Wood Products Subcommittee meeting

will take place in early 2002, at which time the

United States will review the progress made on

performance-based building codes, equivalency,

and other key issues.

ii. Structural Regulatory Reform

Competition Law and Policy: A key goal of our

regulatory reform efforts is to ensure steps to

deregulate Japan’s economy are not undone by

anticompetitive actions by private-sector players. 

An active and strong antitrust enforcement policy

is needed to restrain anticompetitive behavior,

including by incumbent firms, in once heavily

regulated sectors. 

In the Fourth Joint Status Report, Japan agreed to

review the status of the JFTC within the central

government to ensure its independence and

neutrality. Japan also undertook to examine the

introduction of new legislation to enable the JFTC

to uncover violations of the AMA more

effectively. For its part, the JFTC established the

Information Technology and Public Utilities Task

Force to investigate and take enforcement action

against violations of the AMA in industries

undergoing deregulation. The JFTC and the

Ministry of Public Management, Home Affairs,

Posts and Telecommunications (MPHPT) agreed

to cooperate in promoting competition in the

telecommunications sector and subsequently
2002 ANNUAL REPORT 170

issued joint guidelines for business activities in

that sector. With respect to measures to combat

bid rigging, procuring agencies at the central and

local government level were required by the Act

for Promoting Proper Tendering and Contracting

for Public Works, which came into effect on April

1, 2001, to report facts raising suspicions of bid

rigging to the JFTC. Moreover, the Japanese

Cabinet issued a Decision adopting the “Guiding

Principle,” which obligates central and local

government procuring agencies to make efforts to

seek recovery of overcharges from bid rigging

participants and to suspend such participants from

eligibility to bid on future government contracts. 

In addition, Japan agreed to examine the

introduction of new legislation to address the

problem of government procuring officials who

assist bid rigging activities.

In its October 2001 Regulatory Reform

submission, the United States recommended that

Japan increase substantially the staff levels of the

JFTC and make it an independent agency under

the Cabinet Office. The United States urged that

the JFTC’s investigative tools be brought up to

modern international standards by strengthening

the deterrent effect of the administrative fine

(surcharge) system, making changes to permit

adoption of a cooperation leniency program, and

providing greater criminal investigation powers. 

The United States also recommended that Japan

take effective measures to address the epidemic of

bid rigging, which should include new legislation

to prevent so-called “bureaucrat-led bid rigging.” 

The submission called on the JFTC to step up its

promotion of competition in regulated sectors and

to devote additional resources to monitoring

recently deregulated sectors to ensure that

government regulation is not replaced by

anticompetitive administrative guidance or

private-sector restraints. Competition policy

issues were discussed further at the first meeting

of the Cross-Sectoral Working Group in early

November 2001.

Transparency and Other Government Practices: 

Despite improvements in recent years, Japan’s

regulatory system continues to lack the

transparency and accountability necessary to

ensure all players have the same access to

government information and the policymaking

process. New market entrants and competitors

need adequate information on Japan’s regulatory

system in order to base their decisions on accurate

assessments of potential costs, risks and market

opportunities. This is especially true for foreign

firms, which do not have the same access to the

bureaucracy as domestic firms. 

Japan took several steps in 2001 that will increase

the transparency and accountability of its

regulatory system. It has introduced a

government-wide “No Action Letter” system that

will enable businesses to submit inquiries to, and

receive responses from, Japanese agencies on the

interpretation of laws and ordinances and their

application to specific factual situations. Japan

also has implemented a government information

disclosure law, similar to the U.S. Freedom of

Information Act; introduced a government-wide

policy evaluation system; and improved its Public

Comment Procedures by making all of the public

comments available for review by the public. In

the Fourth Joint Status Report, Japan agreed that

each ministry and agency will adopt detailed rules

related to the implementation of the new “No

Action Letter System” by the end of Japanese

Fiscal Year 2001. Japan also agreed to make

continuous efforts to enhance and strengthen the

government-wide policy evaluation system. 

Building on these measures, the United States

recommended in its October 2001 submission that

Japan undertake additional improvements in its

regulatory system to support its reform efforts and

ensure that all players have the same access to

government information and the policymaking

process. These recommendations include: (1)

revising the Public Comment Procedures to make

them an effective regulatory mechanism by

establishing a central registry for all solicitations,

requiring a minimum 30-day comment period,

authorizing an independent review of use of the

Procedures, and establishing a study group to

examine the Procedures; (2) reducing the use of

administrative guidance and requiring all
171 BILATERAL NEGOTIATIONS

administrative guidance to be issued in writing

(except in special cases); (3) developing a

mechanism that would enable all interested

domestic and foreign parties to review and

comment on draft legislation before governmental

agencies make their submissions to the Diet; and

(4) increasing the authority of the courts to review

administrative actions of governmental agencies. 

Further discussions on transparency issues took

place in early November 2001 during the

inaugural meeting of the Cross-Sectoral Working

Group.

Legal System and Infrastructure: Reform of the

Japanese legal system is essential to establishing a

legal environment that is conducive to

international business and investment and

supportive of deregulation and structural reform. 

In keeping with this objective and its Enhanced

Initiative agreements, Japan took significant steps

in 2001 toward modernizing and liberalizing its

legal system. Most notable was the establishment

of a Judicial Reform Council (JRC), which in June

2001 made important recommendations on needed

legal reforms. These recommendations included:

deregulating the requirements for specified joint

enterprises (tokutei kyodo jigyo) to promote

cooperation and collaboration between bengoshi

and foreign lawyers; studying the restriction that

prohibits foreign lawyers from hiring Japanese

lawyers; increasing the number of legal

professionals; increasing the speed and efficiency

of civil litigation; facilitating litigants' collection

of evidence at early stages of litigation; increasing

the number of judges; making the specialized

intellectual property rights departments at Tokyo

and Osaka District Courts function as “patent

courts;” reforming Japan’s 100-year-old

Arbitration Law; and undertaking a

comprehensive study of judicial oversight of

administrative agencies. 

The United States has welcomed these steps and

recommended in its October 2001 submission

additional measures. These include: (1)

expeditious and effective implementation of the

JRC’s recommendations; (2) elimination of all

prohibitions against freedom of association

between Japanese and foreign lawyers; (3)

removal of restrictions on foreign lawyers; (4)

improvements in the foreign lawyer regulatory

system; and (5) modernization of the judicial

system, including by improving pre-trial evidence

gathering mechanisms, augmenting protection of

trade secrets during court proceedings, and

strengthening the powers of judges to fashion

more effective injunctive orders. Further

discussions on Japan’s legal system and

infrastructure took place under the Cross-Sectoral

Working Group, which met in early November

2001. 

Commercial Law: The United States

recommends that Japan revise its Commercial

Code to introduce greater flexibility to the

organization, management, and capital structure of

Japanese companies, and improve efficiency and

accountability. Comprehensive revision of

Japan’s commercial laws should have a profound

effect on both domestic and foreign firms. The

liberalization of restrictions on equity securities,

for example, would facilitate the acquisition of

capital necessary for restructuring and new

investment. Revision of the Commercial Code

also would have significant implications for the

ability of foreign firms to invest and operate

effectively in the Japanese market, bringing

crucial technologies, know-how and employment

to Japan’s economy. 

In the Fourth Joint Status Report, Japan agreed to

revise its commercial code in a manner that would

create a more positive business environment for

both domestic and foreign firms. Steps agreed to

included eliminating restrictions on the use of

stock options and establishing new corporate

governance rules designed to encourage the use of

outside directors on corporate boards. Japan took

a positive step toward necessary reforms with the

Legislative Council’s issuance of its Interim

Tentative Draft of the Outline of Commercial

Code Revision in April 2001, proposing some

major revisions to the commercial law system,

including elimination of restrictions on recipients

of stock options and on the issuance of new

shares, and allowing companies the option of
2002 ANNUAL REPORT 172

adopting a Western-style corporate governance

system. Legislation to implement some of these

recommendations was submitted to the Diet in the

Fall of 2001, and the final recommendations are

due for release in early 2002.

The United States continues to recommend

significant revisions to Japan’s commercial law. 

In its October 2001 Regulatory Reform

submission, the United States urged Japan to: 1)

permit and promote cross-border share exchanges

and other legal mechanisms to facilitate foreign

merger and acquisition activities; 2) introduce

greater flexibility to the capital structure of

Japanese corporations, including the elimination

of restrictions on the quantity and recipients of

new stock options; 3) strengthen corporate

governance mechanisms, including allowing

publicly trade companies the option of adopting

an executive committee and outside director

system; 4) oppose any proposal requiring foreign

corporations to appoint statutory agents who

would be jointly and severally liable for all

liabilities of the corporation; and 5) allow greater

input by the international business community into

the formulation of proposed commercial law

revisions. These and other issues related to the

Commercial Code were raised in early November

during the inaugural meeting of the Cross-Sectoral

Working Group. Also during that meeting,

members of the private sector gave a presentation

on the importance of permitting cross-border share

exchanges in Japan. 

Distribution: Japan's rigid and inefficient

distribution and customs systems restrict market

access for imported products and work against the

competitiveness of foreign-made products. On the

customs front, the United States believes Japan

needs to modernize clearance procedures to fully

open its market to imported goods. Regarding

distribution, Japan's new Large Store Location

Law (SLL) enacted in June 2000 marked an

important step forward in addressing some of the

inefficiencies in the sector, but burdensome

regulations continue to hamper the efficient

movement of goods. Enforcement of the SLL also

must be carefully monitored to ensure that it does

not unfairly discriminate against large stores. 

In the Fourth Joint Status Report, METI agreed to

continue to take measures to facilitate the

implementation of the SLL in a consistent,

transparent, and predictable manner by: 1)

monitoring local governments to ensure that they

do not impede the purpose of the law; and 2)

providing information regarding the application of

the Law through meetings and technical training

of local government officials. In response to

requests by the United States, METI has

established official contact points in Tokyo and

around the country to field complaints by large

store developments and to facilitate their

resolution. On the issue of customs clearance

procedures, the U.S. Government noted its

appreciation for Japan's willingness to consider

the concerns of express carriers and other

companies faced with increased fees for the use of

the Nippon Automated Cargo Clearance System

(NACCS) for air-cargo. Discussions between

users of the new system, which was introduced in

October 2001, and the NAACS Operation Center

took place throughout the year, starting with the

initiation of a public comment procedure in March

2001. 

Our reform recommendations to the Government

of Japan in October 2001 recognized that Japan

has implemented and plans to implement

additional positive measures to simplify and

automate customs processing. The submission

recommended extending the new Simplified

Declaration Procedures Act to express carriers and

raising the de minimis level for customs duties

from yen 10,000 to yen 30,000. At the same time

the United States urged Japan to continue its

dialogue with companies to ensure that a fee

structure equitable to all NACCS air-cargo users

is installed after the expiration of the current

three-year arrangement. The U.S. Government

continues to monitor progress on customs

processing procedures and the fair and uniform

implementation of the SLL. In early November

2001, the Cross-Sectoral Working Group met to

discuss these and other issues. 
173 BILATERAL NEGOTIATIONS

b. Bilateral Consultations

i. Insurance

The 1994 and 1996 bilateral insurance agreements

have made significant contributions to the

deregulation of the Japanese insurance market. 

The agreements included sweeping measures that

resulted in significant improvements in the

product approval process, greater use of direct

sales of insurance products, and the introduction

of risk differentiated automobile insurance. As a

result, foreign insurance companies have

continued to visibly and substantially increase

their presence in both the life and non-life

insurance sectors in Japan.

Bilateral consultations under the two insurance

agreements were held in Tokyo in July 2001. The

2001 review included an analysis of data provided

by Japan, a discussion of changes in the FSA’s

policies/regulations, and an exchange on

important and timely changes in Japan's insurance

sector. As in past years, a representative from the

National Association of Insurance Commissioners

participated in the talks in order to promote U.S.-

Japan regulator-to-regulator discussions of various

aspects of the U.S. and Japanese insurance

regulatory systems. More specifically, the United

States and Japan discussed recommendations by

an FSA study group 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 life and non-life Policyholder

Protection Corporations. 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. 

The United States also raised concerns voiced by

U.S. industry 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. 

There has been increasing concern over the effect

these institutions have on the efficient operation

of Japan’s financial market. As such, the planned

transfer of the three postal services (mail delivery,

savings and insurance) from the Postal Services

Agency to a public postal corporation in 2003

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 2001 Regulatory

Reform submission to Japan, as well as in

response to draft MPHPT plans regarding Kampo

and Yucho put out for public comment in

November, 2001. These recommendations

included ensuring transparency throughout the

process, extending the same standards of

regulation to the postal financial institutions as

applied to the private sector, and prohibiting these

institutions from underwriting any new insurance

products or originating any new non-principalguaranteed investment products. 

Over the past year, the Government of Japan has

taken a number of steps to increase transparency

in its decision-making processes related to the

insurance sector, including use of public comment

procedures by the FSA and MPHPT as well as the

inclusion of foreign representatives on various

government advisory committees. The United

States strongly encourages the FSA and MPHPT

to continue their efforts in this regard. The next

annual consultations are scheduled to be held midyear in 2002, 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 is 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
2002 ANNUAL REPORT 174

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 highly

disappointed that, after rising steadily in 1995 and

1996, sales of North American-made vehicles

have fallen for the past five years, with sales in

2001 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: U .S. exports to Japan

declined from a record level of $13 billion in 1995

to an estimated $11.3 billion in 2001. 

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 is expected to

take place in the first half of 2002.

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

NTT Procurement: The U.S. Government has

urged Japan to increase its public sector purchases

(including purchases by NTT companies, part of a

group in which the Government of Japan held a

majority of shares until early 2001) of U.S.

telecommunications equipment through a series of

bilateral agreements with Japan dating back to

1980. As a result of the NTT Agreements, U.S.

suppliers have made some significant inroads as

suppliers to NTT, the largest single procurer in the

Japanese telecommunications equipment market. 

NTT accounts for approximately one third of the

$36 billion market for terminal and network

equipment. Before the first NTT Agreement was

concluded in 1980, less than 1 percent of NTT

purchases were from foreign firms. These

successive Agreements have helped move NTT

toward procurement decisions based on

market-driven, competitive factors. As a result,

purchases of foreign equipment have increased, to

the benefit of U.S. telecommunications equipment

suppliers and the NTT companies. 

In June 2001 the United States and Japan

conducted the final annual review under the most

recent bilateral agreement – the 1999 U.S.-Japan

NTT Procurement Agreement. At the review, the

United States focused discussion on changes in

procurement brought about by the NTT

restructuring which took effect in 1999. These

procedures include the process through which

suppliers qualify to bid, the criteria used by NTT

to select suppliers, the functioning of the Supplier

Proposal Process, and the use of Japan-specific

national versus internationally-adopted technical

standards. The NTT companies provided data on

foreign procurement during Japan Fiscal Year

(JFY) 2000, which showed an increase in

procurement from foreign telecommunications
175 BILATERAL NEGOTIATIONS

equipment suppliers.

 

The 1999 Agreement expired in July 2001. Due

to the substantive progress made under the series

of NTT Agreements, the United States, after

consultations with U.S. industry, determined that

the best way to pursue the goal of a fully open

NTT market after July was to continue to monitor

NTT purchases and procurement practices closely

and in coordination with U.S. industry. The U.S.

Government will examine information provided

by U.S. industry, and will pursue with the

Government of Japan problems or issues related to

NTT procurement as they arise. In addition, the

United States will look to NTT to narrow the gap

between the noticeably lower foreign share of the

NTT equipment market and that of the Japanese

private sector telecommunications market, in

order to provide new opportunities for globally

competitive U.S. suppliers with their leading

technology products.

Construction/Public Works: The U.S. share of

Japan's $250 billion public works market has

consistently remained well below one percent – a

troubling fact given the competitiveness of

American 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

American companies' ability to participate in

Japan's public works sector. The 1994 Agreement

remains in effect, but the consultative provision in

the 1994 Agreement expired in March 2000. The

United States will continue to engage Japan on

specific matters of concern related to construction,

using appropriate opportunities such as the 2002

inaugural meeting of the Trade Forum, established

under the Partnership. 

In September 2001, Japan hosted the third U.S.-

Japan Construction Cooperation Forum (CCF),

which is designed to facilitate the formation of

joint ventures between U.S. and Japanese

design/consulting and construction companies and

to make it possible for U.S. firms to participate

more fully in Japan's public works market. The

United States looks forward to tangible results

from the CCF. However, these private sector

meetings are not a substitute for government-togovernment consultations. 

Medical Technology: The 1994 Medical

Technology Procurement Agreement has been

successful in providing improved market access

and increased sales for foreign suppliers in Japan's

government procurement sector. The last review

of this agreement in March 2001 showed that

overall foreign market share had increased to just

under 47 percent. In key areas where U.S.

manufacturers are major suppliers, foreign market

share was even more substantial, for example

cardiac pacemakers (98.5 percent), magnetic

resonance (82.5 percent), and artificial joints and

bones (77.4 percent). Although the annual

consultation mechanism of this agreement expired

at the end of March 2001, all of the procedural

provisions remain in force. The U.S. Government

will continue to engage the Government of Japan

on specific matters of concern.

Other: In March 2001, the United States and

Japan conducted reviews of the bilateral Computer

and Telecommunications Procurement

Agreements, concluded in 1992 and 1994,

respectively. Both agreements aim to expand

Japanese public sector procurement of foreign

goods and services in these sectors. The March

reviews included an analysis of data on recent

government purchases provided by Japan and

addressed issues of importance to the United

States, such as transparency of the procurement

system, continued high use of sole-source
2002 ANNUAL REPORT 176

tendering, and the use of “overall greatest value”

methodology in evaluating bids. In addition, the

United States and Japan discussed the Japanese

Information Technology Initiative and how

procurement under the Initiative will be

conducted. The United States remains concerned

over the relatively low level of Japanese public

procurement of highly competitive U.S. computer

and telecommunications goods and services and

will continue to address any issues that arise in all

appropriate fora.

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 in JFY 2000 (which ended in March

2001) hit $28 billion (Yen 3.1 trillion), more than

30 percent above the level of JFY 1999. 

Banking/insurance and telecommunications

sectors showed particularly high growth. 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,

likely as a result of continuing economic problems

in Japan and a slowing global economy. From

April through September 2001, total FDI was

down almost 19 percent from a year earlier. U.S.

investment plunged more than 33 percent. 

Japanese and foreign businesses continue to be

significantly affected by the implementation of

several laws passed in 1999 which included

suggestions raised by the United States during the

dialogue carried out under the 1995 foreign direct

investment agreement. The Securities Exchange

Law, for example, now mandates consolidated and

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. 

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. In October 2001 the

inaugural meeting of the U.S.-Japan Investment

Group set forth a framework for bilateral

discussions on investment that will highlight and

resolve possible impediments. The Group met

again on December 13 and reviewed in detail the

impediments to FDI inflows to Japan. In response

to specific requests from the United States, Japan

explained that it is working to strengthen

accounting practices and increase the number of

accounting and legal professionals. The U.S.

private sector was also given an opportunity to

directly present their investment concerns to the

Government of Japan during the meeting. More

talks will be held in early 2002, culminating in a

joint report on investment.

c. Sectoral Issues

i. Agriculture

Although Japan is the United States’ largest food

and agriculture export market, Japan maintains

many barriers to imports of U.S. food and

agricultural products. 

Rice: Japan’s highly protected rice market has

long been a target for liberalization efforts. In the

Uruguay Round, Japan agreed to market access for

rice in the form of an import quota. In 1999,

Japan converted the quota to a tariff-rate quota,

with a prohibitively high out-of-quota duty. 
177 BILATERAL NEGOTIATIONS

The United States has expressed ongoing concern

over the market share of U.S. firms in Japan’s

overall rice imports in 2001 as compared to recent

years. U.S. market share in Japan’s SimultaneousBuy-Sell (SBS) tenders was particularly low. 

(SBS tenders, which are conducted by the

Japanese Food Agency, 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

continue to monitor this situation closely.

Over the last year, the U.S. Government raised

another problem related to Japanese imports of

U.S. rice – the increasing percentage of low

quality, broken rice in Japanese tenders of U.S.

rice. The United States has pointed out that recent

levels of broken rice imports from U.S. firms (17-

18 percent) exceed what the industry would view

as a normal broken percentage of around 11

percent. Japan has claimed that “brokens” in rice

shipments normally exceed 11 percent, and points

out that the high quality of Japanese rice harvests

in recent years has pushed the domestic supply of

brokens down, forcing those that normally use

brokens (pastry, brewing and animal feed

industries) to turn to the Japanese Food Agency

for imports of this product. In Japan’s November

2001 import tender, there was some decrease in

the percentage of broken rice purchased from the

United States. The United States has told Japan

that it expects this trend to continue in future

import tenders, particularly as the quality of

Japanese rice harvests return to more normal

levels.

Sanitary and Phytosanitary: Japan’s use of

sanitary and phytosanitary measures has created

many barriers to U.S. food and agricultural goods. 

In April 2001, Japan instituted measures limiting

the number of phytosanitary inspections of

imported fruits and vegetables. With quick

intervention by the Administration, the impact of

that initiative was negligible on U.S. shipments. 

However, Japan continues to maintain overly

restrictive quarantine measures on a number of

U.S. products, such as apples, cherries and lettuce.

Organic Food: In May 2001, Japan accepted a

U.S. proposal to permit certification of U.S.

organic processed ingredients to Japanese organic

standards by USDA accredited certifiers, allowing

a continuance of approximately $50 million in

U.S. organic food exports. Negotiations are

underway with Japan to expand the certification to

all U.S. organic food, valued at $100 million.

ii. Steel

Steel issues are detailed in Chapter V, “Other

Multilateral Activities.”

iii. Flat Glass

U.S. flat glass manufacturers continue to face high

hurdles in their efforts to sell their products in

Japan, despite gaining extensive market shares 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.

To address these interrelated problems, the United

States engaged Japan in discussions in 2001 under

the Enhanced Initiative, the outcome of which was

contained in the Fourth Joint Status Report. In

that report, the Government of Japan recognized

the economic benefits of competition in the

distribution sector. It also confirmed that it would

be detrimental to competition and a violation of

Japan’s Antimonopoly Act for distributors to

reach agreements among themselves designed to

exclude imported or other competitors’ products

from entering the market. In addition, the

Government of Japan suggested that enterprises

and foreign governments notify the JFTC of

anticompetitive practices in the flat glass market

and other highly oligopolistic markets. In the

Fourth Joint Status Report, METI also agreed to

continue to pursue economic reforms to ensure

competition in the distribution sector.
2002 ANNUAL REPORT 178

The United States continues to raise glass market

access issues with Japan and to work with U.S.

industry on ways to improve market access and

enhance competition in this sector.

d. Multilateral/WTO Disputes and

Settlements

Varietal Testing of Fruits: In October 1997, the

United States invoked dispute settlement

procedures against Japan regarding its varietal

testing requirements. Japan required repeated

testing of established quarantine treatments each

time a new variety of an already approved

commodity was presented for export. This

redundant requirement had no scientific basis and,

because it imposed expensive and time-consuming

testing on American producers, served as a

significant barrier to market access. The United

States challenged these requirements as

inconsistent with Japan’s obligations under the

WTO Agreement on the Application of Sanitary

and Phytosanitary Measures (the “SPS

Agreement”).

