THE YEAR IN TRADE: 

OPERATION OF THE TRADE 

AGREEMENTS PROGRAM 

44th REPORT 

1992 

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UNITED STATES 

INTERNATIONAL 

TRADE COMMISSION 

USITC PUBLICATION 2640 

JULY 1993 

Prepared in Conformity With 

Section 163(b) of the 

Trade Act of 1974 
U.S. International Trade Commission 

COMMISSIONERS 

Don E. Newquist, Chairman 

Peter S. Watson, Vice Chairman 

David B. Rohr 

Anne E. Brunsdale 

Carol T. Crawford 

Janet A. Nuzum 

Address all communications to 

Secretary to the Commission 

United States International Trade Commission 

Washington, DC 20436 
This report was principally prepared by 

Robert A. Rogowsky 

Director of Operations 

Joseph F Francois 

Acting Director of Economics 

Chief, Trade Reports Division 

Martin F. Smith 

Chief, Major Trading Nations Branch 

Kim S. Frankena 

Project Leader 

Thomas F. Jennings 

Assistant Project Leader 

Paul Gibson 

Joanne E. Guth Todd T. Schneider 

Vivian N. Keller James E. Stamps 

Magdolna B. Kornis Janet Whisler 

Diane L. Manifold Edward S. Wilson 

Michael S. Youssef 

Office of the General Counsel 

Kathryn Gilchrist 

Office of Tariff Affairs and Trade Agreements 

Daniel Shepherdson 

Terry O'Brien 

Office of Industries 

Jackie Jones 

Office of Unfair Import Investigations 

Jeffrey Whieldon 

Office of Management Services 

David Saia, Editorial services 

Pamela Chase, Joyce Bookman, and Paulette Henderson, Designers 

With the assistance of Dean Moore, 

Jayne Bertovich, Presidential Management Intern, and 

student interns Robert Hopkins, Michael Rorke, and Mark Stevens 

Supporting assistance was provided by: 

Paula Wells, Secretarial services 

Linda Cooper, Clerical services 

Dennis Oswell, Index 

TABLE OF CONTENTS 

Page 

Introduction 

Trade policy in 1992 ix 

The international economic environment and world trade in 1992 xiii 

North America xiv 

European Community xvii 

Asia xviii 

Latin America xx 

Central and Eastern Europe/and the Former Soviet Union xx 

Chapter 1. North American Free—Trade Agreement 

Reaching an accord 1 

The final NAFTA text: Selected topics 1 

Tariffs 2 

Rules of origin 2 

Auto and auto parts 2 

Textiles and apparel 3 

Standards 3 

Services 4 

Government procurement 5 

Foreign investment 5 

Emergency actions 5 

Dispute settlement 6 

Intellectual property rights 6 

Agriculture 6 

Energy 7 

Parallel issues 7 

Labor 7 

Environment 8 

The next steps 9 

Chapter 2. The General Agreement on Tariffs and Trade (GATT) 

The Uruguay Round 15 

Agriculture 18 

Services 20 

Market access 22 

Yearend discussions 23 

Principal GATT activities 24 

Dispute settlement 24 

Reviews of free—trade areas 28 

Environment 29 

Organization for Economic Cooperation and Development 37 

Export credit arrangement 37 

Investment codes 38 

United Nations Conference on Trade and Development 39 

UNCTAD VIII 39 

The Generalized System of Preferences 40 

Restrictive business practices 40 

Negotiation and operation of international commodity arrangements 40 
TABLE OF CONTENTS-Continued 

Page 

Chapter 3. Other multilateral trade agreement activities— Continued 

The Generalized System of Preferences 40 

Restrictive business practices 40 

Negotiation and operation of international commodity 

arrangements 40 

Other trade-related activities 43 

Enterprise for the Americas Initiative 43 

Chapter 4. U.S. relations with major trading partners 

The European Community 47 

Blair House agreement—Oilseeds 47 

Third Country Meat Directive 49 

Airbus 50 

EC integration and enlargement 51 

Canada 54 

Beer 54 

Lumber 56 

Interprovincial trade barriers 57 

Automobile content dispute 58 

Japan 58 

Automobiles and parts 59 

Semiconductors 60 

Machine tools 61 

Paper and paper products 62 

Mexico 62 

The Pact for Stability, Competitiveness and Employment 63 

Efforts to control the trade deficit 64 

Agricultural reform 66 

China 67 

Agreement on intellectual property rights 67 

Market-access agreement 68 

China and the GATT 69 

Taiwan 70 

Protection of intellectual property rights 70 

GATT application 71 

Trade and investment framework agreement 72 

Republic of Korea 72 

Telecommunications 73 

Trade and investment agreement 73 

Korean 5-year plan 74 

Chapter 5. Administration of U.S. trade laws and regulations 

Import relief laws 89 

Safeguard actions 89 

Market disruption 89 

Adjustment assistance 89 

Laws against unfair trade practices 90 

Antidumping investigations 91 

Countervailing-duty investigations 91 

Reviews of outstanding antidumping and countervailing-duty orders 92 

Enforcement of trade agreements and response to unfair foreign practices 92 

Section 337 investigations 93 

vi 
TABLE OF CONTENTS-Continued 

Page 

Chapter 5. Administration of U.S. trade laws and regulations—Continued 

Other import administration laws and programs 97 

Generalized System of Preferences 97 

Caribbean Basin Economic Recovery Act 99 

Andean Trade Preference Act 99 

Arrangement Regarding International Trade in Textiles 100 

Steel import program 104 

Figures 

A. Selected trade events, 1992 

B. U.S. merchandise trade with the world, by product sectors, 1992 xv 

C. U.S. exports, imports, and trade balances with major trading 

partners, 1992 xvi 

2-1. Recent disutes under the Tokyo Round agreements 26 

5-1. U.S. imports of textiles and apparel by major suppliers, 1985 

and 1992 103 

Tables 

2-1.Contracting Parties to the GATT: Status as of Dec. 31,1992 16 

2-2.Signatories to the Tokyo Round agreements: Status as of 

Dec. 31,1992 17 

3-1.Summary of international commodity agreements, 1992 42 

4-1.Share of U.S. apparent consumption of Japanese machine tools 

allowed under the 1992 U.S.-Japan VRA 62 

5-1.Summary of activity on Sec. 301 investigations during 1992 94 

5-2.U.S. imports for consumption from GSP beneficiaries and the world, 

1992 97 

5-3.U.S. imports for consumption under the GSP from leading 

beneficiaries, and total, 1992 98 

5-4.U.S. imports for consumption from countries designated under CBERA, 

by duty treatments, 1990-92 100 

5-5.U.S. imports for consumption from countries designated under 

ATPA provisions, by duty treatments, 1992 101 

5-6 Countries with U.S. textile and apparel agreements or quotas: U.S. general 

imports of textiles and apparel subject to the MFA, in 1991, and expiration 

dates of agreements or quotas in place during 1991, as of July 13,1992 102 

Appendix Statistical tables 

A-1. U.S. merchandise trade with Canada, by SITC Nos. (revision 3), 1990-92 110 

A-2. Leading exports to Canada, by HTS number, 1990-92 111 

A-3. Leading imports from Canada, by HTS number, 1990-92 112 

A-4. U.S. merchandise trade with Mexico, by SITC Nos. (revision 3), 1990-92 113 

A-5. Leading exports to Mexico, by HTS number, 1990-92 114 

A-6. Leading imports from Mexico, by HTS number, 1990-92 115 

A-7. U.S. merchandise trade with the European Community, by SITC 

Nos. (revision 3), 1990-92 116 

A-8. Leading exports to the European Community, by HTS number, 1990-92 117 

A-9. Leading imports from the European Community, by HTS number, 1990-92 118 

A-10. U.S. merchandise trade with Japan, by SITC Nos. (revision 3), 1990-92 119 

A-11. Leading exports to Japan, by HTS number, 1990-92 120 

A-12. Leading imports from Japan, by HTS number, 1990-92 121 

vii 
TABLE OF CONTENTS-Continued 

Page 

Appendix Statistical tables-Continued 

A-13. U.S. merchandise trade with Korea, by SITC Nos. 

(revision 3), 1990-92 122 

A-14. Leading exports to Korea, by FITS number, 1990-92 123 

A-15. Leading imports from Korea, by HTS number, 1990-92 124 

A-16 U.S. merchandise trade with Taiwan, by SITC Nos. (revision 3), 

1990-92 125 

A-17. Leading exports to Taiwan, by HTS number, 1990-92 126 

A-18. Leading imports from Taiwan, by HTS number, 1990-92 127 

A-19. U.S. merchandise trade with China, by SITC Nos. (revision 3), 

1990-92 128 

A-20. Leading exports to China, by HTS number, 1990-92 129 

A-21. Leading imports from China, by HTS number, 1990-92 130 

A-22. Countervailing duty actions reported by signatories to the GATT 

Committee on Subsidies and Countervailing Measures, by reporting countries, 1992 131 

A-23. Antidumping actions reported by signatories to the GATT Committee 133 

A-24. Antidumping cases active in 1992, filed under authority of title 

VII of the Tariff Act of 1930, by final outcome and by USITC 

investigation number 143 

A-25. Antidumping orders and findings in effect as of Dec. 31,1992 148 

A-26. Countervailing cases active in 1992, filed under authority of 

sec. 303 or title VII of the Tariff Act of 1930, by final 

outcome and by USITC investigation number 153 

A-27. Countervailing duty orders and findings in effect as of Dec. 31,1992 155 

A-28. Section 337 investigations completed by the U.S. International 

Trade Commission during 1992 and those pending on Dec. 31,1992 157 

A-29. Outstanding sec. 337 exclusion orders as of Dec. 31,1992 159 

A-30. U.S. imports for consumption of leading GSP-duty free imports, 1992 161 

A-31. U.S. imports for consumption and imports eligible for GSP treatment, by 

import categories based on the Harmonized Tariff Schedule (HTS), 1992 162 

A-32. U.S. imports for consumption of leading CBERA duty-free imports, 1989-92 163 

A-33. U.S. imports for consumption, designated and nondesignated countries under 

the CBERA, 1988-92 164 

A-34. U.S. imports for consumption of leading Andean Trade Preference Act (ATPA) 

duty free imports, 1992 165 

List of Abbreviations & Acronyms 167 

Index 169 

viii 
INTRODUCTION 

The annual Year in Trade, Operation of the Trade 

Agreements Program report is one of the principal 

means by which the U.S. International Trade 

Commission (USITC) provides the U.S. Congress 

with factual information on trade policy and its 

administration. The report also serves as a historical 

record of the major trade-related activities of the 

United States, for use as a general reference by 

government officials and others with an interest in 

U.S. trade relations. This report is the 44th in a series 

to be submitted under section 163(b) of the Trade Act 

of 1974 and its predecessor legislation. ]The trade 

agreements program includes "all activities consisting 

of, or related to, the administration of international 

agreements which primarily concern trade and which 

are concluded pursuant to the authority vested in the 

President by the Constitution" and congressional 

legislation.2 

The report consists of the present introduction, 

five chapters, a statistical appendix, and an index. 

Chapter 1 focuses on special topics—for this edition, 

the North American Free Trade Agreement (NAFTA). 

Chapter 2 focuses on activities in the General 

Agreement on Tariffs and Trade (GATT), the main 

area of multilateral trade agreement activities. 

Activities in forums other than the GATT are reported 

in chapter 3. Chapter 4 discusses bilateral relations 

between the United States and its major trading 

partners. Actions taken under U.S. laws, including 

decisions taken on remedial actions available to U.S. 

industry and labor, are discussed in chapter 5. The 

period covered in the report is calendar year 1992, 

although events in early 1993 are occasionally 

mentioned to help the reader understand developments 

more fully. The sections below sketch the policy and 

international economic environment within which 

U.S. trade policy was conducted in 1992. 

Trade Policy in 1992 

Progress on international trade issues proceeded 

slowly during 1992 against a backdrop of economic 

uncertainty in major industrialized countries and 

political upheaval in key areas of the world. Much of 

Europe was mired in weak growth and high 

unemployment, the Japanese economy entered a 

slowdown, and the U.S. recovery was relatively weak. 

Election campaigns in the United States and England, 

political unrest in the former Soviet Union, and the 

civil war in the former Yugoslavia were among the 

issues dominating the attention of policymakers and 

fueling nationalist sentiments. Although multilateral 

liberalization efforts had difficulty gaining 

momentum, global trade flows expanded at a healthy 

clip, and international trade bodies dealt with a wide 

variety of trade issues. Among the thorniest issues 

considered by the GATT was the increasing tension 

between trade and environmental concerns—a subject 

made more urgent by the "Earth Summit" held in Rio 

de Janeiro, Brazil, in June. 3Regional economic 

integration efforts accelerated in North America and 

Asia but faced several setbacks in Western Europe. 

(See figure A for a listing of significant events in 

trade during the year.) Continued progress in 

economic reform was made by many developing 

countries and formerly Communist countries. 

Mexico's far-reaching agrarian reform effort, launched 

in January 1992, was just one example of such steps. 

The Uruguay Round of multilateral trade 

negotiations, in its 6th year during 1992, fell victim 

once again to political exigencies. The Round is the 

most comprehensive and far-reaching 

trade-negotiating effort ever pursued, involving 115 

nations and promising improved coverage of the vast 

majority of trade in goods, as well as services, 

investment, and intellectual property for the first time. 

A comprehensive text introduced by GATT 

Director-General Arthur Dunkel in late 1991 was 

accepted as the basis for further negotiations, and 

these proceeded in 1992 along a four-track approach 

that subsumed the previous efforts of seven 

issue-specific negotiating groups. 

Differences between the European Community 

(EC) and the United States in the area of agriculture 

continued to weigh down the talks, stalling progress 

on most other fronts until late in the year. Some 

progress on one major area of unfinished 

business—rules on trade in services—was made at the 

technical level, however. The resolution of the 

longstanding U.S.-EC oilseed dispute in late 

November 1992 and apparent agreement (refered to as 

the "Blair House agreement") on a formula for 

ix 
Figure A 

Selected Trade Events, 1992 

January 

Jan. 4 — Mexico launches comPrehensive agrarian reform program reversing 7 decades 

of farming dominated by communal land ownership 

Jan. 7-10 — President Bush visits Japan to hOld talks on trade 

Jan. 13 — GATT Trade Negotiations Committee meets to discuss the comptehensiVe 

package of Uruguay Round results proposed by Director—General Arthur Dunkel.in 

December 1991; relaunches negotiations 

Jan. 17 — United States and China announce agreement improving intellectual - property 

rights (IPR) protection in China 

Jan. 28 — Members of the Association of Southeast Asian Nations (ASEAN) announce 

plans for a free—trade area by 2008 

February 

Feb. 7 — The Treaty on European Union (Maastricht Treaty) signed by EC governments 

reflecting commitment to monetary and political union 

Feb. 8 — 25 — Eighth quadrennial conference of the United Nations Conference on Trade 

and Development (UNCTAD) held in Cartagena, Colombia 

Feb. 18 — United States requests waiver of GATT most—favored—nation obligation to 

implement the Andean Trade Preference Act (ATPA) 

Feb 28 — U.S. Eximbank opens its programs to Russia 

March 

Mar. 31 Voluntary restraint agreements (VRAs) on U.S. steel imports expire 

April 

Apr. 29 — United States names India, Taiwan, and Thailand as priority countries under 

the Special 301 provision of the 1988 Trade Act for failure to provide adequate intellectual 

property protection 

Apr. 29 — United States grants an exception to its embargo on trade with Vietnam to allow 

sales of food, medicine, and agricultural supplies 

May 

may2'--EC and EiirOpean. ,Free Trade Association sigmtreaty::treating,.Eoropean.:. 

Economic ArealEEA) 

May.:13 . —.,President Bush freewith Chile upon conClUsion of the NOrtit.American•.:FreaTrado-Agraerrient.(NAFTA):: 

May 18 —19 — Ministerial meeting'of the Organization for Economic Cooperation and 

Development (OECD) Council 

June 

June 1 — Russia joins the International Monetary Fund 

June 2 — Maastricht Treaty defeated in Danish referendum 

June 3 — 14 — "Earth Summit" held in Rio de Janeiro, Brazil; overlap between trade and 

environmental policies discussed 

June 5 — United States and Taiwan announce IPR accord 

June 30 — U.S. steel producers file 84 antidumping and countervailing-duty complaints 

against numerous foreign steelmakers 

June 30 — United States signs agreements with Japan and Taiwan extending their 

restraints on machine tool exports through 1993 
July 

July 6 Leaders'Of the SeVerfleadiniiitidOStriat nations rheafr(MuniONi:Gerrnany 

July 6 United States:designatesBOINia: and Colombia as retroactive. 

to Jai-1.1,1992 

JUly 7 United StateS announces bankOn:certain Chinese goods; OfairningpriSortiabOrie 

:used in their production 

July 17 - United States and the EC sign agreerrientliMiting gOimenMent:Suppott:foelarge 

civil aircraft manufacturers: such' as Airtus 

August 

Aug. 12 - Completion of negotiations on the North American Free-Trade Agreement is 

announced 

Aug. 24 – Korea and China normalize relations 

September 

Sept. 9 - United States and Korea conclude Presidents' EcOnomic Initiative talks 

Sept. 10-11 - Ministers of the Asia-Pacific Economic Cooperation (APEC) forum meet in 

Bangkok; announce that the United States will assume chairmanship of the-regiOnal 

organization in 1993 

Sept. 17 - Participation of the British poundsterling and the Italian lira in the EC's 

Exchange Rate Mechanism (ERM) is suspended. Realignment of several other 

currencies follows 

Sept. 20 - Maastricht Treaty narrowly approved by French voters 

October 

Oct. 10 - United States and China sign a market access agreement easing many Chinese 

import restrictions, removing an obstacle to China's GATT accession 

Oct 23 – President Bush signs the Cuban Democracy Act tightening U.S. economic 

sanctions against Cuba 

Oct. 25 – President Bush signs the Freedom Support Act authorizing U.S. humanitarian, 

economic, and technical assistance to the former Soviet Union 

November 

Nov: 3 .,Arkerisas:Governor Bill Clinton defeats incumbent George:Bush to'beCome 42d 

President Of:the United States 

Nov. 13 - United States and the: EC reach:agreement on sanitary Standards:for:meat 

processing and meat inspection, :improving prospects:for 'a resumption of U.S. exports of 

beet and pork previously banned by the EC 

Nov: 20 United States and the EC reach agreeMent over reform of EC oilseeds regime 

aswelt key in The Uruguay Round 

December 

Dec. 2-3 - 48th session of Contracting Parties to the GATT. Decision to actively seek 

political level agreement on a Uruguay Round package reached 

Dec. 6 - Switzerland rejects the EEA treaty, forcing renegotiation 

Dec. 17 - NAFTA is signed by the heads of state in the participating nations 

Dec. 21 - The Czech and Slovak Republic, Hungary, and Poland sign Central European 

Free-Trade Agreement 

Dec. 22 - Japan and the United States agree to extend agreement on procurement by 

Nippon Telegraph and Telephone for another 3 years 

Dec. 31 - The European Community formally becomes a single, frontier- free market with 

more than 90 percent of the measures needed to remove intra-EC barriers in place 

Figure A—Continued 

Selected Trade Events, 1992 

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

xi 
attaining U.S./EC Uruguay Round agriculture 

objectives removed a major stumbling block to the 

negotiations. The talks resumed in early December 

in an effort to reach political agreement before 

yearend. However, uncertainty surrounding the 

change in U.S. administrations and dissatisfaction 

among some EC members about the Blair House 

agreement weakened the will to come to closure. 

With upcoming national elections, France signaled 

that it might seek a reopening of the Blair House 

accord. Negotiations on the Round did not resume 

until late March 1993. 

Key regional trade pacts—among them the 

NAFTA and the free-trade area agreement among six 

rapidly developing East Asian economies belonging to 

the Association of Southeast Asian Nations 

(ASEAN)4—were concluded successfully, as were a 

number of sectoral and bilateral accords. Trade 

agreements activities in multilateral organizations 

other than the GATT also made some breakthroughs. 

Completion of the NAFTA negotiations was 

announced in August 1992. The continentwide 

agreement is expected to liberalize trade in goods and 

services, ease investment barriers, strengthen 

intellectual property rights (IPR) protection, and foster 

greater cooperation among the three nations on 

economic .and other matters. The agreement was 

formally signed in December by President Bush, 

Mexican President Carlos Salinas, and Canadian 

Prime Minister Brian Mulroney. At yearend the 

agreement was awaiting submission to each national 

legislative body for approval. 

NAFTA is expected to serve as a model for the 

negotiation of free-trade agreements with other Latin 

American countries. In May 1992 President Bush 

announced the United States' intent to enter into 

negotiations with Chile toward a free-trade agreement 

upon enactment of NAFTA. Negotiation of trade and 

investment agreements with other countries of Central 

and South America under the auspices of the 

Enterprise for the Americas Initiative continued, with 

30 accords finalized by yearend. Meanwhile, the 

President formally implemented the Andean Trade 

Preferences Act with the July 1992 designation of 

Bolivia and Colombia as beneficiaries. Most 

countries in the Caribbean Basin, meanwhile, 

continued to benefit from preferential tariff and quota 

treatment under the U.S. Caribbean Basin Economic 

Recovery Act. The proportion of total U.S. imports 

from countries benefiting from such preferences 

reached an all-time high of 16 percent in 1992. 

The Organization for Economic Cooperation and 

Development (OECD) renewed and updated its 

arrangement on export credits. The tying of such 

credit to the purchase of donor country goods and 

services has been a longstanding concern of the 

United States. The new arrangement represents a 

greater level of discipline and cooperation on such 

matters than did previous accords. Tied-aid credit will 

be subject to greater scrutiny and justification among 

OECD members. 

The quadrennial meeting of the United Nations 

Conference on Trade and Development (UNCTAD) in 

February 1992 was marked by major steps toward 

institutional reform. Heretofore, the work of 

UNCTAD was generally carried out through groups of 

countries, divided along political-economic lines. 

Known as the "group system," this division of 

responsibilities contributed to tension and 

combativeness in many UNCTAD deliberations. 

Participants in the 1992 conference agreed 

unanimously to abandon the group system, a step 

expected to revitalize UNCTAD and ensure greater 

participation among members. Moreover, participants 

agreed that future UNCTAD efforts would take a 

market-oriented approach to developing country trade 

objectives, a step both welcomed by the United States 

and reflective of the substantial change in economic 

thinking within key developing countries over the 

previous 4 years. 

On the sectoral front, the expiration of voluntary 

restraint agreements on steel, continuation of 

quantitative limits on textiles and apparel, negotiation 

of new "voluntary restraints" on machine tool 

shipments by Japan and Taiwan, and the filing' of 

numerous complaints under U.S. antidumping and 

countervailing-duty laws by U.S. steelmakers 

dominated 1992 developments. 

Though occasionally contentious, U.S. bilateral 

trade negotiations with key trading partners were 

fairly productive in 1992. By yearend the United 

States and the EC reported apparent resolution of 

several longstanding disputes notably on oilseeds and 

development subsidies provided to domestic civil 

aircraft makers such as Airbus. U.S. efforts to 

influence the Community's single-market program—a 

comprehensive initiative launched in 1985 to remove 

all internal barriers to flows of goods, services, 

capital, and people by yearend 1992—were somewhat 

successful. Tensions over some EC policies such as 

government procurement remained, however. 

The extent of economic disarray in the former 

Soviet Union and the problems associated with 

economic restructuring in Central and Eastern Europe 

were painfully apparent throughout the year. While 

xii 
the EC continued to provide the major share of 

financial and other assistance to its Eastern neighbors, 

the United States added some 80 products to the list 

of items eligible for duty-free treatment after a special 

review of the Generalized System of Preferences 

(GSP) was completed in mid-June. It also undertook 

a review of the entire GSP program, which is slated to 

expire in mid-1993 unless renewed. The program 

provided 140 beneficiary countries with duty-free 

treatment of nearly $17 billion in U.S. imports in 

1992. 

Although the United States and Canada worked 

towards a NAFTA accord, bilateral disputes over beer, 

lumber, and automotive content filled headlines with 

news of bitter disagreements and acts of retaliation. 

At yearend the two sides were engaged in several 

trade skirmishes and mutual dumping and subsidy 

complaints, even as they agreed to accelerate tariff 

reductions associated with the 1988 U.S.-Canada 

Free-Trade Agreement and availed themselves of its 

dispute-settlement provisions for less contentious 

matters. 

The progressive improvement that characterized 

U.S.-Mexican relations in the past few years was 

capped with the December signing of the NAFTA. At 

the same time, relations between the two countries 

came under some strain in the final quarter of 1992. 

Opposition to the final NAFTA accord by some U.S. 

interests intensified, and the Salinas Administration, 

although known as market-oriented and friendly to the 

United States, imposed several measures that 

frustrated U.S. exporters. Mexico's actions came in 

the face of its widening overall trade deficit, 

exchange-rate pressures, and renewed worries about 

its rising external indebtedness. Meanwhile, 

Presidential candidate Bill Clinton's call for side 

accords on environmental and labor matters as a 

condition for final approval of the NAFTA accord met 

with a degree of concern in Mexico City, over 

potential U.S. interference in internal matters. 

The United States and Japan formally agreed on 

steps to resolve several sectoral matters as an adjunct 

to President Bush's January 1992 meeting with Prime 

Minister Miyazawa. However, misunderstanding and 

charges of bad faith ultimately surrounded bilateral 

accords on auto parts and semiconductors and set the 

two countries up for future debate over whether 

specific sales and market share "goals" were a 

necessary policy option. In June 1992 Japan issued 

for the first time its own report chronicling U.S. and 

other foreign trade barriers as a counterpoint to the 

U.S. annual report on foreign trade barriers. Publicly 

chafing at continued U.S. pressure over issues such as 

opening its market to foreign rice in the Uruguay 

Round, Japan asserted that the economic slowdown 

and flagging consumer and business confidence were 

the real causes of falling U.S. sales there. 

Elsewhere in Asia, U.S. relations improved with 

the signing of bilateral market access and IPR 

agreements with China, a telecommunications 

agreement with Korea, and an agreement to intensify 

dialogue with Taiwan on outstanding trade and 

investment concerns. A small step towards resuming 

trade with Vietnam was also taken in April when 

Vietiam was granted an exception to the economic 

embargo for purchase of goods to meet basic human 

needs. The formally separate but politically linked 

GATT applications of China and Taiwan began to 

receive serious consideration by yearend, raising the 

prospect that two significant U.S. import suppliers 

could soon be full-fledged members of the world trade 

organization. The region also moved closer to the top 

of the U.S. trade policy agenda with the September 

announcement that the United States would assume 

the chairmanship of the 15-nation Asia-Pacific 

Economic Cooperation forum in January 1993. 

The International Economic 

Environment and World 

Trade in 19925 

World real output grew at an estimated annual rate 

of 0.8 percent in 1992,6higher than the growth rate of 

0.3 percent in 1991 but much lower than the 

2.2-percent rate recorded in 1990. The relatively 

lackluster growth in world output reflected the 

continued sluggish growth in major industrial 

countries and in Latin America. Output in Eastern 

Europe and the former Soviet Union actually declined. 

Asia, meanwhile, continued its strong economic 

performance. 

World trade grew faster than world output in 

1992. GATT estimates show that world merchandise 

trade volume grew by 4.5 percent in 1992, up from 

3.0-percent growth in 1991. 7The nominal value of 

world trade expanded by 5.5 percent, to $3.7 trillion 

in 1992, compared with 3.5-percent growth in 1991. 

World trade in commercial services is estimated to 

have grown by 8 percent, to $960 billion. 

In the 24 industrialized countries of the OECD 

group, output grew by an estimated 1.5 percent in 

1992, from an actual growth rate of 0.8 percent in 

1991.8Inflation was estimated at 3.5 percent in 1992, 

lower than the 4.8-percent rate registered in 1991. 

Unemployment rose to 7.9 percent in 1992 from 6.8 

percent in 1991. OECD exports increased by 3.7 

percent in 1992, compared with a 2.8-percent increase 
in 1991; imports increased by 4.3 percent, compared 

with a 2.6-percent increase in 1991. 

In developing countries the liberalization of 

domestic and trade policies improved growth 

prospects. The real output of developing countries 

grew by an estimated 6.2 percent in 1992 compared 

with an actual rate of 3.2 percent in 1991. Brisk 

output gains were recorded in the Middle East, which 

expanded by 9.9 percent, and in Asia's newly 

industrializing economies (NIEs),9which expanded at 

an estimated rate of 6.6 percent. Developing 

countries in the Western Hemisphere experienced a 

growth slowdown, increasing output by 2.7 percent on 

average. 

Debt remained a major concern for several 

developing nations, particularly the least developed. 

The International Monetary Fund (IMF) statistics 

show that the external debt of all developing countries 

increased by an estimated $51 billion in 1992, to 

$1,564 billion. Some indebted countries experienced 

faster growth in output and in exports than in debt, 

and thus their creditworthiness improved. However, 

arrears of the severely indebted groups grew rapidly. 

North America 

Output and productivity in the United States, 

Canada, and Mexico rose in 1992. Total exports by 

North America increased to $590.5 billion, whereas 

regional imports increased to $701.2 billion. Regional 

economic integration in North America is expected to 

further enhance productivity and increase regional 

output and trade. 

United States 

In the United States real output grew in May 

1992 by 2.1 percent after falling by 1.8 percent in 

1991. Real personal consumption spending, the major 

component of aggregate demand, increased by 2.2 

percent, following a decline of 0.6 percent in 1991, 

reflecting an improvement in consumer confidence 

and a rise in personal income. Real private domestic 

fixed investment, bolstered by declining long-term 

interest rates, lower unit labor costs, and higher 

capital returns, rose by 3.0 percent after declining by 

7.0 percent in 1991. Subdued inflation (to an annual 

rate of 3.5 percent) allowed the Federal Reserve to 

undertake a series of actions to strengthen domestic 

demand and increase bank lending. Bank reserve 

requirements were reduced, and key interest rates fell 

to their lowest levels in decades. 

Nevertheless, aggregate demand remained weak 

relative to past recoveries. High levels of consumer 

and business debt, more cautious bank-lending 

practices, and the drag of structural adjustments all 

combined to restrain employment and demand growth. 

Real Federal Government spending, restrained by the 

recession and by the Omnibus Budget Reconciliation 

Act of 1990, decreased by 3.2 percent. The Federal 

budget deficit deepened in 1992 to $290 billion (or 

4.8 percent of GDP) from $269 billion in 1991. The 

sluggish economy reduced government revenue at the 

same time that the bailout of savings and loan 

institutions required higher outlays. The 

unemployment rate rose to 7.3 percent in 1992 from 

6.7 percent in 1991. 

In the foreign sector the United States ranked as 

the world's largest merchandise exporter in 1992, 

followed by Germany and Japan. However, the 

strengthening of domestic demand led to increased 

imports. As a result, -the 1992 merchandise trade 

deficit rose to $100.1 billion (or 1.7 percent of GDP) 

from $82.9 billion in 1991 but was considerably lower 

when compared with the 1990 deficit of 

$116.8 billion. Exports rose by 6.0 percent in 1992, 

to an all-time high of $425.0 billion. Imports 

increased by 8.5 percent, to $525.1 billion. Exports 

grew in almost every end-use category in 1992: 

capital goods gained 6.1 percent, automotive vehicles 

and parts gained 16.8 percent, and consumer goods 

gained 9.8 percent. Exports of manufactures grew by 

6.5 percent, to $329.2 billion, and constituted 77.5 

percent of total U.S. exports. Within the 

manufactured goods category, exports of 

advanced-technology products gained 5.1 percent; the 

United States ran a trade surplus in these products of 

$33.3 billion in 1992. Airplanes and parts, scientific 

instruments, specialized industrial machinery, and 

general industrial machinery recorded the most 

positive contributions to the U.S. trade balance in 

1992. Imports of oil increased to $38.5 billion in 

1992, from $36.9 billion in 1991. Figure B shows 

U.S. exports and imports by aggregate product 

sectors. 

U.S. trade in services has particularly expanded. 

In 1992, U.S. total exorts of services expanded from 

$152.3 billion in 1991 to $166.7 billion in 1992; U.S. 

imports of services expanded from $100.0 billion to 

$107.7 billion in 1992. The U.S. balance on trade in 

services mounted to $59.0 billion in 1992 from $52.3 

billion in 1991. Exports of services comprised three 

main categories-travel, royalties and license fees, 

and other private services. The latter included 

education, financial services (banking and insurance), 

and telecommunications services. All of these 

xiv 
Fuel/raw material 

$36.5/8.6% 

All other goods 

$17.9/4.2% 

Food 

$28.9/5.5% 

All other goods 

$19.1/3.6% 

U.S. Exports 

(billion dollars and percent) 

U.S. Imports 

(billion dollars and percent) 

categories grew in 1992. Foreign travel in the United 

States increased from $48.8 billion in 1991 to $54.7 

billion in 1992; royalties and license fees expanded 

from $17.8 billion to $19.6 billion. Other private 

services include receipts of U.S. parent corporations, 

U.S. affiliates' receipts, unaffiliated services (financial 

services of banking and insurance, and 

telecommunications); these receipts increased from 

$46.4 billion in 1991 to $50.9 billion in 1992. 