In March 1999, the WTO Dispute Settlement

Body (DSB) adopted panel and Appellate Body

findings that Japan’s varietal testing requirement

was: (1) maintained without sufficient scientific

evidence, in violation of Article 2.2 of the SPS

Agreement; (2) not based on a risk assessment, in

violation of Article 5.1; and (3) inconsistent with

Japan’s transparency obligations under paragraph

1 of Annex B, since Japan did not publish its

requirements. 

In June 1999, Japan and the United States notified

the DSB of their agreement that a reasonable

deadline for Japan’s implementation was

December 31, 1999. Japan announced that it

eliminated its varietal testing requirement on

December 31, 1999, and continued consultations

with the United States on fumigation requirements

on the eight horticultural products at issue. In

September 2001, Japan approved fumigation

procedures for the final product, apples, and the

United States and Japan notified the DSB that the

case was finally resolved.

Fire Blight: Following the termination of

technical discussions in October 2001, the

Administration initiated dispute settlement

procedures in the WTO against Japan’s quarantine

measures on U.S. apples due to fire blight in early

2002. Japan’s Ministry of Agriculture, Forestry

and Fisheries (MAFF) maintains highly restrictive

requirements for western U.S. apples due to

concerns about fire blight, without either a formal

risk analysis or sufficient scientific evidence. In

February 2001, USDA presented to MAFF the

results of joint U.S.-Japan research which

confirmed that mature symptomless apple fruits

produced in the western United States are not a

pathway for transmission of fire blight. This

research supports earlier USDA research from

1989 and 1998 that was peer reviewed and

published in scientific journals.

7. Taiwan

Trade Ministers at Doha, Qatar approved Taiwan's

WTO membership in November 2001,

recognizing Taiwan's important position in the

global trading system. Taiwan became a member

on January 1, 2002.

Taiwan’s accession to the WTO will benefit most

sectors of the U.S. economy. Taiwan’s WTO

commitments will increase access to a broad range

of U.S. goods and services, including agricultural

exports to Taiwan. Highlights of Taiwan’s WTO

commitments include:

• Tariffs on industrial goods reduced to less

than 5 percent on average; 

• Agricultural tariffs will fall to 12 percent

on average, with most of these reductions

taking place upon accession;

• Taiwan’s state trading monopoly on

tobacco and alcohol eliminated; 

• Tariffs on construction and agriculture

equipment, wood (except plywood), paper

and paper products, furniture, distilled

spirits, beer, certain steel products, civil

aircraft, dolls, toys and games will all be

reduced to zero (some by accession, most

by 2004); 
179 BILATERAL NEGOTIATIONS

• Taiwan has agreed that on accession it

will increase foreign access to a number

of service sectors, including professional

services (architects, accountants,

engineers, lawyers), audiovisual services,

express delivery services, advertising,

computer services, construction,

wholesale and retail distribution,

franchising, and environmental services;

and

• Taiwan will have the obligation to adhere

to the WTO TRIPS Agreement to protect

intellectual property rights.

a. Agriculture and Industrial Quotas

During 2001, the United States continued

discussions with Taiwan regarding its

commitments to import pork and chicken products

at levels agreed to in February 1998 and in

multilateral access arrangements that opened these

“U.S. only” quotas to all WTO members in 2000.

U.S. exporters experienced logistical difficulties 

as the result of Taiwan’s implementation of a

quarterly allocation system for these products in

2001. Taiwan’s WTO commitments on tariff-rate

quotas for chicken, pork, fish, autos and other

products and a minimum market access

commitment for rice were to replace the previous

system on January 1, 2002. As 2001 came to a

close, the United States was working closely with

Taiwan to ensure timely implementation of these

commitments.

b. Intellectual Property Rights

Taiwan moved toward strengthening its

intellectual property rights protection regime

during the past year with passage of several key

legislative bills. However, the level of piracy in

Taiwan remains at a very high level; serious

enough to warrant placing Taiwan on the 2001

Priority Watch List. Taiwan has implemented a

new chip marking system which allows

identification of the manufacturer and designer of

computer chips suspected of containing

counterfeit software. During the Fall legislative

session, Taiwan passed several amendments to

existing laws and one new bill to address optical

media piracy. Taiwan amended its patent law to

extend the term of protection for certain existing

patents from 15 to 20 years, consistent with WTO 

requirements. In the area of copyright protection,

Taiwan amended its law to extend the term of

protection for computer programs to the life of the

writer plus 50 years. Taiwan also passed

legislation requiring licensing of optical media

(such as CDs, video CDs, and DVDs)

manufacturing facilities in an attempt to reduce its

high level of copyright piracy. However, the

optical media law, as passed, appears to fall short

in a number of areas. We will work closely with

Taiwan on implementation of this bill to assure

Taiwan aggressively enforces its provisions. Only

with aggressive enforcement will Taiwan begin to

address its seriously high rates of piracy and

exports of pirated product.

 

We will continue to monitor Taiwan’s progress in

combating its high IP piracy rates, in particular,

whether Taiwan aggressively enforces its existing

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 Taiwan on further amendments to

its copyright law to conform with existing

international IPR norms. 

c. Telecommunications

Several international telecommunications

companies are interested in providing fiber-optic

broadband submarine cable service to Taiwan

customers. The United States has been actively

involved in discussions with the Taiwan

authorities during the past few years to assure that

these companies can effectively compete in the

Taiwan market in a manner consistent with

Taiwan's WTO commitments. In the Fall of 2001,

Taiwan agreed to allow these firms to construct

their own back-haul facilities without first

negotiating such construction with the incumbent

telecommunications providers. In addition,

Taiwan agreed to allow submarine cable firms to

directly sell their services to Internet Service
2002 ANNUAL REPORT 180

Providers, as well as to existing fixed-line

providers. We will continue to monitor Taiwan’s

progress toward full market opening of its

telecommunications sector in a WTO-consistent

manner. 

d. Government Procurement

In August 2001, the United States and Taiwan

reached an understanding clarifying Taiwan’s

commitments for its accession to the WTO’s

Government Procurement Agreement (GPA). The

understanding affirms Taiwan’s commitment to

full and effective participation in the international

rules-based trading system, brings Taiwan further

into conformity with WTO GPA requirements,

and ensures that barriers against U.S. companies

in Taiwan’s government procurement market will

be lifted. Taiwan’s commitments cover both

infrastructure projects and procurement of a wide

range of other goods and services.

8. Hong Kong (Special Administrative

Region)

a. Intellectual Property Rights

Hong Kong continued enforcement actions during

the past year to address piracy of copyrighted

works. The Hong Kong public continues to

become much more aware of the damage being

sustained by its own industries, notably movies,

music, and toys, from copyright and trademark

infringement. Legislation that criminalized the

corporate use of unlicensed software and subjects

corporate pirates to the same penalties, including

fines and jail sentences, as other pirates became

effective in April 2001. However, soon after

implementation, opposition was raised to certain

provisions of the bill as applied to the

photocopying of newspapers and magazines, and

by supporters of small businesses that would like

to decriminalize parallel imports of software for

end-users. Certain provisions of this bill were

suspended and a review is currently underway.

We will continue to monitor this situation and

other anti-piracy efforts closely.

b. Telecommunications

Hong Kong continued to make progress in

opening its telecommunications market during the

past year. We will continue to monitor progress in

this sector closely as Hong Kong prepares for full

market liberalization on January 1, 2003.

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 highlighted the importance of supporting peace

and stability in the region by fostering economic

development. The U.S.-Jordan Free Trade

Agreement (FTA) and the U.S.-Israel Free Trade

Agreement, 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.

2001 Activities

1. U.S.-Jordan Free Trade Agreement

The U.S.-Jordan Free Trade Agreement (FTA)

took effect on December 17, 2001. 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
181 BILATERAL NEGOTIATIONS

a Bilateral Investment Treaty with Jordan, the

FTA does not include an investment chapter (the

treaty has not yet entered into effect pending

exchange of the instruments of ratification).

The agreement builds on other U.S. initiatives in

the region designed to encourage economic

development and regional integration. These

include the 1985 U.S.-Israel Free Trade

Agreement and its extension to areas administered

by the Palestinian Authority in 1996, and the 1996

Qualifying Industrial Zone (QIZ) program.

2. Qualifying Industrial Zones

In 2001, USTR designated the eleventh Qualifying

Industrial Zone (QIZ) in Jordan, the Zarqa

Industrial Zone, in order to attract investment

and strengthen economic integration in the region. 

Since the establishment of the first in 1998, QIZs

have been a bright spot in Jordanian economic

performance. They played an important role in

helping to boost Jordan’s exports to the U.S. from

$16 million in 1998 to a projected $200 million in

2001. 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 $85-100

million, which is expected to grow to $180 to

$200 million when all projects are completed. 

To date all QIZs have been established in Jordan. 

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, Ad-Dulayl Industrial Park, AlKerak 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. The President issued

a November 1996 proclamation delegating the

authority to designate qualifying industrial zones

to the U.S. Trade Representative and providing

duty-free treatment to products of the West Bank

and Gaza.

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.

3. Trade and Investment Framework

Agreements

In 2001, the United States concluded a Trade and

Investment Framework Agreement (TIFA) with

Algeria. TIFA agreements were previously

negotiated with key regional partners, Egypt,

Jordan, Turkey, and Morocco. 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.

In 2001, Trade and Investment Council talks with

the Government of Turkey were inaugurated. In

October 2001, follow up talks on agriculture

import issues were held.

4. WTO Accession

Negotiations on accession to the WTO of Saudi

Arabia and Algeria continue, in which the United

States is seeking entry based on implementation of

WTO provisions upon accession and

commercially meaningful market access

commitments for U.S. goods, services, and

agricultural products. 
2002 ANNUAL REPORT 182

5. Intellectual Property Rights

Protection of intellectual property rights remains a

leading priority in the Middle East region. 

Because of continuing concerns with Israeli

efforts to reduce and eliminate piracy of

intellectual property, Israel remained on the

“Special 301 Priority Watch List” in 2001. Egypt

and Turkey are also on the Priority Watch List,

while Lebanon, Kuwait, Saudi Arabia, and the

United Arab Emirates (UAE) are on the Watch

List.

F. Africa

Overview

The United States enjoys a vibrant and growing

trade and investment relationship with the

countries of sub-Saharan Africa, and the region

remains a key strategic partner. Total two-way

trade between the United States and sub-Saharan

Africa topped $22 billion in the first nine months

of 2001 – an increase of 8 percent compared to the

same period in 2000. Sub-Saharan Africa is home

to more than one-tenth of the world’s population,

supplies 18 percent of U.S. oil needs, and

represents the largest bloc of WTO members (38

countries). 

The African Growth and Opportunity Act

(AGOA) is the centerpiece of U.S. trade policy

towards this important region and is helping to

achieve key Administration objectives in subSaharan 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 more democratic governments in sub-Saharan

Africa. The United States made significant

progress in each of these areas in 2001 and plans

to continue its efforts in 2002. 

1. Implementing the African Growth and

Opportunity Act

The AGOA provides powerful incentives for

economic growth in one of the poorest regions of

the world by granting duty-free and quota-free

access to the $10 trillion U.S. market for nearly

6,500 products. The Act also institutionalizes a

process for strengthening U.S. relations with subSaharan African countries by establishing a U.S.-

Sub-Saharan Africa Trade and Economic

Cooperation Forum co-hosted by the USTR and

the Secretaries of State, Treasury and Commerce. 

The AGOA is authorized through September 30,

2008. 

The United States held the first Trade and

Economic Cooperation Forum in Washington, DC

on October 29-30, 2001. President Bush officially

opened the Forum, which included participation

by Ministerial delegations from every AGOAeligible country. During the event, the USTR cohosted a successful plenary session on AGOA

implementation with the Minister of Industry,

Trade and Marketing of Lesotho, where Trade

Ministers from across the region discussed

strategies for promoting regional economic

reforms and strengthening U.S.-Sub-Saharan

African trade and investment ties. USTR was

joined at the Forum by four Cabinet Secretaries,

the National Security Advisor, and the AID

Administrator, reflecting AGOA’s importance to

the Bush Administration.

In 2001, the Administration worked to designate

countries as eligible for AGOA and to ensure that

the benefits of the Act are broadly shared. The

AGOA requires the President to determine

annually whether sub-Saharan African countries

are, or remain, eligible for benefits based on

criteria set out in the Act. USTR chairs the

interagency AGOA Implementation Subcommittee

responsible for advising the USTR on country

eligibility. Based on the USTR’s

recommendation, the President determined in

December 2001 that all 35 countries that were

designated as eligible for AGOA benefits in 2001

will remain eligible in 2002. The 35 countries are
183 BILATERAL NEGOTIATIONS

Benin, Botswana, Cameroon, Cape Verde, Central

African Republic, Chad, 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,

Uganda and Zambia. 

Under AGOA, eligible countries that meet certain

requirements to prevent illegal transshipment may

also receive preferential duty-free and quota-free

treatment for certain textile and apparel articles. 

In 2001, USTR approved submissions for AGOA

textile and apparel benefits from 12 countries

(Botswana, Ethiopia, Kenya, Lesotho,

Madagascar, Malawi, Mauritius, Namibia, South

Africa, Swaziland, Uganda and Zambia),

including nearly all of the region’s leading apparel

producers. The AGOA Implementation

Subcommittee expects to recommend approval of

pending submissions of another nine countries in

2002. 

As part of its ongoing AGOA implementation

efforts, USTR has coordinated more than 20

regional technical assistance seminars on AGOA

across sub-Saharan Africa. These seminars,

designed to ensure that the sub-Saharan African

public and private sectors are equipped to fully

utilize AGOA benefits, were organized in

conjunction with U.S. Customs, USAID and the

Departments of State and Commerce. Throughout

2001, USTR also worked closely with the

Overseas Private Investment Corporation (OPIC),

the U.S. Export-Import Bank and the U.S. Trade

and Development Agency (TDA) to address

regional infrastructure and supply-side constraints. 

USTR and other federal agencies plan to host

additional national and regional AGOA seminars

in sub-Saharan Africa this year. 

The United States continues to actively promote

public and private sector understanding of AGOA

and U.S. trade policy towards Africa, and these

efforts are raising awareness of the many

opportunities available through expanded trade

with the region. In addition to numerous AGOA

technical assistance and training seminars, USTR

officials have organized briefings for Congress

and private sector business groups and met

frequently with the African diplomatic corps,

Industry Sector Advisory Committees (ISACs)

and companies interested in AGOA. 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 they continue to

maintain a website dedicated to AGOA

information (www.agoa.gov). In 2002, the USTR

will institute a Trade Advisory Committee on

Africa (TACA) to provide a formal vehicle for

regular private sector and NGO input into AGOA

implementation and broader U.S. trade and

investment policy towards sub-Saharan Africa. 

2. Promoting Economic Reform, Growth

and Development

In its first 18 months, the AGOA has prompted

important economic and social reforms across

sub-Saharan Africa and delivered new jobs and

new opportunities for economic growth and

development to the region. The 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

practices to attract and maintain trade and

investment, and are essential for the transfer of

technology, increasing labor force skill, promoting

competition and increasing exports. 

The United States consulted extensively with subSaharan African countries on AGOA eligibility

requirements in 2001, and many eligible countries

are implementing needed reforms as a result. 

These reforms include measures to combat
2002 ANNUAL REPORT 184

corruption, accelerate privatization, deregulate key

industries, promote more open trade, and

strengthen intellectual property and labor law

protections. Countries have ratified ILO

Convention 182 on the elimination of the worst

forms of child labor and are working to change, or

have changed, laws on child trafficking or on

worker rights. 

By bringing increased investment to and creating

new jobs in sub-Saharan African countries, the

AGOA is also demonstrating how trade can

benefit developing countries. In 2001, Lesotho

attracted an estimated $120 million in new

investment as a result of AGOA, four times the

amount it receives annually in overseas aid. 

Kenya attracted nine new investors and the

country predicts that AGOA will create over

150,000 jobs. Namibia won $100 million in new

investment, and U.S. apparel industry leaders

active in Madagascar attribute about 30,000 new

jobs in that country to AGOA. South Africa has

also achieved significant results, exporting to the

United States in over 18 different sectors. 

Overall, anecdotal evidence suggests that

AGOA’s incentives have brought the entire region

nearly $1 billion in new investment.

In addition, U.S. firms say they have increased

their sourcing from sub-Saharan Africa by roughly

75 percent as a result of AGOA. In the first half

of 2001, almost 85 percent of U.S. trade with the

region was with the 35 AGOA eligible countries,

and U.S. imports under the Act accounted for 58

percent of total U.S. imports ($11.6 billion) from

sub-Saharan Africa over the same period. While

most of U.S. imports were in the energy sector,

AGOA is beginning to diversify our trading

relationship. For example, textile and apparel

imports from the region rose nearly 30 percent

($343 million to $438 million) in the first half of

last year, compared to the same period in 2000. 

Imports of minerals and metals were up 14 percent

($1.5 to $1.7 billion) and machinery imports grew

78 percent ($80 million to $142 million). 

3. 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 twentycountry Common Market for Eastern and Southern

Africa (COMESA) and a Joint Declaration on ECommerce with Nigeria in 2001. The COMESA

TIFA is the first U.S. regional TIFA in subSaharan Africa and adds to an existing network of

Trade and Investment Framework Agreements

with individual countries (South Africa, Nigeria

and Ghana). The Administration has used these

agreements to successfully further bilateral trade

promotion initiatives and resolve commercial

disputes. 

AGOA successes are also creating new

commercial opportunities for U.S. exporters. Even

as trade preferences granted under the Act have

increased U.S. demand for African goods, U.S.

exports to the region have grown significantly. 

Indeed, U.S. sales to sub-Saharan Africa were up

nearly 30 percent (to $5.2 billion) in the first nine

months of last year, compared to the same period

in 2000. For those nine months, South Africa was

the largest regional consumer of U.S. exports,

followed by Nigeria, Kenya, Namibia, Angola,

Cameroon, Ghana and the Seychelles. In order to

sustain and build upon this success we need to

ensure growth of new trade opportunities and

increasing AGOA exporters' familiarity with the

U.S. market. Africans, too, will have to continue

their pursuit of new trade opportunities and work

to develop efficient shipping links and other

infrastructure.

a. South Africa

The United States and South Africa enjoy a broad

and mutually beneficial trade and investment

relationship. Total two-way trade grew 9 percent

to $5.7 billion in the first half of 2001, compared

to the same period the previous year. Leading
185 BILATERAL NEGOTIATIONS

U.S. exports to South Africa include

transportation equipment, chemicals, electronic

products, machinery and agricultural goods. 

Imports include minerals and metals,

transportation equipment, chemicals, machinery

and textiles and apparel. South Africa is a valued

partner in the WTO and is the largest U.S.

supplier of AGOA eligible products in subSaharan Africa, with sales worth more than $290

million in the first nine months of 2001. 

As with many diverse and growing 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, and

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. The USTR held a

videoconference with the South African Minister

of Trade and Industry to discuss poultry in

September 2001, and the Administration hopes to

resolve this matter early in 2002. The United

States worked with U.S. VANS providers in 2001

to address concerns related to the South African

Telecommunications Amendment Bill signed into

law in November, and will continue these efforts

in 2002. 

b. Nigeria

Nigeria is the largest overall U.S. trading partner

in sub-Saharan Africa. Total two-way trade

topped $7.9 billion in the first nine months of

2001, a four percent increase over the same period

in 2000. Nigeria is a major global consumer of

U.S. agricultural products and was the largest

foreign purchaser of U.S. red winter wheat in

2001. Nigeria is also the fifth largest U.S.

petroleum supplier, and energy products account

for the vast bulk of the country’s sales to the

United States. Under AGOA, however, the

country is diversifying its export base to

encompass other products, including footwear and

manufactured goods. 

The United States is working closely with the

Government of Nigeria, both through the U.S.-

Nigeria TIFA and other initiative, to promote

expanded trade and investment and a more

diversified economy. Earlier this year, U.S. and

Nigerian governments officially launched a multimillion dollar gum arabic production project in the

northern Nigerian state of Jigawa. U.S. gum

arabic processors have agreed to purchase all

Nigerian production that meets quality standards. 

c. Other Countries and Regions

The Administration plans to continue ongoing

efforts to strengthen bilateral trade and investment

ties throughout sub-Saharan Africa and promote

regional economic integration through work with

the Organization for African Unity (OAU), the

Economic Community of West African States

(ECOWAS), the West African Economic and

Monetary Union (WAEMU), the Economic and

Monetary Community of Central Africa

(CEMAC), COMESA and the Southern African

Development Community (SADC). This year, the

United States will co-chair the inaugural U.S.-

COMESA TIFA Council meeting and host the

U.S.-SADC Forum in Washington, DC. 

4. Facilitating Sub-Saharan Africa’s

Integration Into the Multilateral

Trading System

The AGOA has also helped to promote subSaharan Africa’s integration into the multilateral

trading system and encourage support for new

global trade negotiations in a region that accounts

for more than a quarter of WTO membership. 

The United States worked closely with subSaharan African governments throughout 2001 to

prepare for the successful Fourth WTO

Ministerial Conference at Doha. Between June

and November, the USTR consulted directly with

Trade Ministers and/or Heads of State or

Government from Gabon, Ghana, Kenya, Lesotho,

Mauritius, Nigeria, Senegal, South Africa and

Tanzania to discuss WTO and other matters. He

also co-hosted a WTO Roundtable for Trade
2002 ANNUAL REPORT 186

Ministers at the October U.S.-Sub-Saharan Africa

Trade and Economic Cooperation Forum and led a

similar discussion in Doha. Responding to

invitations from COMESA and the OAU, USTR

officials participated in meetings in Cairo, Egypt

in July and Abuja, Nigeria in September where

African leaders were coordinating regional

positions on WTO issues and preparing for the

Doha Ministerial. 

This year, the United States is working with subSaharan African countries to achieve common

objectives in Geneva and ensure that regional

governments have the capacity to participate

effectively in new WTO negotiations and

implement the results. The Administration has

developed a comprehensive strategy for delivering

WTO technical assistance to the region based on

needs identified by African governments, and will

be cooperating with other bilateral and

multilateral donors on implementation. 

These efforts build on a solid track record of

delivering trade capacity assistance to developing

countries in sub-Saharan Africa and beyond. 

Between 1999 and 2001, the United States

devoted more than $110 million to technical

assistance on WTO agreements, awareness and

accession worldwide, and U.S. spending on these

programs increased by more than 650 percent over

the same period. In 2001, the United States

pledged $1 million to the WTO's Global Trust

Fund for Technical Assistance to help developing

country members meet their Uruguay Round

commitments and participate more fully in the

international trading system. USTR will continue

to coordinate regional seminars and workshops on

key WTO issues (agriculture and services) and

fund scholarships for 30 sub-Saharan African

trade officials to participate in comprehensive

WTO courses in Geneva in 2002.
OTHER MULTILATERAL ACTIVITIES 187

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. 

During 2001, as part of the review policy, USTR

issued a draft review of the U.S.-Chile FTA. 

USTR also initiated an interagency environmental

review of the WTO negotiations on agriculture

and services and continued work on interagency

environmental reviews of the Free Trade Area of

the Americas (FTAA) and the U.S.-Singapore

FTA.

At the fourth WTO Ministerial Conference in

Doha, Qatar (November 2001), the U.S.

Government succeeded in securing a package of

environmental elements that underscores the

WTO’s commitment to sustainable development

and to the simultaneous advancement of trade,

environment, and development interests. 

Specifically, the Doha agenda includes mandates

to negotiate on rules to reduce or eliminate

environmentally harmful and trade-distorting

subsidies in fisheries and export subsidies in

agriculture, as well as on improved market access

for environmental goods and services. Members

also agreed to strengthen the role of the

Committee on Trade and Environment and to

encourage trade and environment technical

assistance, including in connection with

environmental reviews of trade agreements. In

addition, Members agreed to negotiations on the

relationship between the WTO rules and specific

trade obligations in multilateral environmental

agreements (MEAs), as well on ways to enhance

cooperation between the WTO and MEA

secretariats. 

The Doha Declaration also encouraged continued

cooperation between the WTO and international

environmental and developmental organizations,

especially in the preparations for the World

Summit on Sustainable Development to be held in

Johannesburg, South Africa in September 2002. 

USTR is actively participating in preparations for

the Summit, with a view to helping ensure that

developing countries fully integrate into the world

trading system in order to benefit from trade

liberalization and growing trade opportunities. 

The Summit also provides an opportunity to
188 2001 ANNUAL REPORT

promote the availability of trade capacity building

assistance, including assistance to assure that

trade is environmentally neutral or positive, for

countries to improve environmental standards and

regulations, and to stimulate greater access to

environmental technologies for sustainable

development.

Also in 2001, USTR obtained Congress’ approval

of the U.S.-Jordan FTA, which entered into effect

on December 17, 2001. This FTA includes trade

and environment provisions such as on effective

enforcement of environmental laws, an initiative

on technical environmental cooperation,

transparency elements, and provisions liberalizing

market access for environmental goods and

services. USTR continued negotiations on FTAs

with Singapore and Chile, and expects to address

trade and environment issues, as appropriate, with

those countries as talks make progress in early

2002.

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.

1. Multilateral Fora

The WTO Committee on Trade and Environment

(CTE) met three times in 2001, pursuant to its

mandate as elaborated in the Uruguay Round

Agreements. In preparation for the Doha

Ministerial, the Committee reviewed the full range

of trade and environment issues on its agenda and

continued to deepen Members’ understanding of

these issues. The United States contributed to this

process by, inter alia, playing a leadership role in

working to build a consensus on the need for the

WTO to address fisheries subsidies that contribute

to overcapacity and overfishing, and on the trade

and environmental benefits of liberalizing trade in

environmental goods and services. These

initiatives culminated in a successful launch of

negotiations on these topics at Doha. The United

States also stressed the importance of public

outreach to enhance understanding of the trading

system, as well as the valuable role to be played

by environmental reviews of trade agreements. In

addition, Members held valuable information

exchanges with the Secretariats of a number of

MEAs, and furthered their understanding of the

synergies between MEAs and the WTO.

USTR co-chairs U.S. participation in the OECD

Joint Working Party on Trade and Environment

(JWPTE), which met two times in 2001 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 below under Environment and Trade. 

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 more

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.

2. The North American Free Trade

Agreement (NAFTA)

USTR continues to work actively with the
OTHER MULTILATERAL ACTIVITIES 189

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 CEC has undertaken a number of

environmental projects, encompassing such

diverse objectives as studying the market potential

of shade-grown coffee, developing a draft plan to

help control mercury levels in the environment,

promoting efforts to protect the habitat for

migratory birds, and initiating voluntary

environmental management systems with the

private sector. In 2001, the CEC held a

symposium to study the environmental

implications of the changing electricity market in

North America.

The NAAEC allows citizens to make submissions

to the CEC Secretariat to document alleged

non-enforcement of environmental laws by one or

more of the NAFTA Parties. If the Secretariat

finds merit in such submissions, it may

recommend the production of a factual record,

which outlines the circumstances of each case. In

2001, the CEC Council instructed the CEC

Secretariat to prepare factual records for five

citizen submissions, three concerning the

Government of Canada, one concerning the

Government of Mexico, and one alleging failure

by the U.S. Government to effectively enforce

section 703 of the Migratory Bird Treaty Act

against a logging operation.

In 2001, 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 environment officials from all

three NAFTA governments, and meets to discuss

issues of common concern.

USTR, along with other U.S. agencies, has also

been engaged in examining the relationship

between investment and the environment,

including the need for clarification of NAFTA

Chapter 11. (Chapter 11 sets out each

government’s obligations with respect to investors

from other NAFTA countries and their

investments in its territory.) See Chapter IV.

3. The Western Hemisphere

To provide direction on ensuring mutually

supportive economic and environmental policies,

as was agreed at the 1994 Miami Summit of the

Americas, U.S. negotiators worked over the past

year within the framework of the Free Trade Area

of the Americas (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 will continue to support the

FTAA Civil Society Committee to expand

opportunities for expression of views to the FTAA

Ministers by members of civil society throughout

the Hemisphere, and will carefully consider civil

society’s submissions to that Committee on the

full range of issues, including environmental

concerns. The United States is taking into account

the environmental implications of the FTAA

negotiations through an environmental review,

which was initiated in 2000.
190 2001 ANNUAL REPORT

4. Other Issues

Shrimp/Turtle WTO Dispute

As described in Chapter II, the WTO Appellate

Body in the Shrimp-Turtle dispute found that the

United States’ implementation of its sea turtle

protection law (known as the “shrimp-turtle” law)

is fully consistent with WTO rules and complies

with earlier recommendations of the Appellate

Body. Malaysia, along with three other countries,

had brought an initial challenge to the law in

1996. In a 1998 report, the Appellate Body did

not find fault with the U.S. shrimp-turtle law, but

did find that the United States had unjustifiably

discriminated among exporting countries in

applying the law. The United States took steps to

implement those findings by modifying the

application of the law in a manner that both

enhanced sea turtle conservation and addressed

the concerns of the Appellate Body. 

At the request of Malaysia, in 2001 the original

WTO panel considered whether the United States’

implementation measures complied with the

Appellate Body’s 1998 recommendation. The

panel’s report, issued in June 2001, found that the

United States had complied. On Malaysia’s

appeal, the Appellate Body in October 2001

agreed with the panel’s conclusions. This

outcome, along with that in the Asbestos dispute,

provides further confirmation that WTO rules

adequately safeguard Members’ ability to protect

the environment, health and safety.

Asbestos WTO Dispute

The United States participated as a third party in

Canada’s challenge to a French ban of chrysotile

asbestos on health grounds. In 2000, the WTO

dispute resolution panel had found that the French

ban was inconsistent with WTO national

treatment provisions but was justified under WTO

exceptions as a measure necessary to protect

human health. While supporting the panel’s

overall conclusion that the ban is consistent with

WTO rules, the United States questioned the

panel’s finding that the ban violated WTO

national treatment provisions. In March 2001, the

Appellate Body upheld the panel’s conclusion that

France’s ban was WTO-consistent, but also

agreed with the United States that the ban did not

breach national treatment obligations.

B. Trade and Labor

The trade policy agenda of the U.S. Government

includes a strong commitment to improving labor

standards and protecting the rights of workers. To

help assure that trade and labor policies are

mutually supportive and reinforcing, during 2001

the Bush Administration worked to develop a

“toolbox” of actions the United States could take,

either as part of or parallel to trade negotiations, to

protect children and ensure adherence to the

fundamental rights of workers by our trading

partners. Accordingly, USTR worked

cooperatively with other USG Agencies in

multilateral, regional and bilateral fora to promote

labor standards.

Expanded trade benefits all Americans through

lower prices and greater choices among imports. 

Many other American workers benefit from

expanded employment opportunities created by

trade liberalization. However, these gains may

come at the expense of some American workers in

sectors adversely affected by trade flows. 

Because such workers should be fairly

compensated and given the resources – especially

training or re-training – to adjust to new jobs, the

reauthorization of and improvements to the system

of Trade Adjustment Assistance (TAA) is also an

integral part of the Administration’s international

trade agenda. The Administration continues to

consult with Members of Congress concerning the

exact form these improvements to TAA should

take.

1. 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 core labor
OTHER MULTILATERAL ACTIVITIES 191

standards. At the 2001 Doha WTO Ministerial,

we supported a similar proposal which was put

forth by the EU. Unfortunately, at Doha as at

earlier meetings, 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. At its

November 2001 meeting, the Working Party had

before it papers on the impact of expanded trade

on employment that were prepared by the ILO

secretariat, the WTO, and UNCTAD. The efforts

of the Working Party to analyze the relationships

between trade, investment and labor, and to draw

policy conclusions from that anlysis, are

continuing.

The United States remains the largest donor to the

work of the ILO. The U.S. has been particularly

supportive of two ILO initiatives: the International

Program for 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. 

2. 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. USTR therefore joined the

Departments of Labor and State on the U.S.

Delegation to the XII IACML meeting in Ottawa,

in October 2001. Ongoing efforts of the IACML

will take place in two working groups: One will

focus on the labor dimensions of the Summit of

the Americas process, including the Free Trade

Area of the Americas (FTAA). The second

working group will focus 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, and the UN’s Economic Commission for

Latin America and the Caribbean in their work.

The U.S. Government also promoted attention to

labor standards and issues of workforce quality at

the 2001 APEC Labor Ministerial meeting, held in

Kumamoto, Japan. Other regional trade and labor

activities carried out under NAFTA/NAALC and

the OECD are noted in those sections of this

report.

3. Bilateral Activities 

Perhaps the most significant bilateral action

involving the interaction of trade and labor came

with Congressional approval of the U.S.-Jordan

Free Trade Agreement. Article 6 of that

Agreement commits each Party to strive to ensure

that the principles of the ILO Declaration on

Fundamental Rights are recognized and protected

by domestic law, to effectively enforce its labor

laws, and to not waive or derogate from domestic

labor laws to encourage trade. The US-Jordan

FTA marks the first time such labor-related
192 2001 ANNUAL REPORT

obligations have been incorporated into an

American trade agreement. During 2001 USTR

continued FTA negotiations with the Governments

of Chile and Singapore, and expects appropriate

labor provisions to be included in those

agreements.

At the end of 2001, negotiations were concluded

which extended the bilateral textile agreement

with Cambodia. A unique aspect of the

Cambodian textile agreement is that import quotas

for several categories of textiles 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. 

A final aspect of trade and labor bilateral activities

relates to the worker rights provisions of U.S.

trade preference programs. Early in 2001

incidents were reported of continuing acts of

violence against workers and trade union

organizers in Guatemala. It was also confirmed,

through the good offices of the ILO, that

Guatemala’s labor laws did not adequately protect

those workers’ rights contained in provisions of

the U.S. Generalized System of Preferences (GSP)

and Carribean Basin Trade Promotion Act

(CBTPA). USTR and our Embassy in Guatemala

City made it clear to the government that GSP and

CBTPA benefits would be withdrawn unless its

labor law was amended and violence against

workers and their representatives was ended. 

These actions were taken, and Guatemala

continues to participate in U.S. trade preference

programs, although careful monitoring of the

workers’ rights situation there continues.

When CBTPA eligibility was reviewed and

approved in 2000, three other countries were

noted to have problems with respect to meeting

their obligations to effectively provide for

internationally recognized worker rights: El

Salvador, Honduras and Nicaragua. Therefore, in

July of 2001 USTR led a mission to those

countries which also included worker rights

specialists from the Departments of State and

Labor. In each of the countries, meetings were

held with Government officials from the Trade

and Labor Ministries, trade unionists, NGOs, and

employers. Results of the visits concluded that

CBTPA trade benefits would be maintained, but

that we would continue to pay careful attention to

the protection of worker rights in those countries,

particularly in their maquiladora sectors.

C. Organization for Economic Cooperation

and Development

The Organization for Economic Cooperation and

Development (OECD) is a key forum for the

discussion of economic and social issues

confronting its 30 members. The OECD includes

the United States, Canada, Mexico, the countries

of Western Europe, Japan, Australia, New

Zealand, the Czech Republic, Korea, Hungary,

Poland and Slovakia, whose accession was

completed in December of 2000. Argentina and

Russia have formally applied to join. The OECD

has a major cooperation program with Russia, the

purpose of which is to support Russia’s efforts to

establish a market economy and its 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

economies and the development of cooperative

solutions to many of these problems. Members

have negotiated binding agreements in certain

areas 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). 
OTHER MULTILATERAL ACTIVITIES 193

1. Work Program

In 2001, the OECD Trade Committee continued to

address a number of issues of significance to the

multilateral 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. Major projects include studies

on the benefits of ongoing trade liberalization in

services, an extensive review of regional trade

agreements, and preparations for work related to

the fourth WTO Ministerial Conference held in

Doha, Qatar in November.

2. Competition Policy and Trade

The Joint Group on Trade and Competition

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 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

– if not always convergence – of approaches

toward issues of common interest. 

The OECD Joint Group on Trade and Competition

met twice in 2001. Pursuant to its mandate to

undertake further work on the development

dimension of trade and competition, the Joint

Group used the conceptual approaches taken by

both trade policy and competition policy experts

to discuss the potential role of "special and

differential treatment" at the trade, competition,

and development interface. Substantive work, as

well as roundtable discussions, were also

undertaken on both the Economic Effects of

International Exhaustion of Intellectual Property

Rights (parallel imports) as well as competition

dimensions of trade in Electronic Commerce. In

February of 2002, the renewal of the Joint Group's

two-year mandate will be discussed. 

3. Development and Trade 

A number of recent Trade Committee reports have

made an important contribution in informing

public debate on the implications of further trade

liberalization by analyzing the contribution that

expanded international trade can make to

economic development and other broader

economic and social goals. Previous work in 1998

through 2000 concluded that open trade and

investment have been beneficial for development,

particularly when accompanied by a coherent set

of growth-oriented macroeconomic and structural

policies, capacity-building, adequate social policy

and good governance. In particular, open

economies have grown significantly faster than

closed economies over sustained periods of time. 

In turn, this higher growth is associated with a

reduction in poverty. 

In 2000, the Committee began work on a more

detailed follow-up study on the relationship

between international trade and economic

development in non-OECD countries. As a

result, in autumn of 2001, the OECD published a

major new study on The Development Dimensions

of Trade which reviewed the economics of trade

and growth, the relationship of developing

countries to the multilateral trading system, and

the contribution of development co-operation to

economic advancement and integration. To

ensure adequate review, input was sought from

developing country representatives, an informal

meeting of the Working Party was organized with

participants from 14 non-member economies and

UNCTAD, and its findings were the subject of an

OECD Global Forum for Trade hosted by the

Government of Chile in Santiago during June of

2001.

In addition, the Trade Committee continued its

dialogue with transition countries with a view to

encouraging their integration into the multilateral

trading system. In 2001, the Committee focused

on developments in Russia’s trade policy and

trade in services in the Baltic countries. The

dialogue with Russia included discussion of the

role of Russia’s regions in trade policy, regional
194 2001 ANNUAL REPORT

co-operation in Russia’s Far East, and traderelated aspects of regulatory reform. A Round

Table on the Interface between the Central and

Sub-National Levels of Government in Russia’s

Trade Policy was organized in Vladivostok,

Russia on October 11-12, 2001. The Trade

Directorate also organized a Policy Meeting on

the Economic and Business Environment for

Trade in Services in the Baltic States in Tallinn,

Estonia on December 13-14, 2001.

4. Criminalization and

Non-tax-deductibility of 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 thirtyfifth country to sign the Convention. The

Convention requires the parties to criminalize

bribery of foreign public officials in executive,

legislative, and judicial branches, levy significant

penalties on those who bribe, and implement

adequate accounting procedures to make it harder

to hide illegal payments. As of February 1, 2002,

32 of the 35 signatories had adopted legislation to

implement the Convention. 

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 of developing countries, undermine the

rule of law and create an unpredictable

environment for business. 

The signatories to the Convention commenced the

second phase of monitoring - the evaluation of

enforcement - in November 2001. The first phase

of monitoring - the review of the adequacy of

implementing legislation (which commenced in

April 1999) - is almost complete; implementing

legislation of thirty countries has been reviewed. 

The OECD Convention signatories are also

studying whether the Convention's coverage

should be extended to several related issues,

including bribery of foreign public officials as a

predicate offense for money laundering

legislation, the role of foreign-subsidiaries and

offshore financial centers in bribery transactions,

and bribery of foreign political parties and

candidates.

The OECD also has recommended that member

countries eliminate tax deductibility of bribes.

All thirty-five signatories have agreed to

implement this recommendation. While most

signatories have reported that such bribes are

non-deductible, we will continue to work with

the OECD to develop more reliable

methodologies for monitoring implementation of

this recommendation. 

5. Dialogue with Non-OECD Members

The OECD has continued its contacts with nonmember 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).

In 2000, the Committee focused on developments

in Russia’s trade policy and the progress in trade

liberalization of all transition countries over the

previous ten years. The dialogue with Russia

included discussion of proposed reforms in its

trade regime, the interface between the central

and sub-national levels of government in trade

policy, and trade-related aspects of regulatory

reform. This work was continued in 2001 (see

section above on Trade and Development).

The OECD also maintained its commitment to
OTHER MULTILATERAL ACTIVITIES 195

dialogue with Civil Society Organizations in

2001. For example, the Trade Committee held its

third annual consultation with civil society in

October, which provided a renewed opportunity

to exchange views between OECD Members and

civil society. This year’s consultation theme was

“To Doha and Beyond,” with a focus on trade

and sustainable development. In November of

2001, the Joint Working Party on Trade and

Environment (JWPTE) held its seventh

consultation with civil society and exchanged

views on the outcome of the Doha Ministerial.

6. Environment and Trade

The OECD Joint Working Party on Trade and

Environment (JWPTE) met two times in 2001 to

continue its analysis of the effects of

environmental policies on trade and the effects of

trade policies on the environment. The JWPTE

has successfully deepened its capabilities, having

moved from identifying broad effects to

analyzing effects in specific market sectors. This

year the JWPTE completed important work on

methodologies for assessing the environmental

effects of trade liberalization in the services

sector, which will prove useful as USTR

undertakes assessment of the effects of WTO

negotiations on services. The JWPTE has also

worked to forge tools for enhancing the

compatibility of trade and environment policies,

and this year compiled a synthesis of case studies

examining national application of transparency

and consultation procedures, with a view to

disseminating best practices to member countries

early next year. 

Building upon the development initiatives agreed

upon at Doha, the JWPTE agreed to undertake

work on the development dimension of trade and

environment, beginning with an examination of

how developed country environmental measures

may affect developing country exports. The

OECD will then solicit developing country views

through a workshop in 2002 and seek to address

issues identified. 

7. 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 nearly 25-year

old Arrangement and for negotiating further

disciplines to reduce subsidies in official export

credit support.

In 2001, Participants renewed for another year an

agreement to prevent tied aid from being offered

in select countries of the former Soviet Union, in

order to keep these newly opened markets free

from the trade distorting effects of tied aid.

While the Arrangement has reduced overall tied

aid drastically and European tied aid was at its

lowest level in history, Japan emerged as the

largest provider of tied aid in 2001 - accounting

for 70 percent of all such aid. Participants also

began considering in 2001 a proposal to apply

the tied aid disciplines to untied aid, which is a

form of aid financing that is currently not

disciplined multilaterally but which can have

trade distorting effects. Japan is the largest

provider of untied aid.

Participants were unable to conclude negotiations

to bring discipline to agricultural export credits

(currently excluded from the Arrangement) after

several years of negotiations. This was due to

Canada’s inability to accept the proposed

disciplines. The issue will now be addressed in

the WTO, but bilateral contacts will continue in

hopes of reaching consensus on the issue. 

Participants are addressing a number of other
196 2001 ANNUAL REPORT

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.

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 repayment terms. 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. 

The Export Credit Group, the Participants’

primary working group, reached agreement to try

to ensure that export credits to heavily indebted

poor countries (HIPCs) are not provided for

unproductive purposes. Export Credit Group

members agreed on a transparency exercise

whereby members will report semi-annually on

the financing that they have provided to these

countries (2 year repayment term or greater). 

In 2001, the Export Credit Group also made

progress on the issue of bringing environmental

considerations into the financing decisions of

export credit agencies, although agreement has

not yet been reached because the U.S. was

unwilling to accept the draft proposal – believing

it inadequate. Until agreement is reached, most

members have stated their intention to implement

unilaterally the provisions of the current draft

proposal.

8. Investment

The OECD continued its work on international

investment issues. A key area of focus was

follow-up work in regard to the OECD

Guidelines. A prominent event in this regard was

the First Annual Meeting of the National Contact

Points (NCP) of the OECD Guidelines for

Multinational Enterprises. This meeting

provided an opportunity to take stock of the first

year of NCP activity since completion of the

review of the Guidelines and to reflect on

directions for future activity. Discussions

centered around institutional arrangements,

information and promotion, and implementation

of the Guidelines in specific instances. The

OECD also organized the Global Forum on

International Investment which was developed in

order to foster an open and inclusive dialogue on

emerging investment issues. 

The Committee also continued its outreach to

non-Members. Examples of this work include

the OECD-Ukraine Roundtable on the Ukraine

Investment Policy Review and conferences on

foreign direct investment (FDI) in the Caribbean

Basin and Latin American and FDI in South East

Europe (SEE). The latter conference highlighted

the crucial role of FDI in the SEE countries and

outlined a strategy for achieving a favorable

investment environment in the region. 

Additionally, the OECD also organized meetings

on foreign investment in China which were part

of the ongoing OECD-China policy dialogue on

investment issues. 

In addition to these events the CIME also held

regular meetings where issues such as the costs

and benefits of investment and investment

incentives were addressed. 

9. 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
OTHER MULTILATERAL ACTIVITIES 197

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, at www.oecd.org.

10. Regional Economic Integration

The OECD has initiated work to study the nature

and implications of Regional Trade Agreements

(RTAs) and their impact on trade. As part of this

work, a report was produced aiming to provide a

review of the main findings of empirical work

already undertaken outside the OECD on the

effects of RTAs on flows of trade and

investment, and their impact on economic

welfare. The OECD declassified that study in

2001.

As a follow-up to the study on trade and other

economic effects of RTAs, work has been

launched by the Trade Committee to construct a

database that structures the available evidence on

empirical effects of RTAs in a systematic

manner. The purpose of the RTA-database is to

facilitate analysis of patterns across both issues

and RTAs, and allow comparisons between

studies, thereby helping to differentiate between

areas of broad consent among researchers and

those where further empirical clarification of

effects seems desirable.