U.S. trade performance improved in 1992 with a 

few trading partners but worsened with most (figure 

C). On the plus side, the U.S. merchandise trade 

deficit with the Organization of Petroleum Exporting 

Countries declined to $11.2 billion from $14.0 billion. 

The U.S. surplus with Mexico climbed to $5.7 billion. 

However, the U.S. merchandise deficits widened with 

Canada, Germany, the NIEs as a group, Japan, and 

China. The 1992 trade deficit with Japan and China 

increased the most. The U.S. merchandise trade 

surplus with the EC declined to $8.8 billion from 

$17.0 billion in 1991. The United States incurred a 

small trade surplus with other Eastern European 

countries. Leading U.S. exports and imports to U.S. 

major trading partners are highlighted in appendix A. 

The U.S. current accountl° deficit grew to $62.4 

billion in 1992 from $3.7 billion in 1991. The 

merchandise trade deficit on a balance-of-payments 

basis grew to $96.3 billion in 1992 from $73.4 billion 

in 1991. The 1991 surplus on transfer payments 

(mainly due to contributions from U.S. allies for the 

Persian Gulf War) disappeared and was replaced by a 

deficit of $31.4 billion. The U.S. surplus on services 

trade increased to $55.1 billion from $45.3 billion in 

1991. The U.S. surplus on income from foreign 

investment declined to $10.1 billion in 1992, from 

$16.4 billion in 1991, due to the decline in earnings of 

U.S. affiliates abroad. Net inflows of foreign capital 

into the United States increased to $78.0 billion from 

$4.8 billion in 1991, reflecting declining U.S. 

purchases of foreign portfolio assets and increased 

purchases by foreigners of U.S. assets and securities. 

Figure B 

U.S. merchandise trade with the world, by product sectors, 1992 

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

Source: Compiled from official statistics of the U.S. Department of Commerce. 

xv 
Figure C 

U.S. merchandise exports, imports, and trade 

balances with major trading partners, 1992 

Major trading partners 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

Canada 

Canada's deep recession, which lasted from the 

first quarter of 1990 to the first quarter of 1991, 

resulted in a 3.5-percent output contraction. Although 

economic activity started picking up in 1992, output 

grew by just 1.3 percent. The upturn in economic 

activity was generated by a marked increase in 

government spending and in exports. Government 

spending on consumption rose by 1.6 percent, and 

spending on public investment projects rose by 2.6 

percent. Consumer demand revived modestly, 

increasing by 0.5 percent. Private investment 

declined by 1.6 percent due to corporate restructuring, 

falling capacity utilization, and subdued domestic 

demand. In addition, Canada experienced job losses 

and an unemployment rate that hit 11.2 percent in 

1992, up from 10.3 percent in 1991. Canada's 

consumer price index rose by 1.4 percent in 1992, 

down from an increase of 4.8 percent in 1991. 

In the foreign sector Canada's growing exports 

resulted in a merchandise trade surplus of $8.0 billion 

in 1992, up from a surplus of $5.9 billion in 1991. 

Exports of goods and services increased by 7.0 

percent, to $138 billion, and imports increased by 4.3 

percent, to $130 billion. Canada's deficit on the 

current account, however, mounted to $25.0 billion, 

due to larger payments on foreign investment, 

particularly to U.S. corporations. 

The value of U.S. trade with Canada totaled 

$181.5 billion in 1992, higher than U.S. trade with 

Japan and only $7.7 billion lower than U.S. trade with 

the 12-nation EC. The United States recorded a 

$15.0 billion merchandise trade deficit with Canada, 

higher than the merchandise trade deficit in 1991 of 

$12.2 billion and roughly 15.0 percent of the total 

xvi 
U.S. trade deficit. U.S. merchandise exports to 

Canada rose by 5.7 percent, to $83.2 billion. 

Merchandise imports from Canada rose by 8.0 

percent, to $98.2 billion. U.S. exports to Canada rose 

in 9 of 10 SITC sections (table A-1). Regarding U.S. 

exports to Canada, 86 percent consisted of 

manufactured goods, 6.0 percent was food, and 5.0 

percent was fuel and raw material. Regarding U.S. 

imports from Canada, 70 percent was manufactured 

goods, 5.0 percent was food, and 18.0 percent was 

fuel and raw material. Exports of U.S. services to 

Canada climbed from $18.0 billion in 1991 to $18.6 

billion in 1992. 

Mexico 

The Mexican economy in 1992 experienced an 

increasing current account deficit, pressures on 

exchange rates, and rising interest rates. Real gross 

national product grew in 1992 by an estimated 2.6 

percent, compared with 3.6 percent in 1991. 11A 

bright spot was the country's success in taming 

inflation. Consumer price inflation declined to 11.9 

percent after rising by 18.8 percent in 1991. 

Expectations for lower inflation were bolstered by 

Mexico's adoption of conservative fiscal and 

monetary policies. 

Increased imports and declining exports led to a 

merchandise trade deficit of $20.6 billion in 1992. 

Foreign direct investment inflows increased by $6 

billion, and portfolio investment inflows increased by 

$10.6 billion, helping to finance Mexico's current 

account deficit, which was estimated to reach $22.6 

billion in 1992. Such inflows produced a substantial 

capital account surplus of $23 billion and an increase 

in Mexican reserves of $19.3 billion in 1991. 

Mexico's total trade (exports plus imports) with 

the United States grew to $73.5 billion in 1992 from 

$62.7 billion in 1991. The United States recorded a 

merchandise trade surplus of $5.7 billion with Mexico 

in 1992, compared with a merchandise surplus of $1.8 

billion in 1991. U.S. exports to Mexico rose in all of 

the 10 SITC sections (table A-4). Regarding U.S. 

exports to Mexico, 80 percent consisted of 

manufactured goods, 7 percent was food, and 8.0 

percent was fuel and raw material. Regarding U.S. 

imports from Mexico, 73 percent consisted of 

manufactured goods, 16.0 percent was fuel and raw 

material, and the remainder consisted of food and 

other goods. 

European Community 

In the EC, output growth was estimated to average 

1.1 percent in 1992, compared with actual growth of 

0.8 percent in 1991. Higher interest rates in Germany, 

fiscal deficits, and uncertainty about European 

Monetary Union (EMU) worked as a drag on EC 

economic growth in 1992. Inflation declined to 4.9 

percent from 5.4 percent in 1991, and unemployment 

increased to 9.7 percent from 9.1 percent in 1991. 

The flexibility of EC economic and monetary 

policy makers has been hampered by several factors. 

As a result, consumer and business confidence flagged 

and economic activity remained weak. Pressures have 

been building on foreign-exchange and financial 

markets. High interest rates in Germany that could 

not be matched in other Exchange Rate Mechanism 

(ERM) member countries, large fiscal deficits in Italy, 

and large current account deficits in the United 

Kingdom intensified pressures on the other currencies 

associated with the ERM and anchored to the 

Deutsche mark. The hike in German interest rates by 

the Bundesbank to smother reunification-related 

inflationary pressures led to an appreciation of the 

mark. Downward pressures on other member 

currencies intensified and by September led to the 

realignment of some currencies and to the 

abandonment of the ERM by some countries. The 

Italian lira and the pound sterling left the ERM. The 

Spanish, Portuguese, and Irish currencies were 

devalued. The currency turmoil placed in jeopardy 

EC moves toward monetary integration, which began 

in July 1990. (See chapter 4 for additional details.) 

To enhance growth and put life back in the Maastricht 

Treaty, EC heads of state met in Edinburgh, Scotland 

and adopted a growth initiative in December 1992. 

EC world exports reached $1.46 trillion in 1992, 

and imports reached $1.52 trillion, resulting in a small 

merchandise trade deficit. The EC is the top U.S. 

trading partner. Total U.S. trade (exports plus 

imports) with the EC rose to $189.2 billion in 1992 

from $182.7 billion in 1991. U.S. exports declined to 

$97.3 billion from $97.6 billion, whereas imports rose 

to $91.8 billion from $85.1 billion in 1991. In 1992, 

U.S. exports to the EC increased in 6 of 10 SITC 

sections (table A-7), and imports from the EC 

increased in all sections. Of U.S. exports to the EC, 

79 percent was manufactured goods; 6.0 percent was 

food; and 10.0 percent, fuel and raw material. Of 

U.S. imports from the EC, 85 percent consisted of 

manufactured goods; 6.0 percent, food; and 5.0 

percent, fuel and raw material. U.S. services exports 

to the EC rose from $46.5 billion in 1991 to $53.0 

billion in 1992. Germany and the United Kingdom 

were the top U.S. trading partners in the EC. 

Germany 

In Germany tight monetary policy, weak foreign 

demand, and a hesitant recovery in the eastern section 

xvii 
dampened economic activity. Real output grew by 1.4 

percent in 1992 compared with a growth rate of 3.2 

percent in 1991. Consumer price inflation increased 

by 4.8 percent, up from 3.4 percent in 1991. 

Investment in plant and equipment was virtually flat 

in 1992 after rising by 10 percent in 1991, reflecting 

deteriorating business expectations and declining net 

exports. Germany's unemployment rate rose to 7.6 

percent from 6.4 percent in 1991. 

Germany's 1992 merchandise trade surplus 

decreased to $20.0 billion from $24.1 billion in 1991, 

and its current account deficit grew to $26.0 billion, 

compared with a deficit of $19.8 billion in 1991. 

Short-term capital inflows financed the current 

account deficit. Total U.S. trade with Germany rose 

to $47.5 billion in 1992 from $45.6 billion in 1991. 

The United States registered a merchandise trade 

deficit with Germany of $7.6 billion in 1992, 

compared with a deficit of $5.7 billion in 1991. 

The United Kingdom 

The British economy began to stabilize in 1992 

after six consecutive quarters of steep output decline. 

Overall, output fell in 1992 by 0.9 percent, following 

a decline of 1.9 percent in 1991. Consumer spending 

began to recover, growing by 0.5 percent, as did 

private investment. Consumer prices moderated, 

increasing by 5.4 percent from 7.2 percent in 1991, 

but the unemployment rate continued climbing, to 

10.1 percent from 8.5 percent a year earlier. The 

monetary policy of the United Kingdom remained 

focused on lowering the inflation rate. 

Although British merchandise exports in 1992 

increased to $191.0 billion (from $182.4 billion in 

1991), imports increased to $222.0 billion (from 

$201.0 billion), resulting in a trade deficit of $31.0 

billion. The British current account registered a 

deficit of $22.0 billion, following a deficit of $11.1 

billion in 1991. U.S. merchandise exports to the 

United Kingdom reached $21.4 billion, and imports 

reached $19.6 billion, resulting in a U.S. merchandise 

trade surplus of $1.8 billion in 1992. U.S. exports of 

service to the United Kingdom inceased from $14.9 

billion in 1991 to $17.4 billion 1992. U.S. exports of 

services to the United Kingdom increased form $14.9 

billion in 1991 to $17.4 billion in 1992. 

Asia 

Economic activity in Japan slowed in 1992. In 

other Asian countries, the introduction of 

market-oriented reforms improved the prospects for 

continued economic expansion. 12Economic growth 

has been particularly strong in the export-led 

economies of China, Hong Kong, Indonesia, Korea, 

Malaysia, Singapore, Taiwan, and Thailand, growing 

on average by an estimated 6.5 percent in 1992. 

Japan 

In Japan, economic activity continued to expand 

in 1992 but at a slower pace. Total output grew by 

1.8 percent, following a growth rate of 4.4 percent in 

1991. Japan's industrial output fell by 8.0 percent in 

1992-a sharper fall than in the mid-1980s, when yen 

appreciation restrained the country's exports. Gross 

fixed investment declined by 0.2 percent after rising 

by 3.4 percent in 1991. The Bank of Japan's 

Short-Term Survey of Enterprises in Japan showed a 

drop in business investment of 13.6 percent. Private 

consumption declined by 2.1 percent, following 

increases of 2.7 percent in 1991 and 4.2 percent in 

1990. Personal consumption spending on consumer 

durables and clothing decelerated, reflecting declining 

income growth, particularly in wages and bonuses. 

Employee compensation -increased by 5.3 percent, 

compared with a 7.9-percent increase in 1991. 

Household disposable income increased by 4.9 

percent, following an increase of 6.2 percent in 1991. 

An increase in public spending cushioned the 

impact of the decline in investment and consumption 

spending. Public investment by central and local 

governments exhibited steady growth estimated at 10 

percent in real terms. Overall, the Japanese economy 

still operated at a high (93.5-percent) level of capacity 

utilization. The inflation rate in Japan rose slightly, 

by 2.2 percent from 2.1 percent in 1991. 

The contraction was unusual in its severity and 

also in its causes, notably the bursting of the bubble in 

domestic asset prices that followed the extremely 

rapid expansion of domestic credit in the late 1980s. 

Some analysts have suggested that the current 

economic contraction could put strains on the ties that 

bind Japanese industrial conglomerates and their 

affiliated suppliers (keiretsu) and could raise the cost 

of capital in Japan. Analysts also warn that Japan's 

high rates of saving might dwindle as demographic 

trends and consumer habits change and full access to 

world markets becomes increasingly uncertain as 

major trading partners Bristle at Japan's persistent 

trade surplus. Other analysts believe that Japan will 

adjust successfully to its present economic problems 

by applying conservative macroeconomic policies 

combined with well-known corporate flexibility in 

restructuring production and adapting to financial 

problems, as it has in past recessions. 13 

Against this background and out of concern about 

the effect of falling asset prices on the financial 

system and personal income, the Japanese 

Government progressively eased monetary policy in 

xviii 
1992, cutting the official discount rate from 6.0 

percent to 3.25 percent. A number of measures were 

announced to reduce the burden of nonperforming real 

estate debt on bank balance sheets and to relieve 

downward pressure on the stock market. However, 

corporate investment in plant and equipment 

continued to decline because of capital stock 

adjustments, debt repayments, and flagging optimism 

in the face of declining sales and profits. 

Japan's exports of goods increased by 7.9 percent, 

to $330.9 billion in 1992 from $306.6 billion in 1991. 

Imports declined to $198.5 billion from $203.5 billion 

in 1991. Japan's merchandise trade surplus grew to 

$132.3 billion from $103.0 billion in 1991, according 

to Japan's Ministry of International Trade and 

Industry. The current account surplus is expected to 

reach $117.6 billion for the full year 1992 (3.25 

percent of gross domestic product (GDP)), up from 

$72.9 billion in 1991. The rise in the merchandise 

trade surplus is expected to be a source of continued 

friction between Japan and its trading partners. 

The U.S. merchandise trade deficit with Japan 

rose to $49.7 billion in 1992 from $45.1 billion in 

1991. U.S. exports to Japan in 1992 declined to $45.8 

billion from $46.1 billion in 1991; imports increased 

to $95.5 billion from $91.2 billion in 1991. U.S. 

exports increased in 5 of 10 SITC sections, and 

imports increased in 7 sections (table A-10). Of U.S. 

exports to Japan, manufactured goods accounted for 

60 percent; food consisted of 23.0 percent; fuel and 

raw material, for 15.0 percent; and the remainder, 2 

percent. In contrast, 97 percent of U.S. imports from 

Japan consisted of manufactured goods. Exports of 

services from the United States to Japan were valued 

at $26.4 billion in 1992, up from $24.7 billion in 

1991. 

Korea 

In Korea, output growth slowed to 6.5 percent in 

1992 from 8.4 percent in 1991. Tight monetary 

policy lowered domestic demand. Inflation slowed 

from 10.0 percent to 7.0 percent. Korea's mercnadise 

trade deficit declined from $7.0 billion to $2.0 billion, 

and the current account deficit declined by almost 

half, to $4.5 billion from $8.7 billion in 1991. 

Increasing demand in Europe and South East Asia, as 

well as the opening of new markets in the formerly 

socialist countries, spurred Korea's exports, which 

totaled $75.1 billion in 1992, up from $69.6 billion in 

1991. Imports totaled $77.3 billion, up from $76.6 

billion in 1991, resulting in a trade deficit of 

$2.2 billion in 1992.' 

U.S. trade with Korea totaled $30.7 billion in 

1992, down from $32.1 billion in 1991. The United 

States registered a trade deficit with Korea of $2.3 

billion in 1992. U.S. exports to Korea declined from 

$15.2 billion in 1991 to $14.2 billion in 1992, and 

imports declined from $16.9 billion in 1991 to $16.5 

billion. In 1992, U.S. exports to Korea increased in 4 

of 10 SITC sections and imports increased in 5 

sections (table A-13). Of U.S. exports to Korea in 

1992, 68 percent consisted of manufactured goods; 

9.0 percent, of food; 22.0 percent, fuel and raw 

material; and 2.0 percent, other goods. Of U.S. 

imports from Korea, 97 percent consisted of 

manufactured goods. 

Taiwan 

In Taiwan, output growth slowed to 6.7 percent in 

1992 from 7.3 percent in 1991. Exports declined as a 

result of a large increase in wages and the 

appreciation of the Taiwan dollar. Private 

consumption and investment increased, pushing the 

inflation rate up to 5.0 -percent from 3.6 percent in 

1991. Taiwan investment in the mainland, estimated 

at over $3 billion, was an important factor boosting 

trade with China. Total Taiwan exports were $81.0 

billion; its imports, $72.0 billion. The Taiwan 

merchandise trade surplus declined to $9.0 billion 

from $15.8 billion in 1991. 

Total Taiwan trade with the United States rose to 

$39.1 billion in 1992 from $35.7 billion in 1991. 

U.S. exports to Taiwan increased to $14.5 billion from 

$12.7 billion in 1991; U.S. imports increased to 

$24.5 billion from $22.9 billion. The U.S. bilateral 

trade deficit narrowed slightly, to $10.0 billion. In 

1992, U.S. exports to Taiwan increased in 6 of 10 

SITC sections while imports increased in 7 (table 

A-16). Of U.S. exports to Taiwan, 74 percent 

consisted of manufactured goods; 9.0 percent, of food; 

11.0 percent, fuel and raw material; and 5.0 percent, 

other. Of U.S. imports from Taiwan, 97 percent 

consisted of manufactured goods. 

China 

Policy initiatives such as a significant reduction 

in price controls and increased openness to foreign 

investment accelerated economic growth in China. 

According to China's State Statistical Bureau, GDP 

grew by 12.8 percent in 1992. Major economic 

problems in 1992 included excessive spending on 

capital projects, overgrowth in the money supply, and 

fairly high price rises in urban areas. The increase in 

the cost of living from 1991 to 1992 ranged from 4.7 

percent in rural areas to 10.9 percent in medium and 

large cities. Investment in fixed assets increased by a 

total of 37.8 percent over 1991. Industrial production 

rose by 20.8 percent in 1992. Output of 

xix 
foreign-funded enterprises grew by 48.8 percent. 

Output of collective enterprises grew by 28.5 percent, 

and output of state-owned enterprises grew by 14.4 

percent. 

China's further opening to the outside world also 

boosted its foreign trade. China accounts for more 

than 10 percent of world trade in clothing, footwear, 

and other leather goods. Exports of more 

sophisticated consumer durables seem to be 

expanding. China's merchandise exports amounted to 

$86 billion in 1992, 18.2 percent higher than in 1991. 

Manufactured goods rose to 80 percent of total 

exports. Imports increased to $81 billion, up by 26.4 

percent over 1991, led by raw materials and 

machinery and transportation equipment. 

China's total trade with the United States 

increased to $32.9 billion in 1992 from $25.1 billion 

in 1991. U.S. merchandise exports to China increased 

to $7.3 billion from $6.2 billion; imports increased to 

$25.5 billion from $18.9 billion. As a result, the U.S. 

trade deficit with China widened to $18.2 billion from 

$12.6 billion. In 1992, U.S. exports to China 

increased in 7 of 10 SITC sections, and imports 

increased in 8 (table A-19). Of U.S. exports to China, 

82 percent consisted of manufactured goods; 5.0 

percent, food; 12.0 percent, fuel and raw material; and 

1.0 percent, other goods. In contrast, 93 percent of 

U.S. imports consisted of manufactured goods, and 

the remainder consisted of food, fuel and raw 

material, and other goods. 

Latin America [excluding 

Mexico] 

In Latin America, growth recovered in a number 

of countries following the implementation of 

market-oriented policies. 15The ensuing structural 

economic changes earned these countries new 

confidence in world financial markets and allowed 

limited access to new credit financing. Moreover, 

foreign direct investment flows to these countries 

increased, helping to finance deficits on their current 

accounts. Debt-servicing problems, although no 

longer the crises of the 1980s, are still a major 

concern for several Latin American countries. 

Although marked differences remain in 

performance among individual countries, aggregate 

output of Latin America as a whole is estimated to 

have risen at a 3.0-percent rate in 1992. Colombia's 

output growth hovered at 2.0 percent. Chile's and 

Panama's output growth exceeded 8.0 percent, and 

growth in Argentina exceeded 6.0 percent. In other 

Latin American countries the situation is mixed, due 

to political uncertainty and weak fiscal disciplines. 

Domestic stabilization policies and external 

adjustment efforts in Ecuador, Guatemala, Nicaragua, 

Panama, Peru, and Venezuela are expected to enhance 

economic progress in the future. Output growth is 

accelerating in Argentina while inflation is declining 

to about 15 percent, due to the initiation of an 

adjustment program. In Brazil output growth 

remained unchanged at the 1991 level of 1.0 percent. 

Inflation is estimated at 25 percent per month. 

Latin America's total merchandise trade with the 

United States increased to $63.3 billion in 1992 from 

$56.5 billion in 1991. U.S. exports to Latin America 

increased to $31.6 billion from $27.0 billion, and 

imports rose to $31.6 billion from $29.5 billion. The 

United States posted a $132 million trade surplus with 

Latin America in 1992 versus a $2.4 billion trade 

deficit in 1991. The largest U.S. trading partners in 

Latin America during 1992 were Brazil (whose total 

trade with the United States was $13.0 billion), 

Venezuela ($12.8 billion), Colombia ($6.0 billion), the 

Dominican Republic ($4.3 billion), Argentina ($4.2 

billion), and Chile ($3.6 billion). Machinery and 

equipment accounted for one-third of U.S. exports to 

Latin America in 1992, and energy and chemical 

products accounted for nearly one-third of imports. 

U.S. exports of services to Latin America (including 

Mexico) rose from $24.8 billion in 1991 to $27.0 

billion in 1992. 

Central and Eastern Europe 

and the Former Soviet Union 

Negative growth and rampant inflation were 

recorded to varying degrees in Eastern Europe and the 

former Soviet Union. Shortages of industrial inputs 

and spare parts, the breakdown of traditional 

distribution channels, hyperinflation, and the collapse 

of budgetary and monetary controls have contributed 

to the decline in the regional economy. Moreover, 

analysts observed that foreign-exchange reserves are 

inadequate to sustain a credible exchange-rate peg to a 

major currency-a prerequisite for macroeconomic 

stabilization. 16According to the International 

Monetary Fund (IMF), Eastern European countries as 

a group recorded a loss of output at an estimated 

annual rate of 10.4 percent in 1992. The former 

Soviet Union recorded an estimated decline in output 

of 18 percent in 1992. The collapse of trade between 

the countries belonging to the now-defunct Council 

for Mutual Economic Assistance was an important 

element in the decline. Inflation ranged from an 

estimated 11 percent in the Czech and Slovak Federal 

Republics to 2,000 percent in the Commonwealth of 

Independent States. 

X X 
Central and Eastern European world trade 

declined in 1992 but more slowly than in 1991. The 

regional exports reached $85.0 billion and imports, 

$90.0 billion. The former Soviet Union's total trade 

(exports plus imports) with the United States 

increased to $4.4 billion in 1992. U.S. merchandise 

exports to the region mounted to $3.6 billion in 1992 

from $3.5 billion in 1991. U.S. merchandise imports 

from the region increased from $794 million to $801 

million. The United States sustained a merchandise 

trade surplus with the former Soviet Union of $2.8 

billion.I 7 

xxi 
ENDNOTES 

1Section 163(b) of the Trade Act of 1974 (Pub. 

L. 93-618, 88 Stat. 1978) directs that "the 

International Trade Commission shall submit to the 

Congress, at least once a year, a factual report on 

the operations of the trade agreements program." 

2Executive Order No. 11846, Mar. 27, 1975. 

Among such laws are the Reciprocal Trade 

Agreements Act of 1934 (which initiated the trade 

agreements program), the Trade Expansion Act of 

1962, the Trade Act of 1974, the Trade Agreements 

Act of 1979, the Trade and Tariff Act of 1984, and 

the Omnibus Trade and Competitiveness Act of 

1988. 

3Activities by the GATT in 1992 are discussed in 

chapter 2 of this report. The nature and extent of 

tensions between trade and environmental policies 

are more fully explored in last year's report in this 

series, USITC, The Year in Trade: Operation of the 

Trade Agreements Program, 1991, USITC publication 

2554, Aug. 1992, pp. 13-23. 

4For further information on the ASEAN Free 

Trade Agreement, see USITC, East Asia: Regional 

Economic Integration and Implications for the United 

States (investigation No. 332-326), USITC publication 

2621, May 1993. 

5This section was compiled using data from the 

U.S. Department of Commerce; International 

Monetary Fund (IMF), World Economic Outlook, May 

1992 and Jan. 1993; GATT, Annual Report on 

International Trade, 1992; OECD, World Economic 

Outlook, Dec. 1992; U.S. Department of Commerce 

News, Mar. 17, 1993; Economic Report of the 

President, Feb. 1993; International Economic Review, 

USITC, Mar. 1993; U.S. Department of Commerce, 

Bureau of the Census, "U.S. Merchandise Trade: 

April 1993," (FT 900), June 1993, Feb. 15, 1993; 

U.S. Department of Commerce, Survey of Current 

Business, vol. 73, Mar. 1993; IMF, International 

Financial Statistics, Mar. 1993; Monthly Economic 

Review of Japan (several issues); Japan Economic 

Journal (several issues); The Economist, Mar. 6, 

1993; and USITC, Trade Between the United States 

and China, the Former Soviet Union, Central and 

Eastern Europe, the Baltic Nations and Other 

Selected Countries During 1992, USITC publication 

2634, May 1993. 

6IMF, World Economic Outlook, Interim 

Assessment, Jan. 1993. 

7 GATT press release, GATT/1570, Mar. 22, 

1993. 

8OECD, World Economic Outlook vol. 52, Dec. 

1992. 

9The newly industrializing economies (NIEs) 

include Singapore, Hong Kong, Taiwan, and the 

Republic of Korea. 

10The U.S. current account is the record of U.S. 

international transactions in goods, services, 

investment returns, and bilateral transfers. 

11U.S. Embassy, Mexico City, Mexico Economic 

and Financial Report, Apr. 1993. 

12For a discussion of recent liberalization 

measures in Asia, see World Bank, Sustaining Rapid 

Development in East Asia and the Pacific 

(Washington, DC: The World Bank, 1993). 

13A range of these views was expounded in "A 

Survey of the Japanese Economy," The Economist, 

Mar. 6, 1993, pp. 4-18. 

14Republic of Korea, Economic Bulletin, June 

1993. 

15For a review of economic liberalization 

measures in key developing countries in Latin 

America, see, for example, USITC, U.S. Market 

Access in Latin America: Recent Liberalization 

Measures and Remaining Barriers (investigation No. 

332-318), USITC publication 2521, June 1992; and 

James Stamps, "Economic Liberalization in South 

America: 1992 Update," International Economic 

Review, USITC, Oct. 1992, pp. 17-22. 

16OECD, Economic Outlook, vol. 52, Dec. 1992, 

p. 123. 

17For further background see USITC, Trade 

Between the United States and China, the Former 

Soviet Union, Central and Eastern Europe, the Baltic 

Nations, and Other Selected Countries During 1992, 

USITC publication 2634, May 1993, p. 8. 
CHAPTER 1 

The North American 

Free Trade Agreement 

A major focus for U.S. trade policy in 1992 was 

the conclusion of negotiations for a North Atherican 

Free-Trade Agreement (NAFTA). Building on the 

liberalization efforts initiated by the 1988 

U.S.-Canada Free-Trade Agreement (CFTA) and the 

substantial trade and investment reforms undertaken 

by Mexico since the mid-1980s, NAFTA is viewed by 

many as a key means of expanding trade flows and 

lowering trade barriers among the United States, 

Canada, and Mexico—a region comprising 360 

million inhabitants and an economic output totaling 

$6 trillion. NAFTA is also considered to be a first step 

toward the eventual economic integration of all of the 

Americas, 1and thus an important factor influencing 

U.S. competitiveness relative to emerging trade blocs 

in Europe and Asia. 

Reaching an Accord 

Throughout the first half of 1992, the 

Governments of the United States, Canada, and 

Mexico continued their negotiations, begun in June 

1991, on a NAFTA. Observers initially speculated that 

an agreement would be reached by late spring. 

However, negotiations on such subjects as rules of 

origin for automobiles and agricultural tariff 

reductions proved difficult. On August 12, however, 

United States Trade Representative (USTR) Carla 

Hills, Canadian International Trade Minister Michael 

Wilson, and Mexican Commerce Secretary Jaime 

Serra Puche announced the successful conclusion of 

the NAFTA negotiations. 

On September 18, President Bush notified 

Congress of his intent to enter into NAFTA and went 

on to submit the final agreement to Congress. In his 

notification, the President pointed out a number of 

direct and indirect benefits that might be expected to 

result from the implementation of NAFTA. Among 

other things, he said that the agreement would make 

the United States more globally competitive by 

linking it to Canada and Mexico — the United States' 

first and third largest trading partners. The President 

noted NAFTA should expand economic growth in all 

three partner countries by eliminating tariffs and other 

barriers to the flow of goods, services, and 

investment? Representing months of negotiations and 

a high-water mark in U.S.-Mexican relations, 

Ambassador Hills noted that NAFTA would increase 

opportunities for U.S. exporters in the Mexican 

market in sectors such as telecommunications, textiles, 

agriculture, insurance, transportation. and financial 

services. 3 

The NAFTA text was initialed by President Bush, 

President Salinas, and Prime Minister Mulroney at a 

ceremonial event in San Antonio on October 7; 

however, in accordance with the rules of "fast-track" 

negotiating authority, the President was not permitted 

to sign the agreement until 90 days after his formal 

notification to Congress of his intention to enter into 

the agreement. Thus, each of the trio of leaders 

formally signed the accord on December 17. 

The Final NAFTA Text: 

Selected Topics 

The general NAFTA text4is divided into eight 

parts, covering- 

• Objectives and general definitions; 

• Trade in goods (including provisions for 

national treatment, tariff elimination, rules of 

origin, customs procedures, and special 

sections governing agricultural, textiles and 

apparel, energy, and automotive trade); 

• Technical barriers to trade; 

• Government procurement; 

• Investment, services, and related matters; 

• Intellectual property; 

1 
• Administrative and institutional provisions 

(including dispute settlement); and 

• "Other provisions" (including exceptions to the 

agreement). 

A detailed description of the NAFTA and assessment 

of its impact on member economies overall and on 

particular U.S. industries is provided in a recent 

Commission publications Key aspects of NAFTA 

are briefly described below. 

Tariffs 

One of the primary goals of NAFTA is to 

eliminate permanently all tariffs among the United 

States, Canada, and Mexico. In 1992 Mexico's 

trade-weighted average tariff applied on imports from 

the United States was about 10 percent, in contrast to 

the U.S. average of 3 percent on imports from 

Mexico. Before the CFTA entered into force, 

Canada's average tariff on goods from the United 

States was 7.4 percent; the U.S. average tariff on 

goods from Canada was 3.7 percent. 6The CFTA 

designates January 1, 1998, as a final date for phasing 

out tariffs on all goods traded between the United 

States and Canada. Under NAFTA existing tariffs are 

to be eliminated according to a four-tier phase-out 

schedule: immediately, within 5 years, within 10 

years, or in exceptional cases within 15 years. (Tariff 

phaseouts already agreed upon between the United 

States and Canada in the CFTA are not affected by 

these schedules.) Fifty-four percent of U.S. exports to 

Mexico (in terms of value) will be eligible for 

duty-free treatment immediately upon implementation 

of the agreement; 65 percent will be eligible within 5 

years.? 

NAFTA also sets out rules for duty-drawback 

programs, which provide for the refund or waiver of 

customs duties on certain imported materials that are 

used in the production of goods subsequently exported 

to another NAFTA member. Under NAFTA, third 

country goods exported to another NAFTA member 

will be eligible only for a limited duty exemption, 

effectively being subject to the higher of two possible 

customs duties. 8The limitation on drawback and 

duty deferral programs will take effect after a 

transition period of 7 years for U.S.-Mexican trade 

and 2 years for U.S.-Canada trade. 9 

Rules of Origin 

To ensure that the benefits of NAFTA accrue 

primarily to its signatories, the agreement delineates 

rules of origin that establish which goods can be 

treated as "North American" for trade purposes and 

are thus eligible for preferential tariff rates under 

NAFTA. Generally, goods are considered to be of 

North American origin if they are entirely obtained, 

produced, or fabricated from originating materials in 

the United States, Canada, or Mexico; if the 

non-originating materials used to make the goods 

have undergone transformation sufficient to change 

their tariff classifications; or if, in certain cases, the 

non-originating goods not only undergo a change in 

tariff classification but also meet a specified regional 

content criterion. 10Regional value content (RVC) 

requirements apply to a variety of goods. Special RVC 

requirements apply to a few key commodities, such as 

automobiles and apparel. These requirements are 

discussed below. 