Furthermore, the Trade Committee decided in

2001 to investigate the relationship between the

rules-based multilateral trading system and

regional trade agreements. The Committee

launched a comparative analysis of WTO and

selected RTA provisions in various policy areas,

such as tariffs, rules of origin, services,

competition, investment, environmental

protection, standards and dispute settlement. The

objective of the analysis is to examine the extent

to which existing RTAs draw on existing

multilateral trade rules, or go beyond such rules,

and whether RTAs have taken consistent or

differing approaches on particular policy areas.

This work will continue in 2002 with a view to

exploring the synergies between regionalism and

multilateralism, and clarifying some of the

implications of regionalism for the functioning of

the multilateral trading system.

11. Regulatory Reform

The OECD has an ongoing work program

focusing on how governments can improve their

regulations and regulatory processes. It began

conducting reviews of regulatory reform efforts

in member countries in 1998, based in part on

self-assessment. The United States has

supported the OECD’s regulatory reform efforts

as a way to raise the profile of the problems

posed by the regulatory regimes of many OECD

countries to our exporters’ market access; to

demonstrate that the benefits of regulatory

reform (e.g., creation of due process and

transparency) can lead to greater market

openness and competition and more effective

achievement of important policy goals; to

encourage consideration of discussion among

OECD members regarding possible solutions to

market access problems caused by regulation and

regulatory heterogeneity; and to promote growth

in member economies through domestic

efficiency gains and thereby increase demand for

U.S. exports.

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
198 2001 ANNUAL REPORT

equivalence of other countries’ procedures for

conformity assessment where appropriate, and

application of competition principles.

Since 1998, the OECD completed country

reviews of regulatory reform in the United States,

Japan, Mexico, the Netherlands, Korea, Spain,

Denmark, Hungary, Greece, Italy, Ireland, and

the Czech Republic. In 2001, the United

Kingdom, Poland, Canada and Turkey were

reviewed by the Committee.

12. Services

With services negotiations ongoing in the WTO,

services work in the OECD revolved around 

several challenging issues for these negotiations.

A major study, Open Services Markets Matter,

provides governments with a resource to draw

upon in consultations with domestic

stakeholders. The study focuses on three main

areas: (i) the economy-wide benefits of services

trade and investment liberalization for both

developed and developing countries and for

consumers, identifying practical examples and

drawing on available empirical research; (ii)

specific concerns raised by anti-GATS critics,

including that the GATS threatens the provision

of essential public services and governments’

right to regulate service activities; and (iii) key

negotiating challenges under GATS, especially

for developing countries. A Policy Brief with the

main findings was made available at the WTO

Ministerial meeting in Doha, Qatar, and the study

itself will be published in early 2002. 

Significant work was also undertaken on

movement of services providers under mode 4 of

the GATS, looking at issues in mode 4 trade for

both sending and receiving countries; defining

and measuring mode 4; and current GATS

commitments and how these could be improved

in negotiations. Further work is underway on

approaches to the movement of service suppliers

in selected regional trade agreements; the

economic effects of temporary foreign workers in

host and origin countries; progress in mutual

recognition agreements; and further

consideration of improvements to GATS

commitments on mode 4.

In 2001, the OECD published Trade in Services:

Negotiating Issues and Approaches, which

reports on the results of work in its services

project. A third Services Experts Meeting is

planned for March 4 and 5, 2002. Initial work

was also undertaken on non-tariff barriers in the

new economy, with work on regulation of

services traded electronically planned for 2002.

13. Shipbuilding

The OECD Council Working Party on

Shipbuilding has intensified its efforts to seek

viable policy alternatives that would alleviate

market distortions and establish a "level playing

field" amongst the world’s shipbuilders. This

activity has been given the highest priority in that

Working Party, in response to the instruction

given by the OECD Council meeting at

Ministerial level in May 2001 “to redouble its

efforts to explore solutions to bring about normal

competitive conditions in shipbuilding, and

encourage shipbuilding countries outside the

OECD to participate in this work.” The

Working Party is organizing an Industry Hearing

in March of 2002 at which principal industry

representatives will be invited to provide their

views on possible actions governments should

take to address the industry’s problems.

In order to enhance the dialogue with partners

outside the OECD, the Working Party organized

a Workshop on Shipbuilding Policies on

December 19 and 20, 2001. The Workshop

brought together a number of non-OECD

countries with important shipbuilding capacity,

including China, now the world’s third largest

ship producer. Representatives at the Workshop

covered nearly 95% of the world’s shipbuilding

market. At that Workshop, there was strong

support from participants for the OECD efforts to

seek viable policy alternatives to create a more

competitive market, and there were positive signs

that some non-OECD economies may participate

if effective disciplines can be found.
OTHER MULTILATERAL ACTIVITIES 199

14. Steel

On June 5, 2001 President Bush announced a

comprehensive strategy to respond to the

challenges facing the U.S. steel industry. 

Included in this strategy were: (1) negotiations

with U.S. trading partners to seek the near-term

elimination of inefficient excess capacity in the

steel industry worldwide; and (2) negotiations

with our trading partners to develop rules that

will govern steel trade in the future and eliminate

the market-distorting subsidies that gave rise to

the industry=s current condition. These

negotiations were launched at special high-level

OECD meetings on steel held in September and

December of 2001. 

At the first high level OECD meeting on steel

held in September, thirty-nine participating

governments agreed that a global excess of

inefficient steelmaking capacity is a central

problem affecting steel trade. The governments

issued a communique recognizing the problems

caused by the global excess of inefficient

steelmaking capacity, and committed to taking

concrete actions to reduce global excess.

The participants at the September meeting on

steel also recognized the differences among

governments regarding definitions of inefficient

or excess capacity, and acknowledged that in

market-oriented economies, decisions to reduce

capacity will be decided by individual firms, not

governments. Therefore, the participating

governments agreed to proceed with a "self

assessment" in which each government would

consult with its industry to assess what changes

in steelmaking capacity have recently occurred or

are anticipated to occur due to market forces. 

This initiative was continued at a second highlevel meeting held at the OECD in December.

Participating governments reported that market

forces and policy measures have recently resulted

in, or will result in, the projected closure of at

least 61 to 65 million metric tons of capacity by

the end of 2003, a further 9.5 million tons of

capacity by 2005, and another 23 million tons by

2010.

The participants also concurred on the longerterm need to address subsidies and other market

distorting practices and measures. The

governments agreed to discuss in meetings

during 2002 how these distortions may be

addressed.

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 2001, industry CEOs representing all five

parties held their second 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 that the governments of

national/regional industry associations must have

eliminated semiconductor tariffs, or committed to

eliminate these tariffs expeditiously. 
200 2001 ANNUAL REPORT

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

of governments and authorities that may affect

the future outlook and competitive conditions

within the global semiconductor industry. In

June 2001, the United States hosted the second

such meeting. At that meeting, the WSC

recommended that government authorities pursue

the following policies: promotion of open and

competitive markets around the world; avoidance

of specific intervention by government in the

operation of individual companies; protection of

intellectual property rights; non-discrimination

for foreign products in all markets; an end to

investment restrictions tied to technology transfer

requirements; swift accession of China and

Chinese Taipei to the WTO; expanded

participation in the Information Technology

Agreement (ITA); revitalization of efforts to

conclude ITA II; adoption of a growthpromoting, transparent, non-discriminatory and

market-oriented approach to electronic commerce

and maintenance of the internet as a tariff-free

environment; and adoption of environmental

regulations based on scientific assessments of the

risks posed by the targeted materials and their

likely substitutes. The WSC also presented a

White Paper on the industry’s concerns about

proposals to ban the use of lead in

semiconductors and efforts underway within

industry to reduce the use of lead in electronic

products and to develop safe alternatives. The

WSC has also invited China to become a party to

the Joint Statement. China is expected to

become the second-largest market for

semiconductors within a decade. Japan will host

the next meeting of governments and other

authorities in September 2002.

Foreign market share in the Japanese market,

which had exceeded 30 percent in every quarter

during 1997 and 1998, averaged 29 percent in

1999 and remained at about that level in 2000. 

The U.S. Government monitors foreign market

share in the Japanese market on a quarterly basis,

and once a year reports the average annual

foreign share in the Department of Commerce

“U.S. Industry and Trade Outlook.” Market

share data for 2001 is not yet available.

E. Steel

On June 5, 2001 President Bush announced a

comprehensive strategy to respond to the

challenges facing the U.S. steel industry. This

strategy is designed to restore market forces to

world steel markets and to eliminate the 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 the Treasury, to

initiate negotiations with our trading partners

seeking the elimination of inefficient excess

capacity in the steel industry worldwide. Finally,

the President directed the United States Trade

Representative, together with the Secretaries of

Commerce and the Treasury, to initiate

negotiations on the rules that will govern steel

trade in the future and to eliminate the underlying

market-distorting subsidies that led to the current

conditions in the first place.

On June 22, 2001, the United States Trade

Representative requested, on behalf of the

Administration, that the U.S. International Trade

Commission (ITC) initiate a comprehensive

investigation of injury to the industry under

section 201 of the Trade Act of 1974. 

On October 22, the ITC determined that imports

of 12 groups of products, valued at over $10

billion a year, were harming U.S. manufacturers

and workers. These products accounted for

approximately 74%, by volume, of United States

steel imports. 

On December 19, the ITC issued a report
OTHER MULTILATERAL ACTIVITIES 201

containing its recommendation as to what action

the President should take in response to the

import surge. On January 3, 2002, USTR

requested additional information from the ITC,

which responded on February 4, 2002. The

President has until 30 days after that response to

decide on what action, if any, should be taken

under Section 201.

The negotiations on inefficient excess capacity

were launched at special high-level OECD

meetings on steel held in September and

December of 2001. (See steel discussion in

preceding section of activities of OECD.) 

The President’s three-part strategy was designed

to help U.S. industry meet the challenges it faces

while restoring market forces to global steel

trade. It will encourage the elimination of excess

inefficient capacity and subsidies and other

market distorting practices in the global steel

industry.
202 2001 ANNUAL REPORT

VI. Trade Enforcement

Activities

A. Enforcing U.S Trade Agreements

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 helps 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 USTR’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 to 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 57 complaints

at the WTO, thus far successfully concluding 37

of them by settling favorably 19 cases and

prevailing on 15 others through litigation in
TRADE ENFORCEMENT ACTIVITIES 203

WTO panels and the Appellate Body. USTR

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 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 37 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 enforcement of

intellectual property rights; the EU’s market

access for grains; 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 15 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 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; 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.

1. WTO Dispute Settlement

2001 Activities

In 2001, the United States filed one new

complaint under WTO dispute settlement

procedures, involving an import surcharge

imposed by the European Union on corn gluten

feed, and that dispute was resolved shortly

thereafter. The United States also reached an

agreement with the EU to resolve the

long-standing dispute over bananas;

satisfactorily settled the dispute regarding

Belgian duties on imports of rice; and reached

agreement with Brazil regarding certain

provisions of its patent law.

The United States also received favorable WTO

dispute panel or Appellate Body rulings in 2001
204 2001 ANNUAL REPORT

in cases involving U.S. exports of high fructose

corn syrup to Mexico and beef to Korea. 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 at

www.ustr.gov/enforcement.

2. 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 marketplace. 

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. The SEO's

electronic subsidies database, which was fully

installed last year, 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,

which can be found at http://ia.ita.doc.gov/esel/

eselframes.html, includes information on all the

foreign subsidy programs that have been

investigated in U.S. countervailing duty cases
TRADE ENFORCEMENT ACTIVITIES 205

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.

The past year marks an important turning point

in the marshaling of government resources to

deal with distortive foreign subsidies and other

unfair trade practices, and in the intensity and

focus of those efforts. A new, Administrationwide trade compliance initiative was launched

in 2001, with additional personnel and resources

throughout the Executive Branch being

dedicated to increased monitoring and

enforcement activity as concerns our trading

partners’ adherence to their bilateral and

multilateral trade commitments. In terms of

subsidies enforcement, IA has both expanded

the reach and strengthened the organization of

its resources as part of this broader trade

compliance effort.

Last year, IA established a Trade Remedy

Compliance Staff for the purpose of addressing

the problem of foreign unfair trade practices,

particularly those originating in East Asia, in a

more pro-active fashion. Pursuant to

Congressional directives, IA has assembled a

staff of trade analysts with exclusive

responsibility for tracking and analyzing

government policies, business practices and

trade trends in China, Japan and Korea for

possible evidence of burgeoning unfair trade

problems. These Washington-based analysts

will work in coordination with IA officers that

the Congress has mandated be stationed in such

countries as China, Japan and Korea in order to

support administration of the U.S. unfair trade

laws, monitor other countries’ use of their own

trade statutes, and work closely with U.S.

industries in order to prevent and impede at an

early stage the development of unfair trade

problems that could both harm U.S. interests

and create unnecessary frictions with our trading

partners.

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 monitor 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 at 

http://ia.ita.doc.gov/foradcvd/index.html. As

noted above, the deployment overseas of IA

officers will improve the Administration’s

ability to monitor the application of foreign

unfair trade laws to U.S. exports. 

Over the last year, USTR and other senior U.S.

officials have met on several occasions with

South African officials regarding the South

African antidumping order against U.S. exports

of certain poultry parts, and hope to resolve this

matter early in 2002. The Canadian

countervailing duty investigation against U.S.

exports of grain corn, in which the U.S.

Government actively participated as a separate

respondent, ended last year with a finding by the

Canadian International Trade Tribunal that U.S.
206 2001 ANNUAL REPORT

exports did not cause or threaten to cause injury

to the producers of corn in western Canada. 

This ruling terminated the investigation. Other

antidumping investigations of U.S. goods

currently being closely monitored include

Canada’s investigation of fresh tomatoes and

China’s investigation of lysine.

Twice a year, WTO Members notify the WTO

of all antidumping and countervailing duty

actions they have taken during the preceding

six-month period. The actions are identified in

semi-annual reports submitted for discussion in

meetings of the relevant WTO committees. 

Members also notify their preliminary and final

determinations to the WTO on a semi-annual

basis. 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.

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.

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
TRADE ENFORCEMENT ACTIVITIES 207

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

(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

considers that the country fails to implement a

WTO dispute panel recommendation, the USTR

must determine what further action to take under

Section 301. 

There were major developments in the

following Section 301 investigations during

2001. (For those investigations involving WTO

dispute settlement procedures, see Chapter II.)

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 regarding

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: (1) its failure to use

existing law enforcement tools to stop optical

media piracy; and (2) 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. On August

7, 2001, the USTR announced that additional

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. 

The USTR extended the investigation for three

months in order to allow sufficient time for the

development of a final product list. During that

time, the Government of Ukraine again failed to

take steps to stop the high levels of optical

media piracy. 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. Given that the Ukrainian parliament

was scheduled to vote on an optical media

licensing law on December 13, 2001, the USTR

decided to delay the implementation of such

action until December 20, 2001. However,

Ukraine failed to adopt the optical media

licensing law, and the USTR announced

sanctions on December 20, 2001, with an

effective date of January 23, 2002.
208 2001 ANNUAL REPORT

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 statetrading 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 asserts

that such practices have harmed U.S. wheat

farmers by causing U.S. wheat to lose market

share in the 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 this request on October 5, 2001. 

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 the Canadian wheat

marketing practices, as well as any other issues

raised in the petition, the ITC report, or in other

submissions to the USTR. Such comments were

due by January 14, 2002. Because of the

extensive comments filed, USTR extended the

investigation until February 15, 2002, to ensure

thorough review of all information. 

EC - Importation, Sale, and Distribution of

Bananas (301-100a)

Chapter II includes a report on WTO dispute

settlement proceedings involving the EC’s

regime for the importation, sale, and distribution

of bananas. On April 6, 1999, WTO arbitrators

confirmed that the EC had failed to implement

the recommendation and rulings of the WTO

Dispute Settlement Body (DSB) with respect to

its banana regime, and the arbitrators

determined that the level of nullification or

impairment suffered by the United States as a

result of the EC’s WTO-inconsistent banana

regime was $191.4 million per year. Pursuant to

the arbitrators’ determination, on April 19,

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 $191.4 million per

year. In a notice published in April 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 pursuant to Section

301. 

On April 11, 2001, the United States and the EC

announced an understanding in the dispute. The

understanding provides for phased

implementation steps. On July 1, 2001, the EC

adopted a new system of banana licenses based

on historic reference periods. On January 1,

2002, the EC shifted an additional 100,000 tons

of bananas into a tariff-rate quota accessible to

bananas of Latin American origin (with respect

to which U.S. distributors have a substantial

historic share). By January 1, 2006, the EC is to

introduce a tariff-only regime for banana

imports. 
TRADE ENFORCEMENT ACTIVITIES 209

The EC completed the first two phases of

implementation, resulting in additional access

for U.S. banana distributors to the EC

market. In response, the USTR removed the

increased duties on EC products as of July 1,

2001. The United States is continuing to

monitor the EC’s implementation of the

understanding. 

EC - Measures Concerning Meat and Meat

Products (Hormones) (301-62a)

Chapter II includes a report on WTO dispute

settlement proceedings regarding an EC

directive prohibiting import of 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 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. These increased

duties remained in place throughout 2001. 

Talks have continued with the aim of reaching a

mutually satisfactory temporary solution to the

dispute, but no resolution has been reached. 

Other Investigations Involving WTO Dispute

Settlement

Chapter II includes information on the following

Section 301 investigations that involve measures

that are the subject of WTO dispute settlement

proceedings filed by the United States: Japan -

Market Access Barriers to Agricultural Products

(301-112); and Canada - Export Subsidies and

Market Access for Dairy Products (301-113)

2. Super 301

Super 301 has provided a mechanism for the

USTR to review U.S. trade expansion priorities

and identify priority foreign country practices,

the elimination of which is likely to have the

most significant potential to increase U.S.

exports, either directly or through the

establishment of a beneficial precedent. During

calendar years 1999-2001, Super 301 was

authorized by Executive Order 13116.

The 2001 Super 301 Report identified the

following trade expansion priorities: (1)

reestablishing a bipartisan consensus on free

trade; and (2) moving on multiple fronts to

expand trade. The report did not identify any

“priority foreign country practices” within the

meaning of the Executive Order. However, the

report identified for careful monitoring a range

of measures that limit U.S. exporters’ ability to

take advantage of enhanced market access

obtained through trade agreements. 

Examples of such measures include certain

customs valuation practices, burdensome dealer

protection laws, restrictive auto policies,

onerous technical regulations, lack of
210 2001 ANNUAL REPORT

transparency in regulatory rule-making,

agricultural practices, subsidization practices,

telecommunications trade barriers,

discriminatory trade and investment measures in

the auto sector, discriminatory retail policies,

discriminatory policies affecting trade in

electronic commerce, non-transparent

pharmaceutical pricing policies, market access

barriers in the flat glass sector, and market

access barriers affecting the textile sector in

various trading partners.

3. Special 301

During the past year, the United States

continued to implement vigorously the Special

301 program, resulting in substantial

improvement in the global intellectual property

environment. Publication of the Special 301

lists indicates the countries whose intellectual

property protection regimes most concern the

United States, and warns 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. 

a. 2001 Special 301 Review

Announcements

On May 1, 2001, the United States Trade

Representative announced the results of the

2001 "Special 301" annual review which

examined in detail the adequacy and

effectiveness of intellectual property protection

in approximately 80 countries, the largest

number of countries ever reviewed. 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.

Ukraine was identified as a Priority Foreign

Country on March 12, 2001, and an

investigation was initiated under Section 301 of

the Trade Act of 1974. The United States has

worked with Ukrainian officials over the past

several years in an effort to reduce alarming

levels of copyright piracy and to improve

Ukraine’s overall intellectual property regime.

Copyright piracy in Ukraine is extensive and
TRADE ENFORCEMENT ACTIVITIES 211

enforcement is severely lacking, resulting in

increasing unauthorized production and export

of CDs and CD-ROMs. According to estimates

from our copyright industry, Ukraine is the

single largest source of pirate CDs in the Central

and East European region. U.S. industry

estimates that losses to the music industry alone

are $210 million. In addition, a number of

Ukraine’s intellectual property laws, especially

trademark, patent and copyright, fall short of

compliance with the minimum standards set out

in the TRIPS Agreement and the 1992

U.S.-Ukraine bilateral trade agreement. It is

unclear whether Ukraine protects pre-1973

copyrighted works; it does not provide

retroactive protection for sound recordings. In

June, the U.S.-Ukraine Joint Action Plan to

Combat Optical Media Piracy in the Ukraine

was signed. Regrettably, the Ukraine has failed

to live up to the terms of the Plan. A description

of the current status of that dispute is contained

earlier in this chapter in the discussion of cases

under Section 301.

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 2001, USTR placed 16 trading partners on the

“Priority Watch List”: Argentina, Costa Rica,

the Dominican Republic, Egypt, the European

Union, Hungary, India, Indonesia, Israel, Korea,

Lebanon, Malaysia, the Philippines, Russia,

Taiwan and Uruguay. Thirty-two trading

partners were placed on the "Watch List." 

Countries that were not mentioned in the report

last year but are on the Watch List this year

include: New Zealand, the Slovak Republic and

the United Arab Emirates. The following

countries were removed from all lists: Czech

Republic, Denmark, Ecuador, Moldova, Oman,

Qatar, Singapore, and Spain.

On October 31, 2001, the USTR announced the

results of out-of-cycle reviews of Malaysia,

Costa Rica and Lithuania. Malaysia was

moved from the Priority Watch List to the

Watch List as a result of its progress in

combating optical media piracy and its

commitment to sustained IPR enforcement.

Costa Rica remained on the Priority Watch List,

and Lithuania also remained on the Watch List.

b. Intellectual Property and Health

Policy

In announcing the results of the 2001 Special

301 review, USTR reiterated that we were not

considering a change in the present flexible

approach to health-related intellectual property

issues. Consistent with America's protection of

intellectual property, we remain committed to

working with countries that develop serious

programs to prevent and treat HIV/AIDS.

We are informing 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 United States is 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. 

A comprehensive approach is needed to deal

with any serious health emergencies, such as the

AIDS crisis. In dealing with such serious

threats to public health, like AIDS, countries

need to stress education and prevention. The

cost of drugs is but one of many important

issues that must be addressed. Effective drug

treatment necessitates urgent action to
212 2001 ANNUAL REPORT

strengthen health management systems –

especially with regard to the means and methods

of drug distribution. Other needed measures

include: the development of appropriate drug

selection policies and standard treatment

guidelines; the training of care providers at all

levels; an increase in the availability of adequate

laboratory support to diagnose and monitor

these complex therapies; and ensuring that the

right drugs are used for the right purpose and in

the right amount.

Certain countries have done an excellent job

addressing the AIDS crisis, especially given

their limited means. Such countries include

Uganda, Senegal, and Thailand. However, some

interested parties blame only the pharmaceutical

companies without fully examining the many

issues involved in addressing the AIDS crisis.