Autos and Auto Parts 

In the NAFTA negotiations, both Mexico and 

Canada (whose automobile industries consist of U.S. 

or other foreign subsidiaries) initially favored 

language that would require automakers to incorporate 

50 percent RVC in their vehicles to qualify for 

preferential treatment. The United States, on the other 

hand, favored a rule that would require 70 percent 

RVC for such preferential treatment. Under the 

agreement finally reached, the required RVC for 

preferential treatment under NAFTA is 56 percent on 

January 1, 1998 and increases gradually to 62.5 

percent on January 1, 2002 for passenger automobiles, 

light trucks, and the engines and transmissions of 

those kinds of vehicles; the initial RVC is 55 percent 

with a gradual increase to 60 percent by January 1, 

2002 for other vehicles and automotive parts. The 

RVC for automobiles is to be calculated by using 

what is called a "net cost" method with certain rules 

specific to motor vehicles. The value of certain 

components imported from outside North America 

must be "traced" through the entire production 

chain. 11 

Where required, the RVC test applies to all 

automotive imports under NAFTA. NAFTA rules of 

origin would replace the CFTA rules of origin for 

trade in automotive products except for U.S. 

automotive exports to Canada under the 1965 Auto 

Pact. 12 

NAFTA affects other aspects of the auto trade as 

well. Under the agreement, U.S. tariffs on eligible 

passenger automobiles imported from Mexico will be 

eliminated immediately. U.S. tariffs on eligible 

light-duty trucks imported from Mexico will be 

lowered immediately to 10 percent and then 

2 
eliminated over 5 years. Mexican tariffs on 

automobiles and light-duty trucks imported from the 

United States and Canada will be lowered by 50 

percent initially, then will be phased out (over 5 years 

for light-duty trucks, and over 10 years for passenger 

automobiles). Tariffs on certain auto parts are to be 

phased out immediately; others will be eliminated 

over 5 to 10 years. 

Despite certain liberalization efforts, a major issue 

in U.S.-Mexican automotive trade over the years has 

been Mexico's so-called Auto Decree and Auto 

Decree Implementing Regulations, which have 

continued to protect Mexico's automobile industry and 

place heavy restrictions on foreign automobile trade 

with Mexico. 13Under NAFTA the Auto Decree and 

Auto Decree Implementing Regulations must be 

brought into conformity with NAFTA's liberalizing 

provisions by January 1, 2004. 14For its part, the 

United States must amend the "fleet content" 

definition used in the determination of compliance 

with its so-called CAFE (Corporate Average Fuel 

Economy) standards. 15For the next model year after 

January 1, 2004, if not before, U.S. automobile 

companies are required to "consider an automobile to 

be domestically manufactured in any model year if at 

least 75 percent of the cost to the manufacturer of 

such automobile is attributable to value added in 

Canada, Mexico, or the United States." 16 

Textiles and Apparel 

NAFTA's rules of origin for textiles and apparel 

are primarily based on a "yarn forward" approach. 

Very broadly this means that most textiles and apparel 

produced in the NAFTA countries must be produced 

from yam made in one of those countries in order to 

qualify for preferential treatment under the agreement. 

Only the fibers may be imported. However, yarns 

made of cotton—and most articles composed of 

manmade fibers 17—must use not only yarn, but also 

fibers produced in the NAFTA countries (the "fiber 

forward" rule). Some apparel made in North America 

of imported fabric may qualify for preferential 

treatment: for instance, certain underclothing and 

nightwear made of cotton knit fabrics and apparel 

made of silk and linen, and other apparel of specified 

fabrics in short supply in the NAFTA countries. 

NAFTA also provides for "tariff preference levels," 

which permit certain fabrics, yarns, and apparel that 

do not meet the rules of origin to qualify for 

preferential tariff treatment up to certain import 

ceilings. 18U.S. import quotas on textiles and apparel 

from Mexico will be eliminated immediately on goods 

that meet NAFTA rules-of-origin requirements and all 

U.S. imports of Mexican apparel made from 

U.S.-formed and -cut fabric. Quotas for Mexican 

textiles and apparel that do not meet the NAFTA 

rules-of-origin requirements but still meet U.S. 

Customs Service rules-of-origin (i.e., substantial 

transformation), will be phased out over 10 years. 

Duties on trade in textiles and apparel between the 

United States and Mexico that meet the rules-of-origin 

requirements either are eliminated immediately or 

phased out over a 6 or a 10 year period. 19The 

agreement establishes a Subcommittee on Labelling of 

Textile and Apparel Goods, which, functioning under 

the aegis of a Committee on Standards-Related Issues, 

is charged with developing uniform labelling 

requirements among the NAFTA partners. 20In cases 

of conflict NAFTA provisions on textiles and apparel 

take precedence over the Arrangement Regarding 

International Trade in Textiles (commonly known as 

the Multifiber Arrangement). 21 

Standards 

The Mexican Government is extensively involved 

in the setting of product, labor, health, safety, and 

environmental standards. Since legislation addressing 

the subject was passed in 1988, the Government has 

developed about 5,500 national standards, both 

mandatory and voluntary. This degree of involvement 

has not, however, ensured a fully transparent system 

of establishing standards and technical regulations. In 

Mexico public notification of standards making is 

virtually nonexistent, and the channels through which 

the private sector can participate in the process are 

limited.22 

Mexican standards affecting the environment, 

labor practices, and working conditions have caused 

concern in both the United States and Canada because 

they are in some cases not considered as stringent as 

U.S. and Canadian standards, are not adequately 

enforced, or both. (See "Labor" and "Environment" 

sections below.) Additional concerns have centered 

on (1) the process through which most standards are 

established, (2) the potential use of standards as trade 

barriers, and (3) national sovereignty over the 

generation and application of standards. 

The NAFTA text addresses these issues in two 

separate chapters dealing with sanitary and 

phytosanitary (SPS) measures, and "standards-related 

measures."23Under NAFTA, for example, each 

member nation may establish its own SPS measures 

and levels of protection for human, animal, and plant 

life and health. Each member may even adopt 

measures more stringent than international standards 

(although each NAFTA country pledges to make 

3 
every effort to conform to international standards 

whenever possible). The measures a country adopts 

must be based on scientific principles, as well as on 

risk assessment. Each NAFTA member is enjoined to 

adopt measures "only to the extent necessary to 

achieve its appropriate level of protection," and is 

prohibited from using SPS measures as a "disguised 

restriction on trade." 24 

An important goal outlined in the NAFTA 

provisions is to strive for equivalent SPS measures in 

all three nations. In keeping with this goal each 

NAFTA country is encouraged to accept the SPS 

measures of another as equivalent to its own 

(provided that the exporting country proves to the 

importing country's satisfaction that the standards of 

the exporting country attain the importing country's 

predetermined level of protection). The agreement 

also establishes a Committee on Sanitary and 

Phytosanitary Measures not only to enhance SPS 

conditions in NAFTA members, but to facilitate 

technical cooperation. 25 

Provisions similar to those described above apply 

to other standards-related measures. Each NAFTA 

nation may choose its own measures, is requested 

(though not compelled) to use international standards 

as a basis for its own standards-related measures, and 

cannot use such measures as an unnecessary obstacle 

to trade. The NAFTA parties are enjoined to make 

their standards-related measures and "conformity 

assessment procedures" compatible "to the greatest 

extent practicable." 26A Committee on 

Standards-Related Measures will serve to monitor the 

implementation of NAFTA rules on standards-related 

• measures and to facilitate the process through which 

the three NAFTA nations seek to make their 

standards-related measures more compatible. 

Services 

Financial Services 

Under current law the U.S. financial services 

market is generally open to Mexican banks, as is the 

Canadian market. Mexico opened its 

Government-owned banks to foreign and domestic 

investors in 1989. In January of the next year it 

altered its Constitution to allow privatization of its 

banks.27Nonetheless, Mexico still imposes 

considerable limitations on activities by U.S. banks 

within its borders. More than 40 U.S. banks maintain 

representative offices in Mexico, but only one U.S. 

bank, Citibank, conducts business within Mexico. 

(Citibank, however, is prohibited from opening new 

offices in-Mexico and from offering a full range of 

banking services.) Under current Mexican law 

foreign ownership in Mexican banks is limited to 30 

percent of voting stock. 28Other restrictions include 

limitations on the entry of U.S. broker-dealers into 

Mexican capital markets. Again, foreign firms are 

limited to a roughly 30-percent equity stake and, 

although they may conduct research, they cannot offer 

broker-dealer services. 

NAFTA allows financial service providers in 

member countries to set up banking, securities, and 

insurance operations in other member countries and 

ensures that members offer national and MFN 

treatment to these providers. Given these rules, U.S. 

and Canadian investors may offer the range of 

banking services already offered by Mexican banks 

and may do so by acquiring existing banks or 

establishing separately-capitalized subsidiaries. 29 

 Some special conditions, however, pertain. Under the 

terms of the agreement, for example, Mexico is 

permitted to limit to an agreed-upon percentage the 

market share that financial service providers in the 

United States and Canada may acquire." The market 

share that other NAFTA members may have in the 

Mexican commercial banking sector increases from 8 

to 15 percent within an initial transition period which 

ends January 1, 2000. For its part Canada exempts 

Mexico and the United States from certain 

nonresident requirements imposed by its 

Government 31 

Other Services 

In the area of transportation services, NAFTA 

contains reservations that exclude maritime and air 

services from the agreement. NAFTA does, however, 

provide new regulations for trucking, bus, and rail 

services. The trucking sector was a primary concern 

of the U.S. NAFTA negotiators because current 

arrangements severely restrict trucking services 

between the United States and Mexico. Under 

NAFTA Mexican truckers will have access to all of 

the United States for international carriage of cargo, 

and vice versa, 6 years after the agreement comes into 

force. After 10 years Mexico is to lift its traditional 

restrictions on foreign investment in this sector and to 

allow 100-percent investment in Mexican truck (and 

bus) companies.32Bus firms in the NAFTA nations 

may begin offering cross-border bus service within 3 

years. Although foreigners may invest in certain 

aspects of rail service, such as owning and operating 

rail terminals, Mexico retains its exclusive right to 

operate the Mexican railway system and tend to its 

basic in frastruc ture.33 

4 
Basic telecommunication services are specifically 

excluded from the purview of NAFTA. However, 

"enhanced" and "value-added" services, such as 

computer data processing and electronic data base 

services, are covered. Accordingly, Mexico must give 

U.S. and Canadian firms access to its existing public 

telecommunication services and transport networks. It 

must also eliminate its current restrictions on 

foreign-owned private networks and on enhanced 

services offered by foreigners who are using leased 

lines from Mexico to the United States. Further, the 

agreement places certain restrictions on the prices of 

public communications and transport services. 34 

Government Procurement 

Both the United States and Canada are signatories 

to the GATT Government Procurement Code, which 

requires them to allow suppliers from all code 

signatories to compete for certain government 

contracts under conditions no less favorable than those 

given to domestic suppliers. (The CFTA goes further 

than the GATT Code in terms of coverage. 35) Mexico 

is not a code signatory. Accordingly, during the 

NAFTA negotiations an effort was made to open a 

good portion of Mexico's government procurement 

market to suppliers from other NAFTA members for 

goods and services (notably construction services). 

Procurement by specific Federal Government 

departments and agencies in all three countries, such 

as Mexico's Ministry of Communications and 

Transport, Canada's Department of Agriculture, and 

the U.S. Department of Commerce, as well as Federal 

Government enterprises, 36such as the Mexican Postal 

Service, Canada's Via Rail, and the U.S. Tennessee 

Valley Authority are covered by NAFTA. 37The 

agreement applies to contracts by specified Federal 

Government departments and agencies of more than 

$50,000 in goods and services and more than $6.5 

million for construction services. For covered Federal 

Government enterprises, NAFTA rules apply to 

procurements of more than $250 million in goods and 

services and more than $8 million for construction 

services. 38Mexico is permitted to phase in its 

transition to the new procurement regime over ten 

years. By the end of the tenth year, Mexico is obliged 

to open all its federal procurement, subject to a 

set-aside limitation of $1.5 billion. 39 

The government procurement provisions of the 

agreement also include enhanced procedures for the 

submission, receipt, and opening of bids, as well as 

the awarding of contracts 40and requires each NAFTA 

nation to maintain a bid protest system. 41The 

NAFTA government procurement provisions do not, 

however, apply to the purchasing of weapons, 

ammunition, arms, and other devices related to 

national security.42 

Foreign Investment 

The United States is Mexico's largest foreign 

direct investor.43Such investment is regulated by the 

1973 Law to Promote Mexican Investment and to 

Regulate Foreign Investment and by the Mexican 

Constitution44The 1973 law prohibits foreign 

investment in certain sectors and limits foreign 

ownership in others, generally to 49 percent. 45 

 Executive regulations in 1989 interpreting the 1973 

law resulted in greater opportunities for foreign 

investment in sectors that, all told, account for the 

majority of Mexico's economic output. 46The 

approval process for foreign investment was 

simplified as well. 47Nonetheless, "activities" in 141 

areas—including transportation equipment, 

transportation services, secondary petrochemicals, 

mining, and auto parts—remain "classified" and hence 

limited.48 

To a certain extent this state of affairs continues 

under NAFTA, which makes exceptions for activities 

that are reserved for the state under the Mexican 

Constitution.° (See, for example, the "Energy" 

section of this chapter.) In many other sectors, 

however, NAFTA ensures that investors and 

investments from member countries will receive 

national treatment 5° and most-favored-nation 

treatment. 51With some exceptions NAFTA countries 

may not impose special performance requirements 

such as minimum domestic content and trade 

balancing.52Expropriation of the investments of 

NAFTA investors is prohibited, save for a "public 

purpose," on a nondiscriminatory basis, and under due 

process of law. Owners of expropriated investments 

must be compensated for those investments "without 

delay" and at market prices. 53Investors may also 

seek monetary damages through binding international 

arbitration or may seek to apply remedies available 

through the host country's domestic courts. 54 

Emergency Actions 

All parties in the NAFTA negotiations agreed on 

the need for "safeguards" to remedy or prevent harm 

to domestic agricultural and industrial sectors 

resulting from freer trade among the United States, 

Canada, and Mexico. There was also concern that this 

privilege not be abused. As a consequence there are 

provisions for general emergency safeguard actions in 

chapter 8 of the NAFTA text and for specific 

5 
"emergency actions" that may be taken in a selected 

sectors (agriculture and textiles) in the chapters 

pertaining to such goods. Certain procedural 

requirements must be followed, however. 55 

Chapter 8 of the NAFTA addresses the issue of 

emergency actions (1) bilaterally, in the context of 

injury to a domestic injury as a result of 

implementation of the agreement and (2) in the 

context of global safeguard actions taken under GATT 

article XIX (the so-called escape clause). Bilateral 

"emergency actions" are permitted when, as a result 

of the reduction or elimination of a duty under the 

NAFTA, a good is being imported in such increased 

quantitites and under such conditions as to be a 

substantial cause of serious injury or threat thereof. To 

prevent or remedy such injury, a NAFTA country may 

suspend reductions of duties or temporarily increase 

duties to pre-NAFTA levels for up to 3 years (4 years 

in the case of sensitive goods). 56Except in certain 

circumstances, NAFTA members must be excluded 

from so-called "global" emergency actions undertaken 

by another NAFTA member. 57A NAFTA country 

taking an action against another NAFTA country 

under either the bilateral or global action provision 

would be obligated to provide substantially equivalent 

compensation.58 

Dispute Settlement 

A major goal for the NAFTA negotiators was to 

establish a swift and effective means of resolving 

disputes among the United States, Canada, and 

Mexico. NAFTA provides for a 30- to 45-day 

consultation period should a potential dispute arise 

and, should the consultation prove fruitless, parties 

may appeal to a trilateral Free Trade Commission set 

up under NAFTA, which is responsible for 

implementing the agreement. 59If that Commission is 

unable to resolve the matter, a complaining country 

may elect to request an arbitration panel composed of 

five members. The panel is required to render a final 

report on the dispute within 4 months 60 If a losing 

country does not comply with the panel's 

recommendation, the winning country may retaliate 

by withdrawing "equivalent trade concessions." 

Building upon an innovation contained in the 

CFTA, NAFTA also provides for independent 

binational panels to review antidumping and 

countervailing-duty determinations made by a member 

country.61Should a complaining country disagree 

with a panel decision (which is binding under 

NAFTA), it may request the establishment of an 

extraordinary challenge committee to review the 

matter. 62 

Intellectual Property Rights 

Before the NAFTA negotiations began, the United 

States repeatedly expressed concern about the 

adequacy of Mexican intellectual property law. Partly 

as a result of this concern, in June 1991 the Mexican 

Congress passed a new industrial property law, which 

extended product patent protection to pharmaceutical, 

chemical, metal alloy products and some 

biotechnological inventions. 63The Mexican Congress 

also approved a strengthened copyright law (which 

was originally passed in July 1991 and amended the 

next month) that included stiff fines for copyright 

violators and additional protection for computer 

software .64 

The NAFTA provisions on intellectual property 

build on the liberalization already undertaken in 

Mexico by calling for specific commitments in a 

range of areas, among them copyrights, patents, 

trademarks, industrial and trade secrets, and 

semiconductor chips. Copyrights for sound recordings, 

for instance, are protected for at least 50 years under 

NAFTA, and patents are made available for almost 

any type of invention. NAFTA also calls for stringent 

enforcement of intellectual property laws and for 

imprisonment, monetary fines, or both in the case of 

violations.65 

With regard to intellectual property rights, two 

major areas of disagreement between NAFTA 

negotiators for the United States and Canada were 

pharmaceuticals and so-called "cultural industries," 

such as publishing and film. The United States has 

long sought greater market access in these areas, but 

Canada has resisted its efforts. With NAFTA each side 

ceded ground. Canadian cultural industries, which 

were excluded from the CFTA, remain excluded under 

NAFTA. However, Canada did agree to effectively 

eliminate its compulsory licensing requirements for 

pharmaceuticals. These requirements essentially gave 

any Canadian the right to produce patented 

pharmaceuticals and limited the original patentholder 

to a royalty of only 4 percent of the selling price of 

the drug. 

Agriculture 

As in the protracted GATT Uruguay Round, 

agriculture proved to be a major challenge in the 

NAFTA negotiations. After months of disagreement 

and little progress, the NAFTA partners decided to 

pursue separate negotiations on the subject. As a 

result, Canada and Mexico have their own agreement 

on agriculture, as do Mexico and the United States. 66 

embodied in NAFTA. Agricultural trade Both are 

6 
between the United States and Canada is still 

governed primarily by the CFTA. 

Under NAFTA tariffs and quantitative restrictions 

on agricultural goods are phased out immediately, 

within 5 years, within 10 years, or within 15 years. 

Certain "sensitive" agricultural sectors presented 

particular dilemmas and received the maximum 

15-year phaseout: for example, orange juice from 

Mexico (considered to be a competitive threat to U.S. 

producers) and corn from the United States (deemed 

to pose a threat to Mexican producers). 

Many nontariff barriers to agricultural trade are 

converted to tariff-rate quotas. Under this system a 

predetermined quantity of a particular agricultural 

commodity may enter any NAFTA nation duty-free, 

and imports exceeding the predetermined quantity are 

subject to a specified tariff. Within an agreed-upon 

phaseout period the quantity eligible for duty-free 

treatment increases and the tariff decreases until the 

commodity is entirely duty-free in any amount. 67 

Other subjects, such as health and sanitary 

requirements, were intensely discussed as well. (These 

subjects are covered in the "Standards" section 

above.) Noting that export subsidies for agricultural 

products are in particular cases "inappropriate" among 

NAFTA members, the agreement also establishes a 

Working Group on Agricultural Subsidies, which is to 

work for the eventual elimination of all agricultural 

export subsidies affecting trade among the NAFTA 

nations.68 

Energy 

Mexico's electricity and petroleum industries are 

both national monopolies. The Comision Federal de 

Electricidad controls, with some exceptions, electric 

power generation and distribution within the country. 

Petroleos Mexicanos controls all aspects of Mexican 

crude petroleum exploration and production, as well 

as production of refined products and primary 

petrochemicals. 69 Under NAFTA, goods, activities, 

and investments in these sectors are by and large 

reserved to the Mexican state. Mexico may also 

restrict the granting of import and export licenses. 7° 

The agreement does, however, permit some private 

investment in nonbasic petrochemical goods and in 

electricity-generating fac ilities. 71Energy trade 

commitments set forward in the CFTA are still to be 

honored by both the United States and Canada. 

More generally the NAFTA energy provisions, in 

keeping with GATT disciplines, do not allow NAFTA 

partners to impose minimum or maximum export or 

import price requirements (subject to certain 

restrictions). Nor does NAFTA allow a member to 

impose a tax, duty, or charge on exported energy or 

basic petrochemical goods—unless the same tax, duty, 

or charge applies to these goods when they are 

consumed domestically. 72 

Parallel Issues 

Although NAFTA has enjoyed strong backing 

from much of the business community in all three 

signatories, some industry representatives, several 

environmental groups, and labor leaders in the United 

States and Canada voiced strong reservations about 

the agreement throughout its negotiation and after its 

conclusion. Both Democratic and Republican leaders 

in the United States responded with plans of action. 

On August 24 President Bush proposed a $10 billion, 

5-year program for worker retraining that featured 

assistance for workers displaced because of 

NAFTA 73 

In an October 4 speech endorsing NAFTA, 

Democratic Presidential candidate Bill Clinton 

outlined plans for "supplemental" agreements he 

would pursue if elected. 74These agreements would 

address labor and environmental issues, as well as 

additional safeguards from import surges. For 

example, in Clinton's view, . a supplemental 

environmental agreement would set up an 

environmental protection commission that would not 

only work to prevent pollution, but would 

"encourage" NAFTA nations to enforce their 

environmental laws through a variety of mechanisms. 

Negotiation of these agreements was to take place in 

the spring of 1993. A more detailed look at the issues 

raised during the year about labor and environmental 

provisions is given below. 

Labor 

The vast majority of studies examining the impact 

of NAFTA on U.S. labor have concluded that the 

agreement would lead to a net increase, albeit modest, 

in U.S. jobs.75One recent USITC study76found 

longterm gains in employment likely in several 

industrial sectors including automotive parts; 

industrial machinery; computers, components and 

electronics; machine tools; steel mill products; 

textiles; and pharmaceuticals among others. In the 

agricultural sector, both the fisheries and the grains 

and oilseeds sectors would likely see employment 

increases. 

Some studies have indicated as well that in the 

long run the agreement might help to stem the flow of 

illegal Mexican immigrants into the United States. 77 

7 
Other analyses, however, projected a net loss of U.S. 

jobs in some sectors due to either outright elimination 

as a result of increased competition from imports or a 

move south of the border to take advantage of wage 

differentials between the United States and Mexico. 78 

 In addition, some argued that, despite benefits to 

highly-skilled, white-collar professionals, the average 

real wages of unskilled and low-skilled U.S. labor 

could fall slightly as a result. 79Those industrial and 

agricultural sectors identified by the USITC as likely 

to experience some localized longterm job losses due 

to factors associated with NAFTA include apparel, 

automobiles, major household appliances, flat glass, 

fresh-cut flowers, certain fresh and frozen vegetables, 

and citrus juice among others. 

Labor organizations in both the United States and 

Canada80continued to oppose NAFTA throughout 

1992. In the United States the AFL-CIO called for 

renegotiation of the agreement to include provisions 

for increasing Mexico's minimum wage, establishing 

rights for Mexican workers to organize and bargain 

collectively, strong Mexican health and safety 

standards, and the right to levy U.S. trade sanctions in 

the case of Mexican labor violations. 81Such 

demands, however, met with firm resistance from U.S. 

and Mexican officials, the latter insisting that Mexico 

would not give up its right to make and enforce its 

own labor laws. 82 

By the end of 1992 it appeared that a 

supplemental agreement on labor would be negotiated 

and it would 'likely include provisions for a tripartite 

labor commission. Nonetheless, the issues addressed 

in the agreement, and particularly the scope of powers 

of the proposed commission, remained unclear. 

Environment 

Although there is no specific section on the 

environment in the NAFTA, provisions related to 

environmental protection appear throughout the 

document. The text affirms, for example, the right of 

each NAFTA partner to choose for itself the 

regulations and concomitant level of environmental 

protection that it deems necessary and desirable. In 

addition, the text ensures that, should a conflict arise, 

the provisions of such international environmental 

agreements as the Convention on International Trade 

in Endangered Species of Wild Fauna and Flora, the 

Montreal Protocol on Substances That Deplete the 

Ozone Layer, and the Basel Convention on the 

Control of Transboundary Movements of Hazardous 

Wastes and Their Disposal generally take precedence 

over provisions in NAFTA. 83Further, NAFTA 

specifies that member nations should not lower their 

environmental standards or ease enforcement to attract 

investment and clears the way for member states to 

adopt "appropriate" measures to ensure that foreign 

investment is "undertaken in a manner sensitive to 

environmental concerns."" 

Such provisions did not fully satisfy certain 

environmental groups and legislators in both the 

United States and Canada. Notably, some said 

NAFTA did not address the issue of long-term 

funding to clean up the heavily polluted area along the 

2,000-mile border between the United States and 

Mexico, where most maquila plants are located. 85 

The Bush administration sought to address the 

broader problem of transborder pollution "in parallel" 

with NAFTA, through an Integrated Environmental 

Plan for the Mexican-U.S. Border Region, which was 

released in February 1992. The plan outlines steps for 

determining what environmental problems exist at the 

border. It also sets up mechanisms for bilateral 

cooperation in enforcing current environmental laws 

and reducing extant pollution. The United States and 

Mexico plan to jointly spend close to $1 billion on 

border cleanup over the next 3 years. 86Nonetheless, 

critics argued that such efforts were not sufficient, 87 

 estimating border cleanup costs from $5 to $15 

billion.88 

Citing illegal dumping of hazardous waste, lack of 

sewage treatment, pesticide runoff, pollution of 

groundwater supplies, lack of smokestack scrubbers, 

and even discharges of low-level nuclear waste, some 

environmentalists also maintained that Mexico does 

not currently enforce its own stringent environmental 

laws adequately89and, argued that it would not be 

particularly inclined to do so in the future. 90Despite 

strong industry disagreement, some environmentalists 

said the agreement would simply induce U.S. firms 

that do not wish to comply with U.S. environmental 

standards to move their operations south, 91thereby 

resulting in even greater despoiling of the Mexican 

environment. 

As with labor, the prospect for a side agreement 

on the environment was strong by the end of 

1992—although the shape it would take remained 

unclear. Perhaps the largest question concerned what 

powers a proposed North American Commission on 

the Environment would have. Differing positions 

within the environmental community reflected a split 

between groups willing to approve NAFTA, provided 

it had a supplemental agreement attached, and those 

that rejected the agreement as written and proposed 

reopening it to negotiation.92 

8 
The Next Steps 

Conclusion of the NAFTA negotiations was the 

first step toward realizing the goal of liberalized trade 

in North America. However, all three countries must 

still formally ratify the pact. In the United States, 

legislation implementing the accord must be approved 

by both houses of Congress before the agreement can 

enter into force and become binding as a matter of 

domestic law. This approval will occur under 

so-called fast-track procedures. 93 

According to the procedures, once the President 

formally notifies Congress of his intent to enter into a 

trade agreement, he must wait 90 days before signing 

it. The President must also consult with Congress" 

during the negotiating process and submit the final 

text of the agreement along with implementing 

legislation and proposed administrative actions to 

Congress for its consideration. 95There is no specific 

timetable for drafting the implementing legislation. 

However, once such legislation is drafted and 

presented as a bill to Congress, the U.S. House and 

Senate between them have 90 legislative days in 

which to approve or disapprove the legislation as it is 

written. Both must act. No amendments to, or 

filibusters of, the implementing legislation are 

permitted, and debate on the implementing bill cannot 

exceed 20 hours in either legislative branch. 

By the end of 1992 the agreement's chances of 

passage in both Canada and Mexico appeared to be 

high.96Less certain was the fate of NAFTA in the 

chambers of the U.S. House of Representatives and 

Senate, where concerns about NAFTA's effects on 

jobs and the environment continued to be voiced into 

the new year. President Clinton has stated that passage 

of NAFTA will be a priority for his administration. 

By mid-1993, however, it was still not clear when the 

U.S. Congress would begin its official debate on the 

accord. Although implementing legislation has yet to 

be submitted as negotiations on supplemental accords 

continue, the stated goal of the Clinton administration 

is implementation of the agreement by its original 

target date: January 1, 1994. 

9 
ENDNOTES 

1 The proposal to integrate the economies in the 

Western Hemisphere was launched by President 

George Bush in 1990 under the aegis of the 

Enterprise for the Americas Initiative (EAI). President, 

"Remarks Announcing the Enterprise for the 

Americas Initiative," Weekly Compilation of 

Presidential Documents, June 27, 1990, pp. 

1009-1013. NAFTA contains an accession clause. 

The clause allows accession by other countries 

regardless of location "subject to such terms and 

conditions as may be agreed between [an applying] 

country or countries and the [North American Free 

Trade] Commission )a trilateral commission 

established under NAFTA) and following approval in 

accordance with the applicable legal procedures of 

each country." Office of the United States Trade 

Representative, North American Free Trade 

Agreement Between the Government of the United 

States of America, the Government of Canada, and 

the Government of the United Mexican States 

(NAFTA) (Washington,: GPO, 1992), ch. 22, art. 

2204(1). 

2The White House, Office of the Press 

Secretary, "Text of a Letter from The President to the 

Speaker of the House of Representatives and the 

President of the Senate," Sept, 18, 1992. 

3Written Testimony by Ambassador Carla A. Hills 

before the Committee on Ways and Means, U.S. 

House of Representatives, Sept. 9, 1992. 

4Exclusive of actual tariff schedules, specific 

rules of origin, and specific reservations and 

exceptions. 

5USITC, Potential Impact on the U.S. Economy 

and Selected Industries of the North American 

Free-Trade Agreement, USITC publication 2596, Jan. 

1993. 

6Tariff figures are from the Office of the United 

States Trade Representative and USITC, ibid, p. x. 

7NAFTA, vols. 3, 4, and 5 (tariff schedules) and 

Anne M. Driscoll, "Key Provisions of the North 

American Free Trade Agreement," Business America, 

U.S. Department of Commerce, Oct. 19, 1992. 

8 A duty waiver, reduction, or refund that is 

contingent on exportation may not exceed the smaller 

of the following two amounts: (1) the total amount of 

the duties paid or owed on the initial importation of 

the third-country goods into North America or (2) the 

total amount of duties paid on the goods' subsequent 

shipment to another NAFTA signatory. NAFTA 

similarly limits conditional duty exemptions offered by 

duty deferral programs. NAFTA, art. 303(3). For a 

further discussion, see USITC, Potential Impact on 

the U.S. Economy and Selected Industries of the 

North American Free-Trade Agreement, pp. 3-3 to 

3-5. 

9NAFTA, art. 303(7) and annex 303.7. Art. 404 

of the CFTA prvided for the total elimination of 

conditional duty exemptions for U.S. Canadian trade 

as of January 1, 1994. NAFTA's partial limitation on 

duty avoidance schemes replaces CFTA's total 

elimination of such schemes and extends the 

effective date for 2 years until January 1, 1996. 

1 ° NAFTA, ch. 4, art. 401(a)-(d). 

11 The net cost method is based on the total cost 

of a commodity, minus costs such as royalties, 

packing, shipping, and sales promotion. NAFTA, ch. 

4, art. 402(3) and 403(1) to 403(5). 

12NAFTA, app. 300-A.1. 

13In 1989 the Mexican Government published 

two new decrees that eased restrictions on foreign 

automakers and allowed greater foreign investment in 

the nation's auto parts industry. 

14NAFTA, app. 300-A.2(1). 

15Although it is generally referred to as "CAFE," 

the standards were enacted by the Energy Policy 

and Conservation Act of 1975 (42 U.S.C. 6201). 

16NAFTA, app. 300-A.3(1). Under the current 

CAFE regulations, if a given model car has below 75 

percent U.S. or Canadian content, it must count as 

an import for CAFE purposes. 

17Yarn, knit fabrics, nonwoven fabrics, and 

made-up articles. 

18NAFTA, ch. 4, annex 401. 

19NAFTA, ch. 3, annex 300-B, sec. 2. 

20NAFTA, ch. 9, annex 913.5.a-4. 

21NAFTA, ch. 3, annex 300-B, sec. 1. 

22"Standards in the North American Free Trade 

Agreement," U.S. Department of Commerce, Office of 

Mexico, Oct. 17, 1991. 

23NAFTA, chs. 7 and 9. 

24NAFTA, ch. 7, arts. 709-713. 

25NAFTA, arts. 714 and 722. 

26NAFTA, ch. 9, arts. 906, 908. 

27Regulation of May 15, 1989, Diario Oficial de 

la Federacion, May 16, 1989; Regulation of Jan. 25, 

1990, Diario Oficial de la Federacion, Jan. 26, 1990. 

28U.S. Department of the Treasury, National 

Investment Study, 1990, pp. 277-278. 