Certain countries try to justify the use of

protectionist measures by associating these

measures with the AIDS crisis when no such

linkage exists. This behavior diverts countries,

and other interested parties, from focusing on

areas of real concern. Indeed, local production

requirements can also cost the jobs of American

workers.

In sum, the HIV/AIDS scourge is devastating –

but there are ways to counter it. Drug therapies

must be part of an integrated approach. 

Solutions must be found to encourage the

discovery and production of other effective

treatments in the future – for this disease and

others. 

On November 14, at the 4th World Trade

Organization (WTO) Ministerial Conference,

the United States joined other WTO Members in

issuing a separate political Declaration that

highlights provisions in the TRIPS agreement

that provide Members with the flexibility to

address public health emergencies, such as

epidemics of HIV/AIDS, tuberculosis and

malaria. Through the Declaration, Members

expressed their strong support for the TRIPS

agreement and the importance of intellectual

property protection for the development of

life-saving drugs. Ministers also agreed to a

U.S. proposal to extend until January 1, 2016,

the time by which least-developed WTO

Members must implement TRIPS provisions on

protecting patent rights for pharmaceutical

products.

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:

< In January 2001, Korea enacted

amendments to strengthen its patent and

trademark laws. 

< In February 2001, Turkey enacted

long-awaited amendments to its

Copyright Law, with the goal of

bringing Turkey into compliance with

the TRIPS Agreement.

< In February 2001, President Kim of

Korea issued public orders to the

Ministry of Information and

Communications and the Ministry of

Justice designed to strengthen their

copyright enforcement efforts.

< On March 20, 2001, the Danish

Parliament approved legislation making

civil ex parte searches available. The

legislation was signed into law on

March 28, 2001.

< In March 2001, the United States agreed

to settle a WTO dispute it brought

against Greece regarding television

piracy after Greece passed new

legislation providing for the immediate

closure of television stations that

infringe intellectual property rights, and

committed to provide effective

deterrence against any increase in the

level of television piracy.
TRADE ENFORCEMENT ACTIVITIES 213

< Hong Kong's amendments to its

Copyright Ordinance, clarifying

end-user software piracy as a criminal

offense, became effective on April 1,

2001.

< In response to a WTO panel decision, in

which the United States prevailed,

Canada amended its Patent Act to

extend patent protection from 17 to 20

years to comply with its WTO

Trade-Related Aspects of Intellectual

Property Rights (TRIPS) obligations. 

The law entered into force on July 12,

2001.

< In November 2001, Taiwan's legislature 

passed an optical media management

law, in response to the U.S. Special 301

process. Under the law, fines were

increased and the government has the

authority to seize machinery and

products. Due to a six- month transition

period, it will be some time before the

effectiveness of Taiwan's enforcement

effort will be seen.

< In November 2001, Taiwan also enacted

legislation extending the term of patent

protection from 15 to 20 years as

required by the TRIPS Agreement.

d. Ongoing Initiatives

Implementation of the 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, 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 among 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, a number of

countries are still in the process of finalizing

implementing legislation and establishing

adequate enforcement mechanisms. The United

States will continue to work with such countries

and expects further progress in the very near

future to complete the TRIPS implementation

process. However, in those instances where

additional progress is not achieved in the near

term, or where the United States has been

unable to resolve concerns through bilateral

consultation, we will pursue our rights through

WTO dispute settlement proceedings. 

Controlling Optical Media Production and

Internet Piracy

To address existing and prevent future piratical

activity, over the past year several of our trading

partners, including Malaysia, have taken

important steps toward implementing, or have

committed to adopt, much needed controls on

optical media production. However, others that

are in urgent need of such controls, including

Ukraine, have made insufficient progress in this

regard. 

Governments such as those of Bulgaria, China,
214 2001 ANNUAL REPORT

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. We

continue to urge our trading partners facing the

challenge of pirate optical media production

within their borders, or the threat of such

production developing, to adopt similar controls

in the coming year. During 2001, Ambassador

Zoellick took note of the positive initial steps

taken by Malaysia to implement its optical

media law and urged Russia, Thailand,

Indonesia, the Philippines and Taiwan to follow

suit.

As serious as the problem of optical media

piracy is, the internet is even more problematic

in that it has provided an efficient global

distribution network for pirated products. 

Several approaches must be taken by

governments to address this problem, including

full implementation of the TRIPS Agreement’s

enforcement obligation to provide effective

action and adequate deterrence against

commercial piracy, whether it occurs in the online environment or in the physical world. In

addition, governments should ratify and

implement the two WIPO “internet” treaties,

which clarify exclusive rights in the on-line

environment and specifically prohibit the

circumvention of technological protection

measures for copyrighted works. 

Government Use of Software 

In October 1998, a new Executive Order was

adopted directing U.S. Government agencies to

maintain appropriate, effective procedures to

ensure legitimate use of software. The President

also directed USTR to undertake an initiative

over the following 12 months 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 since October of

1998. Countries that have issued decrees

mandating the use of only authorized software

by government ministries include China,

Colombia, Ireland, Jordan, Paraguay, Thailand,

France, the U.K., Greece, Hungary, Hong Kong,

Macau, Lebanon, Taiwan and the Philippines. 

This past year the Governments of Israel and

Spain reported that they have also issued similar

decrees. Ambassador Zoellick noted his

pleasure that these governments have

recognized the importance of setting an example

in this area. 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 2002.

4. 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. An

affirmative determination under Section 1377

must be treated as an affirmative determination

of a violation of a trade agreement under

Section 304(a)(1)(A) of the Trade Act of 1974.

Since the World Trade Organization (WTO)

Basic Telecommunications Agreement came

into force in February 1998,

telecommunications markets overseas have
TRADE ENFORCEMENT ACTIVITIES 215

rapidly opened to competition. U.S. companies

have invested billions of dollars to build global

networks, partner with foreign companies, and

expand their commercial presence in foreign

markets. 

However, there remain obstacles to the full

expansion of U.S. telecommunications

companies into overseas markets. Of these, the

most pervasive and difficult to overcome are

barriers placed on new entrants by the dominant

incumbent carrier. Most major U.S. trading

partners have undertaken obligations in the

WTO to ensure the pro-competitive entry of

new service suppliers into the market, including

obligations to maintain appropriate measures to

prevent anticompetitive conduct, ensure costoriented interconnection, and administer scarce

resources in an objective and non-discriminatory

manner.

 

The 2001 Section 1377 review focused on

practices of incumbent carriers that hinder the

development of competitive telecommunications

markets in various countries. In addition, the

2001 review announced resolution of

outstanding issues from past reviews. 

Canada: USTR announced resolution of a

complaint raised in the 2000 1377 review

concerning the consistency of Canada’s

contribution collection (universal service)

regime with its WTO Reference Paper

obligations. The Canadian regulator (CRTC)

reformed this system in November 2000. These

reforms are expected to save competitive service

providers millions of dollars.

Colombia: Colombia was under review for the

inability of U.S. telecommunications operators

to obtain licenses to offer international carrier

services consistent with its WTO commitments.

Carrier services involve the provision of

wholesale transmission capacity – via submarine

cables or otherwise – to other

telecommunications operators and Internet

service providers. Colombia’s failure to license

such services affects tens of millions of dollars

of investment and deprives Colombian users of

much-needed international bandwidth for

Internet services and other applications. In mid2001, Colombia’s legislature enacted legislation

to address this problem. 

EU Member States: The 2001 review focused

on alleged anticompetitive behavior by the

dominant incumbent carriers in Germany,

France, Italy, Spain and the United Kingdom.

These problems related to local loop unbundling

(i.e. competitors’ ability to lease subscriber

lines) and actions by the dominant incumbent

carrier to slow down, degrade, and, in some

cases, deny access to the local loop by a new

entrant. The European Commission appears to

share U.S. concern about these practices and has

taken positive steps at the EU level to address

them. The United States continues to work

closely with the EU to monitor how EU Member

States are addressing these issues.

Japan: As in past years, Japan represented an

important focus of the 2001 Section 1377

review. Principal concerns raised in the review

relate to: (1) the lack of effective dominant

carrier regulation, including retail price

regulation; (2) the lack of a fully independent

regulator with effective enforcement powers; (3)

burdensome licensing and filing requirements;

(4) above-cost interconnection rates in both the

wired and wireless markets; and (5) the lack of

an effective rights-of-way regime. Japan has

taken important steps to address aspects of these

problems, particularly through legislation passed

in mid-2001. USTR will continue to vigorously

monitor implementation of this legislation and

development of further competitive safeguards

under the U.S.-Japan Regulatory Reform and

Competition Policy Initiative.

Mexico: The United States remains concerned

with trade barriers in Mexico’s $12 billion

telecommunications market affecting

international services. Mexican measures do

not permit effective competition in its

international telecommunications services

market. These measures deny other competitive
216 2001 ANNUAL REPORT

Mexican carriers the opportunity to provide

lower-cost alternatives to U.S. companies

linking with Mexico – alternatives many

competitive Mexican phone companies are

eager to offer. As a result, wholesale

telecommunications rates for U.S.-Mexico calls

are still roughly four times their cost. These

inflated rates cost U.S. companies and

consumers about $600 million a year.

Our concerns relate to WTO dispute settlement

proceedings initiated on August 17, 2000, when

the United States initiated WTO consultations

with Mexico regarding a wide range of

measures affecting telecommunications services. 

The United States and Mexico held such

consultations on October 10, 2000 but did not

resolve the dispute. Therefore, on November

10, 2000, the United States requested the

establishment of a panel and additional

consultations with the Government of Mexico. 

These additional consultations, held on January

16, 2001, did not resolve the dispute. 

Since the initial U.S. request for consultations,

Mexico has taken steps to address several

barriers to telecommunications trade. However,

Mexico has not yet addressed trade barriers

affecting international telecommunications

services. 

Peru: In the 2001 review, USTR noted the

reduction in interconnection rates in Peru, which

had been subject to Section 1377 review since

2000. In December 2000, the Peruvian regulator

(OSIPTEL) reduced all fixed-line

interconnection rates to 1.68 cents per minute,

down from 2.9 cents per minute. Rates are

expected to continue to decline to .96 cents per

minute by July 2002, which should put Peru’s

interconnection rates at among the lowest in

Latin America. In addition, OSIPTEL is

reportedly developing a methodology for

analyzing the cost of terminating calls onto

mobile networks. 

South Africa: The 2001 review continued to

note very serious concerns with alleged barriers

in South Africa’s market for value added

network services (VANS). Specifically,

Telkom, South Africa’s state-owned monopoly

supplier of basic telecommunications services,

continues to deny certain U.S. service suppliers

the network capacity they need to supply such

services. At the time of the review, USTR noted

progress in efforts by South Africa’s

telecommunications regulator to resolve these

and related issues. In addition, in late March, 

South Africa’s Minister of Communications

took a major step forward, declaring that VANS

should have the right to offer a broader range of

data services. However, since that time the

South African Parliament enacted legislation,

which appears to impose new impediments on

the ability of VANS to offer their services. The

United States is closely monitoring

developments in South Africa to ensure that the

new legislation is consistent with South Africa’s

WTO commitments. 

Taiwan: The 2001 review identified serious

limitations on the competitive offering of

telecommunications services and expressed

concern that such limitations appeared to be

inconsistent with the commitments undertaken

by Taiwan as part of its bilateral WTO

accession negotiations with the United States to

liberalize its telecommunications market by July

1, 2001. Since that time, Taiwan has pledged to

take steps to address key concerns. The U.S.

Government continues to work with Taiwan to

ensure that Taiwan fulfills its WTO

commitments.

5. Government Procurement

Executive Order 13116 of March 31, 1999,

reinstituted certain elements of Title VII of the

1988 Omnibus Trade and Competitiveness Act,

as amended (expired 1996). The Executive

Order required the USTR to identify countries

that: (1) are not in compliance with their

obligations under the WTO Government

Procurement Agreement (GPA), Chapter 10 of

the North American Free Trade Agreement, or

other agreements relating to government
TRADE ENFORCEMENT ACTIVITIES 217

procurement to which those countries and the

United States are parties; or (2) maintain, in

government procurement, a significant pattern

or practice of discrimination against U.S.

products or services, which results in

identifiable harm to U.S. businesses when those

countries’ products or services are acquired in

significant amounts by the U.S. Government.

In 2001, based on public responses to a Federal

Register notice, consultations with the private

sector, and its own information, the USTR

determined that no countries met the criteria for

Title VII identification. The 2001 report,

however, did take note of questionable

government procurement practices that the

Administration is monitoring and addressing in

ongoing consultations with the relevant foreign

governments. The report also described U.S.

efforts to eliminate discriminatory foreign

procurement practices by building and

strengthening the international rule of law in a

wide range of multilateral, regional, and

bilateral fora.

6. 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 or entities 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, including

representation, 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 pursuant to

the five-year "sunset" provisions of the U.S.

antidumping law and in conformity with the

WTO antidumping agreement.

Most antidumping determinations may be

appealed to the U.S. Court of International

Trade, with further judicial review possible in
218 2001 ANNUAL REPORT

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.

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; and 57 in 2001. 

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; and 30 in 2001. In 2000, Commerce

revoked 120 antidumping duty orders and

continued 13 antidumping duty orders under its

sunset review procedures; in 2001, 4

antidumping duty orders were revoked and 3

were continued under those procedures.

7. 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: 28 in 1986; 8 in 1987; 17 in

1988; 7 in 1989; 7 in 1990; 11 in 1991; 22 in

1992; 5 in 1993; 7 in 1994; 2 in 1995; 1 in 1996;

6 in 1997; 11 in 1998; 10 in 1999; 7 in 2000;

and 18 in 2001. The number of CVD orders

imposed in and since 1986 are: 13 in 1986; 14 in

1987; 7 in 1988; 6 in 1989; 2 in 1990; 2 in 1991;

4 in 1992; 16 in 1993; 1 in 1994; 2 in 1995; 2 in

1996; 0 in 1997; 1 in 1998; 6 in 1999; 6 in 2000,

and 6 in 2001. In 2000, Commerce conducted

sunset reviews of 54 of its outstanding

countervailing measures. Also in 2000, 29

measures were revoked pursuant to these sunset

procedures and 25 measures remained in force. 

In 2001, Commere initiated sunset reviews of 2

of its outstanding countervailing measures. No

measures were revoked pursuant to these sunset

procedures, while 2 measures remained in force. 

8. 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
TRADE ENFORCEMENT ACTIVITIES 219

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, 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 2001, the USITC instituted 24 new Section

337 investigations and three ancillary

proceedings. During the year, the USITC issued

two limited exclusion orders covering imports

from foreign firms. The President permitted

these exclusion orders to become final. 

9. Safeguard Actions (Section 201)

Section 201 of the Trade Act of 1974 provides a

procedure whereby the President may grant

temporary import relief to a domestic industry

seriously injured by increased imports. 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 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, 2002, the United States had

safeguard measures in place on two imported

products: certain steel wire rod (wire rod); and

circular welded carbon quality line pipe (line

pipe).

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
220 2001 ANNUAL REPORT

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.

During 2001, the WTO Appellate Body issued a

report finding that the U.S. safeguard measure

on lamb meat was inconsistent with the

Safeguards Agreement and GATT 1994. After

consultations with the U.S. industry, the United

States decided to continue providing adjustment

assistance to the industry through FY 2003 and

to terminate the safeguard effective November

15, 2001.

On October 19, 2001, a WTO panel issued a

report finding that the U.S. measure on line pipe

was inconsistent with the Safeguards Agreement

and GATT 1994 in that it imposed a TRQ

inconsistent with Article XIII of GATT 1994,

and 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. The United States has

appealed aspects of this report to the Appellate

Body, which should issue its report by February,

2002.

On June 1, 2001, the safeguard measure on

wheat gluten expired. The U.S. Department of

Agriculture subsequently instituted an

adjustment assistance program to facilitate U.S.

wheat gluten producers’ adjustment to import

competition.

On June 22, 2001, the Administration requested

the USITC to commence an investigation of

certain steel products. (The President excluded

from his request all steel products already

subject to a safeguard measure.) On October

24, 2001, the USITC announced that it had

made affirmative injury determinations or was

equally divided with respect to imports of 16 of

the 33 product categories under consideration. 

On December 7, 2001, the USITC announced its

recommendations as to the safeguard measure

the President should impose for each of the 16

product categories for which it made an

affirmative determination. On December 19,

2001, the USITC issued its report explaining its

injury determinations and recommended

safeguard measures. Under the statute, the

President has up to 75 days from receipt of this

report to announce the safeguard measures he

intends to take. (See further discussion in

Chapter V under steel policy.)

10. 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 imports. Available assistance

includes job retraining, trade readjustment

allowances (TRA), job search, relocation, and

other reemployment services. The program

expired on September 30, 2001. However, the

Administration is committed to working with

Congress for the rapid renewal of TAA. Funds

have been appropriated by the Congress to

continue program operations despite the lapse in

authorization.

The NAFTA Implementation Act established

the North American Free Trade Agreement

Transitional Adjustment Assistance program

(NAFTA-TAA). Workers seeking

NAFTA-TAA services and benefits must file a

petition with the Governor’s designated

representative in the State where the workers’

firm is located. For workers to be eligible to

apply for NAFTA-TAA, the Secretary of Labor
TRADE ENFORCEMENT ACTIVITIES 221

must certify that members of the workers group

have become or are threatened to become totally

or partially separated from their employment;

that the sales and/or production at the workers’

firm have declined; and that either (1) increased

imports from Canada and/or Mexico of articles

like or directly competitive with those produced

by the petitioning workers have contributed

importantly to the actual or threatened

separations and to the declines in sales and/or

production at the workers’ firm or (2) that there

has been a shift of production from the

petitioning workers’ firm to Canada or Mexico. 

Certification under the NAFTA-TAA program

does not in any way imply that the Agreement

itself caused the separations.

The U.S. Department of Labor administers the

TAA and NAFTA-TAA programs through the

Employment and Training Administration

(ETA). Workers certified as eligible to apply

for adjustment assistance may apply for TAA

and NAFTA-TAA benefits and services at the

nearest office of the State Employment Security

Agency. Under the TAA program, workers

must be enrolled in approved training, or must

have successfully completed approved training,

in order to be eligible for TRA. A State may

waive this requirement if training is not feasible

or appropriate. Under the NAFTA-TAA

program, in order to be eligible for TRA,

workers must be enrolled in approved training

within six 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. No waivers of these

requirements are permitted under NAFTA-TAA.

Fact-finding investigations were instituted for

2,269 TAA petitions in fiscal year (FY) 2001. 

In FY 2001, 1003 certifications were issued

covering an estimated 134,695 workers, whereas

622 petitions covering an estimated 60,428 

workers resulted in denials of eligibility to

apply. Fact-finding investigations were

instituted for 1,289 NAFTA-TAA petitions in

FY 2001. In FY 2001, 556 NAFTA-TAA

certifications were issued covering an estimated

78,914 workers, whereas 441 NAFTA-TAA

petitions covering an estimated 46,961 workers

resulted in denials of eligibility to apply.

Under the TAA program, the number of workers

who entered training during FY 2001 is

estimated to be 26,700; and during the same

year, an estimated 31,300 began receiving Trade

Readjustment Allowances (TRA). Under the

NAFTA-TAA program, the number of workers

who entered training during FY 2001 is

estimated to be 4,700; during the same year, an

estimated 2,500 began receiving TRA. Total

funding for training, job search, relocation, and

State administrative expenses under TAA was

$94.3 million in FY 2001 and under NAFTATAA was $35.7 million in FY 2001. Total

funding for TRA under TAA was $248 million

and under NAFTA-TAA was $27 million in FY

2001.

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, through September 30, 2001. Since

Congress included an appropriation for the

program in Commerce’s FY 2002 appropriation

EDA is continuing to operate the program. 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.

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 2001, EDA provided $ 10.5 
222 2001 ANNUAL REPORT

million in funding to the TAACs. That amount

included $ 0.183 million in defense adjustment

funding, which is used to assist trade-impacted

firms that also have been affected by defense

downsizing or are located in areas that have

been affected by defense downsizing.

TAACs assist firms in completing petitions for

certification of eligibility. In FY 2001, EDA

certified 179 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 2001, the

APRC approved 118 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

adjustment 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 permits EDA to provide

technical assistance for industry-wide projects. 

However, EDA has used the available funds to

maintain the TAAC network.

The Emergency Steel Loan Guarantee Act of

1999 and the Emergency Oil and Gas

Guaranteed Loan Program Act (also enacted in

1999) created the Emergency Steel Loan

Guarantee Board and the Emergency Oil and

Gas Guarantee Loan Board. The boards are

authorized to provide loan guarantees to steel

companies and to qualified oil and gas

companies in amounts for up to 85 percent of

the loan principal. The programs have been

structured to fulfill the two objectives of the

legislation: to assist steel and oil and gas firms

injured by the import crises and to protect

government funds by guaranteeing only sound

loans. 

In FY 2001, the Emergency Steel Loan

Guarantee Board did not approve any new offers

of guarantee to qualified steel companies, but

did complete one previously approved loan

guarantee for $110 million. Congress extended

the authority of the Board to offer guarantees for

another two years until December 31, 2003.

The Emergency Oil and Gas Guarantee Loan

Board did not approve any new offers of

guarantee during FY 2001. During FY 2001, it

completed two previously approved loan

guarantees totaling almost $2.9 million. After

the end of FY 2001, it completed a final loan

guarantee for $1.5 million that was previously

approved by the Board in FY 2001. The

Board’s authority to extend offers of guarantee

to qualified oil and gas companies ended on

December 31, 2001 and was not extended by

Congress.
TRADE POLICY DEVELOPMENT 223

VII. Trade Policy 

 Development

A. Congressional Affairs

In 2001, USTR worked closely with the 107th

Congress to advance a trade agenda to best serve

America’s farmers, workers, businesses and

consumers. 

Important and considerable progress was made

to restore trade negotiating authority to the

President. On December 6, the House of

Representatives passed the Bipartisan Trade

Promotion Authority Act of 2001. On

December 18, the Senate Finance Committee

reported this legislation out favorably by a vote

of 18-3. The Senate is expected to take up this

legislation in early 2002. 

Last year, the Congress approved two

agreements: the Jordan Free Trade Agreement

and the Vietnam Bilateral Trade Agreement. 

Both are important components of a strong

trade-liberalizing agenda. 

USTR also worked with Congress to reject a

resolution of disapproval regarding Normal

Trade Relations with China. 

Regrettably, three important programs, the

Andean Trade Preferences Act, the Generalized

System of Preferences and the Trade

Adjustment Assistance program lapsed in 2001. 

Hopefully, Congress will act to renew these

programs in early 2002.

USTR consulted closely with Congress on

negotiations regarding a Free Trade Area of the

Americas, the Doha WTO Ministerial, the USChile Free Trade Agreement, and the USSingapore Free Trade Agreement. 

Consultations also took place regarding

Congressional calls for a US-Australia Free

Trade Agreement. 

USTR officials testified before Congress on

such issues as Trade Promotion Authority, WTO

negotiations, pending WTO disputes, Jordan

FTA, U.S.-Vietnam Bilateral Trade Agreement,

Free Trade Area of the Americas, Chile FTA,

Singapore FTA, Steel 201 investigation,

softwood lumber, and many other issues of

Congressional interest.

USTR consulted closely with Congress on a

number of trade-related issues, including Steel

201 investigations, U.S. lamb safeguard actions,

U.S.-Canada Softwood Lumber, China’s WTO

Accession, pending WTO disputes (including

Foreign Sales Corporation, beef hormones,

bananas, the 1916 Act, and wheat gluten),

OECD Shipbuilding, U.S. Mexico cross-border

trucking, conflict diamonds, AGOA

implementation, and the Cambodia Textile

Agreement.

The Office of Congressional Affairs continued

to respond in a timely manner to all requests for

information from Congressional offices and

Committees. In addition, Congressional Affairs

transmitted statutorily required reports to

Congress on a timely basis. Congressional

Affairs also continued to provide trade-related

briefing materials for foreign trips by

Congressional delegations. USTR looks

forward to maintaining and improving its close

working relationship with Congress in 2002.
224 2001 ANNUAL REPORT

B. 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.

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 negotiation

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
TRADE POLICY DEVELOPMENT 225

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.

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, Defense and

the Environmental Protection Agency are,

respectively, the Agricultural Policy Advisory

Committee (APAC), Labor Advisory Committee

(LAC), Defense Policy Advisory Committee

(DPACT), 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 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.
226 2001 ANNUAL REPORT

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 2001, 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. In 2001, USTR addressed

sessions of the NGA, NCSL, the American

Economic Development Council, the American

Legislative Exchange Council, and other state

and local organizations regarding the

Administration’s top trade priorities. 

There is significant support among state and

local officials for market-opening initiatives. 

This past year, Trade Promotion Authority for

the President was endorsed by the U.S.

Conference of Mayors, the National Conference

of State Legislatures, the American Legislative

Exchange Council, and the National Governors

Association’s Economic Development and

Commerce Committee on behalf of the nation’s

Governors.

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 nongovernmental groups.
TRADE POLICY DEVELOPMENT 227

2001 Outreach Efforts

The 2001 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.

i. Trade Promotion Authority

Throughout 2001, 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 for the

President. 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 2001, IAPL worked on public

outreach, logistical and security preparations for

the WTO Ministerial in Doha, Qatar. This

included the accreditation of USTR advisory

committees to attend the WTO Ministerial, and

the coordination of a series of briefings and

dissemination of information for advisors and

the public regarding the Doha agenda. For the

first time ever, USTR utilized live and recorded

webcasts during the course of the WTO

Ministerial in Doha, Qatar to brief cleared trade

advisors and the public regarding the status of

negotiations. The USTR website was also

updated several times a day with current

information, as well as the results of the

Ministerial Declaration launching new global

trade negotiations at the WTO.

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 Buenos Aires, and subsequent

meetings of the Trade Negotiations Committee. 

USTR facilitated the public dissemination of the

draft text of the nine chapters of the FTAA,

fulfilling a promise made by Western

Hemisphere leaders at the April Summit of the

Americas in Quebec City to make the trade

negotiation process more transparent and

accessible to the public. USTR also took note of

recommendations made by the Americas

Business Forum, issued invitations for public

comment from the FTAA civil society

committee, and briefed advisors and the public

regarding the ongoing environmental review of

the negotiations.

iv. Benefits of NAFTA

USTR disseminated information to advisory

committees, state and local governments, and

the public regarding the benefits of NAFTA to

America in terms of building jobs and economic

growth. In coordination with the governments

of Canada and Mexico, USTR prepared an

informational brochure, “NAFTA at Seven:

Building on a North American Partnership.” 

The brochure explains how NAFTA has led to

increased opportunity and prosperity in all three

countries; has raised standards of living; and has

helped promote the effective enforcement of

environmental and labor laws. It is available on

USTR’s website.

v. China Accession to the WTO 

USTR briefed and facilitated consultations with

advisory committees and other stakeholders on

issues regarding China’s accession to the WTO,

on implementation of China’s WTO obligations,

and the legislation granting permanent Normal

Trade Relation (NTR) status for China.

vi. Bilateral Trade Agreements

USTR briefed and facilitated consultations with

advisory committees and other stakeholders on

Congressional approval of the U.S.-Jordan FTA,
228 2001 ANNUAL REPORT

the U.S.-Vietnam bilateral trade agreement, and

on the negotiations underway to conclude free

trade agreements with Singapore and Chile. 

USTR also briefed advisors and the public

regarding environmental reviews of agreements.

vii. Monitoring and Compliance

Activities

USTR briefed and facilitated consultations with

advisors and other stakeholders on disputes

including the European Community regime for

the importation, sale, and distribution of

bananas; European Community beef hormones

import restrictions; the case brought by the E.U.

against the U.S. Foreign Sales Corporation; the

Shrimp-Turtle WTO case; 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.

viii. 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.

ix. 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. USTR’s

internet homepage serves as a vehicle to

communicate to the public. For the first time

ever, USTR utilized live and recorded webcasts

from the WTO Ministerial in Doha, Qatar to

brief cleared trade advisors and the public

regarding the status of negotiations. During

2001, 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. USTR is also undertaking a survey of

advisory committee members to explore ways to

improve the website content, including posting

of reading room documents. The USTR internet

address is http://www.ustr.gov.

C. Policy Coordination

By law, USTR plays the leading role in the

development of policy on trade and trade-related

investment. Under the Trade Expansion Act of

1962, the President established an interagency

trade policy mechanism 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 60

subcommittees responsible for specialized areas

and several task forces that work on particular

issues. The TPSC regularly seeks advice from

the public on its policy decisions and

negotiations through Federal Register notices

and public hearings.

Through the interagency process, USTR assigns

responsibilities 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 taken

up by the TPRG (Deputy USTR/Under

Secretary level). 

Member agencies of the TPRG and the TPSC

consist of the Departments of Commerce,
TRADE POLICY DEVELOPMENT 229

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, as well as

particularly important or controversial

trade-related issues.

During the interagency review stage, advice is

generally 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.

As 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.
U.S. TRADE IN 2001 1

U.S. Trade in 2001

I. 2001 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 2001 to a value of approximately $3.2

trillion.2 This decline in trade represented a

sharp change from the strong growth of 17

percent in 2000, and was the also first decline in

total trade in nearly two decades, since the 3

percent decline in 1982. The decline in trade in

2001 largely reflected the slowdown of the U.S.

economy into recession and a slowdown of a

number of trade partners’ economies. World

economic growth in 2001 is estimated to be at its

lowest pace since 1992 when the world

economy grew by 2 percent. This slowdown

was occurring even prior to the tragedy of

September 11. U.S. trade of goods and services

and U.S. trade of goods alone exhibited similar

declines, both down 3 percent. U.S. trade in

services also declined, down 1 percent in the

past year. 

Both U.S. exports and imports were similarly

affected. Exports of goods and services, and

earnings on investment declined by 4 percent in

2001, falling sharply from the 14 percent

increase in 2000. It was the first decline in total

exports since 1985 (down 2 percent). Imports

of goods and services, and payments on

investment declined by 4 percent in 2001,

significantly lower than the expansion of 19

percent in 2000 (their highest growth rate since

1984). This was the first decline in total imports

since 1991 (down 3 percent).

Despite the trade decline in 2001, 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 trade3 and for

roughly 16 percent of world services trade. The

value of trade has increased 24-fold since 1970,

and 70 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 1970-2001 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 10.8 percent per year

since 1970, compared to U.S. gross domestic

product (GDP) whose growth rate averaged 7.7

percent per year. In real terms, the growth in

trade was more than double the pace of GDP

growth, 6.6 percent versus 3.1 percent. 

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, 2001 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

22-fold since 1970 and 63 percent since 1994. 
2 2001 ANNUAL REPORT

 Total exports + imports

 Source: U.S. Department of Commerce.

The value of trade in goods and services,

including earnings and payments on investment,

was 31.4 percent of the value of U.S. GDP in

2001 (figure 2). This represented a decline

from the corresponding figure in 2000 (34

percent), but was still an increase from the ratio

in 1994 (27 percent), and 1970 (13 percent). For

goods and services, excluding investment

earnings and payments, U.S. trade represented

24.4 percent of U.S. GDP in 2001, down from

26 percent in 2000, but 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 2001

is 20-fold greater than 1970 and 58 percent

greater than 1994. U.S. imports of goods and

services is 28-fold greater than 1970 and 82

percent greater than 1994. 

With the dollar decline in U.S. imports outpacing

that of exports, the total deficit on goods and

services trade (excluding earnings and payments

on foreign investment) declined by

approximately $25 billion from $376 billion in

2000 (3.8 percent of GDP) to $351 billion in

2001 (3.4 percent of GDP). This marked the

first decline in the overall U.S. goods and

services deficit since 1995 (down $0.3 billion),

and the largest decline since 1991 (down $50

billion). The U.S. deficit in goods trade alone

decreased by $20 billion from $452 billion in

2000 (4.6 percent of GDP) to $432 billion in

2001 (4.2% of GDP). This marked the first

decline in the U.S. goods trade deficit since 1991

(down $35 billion). The services trade surplus,

however, slightly increased from $76 billion in

2000 to $81 billion in 2001 (still 0.8 percent of

GDP). 
U.S. TRADE IN 2001 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 declined by 6 percent in 2001,

as compared to the 14 percent increase of the

preceding year. Manufacturing exports, accounting

for 88 percent of total goods exports, also declined

6 percent in 2001 (table 1). High technology

exports, a subset of manufacturing exports, declined

10 percent in 2001. However, agriculture exports,

accounting for 7 percent of total goods exports,

increased 4 percent in 2001.

Most of the major end-use categories for goods

exports also declined in 2001 (figure 3). Exports

of capital goods were down 8 percent in 2001,

while autos and autoparts were down 7 percent and

industrial supplies and materials were down 6

percent. Exports of foods, feeds, and beverages

increased slightly (up 2 percent) in 2001, while

exports of consumer goods remained relatively flat

(down less than 1 percent). Capital goods and

industrial supplies and materials remained the

largest categories for U.S. exports in 2001, at 44

percent and 22 percent, respectively.

Since 1994, exports of capital goods have risen 60

percent, while consumer goods have increased 50

percent. Exports of advanced technology products

have increased 69 percent while exports of

manufactured products overall, of which capital

goods and high technology products are

subcomponents, have increased 50 percent. 

Exports of agricultural products have increased 19

percent since 1994. Of the $226 billion increase in

goods exports since 1994, capital goods accounted

for 54 percent of the increase, industrial materials

and supplies accounted for 18 percent and

consumer goods accounted for 13 percent.

On a regional basis, U.S. goods exports in 2001

declined to nearly all of the major regions (table

2), except China and Latin America (excluding

Mexico). U.S. exports also declined to both high

income (down 6 percent) and low to middle
4 2001 ANNUAL REPORT

Table 1:

U.S. Goods Exports

Exports:

1998 1999 2000 2001* 00-01* 94-00*

Billions of Dollars Percent Change

Total (BOP basis) 670.4 684.6 772.2 728.3 -5.7 44.8

 Food, feeds, and beverages 46.4 45.5 47.5 48.6 2.5 15.9

 Industrial supplies and materials 148.3 147.0 171.9 161.6 -6.0 33.1

 Capital goods, except autos 299.4 310.9 357.0 327.7 -8.2 59.8

 Autos and auto parts 72.4 75.1 80.2 74.7 -6.8 29.4

 Consumer goods 80.3 82.0 90.6 90.1 -0.5 50.2

 Other 35.4 35.3 34.8 35.5 2.2 34.1

 Addendum: Agriculture 52.0 48.2 53.0 55.3 4.3 19.4

 Addendum: Manufacturing 595.2 611.8 691.5 647.9 -6.3 50.4

 Addendum: High technology 186.4 200.3 227.4 203.7 -10.4 68.7

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Balance of Payments Basis for Total, Census Basis for Sectors.
U.S. TRADE IN 2001 5

* Annualized based on January-November 2001 data

Source: U.S. Department of Commerce, Census Basis.

Table 2:

U.S. Goods Exports to Selected Countries/Regions

Exports to:

1998 1999 2000 2001* 00-01* 94-00*

Billions of Dollars Percent Change

Canada 156.6 166.6 178.9 164.7 -8.0 43.9

European Union 149.0 151.8 165.1 161.5 -2.1 49.9

Japan 57.8 57.5 64.9 58.5 -9.8 9.4

Mexico 78.8 86.9 111.3 101.6 -8.8 99.8

China 14.2 13.1 16.2 19.2 18.6 106.8

Pacific Rim, except Japan and China 95.3 103.2 121.5 105.4 -13.2 24.0

Latin America, except Mexico 63.4 55.2 59.3 59.3 0.0 42.2

Addendum: High Income Countries 394.4 406.3 442.9 416.8 -5.9 39.1
6 2001 ANNUAL REPORT

Addendum: Low to Middle Income

 Countries

287.3 289.1 338.7 321.2 -5.2 50.9

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Census Basis.

income countries (down 5 percent). Since 1994,

however, U.S. export growth from low and

middle income countries has been significantly

higher than that from high income countries (up

51 percent vs. up 39 percent). The share of low

and middle income countries in U.S. total goods

exports was 44 percent to 2001.

Goods exports to China continued to increase in

2001, up 19 percent, though slightly less than the

2000 increase of 23 percent. Most of the U.S.

export growth to China was in capital goods,

which were up 29 percent. Exports of capital

goods and industrial supplies and materials

accounted for nearly 85 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 relatively flat in 2001, up less than

$10 million. In 2000, exports had grown 7.5

percent. Capital goods accounted for most of

U.S. export growth, while exports of consumer

goods declined 11 percent. U.S. exports to

Latin America excluding Mexico have increased

by 42 percent since 1994.

Exports to our NAFTA partners declined 9

percent in 2001, but are up 87 percent since

1993, the year before NAFTA implementation

started. Over 36 percent of aggregate U.S.

goods exports went to NAFTA countries in

2001, up from nearly 31 percent in 1993. 

U.S. exports to Canada, the largest U.S. export

market accounting for 23 percent of U.S.

exports, declined by 8 percent in 2001. U.S.

exports to Canada of both autos and autoparts

and capital goods declined in 2001, both down 11

percent. Despite this decline, U.S. exports to

Canada are up by nearly 44 percent since 1994.

U.S. exports to Mexico, the second largest

single country export market accounting for 14

percent of U.S. exports, declined by roughly 9

percent in 2001. The decline in U.S. exports to

Mexico marked the first decline since 1995, the

year of the peso crisis. U.S. exports of

industrial supplies, capital goods, and consumer

goods exhibited declines of 12 percent, 10

percent, and 12 percent, respectively. Still,

however, U.S. exports to Mexico have nearly

doubled since 1994.

Export sales to Japan, after increasing 13

percent in 2001, declined 10 percent in 2001. 

U.S. exports to Japan have declined in four of

the past five years. Japan continues to be mired

in economic stagnation, with total industrial

production down 3.6 percent between 1994 and

October 2001 (down 12 percent between

October 2000 and October 2001). Japan’s GDP

is estimated to have declined one percent in

2001. Accordingly, U.S. exports to Japan are

down across the board: 14 percent in industrial

supplies, 13 percent in capital goods, 11 percent

in autos and autoparts, 7 percent in consumer

goods, and 4 percent in foods, feeds, and

beverages. Since 1994, U.S. exports to Japan

are up only 9 percent. 

Goods exports from the United States to the

Asian Pacific Rim countries (excluding Japan

and China) declined by 13 percent in 2001,

reversing the export growth trend that has

occurred since the 1998 Asian financial crisis. 
U.S. TRADE IN 2001 7

U.S. exports, after declining by 17 percent in

1998, had grown by 8 percent in 1999 and 18

percent in 2000. Most of the export decline was

in capital goods and industrial supplies, down 16

percent and 12 percent, respectively. Since

1994, U.S. exports to the Asian Pacific Rim are

up 24 percent.

U.S. exports to the European Union were down

2 percent in 2001. Exports grew in consumer

goods (up 12 percent) and autos and autoparts

(up 14 percent), but declined in capital goods and

industrial supplies (down 7 percent and 6

percent, respectively). In 2001, the EU

accounted for 22 percent of aggregate U.S.

exports. Since 1994, U.S. exports to the EU

have increased by nearly 50 percent.

B. Import Growth

U.S. goods imports declined 5 percent in 2001,

the first decline in imports since 1991, the year

of the last U.S. recession. The decline in U.S.

imports also reversed an increasing import

growth trend over the past 3 years (up 5 percent

in 1998, up 12 percent in 1999, and up 19

percent in 2000) (table 3 and figure 4). A

major factor in this decline has been the overall

weakness in the U.S. economy. Real GDP

growth over the first three quarters of 2001 has

slowed considerably, (up 1.3 percent in the first

quarter on an annualized basis, up 0.3 percent in

the second quarter, and down 1.3 percent in the

third quarter).

Manufacturing imports, accounting for 83

percent of total goods imports, declined by 6

percent in 2001. High technology imports, a

subset of manufacturing imports, declined by 11

percent in 2001. However, agriculture imports,

accounting for 3 percent of total goods imports,

increased by 1 percent in 2001.

Most of the end-use categories of goods imports

also declined in 2001. Capital goods imports

declined by 13 percent in 2001, industrial

supplies and materials declined by 6 percent, and

autos and autoparts declined by 4 percent. U.S.

imports of consumer goods and foods, feeds, and

beverages, however, increased by nearly 2

percent. Capital goods, consumer goods, and

industrial supplies and materials accounted for

most of U.S. imports in 2001, at 26 percent, 25

percent, and 24 percent, respectively. 

Since 1994, U.S. imports of consumer goods

have nearly doubled, while imports of industrial

supplies and materials, capital goods, and autos

and autoparts have increased 74 percent, 64

percent, and 60 percent, respectively. Imports

of advanced technology products have doubled, 

imports of manufactured products have

increased 71 percent, and imports of agricultural

products have increased 53 percent since 1994. 
8 2001 ANNUAL REPORT

Table 3:

U.S. Goods Imports

Imports:

1998 1999 2000 2001* 00-01* 94-00*

Billions of Dollars Percent Change

Total (BOP Basis) 917.1 1,030.0 1,224.4 1,160.6 -5.2 73.6

 Food, feeds, and beverages 41.2 43.6 46.0 46.8 1.7 51.0

 Industrial supplies and materials 200.1 222.0 299.8 282.6 -5.7 74.3

 Capital goods, except autos 269.5 295.3 346.7 302.4 -12.8 64.0

 Autos and auto parts 148.7 179.0 195.9 189.1 -3.5 59.9

 Consumer goods 217.0 241.7 281.4 285.8 1.6 95.4

 Other 35.4 43.0 48.3 48.5 0.3 127.9

 Addendum: Agriculture 35.7 36.7 39.2 39.7 1.2 52.8

 Addendum: Manufacturing 792.4 882.7 1,012.9 956.1 -5.6 71.4

 Addendum: High technology 156.8 181.2 222.1 197.5 -11.1 101.3

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Balance of Payments Basis for Total, Census Basis for Sectors.
U.S. TRADE IN 2001 9

 * Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Census Basis.

Table 4:

U.S. Goods Imports from Selected Countries/Regions

Imports from:

1998 1999 2000 2001* 00-01* 94-01*

Billions of Dollars Percent Change

Canada 173.3 198.7 230.8 219.9 -4.7 71.3

European Union 176.4 195.2 220.0 222.0 0.9 85.9

Japan 121.8 130.9 146.5 127.8 -12.8 7.2

Mexico 94.6 109.7 135.9 131.9 -3.0 166.5

China 71.2 81.8 100.0 102.7 2.7 164.7

Pacific Rim, except Japan and China 134.7 147.1 171.5 148.7 -13.3 44.0

Latin America, except Mexico 50.3 58.5 73.3 68.4 -6.8 77.8

Addendum: High Income Countries 497.2 552.8 630.7 602.7 -4.4 56.6
10 2001 ANNUAL REPORT

Addendum: Low to Middle Income

 Countries

414.7 471.9 587.3 552.5 -5.9 98.5

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Census Basis.

Of the $492 billion increase in goods imports

since 1994, consumer goods increased 28

percent, while industrial materials and supplies

and capital goods both increased 25 percent. 

On a regional basis, U.S. goods imports declined

from nearly all of the major regions, except the

European Union and China which exhibited

moderate growth (table 4). U.S. imports from

high income countries and low and middle

income countries also declined, by 4 percent and

6 percent respectively. Since 1994, however,

U.S. import growth to low and middle income

countries has been significantly higher than that

to high income countries (up 99 percent vs. up

57 percent). The share of low and middle

income countries in U.S. total goods imports was

48 percent to 2001.

U.S. goods imports from the European Union,

accounting for 19 percent of total U.S. imports,

stayed relatively level in 2001 (up only 1

percent). Increasing import categories included

consumer goods (up 7 percent), autos and

autoparts (up 2 percent) and foods, feeds, and

beverages (up less than 1 percent). Imports of

industrial supplies and materials declined 6

percent while capital goods were down slightly. 

Imports from the EU have increased 86 percent

since 1994.

Imports from our NAFTA partners declined 4

percent in 2001, but are up by 133 percent since

1993, the year before NAFTA implementation

started. Nearly 31 percent of aggregate U.S.

goods imports were from NAFTA countries in

2001, up from 26 percent in 1993. 

U.S. imports from Canada, the largest single

country supplier of goods to the United States

accounting for 19 percent of U.S. exports,

declined by 5 percent in 2001. U.S. imports of

capital goods, autos and autoparts, and consumer

goods declined in 2001, down 15 percent, 10

percent, and 2 percent, respectively. However,

imports of foods, feeds, and beverages and

industrial supplies and materials grew in 2001, up

12 percent and 3 percent, respectively. Despite

the overall import decline from Canada, U.S.

imports from Canada have grown by 71 percent

since 1994.

U.S. imports from Mexico, the third largest

single country supplier of goods to the United

States accounting for nearly 12 percent of U.S.

imports, declined by 3 percent in 2001. 2001

marked the first decline in U.S. imports from

Mexico since 1986. U.S. imports of industrial

supplies from Mexico declined 13 percent in

2001, while imports of capital goods and autos

and autoparts both declined by 1 percent. 

However, U.S. imports of foods, feeds, and

beverages increased by 3 percent. U.S. imports

from Mexico have grown 167 percent since

1994.

Imports from Japan, the second largest single

country supplier of goods to the United States,

declined 13 percent in 2001, and have increased

only 7 percent since 1994, in sharp contrast to

strong import growth from Japan in the 1980s. 

Purchases from Japan in 2001 accounted for 11

percent of total U.S. imports, as compared to 18

percent in 1994. U.S. imports from Japan

declined in nearly all of the major end use
U.S. TRADE IN 2001 11

categories in 2001: down 23 percent in capital

goods, down 13 percent in foods, feeds, and

beverages, down 11 percent in industrial

supplies, and down 6 percent in autos and

autoparts. U.S. imports of consumer goods,

however, increased by 1 percent in 2001.