29U.S. and Canadian investors may also set up 

institutions that have no equivalent in Mexico, such 

as mortgage lending companies. NAFTA, ch. 14, arts. 

1403-1408. 

30By the year 2000, foreign banks may increase 

their collective share of the Mexican banking sector 

to 15 percent. If foreign banks acquire a 25-percent 

10 
share of the Mexican market after the year 2000, 

Mexico may apply temporary safeguards. NAFTA, ch. 

14, art. 1409, and annex VII. 

31Among other things, these rules prohibit 

nonresidents from acquiring more than 25 percent of 

the shares in a federally regulated Canadian financial 

institution. Under the CFTA the United States is 

already exempt from these rules. 

32NAFTA, annex I, "Schedule of Mexico." 

33Ibid., p. III-M-3. 

34NAFTA, ch. 13, art. 1302. 

35The CFTA covers contracts for goods by 

specified entities in each country valued at more than 

$25,000 and less than 130,000 Special Drawing 

Rights, the threshold for coverage by the GATT 

Government Procurement Code. 

36 NAFTA extends beyond the CFTA by including 

state-owned enterprises (such as Canada's crown 

corporations) in its provisions on government 

procurement. The three Federal Governments 

involved will attempt to extend the agreement's 

coverage to State and Provincial Governments that 

accede to its terms. 

37NAFTA, ch. 10, annex 1001.1a-1. 

38NAFTA, ch. 10, art. 1001. 

39NAFTA, ch. 10, annex 1001.2a. 

40 NAFTA, ch. 10, art. 1015. 

• 41NAFTA, ch. 10, art. 1017. 

42NAFTA, ch. 10, art. 1018. 

43U.S. direct investment in Mexico was '$11.6 

billion in 1991. Driscoll, "Key Provisions of the North 

American Free Trade Agreement." 

44Mexican Constitution, art. 27, sec. 1. 

45 This figure may be increased if greater foreign 

ownership is deemed in the national interest. 

46 For further discussion of this topic, see USITC, 

Review of Trade and Investment Liberalization 

Measures by Mexico (investigation No. 332-282), 

USITC publication 2275, April 1990, pp. 5-7, 5-8. 

47 Gist, U.S. Department of State, Jan. 14, 1992, 

p. 2. 

48USTR, 1992 Trade Policy Agenda and 1991 

Annual Report of the President of the United States 

on the Trade Agreements Program, 1992, p. 67. 

49NAFTA, ch. 11, art. 1101(2), and annex III. 

50 According to the agreement, each [NAFTA] 

Party shall accord to investors of another [NAFTA] 

party treatment no less favorable than that it accords, 

in like circumstances, to its own investors with 

respect to the establishment, acquisition, expansion, 

management, conduct, operation, and sale or other 

disposition of investments." NAFTA, ch. 11, art. 1102 

(1). 

51According to the agreement, "each [NAFTA] 

Party shall accord to investors of another [NAFTA] 

Party treatment no less favorable than that it 

accords, in like circumstances, to investors of any 

other Party or of a non-Party with respect to the 

establishment, acquisition, expansion, management, 

conduct, operation, and sale or other disposition of 

investments." NAFTA, ch. 11, art. 1103 (1). 

52NAFTA, ch. 11, art. 1106. 

53NAFTA, ch. 10, art. 1110. 

54NAFTA, ch. 11, arts. 1115-1138. 

55NAFTA, ch. 8, annex 803.3. 

56Under the bilateral action provision, a NAFTA 

party may suspend the further reduction of a rate of 

duty or increase the rate to the lesser of the MFN 

rate or rate in effect immediately preceding entry into 

force of the agreement. NAFTA, ch. 8, art. 801, 

para. 1. 

57A NAFTA party that is taking a global 

safeguard action under GATT article XIX must 

exclude imports from a NAFTA party from such 

action unless (1) imports from the NAFTA party 

account for a substantial share of total imports, and 

(2) such imports contribute importantly to the serious 

injury or threat thereof to a domestic industry. 

NAFTA, ch. 8, art. 802. 

58NAFTA, ch. 8, art. 801, para. 4; and art. 802, 

para. 6. 

59The Free Trade Commission is to comprise 

"cabinet-level representatives of the [NAFTA] Parties 

or their designees." NAFTA, ch. 20, art. 2001 (1). 

60NAFTA, ch. 20, arts. 2003-2019. 

61Such panels are composed of five members. 

They must render a final decision on a case 315 

days after a request for a panel is made. The 

CFTA's system for dispute settlement replaced the 

then-existing domestic judicial review procedure for 

antidumping and countervailing duty cases with 

review by binational panels of experts. 

62NAFTA, ch. 19, arts. 1901-1904. 

63The Law of Development and Protection of 

Industrial Property, Diario Oficial de la Federacion, 

June 17, 1991. 

64Executive Decree of July 11, 1991, Diario 

Oficial de la Federacion, July 17, 1991. For additional 

information, see "Some U.S. Firms Seek Changes in 

Mexican Patent, Copyright Laws," U.S.-Mexico Free 

Trade Reporter, July 26, 1991, p. 2. 

65NAFTA, ch. 17, arts. 1701-1717. 

66NAFTA, ch. 7, annex 703.2, secs. A and B. 

67Ibid. 

68NAFTA, ch. 7, art. 705. The CFTA envisioned 

common treatment of subsidies by both the United 

11 
States and Canada within 5 to 7 years after the 

signing of the agreement. 

69Mexican Constitution, arts. 25, 27, and '28. 

70NAFTA, ch. 6, arts. 601-603. 

71NAFTA, ch. 11, art. 1102. 

72NAFTA, ch. 6, arts. 603-604. 

73President, "Remarks at Lincoln Technical 

Institute in Union, New Jersey," Weekly Compilation 

of Presidential Documents, Aug. 31, 1992, Vol. 28., 

No. 35, pp. 1489-1492. 

74Gov. Bill Clinton, cited in "Clinton Backs 

NAFTA, Proposes Pact for Labor, Environment, and 

Import Surges," U.S.-Mexico Free Trade Reporter, 

Oct. 19, 1992, p. 1. 

75For example, a collection of economic papers 

issued by the USITC in May 1992 concluded that on 

the whole, NAFTA would increase aggregate 

employment between 0.1 percent and 2.5 percent 

and that aggregate wages would rise between 0.1 

percent and 0.3 percent. USITC, Economy-Wide 

Modeling of the Economic Implications of a FTA With 

Mexico and a NAFTA With Canada and Mexico 

(investigation No. 332-317), USITC publication 2516, 

May 1992. 

76USITC, Potential Impact on the U.S. Economy 

and Selected Industries of the North American 

Free-Trade Agreement. 

77There are arguments, however, that as a result 

of NAFTA, illegal immigration from Mexico would 

increase rather than decrease in the short term. Gary 

Clyde Hufbauer and Jeffrey J. Schott, NAFTA: An 

Assessment, Institute for International Economics, 

Feb. 1992, pp. 24-26. More than 90 percent of the 

United.States' illegal immigrants come from Mexico. 

78 In 1991 the average hourly compensation for 

Mexican production workers in manufacturing was 

$2.17. The average compensation for such workers 

in maquiladora industries was (in 1990) $1.25. In 

contrast, the average hourly compensation rate for 

U.S. production workers in manufacturing was $15.45 

in 1991, according to the U.S. Bureau of Labor 

Statistics. Other potential sources of job loss under 

discussion were the economic efficiency gains 

expected to result from NAFTA. See, for example, 

Hufbauer and Schott, NAFTA: An Assessment. 

79See four studies cited in USITC, Potential 

Impact on the U.S. Economy and Selected Industries 

of the North American Free-Trade Agreement, p. 2-6. 

80The opposition voiced by U.S. and Canadian 

labor was not generally shared by Mexico's unions. 

81In a statement issued in early 1993, the 

AFL-CIO enumerated its position in a 21-point 

program for changing the original agreement. 

"Statement by the AFL-CIO Executive Council on the 

North American Free Trade Agreement," press 

release, Feb. 17, 1993, pp. 1-3. 

82Bob Davis, "Clash Looms Over Scope of 

NAFTA Panel," Wall Street Journal, Jan. 28, 1993, p. 

A10. 

83NAFTA, art. 104(1). 

84NAFTA, ch. 11, art. 1114. 

85 The border region has served as a home to 

export-oriented production facilities, or maquilas, 

since the adoption of Mexico's Border 

Industrialization Program in 1965. Some members of 

the U.S. Congress proposed instituting a so-called 

border tax that would be collected to help pay for 

environmental cleanup and for labor adjustment costs 

as well. No binding action was taken on these 

proposals in 1992. 

86Anne Alonzo and Edward M. Ranger Jr., "The 

U.S.-Mexico Border Plan," Business Mexico, Apr. 

1992. 

87For example, see U.S. Senate, Committee on 

Finance, Subcommittee on International Trade, 102d 

Cong., 2d sess., Sept. 16, 1992, testimony of Justin 

Ward, Natural Resources Defense Council. 

88U.S. House, Committee on Ways and Means, 

transcript of hearings on NAFTA and Supplemental 

Labor/Environmental Pacts, 103d Cong., 1st sess., 

Mar. 11, 1993, Rep. Robert T. Matsui. The U.S. EPA 

estimates border pollution cleanup costs at $7 billion. 

89Some sources have cited a study by the U.S. 

General Accounting Office, which found that out of 

six new U.S. maquilas sampled in Mexico, none had 

submitted an environmental impact 

assessment—which is required by Mexico's 1988 

General Ecology Law. U.S. General Accounting 

Office, U.S.-Mexico Trade: Assessment of Mexico's 

Environmental Controls for New Companies, Aug. 

1992, p. 13. 

9° Lack of funding for enforcement of 

environmental laws is acknowledged as a key 

problem. 

91Others argue that NAFTA will not lead to 

"pollution haven" investment in Mexico, in part 

because pollution abatement costs are so small for 

most industries and because most industries with 

high pollution abatement costs have low U.S. tariffs. 

See, for example, Government of Canada, North 

American Free Trade Agreement: Canadian 

Environmental Review, Oct. 1992. 

92Some environmental groups such as Friends 

of the Earth, for example, advocated a commission 

with powers to help nations enforce their own 

environmental laws. Others, such as the National 

Wildlife Federation, saw the proposed commission's 

efforts as complementary to, and not superseding, 

government agencies' efforts in the NAFTA countries. 

As they view it, the NAFTA environmental 

commission would report on and offer suggestions to 

12 
resolve environmental problems related to the 

agreement. 

93U.S. procedures for implementing NAFTA are 

set forth in the Omnibus Trade and Competitiveness 

Act of 1988, which also authorized the President to 

enter into the negotiations that culminated in NAFTA. 

19 U.S.C. 2902 et seq. For a discussion, see 

Committee on Ways and Means, U.S. House of 

Representatives, Overview and Compilation of U.S. 

Trade Statutes (1991 ed.), 102d Cong., 1st Sess., 

WMCP 102-5, pp. 155 to 165. 

94The Committee on Ways and Means of the 

House of Representatives, the Committee on Finance 

of the Senate, and each other committee of 

Congress that has jurisdiction over legislation 

involving subjects that would be affected by the 

agreement. 

95 The President is also required to submit an 

explanation of how the implementing bill and 

administrative action would change U.S. law and a 

statement asserting that the agreement makes 

"progress in achieving" the objectives set forth in the 

1988 act. 

96NAFTA was introduced into the Canadian 

House of Commons on Feb. 25, 1993, just 1 day 

after Prime Minister Mulroney announced his 

intention to resign from office in June. The 

agreement was ratified by Canada on June 23, 1993. 

13 

CHAPTER 2 

The General Agreement on Tariffs 

and Trade 

The General Agreement on Tariffs and Trade 

(GATT) entered into force in 1948 with 23 original 

members. 1 Originally set up as a body of rules to 

govern international trade, the GATT over time has 

also become an organization to oversee the conduct of 

these rules. Situated in Geneva, Switzerland, the 

organization's purpose is to provide a forum for 

discussion of world trade issues that allows for the 

disciplined resolution of trade disputes, based on the 

founding principles of the GATT, which include 

nondiscrimination, national treatment, transparency, 

and most-favored-nation (MFN) treatment. 

GATT activities in 1992 were largely focused on 

the Uruguay Round of multilateral trade negotiations, 

launched in 1986 to expand GATT coverage to new 

areas, such as services and intellectual property rights, 

as well as to improve existing rules in areas such as 

agriculture. The Round is now host to upwards of 

115 participants, most of which are contracting parties 

to the GATT. 

In addition to the Round, the GATT continues its 

ongoing activities regarding the application of its 

existing rules to specific cases in world trade as well 

as to extending the rights and obligations of the 

General Agreement to new members. Regular GATT 

activities were slower than normal in 1992, 2owing to 

efforts marshaled toward finishing the Uruguay 

Round. Three issues that did receive attention were 

(1) dispute settlement, (2) regional trade 

arrangements, and (3) trade and the environment. 

Membership in the GATT rose from 92 countries in 

September 1986 when the Round began, to 105 by 

yearend 1992, and to 111 by May 1993, reflecting the 

importance of trade to the economies of most 

countries. See tables 2-1 and 2-2 for a listing of 

signatories to the General Agreement and to the 

Tokyo Round agreements, respectively, as of 

December 31, 1992. New GATT members in 1992 

included Mozambique and Nainibia, based on 

accessions as former colonies or protectorates of other 

contracting parties. (Mali joined in 1992 but did not 

ratify its membership until 1993.) Working parties 

created in 1992 to examine requests for accession 

included those for Slovenia, Ecuador, Albania, as well 

as Chinese Taipei. 3 

The following sections review developments in 

the Uruguay Round and selected regular GATT 

activities. 

The Uruguay Round 

Uruguay Round negotiations in 1992 began on a 

hopeful note, starting with the presentation of the 

Draft Final Act (DFA). Scheduled to conclude in 

December 1990, negotiations had deadlocked over the 

subject of agricultural trade reform. Countries 

seeking greater agricultural trade liberalization, led by 

the United States and the Cairns group 4of self-styled 

"free-market agricultural exporters," reached an 

impasse in discussions with other participants such as 

the European Community (EC), Japan, and Korea, 

seeking essentially to retain their protective measures 

concerning agricultural trade, such as agricultural 

import barriers and export subsidies. Following 

extensive consultations in 1991, GATT 

Director-General Arthur Dunkel, in his capacity as 

chairman of the Trade Negotiating Committee (TNC) 

overseeing the Uruguay Round negotiations, brought 

together agreements already reached between 

negotiators and provided a final draft text on his own 

initiative for several contentious areas where 

negotiators had not reached a compromise draft after 

5 years of talks. 5This compendium, known as the 

"Draft Final Act" and often referred to as the "Dunkel 

text," was issued on December 20, 1991, and 

represented the first comprehensive view of a package 

of possible agreements and tradeoffs that negotiators 

could consider. 6 

Based on the DFA and the understanding among 

participants that it would form the basis for 

subsequent negotiations in the Round,? Dunkel set 

15 
Table 2-1 

Contracting Parties to the GATT: Status as, of Dec. 31, 1992 

Contracting Parties to the GATT (105) 

Antigua and Denmark Luxembourg Sierra Leone 

Barbuda Dominican Republic Macau Singapore 

Argentina Egypt Madagascar South Africa 

Australia El Salvador Malawi Spain 

Austria Finland Malaysia Sri Lanka 

Bangladesh France Maldives Suriname 

Barbados Gabon Malta Sweden 

Belgium Gambia Mauritania Switzerland 

Belize Germany Mauritius Tanzania 

Benin Ghana Mexico Thailand 

Bolivia Greece Morocco Togo 

Botswana Guatemala Mozambique 1 Trinidad and 

Brazil Guyana Myanmar Tobago 

Burkina Faso Haiti Namibia1 Tunisia 

Burundi Hong Kong Netherlands Turkey 

Cameroon Hungary New Zealand Uganda 

Canada celand Nicaragua United Kingdom 

Central African ndia Niger United States 

Republic ndonesia Nigeria of America 

Chad reland Norway Uruguay 

Chile srael Pakistan Venezuela 

Colombia taly Peru Yugoslavia 

Congo Jamaica Philippines Zaire 

Costa Rica Japan Poland Zambia 

Cote d'Ivoire Kenya Portugal Zimbabwe 

Cuba Korea, Republic of Romania 

Cyprus Kuwait Rwanda 

Czechoslovakia Lesotho Senegal 

Countries to whose territories the GATT has been applied and that now, as independent states, 

maintain a de facto application of the GATT pending final decisions as to their future commercial 

policy (27) 

Algeria Equatorial Guinea Saint Christopher Swaziland 

Angola Fiji and Nevis Tonga 

Bahamas Grenada Saint Lucia Tuvalu 

Bahrain Guinea-Bissau Saint Vincent United Arab 

Brunei Darussalam Kiribati and the Grenadines Emirates 

Cambodia Mali Sao Tome and Principe Yemen 

Cape Verde Papua New Guinea Seychelles 

Dominica Qatar Solomon Islands 

1 New member in 1992. 

Source: GATT, Saint Lucia Becomes a Contracting Party to GATT press communiqué, GATT/1572, Apr. 14, 1993. 

16 
Table 2-2 

Signatories to the Tokyo Round agreements: Status as of Dec. 31, 1992 

(Accepted (A); signed, acceptance pending (S); provisional acceptance (P); new member 1992 (+)), Reservation, 

condition, declaration, or any combination (*) 

Standards 

Government 

procurement 

Subsidies Bovine 

meats 

Dairy 

products 

Customs 

valuation 

Import 

licensing 

Civil 

aircraft 

Antidumping 

S S A A A' S S 

A+ A' A A A A A 

A A A A A A A A 

A A 

P 

A 

A A A A' A 

A A A A A' A A A 

A A A 

A' A 

A 

A' A A A 

A' A' 

A A A+ A+ A A A 

A A A A A A A A A 

A A A A A A A A 

A A 

A' A' 

A S 

A' 

A A A A A A 

A' A A A A A 

A A A' A A 

A' 

A A 

A A A' 

A A 

A A A A A A A A A 

A A A A 

A 

A A 

A' 

A A' A A 

A A 

A A A A A' A A 

A A 

A A A A A A A A A 

A A A A 

A A' A 

S A A S A A 

A A 

A A A A A A A 

S 

A A A A 

A A A A 

A A A 

A A A A A A A A A 

A A A A A A A A A 

Contracting party: 

Argentina 

Australia 

Austria 

Belgium 

Belize 

Botswana 

Brazil 

Canada 

Chile 

Colombia 

Cyprus 

Czechoslovakia 

Denmark 

E

gypt 

EC i 

Finland 

France 

Germany 

Greece 

Guatemala 

Hong Kong 2 

Hungary 

India 

Indonesia 

Ireland 

Israel 

Italy 

Japan 

Korea 

Lesotho 

Luxembourg 

Malawi 

Mexico 

Netherlands 

New Zealand 

Nigeria 

Norway 

Pakistan 

Philippines 

Poland 

Portugal 

Romania 

Rwanda 

Singapore 

South Africa 

Spain 

Sweden 

Switzerland 

See footnotes at the end of table. 

17 
Table 2-2 

Signatories to the Tokyo Round agreements: Status as of Dec. 31, 1992—Continued 

(Accepted (A); signed, acceptance pending (S); provisional acceptance (P); new member 1992 (+)), Reservation, 

condition, declaration, or any combination (*) 

Standards 

Government 

procurement 

Subsidies 

Bovine 

meats 

Dairy 

products 

Customs 

valuation 

Import 

licensing 

Civil 

aircraft 

Antidumping 

Tunisia A A 

Turkey A A* 

United Kingdom A* A*+ A.+ A'+ A' 

United States A A A A A A A A 

Uruguay A A A 

Yugoslavia A S A A A A 

Zimbabwe A* 

Noncontracting parties: 

Bulgaria A A 

Paraguay P 

Total signatories 39 13 24 25 16 29 27 21 25 

1 The EEC is a signatory to all the agreements. Because the Standards Agreement and the Civil Aircraft 

Agreement cover matter that go beyond the authority of the EEC, each of the EEC member states is a signatory to 

these agreements. 

2 Hong Kong, which had been applying several of the codes under the auspices of the United Kingdom, changed 

its status under the codes in 1986, and is now a signatory in its individual capacity. 

Source: GATT, GATT Activities 1992, Geneva, July 1993, annex Ill. 

out in January 1992 a 4-track work plan to conclude 

the Round by focusing negotiations on (1) market 

access, (2) services, (3) a legal review of the DFA, 

and (4) possible adjustments to the DFA in specific 

places. 8 

Market access talks were held up for most of 1992 

by sparring between the EC and the United States 

over agriculture as well as other issues. 9Negotiations 

on trade in services advanced overall during the 

year, 1 ° and the legal review of the DFA was 

completed. Action on track 4, possible adjustments to 

the DFA, awaits agreement by participants on the first 

three tracks, although concerns about different parts of 

the Dunkel text were raised informally at yearend 

1992 by several delegations. 

During 1992 the issue of agriculture in the 

multilateral context became enmeshed in the 

longstanding U.S.-EC bilateral dispute over oilseeds, 

nearly leading to U.S. trade retaliation in November 

1992. On November 20, 1992, the two sides finally 

settled on a compromise, both to bilateral disputes on 

agriculture and also to their differences over elements 

in the agriculture text of the DFA. This agreement 

provided an optimistic note at yearend, triggering a 

resumption of Uruguay Round talks in December 

1992 on market access and other topics put off until 

the impasse over agriculture was seen to be resolved. 

The following discussion focuses on the two 

sectoral areas of the 1992 work program—services 

and market access—plus the area that has proved to 

be a pivotal issue in the Uruguay Round negotiations 

from the start: agriculture. 

Agriculture 

In January 1992 at the first 1992 TNC meeting, 

chairman Dunkel indicated that henceforward 

negotiations would need to take place on a global 

basis, with adjustments to the DFA only if "we all can 

collectively agree to [them] without unravelling the 

package." 11Although no participant flatly rejected 

the DFA, the EC did object to the entirety of the 

agriculture provisions. 12 

The DFA agriculture provisions called for 

specific, binding commitments in each of three areas: 

1. A 20-percent reduction in internal support 

(subsidy) expenditures; 

2. Conversion of nontariff import barriers to 

tariffs (tariffication), followed by a 36-percent 

reduction in these tariffs; and 

3. A 24-percent reduction in export subsidies in 

volume terms as well as a 36-percent reduction 

in export subsidies in terms of budget outlays. 

18 
All these reductions were to begin in 1993 for a 

6-year period. In addition, the text included a draft 

agreement on sanitary and phytosanitary measures. 13 

Given the EC objections to the agriculture section 

of the DFA, other participants were not prepared to 

move forward with other areas under negotiation in 

the Round until assured that agriculture would be 

included in the overall package and to what extent. 14 

In March 1992 President Bush and EC 

Commission President Delors sought to reach a 

mutual understanding over the Dunkel text provisions 

on agriculture, but they were unsuccessful. Regarding 

direct payments to producers, the United States 

proposed that those payments that do not affect 

production be exempted from the Dunkel text's call 

for a 20-percent reduction of internal subsidy 

payments. The EC responded with a willingness to 

accept a 36-percent reduction in internal support, 

export subsidies, and market access combined, rather 

than making specific, binding commitments in each 

category individually, in return for two conditions. 

One condition was "rebalancing," whereby the EC 

would be permitted to offset market access 

liberalization in some areas with increased tariffs in 

other areas with little or no protection, such as 

oilseeds and other nongrain feedstuffs. The second 

condition was a "peace clause" whereby the United 

States would forgo unilateral action on matters likely 

to be covered in the Round's agricultural agreement, 

submitting such disagreements instead to the GATT 

for resolution under existing dispute-settlement 

procedures. 

By May 1992 the Community had finalized a 

package of measures aimed at reforming its Common 

Agricultural Policy (CAP). 15Although the EC reform 

is considered an internal EC matter and does not 

address the issues of market access or export 

subsidies, the reform was widely considered as 

providing a basis from which the EC could reach 

agreement with the United States and other 

participants in the Round over agricultural trade. 

In July 1992 the leaders of the seven leading 

industrial nations (G-7) at their summit meeting in 

Munich acknowledged "the slow pace of the [Uruguay 

Round] negotiations" since mid-1991 but pointed out 

that progress had been made, characterizing the 

agricultural negotiations thus: 

Progress has been made on the issue of 

internal support in a way which is consistent 

with the reform of the common agricultural 

policy, on dealing with the volume of 

subsidized exports and on avoiding future 

dispute. These topics require further work. In 

addition, parties still have concerns in the 

areas of market access and trade in cereal 

substitutes that they should seek to address. 16 

Nonetheless, although there was much high-level 

political discussion of agriculture on the margins of 

the G-7 summit, little of substance resulted. One of 

the few understandings to emerge was that few 

concessions in the agriculture negotiations would be 

forthcoming from the EC in general—and from 

France in particular—until after the referendum in 

France on the Maastricht Treaty on European union, 

scheduled for September 20, 1992. 

During the first half of 1992, a U.S. challenge to 

the EC regime on oilseeds 17was also proceeding 

through dispute-settlement procedures in the GATT 

for the second time. The United States has been 

actively challenging the consistency of the EC 

oilseeds subsidy program under the GATT since 1988, 

when the first GATT panel was established at U.S. 

request to examine EC subsidies to processors and 

producers of oilseeds and related animal-feed proteins. 

This first dispute panel supported U.S. claims and 

recommended that the EC bring its subsidy program 

into compliance with the GATT. The panel report 

was issued in 1989 and adopted in January 1990. 

In March 1992 a "followup" pane1 18issued its 

findings, again supporting the U.S. position. This 

second panel declared further that the United States 

should be granted authority under the GATT to 

withdraw concessions to offset the trade losses 

stemming from the EC subsidy program, if the EC did 

not eliminate its impairment of U.S. trade rights by 

either modifying the new subsidy program or by 

compensating the United States. 

In June 1992 the EC requested and received from 

the GATT authorization to renegotiate its tariff 

concessions on oilseeds under GATT article 

XXVIII:4. However, the EC and the United States 

failed to agree on acceptable compensation for the 

right to raise tariffs beyond the zero-duty binding 

currently in effect. 19As a result of this impasse, the 

United States requested at the September 1992 GATT 

Council meeting that the EC submit to binding 

arbitration of the dispute through the GATT, an 

approach that the EC rejected. 

Additional talks between the United States and the 

EC during October and into November 1992 over 

both the bilateral oilseeds dispute and the multilateral 

situation concerning agriculture in the Uruguay Round 

came to a head in early November. Negotiations in 

Chicago between the U.S. and the EC agriculture 

Ministers broke down in the days leading up to the 

U.S. Presidential election on November 3. 20The lack 

of redress in the GATT over the oilseeds issue despite 

the twice-upheld U.S. legal position, followed by this 

19 
breakdown in the possibility for a negotiated 

settlement of differences over agriculture, combined to 

dim the possibility that agriculture negotiations could 

continue in good faith. 

At the November 4 GATT Council meeting the 

United States repeated its request for binding 

arbitration concerning trade damages arising from the 

oilseeds issue and, being rebuffed by the EC, 

requested authorization from the GATT to withdraw 

from the EC $1 billion in trade concessions in 

compensation. Not unexpectedly, the EC refused to 

agree to the unanimous decision necessary for such 

authorization and blocked the U.S. request. 

On November 5, 1992, the United States 

announced its intent to withdraw concessions from the 

EC for its failure to bring its oilseeds subsidies regime 

into line with the GATT.21The United States said it 

would increase tariffs to 200 percent ad valorem, 

beginning December 5, 1992, on imports of white 

wine, rapeseed oil, and wheat gluten from the EC. 

These items were valued at $300 million, and a list of 

possible additional products valued at $1.7 billion was 

prepared for further sanction should the EC fail to 

reform its policies or otherwise rectify the situation. 

On November 18 and 19, EC Commissioners 

Andriessen and MacSharry met with United States 

Trade Representative Hills and Agriculture Secretary 

Madigan to try to resolve the agriculture issues 

threatening to raise trade sanctions and impeding the 

multilateral trade negotiations. On November 20, 

both sides announced that they had reached an 

agreement on the oilseeds dispute, as well as on 

several other bilateral farm disputes 22and on 

agricultural issues contested by the two sides in the 

Uruguay Round. 

Negotiated at the Blair House in Washington DC, 

for which the agreement was named, these U.S.-EC 

understandings addressed two of the three areas under 

discussion in the multilateral talks on 

agriculture—that is, internal support and export 

competition. The Blair House agreement was 

expected to clear the way for resumed Uruguay 

Round negotiations in Geneva on the third area of 

agricultural market access, as well as all outstanding 

topics in general, with the hope that at least an 

agreement in principle to the DFA could be agreed by 

the time U.S. administrations changed on January 20, 

1993. 

The two sides agreed to support the 20-percent 

reduction in internal farm supports already outlined in 

the Dunkel text. Concerning agricultural export 

subsidies, the United States and the EC agreed to seek 

modification of the DFA to reflect the Blair House 

agreement to reduce export subsidies on agriculture 

by 21 percent on a volume basis over 6 years using a 

1986-90 base period, as well as accept the 36-percent 

reduction in export subsidy budget outlays as set out 

in the DFA. 

The two sides also agreed that if the internal 

support and export subsidy measures are met, then the 

measures subject to the reduction commitments or the 

direct payments involved with them will not be 

subject to challenge under GATT rules. 23However, 

actions under countervailing-duty laws will still be 

allowed, should subsidized imports either cause or 

threaten injury in the domestic market. On nongrain 

feed ingredients (NGFI), 24both sides agreed to confer 

should EC imports of NGFI threaten to undermine the 

EC reform program for the CAP. 

In early December 1992 negotiators resumed talks 

in Geneva on agriculture, as well as other Uruguay 

Round topics, in an effort to reach a "political-level" 

agreement before the end of the year. Meetings on 

market access for agriculture were expected to resume 

with the tabling of delegations' proposed tariff 

reductions for agriculture, but further delays 

undermined efforts to reach the yearend target date for 

an overall agreement in principle. The EC agriculture 

schedule, for example, was not available until 

mid-December 1992, owing to French objections to 

the Blair House agreement. 

These French objections reflected both popular 

discontent, such as angry demonstrations by French 

farmers against the agreement, and official 

disapproval. French politicians, awaiting 

parliamentary elections in March 1993, threatened to 

resort to the extreme sanction allowed member states 

under EC procedures to veto a Community decision 

for reasons of "vital national interest." The French 

Government accused negotiators for the EC 

Commission of having exceeded their mandate from 

the member states, given through the EC Council, that 

no additional concessions be given in agriculture 

beyond those already negotiated internally for the 

CAP reform in May 1992.25 

Services 

Negotiation on services was set out by GATT 

Director-General Dunkel in January 1992 as one of 

the four tracks to be pursued during the year. Services 

negotiations were to revolve around (1) the 

"framework" agreement known as the General 

Agreement on Trade in Services (GATS) that sets out 

basic obligations such as ensuring transparency in 

service-related regulation; (2) annexes that contain 

particular provisions applicable to certain sectors;26 

20 
and (3) schedules of commitments detailing each 

specific sector in which market-access provisions will 

apply. ' Negotiations over services advanced 

substantially during the year. 27However, at yearend, 

diffeiences over telecommunications, financial, 

audiovisual, and transport services still remained 

stumbling blocks. 

MFN Exemptions and 

"Conditional" MFN 

The GATS contained in the DFA would oblige 

signatories to extend benefits of the agreement, as 

well as liberalization in the service sectors listed in 

the schedules of commitments, to all signatories on a 

nondiscriminatory basis. That is, a signatory to the 

GATS would be required to extend benefits 

unconditionally to other signatories on a 

most-favored-nation, or MFN, basis. A signatory may 

request exemptions from applying MFN treatment to 

services under the terms of the DFA with respect to 

sectors or to specific measures, but they should not 

last longer than 10 years, and must be reviewed after 

the first 5 years. The United States has sought an 

exemption from MFN in a number of sectors. 28 

 Financial services and telecommunications services 

were two sectors where the United States sought to 

condition its application of MFN treatment on an 

exchange of market access commitments with other 

participants. The EC has sought exemptions from 

MFN obligations in a number of sectors as well, 

including maritime and land transport services, and 

for its audiovisual sector to protect its TV, film, and 

sound recording industries by requiring that a certain 

portion of broadcasting in its member states be 

reserved for works by EC producers. In addition, the 

EC has notified a long list of measures, primarily in 

the financial and professional services areas that 

would require MFN exemptions should the results of 

the round's market-access negotiations prove 

unsatisfactory to the EC. 

1992 Developments 

In March 1992 the Group on Negotiations on 

Services (GNS) held a stock-taking exercise. The 

GNS chairman reported that offers on initial 

commitments had been tabled by 47 participants (24 

of these being revised offers) with 32 draft lists of 

intended MFN exemptions. 29Although these offers 

represented considerable progress, the United States 

was criticized for seeking exemptions for maritime 

and air transport, basic telecommunication services, 

and financial services. In response, the United States 

made it clear that its approach regarding financial 

services and basic telecommunication services was a 

negotiating tactic to elicit active negotiations and 

improved offers from other trading partners. 