Although U.S. imports from China increased by

3 percent in 2001, this marked a significant

decline from the double-digit import growth

exhibited since 1983. U.S. imports from China

were up 22 percent in 2000 and were up by 165

percent since 1994. U.S. imports from China

accounted for 9 percent of total U.S. goods

imports in 2001. 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 66 percent of U.S. imports from China in

2001. 

Imports from Latin America (excluding Mexico)

declined by 7 percent in 2001, but were up by 78

percent since 1994. U.S. imports of foods,

feeds, and beverages were down 9 percent in

2001, while imports of industrial supplies were

down by 11 percent.5 U.S. imports of capital

goods and autos and autoparts, however, were

up 6 percent and 4 percent, respectively, in

2001. 

Imports from the Pacific Rim (excluding Japan

and China) declined 13 percent in 2001, but

were up 44 percent since 1994. This region

represented 13 percent of total U.S. imports in

2001. U.S. imports of capital goods, industrial

supplies, and consumer goods declined by 21

percent, 8 percent, and 6 percent, respectively,

while imports of autos and autoparts and foods,

feeds, and beverages increased by 18 percent

and 2 percent, respectively.

III. Services Trade

A. Export Growth

U.S. exports of services declined nearly 3

percent in 2001, the only decline in services

exports in the past 40 years (table 5 and figure

5). Since 1994, U.S. services exports have

increased by 41 percent. U.S. services exports

accounted for 39 percent of the level of U.S.

goods exports in 2001, down slightly from 40

percent in 1994. 

The decline in U.S. services exports in 2001 was

led by the passenger fares and travel categories,

down 13 percent and 11 percent, respectively. 

These tourism-related categories together

accounted for one-third of total U.S. services

exports.6 Exports of other transportation

services (freight) also declined, down 7 percent

in 2001. Only two of the major services export

categories, the other private services category

(including business and professional services,

education, and financial services) and the

royalties and licensing fees category, exhibited

export growth in 2001. U.S. exports of other

private services were up 4 percent in 2001,

while exports of royalties and licensing fees

services were up 1 percent. 

Since 1994, nearly all of the major services

export categories have grown. Export growth

has been led by the other private services

category (up 83 percent) and the royalties and

licensing fees category (up 44 percent). The

5

 U.S. imports of industrial supplies accounted for

more than half of U.S. imports from Latin America in

2001.

6

 Travel accounted for 26 percent and passenger

fares accounted for 6 percent.
12 2001 ANNUAL REPORT

travel and other transportation categories also

were up 26 percent and 19 percent, respectively. 

Of the $83 billion increase in U.S. services

exports between 1994 and 2001, the other

private services category accounted for 61

percent of the increase, the travel services

category accounted for 18 percent of the

increase, and the royalties and licensing fees

category accounted for 14 percent of the

increase.

Detailed sectoral breakdowns for exports of the

other private services category are available

only through 2000. In 2000, other private

services exports totaled $107.6 billion. Of this,

U.S. exports to business related parties (to a

foreign parent or affiliate) accounted for $31.6

billion, or 29 percent of total other private

service exports. For the remaining exports of

other private services to unaffiliated parties, the

values of exports in 2000 were: business,

professional and technical services, $28.0 billion;

financial services, $17.0 billion; education, $10.3

billion; insurance premiums, $8.9 billion; and

telecommunications, $3.8 billion. The largest

exporting categories within the business,

professional and technical services category

were construction, engineering, architectural,

and mining services ($5.3 billion) and installation,

maintenance and repair of equipment services

($4.2 billion).

Japan was the largest purchaser of U.S. private

services exports in 2000, accounting for 12% of

total U.S. private services exports. The top 5

purchasers of U.S. services exports in 2000

were: Japan ($34.2 billion), the United Kingdom

($30.1 billion), Canada ($23.2 billion), Germany

($16.0 billion), and Mexico ($14.0 billion).

Regionally, the United States exported $78.7

billion to the Asia/Pacific Region ($44.4 billion

excluding Japan), $90.0 billion to the EU, $37.2

billion to NAFTA countries, and $28.5 billion to

Latin America (excluding Mexico).

B. Import Growth

Services imports by the United States also

declined in 2001, down almost 7 percent to $203

billion (table 6, figure 6). This was the first

decline in services imports since 1992. Although

the rate of the decline in imports was greater

than that of exports in 2001 (down 6.5 percent

vs. down 3.2 percent), import growth has been

greater than export growth since 1994 (up 54

percent vs. up 41 percent). U.S. imports of

services in 2001 were led by two of the six

major services import categories: the travel

category and other private services category. 

These two categories accounted for over half of

total services imports in 2001.

Nearly all of the major services import

categories exhibited declines in 2001, mostly

ranging between 5 percent and 11 percent. The

largest decline occurred in travel services
U.S. TRADE IN 2001 13

Table 5:

U.S. Services Exports

Exports:

1998 1999 2000 2001* 00-01* 94-01*

Billions of Dollars Percent Change

Total (BOP basis) 262.3 272.8 293.5 284.1 -3.2 41.3

 Travel 71.3 74.7 82.0 73.4 -10.6 25.6

 Passenger Fares 20.1 19.8 20.7 18.1 -12.8 6.4

 Other Transportation 25.6 26.9 30.2 28.2 -6.5 18.8

 Royalties and Licensing Fees 35.6 36.4 38.0 38.4 1.0 43.9

 Other Private Services 91.3 98.1 107.6 112.4 4.4 82.8

 Transfers under U.S. Military

 Sales Contracts

17.5 15.9 14.1 12.9 -8.6 0.5

 U.S. Government Miscellaneous

 Services

0.9 0.9 0.9 0.9 -0.1 -2.9

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Balance of Payments Basis.
14 2001 ANNUAL REPORT

* Annualized based on January-November 2000 data

 Source: U.S. Department of Commerce, Balance of Payments Basis.

imports, down 11 percent in 2001, but up 31

percent since 1994. Imports of other private

services declined 9 percent in 2001, but were up

65 percent since 1994. On the import growth

side, payments of royalties and licensing fees

increased 4 percent in 2001 and were up nearly

186 percent since 1994. Of the $71 billion

increase in U.S. services imports between 1994

and 2001, the other private services category

accounted for 28 percent of the increase, and

the travel services category accounted for 19

percent of the increase.

As with exports, detailed sectoral breakdowns

for imports of other private services are

available only through 2000. In 2000, other

private services imports totaled $54.7 billion. Of

this, U.S. imports from business related parties

(from a foreign parent or affiliate) accounted for

$25.3 billion or 46 percent of total other private

service imports. For the remaining imports of

other private services from unaffiliated parties,

the values of imports in 2000 were: insurance

premiums, $27.9 billion; business professional

and technical services, $7.8 billion;

telecommunications, $5.4 billion; financial

services, $4.5 billion; and education, $2.1 billion. 

The largest importing categories within the

business, professional and technical services

category were research, development and

testing services ($851 million), legal services

($839 million), and computer and data processing

services ($837 million).

In the import sector, the United Kingdom

remained our largest supplier of private services,

providing $26.9 billion to the United States in

2000. This accounted for 13% of total U.S.
U.S. TRADE IN 2001 15

imports of private services in 2000. The United

States imported $17.2 billion from Japan, our

second largest supplier, and $16.3 billion from

Canada, our third largest supplier. Germany and

Mexico were our fourth and fifth largest import

suppliers, exporting $11.4 billion and $11.0 billion

worth of services to the United States,

respectively, in 2000. Regionally, the United

States imported $74.7 billion of services from the

EU, $51.3 billion from the Asia/Pacific region

($34.1 billion excluding Japan), $27.3 billion from

NAFTA, and $11.1 billion from Latin America

(excluding Mexico).

IV. The U.S. Trade Deficit

The U.S. goods and services deficit declined by

$25 billion in 2001 to a level of $351 billion (table

7). The U.S. goods trade deficit alone

decreased by $20 billion to $432 billion in 2001. 

However, the services trade surplus slightly

increased by $5 billion to $81 billion in 2001.

As a share of U.S. GDP, the goods and services

trade deficit was 3.4 percent of GDP in 2001, a

decline from the 3.8 percent level in 2000, but

still up from the 1.3 percent level of 1995-1997

(table 8). For goods alone, the trade deficit was

4.2 percent of GDP in 2001, down from 4.6

percent in 2000, but up from 2.4 percent in 1997. 

For services alone, the U.S. trade surplus was

0.8 percent of GDP in 2001, the same as in

2000. 

The regional distribution of the goods trade

deficit for the past four years is shown in table

9.
16 2001 ANNUAL REPORT

Table 6:

U.S. Services Imports

Imports:

1998 1999 2000 2001* 00-01* 94-01*

Billions of Dollars Percent Change

Total (BOP basis) 182.4 189.2 217.0 203.0 -6.5 53.9

 Travel 56.5 58.9 64.5 57.4 -11.0 31.2

 Passenger Fares 20.0 21.3 24.2 22.9 -5.6 75.0

 Other Transportation 30.4 34.1 41.1 38.5 -6.4 47.8

 Royalties and Licensing Fees 11.2 12.6 16.1 16.7 3.8 185.7

 Other Private Services 49.3 46.1 54.7 50.0 -8.5 64.7

 Direct Defense Expenditures 12.2 13.3 13.6 14.6 7.4 42.6

 U.S. Government Miscellaneous

 Services

2.8 2.8 2.9 2.9 1.6 14.3

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Balance of Payments Basis.

Table 7

U.S. Trade Balances with the World

Balance:

1998 1999 2000 2001*

Billions of Dollars

Goods and Services (BOP Basis) -166.8 -261.8 -375.7 -351.1

Goods (BOP Basis) -246.7 -345.4 -452.2 -432.2

Services (BOP Basis) 79.9 83.6 76.5 81.1

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Balance of Payments Basis for World.
U.S. TRADE IN 2001 17

Table 8

U.S. Trade Balances as a share of GDP

Share of GDP:

1998 1999 2000 2001*

Percent

Goods and Services (BOP Basis) -1.9 -2.8 –3.8 -3.4

Goods (BOP Basis) -2.8 -3.7 -4.6 -4.2

Services (BOP Basis) 0.9 0.9 0.8 0.8

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce.

Table 9

U.S. Goods Trade Balances with Selected Countries/Regions

Balance:

1998 1999 2000 2001*

Billions of Dollars

Canada -16.7 -32.1 -51.9 -55.2

European Union -27.3 -43.4 -55.0 -60.5

Japan -64.0 -73.4 -81.6 -69.2

Mexico -15.9 -22.8 -24.6 -30.3

China -56.9 -68.7 -83.8 -83.5

Pacific Rim, except Japan and China -39.4 -43.9 -50.0 -43.3

Latin America, except Mexico 13.1 -3.3 -14.1 -9.1

Addendum: High Income Countries -102.7 -146.4 -187.8 -185.8

Addendum: Low to Middle Income

 Countries

-127.4 -182.8 -248.6 -231.2
18 2001 ANNUAL REPORT

* Annualized based on January-November 2001 data.

Source: U.S. Department of Commerce, Census Basis.
Background Information on the WTO

Doha Declarations

Doha Ministerial Declaration ............ ............ ............ ............ ...........

Doha Declaration on the TRIPs Agreement and Public Health ............ ............ ..........

Doha Declaration on Implementation-Related Issues and Concerns ............ ............ ......

Institutional Issues

Membership of the WTO. ............ ............ ............ ............ ............ ...

2002 WTO Budget Contributions ............ ............ ............ ............ ........

2002 Budget for the WTO Secretariat ............ ............ ............ ............ .....

Waivers Currently in Force ............ ............ ............ ............ ............ .

WTO Secretariat Personnel Statistics ............ ............ ............ ............ .....

WTO Accession Application and Status ............ ............ ............ ............ ...

Indicative List of Governmental and Non-Governmental Panelists ............ ............ ......

Appellate Body Membership ............ ............ ............ ............ ............

Where to Find More Information on the WTO ............ ............ ............ ..........
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.

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.
2

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.

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
3

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 countries to 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

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 proposals submitted 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, as stipulated 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 leastdeveloped countries to participate effectively in the negotiations.
4

TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS

17. We stress the 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.

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 development so 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; modalitiesfor 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 Members to undertake obligations and commitments commensurate with their

individual 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
5

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 development so 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

relevantintergovernmental organisations, including UNCTAD, 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

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.
6

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.

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

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
7

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 bodies

since 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

opportunities for trade for Members at all stages 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 issues

relating 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

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
8

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 assistancewith

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 Trade-Related 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 of sustainably financed technical assistance and capacity-building programmes. We instruct the

Director-General 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.

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 partners to

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.
9

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.

46. The overall conduct of the negotiationsshall be supervised by a Trade NegotiationsCommittee 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 of special 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.
10

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.

_________
11

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 stress the need for the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights

(TRIPS Agreement) to be part of the wider national and international action to address these problems.

3. We recognize that intellectual property protection is important for 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 Members from 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 manner supportive 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 commitments in 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.

(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.
12

(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

pharmaceutical sector could face difficulties in 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-country Members to provide incentives to 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 least-developed 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.
13

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

understandings reached on implementation issues in the intensive informal and formal meetings held under

this process since May 2000;
14

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 NetFood-Importing Developing Countries,

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

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

problemwhilecontinuing to achieve the importing Member's appropriate level of protection.
15

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 instructs the 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:

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.
16

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 as if 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 financialinstitutionsin identifying TBT-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, 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
17

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.

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 Underlines the importance of strengthening 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
18

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 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.
19

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.

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 of special and differential treatment provisions, and to report to the General Council

with clear recommendations for a decision by July 2002; and 
1

 BISD 26S/203.

2A list of these issues is compiled in document Job(01)/152/Rev.1.

20

(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")1

 should 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. 

__________
21

MEMBERSHIP OF THE WORLD TRADE ORGANIZATION

as of December 18, 2001 (144 Members)

Government Entry into Force

/Membership Government Entry into Force

/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
22

Government Entry into Force

/Membership Government Entry into Force

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

Mexico January 1, 1995 Suriname January 1, 1995

Moldova July 26, 2001 Swaziland January 1, 1995

Mongolia January 29, 1997 Sweden January 1, 1995

Morocco January 1, 1995 Switzerland July 1, 1995

Mozambique August 26, 1995 Taiwan (referred to in the

WTO as Chinese Taipei) December 11, 2001

Myanmar January 1, 1995 Tanzania January 1, 1995

Namibia January 1, 1995 Thailand January 1, 1995

Netherlands - For the

Kingdom in Europe and

for the Netherlands

Antilles 

January 1, 1995 The Gambia October 23, 1996

New Zealand January 1, 1995 Togo May 31, 1995

Nicaragua September 3, 1995 Trinidad and Tobago March 1, 1995

Niger December 13, 1996 Tunisia 34786

Nigeria January 1, 1995 Turkey March 26, 1995

Norway January 1, 1995 Uganda January 1, 1995

Oman November 9, 2000 United Arab Emirates April 10, 1996

Pakistan January 1, 1995 United Kingdom January 1, 1995

Panama September 6, 1997 United States January 1, 1995

Papua New Guinea June 9, 1996 Uruguay January 1, 1995

Paraguay January 1, 1995 Venezuela January 1, 1995

Peru January 1, 1995 Zambia January 1, 1995

Philippines January 1, 1995 Zimbabwe March 5, 1995

Poland July 1, 1995

Portugal January 1, 1995

Qatar January 13, 1996

Romania January 1, 1995
23

2002 BUDGET FOR THE WTO SECRETARIAT
24

2002 BUDGET FOR THE APPELLATE BODY AND ITS SECRETARIAT

P

A 2002

R SECTION Estimates

T

A 1 Staff(Work/years)

(a) Salary 1,500,200

(b) Pensions 296,400

(c) Other Common Staff costs 244,400

2 Temporary Assistance 36,000

B 3 Communications

(a) Telecommunications 6,500

(b) Postage charges

4 Building Facilities

(a) Rental 

(b) Utilities 13,000

(c) Maintenance and Insurance 0

5 Permanent Equipment 47,200

6 Expendable Equipment 17,700

7 Contractual Services

(a) Reproduction 15,000

(b) Office Automation / Informatics 0

(c) Other

C 8 Staff Overhead Costs

(a) Training

(b) Insurance 5,000

(c) Joint Services

(d) Miscellaneous 2,000

9 Missions

(a) Official 10,000

(b) Technical Co-operation

10 Trade Policy Training Courses

11 Contribution to ITC

12 Various

(a) Representation and Hospitality 1,000

(b) Dispute Settlement Panels

(c) Permanent Group of Experts/ Arbitration under GATS

(d) Appellate Body Members 618,200

(e) Library 3,400

(f) Publications

(g) Public Information Activities

(h) External Auditors

(i) Ministerial Meeting

(j) ISO

(k) Other

13 Unforeseen Expenditure

TOTAL 2,816,000
25

SCALE OF CONTRIBUTIONS FOR 2002

 (Minimum contribution of 0.015 per cent)