In fall 1992, in an attempt to move talks forward 

in financial services, 30 the United States announced a 

change in emphasis in its approach that it would 

withhold final decision regarding financial services 

until the end of the round. 31The EC has indicated 

that it views U.S. demands for exemptions in the 

services talks as hindering the chances for an overall 

services agreement that would include the widest 

participation by developing countries, something that 

the EC has particularly sought. Nonetheless, the EC 

has joined the United States in reserving its right to 

invoke an MFN exemption for financial services if 

other countries fail to improve their services offers. 

These offers include in particular financial services 

offers from key developing countries in Asia and 

Latin America as well as Japan. In October 1992 the 

EC wrote to 13 countries 32warning that more 

generous offers • in financial services may be 

withdrawn if improvements in offers from these 

participants are not forthcoming. The U.S. 

Government has been seeking similar liberalization 

commitments from key developing countries as well. 

In negotiations on telecommunications services, 

the United States also sought to move negotiations 

forward. In December 1991 the United States had 

attempted to catalyze talks by offering to extend MFN 

treatment in the Uruguay Round to basic 

telecommunications services. 33Until then, the United 

States had been unwilling to extend MFN treatment 

for basic services (such as voice telephony or telex 

services) because other countries were considered 

unlikely to liberalize their domestic markets for basic 

telecommunications, dominated to a large extent by 

state-controlled monopolies. 34However, this offer of 

U.S. willingness to extend MFN treatment for basic 

services if other countries were in fact willing to do 

the same was still conditioned on the agreement of 

major U.S. trading partners, such as Canada, the EC, 

and Japan, to make commitments to open their own 

long distance telephone service markets to 

international competition. 35 

By late 1992 the United States, the EC, and other 

participants with significant markets in telecommunications, were considering a 2-year extension of 

negotiations on basic telecommunications as a means 

to overcome their longstanding impasse over 

telecommunications issues. 36Some participants 

proposed that during the extension the status quo 

should be frozen, preventing any country from taking 

an MFN exemption and relieving all members of the 

21 
obligation to apply MFN status during the 2-year 

extension. 37 

In talks on transport services the GATT Secretariat 

has circulated a broad proposal to liberalize maritime 

service markets based on proposals initially advanced 

by the Nordic countries. The United States has 

resisted such proposals, instead seeking for maritime 

services an exemption from applying MFN 

obligations. In addition, the United States has not 

included offers based on national treatment principles 

in its schedule of service commitments. EC 

negotiators, however, have sought some U.S. 

commitments in maritime services. 38However, it is 

reported that a wide range of countries 39would need 

to liberalize their maritime transport markets 

significantly before the United States would be 

willing to consider dropping its demand for a 

maritime exemption—something U.S. negotiators 

consider unlikely. By December 1992 the EC had 

come to link movement on its exemption for 

audiovisual services (see below) to U.S. concessions 

on maritime transport services. 40In civil aviation 

services, the annex will exempt landing rights from 

the GATS, both for "hard" rights, such as those that 

actually support permission to land an airplane in 

foreign territory, and "soft" rights, such as baggage 

handling and in-flight catering. 41 

For audiovisual services EC negotiators have 

sought an exemption on audiovisual programs 42to 

protect the 1989 EC Broadcast Directive, in addition 

to offering no market-access commitments for 

audiovisual services. The EC Broadcast Directive is 

legislation aimed at reserving a portion of national 

television and other programming time for national 

cultural programs. While the United States has 

indicated it may be willing to accept some EC 

reservations in audiovisual services in the form of an 

EC exemption or an attenuated market-access offer in 

this sector, the United States has steadfastly opposed 

"cultural exemptions" where any party may exclude 

any audiovisual service sector for purposes of 

"cultural preservation," although the EC and others 

point out similar provisions in U.S. agreements with 

Canada and Mexico. 43 

The EC circulated informally a revised services 

offer by mid-December 1992, one that had been held 

up by divisions between EC member states. Key 

developing countries withheld improved services 

offers until a formal presentation of the U.S.-EC 

agricultural agreement could be made and its 

implications become more clear. Nonetheless, some 

key developing countries, such as Argentina, Egypt, 

Turkey, and some East European countries, did table 

revised services offers during December. 44 

In December 1992 Japan tabled a revised schedule 

of commitments and reservations encompassing 

approximately 75 different service sectors. 45A 

Japanese official characterized these commitments as 

"unilateral concessions" in an attempt to help provide 

impetus to the services talks, although other 

participants have reserved judgment on this point. The 

revised Japanese offer seeks sectoral exemptions in 4 

areas—legal consulting services, freight forwarding, 

licenses for radio stations, and cabotage—while lifting 

two exemptions previously sought in the areas of 

restricted land ownership by nonnationals and entry of 

foreign personnel. 

Market Access 

In early 1992 it was envisioned that all 115 

participants in the market access negotiations would 

submit their final line-by-line schedules of tariff 

concessions and commitments for all 

products—agricultural as well as industrial 

products—by March 31, 1992.46However, at 

stock-taking meetings in March the chairman of the 

Negotiating Group on Market Access reported that he 

had received only 37 submissions and expected 14 

more from other participants shortly. 47 

Although the chairman reported that "many 

participants had confirmed their expectation of being 

able to meet, and in some instances to significantly 

exceed, an overall one-third reduction of tariffs," he 

pointed out nonetheless that the submissions were 

variable in overall quality and completeness, in 

particular the 23 submissions on agricultural 

products.48Participants such as Australia and 

members of ASEAN have criticized the United States 

and the EC for holding up talks in areas such as 

market access with their failure to compromise on 

agriculture. 

Active participation by other countries has also 

been hindered by a second U.S.-EC stumbling block 

over industrial market access. In 1992 the United 

States continued to pursue its "zero-for-zero" 

proposals as the centerpiece of its market-access 

strategy. With the zero/zero proposals, the U.S. 

market-access offer goes beyond the roughly one-third 

reduction49in average industrial products tariffs 

achieved in the Tokyo Round and as set out as a goal 

at the Uruguay Round Mid-Term Meeting in April 

1989.50These proposals to eliminate particular 

sectoral tariffs, as originally offered by the United 

States in March 1990 were pharmaceuticals, beer, 

distilled spirits, furniture, toys, wood, paper, bicycle 

parts, construction equipment, agricultural equipment, 

non-ferrous metals,51electronics (including 

22 
semiconductors, and computer and computer 

equipment), medical equipment, scientific equipment, 

and stee1.52During 1992, the United States and the 

EC discussed the product coverage of the various 

zero/zero sectors. 

A second area of disagreement is how to cut tariff 

peaks. "Tariff peaks" are high tariff rates. During 

1992, the threshold level for peaks as well as the cut 

that would be offered continued to be discussed. By 

the end of 1992, the debate had boiled down to the 

United States defining tariff peaks as tariffs in excess 

of 15 percent, whereas the EC considered peaks to 

include 15 percent. No formal offers were made on 

the depth of cut. 53 

The Punta del Este declaration inaugurating the 

Uruguay Round called for negotiations on tariffs that 

"shall aim, by appropriate methods, to reduce or, as 

appropriate, eliminate tariffs including the reduction 

or elimination of high tariffs and tariff escalation." 54 

 The Mid-Term Review meeting concluded that 

participants would agree on a "substantial reduction 

or, as appropriate, elimination of tariffs by all 

participants with a view to achieving lower and more 

uniform rates, including the reduction or elimination 

of high tariffs, tariff peaks, tariff escalation and low 

tariffs". 55 

The EC has cited as priority items the U.S. tariffs 

on three sectors — textiles, glassware and china, and 

footwear.56EC negotiators are seeking to reduce 

tariff peaks by one-half. In addition, the EC was 

linking any tariff reductions in the EC electronics 

sector, sought by U.S. negotiators, with reductions in 

the U.S. textiles and apparel tariffs. 

A third area of uncertainty in market access talks 

is tariffs on chemicals. In 1992, negotiations 

proceeded closely along the lines of a plan worked out 

initially in 1991 by U.S., Canadian, and EC chemical 

industries.57 However, whereas the EC is seeking to 

have all tariffs reduced and bound over the same 

period, the United States is seeking a longer phaseout 

for over 80 chemicals of interest to the EC. These 

chemicals are largely in the area of organic chemicals, 

including dyestuffs. 58 

Following the announcement of a U.S.-EC 

compromise on agriculture on November 20, 1992, 

the TNC reactivated the multilateral trade negotiations 

process in Geneva. 59The joint U.S.-EC press 

statement60stated the intention of the two sides to 

pursue a successful conclusion to the Uruguay Round, 

highlighting among others the market-access area: 

On market access, the United States and EC 

Commission have found the basis to achieve 

an ambitious result that meets their respective 

objectives as follows: detailed negotiations 

will continue on specific sectors or products 

in order to make progress towards the 

completion of a substantial and balanced 

package. Tariff reductions will be maximized, 

with as few exceptions as possible, including 

the substantial reduction of high tariffs, the 

harmonization of tariffs at very low levels, 

and the elimination of tariffs in key sectors. 

The prospect exists that the Montreal target 

could be substantially exceeded. However, 

participation of third countries—not only the 

developing countries, but other industrialized 

countries—and elimination of non-tariff 

distortions are considered to be of essential 

importance, and both parties will continue 

efforts to achieve maximum results in this 

regard in Geneva during the coming weeks. 

The thrust of the joint U.S.-EC statement—to 

overcome remaining obstacles to conclude an overall 

Uruguay Round package in the foreseeable 

future—indicated to other participants that unresolved 

industrial market-access issues would need to be 

agreed first between these two sides before other 

countries would be likely to make serious and 

substantial offers in return. One difficulty, for 

example, is that little or no market-access negotiation 

between the United States and the EC has involved 

Canada and Japan, although reportedly they have been 

kept informed of U.S.-EC discussions to an extent. 

In December 1992 the EC presented its revised 

market-access offers for goods and services to 

participants in the Round. The EC offer included zero 

tariffs on pharmaceuticals, construction equipment, 

medical equipment, and steel. 

Yearend Discussions 

With progress on services and the U.S.-EC 

agreement on agriculture, the issue of market access 

began to assume the central focus of attention in the 

Round by yearend 1992. However, negotiators' 

efforts to grapple with this broad subject were 

hindered by the uncertainty of the change in U.S. 

administration brought about by the November 3, 

1992 election. As a result, market access talks began 

to coalesce only following a hiatus in early 1993 as 

the new U.S. administration was inaugurated January 

20, 1993, and new trade policy personnel took up 

their posts. Once these personnel changes were in 

place, discussions between the United States and the 

EC began as an essential component of an overall 

multilateral agreement on market access. These 1993 

discussions started in Brussels between the new 

United States Trade Representative, Mickey Kantor, 

23 
and new EC Trade Commissioner, Sir Leon Brittan, 

on March 29, 1993. 61 

In the interim between the U.S. election and the 

change in administrations, informal meetings took 

place in December 1992 and January 1993 between 

key delegations in the Round and Director-General 

Dunkel to help identify areas of the DFA that 

participants might seek to modify. The areas 

identified by the United States, as well as by other 

countries, include antidumping, subsidies, 

trade-related intellectual property rights, certain 

environment-related issues in the texts on technical 

barriers to trade 62and on sanitary and phytosanitary 

measures, textiles, and institutional issues such as the 

establishment of a multilateral trade organization. 63 

Principal GATT Activities 

While the Uruguay Round proceeded in its efforts 

to expand and improve multilateral trade rules, regular 

activities of the GATT in 1992 reflected an effort to 

widen the scope and use of existing world trade rules. 

Action on the following selected topics—dispute 

settlement, the growing resort to and multilateral 

scrutiny of regional trade areas, and the issue of trade 

and the environment—all bear witness to increased 

use of the GATT by contracting parties to address a 

broader range of world trade matters. At the same 

time, the experience in grappling with these issues 

during 1992 highlights the difficulty of resolving 

complex issues and seeking to achieve at times 

competing goals within the multilateral context. 

Dispute Settlement 

Following the provisional adoption of streamlined 

dispute-settlement procedures in April 1989, 64there 

has been a marked increase in the use of GATT 

dispute–settlement procedures. Since 1991 this 

increase has extended as well to the dispute provisions 

of the Tokyo Round codes of conduct. 65At the same 

time, failure to comply with dispute–panel judgments 

has also been increasing. 

A portion of these stymied dispute cases are a 

subset of "contingent acceptance" cases, whereby a 

disputant will carry out a ruling only as part of the 

conclusion of the Uruguay Round. The remaining 

cases, however, represent a failure to resolve trade 

disputes through current procedures and thus point up 

the fragile underpinning of a multilateral trading 

system under which disputants can, and at times do, 

ignore or circumvent the rules when such rules are not 

in their favor. 66 

The GATT director-general and other GATT 

officials have repeated warnings that this paralysis has 

become a serious problem for the GATT system. The 

recent increased and vigorous use of the GATT 

dispute system may be viewed as a renewed effort by 

governments to turn to the multilateral system to help 

resolve their bilateral trade problems. There is also 

concern that nonimplementation of dispute-panel 

reports and disregard for the dispute-settlement system 

could undermine GATT rules overall. This, in turn, 

could lead signatories to rely less on multilateral 

disciplines and more on bilateral or regional policies. 

One prime concern, should GATT members begin to 

view multilateral disciplines as ineffectual, is the 

greater uncertainty likely to result in the world trading 

system, with the possibility that such uncertainty 

could precipitate much the same economic chaos as 

witnessed during the trade wars of the 1930s. 

In surveying the recent 1991-92 period, the 

director-general has highlighted the remarkable 

increase in the number of trade disputes referred to 

the GATT for resolution from 1 active panel at the 

end of 1990 to 11 panels a year later at the end of 

1991.67In the first half of 1992, the director- general 

pointed again to a continuous rise in 

dispute-settlement activity, particularly in the Tokyo 

Round code committees. 68During this period six 

new panels were established: three under the 

antidumping code, two under the subsidies code, and 

one in the GATT Council. By the end of 1992, the 

director-general could report that the rate of new 

panels being established fell slightly from 11 during 

1991 but remained significant at 8 new panels during 

the corresponding period in 1992. 69The proportion 

of disputes brought under the Tokyo Round 

agreements remained large, with most panels in 1991 

and 1992 being brought under the codes, notably the 

Subsidies, Antidumping, and Government 

Procurement Codes. Key disputes involving the 

United States and its major trading partners are 

discussed in chapter 4 of this report. 70 

One major aspect of this frequent resort to dispute 

settlement is the increased number of panel reports 

that go unheeded once presented. Although the 1989 

streamlined dispute procedures have sped up the panel 

process, 71the end goal of resolving disputes through 

panel report adoption and recommendations is often 

stymied by nonimplementation of a report due to the 

inaction on the part of a disputant. From 1990 to 

1992 the average period before a report is fully 

adopted almost doubled. 

Implementation problems have increased since the 

start of the Uruguay Round. Since 1986 15 panel 

reports have been adopted under the original 

24 
dispute-settlement rules (prestreamlined procedures) 

under which the panel recommendation involved 

domestic policy action. Of these 15 reports, 8 had 

implementation problems in 1990, either postponing 

compliance or complying insufficiently to satisfy 

contracting parties.72By early 1992 11 panel reports 

had implementation problems, making over two-thirds 

of panel reports adopted since the start of the Round 

either not satisfactorily implemented or postponed. 73 

A second aspect of this increase in noncompliance 

is the adoption of a dispute-panel report with the 

caveat that effective implementation is contingent on 

the outcome of the Uruguay Round. Despite an 

increase in the number of reports adopted—from four 

in 1991 to six in 1992—GATT officials have 

cautioned that adoption does not necessarily guarantee 

full implementation. At least four panel reports have 

been adopted but linked to the outcome of 

negotiations in the Round: 74(1) the U.S.-Canadian 

ice cream and yoghurt pane1, 75(2) the 1990 U.S.-EC 

oilseeds panel,76(3) the U.S.-Japan section 337 

pane1,77and (4) the EC-Japan component-parts 

pane1.78 

Both for the backlog of panel reports that go 

unimplemented and for those conditioned on results in 

the Uruguay Round, the director-general has 

repeatedly stressed that these panel reports are based 

on existing rights and obligations under the GATT and 

therefore should be implemented independently and 

regardless of other conditions, such as the Uruguay 

Round.79Moreover, conditioned acceptance of panel 

reports is viewed as undermining negotiation efforts 

involving future dispute-settlement rules when 

existing disciplines are already ineffective. With 

Canada, the EC, Japan, and the United States involved 

in over 90 percent of the disputes brought to the 

GATT since the start of the Uruguay Round, the 

director-general has stressed that these major trading 

partners have a particular responsibility to ensure the 

effective functioning of the dispute system. The 

United States in particular has been involved in 

virtually every recent dispute brought under the Tokyo 

Round codes, both as complainant and as defender. 

(See figure 2-1 for recent code insert figure 

2-1disputes.) Moreover, one observer has commented 

that there have never before been so many trade 

disputes brought to the dispute-settlement system 

during ongoing trade negotiations. 80She suggests 

that, because so many of these disputes have been 

brought by either the United States or the European 

Community, this heavy use of the dispute system may 

be aimed in part at influencing the Uruguay Round 

negotiations. 

The analysis by Professor Robert Hudec and 

others points to a number of observations regarding 

the increase in dispute-settlement cases and 

nonimplementation of a number of these cases. 81 

 First, it concludes that the GATT dispute-settlement 

system has nonetheless been quite successful during 

GATT's tenure as an international institution, both in 

the 1980s and overall. Second, after noting that the 

stronger GATT members benefit more from the 

dispute-settlement process than weaker ones do, the 

authors' argue that the data in the analysis "tell us 

when a dramatic increase in noncompliance occurred 

(the 1980s), and the study of individual country 

records tells us who made the noncompliance happen 

(the United States, the European Community and 

Canada)." [original emphasis retained] A third 

observation finds a "distinctive noncompliance record 

of the United States in the 1980s," which the authors 

hypothesize to be related to changes in the domestic 

politics of U.S. trade policy where "the U.S. Congress 

demanded and received a decidedly more bellicose 

trade policy," based on the idea that foreign 

governments were not providing fair or equivalent 

market access for U.S. goods in foreign markets in 

return for "the relative openness of the U.S. market." 

In addition to nonimplementation and conditional 

implementation, the director-general has pointed out 

that some requests for consultations or dispute panels 

have failed to precisely identify the legal basis or the 

substance of the dispute. 82Not only have vague 

complaints burdened legitimate GATT operations, in 

effect harassing a trading partner through a GATT 

mechanism without any expected hope of actually 

resolving a complaint, but such incomplete requests 

compromise the possibility of third-party submissions 

to a panel as cocomplainants. 

Inactive disputes have also posed additional 

burdens and difficulties for the GATT. Panel reports 

have remained unadopted despite the withdrawal of 

the underlying measures that triggered the dispute 

initially. Some panels moreover were established long 

ago but have not been activated because the 

complainant has not pursued the matter. The 

director-general has suggested that cases such as 

these, if not actively pursued within a year, might be 

considered withdrawn. 

Another increasing problem in the 

dispute-settlement area appears to be "forum 

shopping," wherein a complainant picks a GATT 

agreement to address a dispute on the basis of one of 

eight different dispute-settlement mechanisms under 

the General Agreement and the Tokyo Round 

agreements. Such picking and choosing may restrict 

25 
Figure 2-1 

Recent Disputes under the Tokyo Round agreements 1 

ANTIDUMPING CODE 

Panel on Canadian Duties on Beer Imports from the United States 

In July 1992 the Committee on Anti-Dumping Practices established a panel at the 

request of the United States to examine Canada's antidumping duties on U.S. beer. 

The United States argued that there were no dumped imports in the Province in 

question (British Columbia), and Canada maintained that its duties were consistent 

with the code. 

Panel on U.S. Duties on Steel Plate from Sweden 

In April 1992 the Anti-Dumping Committee formed a panel to examine a Swedish 

complaint about U.S. antidumping duties on stainless steel plate from Sweden. 

Sweden argued that the reasons for the duties, in force since 1973, are no longer 

valid. The United States has blocked adoption of the report on the grounds that the 

panel recommendation exceeded its mandate by prescribing a specific remedy — to 

revoke the U.S. antidumping duties — rather than the standard practice of instructing 

a sovereign nation to bring its laws into compliance with its international obligations 

without specifying how to do so. 

Panel on U.S. Duties on Steel Pipes from Sweden 

In November 1992, Sweden requested again that the committee adopt the panel 

report on U.S. antidumping duties on stainless steel pipes and tubes from Sweden. 

The panel was formed in January 1989 following imposition of U.S. duties. Sweden 

maintained that the U.S. investigation failed to verify whether the industry was a 

qualified petitioner. The report was presented in the fall of 1990 and has been before 

the committee seven times without adoption because the United States again objects 

that the panel recommendation is overly specific. 

GOVERNMENT PROCUREMENT CODE 

Toll Collection System 

In May 1992 a panel concluded that Norway had failed to provide the national 

treatment required under the Government Procurement Code in tendering for bids on 

a toll system. On September 23, 1991, a panel had been established at the request of 

the United States to examine a contract by Norway for electronic highway toll 

collection equipment for the city of Trondheim. The United States argued that a U.S. 

supplier had been excluded by the single tender process, whereas Norway had 

maintained that the contract was a pilot project exempt under the code's research and 

development provisions. 

Sonar Mapping System 

In May 1992 the Government Procurement Committee considered a panel report on a 

U.S. procurement contract on behalf of the National Science Foundation for a sonar 

mapping system. In July 1991 the panel was established at EC request to examine a 

contract for a multibeam sonar mapping system for use in the Antarctic. The EC 

argued that the procurement for use in an ice-breaking vessel was inconsistent with 

the code whereas the United States maintained that the procurement was exempt 

from the code, because it was part of a services contract not covered by the code. 

The panel concluded that the procurement was not a service contract but rather was a 

product covered by the code whether or not taking place under a service contract. 

The United States would not agree to adopt the report at the May 1992 meeting, 

saying it needed more time to consider the report. The committee will revert to the 

report at future meetings. 

26 
Figure 2-1—Continued 

Recent Disputes under the Tokyo Round agreements .' 

SUBSIDIES CODE 

Canadian Panel on U.S. Softwood Lumber Measures 

In December 1991 the Subsidies Committee agreed to form a panel to examine 

Canada's contention that U.S. bonding requirements on imports of certain softwood 

lumber products from Canada were not in conformity with U.S. obligations under the 

Subsidies Code. 

Canadian Countervailing Duty on U.S. Corn 

In March 1992, the Committee on Subsidies and Countervailing Measures adopted 

the first panel report ever under the Subsidies Code. In 1989 the United States 

requested reconciliation over a March 1987 countervailing-duty determination by the 

Canadian International Trade Tribunal on imports of U.S. corn. On July 18, 1991, a 

panel was established to examine the U.S. complaint that the duties were inconsistent 

with Canada's obligations under the code because no material injury to Canadian 

producers was shown to justify these duties. 

Panel on U.S. Wine industry Definition 

In April 1992 a second report was adopted under the Subsidies Code, concerning 

possible countervailing or antidumping action on imported wine. In early 1985 the EC 

asked for a panel under the Subsidies Code to examine certain provisions of the U.S. 

Trade and Tariff Act of 1984 that in effect stretched the definition of the word "industry" 

to allow grape growers as well as wine producers to initiate countervailing-duty or 

antidumping-duty cases against wine imports. The EC held that only wine producers 

were entitled to be qualified petitioners. As no action was taken under these 

provisions, leaving only a hypothetical situation to consider, the United States had 

argued against the formation of the panel. 

German Airbus Exchange-Rate insurance Subsidy 

On April 28, 1992, the Subsidies Committee received the panel report favoring the 

U.S. position concerning the German exchange-rate scheme for Deutsche Airbus. 

The EC could not agree to adopt the report, and so the committee is expected to 

revert to the report at future meetings. The committee agreed to a dispute panel on 

March 6, 1991, to examine a U.S. complaint that an exchange-rate insurance scheme 

for the German aircraft firm, Deutsche Airbus, violated the Subsidies Code. 

The United States requested consultations under the Subsidies Code in March 1989. 

However, the EC considered the case to pertain to the Agreement on Trade in Civil 

Aircraft. Although the EC did not block the panel from proceeding under the Subsidies 

Code, it considered that treatment under the Subsidies Code would deprive the 

Community of its rights under the Civil Aircraft Code and would not permit a full 

examination of the subject. 

1 For further discussion of bilateral disputes, see chapter 4 of this report. 

27 
the full debate of an issue and may lead a panel to 

consider the dispute only in light of the agreement 

under which the panel was established. One salient 

example is the dispute over EC Airbus subsidies, 

which the United States has sought to have 

examined under the Subsidies Code and the EC has 

sought to have examined under the Civil Aircraft 

Code. 83 

All of these difficulties in the GATT 

dispute-settlement process reflect an increased use of 

the available multilateral mechanisms, indicating that 

signatories are at least willing to bring disputes to a 

common forum. Although the increasing number of 

unimplemented panel reports are viewed by some as 

cause for concern, the increase in dispute-settlement 

panels would also indicate that all stages relating to 

the dispute-settlement process are on the increase, 

including formation of panels, release of panel 

reports, adoption of panel reports, and carrying out of 

panel reports. 84The fact that panels are being formed 

and are issuing reports more quickly also suggests that 

changes to the procedures agreed to in the Mid-Term 

Review of the Uruguay Round are having a salutary 

effect. However, the many difficulties encountered in 

finally settling complaints in a multilateral forum will 

need to be overcome to ensure that members are 

sufficiently satisfied with the results to continue their 

reliance on a common dispute mechanism. 

Review of Free-Trade Areas 

Regional trade arrangements have generally been 

a constant feature of the world trade system and to 

date have not posed a significant barrier to 

multilateral liberal i zati on. 85Greater regional 

integration, however, arouses concern that these 

arrangements may substitute for, rather than 

complement, broader liberalization undertaken 

through multilateral trade negotiations under the 

auspices of the GATT. Although these arrangements 

are permitted under GATT rules, nonparticipants 

suspect that these regional arrangements may result in 

de facto or de jure discrimination against them. 

GATT Review of Regional Trade 

Arrangements 

Growing interest in 1992 in economic integration 

through regional trade agreements has led to increased 

notification of such arrangements to the GATT, as 

well as an increase in GATT working parties 

examining these pacts to ensure their compatibility 

with GATT rules comprising the multilateral trading 

system, In particular, GATT article XXIV 

("Territorial Application-Frontier Traffic-Customs 

Unions and Free-Trade Areas") allows contracting 

parties to enter into regional arrangements that 

liberalize economic measures among a few members 

without passing on the benefits of this liberalization to 

other GATT members. One of the essential 

requirements is that barriers to nonparticipants be no 

higher than before the new arrangement: 

the duties and other regulations of commerce 

... shall not on the whole be higher or more 

restrictive than the general incidence of the 

duties and regulations of commerce ... prior to 

the formation of such union 

Although such arrangements may disadvantage 

GATT members outside compared with those inside 

the regional agreement, the founders of the GATT 

foresaw these arrangements as promoting closer 

economic integration among participant countries. 

These arrangements could in turn benefit the other 

nonparticipating GATT members and the world 

trading system at large rather than act as a seeming 

breech of the nondiscrimination principle. The 

drafters of the GATT set down a review process of 

these regional arrangements to see that they do not 

conflict with the General Agreement's overall 

objectives of promoting freer trade with other 

countries. The director-general of the GATT has also 

pointed out that an ongoing process of world trade 

liberalization, in which parties to these integration 

arrangements are participants, reduces the chance of 

conflict between these arrangements and the broader 

world trade system. 87 

The review process for regional trade 

arrangements typically involves setting up a working 

party to examine whether the provisions of the 

arrangement are in conformity with GATT rules. 

However, in over 50 working parties on individual 

customs unions or free-trade areas, not one has 

reached any definitive conclusions on the 

compatibility of these arrangements with the GATT, 

according to the GATT director-general 88 

The Canada-United States Free-Trade Agreement 

that entered into force January 1, 1989, was one of an 

increasing number of such arrangements notified to 

the GATT for examination. However, the magnitude 

of this agreement—the world's largest bilateral 

free-trade area covering both goods and services, 

worth over $200 billion annually—may have alerted 

GATT members to the need to freshly consider the 

role of the working party review process as much as 

did the rising number of such arrangements. 

In November 1991 the working party set up in 

February 1989 to examine this regional agreement 

28 
submitted its report to the GATT Council. The 

chairman of the working party reported that the group 

was unable to reach any conclusion as to the 

consistency of the agreement with the GATT, as was 

maintained by both members of the agreement. 

However, the chairman noted that this lack of 

conclusions should come as no surprise, as past 

working parties have been unable to conclude whether 

any other regional arrangements are or are not in 

conformity with provisions of the GAIT. He also 

pointed out that past working party reports have 

provided little guidance for newly formed working 

parties. This lack of guidance from past reports, he 

suggested, may in turn hamper countries attempting to 

create regional arrangements that are in conformity 

with multilateral GATT trading rules. He indicated 

that contracting parties may wish to give some new 

thought as to how future examinations of regional 

trade arrangements under article XXIV should be 

conducted and what sort of conclusions might be most 

useful. 

Recent Notification of Regional 

Arrangements 

In reporting on this issue, the director-general has 

pointed out that two types of regional developments 

have been taking place recently: (1) continued 

evolution of integration agreements already in place, 

such as the 1992 program in the European 

Community and the European Economic Area (EEA) 

combining the EC and European Free Trade 

Association (EFTA) member states and (2) new 

initiatives around the world to develop closer regional 

ties, notably requests for association agreements 

between the EC and a number of East European states 

and the expansion of the Canada-United States 

Free-Trade Area to include Mexico under the North 

American Free-Trade Agreement (NAFTA). 89 

Since 1991 four regional trade arrangements have 

been notified to the GATT Council." First, in 

February 1992 the Southern Cone Common Market 

(MERCOSUR) was notified to the GATT Council as 

coming into existence in November 1991, comprising 

Argentina, Brazil, Paraguay, and Uruguay. The aim 

of MERCOSUR is to establish a common market by 

eliminating internal tariff and nontariff barriers and 

replacing them with a common external tariff. 

Discussions arose in ensuing months about whether 

the standard article XXIV review should apply to 

MERCOSUR or whether, because its members are all 

developing countries and the arrangement was also 

notified under the Enabling Clause of the GATT, 91a 

more informal review through the GATT Committee 

on Trade and Development should apply. 

Second, several new free-trade agreements were 

also notified to the GATT Council in February 1992. 

One was between Finland and Estonia, establishing 

free trade in industrial products between these two 

countries.92Another was between EFTA countries 

and Turkey, effective April 1, 1992,93aiming to 

eliminate all duties on trade between these countries 

by 1995, although separate agreements cover 

agricultural goods. 

Third, several bilateral "association" agreements 

between the EC and several East European countries 

were notified to the GATT as signed in 1991, coming 

into effect in 1992. These include Hungary, Poland, 

and the Czech and Slovak Federal Republic, signed on 

December 16, 1991, and entering into force March 1, 

1992. These agreements envision the gradual 

establishment of a free-trade area between the EC and 

each of these countries involved by ending tariffs over 

a 10-year staging period. 

Fourth, covering another type of regional trade 

arrangement, the working party reviewing the 

transitional measures adopted by the EC regarding the 

1990 unification of Germany continued its work into 

1992. 

GAIT members have only begun to consider how 

signatories should go about reviewing regional trade 

arrangements more effectively than through the 

current working party process. Such consideration 

comes at a time when—and largely because—an 

increasing number of such arrangements are being 

formed. Although unrelated in any direct way, the 

GATT Trade Policy Review Mechanism (TPRM) may 

assist signatories to fashion a more effective review of 

regional trade arrangements, either along lines similar 

to the TPRM or in some new way. Adopted on a 

provisional basis at the Uruguay Round's Mid-Term 

Review in April 1989, the TPRM reviews the trade 

policy regimes of GATT members on a regular basis 

and has been regarded generally as a success in 

increasing the transparency for other members of the 

overall trade policy stance of the member under 

review. In March of 1992 the TPRM conducted 

comprehensive examinations of the trade regimes of 

Argentina, Austria, Finland, Ghana, Singapore, and 

the United States; in June, of Bangladesh and Canada; 

in July, of Korea and Uruguay; and in October, of 

Brazil, Egypt, and Japan. 

Environment 

Largely separate until now, trade policies and 

environment policies since the early 1990s have begun 

29 
to converge and at times collide as a result of 

proliferating domestic and international environmental 

rules and an expansion of global trade and investment 

flows.94The GATT, as the institution overseeing the 

conduct of world trade, regards its rules not as an 

obstacle to environmental protection but rather as a 

means to actually help solve environmental 

problems.95On the other hand, the position of a 

number of environmentalists is that economic growth 

and the associated depletion of the Earth's resources 

are the root causes for much of the harm inflicted on 

the environment, with the free-trade system the 

primary means by which this harmful growth is 

spread worldwide. 96The GATT, as the foremost 

proponent of free trade, has recently been pilloried by 

environmental organizations as "anti-environment," 

although during 1992 the most pointed conflict 

regarding trade and environmental issues occurred not 

in the GATT arena but in the debate over the 

NAFTA.97In particular, environmentalists complain 

that world trade rules give priorty to unfettered and 

expanded trade and do not fully recognize the cost of 

environmental degradation in economic transactions. 

As a result, it is sometimes difficult even for countries 

committed to environmental protection to pursue such 

a goal. 

At the June 1992 United Nations Conference on 

Environment and Development (UNCED), dubbed the 

"Earth Summit," GATT Director-General Arthur 

Dunkel highlighted two mutually reinforcing links 

between trade and the environment: (1) from the 

macroeconomic viewpoint, the world trading system 

provides the financial and technological resources 

needed to carry out environmental policies and (2) 

from the microeconomic viewpoint, world trade rules 

help prevent ill-considered trade restrictions that 

disrupt international commerce without necessarily 

helping to solve environmental problems. 98 

Nonetheless, despite this generally harmonious 

view of reinforcing links between trade and the 

environment, tensions have surfaced between the 

goals of liberalizing trade and protecting the 

environment. Complaints have been lodged in the 

GATT over unilateral actions to protect the 

environment when those actions disrupt existing trade 

flows. For example, in June 1992, the EC asked the 

GATT Council to establish a dispute-settlement panel 

to examine in light of its own situation the U.S. 

restrictions on imports of certain tuna products that 

led to Mexico's request for a dispute panel in 

February 1991." The U.S. measures that came into 

force in October 1990 established a direct embargo on 

tuna imports from Mexico and Venezuela under the 

U.S. Marine Mammal Protection Act of 1972. 

Following a U.S. court order in January 1992, 1 °3 

 a secondary embargo banned imports of these tuna 

products from Mexico and Venezuela through 

intermediary nations as well. This intermediary 

embargo affected EC member states. With the 

establishment of the panel in July 1992, the 

Netherlands was included as a cocomplainant to, the 

EC panel as representative of the Netherlands 

Antilles, whose interests had been harmed by the 

intermediary embargo. 1 ° 1 

In October 1992 the United States signed into law 

the International Dolphin Conservation Act (IDCA). It 

establishes a 5-year moratorium beginning March 1, 

1994, on the practice of setting yellowfin tuna fishing 

nets over dolphin schools. The law will eliminate the 

intermediary embargo and will lift the direct embargo 

on tuna products for those countries agreeing to the 

law and implementing the moratorium. 

In November 1992 the EC asked for additional 

consultations under GATT article XXIII, believing 

these new measures still fall short of bringing the 

United States into compliance with GATT rules. As 

no country has yet agreed to the IDCA legislation 

passed by the United States, thus leaving the embargo 

in place, the EC panel has gone forward with results 

most likely forthcoming in mid-1993. 1 °2 

To address some of the growing concerns among 

GATT members about the overlap between trade and 

environment issues, the GATT Council held informal 

consultations in 1991 that led to an internal 

"structured debate" on May 29-30, 1991, on trade and 

the environment. The broad initial conclusion of the 

debate was that trade rules need not necessarily be 

changed to advance environmental protection or, put 

alternatively, that trade liberalization and protection of 

the environment are not mutually conflicting 

objec tives . 1 °3 

In October 1991 the GATT activated its Working 

Group on Environmental Measures and International 

Trade, a group that was originally created in 

November 1971 prior to the first United Nations 

conference on the environment but never convened 

until 1991. 1 °4The group held six substantive 

meetings in 1992, according to the yearend interim 

report by the group chairman, and followed the 

three-part agenda adopted at its first meeting: 1 °5 

1. To examine the trade provisions of existing 

multilateral environmental agreements and 

their relation to GATT trade principles and 

provisions; 

30 
2. To examine the transparency of national 

environmental regulations for their likely effect 

on trade; and 

3. To examine the trade effects of new packaging 

and labeling requirements aimed at protecting 

the environment. 

The group, along with the GATT Committee on 

Trade and Development and GATT Council, was also 

charged by the GATT contracting parties with 

followup of trade-oriented elements of the "Agenda 

21" item arising out of the June 1992 UNCED 

meeting. 

On the first agenda item concerning multilateral 

trade and environment agreements, the group 

concluded that more recent and more specific 

environmental agreements generally take precedence 

over earlier ones, but that the same membership and 

subject matter must remain for this to be true. The 

group's conclusion led to discussion of what 

constitutes an "international" agreement in this 

context and how it might be defined, with further 

issues arising, such as the number and 

representativeness of participants in terms of stages of 

development or geographical diversity, whether 

membership was generally open or restricted, and how 

a regional agreement might be seen in this context. 

In-addition, the group is composing a checklist of 

environmental policy instruments with which to 

identify more clearly the trade effects of national 

environmental regulations. The aim of the checklist 

would include pointing out gaps that may exist in 

current GATT or prospective Uruguay Round 

provisions related to transparency, as well as the 

question of implementation or compliance with 

existing GATT provisions. 106Some of the group's 

discussions have also considered the issue of 

extraterritoriality. 1 °7 

Regarding the second agenda item, the group 

expected Uruguay Round provisions 108to reinforce 

the scope of measures already in force that ensure the 

transparency of regulations in the field of trade and 

environment. Prior notification of regulations is 

considered trade enhancing because the consensus of 

the group is that countries have generally found it a 

simple matter to modify national regulations to 

encompass another country's concerns without vetting 

the original rule, thus allowing the national regulation 

to go forward while averting possible future trade 

disputes. 

Under the third point of packaging and labeling 

requirements, the group has found that the potential 

trade effects may be considerable, indicating that such 

measures should be examined closely and carefully. 

31 
ENDNOTES 

1Australia, Belgium, Brazil, Burma, Canada, 

Ceylon, Chile, China, Cuba, Czechoslovakia, France, 

India, Lebanon, Luxemburg [sic], the Netherlands, 

New Zealand, Norway, Pakistan, Rhodesia, Syria, 

South Africa, the United Kingdom, and the United 

States. GATT Text of the General Agreement, 

Geneva, July 1986, p. 1. 

2 Office of the United States Trade 

Representative (USTR), 1993 Trade Policy Agenda 

and 1992 Annual Report of the President of the 

United States on the Trade Agreements Program, 

1993, p. 31. 

3 Commonly known as Taiwan, and formally 

entitled for purposes related to GATT accession as 

the Separate Customs Territory of Taiwan, Penghu, 

Kenmin, and Matsu. As of April 1993 there were a 

total of 11 GATT working parties examining the 

membership applications of Albania, Algeria, Bulgaria, 

Chinese Taipei, Ecuador, Honduras, Mongolia, Nepal, 

Panama, Paraguay, and Slovenia. There is also a 

working party on China's status as a contracting 

party. GATT, "GATT Membership Rises to 110 With 

Accession of Dominica," press release, GATT/1574, 

Apr. 22, 1993. See chapter 4 for separate 

discussions of the GATT membership applications of 

Chinese Taipei and China. 

4 The Cairns Group includes Argentina, Australia, 

Brazil, Canada, Chile, Colombia, Hungary, Indonesia, 

Malaysia, New Zealand, the Philippines, Thailand, 

and Uruguay. 

5 Such as texts on antidumping, and subsidies 

and countervailing duties. 

6 GATT Secretariat, Trade Negotiations 

Committee, Draft Final Act Embodying the Results of 

the Uruguay Round of Multilateral Trade Negotiations, 

MTN.TNC/W/FA, Dec. 20, 1991. 

7 For an overview of the elements of the Dunkel 

text, see USITC, The Year in Trade: Operation of the 

Trade Agreements Program (OTAP), 1991, USITC 

publication 2554, Aug. 1992, pp. 8-13. 

8 "TNC Adopts Four-Track Strategy to Conclude 

the Round," GATT Focus, newsletter No. 87, 

Jan.-Feb. 1992, pp. 1-2. 

9 For a succinct characterization of the year's 

stalemate by director-general Dunkel, see GAIT, 

"News of the Uruguay Round of Multilateral Trade 

Negotiations," press release No. 52, Nov. 11, 1992, 

P. 3 . 

10 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 30. 

11"TNC Adopts Four-Track Strategy to Conclude 

the Round," p. 2. 

12 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 30. 

13 GATT, Draft Final Act Embodying the Results 

of the Uruguay Round of Multilateral Trade 

Negotiations, MTN.TNC/W/FA, Dec. 20, 1991, pp. L.1 

to L.74. 

14 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 30. 

15 For further detail, see Michael Lyster and 

Joanne Guth, "EC Proposes Agricultural Reform," 

International Economic Review, USITC, Sept. 1991, 

pp. 3-6. 

16 Presse- and lnformationsamt der 

Bundesregierung, Economic Declaration of the 

Munich Economic Summit 1992, "Working Together 

for Growth and a Safer World," press release, July 8, 

1992, Wirtschaftsgipfel, Munich, p. 2. 

17 Such as soybeans, sunflowerseed, rapeseed, 

and their products. 

18 The original oilseeds panel reconvened in 

December 1991 to review the issue in light of the 

proposed EC reforms for its agriculture sector. 

19 Whereas the United States estimated the 

global damage of the EC oilseeds policy to be 

approximately $2 billion annually—of which the loss 

to U.S. producers is about $1 billion—the EC 

estimated global damage at less than $400 million. 

20 The EC agriculture commissioner resigned 

November 5, reportedly due to the EC Commission 

president's intervention, which compromised the 

Agriculture commissioner's ability as chief EC 

negotiator for agriculture and may have prevented a 

settlement between the two sides. Commissioner 

MacSharry withdrew his resignation and was thus 

reinstated on November 10. See Bruce Barnard, 

"Farm Chief Mac Sharry Quits in EC Row over Trade 

War," Journal of Commerce, Nov. 6, 1992, p. 1A; and 

Frances Williams, David Gardner, and David Buchan, 

"MacSharry Back as EC Ends Squabble," Financial 

Times, Nov. 11, 1992, p. 4. 

21 USTR, "U.S. To Withdraw Trade Concessions 

in Oilseeds Dispute With EC," press release No. 

92-62, Nov. 5, 1992. 

22 Such as on corn gluten, malted barley sprouts, 

and the market-access agreement for U.S. corn and 

sorghum exports to Spain and Portugal as part of 

their 1986 accession to the EC. 

23 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 30. 

24 Including feedstuffs such as oilseeds but also 

others such as corn gluten feed and cassava. 

25 Although a French veto of a Community 

position would isolate France within the EC at a time 

32 
when the rest of the EC appears intent on moving 

forward with the Round rather than allowing it to 

languish over the issue of agriculture, French national 

elections held in March 1993 nonetheless led to the 

downfall of the ruling government. The new 

government has warned that, although the overall 

balance of concessions in the Round is an important 

factor, the agriculture portion of the agreement 

reached at Blair House is not acceptable as it stands 

today. U.S. Department of State, "Uruguay Round: 

Memorandum on New French Trade Position," 

telegram, message reference No. 12614, prepared by 

U.S. Embassy, Paris, May 14, 1993. 

26 The GATS annexes in the December 1991 

DFA include financial services, labor mobility, 

telecommunication services, and air transport 

services. 

27 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 30. 

28 USTR, Director for Multilateral Services 

Negotiations, conversation with USITC staff, June 30, 

1993. These exemptions involve: maritime 

transport, financial services, land use, legal services, 

tourism, basic telecommunications, air transport, 

movement of persons, and land transport. 

29 "Trade in Services," GATT Focus, newsletter 

No. 89, Apr. 1992, p. 8. 

39 The major issues involved in the GATT 

financial services negotiations include (1) application 

of MFN and national treatment principles to financial 

services, (2) the right of establishment for banks or 

financial operators to set up a branch or subsidiary 

in another country, (3) the right of financial operators 

to provide cross-border financial services, and (4) a 

right of governments to retain prudential control over 

the provision of financial services. "Banking and 

Financial Services," European Update, West 

Publishing Co., 1991 WL 11697 (D.R.T.), Feb. 4, 

1993, par. 8.4. 

31 USTR, Director for Multilateral Services 

Negotiations. 

32 The EC Council of Ministers, following its Oct. 

19 meeting of EC finance ministers, declined to give 

a full list of countries. A partial list reportedly 

includes Argentina, Brazil, Egypt, India, Indonesia, 

Malaysia, Mexico, Singapore, Taiwan, Thailand, and 

Turkey. See Europe Information Service, "GATT: EC 

Fires Off Letter Complaining of Financial Services 

Offers," European Report, No. 1805 (Oct. 21, 1992), 

External Relations, p. 1; Lionel Barber and Andrew 

Hill, "EC Officials see GATT Breakthrough," Financial 

Times, Oct. 20, 1992, p. 6; BNA, "EC Official Sees 

Major Progress in Services, Tariffs in Canada Talks," 

International Trade Reporter, vol. 9, no. 42, Oct. 21, 

1992, p. 1808; Journal of Commerce, Oct. 20, 1992, 

p. 5A; and "EC Presses Developing Countries to 

Improve Offers in GATT Financial Services," Inside 

U.S. Trade, vol. 10, no. 43, Oct. 23, 1992, pp. 1-2. 

33 USTR, "U.S. Offers To Extend MFN Treatment 

to Basic Telecommunications Services in the Uruguay 

Round," press release 91-58, Dec. 18, 1991. 

34 USTR, "Statement by United States Trade 

Representative Carla A. Hills," p. 4; President, Report 

to the Congress on the Extension of Fast Track 

Procedures - Pursuant to Section 1103(b) of the 

Omnibus Trade and Competitiveness Act of 1988, 

Mar. 1, 1991, annex p. 57; and USTR, "U.S. Offers 

To Extend MFN Treatment to Basic 

Telecommunications Services in the Uruguay Round." 

European telecommunications markets, for example, 

are generally controlled by public-sector bodies or 

monopolies like Post, Telegraph, and Telephone or 

Telephone Administration entities. 

35 USTR, "U.S. Offers To Extend MFN Treatment 

to Basic Telecommunications Services in the Uruguay 

Round." 

36 The extension of telecommunication services 

talks would allow time for the EC Commission to 

begin implementing its plan to deregulate intra-EC 

telephone services that it set out on October 21, 

1992. The process of liberalizing EC domestic 

telecommunications industries has put EC negotiators 

in a difficult position to make binding commitments in 

the telecommunications services talks. See 

"Telecommunications: Plan To Deregulate Intra-EC 

Telephone Services," European Report, No. 1806 

(Oct. 24, 1992), Internal Market, p. 12. 

37 GATT, Economic Affairs Officer, Group of 

Negotiations on Services Division, telephone 

conversation with USITC staff, June 30, 1993. 

38 USTR, Director for Multilateral Services 

Negotiations. 

39 Such as Argentina, Brazil, Egypt, the EC, 

Korea, Malaysia, Mexico, and Singapore. 

4° USTR, Director for Multilateral Services 

Negotiations. 

41 Ibid. 

42 Ibid. 

43 Ibid. 

44USTR, "List of Country Offers on Services," 

June 15, 1993, list provided to USITC staff by USTR, 

Director for Multilateral Services Negotiations. 

45 Government of Japan, "Draft Schedule 

concerning Initial Commitments of Japan," Dec. 4, 

1992. 

46 "Negotiations Losing Momentum, TNC 

Chairman Warns," p. 8. 

47 The United States did not submit an offer until 

January 1993. 

48 "Negotiations Losing Momentum, TNC 

Chairman Warns," p. 8. 

49 The original U.S. market access offer of 

October 1990 proposed cutting tariffs by a 

trade-weighted average of 38 percent. 

33 
59 GATT Secretariat, Trade Negotiations 

Committee, Mid-Term Meeting, MTN.TNC/11, Apr. 21, 

1989, p. 4. 

51 Such as aluminum, lead, copper, and zinc 

products. 

52 President, Report to the Congress on the 

Extension of Fast Track Procedures, annex p. 4. 

Beer, distilled spirits, and certain electronics were 

added to the zero/zero initiatives in October 1990, for 

a total of 12 initiatives. Bicycle parts were 

subsequently dropped from the zero/zero offers. 

USTR, Office of GATT Affairs, discussion with 

USITC staff, July 16, 1993. 

54 GATT, Ministerial Declaration on the Uruguay 

Round, MIN.DEC, Sept. 20, 1986, p. 5. 

55 GATT Secretariat, Trade Negotiations 

Committee, Mid-Term Meeting, p. 4. 

56 An elaboration on a number of these 

items—including clothing, silk- and wool-blend fabrics, 

ceramic tiles, tableware, glassware, footwear, garlic 

and dried or dehydrated onions, zinc alloys, and 

coloring matter—can be found along with their U.S. 

harmonized system tariff codes in Services of the 

Commission of the European Communities (EC 

Commission), "Tariffs and Equivalent Measures," 

Report on United States Trade and Investment 

Barriers -1993: Problems of Doing Business with the 

US, Apr. 15, 1993. 

57 "U.S., EC Market Access Dispute Holds Up 

Uruguay Round Negotiations," Inside U.S. Trade, 

Feb. 14, 1992, pp. 1, 17-18. 

58 "Delors Rejects New Bush Offer on GATT as 

Pressure Mounts on U.S.," pp. 1-3. 

59 "US-EC Deal Reactivates Negotiations," GATT 

Focus, newsletter No. 95, Nov.-Dec. 1992, p. 1. 

63USTR, "Joint Press Statement - The 

Commission of the European Communities and The 

United States of America," Washington, Nov. 20, 

1992; EC Commission, "Joint Press Statement - The 

Commission of the European Communities and The 

United States of America," IP(92)939, Brussels, Nov. 

20, 1992; and EC Office of Press and Public Affairs, 

"Joint Press Statement by the European Communities 

and the United States," European Community News, 

Washington, Nov. 20, 1992. 

61 The USTR announced that during these 

discussions in March 1993 it had become clear that 

the EC was serious about offering a market access 

package that was larger than the one previously 

offered. The USTR also said that it was clear that 

the EC is prepared to work on market access as the 

first order of business, rather than waiting until the 

end of the Round to finalize such a package. 

Ambassador Kantor went on to say that the two 

sides agreed to accelerate both bilateral and 

plurilateral discussions with other participants in the 

Round, with future meetings to be held. This 

approach is aimed at reaching agreement on the 

essential decisions required to form the basis for a 

market-access package to be finalized in the 

negotiations in Geneva that will include as many 

sectors and countries as possible. 

62 Commonly known as the Standards Code. 

63 U.S. Senate, Committee on Finance, 103d 

Cong., 1st sess., May 20, 1993, testimony of 

Ambassador Michael Kantor, United States Trade 

Representative, p. 2. 

64 As part of the Montreal Mid-Term Review of 

progress in the Uruguay Round, the GATT Council 

implemented the "Improvements to the GATT Dispute 

Settlement Rules and Procedures" on a trial basis 

starting May 1, 1989. GATT Secretariat, Trade 

Negotiations Committee, Trade Negotiations 

Committee Meeting at Ministerial Level - Montreal, 

December 1988, MTN.TNC/7(MIN), Dec. 9, 1988, pp. 

26-33, and GATT Secretariat, Trade Negotiations 

Committee, Mid-Term Meeting, -MTN.TNC/11, Apr. 21, 

1989. 

65 The expanded use of GATT dispute-settlement 

procedures in the early 1990s continues the sharp 

increases seen during the 1980s. For a statistical 

accounting and analysis of GATT dispute-settlement 

cases, see Robert Hudec, Daniel Kennedy, and Mark 

Sgarbossa, "A Statistical Profile of GAIT Dispute 

Settlement Cases: 1948-1989," Minnesota Journal of 

Global Trade, vol. 2, issue 1 (winter 1993), pp. 

1-114. Of 207 total complaints during 1948-89 

covered in the analysis, 115 occurred during 

1980-89. 

66 One root cause of this dissatisfaction is the 

ability of any one party, typically the disputant 

charged with implementing an unfavorable panel 

report, to prevent or "block" a panel report from 

being adopted "by consensus" (i.e. unanimity) by the 

Contracting Parties. 

67 "Dispute Panels Jump from 1 to 11," GATT 

Focus, newsletter No. 86, Nov.-Dec. 1991, p. 1. In 

1991 four new panels were established under 

standard dispute-settlement articles XXII and XXIII 

and eight new panels were formed under the Tokyo 

Round agreements. Of the latter under the codes, 

four were under the subsidies code, two under the 

antidumping code, and two under Government 

Procurement Code. Six of these new code panels 

were formed in the second half of 1991. GATT, 

Council Overview of Developments in International 

Trade and the Trading System, C/RM/OV/3, Mar. 6, 

1992, pp. 13-16, published in its entirety in Jacques 

Werner, ed., World Trade Materials, vol. 4, No. 3 

(May 1992), pp. 71-110. 

68 "Uruguay Round Link Hampers Settlement of 

Disputes," GATT Focus, newsletter No. 91, July 

1992, p. 1. 

34 
69 "Director-General Reports on 

Dispute-Settlement Panels," GATT Focus, newsletter 

No. 95, Nov.-Dec. 1992, p. 4. 

70 Notifications to the GATT of countervailingand antidumping-duty actions taken in 1992 by U.S. 

trading partners may be found in tables A-22 and 

A-23, respectively. 

71 The main features of the streamlined 

dispute-settlement procedures are more specific 

procedures and time-limits for consultations between 

disputants, arbitration as an alternative to panel 

proceedings, dispute panels to be established 

normally at the latest by the first GATT Council 

meeting following that of the initial panel request, 

strict time limits for determining terms of reference 

and panel composition as well as schedule of work 

(normally 6 months maximum), procedures for 

multiple complainants and for the intervention of third 

contracting parties, avoidance of delays to report 

adoption by the Council, total period from initiating 

consultations to decisions on report by the Council 

not to exceed 15 months, legal advice for 

less-developed-country contracting parties in a 

dispute, and implementation of panel 

recommendations to be considered by the Council no 

more than 6 months after adoption of panel report. 

GATT, GATT Activities 1989, Geneva, June 1990, 

pp. 76-77. 

72 GATT, Council Overview of Developments in 

International Trade and the Trading System, press 

release No. 1509, Apr. 18, 1991, pp. 10-11. 

73 GATT, Council Overview of Developments in 

International Trade and the Trading System, 

C/RM/OV/3, Mar. 6, 1992, p. 14. 

74 Ingrid Nordgren, The GATT Panels During the 

Uruguay Round - A Joker in the Negotiating Game," 

Journal of World Trade, vol. 25, No. 4 (Aug. 1991), 

p. 68. 

76 In the case of the ice cream panel, the report 

was adopted in December 1989 but Canada linked 

its implementation to dismantlement of U.S. 

restrictions on the same products in force owing to 

the 1955 U.S. agricultural waiver by the GATT 

contracting parties, which waiver the Round is 

expected to eliminate. 

76 In the case of the oilseeds panel adopted in 

January 1990, the EC conditioned changes in its 

agricultural regime on the outcome of agricultural 

negotiations in the Round. 

77 In the case of the section 337 panel, adopted 

in November 1989, the United States cited its strong 

reservation about the report and conditioned 

followthrough on the satisfactory conclusion of 

intellectual property rights negotiations in the Round. 

78 In the case of the component parts 

("screwdriver") panel adopted in May 1990, the EC 

likewise made followthrough on the panel report 

contingent on a satisfactory solution to the problem 

of circumvention of antidumping duties being 

negotiated in the Round. 

79 GATT, Council Overview of Developments in 

International Trade and the Trading System, 

C/RM/OV/3, Mar. 6, 1992, p. 14. 

80 Nordgren, "The GATT Panels During the 

Uruguay Round," p. 57. 

81 Hudec et al, "A Statistical Profile of GATT 

Dispute Settlement Cases." 

82 "Increase in Dispute-Settlement Activity," GATT 

Focus, newsletter No. 83, Aug. 1991, p. 8. 

83 The Airbus dispute is discussed more fully in 

chapter 4 of this report. 

84 In the statistical analysis of GMT 

dispute-settlement panels between 1948 and 1989 by 

Hudec and others, the first conclusion reached by 

the authors is that- 

"Problems notwithstanding, the GATT dispute 

settlement procedure has been a successful 

international legal institution. The overall success 

rate of slightly more than 88%, or even the 1980s 

success rate of slightly more than 81%, means 

that at least four out of five valid complaints are 

being dealt with successfully." 

86 International Monetary Fund, Regional 

Trade Arrangements, Mar. 1992, Washington 

DC, p. 41. 

86 GATT, Basic Instruments and Selected 

Documents, vol. IV (Geneva: GATT 1969), p. 1-78. 

See GATT art. XXIV. 

87 GAIT, Council Overview of Developments in 

International Trade and the Trading System, press 

release No. 1509, Apr. 18, 1991, p. 17. 

88 GATT, Council Overview of Developments in 

International Trade and the Trading System, 

C/RM/OV/3, Mar. 6, 1992, p. 18. 

89 GAT, Council Overview of Developments in 

International Trade and the Trading System, press 

release No. 1509, Apr. 18, 1991, pp. 16-17. 

90 GATT, Council Overview of Developments in 

International Trade and the Trading System, 

C/RM/OV/3, Mar. 6, 1992, pp. 18-19. 

91 Part IV of the General Agreement, added in 

1965, and the "enabling clause," negotiated as part 

of the Tokyo Round agreements, provide for industrial 

country members to give special consideration to 

reducing existing barriers and to refrain from erecting 

new barriers to trade with developing countries. 

92 Signed in February 1992. 

93 Signed December 10, 1991. 

94 U.S. Congress, Office of Technology 

Assessment (OTA), Trade and the Environment: 

Conflicts and Opportunities, OTA-BP-ITE-94 

35 
(Washington, DC: GPO, May 1992). For another 

discussion of trade and environment issues, see 

USITC, The Year in Trade: OTAP, 1991, USITC 

publication 2554, Aug. 1992, pp. 13-23. 

65 GATT, "Expanding Trade Can Help Solve 

Environmental Problems, Says Report - GATT Rules 

Are Not An Obstacle to Environmental Protection, but 

Trade Weapon Could Be Counterproductive," press 

release No. 1529, Feb. 3, 1992. 

96 For a fuller treatment of trade and the 

environment issues, see USITC, The Year in Trade: 

OTAP, 1991, USITC publication No. 2554, Aug. 1992, 

pp. 13-21. For a presentation of the environmentalist 

view supporting sustainable development against the 

GATT liberal trade regime, see Robert Housman and 

Durwood Zaelke, "Trade, Environment, and 

Sustainable Development: A Primer," Hastings 

International and Comparative Law Review, vol. 15 

(1992), pp. 535-612. 

67 See chapter 1 of this report for a full 

treatment of the NAFTA. 

68 GATT, "Dunkel Emphasises [sic] Importance of 

the Uruguay Round for Sustainable Development and 

Better Environmental Protection," press release No. 

1545, June 11, 1992, p. 4. By contrast, a short list 

of environmentalists' arguments about the GATT's 

impact on the environment was summarized by The 

Economist. "Trade and the Environment," The 

Economist, London, Feb. 27, 1993, pp. 25-28. In 

particular, see the section entitled "A catalogue of 

grievances." Environmentalists' critiques of the GATT 

notwithstanding, trade policy analysts in the United 

States and elsewhere do not necessarily agree with 

these interpretations of whether or how the GATT 

limits a country's ability to set and enforce 

environmental objectives. 

66 In February 1991 Mexico requested and was 

granted a dispute panel to examine whether U.S. 

import restrictions on certain tuna products-in 

particular, those caught with purse-seine nets-were 

contrary to GATT provisions. The panel ruled in 

favor of Mexico in September 1991, but the report 

was withdrawn in November 1991 from further 

consideration by the GATT Council due to a request 

by both Mexico and the United States, which wished 

to pursue resolution of the dispute through bilateral 

discussions. For further detail, see USITC, The Year 

in Trade: OTAP, 1991, USITC publication 2554, 

Aug. 1992, pp. 13-23; USITC, Tuna: Current Issues 

Affecting the U.S. Industry (investigation No. 

332-313), USITC publication 2547, Aug. 1992, pp. 

3-12 to 3-14; and U.S. Congress, OTA, Trade and 

the Environment, chs. 2 and 3. 

100 "Action Urged on Tuna Panel Report," GATT 

Focus, newsletter No. 88, Mar. 1992, p. 5. 

101 "Panel Established on US Secondary Tuna 

Embargo," GATT Focus, newsletter No. 91, July 

1992, p. 2. 

102 USTR, Office of the General Counsel, 

telephone conversation with USITC staff, Mar. 18, 

1993. See also "U.S. Says Secondary Tuna Ban Is 

Covered by GATT Exception Rules," Inside U.S. 

Trade, Apr. 16, 1992, pp. 1-2. 

103 The report of the structured debate can be 

found in GATT, "Trade and the Environment," 

International Trade 90-91, vol. I, 1992. Also see 

Edward Wilson, "The Environment and Trade: 

International Organizations Address the Issues," 

International Economic Review, USITC, May 1992, 

pp. 16-20, and USITC, The Year in Trade: OTAP, 

1991, USITC publication 2554, Aug. 1992, ch. 1. 

104 U.S. Congress, OTA, Trade and the 

Environment, p. 23. 

105 GATT, Trade and the Environment, TE 001, 

Apr. 1, 1993, pp. 1-9. The group's agenda derived 

in large measure from the debate held in May 1992. 

106 U.S. Department of State, "Group on 

Environmental Measures and International Trade," 

telegram, message reference No. 00954, prepared by 

U.S. Mission, Geneva, Jan. 29, 1993. 

107 U.S. Department of State, "Group on 

Environmental Measures and International Trade," 

telegram, message reference No. 00918, prepared by 

U.S. Mission, Geneva, Jan, 29, 1993. 

108 Such as the Central Registry of Notifications 

in the Round's negotiating group on Functioning of 

the GATT System and the specific transparency 

provisions negotiated under the Agreement on 

Technical Barriers to Trade. 

36 
CHAPTER 3 

Other Multilateral Trade 

Agreement Activities 

Although the General Agreement on Tariffs and 

Trade (GATT) provides the multilateral framework for 

the conduct of international trade, several international 

organizations also address world trade matters as part 

of their focus on other international economic issues. 

The Organization for Economic Cooperation and 

Development (OECD) and the United Nations 

Conference on Trade and Development (UNCTAD) 

both provide a forum for consultation and policy 

coordination on a host of economic issues. Bodies 

associated with UNCTAD such as the international 

commodity organizations provide a basis for 

coordinating and regulating certain specific aspects of 

international trade. The work of these organizations 

often complements the work done in the GATT. 

The following sections detail U.S. participation in 

these important organizations in 1992. Other U.S. 

agreements and trade activities, such as the steel 

import program, the Multifiber Arrangement (MFA), 

and the Enterprise for the Americas Initiative (EAI), 

are also addressed. 

Organization for Economic 

Cooperation and 

Development 

The OECD provides a longstanding forum for the 

world's 24 industrialized countries to discuss and 

study mutual economic and social issues.' The 

OECD work program begun in the early 1990s sets 

out issues for which OECD work may provide the 

basis for future multilateral trade negotiations? These 

topics include a range of issues related to "the 

increasing globalization of the world economy and the 

closer relationship between trade policy and 

competition, investment, technology and innovation, 

and environment policies." 3In 1992, the organization 

completed a stage of discussion on two of the topics, 

the Export Credit Arrangement and the Investment 

Code. 

Ongoing work monitoring trade policy 

developments continued as well in 1992 through the 

OECD Trade Committee, which conducted workshops 

and studies with the central and east European 

countries and the dynamic Asian economies. This 

work with nonmember countries expanded in 1992 

with the invitation of the Czech and Slovak Federal 

Republic, Hungary, Poland, and Mexico, to participate 

as observers in the work of the committee and its 

working party. 

Export Credit Arrangement 

In February 1992 a new agreement on the use of 

tied-aid credit went into effect for participants of the 

OECD Export Credit Arrangement. 4Since 1978 the 

arrangement has aimed at regulating and reducing 

government-sponsored subsidies provided through 

official export credits. 

The 1992 tied-aid export credits agreement—also 

known as the "Helsinki package"—represents the 

culmination of efforts begun by the United States in 

1989 to address the competitive disadvantages faced 

by U.S. exporters in foreign markets as a result of 

other governments' use of tied-aid export credits. In 

July 1990 the OECD Council of Ministers agreed to 

strengthen the arrangement by the June 1991 

ministerial meeting. This effort failed when EC 

member states could not agree among themselves to 

accept the draft accord. By December 1991, however, 

all participants had ratified the agreement, which 

entered into force February 15, 1992. 

The Helsinki package is expected to remove 

distortions to international trade by discouraging the 

use of aid for commercial advantage in markets that 

have traditionally been targets of tied-aid offers. From 

a development perspective the object of the package is 

to provide aid on a more rational economic basis by 

directing it to the neediest countries and for the most 

worthwhile projects, thus better utilizing the aid 

available. From a trade policy perspective the object is 

to allow exporters from signatory countries to bid on 

37 
project and supply contracts solely on the basis of 

cost-effectiveness rather than on the basis of costs 

distorted by use of tied-aid credits. 

Previous efforts to strengthen the arrangement 

raised the cost of providing tied-aid finance by 

increasing the minimum concessionality level of 

tied-aid credit from 25 to 50 percent for least 

developed developing countries (LLDCs) and to 35 

percent for other less developed countries (LDCs). 