2001 2002 INTEREST 2002 NET

MEMBERS CONTRIBUTION CONTRIBUTION EARNED* CONTRIBUTION

CHF % CHF CHF CHF

Albania 19,935 0.015 21,315 21,315 

Angola 81,069 0.057 80,997 (241) 80,756 

Antigua and Barbuda 19,935 0.015 21,315 21,315 

Argentina 709,686 0.510 724,710 724,710 

Australia 1,717,068 1.218 1,730,778 (10,422) 1,720,356 

Austria 2,022,738 1.438 2,043,398 (11,763) 2,031,635 

Bahrain 99,675 0.068 96,628 (582) 96,046 

Bangladesh 136,887 0.105 149,205 149,205 

Barbados 26,580 0.020 28,420 (68) 28,352 

Belgium 3,686,646 2.683 3,812,543 (17,216) 3,795,327 

Belize 19,935 0.015 21,315 (90) 21225 

Benin 19,935 0.015 21,315 (87) 21,228 

Bolivia 35,883 0.026 36,946 (168) 36,778 

Botswana 51,831 0.041 58,261 58,261 

Brazil 1,391,463 0.988 1,403,948 (1,141) 1,402,807 

Brunei Darussalam 61,134 0.044 62,524 (335) 62,189 

Bulgaria 131,571 0.094 133,574 (177) 133,397 

Burkina Faso 19,935 0.015 21,315 21,315 

Burundi 19,935 0.015 21,315 21,315 

Cameroon 38,541 0.027 38,367 (243) 38,124 

Canada 5,172,468 3.914 5,561,794 (29,044) 5,532,750 

Central African Republic 19,935 0.015 21,315 21,315 

Chad 19,935 0.015 21,315 21,315 

Chile 445,215 0.311 441,931 (1,209) 440,722 

China, People’s Rep. of 2.973 4,224,633 4,224,633 

Colombia 337,566 0.233 331,093 (456) 330,637 

Congo 34,554 0.024 34,104 34,104 

Costa Rica 126,255 0.104 147,784 (577) 147,207 

Côte d’Ivoire 98,346 0.068 96,628 (18) 96,610 

Croatia 205,995 0.147 208,887 208,887 

Cuba 71,766 0.064 90,944 (438) 90,506 

Cyprus 91,701 0.064 90,944 (452) 90,492 

Czech Republic 707,028 0.511 726,131 (4,344) 721,787 

Democratic Republic of the Congo 33,225 0.024 34,104 34,104 

Denmark 1,330,329 0.948 1,347,108 (8,013) 1,339,095 

Djibouti 19,935 0.015 21,315 21,315 

Dominica 19,935 0.015 21,315 (78) 21,237 

Dominican Republic 159,480 0.125 177,625 177,625 

Ecuador 122,268 0.085 120,785 120,785 

Egypt 360,159 0.266 377,986 (2,243) 375,743 

El Salvador 69,108 0.058 82,418 (234) 82,184 

Estonia 82,398 0.063 89,523 (346) 89,177 

European Communities 0 0.000 0 0 

Fiji 23,922 0.016 22,736 (140) 22,596 

Finland 944,919 0.672 954,912 (5,242) 949,670 

France 7,663,014 5.541 7,873,761 (408) 7,873,353 

Gabon 47,844 0.034 48,314 (319) 47,995 

Gambia 19,935 0.015 21,315 21,315 

Georgia 21,264 0.015 21,315 21,315 
2001 2002 INTEREST 2002 NET

MEMBERS CONTRIBUTION CONTRIBUTION EARNED* CONTRIBUTION

CHF % CHF CHF CHF

26

Germany 12,912,564 9.291 13,202,511 (47,398) 13,155,113 

Ghana 46,515 0.042 59,682 (234) 59,448 

Greece 437,241 0.311 441,931 (1,785) 440,146 

Grenada 19,935 0.015 21,315 (69) 21,246 

Guatemala 79,740 0.063 89,523 (396) 89,127 

Guinea 19,935 0.015 21,315 21,315 

Guinea-Bissau 19,935 0.015 21,315 21,315 

Guyana 19,935 0.015 21,315 (79) 21,236 

Haiti 19,935 0.015 21,315 21,315 

Honduras 50,502 0.039 55,419 (209) 55,210 

Hong Kong, China 4,791,045 3.345 4,753,245 (30,793) 4,722,452 

Hungary 526,284 0.413 586,873 (3,180) 583,693 

Iceland 59,805 0.045 63,945 (351) 63,594 

India 1,100,412 0.830 1,179,430 (1,777) 1,177,653 

Indonesia 1,234,641 0.831 1,180,851 (286) 1,180,565 

Ireland 1,265,208 1.141 1,621,361 (8,246) 1,613,115 

Israel 736,266 0.548 778,708 (4,314) 774,394 

Italy 6,244,971 4.407 6,262,347 (21,284) 6,241,063 

Jamaica 79,740 0.057 80,997 (400) 80,597 

Japan 9,519,627 6.629 9,419,809 (42,322) 9,377,487 

Jordan 94,359 0.066 93,786 (87) 93,699 

Kenya 69,108 0.047 66,787 (304) 66,483 

Korea, Republic of 3,387,621 2.381 3,383,401 (13,182) 3,370,219 

Kuwait 287,064 0.194 275,674 (518) 275,156 

Kyrgyz Republic 19,935 0.015 21,315 21,315 

Latvia 67,779 0.051 72,471 (382) 72,089 

Lesotho 19,935 0.015 21,315 21,315 

Liechtenstein 37,212 0.027 38,367 (236) 38,131 

Lithuania 0.083 117,943 117,943 

Luxembourg 394,713 0.297 422,037 (2,005) 420,032 

Macao, China 85,056 0.062 88,102 (460) 87,642 

Madagascar 19,935 0.015 21,315 (129) 21,186 

Malawi 19,935 0.015 21,315 21,315 

Malaysia 1,946,985 1.313 1,865,773 (8,090) 1,857,683 

Maldives 19,935 0.015 21,315 (74) 21,241 

Mali 19,935 0.015 21,315 21,315 

Malta 66,450 0.048 68,208 (397) 67,811 

Mauritania 19,935 0.015 21,315 21,315 

Mauritius 58,476 0.041 58,261 (339) 57,922 

Mexico 2,607,498 2.106 2,992,626 (3,761) 2,988,865 

Moldova 0.015 21,315 21,315 

Mongolia 19,935 0.015 21,315 21,315 

Morocco 216,627 0.160 227,360 (1,079) 226,281 

Mozambique 19,935 0.015 21,315 21,315 

Myanmar, Union of 43,857 0.032 45,472 (61) 45,411 

Namibia 41,199 0.029 41,209 (209) 41,000 

Netherlands, Kingdom of the 4,571,760 3.625 5,151,125 (27,140) 5,123,985 

New Zealand 385,410 0.266 377,986 (2,310) 375,676 

Nicaragua 23,922 0.020 28,420 (44) 28,376 

Niger 19,935 0.015 21,315 21,315 

Nigeria 295,038 0.204 289,884 289,884 
27

Norway 1,231,983 0.859 1,220,639 (7,460) 1,213,179 

Oman 139,545 0.099 140,679 140,679 

Pakistan 260,484 0.185 262,885 262,885 

Panama 175,428 0.124 176,204 (272) 175,932 

Papua New Guinea 51,831 0.033 46,893 (279) 46,614 

Paraguay 99,675 0.064 90,944 90,944 

Peru 196,692 0.137 194,677 (497) 194,180 

Philippines 881,127 0.628 892,388 892,388 

Poland 944,919 0.703 998,963 (5,179) 993,784 

Portugal 826,638 0.609 865,389 (583) 864,806 

Qatar 83,727 0.076 107,996 (289) 107,707 

Romania 241,878 0.170 241,570 (1,083) 240,487 

Rwanda 19,935 0.015 21,315 21,315 

Saint Lucia 19,935 0.015 21,315 (27) 21,288 

Senegal 31,896 0.023 32,683 (197) 32,486 

Sierra Leone 19,935 0.015 21,315 21,315 

Singapore 3,059,358 2.080 2,955,680 (13,511) 2,942,169 

Slovak Republic 283,077 0.205 291,305 (1,650) 289,655 

Slovenia 235,233 0.169 240,149 (1,215) 238,934 

Solomon Islands 19,935 0.015 21,315 21,315 

South Africa 749,556 0.521 740,341 (3,902) 736,439 

Spain 3,291,933 2.468 3,507,028 (16,747) 3,490,281 

Sri Lanka 127,584 0.095 134,995 (599) 134,396 

St. Kitts and Nevis 19,935 0.015 21,315 (120) 21,195 

St. Vincent and the Grenadines 19,935 0.015 21,315 (23) 21,292 

Suriname 19,935 0.015 21,315 21,315 

Swaziland 23,922 0.018 25,578 (147) 25,431 

Sweden 2,049,318 1.497 2,127,237 (12,588) 2,114,649 

Switzerland 2,154,309 1.536 2,182,656 (7,533) 2,175,123 

Tanzania 35,883 0.025 35,525 35,525 

Thailand 1,503,099 0.999 1,419,579 (8,335) 1,411,244 

Togo 19,935 0.015 21,315 21,315 

Trinidad and Tobago 62,463 0.045 63,945 (199) 63,746 

Tunisia 183,402 0.134 190,414 (644) 189,770 

Turkey 1,113,702 0.792 1,125,432 (1,951) 1,123,481 

Uganda 25,251 0.020 28,420 (98) 28,322 

United Arab Emirates 708,357 0.519 737,499 (2,189) 735,310 

United Kingdom of Great Britain

 and Northern Ireland

7,962,039 5.862 8,329,902 (49,194) 8,280,708 

United States of America 20,773,599 15.723 22,342,383 (18,783) 22,323,600 

Uruguay 90,372 0.064 90,944 90,944 

Venezuela 445,215 0.315 447,615 (1,449) 446,166 

Zambia 29,238 0.021 29,841 29,841 

Zimbabwe 45,186 0.034 48,314 (88) 4822

TOTAL 132900000 100 142100000 -476855 141623145

* Interest earned in 2000 under the Early Payment Encouragement Scheme (L/6384) and to be deducted from the 2002

contribution.
28

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 

Harmonized System (HS) changes: A collective waiver provides

22 mem bers additional time to finalize the conversion of their

tariff classification systems to the 1996 HS nomenclature.

Zambia, Sri Lanka and Nicaragua were granted individual

waivers to finalize conversions from pre-HS tariff systems to the

Harmonized System.

April 30, 2002

May 9, 2001

 (collective) 

 

 October 31, 2001

(individual)

Haiti - Customs Valuation: To allow a 3-year extension for the

application of the Customs Valuation Agreem ent. January 30, 2003 December 20, 2001

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

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

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

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 W TO

Members that are not IMF m embers.

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 Agreem ent: 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
29

WTO SECRETARIAT PERSONNEL STATISTICS

Number of Staff Members by Job Category

Country Senior Professional Support Total

Argentina 9 6 15

Australia 7 4 11

Austria 2 2 4

Barbados 1 0 1

Belgium 5 0 5

Benin 1 0 1

Bolivia 3 1 4

Brazil 2 2 4

Burkina Faso 1 0 0 1

Canada 26 6 32

Chile 3 4 7

Colombia 5 3 8

Congo 1 0 1

Costa Rica 1 0 1

Cuba 0 1 1

Denmark 1 1 2

Egypt 6 0 6

Estonia 1 0 1

Finland 2 2 4

France 1 63 149 213

Germany 11 4 15

Ghana 1 0 1

Greece 3 1 4

Honduras 0 1 1

Hong Kong 1 0 1

Hungary 1 0 2 3

India 9 4 13

Indonesia 1 0 1

Ireland 4 11 15

Italy 11 7 18

Ivory Coast 0 1 1

Japan 3 0 3

Korea 2 0 2

Malawi 1 0 1

Malaysia 1 1 2

Mauritius 1 1 2

Mexico 2 1 3

Morocco 1 0 1

Netherlands 7 1 8

Norway 3 1 4

New Zealand 1 3 1 5

Nigeria 1 0 1
Number of Staff Members by Job Category

Country Senior Professional Support Total

30

Pakistan 1 0 1

Papua New Guinea 1 0 1

Paraguay 0 1 1

Peru 2 8 10

Philippines 6 0 6

Poland 2 2 4

Portugal 1 1 2

Romania 2 1 3

Rwanda 1 0 1

Senegal 0 1 1

South Africa 2 1 3

Spain 33 23 56

Sri Lanka 2 2 4

Sweden 3 2 5

Switzerland 22 20 42

Tanzania 1 0 1

Thailand 2 0 2

Tunisia 3 1 4

Turkey 2 0 2

United Kingdom 28 70 98

Uruguay 5 4 9

United States 1 21 4 26

Venezuela 1 4 0 5

Zambia 1 0 1

Zimbabwe 1 0 1

TOTAL 6 351 359 716

Note:

Professional Staff includes temporary translators and interpreters

Source: WTO Secretariat
1

“Applicant”column includes date the Working Party (WP) 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.

31

WTO ACCESSION APPLICATIONS AND STATUS (as of 1-7-02)1

Applicant Status of Multilateral and Bilateral Work 

Algeria 

(1987)

GATT 1947 accession process never activated. Second WTO Working Party scheduled

for February 7, 2002 to review updated documentation and initial goods and services

market access offers.

Andorra 

(1997)

WP meeting on October 13, 1999 reviewed legislative implementation schedule and goods

and services market access offers. Review of legislative implementation and revised

market access offers expected at second WP meeting in 2002.

Armenia

(1993)

WP meeting on June 24, 1999 reviewed the draft WP report and protocol Legislative

implementation underway. Negotiations for commitments on tariffs and services

completed. Informal plurilateral and WP meetings to review outstanding issues in

agricultural supports and protocol expected in early 2002.

Azerbaijan

(1997)

First WP meeting to convene in late March 2002 to review initial documentation. No

market access offers to date. 

Belarus 

(1993)

WP meeting held on March 5, 2001 with bilateral negotiations on goods and services

market access negotiations on the margins. Little progress in WTO implementation or

trade regime liberalization recorded since previous WP meeting in April 1998. 

Bosnia

Herzegovina

(1999)

Application accepted at July1999 General Council; has not yet submitted initial

documentation to activate the accession negotiations.

Bhutan *

(1999)

Application accepted at October 1999 General Council; expected to submit initial

documentation to activate the accession negotiations during 2002.

Cambodia *

(1995)

Second WP meeting to convene in mid-February 2002 to continue review of the foreign

trade regime and agenda for legislative implementation of WTO. Initial market access

offers circulated in December 2001.

Cape Verde *

(2000)

Application accepted at July 2000 General Council; has not yet submitted initial

documentation to activate the accession negotiations.

China 

(1986)

China became the 143rd Member of the World Trade Organization on December 11, 2001.

Iran Application for accession to the WTO first circulated in September 1996; under

consideration in the General Council since July 2001.

Kazakhstan

(1996)

WP meeting held July 12-13, 2001. Legislative implementation underway. U.S.

comments on revised market access offers transmitted in May 2001. Revised offers and

updated agenda for enactment of WTO legislation expected in 2002.

Laos *

(1998)

Initial documentation submitted in March 2001. No working party meetings or market

access offers to date.

Lebanon

(1999)

Initial documentation submitted in June 2001. No market access offers to date. First WP

meeting anticipated in late May, after circulation of written responses to initial questions

and comments.

Libya Application for accession to the WTO first circulated in December 2001; will be

considered at the first General Council meeting in 2002.

Lithuania

(1994)

Lithuania became the 141st Member of the WTO on May 31, 2001.

Former

Yugoslav

Republic of

Macedonia

(1995)

WP meetings held March 15, and December 7, 2001, with negotiation of goods and

services market access offers on the margins. Further market access bilaterals and

agricultural plurilateral meetings expected in March 2002. Next formal WP meeting

expected in May 2002 to review progress of legislative implementation of WTO

provisions and draft WP report. 

Moldova

(1993)

Moldova became the 142nd Member of the WTO on July 26, 2001.
Applicant Status of Multilateral and Bilateral Work 

32

Nepal *

(1989)

GATT 1947 accession process suspended in 1994. First WTO WP meeting held May 22,

2000, and additional information provided in October 2000. Market access offers

discussed bilaterally in September 2000. Revised offers expected soon, with opportunity

for additional bilateral and WP meetings in 2002.

Russia 

(1993)

WP meetings held June 23-24 (formal) and December 10 (informal), 2001. Intensive

bilateral and multilateral work on protocol, agriculture, and goods and services market

access during 2001 continued during January 23-24, 2002 formal WP meeting.

Legislative implementation ongoing. Initial draft of Working Party report to be circulated

during first quarter 2002. 

Samoa *

(1998)

Initial documentation submitted in February 2000 with additional information in

November 2000 and August 2001. First WP meeting expected in March 2002.

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; will be considered

at the first General Council meeting in 2002.

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. Revised market access offers and second WP

meeting expected in second half of 2002.

Ukraine

(1993)

WP meeting held June 13-14, 2001. Persistent non-tariff barriers and lack of IPR

protection undermines progress achieved to date in bilateral goods and services market

access negotiations. Comprehensive revised goods and services offers circulated in

December 2001. Bilateral and Working Party discussions in 2002 will focus on need for

realistic legislative agenda to implement WTO-consistent trade regime and elimination of

nontariff barriers. WP to consult in early February 2002 on next steps.

Uzbekistan

(1995)

Circulation of initial documentation completed in April 2001. First WP meeting expected

in May 2002. 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)

Last WP meeting in November 2000 completed initial review of the trade regime. Next

WP meeting, expected in April 2002, will address plans for legislative implementation of

WTO provisions. Goods and services market access offers expected in early 2002.

Yemen *

(2000)

Application accepted at July 2000 General Council; has not yet submitted initial

documentation to activate the accession negotiations.

Yugoslavia

(2001)

Application accepted at February 2001 General Council; initial documentation to activate

the accession negotiations to be circulated in early 2002. No market access offers to date.
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.

33

WORLD TRADE

ORGANIZATION

WT/DSB/19

29 March 2000

(00-1284)

INDICATIVE LIST OF GOVERNMENTAL AND

NON-GOVERNMENTAL PANELISTS

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.

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.

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.
34

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
35

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

PALEKA, 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
36

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)
37

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

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

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
38

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

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

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
39

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

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
40

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

HÄBERLI, Mr. C Trade in Goods

INEICHEN-FLEISCH, Ms. M.-G. Trade in Goods and Services

KRAFFT, Mr. M-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
41

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
42

ANNEX

Administration of the Indicative List

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 non-governmental

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 non-governmental

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. 
43

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.
44

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.

45

WORLD TRADE

ORGANIZATION

WT/DSB/19/Add.1

26 June 2001

(01-3178)

INDICATIVE LIST OF GOVERNMENTAL AND

NON-GOVERNMENTAL PANELISTS

Addendum

1. 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
46

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

__________
1

 Curricula Vitae containing more detailed information are available on request from the WTO Secretariat

(Council Division – Room 2025).

47

WORLD TRADE

ORGANIZATION

WT/DSB/W/172

5 October 2001

(01-4843)

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

EUROPEAN

COMMUNITIES

FRANCE STERN, Mme. B. Trade in Goods and Services

MEXICO AGUILAR ÁLVAREZ, Mr. G. Trade in Goods and Services; TRIPS

AMIGO CASTAÑEDA, Mr. J. TRIPS

DE MATEO VENTURINI, Mr. F. Trade in Services

JASSO TORRES, Mr. H. Trade in Goods

ORTEGA GÓMEZ, Mr. A. Trade in Goods and Services; TRIPS

PEREZCANO DÍAZ, Mr. H. Trade in Goods and Services; TRIPS

RAMÍREZ HERNÁNDEZ, Mr. R. Trade in Goods and Services

REYES, Ms. L.H. Trade in Goods

TRASLOSHEROS HERNÁNDEZ, Mr.

J.G.

Trade in Goods and Services; TRIPS

ZABLUDOVSKY KUPER, Mr. J. Trade in Goods and Services; TRIPS
48

NIGER TANKOANO, Mr. A. Trade in Goods and Services; TRIPS

__________

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.
1

 Curricula Vitae containing more detailed information are available on request from the WTO Secretariat

(Council Division – Room 2025).

49

WORLD TRADE

ORGANIZATION

WT/DSB/W/174

26 October 2001

(01-5272)

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 MAKUC, Mr. A. Trade in Goods and Services

PÉREZ GABILONDO, Mr. J.L. Trade in Goods; TRIPS

RUIZ, Mr. J. A. Trade in Goods and Services

__________
1

 Curricula Vitae containing more detailed information are available on request from the WTO Secretariat

(Council Division – Room 2025).

50

WORLD TRADE

ORGANIZATION

WT/DSB/W/179

7 December 2001

(01-6240)

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

AUSTRALIA KENYON, Mr. D. Trade in Goods and Services

INDIA NARAYANAN, Mr. S. Trade in Goods; TRIPS

ISRAEL HOROVITZ, Mr. D. Trade in Goods and Services

POLINER, Mr. H.Z. TRIPS

__________
51

MEMBERSHIP OF THE WTO APPELLATE BODY

The membership of the WTO Appellate Body is as follows:

Mr. G M Abi-Saab (Egypt), Mr. Julio Lacarte Muro (Uruguay),

Mr. James Bacchus (United States), Mr. Yasuhei Taniguchi (Japan),

Professor Claus-Dieter Ehlermann (Germany), Professor Luiz Olavo Baptisa

Justice Florentino Feliciano (the Philippines), Mr. John S. Lockhart

Mr. A V Ganesan (India), 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 practised 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.

Claus-Dieter Ehlermann

Professor Claus-Dieter Ehlermann of Germany, born 1931, is an internationally-recognized authority on international economic law

who currently holds the Chair of Economic Law at the European University Institute in Florence and is Honorary Professor at the

University of Hamburg. In May 1995, after more than 34 years of service for the European Commission, he retired from his post of

Director-General of the Directorate General for Competition to the Commission.

In 1961 Professor Ehlermann joined the Legal Service of the European Commission and rose to become its head in 1977. He served as

Director-General of the Legal Service for ten years until 1987 when he was appointed spokesman of the Commission and special

adviser of the President on institutional questions. In 1990 he became Director-General of the Directorate-General for Competition,

bringing him into close contact with competition authorities in the United States (within the framework of the bilateral US-EU

Cooperation Agreement negotiated in 1990/91) and in Japan, Australia and New Zealand. He also assisted the fledgling competition

authorities in the transition economies of Central and Eastern Europe.

Since 1972, Professor Ehlermann has also pursued an academic career, teaching Community Law in Bruges, Brussels, Hamburg, and,

since May 1995, in Florence. He has written more than 160 publications which, since 1991, have dealt primarily with competition law

and policy, industrial policy and international cooperation. He also serves as a member on several academic advisory bodies, in

particular with respect to law reviews.
52

Florentino Feliciano

Mr. Justice Florentino Feliciano of the Philippines, born 1928, is Senior Associate Justice of the Supreme Court of the Philippines and

Vice-Chairman of the Academic Council of the Institute of International Business Law and Practice of the International Chamber of

Commerce in Paris.

Before joining the Judiciary in 1986, Mr. Feliciano had been a Member since 1962 of the law firm Sycip, Salazar, Feliciano and

Hernandez, where he was extremely involved in trade and corporate law cases and transactions concerning anti-dumping, intellectual

property rights, banking and insurance services, shipping and telecommunications.

Mr. Feliciano also has extensive experience as an arbitrator in international investment and commercial disputes at the International

Centre for Settlement of Investment Disputes in Washington, and at the ICC in Paris. He has been on the Arbitrators Panel of the

American Arbitration Association in New York and was also a Member of the Asian Development Bank Administrative Tribunal.

Having graduated in law from the University of the Philippines, Mr. Feliciano went on to earn his Masters and Doctorate Degrees in

law from Yale University. He taught in the Faculty of Law of the University of the Philippines and of Yale University. A Member of

Institut de Droit International, he has lectured at the Hague Academy of International Law. He has written and published on various

aspects of international business law and public international law.

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; 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.

Julio Lacarte Muro

Mr. Julio Lacarte Muro of Uruguay, born 1918, was a career diplomat who has been involved with the GATT/WTO trading system

since its creation almost fifty years ago and has participated in all eight rounds of multilateral trade negotiations under the GATT.

Mr. Lacarte served as the Deputy Executive Secretary of the GATT in 1947-48. He returned to the GATT as Uruguay's Permanent

Representative in 1961-66 and 1982-92, during which periods he served as Chairman of the Council, the Contracting Parties, several

dispute settlement panels, and the Uruguay Round negotiating groups on dispute settlement and institutional questions.

Mr. Lacarte has also served as the Deputy Director of the International Trade and Balance-of-Payments Division of the United Nations

and as the Director of Economic Cooperation among Developing Countries of UNCTAD. He has also been Uruguay's Ambassador to

several countries, including the European Communities, India, Japan, the United States and Thailand.

In his academic career, Mr. Lacarte has been a professor at the International Association of Comparative Law and at the University of

Comparative Law at Strasbourg University. He has written several publications, including a recently-published book covering all the

subject matter of the Uruguay Round from its inception to the Marrakesh Final Act.

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
53

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.

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
54

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

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.

LIST OF TRADE AGREEMENTS 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 2001 ANNUAL REPORT

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)

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)
LIST OF TRADE AGREEMENTS 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 2001 ANNUAL REPORT

< 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)
LIST OF TRADE AGREEMENTS 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)

< Agreements on Trade in Textiles and Textile Products (signed February 1, 1997; provisional

implementation pending final exchange of notes)

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)
6 2001 ANNUAL REPORT

Estonia

< Bilateral Investment Treaty (February 16, 1997)

European Union

< 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)

< Wine Accord (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)
LIST OF TRADE AGREEMENTS 7

< Agreement on Global Electronic Commerce (December 9, 1997)

< Agreed Minute on Humane Trapping Standards (December 18, 1997)

< 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 Untied 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)

France

< Memorandum of Understanding Relating to the Development of Technology-Based Joint

Ventures between Small United States and French Companies (February 1986)

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)

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)
8 2001 ANNUAL REPORT

Indonesia

< Conditions for Market Access for Films and Videos into Indonesia (April 1992)

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)
LIST OF TRADE AGREEMENTS 9

< Measures Related to Japanese Public Sector Procurement of Computer Products and Services

(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 2001 ANNUAL REPORT

< 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)

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)

< Investment Agreement (May 19, 1989)

< Agreement on Liberalization of Agricultural Imports (May 25, 1989)
LIST OF TRADE AGREEMENTS 11

< 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)

Kyrgyzstan

< Agreement on Bilateral Trade Relations (August 21, 1992)
12 2001 ANNUAL REPORT

< 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)

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)

Morocco

< Bilateral Investment Treaty (May 29, 1991)

Nepal

< Exchange of notes extending bilateral agreement on Trade in Textiles and Textile Products (July

13, 2000)
LIST OF TRADE AGREEMENTS 13

Nicaragua

< Bilateral Intellectual Property Rights Agreement with Nicaragua (December 22, 1997)

Norway

< Agreement on Procurement of Toll Equipment (April 26, 1990)

Oman

< Exchange of notes extending bilateral agreement on Trade in Textiles and Textile Products

(November 25, 2000)

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)

Romania

< Agreement on Bilateral Trade Relations (April 3, 1992)

< 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)
14 2001 ANNUAL REPORT

< 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)

< 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)

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)
LIST OF TRADE AGREEMENTS 15

< 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 Trade in Textiles and Textile Products (1997)

< Agreement on Market Access (February 20, 1998)

< Extension to Agreement on Trade in Textiles and Apparel Products (December 15, 2000)

< Understanding on Government Procurement (August 23, 2001)

< Extension to Agreement on Trade in Textiles and Apparel Products (November 16, 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

< Bilateral Investment Treaty (February 7, 1993)

Turkey

< Bilateral Investment Treaty (May 18, 1990)

< WTO Settlement Concerning Taxation of Foreign Film Revenues (July 14, 1997)
16 2001 ANNUAL REPORT

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)
LIST OF TRADE AGREEMENTS 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 2001 ANNUAL REPORT

Poland

< Comprehensive Trade Package on Tariff Reduction (June 15, 2001)

Russia

< Bilateral 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)
LIST OF TRADE AGREEMENTS 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 2001 ANNUAL REPORT

< 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)

Chile

< U.S.-Chile Joint Commission on Trade and Investment (May 19, 1998)

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)

Morocco

< U.S.-Morocco Trade and Investment Framework Agreement (March 16, 1995)

Nigeria

< U.S.-Nigeria Trade and Investment Framework Agreement (February 16, 2000)

South Africa

< U.S.-South Africa Trade and Investment Framework Agreement (February 18, 1999)
LIST OF TRADE AGREEMENTS 21

Turkey

< U.S.-Turkey Trade and Investment Framework Agreement (September 29, 1999)

Uruguay

< U.S.-Uruguay Bilateral and Commercial Trade Review (May 20, 1999)