The "concessionality level" of tied-aid export credits 

is the extent to which an importing country's 

financing package, composed of some combination of 

government and private funding, is below market rates 

because of below-cost or "concessional" funds 

provided by a donating government. Companies 

losing contract bids for the resulting development 

projects often allege that the governments of the 

winning bidders adjust the extent of below-market 

financing to ensure that the package is attractive 

enough to secure the resulting contracts for producers 

of the donating country. 

By November 1989 the United States had moved 

to focus the attention of the OECD Export Credits 

Group on a U.S. proposal aimed at untying tied-aid 

credits, particularly for capital goods sectors 5in 

certain "spoiled" markets6in which the United States 

felt U.S. suppliers were systematically being 

disadvantaged by the tied-aid credit offers of 

governments in Europe and Japan. The United States 

changed the focus of its "War Chest" 7as well from 

solely responding to others' below-market export 

credit offers to actively targeting projects in LDC 

markets where foreign competitors were using tied-aid 

export credits to win export contracts. By spring 1991, 

after discussions with the OECD Development 

Assistance Committee (DAC) on trade and aid 

distortions caused by tied-aid practices, participants in 

the OECD Arrangement agreed in principle on the 

concept of prohibiting tied aid for projects that are 

commercially viable on market terms and for which 

commercial-term financing is available. 

The Helsinki package will separate projects that 

need only commercial finance through export credits 

from those that need concessional aid finance. 

Participants will notify projects for discussion within 

the OECD Export Credit Group if there is any 

question about the financial viability 8of a project. A 

body of "case law" will thus be developed over time 

to help both export credit and aid agencies distinguish 

between the two types of projects. Moreover, the 

Helsinki package restricts tied aid from being given to 

relatively rich LDCs 9and permits tied aid for 

financially viable projects in middle-income LDCs 

only when neither private nor official export credits 

are available. In the area of export credits the package 

ends interest rate subsidies for middle-income LDCs 

and reduces them for LLDCs. Lastly, all tied-aid 

offers on large projects, those above 50 million 

special drawing rights (equivalent to over US$70 

million at yearend 1992), must be notified to the 

OECD Export Credit Group and will be discussed to 

ensure their developmental soundness and to 

maximize the use of official export credits on 

market-related terms and to minimize the use of aid 

for such projects when more market-rate export 

credits are appropriate. 

Investment Codes 

Since 1961, investors in the United States, 

Canada, Western Europe, Japan, Australia, and Ncw 

Zealand have benefited from the OECD's multilateral 

forum for discussions on reducing or abolishing 

barriers in the financial area. The OECD Code of 

Liberalization of Current Invisible Operations and the 

Code of Liberalization of Capital Movements have 

provided a framework for discussion of financial 

issues as well as for extending the liberalization of 

capital markets. 10These 1961 "codes of 

liberalization," as well as the 1976 national treatment 

instrument (NT1), oblige OECD members to grant 

national treatment to investments from other OECD 

countries for the establishment, operation, and 

disposition of investments.I I 

In 1984 a major overhaul of these codes began, 

resulting in an expanded set of obligations on 

liberalization of international capital movements and 

associated trade in banking and financial services. 12 

 Because the codes mandate a progressive 

liberalization, signatories must lodge reservations if 

they wish to retain particular barriers slated to be 

freed up. These reservations then become subject to 

regular review.I 3Since adoption of these new 

obligations in May 1989, the OECD Committee on 

Capital Movements and Invisible Transactions 

(CMIT) has focused on an examination of the 

reservations lodged by member states. 

By early 1992 the committee's examination of 

member-state reservations was completed and 

approved by the governing OECD Council." The 

council concluded that a substantial liberalization of 

capital movements appears to be the result of the May 

1989 code changes. Only Greece, Ireland, Portugal, 

and Spain have registered significant reservations to 

the codes' improvements, and none of these countries 

exert any major influence on international capital 

flows, the council pointed out. These reservations, 

moreover, stem in part from derogations granted to 

38 
them by the EC for increased time to implement the 

EC Capital Movements Directive, which is scheduled 

to go into effect elsewhere in the EC at the start of 

1993. 15 

United Nations Conference 

on Trade and Development 

UNCTAD was created as an organ of the United 

Nations General Assembly in 1964. Its purpose is to 

promote international trade as a means of accelerating 

the economic advancement of developing countries. 

UNCTAD is one of the principal mechanisms for the 

General Assembly to deliberate on issues of 

international trade and economic cooperation. 

UNCTAD also provides a forum for the exchange of 

views on trade and aid programs among countries that 

are at different stages of economic development or 

that have different economic systems. Membership in 

UNCTAD is open to all countries that are members of 

the United Nations or of any of the agencies related to 

the organization. Current membership includes all 180 

U.N. members plus Monaco, Switzerland, Tonga, and 

Vatican City. The agency's Secretariat is in Geneva, 

Switzerland. 

UNCTAD convenes at the ministerial level once 

every 4 years. UNCTAD VIII, originally scheduled 

for September-October 1991, 16was held in February 

1992. " Between conferences, the Trade and 

Development Board (TDB), UNCTAD's governing 

body, holds two or more regular sessions per year and 

an occasional special session. UNCTAD also oversees 

the Generalized System of Preferences (GSP) and 

monitors and initiates international commodity 

agreements. 

UNCTAD VIII 

UNCTAD VIII was held from February 8 to 25, 

1992, in Cartagena, Colombia. 17The main theme for 

this eighth quadrennial conference was to strengthen 

"national and international action and multilateral 

cooperation for a healthy, secure and equitable world 

economic environment." 18The Final Act of 

UNCTAD VIII, unanimously adopted by delegations 

from the 125 participating countries, called for a 

series of initiatives aimed at institutional reform, 

refocusing work programs, and promoting cooperation 

toward development among members. 19Together 

they make a major shift in UNCTAD's structure and 

emphasis. UNCTAD's transformation is attributed to 

the realization that to improve development prospects, 

it is important for nations "to overcome confrontation 

and to foster a climate of genuine cooperation and 

solidarity. "20 

During UNCTAD VIII members adopted several 

reforms to strengthen and organize the work of 

UNCTAD and to redirect it toward market-oriented 

solutions to development problems. These changes 

replaced the existing committees of the TDB with 

four new standing committees and five ad hoc 

committees.21This new structure should 

"considerably strengthen UNCTAD's capacity to play 

an active role in the international cooperation for 

development."22The Special Committee on 

Preferences and the Inter-Governmental Group of 

Experts on Restrictive Business Practices were 

retained from the former structure. The four new 

standing committees are Commodities, Poverty 

Alleviation, Economic Cooperation Among 

Developing Countries, and Developing Competitive 

Services Sectors in Developing Countries. The five 

new ad hoc committees are Comparative Experiences 

with Privatization, Investment and Resource Flows, 

Trade Efficiency (Electronic Data Interchange), 

Expansion of Trading Opportunities for Developing 

Countries, and the Interrelationship Between 

Investment and Technology Transfers. Other notable 

changes at UNCTAD include the creation of an 

executive committee of permanent representatives, 

which will meet monthly to monitor all UNCTAD 

activities, and the abandonment of the group system, a 

step expected to revitalize the conference and ensure 

greater participation among members. The group 

system was a practice at previous conferences that 

divided members into groups: developed countries, 

developing countries (the Group of 77), the People's 

Republic of China, and the former communist 

countries of Eastern Europe and the Soviet Union. 

That system was criticized as fostering polarization 

and limiting debate. Although some regional groups 

continued to consult at UNCTAD VIII, for the first 

time members were free to speak as sovereign states, 

and the group system was largely abandoned. 

UNCTAD VIII also examined a proposal to create 

Trade Points—organizations that bring together 

traders, administrators, transporters, and insurers to 

assist and promote trade by developing countries. The 

Trade Point proposal reflects UNCTAD's new 

emphasis on improved trade efficiency. 23By 

associating all the participants in a trade transaction 

(e.g., importers, exporters, bankers, insurers, 

transporters, etc.) in a single location exporters could 

complete the necessary procedures more cheaply and 

faster than before. UNCTAD members agreed to 

establish Trade Points in 16 pilot countries after many 

39 
ministers visited the model for the project that was 

established in Colombia in February 1992. 24 

The primary U.S. objective during UNCTAD VIII 

was to seek institutional reforms that would enhance 

UNCTAD's contribution to economic development. 25 

 In particular the United States argued that an overhaul 

in structure and emphasis was needed to make the 

organization more practical and less confrontational. 

In endorsing the Final Act, the United States 

welcomed most of the changes adopted and 

underscored the importance of fully implementing the 

agreed institutional reforms. 26However, the United 

States objected to several statements in the Final Act, 

including its call for a global meeting on foreign 

commercial debt. The United States believes that a 

case-by-case approach to debt issues is a fundamental 

feature of the international debt strategy and that these 

issues should be handled by international financial 

institutions.27 

The Generalized System of 

Preferences 

The GSP is a framework under which developed 

countries provide preferential tariff treatment to 

certain goods exported by developing countries as a 

way to further their economic development. The GSP 

program was discussed initially at the first UNCTAD 

in 1964. The authority for GATT members to 

establish such a system of preferences was granted in 

1971 through a waiver of article I of the GATT, which 

requires nondiscriminatory application of the MFN 

tariffs. 28The UNCTAD Special Committee on 

Preferences is responsible for overseeing the GSP. 

The Final Act of UNCTAD VIII strengthened the 

mandate for the Special Committee on Preferences by 

calling on the Committee to examine the ways and 

means of extending preferential treatment to 

developing countries for goods, in accordance with 

the principles and objectives underlying the GSP 29 

 and called upon the donor countries to strengthen their 

commitment to the principles of GSP—namely 

nondiscrimination and nonreciprocity. 3° 

The Committee on Preferences held its 19th 

session in May 1992. Delegates to the annual meeting 

reviewed the operation and effectiveness of the GSP. 

Throughout the year UNCTAD officials staged 

numerous workshops and seminars to explain the 

operation of the GSP programs of numerous donor 

countries, including the United States, to developing 

countries. 

During the 19th session member countries were 

each given a copy of a computer software package 

entitled "Trade Analysis and Information System" 

(TRAINS). TRAINS was initiated by the Committee 

on Preferences 3 years ago and was designed as a 

practical tool to assist exporters and government 

officials in implementing the GSP. TRAINS enables 

the user to retrieve information on trade control 

measures and data on trade flows and contains 

addresses of potential importers for selected products 

and markets. TRAINS also provides users full details 

of country benefit programs under the GSP and is 

expected to be helpful in attaining UNCTAD's goal of 

expanding trade. 

Restrictive Business Practices 

Resolution 35/63, adopted at UNCTAD's fifth 

conference on December 5, 1980, 31calls upon the 

organization to act in an advisory and training role to 

assist developing countries in detecting and effectively 

controlling restrictive business practices (RBPs). 

UNCTAD has concentrated on two categories of 

RBPs: (1) "horizontal RBPs," or cartel arrangements, 

that dominate the domestic market, imports, exports, 

or world markets and (2) "vertical RBPs," or practices 

such as actual or threatened refusals to deal, resale 

price maintenance, tied selling, exclusive dealing, and 

predatory pricing. 32 

An Intergovernmental Group of Experts (IGE) 

meets annually to review cases of RBPs encountered 

by developing countries and to discuss legislation 

introduced by various countries to control RBPs. At 

the 11th annual meeting of the IGE, held in Geneva 

on November 23 to 27, 1992, the group focused on 

deregulation—including the deregulation of natural 

monopolies—and the rights of defendants in 

competition investigations and proceedings. 33The 

IGE committed to prepare a study on competition and 

economic reforms in developing countries and to 

undertake a review of technical assistance activities in 

the field of competition policy by member states and 

international organizations. Both studies will be 

reviewed at the 12th session to evaluate the 

effectiveness of UNCTAD's technical assistance 

activities. 

Negotiation and Operation of 

International Commodity 

Arrangements 

Within the U.N. system UNCTAD is the primary 

organization responsible for international commodity 

40 
policy and commodity trade. In this role UNCTAD 

has promoted the negotiation of international 

commodity agreements among producing and 

consuming countries to stabilize market conditions for 

a wide range of primary products of vital economic 

importance to developing countries. 

The Final Act of UNCTAD VIII recognized the 

need for an international commodity policy given the 

depressed conditions in world commodity markets. 

"In this context a consensus emerged on the need for 

sound, compatible and consistent policies emphasizing 

increased reliance on market forces to determine 

commodity prices."34UNCTAD's shift in 

development strategy also affected its 

recommendations on national commodity policies. 

UNCTAD recommended that in forming such policies, 

member countries emphasize comprehensive 

commodity-sector strategies, product diversification, 

and improved competitiveness. 35 

At the end of 1992 the United States was a 

member of five international commodity agreements 

covering coffee, jute and jute products, natural rubber, 

tropical timber, and wheat. These agreements are 

described in earlier reports in this series. 36Table 3-1 

and the following sections summarize significant 

developments related to the agreements during 1992. 

Cocoa 

The current International Cocoa Agreement 

(ICCA)37expires on September 30, 1993. 

Negotiations throughout 1992 were not successful in 

developing a new cocoa agreement. Consuming and 

producing countries are at odds over production 

policy (diversification of crops and limits on the 

amount of production), short-term mechanisms for 

withholding supplies from the market, price goals, and 

financing of the agreement. 38The United States is not 

a signatory to the ICCA, but did participate as an 

observer in these negotiations. 

Coffee 

The International Coffee Council (ICC) met four 

times in 1992 to renegotiate a new International 

Coffee Agreement (ICA). The problem in reaching an 

agreement relates to differences over the role that 

should be played by producers and consumers in 

controlling exports and ensuring an effective control 

system. The producing countries are generally looking 

to receive a higher price for their coffee; however, 

their efforts reportedly have been hampered by the 

group's inability to unite behind a unified approach. 

The consuming countries are seeking a system that (1) 

would prevent dual pricing, (2) would establish a 

transparent quota allocation system that would reflect 

current market conditions, and (3) would permit 

flexible application of quotas to accommodate 

changes in demand for different types of coffee. 

The current agreement is in operation until 

September 30, 1993; however, all economic 

provisions (export quotas) have been suspended since. 

July 1989. Since the export restraints were suspended, 

coffee prices and foreign exchange earnings of 

producer-nations have been in a downward spiral. By 

yearend 1992 the composite indicator price for coffee 

had fallen to just over 50 cents per pound, or 21 

percent below the already low composite price of 

1991. Coffee prices are likely to remain low until the 

world coffee surplus is reduced. 39 

The U.S. position is that any new ICA must have 

a universal quota, thereby eliminating the two-tier 

market that helped undermine the previous agreement. 

The two-tier market developed as coffee exported to 

non-ICA countries entered international commerce at 

nonregulated prices. The universal quota would be the 

foundation of any new ICA using export quotas to 

support prices. These quotas would be applied by 

exporting members on all exports to all 

destinations—without distinction between member 

and nonmember.40According to U.S. negotiators, a 

new ICA must also have a system of selectivity, under 

which at least three different coffee types would be 

available to consumers, each type having a separate 

quota, indicator price, and movement range. 

Jute and Jute Products 

The 1992 semiannual sessions conducted by the 

International Jute Council (IJC) for the International 

Jute Organization (IJO) in Dhaka (April 29 to May 4) 

and in Beijing (November 3 to 9) focused on 

conditions in the world jute markets, reviewed current 

market promotion activities, considered new projects, 

and examined administrative rules and regulations of 

the International Jute Agreement (IJA) in effect until 

January 9, 1996. 

Natural Rubber 

The present International Natural Rubber 

Agreement (INRA II) will expire at the end of 1993. 

Under the terms of the agreement, the International 

Natural Rubber Organization (INRO) Council may 

agree to renegotiate the agreement or extend the 

present agreement for a period not to exceed 2 years 

after the expiration date. 41 

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An INRO Special Council Meeting was held in 

January 1992 as required by the agreement when 

cumulative acquisition of 100,000 tons of rubber was 

made to the buffer stock. The accumulations were 

triggered by weak prices resulting from increased 

production levels and stagnant consumption. A 

Council delegate proposed to reduce the reference 

price by 3 percent; however, the measure failed. 

Therefore, the buffer stock price ranges remained 

unchanged. The Daily Market Indicator Price 42stayed 

in the "may buy" range for most of 1992. At the 

January 1992 meeting the Council decided to establish 

an "Ad Hoc Group of Experts" to review buffer stock 

operations and procedures. This group was 

commissioned to address the market impact and cost 

effectiveness of buffer stock operations and to 

recommend possible improvements in the functioning 

of the buffer stock. 

At the 25th Council session the Ad Hoc Group of 

Experts recommended that INRO examine the merits 

of utilizing the futures market for price stabilization 

and cost effectiveness. However, it was pointed out 

that INRA II allows the Buffer Stock Manager to 

intervene only in the physical spot market; therefore, 

actual intervention in the futures market would 

necessitate an amendment to the agreement. 

Sugar 

The 1987 International Sugar Agreement (ISA) 

entered into force on January 1, 1988. It has operated 

for its initial 3-year term and through two 1-year 

extensions during which the International Sugar 

Organization (ISO) had hoped that the Uruguay 

Round of the GATT would be concluded. Following 

the December 31, 1992, expiration of the 1987 ISA, a 

new ISA entered into force January 20, 1993. The 

ISA has not contained economic provisions to control 

prices since 1984. 

The United States was a signatory to the 1987 

ISA, which had 42 members in 1992 (34 exporting 

members and 8 importing members). Although it 

participated in the 1992 negotiations, the United 

States decided not to sign the new agreement because 

of the linkage of budget contributions by members to 

ability to pay rather than to members' position in the 

world sugar economy and derived benefits from the 

IS0. 43 

Tropical Timber 

The International Tropical Timber Council (ITTC) 

at its 10th session in June 1991 extended the 

International Tropical Timber Agreement (ITTA) for a 

period of 2 years, until March 31, 1994. At the ITTC 

meeting in November 1992 the group discussed 

tropical timber labeling laws, sustainable tropical 

timber production, and renegotiation of the agreement. 

Wheat 

The International Wheat Council (IWC) in 

November 1992 extended the International Wheat 

Agreement (IWA) for an additional 2 years until June 

30, 1995. In August 1992 a new executive director to 

the IWC was appointed from the United States. 

However, the United States is in arrears in its 

financial obligation to the IWC, and thus, under the 

provisions of the agreement, has lost its vote until 

such time as the U.S. financial account becomes 

current." 

Other Trade-Related 

Activities 

Enterprise for the Americas 

Initiative 45 

The Enterprise for the Americas Initiative was 

launched in 1990 to recognize and encourage 

economic reforms in Latin American and Caribbean 

countries. The three key components of the EAI are 

(1) expanded trade among countries in the 

hemisphere, with the long-term objective of a Western 

Hemisphere free-trade zone, (2) investment promotion 

and support for economic reforms that encourage 

private investment, and (3) debt relief for Latin 

American and Caribbean countries. The United States 

has signed "framework agreements" with 30 Latin 

American and Caribbean countries (excluding the 

agreement signed with Mexico) interested in working 

towards freer trade in the hemisphere. 

Through the framework agreements, the 

negotiating countries formally commit to initiate and 

maintain a dialog on economic issues of common 

concern. The framework agreements provide for the 

creation of a consultative mechanism in the form of a 

bilateral or multilateral Council on Trade and 

Investment. The Councils monitor trade and 

investment relations and convene consultations on 

specific trade and investment issues. Annexes to the 

framework agreements describe each Council's 

immediate action agenda. The agenda varies by 

country but generally focuses on cooperation in the 

GATT Uruguay Round negotiations, increasing of 

market access, and removal of impediments to trade 

and investment flows. 46 

43 
On May 13, 1992, following meetings with the 

Chilean President, President Bush announced his 

intention to negotiate a comprehensive free-trade 

agreement with Chile upon conclusion of the North 

American Free-Trade Agreement. Such an agreement, 

which the administration had planned to negotiate 

under the same "fast track" procedures used to 

negotiate the NAFTA, would make Chile the first 

South American country to participate fully in the 

trade benefits of the EAI. 47However, the NAFTA 

was not implemented during 1992. In early 1993 the 

Clinton administration affirmed its commitment to 

begin negotiations under a separate "fast track" 

authority for a free-trade agreement with Chile as 

soon as the NAFTA is implemented.48 

44 
ENDNOTES 

1The founding members signing the OECD 

Convention are Austria, Belgium, Canada, Denmark, 

France, Germany, Greece, Iceland, Ireland, Italy, 

Luxembourg, the Netherlands, Norway, Portugal, 

Spain, Sweden, Switzerland, Turkey, the United 

Kingdom, and the United States. Japan, Finland, 

Australia, and New Zealand acceded at subsequent 

dates. The Commission of the European 

Communities takes part in the work of the OECD, 

and the Czech Republic, the Slovak Republic, 

Hungary, and Poland participate under the "Partners 

in Transition" program of 1991. 

2USTR, 1993 Trade Policy Agenda and 1992 

Annual Report of the President of the United States 

on the Trade Agreements Program, 1993, p. 39. 

3OECD, "Communique," OECD press release, 

SG/PRESS(91)31, Paris, June 5, 1991, par. 17. 

4Formally entitled the Arrangement on Guidelines 

for Officially Supported Export Credits. The 1976 

OECD Consensus on guidelines for officially 

supported export credits preceded the 1978 

arrangement. Export-Import Bank of the United 

States, Report to the U.S. Congress Under Section 

15 (g) of the Export-Import Bank Act of 1945, as 

Amended (Section 19 of the Export-Import Bank Act 

of 1986, Public Law 99-472), June 1992, p. 2. 

5 Construction, power, telecommunications, and 

transportation equipment. 

6 Notably in Asia and North Africa. 

7In October 1986 the U.S. Congress authorized 

a "war chest" to be used in support of U.S. 

Government efforts to reach a multilateral agreement 

under the OECD Export Credit Arrangement on the 

issue of reducing subsidies provided by export credit 

agencies through the use of tied-aid credits. The war 

chest provides grant resources, administered 

primarily by the U.S. Export-Import Bank, that may 

be combined with direct loans, with guarantees from 

other U.S. aid agencies such as the Agency for 

International Development or the Trade and 

Development Program (now known as the Trade and 

Development Agency), or with both to generate a 

tied-aid credit. War chest resources are used on a 

selective basis, typically in response to a tied-aid 

credit offer by a competitor country that breaches 

either the spirit or letter of the OECD Export Credit 

Arrangement. OECD, The Export Credit Financing 

Systems in OECD Member Countries, Paris, 1990, 

pp. 227-252. 

8 Defined as able to cover operating costs plus 

debt service on commercial terms. 

9 Tied aid is prohibited for LDCs with annual per 

capita income above $2,465 in 1990 as measured by 

the World Bank. These countries include 

upper-middle-income LDCs such as Brazil, Mexico, 

and Venezuela in Latin America; Czechoslovakia, 

Hungary, and the former Soviet Union in eastern 

Europe; Libya in North Africa; and high-income 

economies nonetheless considered as developing, 

such as Hong Kong, Korea, and Singapore in East 

Asia. World Bank, World Development Report 1992, 

1992, pp. 218-219. 

10Robert Ley, "Liberating Capital Movements," 

OECD Observer, Aug.-Sept. 1989, Paris, p. 25. 

11USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 41. 

12The new commitments fall into three types of 

activity: (1) short-term capital movements (such as 

money market operations, financial credits and loans, 

swaps, options, etc.) not previously covered under 

the codes; (2) cross-border services (such as 

payment, banking and investment, and 

asset-management services) now encompassed 

under the Current Invisibles Code; and (3) 

financial-sector establishment now requiring under the 

Current Invisibles Code that nonresident enterprises 

should receive "equivalent treatment," that is, the 

same right to establish a business as domestic 

financial firms enjoy. Pierre Poret, "Liberalising 

Capital Movements," OECD Observer, June/July 

1992, Paris, p. 5. 

13Ley, "Liberating Capital Movements," p. 25. 

14Poret, "Liberalising Capital Movements," p. 5. 

15Ibid., p. 6. 

16UNCTAD VIII was delayed because Uruguay 

withdrew its offer to host the conference in Punta del 

Este. U.S. Department of State, "UNCTAD 

VIII—Wrap Up," telegram, message reference No. 

03005, prepared by U.S. Embassy, Bogota, Feb. 27, 

1992. 

17For a discussion of UNCTAD VII see USITC, 

Operation of the Trade Agreements Program (OTAP), 

39th Report, 1987, USITC publication 2095, July 

1988, pp. 3-6 to 3-7. 

18UNCTAD, UNCTAD Bulletin, Nov.-Dec. 1991, 

p. 4. 

19UNCTAD, UNCTAD Bulletin, Jan.-Apr. 1992, p. 

3. 

20UNCTAD, Report of the United Nations 

Conference on Trade and Development on Its Eighth 

Session, TD/364, July 6, 1992, p. 4. 

21For a detailed description of the restructuring 

of the committee system, or for a detailed description 

of the new committees or working groups and their 

responsibilities, see United Nations, UNCTAD 

Bulletin, Jan.-Apr. 1992, pp. 3-8. 

22 UNCTAD Bulletin, Jan.-Apr. 1992, p. 3. 

45 
23UNCTAD, informal communication with USITC 

staff, Mar. 29, 1993. 

24For a more detailed description of the trade 

point concept and the diagram of its operation, see 

UNCTAD Bulletin, May-June 1992, p. 9. 

25U.S. Department of State, "Text of Final 

Plenary Statement—UNCTAD VIII," telegram, 

message reference No. 03010, prepared by U.S. 

Embassy, Bogota, Feb. 27, 1992. 

26Ibid. 

27Ibid. 

28See GATT Decision of June 25, 1971 

(L/3545), Basic Instruments and Selected Documents 

(B/SD), Eighteenth Supplement, p. 24, and GATT 

Decision of Nov. 28, 1979 (L/4903), B/SD, 

Twenty-sixth Supplement, p. 203. 

29UNCTAD, Report on Eighth Session, par. 139. 

30UNCTAD, Draft Report of the Special 

Committee on Preferences on Its Nineteenth Session, 

TD1131/C.5/1.78/Add.1, May 20, 1992, par. 20. 

31Adopted as "The Set of Multilaterally Agreed 

Equitable Principles and Rules for the Control of 

Restrictive Business Practices," 

TD/RBP/CONF/10/Rev.1, Dec. 5, 1980. This 

document is UNCTAD's code of conduct on 

restrictive business practices. 

32For additional background see USITC, OTAP, 

41st Report, 1990, USITC publication 2403, Sept. 

1991, p. 69. 

33U.S. Department of State, "UNCTAD: 

Restrictive Business Practices Meeting," telegram, 

message reference No. 00577, prepared by U.S. 

Embassy, Geneva, Jan. 20, 1993. 

34UNCTAD, UNCTAD Bulletin, Jan.-Apr. 1992, p. 

7. 

35Ibid. 

36See, for example, USITC, The Year in Trade: 

OTAP, 1991, USITC publication 2554, Aug. 1992, pp. 

61-67. 

37The two C's in the initials for the International 

Cocoa Agreement (ICCA) and the International 

Cocoa Organization (ICCO) are used to distinguish it 

from the International Coffee Agreement (ICA) and 

International Coffee Organization (ICO). 

38Negotiations were held in March 1993. 

Attention at these meetings was turned to developing 

an administrative agreement (an agreement that 

operates without economic clauses) to replace the 

current agreement when it expires. The purpose of 

having an administrative agreement is to provide a 

mechanism to liquidate the buffer stock in an orderly 

fashion instead of all at once on the October 1 

deadline. An immediate liquidation would flood the 

market with additional cocoa, thus depressing prices 

even further. These negotiations also concluded 

without reaching a new agreement. 

39U.S. Department of State, "Colombian 

Reactions to Collapse of Coffee Negotiations," 

telegram, message reference No. 05116, prepared by 

U.S. Embassy, Bogota, Apr. 1, 1993. 

4° U.S. Department of Agriculture, World Coffee 

Situation, FCOF 3-92, Dec. 1992. 

41At the 26th Council session, the Council 

requested that members make a definitive decision 

on renegotiation of the agreement by March 30, 

1993. 

42The Daily Market Indicator Price is a 

composite, weighted average of daily official 

current-month natural rubber prices on the Kuala 

Lumpur, London, New York, and Singapore markets. 

43U.S. Department of State, "Background on 

U.S. Withdrawal From International Sugar 

Agreement," telegram, message reference No. 

0322172, prepared by U.S. Department of State, 

Washington, June 3, 1992. 

44The United States is in arrears in the amount 

of £94,000 (approximately $150,000) but is expected 

to become current in fiscal year 1993. U.S. 

Department of State official, interview by USITC staff, 

May 25, 1993. 

45For more detailed background on the EAI, see 

USITC, The Year in Trade: OTAP, 1991, USITC 

publication 2554, p. 67. 

46U.S. Department of Commerce, "Fact Sheets 

on the Enterprise for the Americas Initiative: 

Framework Agreements on Trade and Investment," 

Oct. 25, 1991, p. 10. 

47"Statement by Press Secretary Fitzwater on 

the President's Meeting With President Patricio 

Aylwin of Chile," May 13, 1992, and "Remarks at the 

State Dinner for President Patricio Aylwin of Chile," 

May 13, 1992, Weekly Compilation of Presidential 

Documents, May 18, 1992, pp. 858-859. 

48U.S. House, Committee on Ways and Means, 

Subcommittee on Trade, Testimony of Ambassador 

Michael Kantor, United States Trade Representative, 

Before the Subcommittee on Trade, Committee on 

Ways and Means, United States House of 

Representatives, Apr. 21, 1992, and "Hearing of the 

Trade Subcommittee of the House Ways and Means: 

Fast Track Authority, USTR Mickey Kantor," Apr. 21, 

1992. 

46 
CHAPTER 4 

U.S. Relations With Major 

Trading Partners 

This chapter reviews trade relations and principal 

bilateral trade issues with seven major U.S. trading 

partners in 1992: the European Community (EC), 

Canada, Japan, China, Mexico, the Republic of Korea 

(Korea), and Taiwan. An analysis of U.S. trade flows 

with these partners was provided in the introduction to 

this report. 

The European Community 

As in previous years, agricultural issues remained 

the focus of trade tensions between the United States 

and the EC in 1992. The most contentious was a 

dispute over EC oilseed subsidies, which was resolved 

late in the year in the context of a broader agricultural 

agreement, known as the Blair House agreement. The 

Blair House agreement also settled ongoing disputes 

on other issues, such as U.S. exports of corn gluten 

feed and malt sprout pellets to the EC, and extended 

the existing settlement of the enlargement-related farm 

trade dispute. 

The United States and the EC also resolved a 

dispute over the EC's Third Country Meat Directive, 

which sets hygiene and inspection requirements for 

imported meat. EC bans on growth hormones in 

livestock production, as well as on bovine 

somatotropin (BST), a genetically engineered natural 

hormone that boosts milk production in dairy cows, 

remained in effect throughout 1992. 

Outside of agriculture, in July 1992 an agreement 

was negotiated in the long-term dispute over EC 

support to the Airbus consortium. The U.S. 

Government also continued to monitor developments 

in the EC 92 program,' as well as the Community's 

efforts to deepen cooperation on economic and 

security matters and to broaden EC membership. 

Blair House 

Agreement—Oilseeds 

With U.S. patience waning in the longstanding 

oilseeds dispute? the United States and the European 

Community continued negotiating about EC oilseeds 

subsidies in 1992 toward an eventual settlement, 

which United States Trade Representative (USTR) 

Carla Hills termed "way overdue." 3Since 1988, the 

United States has won two rulings by GATT panels, 

which found that EC subsidies to its oilseeds 

producers and processors deny U.S. exporters the 

benefits of duty-free access to the EC market as 

guaranteed to the United States in the Dillon Round of 

trade negotiations in 1962. 4According to USTR, the 

subsidies cost the U.S. industry about $1 billion 

annually.5 

The United States began its GATT case on 

oilseeds after the American Soybean Association in 

1987 filed a petition with USTR under section 301 of 

the Trade Act of 1974 alleging that EC oilseeds 

subsidies were harming U.S. exporters and impairing 

zero-tariff commitments. A GATT panel in its 1990 

report ruled that EC payments to oilseeds producers 

and processors are inconsistent with GATT article 111 6 

? and impair EC tariff concessions to the United States.

 In response the EC promised to modify its subsidies 

by the 1991 crop year. 8Although the EC proposed a 

new reform of its oilseeds subsidies regime in July 

1991, the United States opposed the new plan on the 

basis that it continued to limit the benefits that should 

accrue to the United States as a result of the duty-free 

bindings on oilseeds.9The United States proposed 

that the original panel be reconvened to consider 

whether or not the EC's proposed policy would fully 

support the panel's findings. 1 ° 

A followup report, released by the panel in March 

1992, supported the U.S. position, stating that the EC 

reform did not comply with the panel's earlier 

recommendations. The EC was given a choice to 

either modify its oilseeds support regime or to 

47 
renegotiate the zero tariff bindings agreed to in 

1962." At the April 1992 GAIT Council Meeting, 

the Community indicated that it was not prepared to 

agree to either course of action. On May 1, 1992, the 

USTR announced the United States' intention to 

retaliate due to the failure of the EC to comply with 

GATT panel rulings. On June 12 a list of EC exports, 

compiled by USTR and valued at $2 billion, was 

published in the Federal Register.12 The list would 

be used to choose those products on which U.S. 

prohibitive tariffs would be imposed, with an average 

annual import value of $300 million, if the EC did not 

reform its oilseeds regime. 13 

At the June 1992 GATT Council meeting, the EC 

formally requested authorization to reopen talks with 

the United States to negotiate compensation under 

GAIT article XXVIII." According to GAIT rules, 

the EC would be permitted to keep its current oilseeds 

program if it provided compensation acceptable to the 

United States and other producers of soybeans and 

other cereal substitutes. According to U.S. estimates, 

if the EC sought to compensate through annual 

payments, then it would be required to pay 

approximately $1 billion to U.S. oilseeds producers 

and another $1 billion to producers in other 

countries. 15Reportedly the United States was 

unwilling to settle for any compensation package that 

did not include the complete dismantling of the EC 

oilseeds subsidy regime. 16 

In accordance with GATT article XXVIII:4, the 

EC had to find a satisfactory solution by August 19, 

1992, 60 days after negotiations had been authorized. 

The EC first proposed to replace its tariff bindings, 17 

 establish tariff quotas, and then "rebind" the zero 

tariff on the current value of trade and place a higher 

tariff on additional oilseeds imports. The EC also 

offered tariff concessions on a number of other 

products of interest to the United States and other 

soybean-producing countries. 18However, the United 

States remained unwilling to accept any deal that 

would not primarily benefit U.S. oilseeds producers. 19 

 The second compensation package offered by the EC 

Commission consisted of annual payments that were 

substantially less than the $1 billion the United States 

claimed it was due. The United States rejected that 

offer and instead demanded wider access to the 

Community market for oilseeds imports. 2° 

Despite the passing of its August 19 deadline 

without agreement, the United States refrained from 

taking retaliatory action against the Community. 21At 

the September GATT Council meeting, the EC asked 

for a working party to review negotiations, but this 

request was rejected by the United States and other 

oilseed-producing countries. Instead, the United States 

requested that the EC agree to binding arbitration to 

determine the amount of damage to the U.S. oilseed 

industry, but the EC rejected this proposa1. 22Finally, 

negotiations under GATT auspices were broken off 

when the United States and the other countries 

rejected EC offers as inadequate compensation for 

their trade losses. 23At a GATT Council meeting on 

November 4, 1992, the United States reiterated and 

the EC rejected a request for binding arbitration. In 

addition, the United States sought authorization by the 

GATT for a withdrawal of concessions, but the EC 

did not support a consensus in favor of such 

authorization. 24 

In response to the breakdown on November 5, 

1992, the United States announced its intention to 

withdraw trade concessions by imposing increased 

duties affecting up to $1 billion of EC exports of 

white wine, rapeseed oil, and wheat gluten? 5These 

U.S. imports from the EC, chosen from the June list 

published by the USTR, would be assessed 

200-percent ad valorem tariffs unless further 

negotiations in the ensuing 30 days led to a 

satisfactory settlement by December 5, 1992. 26 

In bilateral negotiations held on November 19, the 

United States and the EC finally reached a political 

agreement on the oilseeds dispute at the Blair House 

in Washington, DC. According to the EC, the deal 

complies with the framework of the EC's Common 

Agricultural Policy (CAP)27 In addition, according 

to Ambassador Hills, the agreement meets the U.S. 

objective for increased access to the EC market for 

oilseeds and moves "agricultural problems into the 

multilateral forum of Geneva." 28The agreement also 

clarifies the position the two parties will take on other 

issues contained in the Dunkel text, which was the 

guideline for the GATT Uruguay Round discussions 

throughout 1992. 29 

The United States accepted EC Agricultural 

Commissioner Ray MacSharry's offer to impose a 

ceiling of 5.128 million hectares on EC production of 

oilseeds and to take at least 10 percent of this oilseed 

crop land out of production annually, starting from the 

1994/95 marketing year. 30Under the broader CAP 

reform, EC farmers are already obliged to take 15 

percent of the oilseed crop land out of production. 

However, further changes in the CAP could reduce 

this amount over 3 years until the end of 1996. The 

new agreement will not allow the amount of oilseed 

crop land out of production to fall below 10 percent. 

According to a Community official, a ceiling of 

5.128 million hectares would eventually lead to 

annual production of 11.5 million tons, roughly the 

amount produced by the Community in crop year 

1989/90.31Measures to take 15 percent of the oilseed 

48 
crop land out of production the first year and at least 

10 percent of the land out of production every year 

thereafter are expected to cut production to 10.1 

million tons, on a permanent basis, giving the United 

States greater access to the EC market. 32Production 

of oilseeds for nonfood uses will be allowed on the 

set-aside land, up to a maximum of 1 million tons in 

soya equivalent,33but the EC must ensure that this 

production will not undermine the market for oilseeds 

imports.34The accord includes a provision for 

binding arbitration in the event of any dispute over 

these limits, in addition to the standard 

dispute-settlement procedures available under the 

GATT.35 

The United States and the EC also agreed on a 

"peace clause," which provides that neither party will 

challenge under GATT rules on subsidies those 

measures that fully reflect the commitments and 

criteria agreed to reduce internal support measures 

and export subsidies. Nonetheless, actions under 

national countervailing-duty law will still be permitted 

in the event that subsidized imports either cause or 

threaten material injury to a domestic industry. 36 

The Blair House agreement also settled ongoing 

disputes over U.S. exports of corn gluten feed 37and 

malt sprout pellets 38to the EC. The EC had denied 

U.S. corn gluten duty-free access to the EC on the 

grounds that the U.S. product did not meet the 

required technical specifications. A 1991 agreement 

restored duty-free status, but problems relating to 

tariff classification continuing after that agreement 

were only resolved in the Blair House agreement. 

With respect to malt sprout pellets, the EC agreed to 

establish a tariff-rate quota on imports to enable trade 

to continue at historic levels, although problems 

relating to product definition remain. U.S. exports of 

malt sprout pellets, traditionally accorded duty-free 

treatment by the EC, had been reclassified during 

1992 as residues of worked cereals, subject to a 

prohibitively high variable levy (tariff), under EC 

law.39 

The Blair House agreement extended for another 

year (through 1993) an earlier agreement that permits 

the entry of 2 million metric tons of corn and 300,000 

metric tons of sorghum into Spain at reduced tariffs. 

This agreement for compensation to the United States 

originally resulted when Spain joined the EC in 1986 

and breached its tariff binding on imports of corn and 

sorghum to make its agricultural regime consistent 

with the CAP. The EC also agreed to provide a 

reduced tariff on one-half million tons of corn imports 

into Portuga1. 4° 

The Blair House agreement was approved by the 

Commission of the European Communities (EC 

Commission) by unanimous vote on November 2041 

 and had its final details settled just 2 days before the 

December 5 deadline for imposing tariffs on EC 

exports to the United States. Although the Blair House 

agreement has been strongly opposed by the French 

farm lobby, the EC Commission later reported that it 

complied with the framework of the EC's CAP. 42The 

oilseeds agreement among the EC, the United States, 

and other oilseed-producing countries still awaits its 

final approval in the EC as part of the overall GATT 

package of Uruguay Round results. 43According to 

U.S. Agriculture Secretary Edward Madigan, "if the 

EC follows through on the final negotiations, then the 

agreement will have a favorable impact on the United 

States and will reopen that market." 44 

Third Country Meat Directive 

Since 1987 the U.S. meat industry has claimed 

that the EC improperly restricts U.S. exports through 

the EC's Third Country Meat Directive (TCMD), 45 

 which sets strict hygiene and inspection standards for 

foreign meat plants. Under EC sanitary specifications, 

foreign plants must be inspected for compliance with 

the directive before being placed on an official list of 

foreign meat suppliers authorized .to export to the EC. 

Full EC implementation of the TCMD after 1988 led 

to a steady decline in the number of U.S. meat plants 

eligible to export to the EC. 46In 1990 the EC 

decided to "delist" a number of U.S. slaughterhouses 

found in breach of EC veterinary and sanitation 

requirements 47The EC, alleging that U.S. meat 

plants did not meet the sanitary provisions of their 

directive, banned all imports of U.S. pork on 

November 1, 1990, and U.S. beef on January 1, 

1991 .48 

On November 28, 1990, the National Pork 

Producers Council and the American Meat Institute 

filed a petition under section 301 of the Trade Act of 

197449alleging that the TCMD constitutes a "barrier 

to imports that is not based on, or justified by, any 

scientific analyses." 50The industry petition alleges 

that the inspection requirements for U.S. meat exports 

are not the same as those for meat produced and 

consumed in individual member states, nor are the 

requirements fully enforced in plants shipping across 

EC borders.51In addition, the petition alleged that 

the TCMD constitutes a foreign practice that denies 

the United States access to the EC market, thereby 

violating the GATT. 52The petitioners stated that the 

EC's removal of certain U.S. plants from the official 

list, pursuant to the directive, restricted imports of 

U.S. meat products into the EC. 53 

49 
In response to the petition, on January 10, 1991, 

the USTR initiated a section 301 investigation with 

respect to the EC's inspection requirements for 

imported meats.54In an exchange of letters in May 

1991, the United States and the EC agreed to 

reconcile differences between U.S. and EC meat 

inspection procedures by December 1991. The EC 

also agreed to re-inspect U.S. meat plants and relist 

those found in compliance. 55Following the relisting 

of plants, formal bilateral talks on "equivalency 

standards" began between veterinary officials from the 

United States and the EC in mid-November 1991. 56 

Between November 1991 and April 1992 the joint 

group of U.S.-EC veterinary officials met six times. In 

addition, a U.S.-EC policy group that included chief 

veterinary officials from both sides consulted in 

March, June, and July 1992. 57By late February 1992 

the joint group had identified 60 issues that merited 

further discussion.58With respect to 28 of the 45 

public health issues, the veterinary group then 

concluded that the U.S. and EC requirements are 

equivalent and that the best means for resolving 

problems is to facilitate better communication 

between the two inspection services. In May 1992 the 

group was able to agree on proposed solutions to the 

remaining issues. With respect to those issues, the 

group proposed to the policy group specific actions 

designed to lead to a permanent resolution. The policy 

group then met in June and July 1992 to consider the 

conclusions of the joint group of veterinary officials." 

At the July meeting the United States and the EC 

negotiated a tentative draft agreement. 60Anticipating 

formal approval of the agreement by EC authorities, 

the USTR terminated the section 301 investigation on 

October 9, 1992. 61 

On November 13, 1992, the United States entered 

into a formal agreement with the European 

Community.62The agreement recognizes equivalency 

between the veterinary inspection systems of the 

United States and the EC. 63The agreement reached 

also establishes interim requirements for determining 

the eligibility of U.S. cattle- and pig-slaughtering 

facilities for exporting meat to the EC. 64These 

temporary standards are expected to facilitate EC 

approval of additional U.S. plants. In addition, the 

agreement incorporates a number of provisions aimed 

at improving communication and cooperation between 

the U.S. and EC veterinary services. 63The agreement 

has the target date for full implementation of 

December 31, 1993.66 

Ambassador Hills stated that "this agreement 

represents a truly cooperative effort on behalf of both 

parties to understand each other's meat inspection 

process and to develop ways to work together to 

resolve our differences," adding that "the deal was 

good for meat producers and consumers." 67USTR 

indicated that it will closely monitor implementation 

of the agreement and will consider what further action 

to take pursuant to section 301 if the agreement is not 

satisfactorily implemented. 

Airbus 

The longstanding U.S.-EC dispute over subsidies 

to the European aircraft manufacturer Airbus moved 

closer to a final resolution in 1992 with the signing of 

a bilateral agreement in July 1992. Airbus Industrie, a 

consortium of airplane manufacturers from four EC 

countries, comprises Deutsche Airbus of Germany, 

Aerospatiale S.A. of France, British Aerospace PLC 

of the United Kingdom, and Construcciones 

Aeronauticas, S.A. of Spain. In 1986 the United States 

and the EC entered into negotiations after the United 

States claimed that excessive subsidization by Airbus 

partner Governments had seriously disadvantaged the 

U.S. aircraft industry. 68Conversely, the EC alleged 

that U.S. manufacturers receive indirect subsidies 

through defense contracts. 69 

The central U.S. concern was over the high rate 

of direct subsidies, estimated at over 70 percent of 

Airbus development costs. The United States 

proposed a reduction of these subsidies to 25 percent 

of development costs. Negotiations were suspended in 

February 1991 after the United States rejected an EC 

proposal to eliminate production subsidies and cap 

development subsidies at 45 percent. Another disputed 

issue was over the sizes of aircraft covered by the 

agreement. The United States requested that the 

agreement cover all aircraft with more than 100 seats, 

whereas the EC desired that the agreement cover only 

aircraft with over 140 seats. In addition, contrasting 

opinions were raised over whether and how to include 

indirect subsidies in the talks 70 

These issues remained unresolved, and in 

February 1991 the United States filed the first of two 

complaints under the GATT Subsidies Code. First, the 

United States requested a dispute-settlement panel to 

investigate the German exchange-rate guarantees 

associated with Airbus. 71The United States 

contended that the scheme was an explicitly 

prohibited export subsidy under the terms of the 

GATT Subsidies Code.72According to the United 

States, the German Government provided an average 

subsidy of $2.5 million for each completed aircraft 

delivered for export in 1990, 73thereby cushioning the 

German aircraft industry from the weakening dollar 

and reducing the incentive to use lower priced U.S. 

aircraft components. On January 15, 1992, the GATT 

50 
panel found that German exchange-rate guarantees 

provided to Deutsche Airbus were contrary to GATT 

rules.74Although the EC continued to block the 

adoption of the panel report in 1992, 75the German 

Government suspended payments after the panel 

reported its finding and finally dismantled the 

program in the summer of 1992. 76 

In May 1991 the United States filed a second, 

more general complaint over Airbus production and 

development subsidies under the GATT Subsidies. 

Code. The United States had the option to request a 

dispute-settlement panel after 30 days if bilateral 

negotiations did not produce an agreement. 77Informal 

consultations continued between the United States and 

the EC and were followed by a meeting of the 

Subsidies Code Committee for conciliation. By 

January 1992 the United States and the EC agreed to 

restart negotiations on aircraft trade issues under the 

presumption that an agreement would be reached 

early in 1992. 78As a result, the United States 

deferred its option to request a dispute-settlement 

panel until the March 31, 1992, deadline set by both 

parties. 

On March 31, 1992, the United States and the EC 

reached a tentative bilateral agreement over domestic 

subsidies granted to Airbus. Later, further discussions 

were held to clarify certain provisions of the draft 

agreement, particularly those regarding new 

disciplines on indirect government support to the civil 

aircraft industry. 79The final agreement, signed on 

July 17, 1992, provides for the following: 

1. A prohibition on any future production 

subsidies; 

2. A cap on direct government support for 

development of any new aircraft at 33 percent 

and a requirement that repayment be at interest 

rates close to market levels; 

3. A requirement that the repayment of past 

production supports be on the terms and 

conditions previously agreed, thus prohibiting 

revision that would effectively increase the 

subsidy beyond limit; 

4. Strengthened disciplines against unfair 

government marketing practices through the 

use of inducements and offsets, including 

political and economic incentives to potential 

customers of Airbus; and 

5. Increased transparency of government support 

activities. 80 

The agreement sets a ceiling on indirect government 

support at 3 percent of the total revenue of the civil 

aircraft industry and at 4 percent for any individual 

aircraft manufacturer. 81 

The arrangement also requires Airbus 

Governments to make certain data and information 

available on finances, to prevent Governments from 

providing equity infusions that would serve to 

undermine the agreement. In addition, an "exceptional 

circumstances clause" enables each party to 

temporarily derogate from the agreement (with the 

exception of the development and support provisions) 

if the survival and financial viability of an aircraft 

manufacturer are in jeopardy—but strict conditions 

apply.82The agreement applies to civil aircraft of 

greater than 100 seats in size that are manufactured in 

Europe by the Airbus consortium and in the United 

States by Boeing and McDonnell Douglas. 83 

In accordance with article II.1 of the agreement, 

both parties must consult at least twice a year to 

ensure the correct functioning of the agreement, and 

each party may call for consultations at any time if it 

believes there is a problem. The agreement specifies 

that consultations must include an exchange of 

information on direct and indirect supports and 

Government equity infusions, a review of information 

on Government support commitments predating the 

agreement, and the prospects for future Government 

support for the development of new aircraft. Each 

party maintains the right to withdraw from the 

agreement after consultations with 12 months' 

notice. 84The first set of consultations was scheduled 

for July 1993, but the United States called for early 

consultations with the EC beginning April 1, 1993. 85 

According to the USTR, the United States and the 

EC have reaffirmed their commitment to the 

progressive, worldwide reduction of subsidies for civil 

aircraft development and manufacture. 86Both the EC 

and the United States 87expressed their willingness to 

renegotiate the GATT Civil Aircraft Agreement along 

lines similar to those of the U.S.-EC agreement, 

extending its provisions to all countries who are major 

producers of aircraft and aircraft components. 88 

EC Integration and 

Enlargement 

"EC 92" Program 

January 1, 1993 marked the official deadline for 

the completion of the European Community's internal 

market or "EC 92" program. The EC Commission's 

White Paper, which launched the EC 92 program in 

51 
1985, listed some 282 measures considered necessary 

to achieve a frontier-free market among the member 

states. By the end of 1992 the EC Council of 

Ministers (EC Council) had adopted 261 of the 282 

measures. The EC Council reached common positions 

on an additional three directives, bringing the number 

of substantially completed measures to 264, or 94 

percent of the program. 89Outstanding were proposals 

on the harmonization of company tax and company 

laws, Community trademark specifications, laws 

governing labor mobility, and border controls." As 

of January 1, 1993, 233 internal market measures 

issued by the EC Council had entered into force 9 1 

The United States has supported the completion of 

the EC single-market program and is interested in 

maintaining a positive trade relationship with the EC. 

The United States has actively monitored the policies 

of the EC 92 program to ensure that U.S. interests are 

protected in the event of restrictive or discriminatory 

practices by the EC. Of special interest to the United 

States in 1992 were issues relating to standards, 

testing, and certification; certain EC copyright 

legislation; public procurement procedures in the 

Utilities Directive; and the Broadcast Directive. 92 

In the area of standards the United States opened 

discussions with the EC on possible "mutual 

recognition agreements," which make it easier for 

foreign manufacturers to obtain regulatory approval of 

their product. In the area of intellectual property 

rights, new EC legislation covering rental rights, data 

base protection, and home copying includes 

reciprocity provisions that are contrary to U.S. 

interests.93In 1992 the United States threatened to 

impose sanctions on the EC in 1993 should it 

implement the discriminatory provisions of the 

Utilities Directive, which covers procurement 

procedures in the water, energy, transport, and 

telecommunications sec tors. 94 

Since 1989 the EC Broadcast Directive has 

required EC member states to guarantee "where 

practicable" that broadcasters reserve a majority 

proportion of their entertainment transmission time for 

European operations. The United States took the 

position that this quota is a violation of the EC's 

GATT obligations and placed the EC on the Special 

301 watchlist in both 1991 and 1992, holding two 

rounds of consultations with the EC under GATT 

article XXII. In 1992 the United States negotiated 

directly with EC member states about their 

implementation of the directive and indicated it will 

continue talks to discourage member states' plans to 

enact stricter quotas on broadcast. In addition, 

broadcast has been the subject of extensive talks in 

the Uruguay Round. 95 

The Maastricht Treaty 

The text of the Treaty on European Union, 

popularly termed the "Maastricht Treaty," was agreed 

to by EC heads of state on December 9 to 10, 1991. 

The Maastricht Treaty is designed to achieve a greater 

level of economic and political integration than 

envisioned in the EC's 1985 White Paper launching 

the 1992 program. Economic and Monetary Union 

(EMU) is to be achieved in three phases, leading to a 

common currency by 1999. European political union 

was designed to achieve a common foreign and 

security policy. 96In addition, the Maastricht Treaty 

expands the power of the European Parliament, grants 

common citizenship to Europeans, and extends the 

EC's powers in such fields as consumer protection, 

public health, and environmental policy. 97The treaty, 

signed on February 7, 1992, and originally scheduled 

to be enacted on January 1, 1993, requires ratification 

by each member state before it can enter into effect. 

By yearend 1992 all member states but Denmark, 

the United Kingdom, and Germany had ratified the 

treaty. 98Denmark, in a popular referendum held June 

2, 1992, voted against the Maastricht Treaty. 

Opponents contended that the Maastricht Treaty 

represents an unacceptable centralizing of power in 

the EC institutions 99In addition, on June 9 Denmark 

rejected a British proposal to attach a protocol to the 

Maastricht Treaty clarifying certain aspects of EC 

union, such as the principle of subsidiarity. 1 " The 

subsidiarity principle contained in the Maastricht 

Treaty states that the Community shall act "only and 

in so far as the objectives of the proposed action 

cannot be sufficiently achieved by the member states. 

According to EC analysts, during the summer 

of 1992 subsidiarity emerged as the preferred means 

to bring Denmark back into the fold, to keep British 

Euroskeptics at bay, and to satisfy member states that 

their powers will not diminish under Maastricht. 102 

 The argument was that because of the subsidiarity 

clause a more federalist Europe would still safeguard 

local and national prerogatives by ensuring that 

centralized policies were only pursued if they were 

deemed a better way to accomplish common 

objectives than more localized solutions. 

At the Edinburgh Summit in December 1992, 

Denmark requested and the EC agreed to a 

compromise that will exempt Denmark from the EC's 

single currency objectives, the common defense 

policy, legal and police cooperation, and European 

citizenship. 103The compromise will be legally 

binding but will not require reratification of the 

treaty. 104 Denmark scheduled a second referendum in 

May 1993. 105The United Kingdom's ratification vote 

52 
of the Maastricht agreement, based on Denmark's 

vote, should occur in the fall of 1993. 106 

EMU, an objective of the Maastricht Treaty, has 

also been a recent source of concern for member 

states. The Maastricht Treaty requires member states 

to meet certain criteria for EMU. 107If all the criteria 

are fulfilled, EMU envisages the establishment of a 

single currency and a single European central bank to 

manage that currency by the first of January 1999. 

Nearly all member states are experiencing difficulty 

meeting the criteria. 108 

Meanwhile, differences in macroeconomic 

priorities and performances strained the existing 

Exchange Rate Mechanism (ERM). By 

mid-September overwhelming pressures led to the 

withdrawal of the British pound and Italian lira from 

the ERM and the devaluation of several other 

currencies relative to the German mark. As a result of 

the currency crisis and poor economic conditions, the 

Maastricht schedule for monetary union poses a 

challenge for member states that must revitalize their 

economies to meet the convergence criteria for EMU. 

According to a U.S. official, the currency crisis may 

somewhat delay the whole EMU process or by 

January 1999 fewer countries than the Maastricht 

Treaty had envisioned may actually join the 

establishment of a single currency and a single 

European central bank to manage that currency. The 

EC could form a "two-stage" or a "two-speed" 

Europe, with only a few EC member states in the 

currency union. 1 °9 

The European Economic Area and 

Other Agreements 

While the EC was working on its goal of 

completing the EC internal market by December 31, 

1992, Community officials continued to negotiate new 

agreements with countries outside the Community. In 

May 1992 the EC and seven members of the 

European Free Trade Association (EFTA)"° signed 

the European Economic Area (EEA) agreement, 

which extends the four EC freedoms—free movement 

of goods, capital, services, and people—to the 

countries of EFTA. The EEA was originally scheduled 

to begin on January 1, 1993, but Swiss rejection of 

the EEA in a December 1992 referendum required the 

EC to postpone the implementation date and negotiate 

a new agreement without Switzerland in February 

1993 . 111 The EEA is now expected to begin in 

September 1993, although the scheduled date to enter 

into force keeps getting delayed. 112The agreement is 

regarded as a new stage in EC-EFTA relations and 

should facilitate and accelerate full EC membership 

for its members. 113 

In addition to membership applications from 

Turkey, Cyprus, Malta, Sweden, and Austria before 

1992, the EC received membership applications from 

Finland in March 1992, Switzerland in May 1992, and 

Norway in November 1992. In early December 1992 

at the Edinburgh Summit the EC agreed to start 

membership negotiations with Austria, Sweden, and 

Finland before the end of January. A recent favorable 

opinion from the EC Commission on Norway's 

membership application will enable Norway to 

negotiate membership alongside Austria, Sweden, and 

Finland. 114Although Switzerland's membership 

application is still on track, its membership has been 

temporarily placed in doubt since its rejection of the 

EEA. 115 

In accordance with Community membership 

policy, new members are required to fully accept 

Community legislation established prior to their 

accession, known as the "acquis communautaire." 

Austria, Sweden, Finland, and Norway are also 

required to accept the Maastricht Treaty. 116Accession 

is likely for Austria, Sweden, Finland, and Norway by 

January 1, 1995. 117 

Other candidates for full EC membership are 

Cyprus, Malta, and Turkey. Cyprus and Malta are 

awaiting an opinion from the EC Commission on their 

membership applications. A response is not expected 

until late 1993. 118Turkey, an associate member of 

the EC since 1964, received a negative opinion from 

the EC in 1989. Turkey is planning to improve its 

economy and is hoping to negotiate a customs union 

with the EC by 1996, as provided for in the 

EC-Turkey association agreement. 119 

Negotiations continued throughout 1992 on 

agreements with the Central and Eastern European 

countries. The newest so-called "association 

agreements" were negotiated with both Romania and 

Bulgaria during 1992. 120Along similar terms as 

previous association agreements negotiated with 

Hungary, Czechoslovakia, and Poland, 121the 

association agreements with Romania and Bulgaria 

call for the progressive liberalization of the movement 

of goods, services, people, and capital and a free-trade 

zone for most products within 10 years. 122 

In October 1992, the EC decided to negotiate 

broader trade agreements, known as partnership and 

cooperation agreements, with the former Soviet 

republics. 123The first round of EC-Russian 

exploratory talks, held in early December 1992, 

looked at setting up companies, investment services 

and capital flows, intellectual property rights, and 

cultural and institutional provisions. 124 

53 
Representatives of the EC Commission and the 

Russian Federation held a second round of followup 

discussions on December 22 to 23, 1992, 

concentrating their efforts on the potential problems 

inherent in the negotiations on the new accord. 125The 

agreement is scheduled to be completed during 

1993 . 126 

Canada 

Bilateral relations between the United States and 

Canada during 1992 were focused on the negotiation 

of the North American Free-Trade Agreement 

(NAFTA) and the subsequent attempt to bolster 

support and ensure passage of the agreement in each 

country. The United States-Canada Free-Trade 

Agreement (CFTA), signed in 1988, was in its 4th 

year of operation, with duties declining on or ahead of 

schedule 127and with certain disputes being addressed 

according to the structure set out by the agreement. 128 

 Three of the more visible disputes are discussed 

below (beer, lumber, automobiles and auto parts). 

Finally, as Canada continued its efforts at integration 

with its North American neighbors, it sought to 

eliminate internal barriers among its own Provinces. 

This effort, also reviewed below, was ultimately 

overshadowed by the October national referendum on 

constitutional reform. 129All of these issues 

emphasize the difficulties on the path to free trade on 

the North American continent. 

Beer 

Disputes over beer between the United States and 

Canada in 1992 continued to escalate from 1991 and 

by yearend had culminated in a significant trade 

confrontation. Exporting $22 million in beer to 

Canada in 1992, the United States held about 3 

percent of the Canadian beer market. Canada's beer 

exports to the United States totaled $141 million in 

1992, however, and represented less than 1 percent of 

the U.S. beer market. Each country claims that the 

other country's local practices discriminate against 

imported beer. Local, State, and Provincial laws 

concerning the brewing industry were grandfathered 

into the CFTA. As a result, the present disputes have 

been dealt with through the GATT or by one country's 

unilateral action. 

U.S. Claims 

On February 6, 1991, the United States initiated a 

dispute settlement case in the GATT against Canadian 

Provincial practices considered inconsistent with the 

GATT. In June 1991 the USTR initiated a section 301 

investigation of alleged unfair trade practices by the 

Canadian Provincial liquor boards against U.S. beer, 

pursuant to a petition initiated by G. Heileman and 

Stroh brewing companies. 13 ° The GATT panel, 

formed in February 1991, was asked to examine the 

importation, distribution, and sale of certain alcoholic 

beverages by Provincial marketing agencies. On 

September 18, 1991, the panel found that the 

Provincial practices were inconsistent with Canada's 

GATT obligations. Specifically, the panel found that 

restrictions on the access of imported beer to points of 

sale, restrictions on private delivery of beer, 

differential markups, and minimum price requirements 

were all inconsistent with GATT obligations. As part 

of the section 301 investigation, the USTR announced 

on December 27, 1991, that U.S. rights under the 

GATT were being denied by the Canadian Provincial 

practices and that the United States would 

substantially increase duties on beer and malt 

beverages from Canada to offset damage from these 

practices no later than April 10, 1992. 131Canada 

joined with other GATT contracting parties in 

approving the GATT panel report on February 18, 

1992. 

On March 31, 1992, the Canadian Government 

announced that it would end discrimination against 

imports of foreign beer over the next 3 years and 

would eliminate interprovincial trade barriers to 

domestic beer by July 1, 1992. Canadian brewers 

claim the elimination of interprovincial trade barriers 

is an important step without which foreign beers 

would have greater access to the Canadian market 

than domestic brewers. 132 

The United States declared the response 

unacceptable. It considered the 3-year phaseout of the 

barriers to be too long and held that the Canadian 

Government needed to specify a timetable for the 

removal of specific barriers and that the proposals 

would not bring Canada into GATT conformity. 133 

 The U.S. beer industry maintained that the proposal 

was a stalling tactic of the Canadian Government 

meant to prolong protection of its domestic beer 

industry. 134The USTR reiterated its December 1991 

threat to impose 100-percent duties on Canadian beer 

if an agreement was not reached by April 10, 1992. 135 

 The Canadian Government then threatened to retaliate 

with similar measures. 136 

Last minute negotiations prompted the USTR to 

delay imposing punitive duties on Canadian beer. The 

Canadians had submitted another proposal on April 

13, 1992, addressing short-term U.S. concerns, 

providing specific dates for steps in compliance, and 

54 
guaranteeing full access by mid-1994. The United 

States ultimately rejected this offer on the grounds 

that U.S. brewers deserved access to the Canadian 

market sooner than mid-1994. The announcement of 

the rejection of the Canadian proposal on April 14 

resulted in a suspension of customs clearance for 

Canadian beer, making shippers retroactively liable 

for any new duties that might be imposed. 137The 

Ontario Liquor Control Board, the wholesale buyer of 

all foreign beer in the Province, responded by 

canceling all imports of U.S. beer. 

On April 25, 1992, the two countries reached an 

agreement. U.S. brewers would be given access to the 

Canadian retail market by October 1, 1993, and 

Canadian policies allowing higher retail markup for 

imported beer would end on July 1, 1992. 138In light 

of the agreement in principle, the Ontario Liquor 

Control Board began importing U.S. beer on April 27, 

1992. 

On April 30, 1992, the Province of Ontario 

introduced a new tax on beer cans in its annual 

budget. The tax was an "environmental levy" of 10 

cents per can. The levy was placed only on beer cans 

and not on soft drink cans. U.S. brewers claimed that 

the tax was another way for Ontario to discriminate 

against U.S. beer, since almost all U.S. beer exported 

to Canada is shipped in cans, whereas only 20 percent 

of Canadian beer is canned. 139The new 

"environmental levy" removed the price advantage of 

U.S. beer. The Canadians claimed that the levy was 

for environmental purposes and was not 

discriminatory because it applied to both foreign and 

domestic beer. As most other Provinces complied with 

the April 25 agreement without incident, 14° the U.S. 

negotiating efforts focused on Ontario, Canada's 

largest importer of beer. 

Ontario proposed lowering its barriers to beer 

imports, but U.S. brewers claimed the proposal failed 

to resolve their problems. U.S. brewers complained 

that the new pricing formula offered by Ontario would 

raise rather than lower prices. U.S. brewers would still 

have to ship through Ontario Government warehouses, 

thus adding a cost that Canadian brewers do not have 

to bear. Finally, U.S. brewers noted that the Province 

still refused to lift its discriminatory "environmental 

levy." 141 Ontario's environmental tax works to 

protect domestic producers and is believed to be 

inconsistent with article III of the GATT. 142 

On July 14, 1992, the United States requested 

GATT authorization for retaliation against Canada. 

However, Canada and the EC blocked the measure. 

The United States then refused the Canadian offer for 

dispute settlement through binding arbitration. On 

July 24, 1992, the USTR announced a 50-percent ad 

valorem duty on all beer brewed and bottled in 

Ontario. 143This duty affected mainly the Molson and 

Labatts breweries, Canada's largest brewers. In 

response to the U.S. action, Canada levied a 

50-percent duty on the two petitioners in the section 

301 investigation, G. Heileman Brewing Co. and the 

Stroh Brewery Co. 144Although bilateral negotiations 

continued, the retaliatory duties remained in effect 

well into 1993. 

Canadian Claims 

Canada, meanwhile, had some complaints of its 

own about U.S. treatment of imported alcoholic 

beverages. On May 29, 1991, the GATT Council, at 

the request of Canada, agreed to establish a panel to 

examine possible discriminatory measures by the U.S. 

Federal and State Governments affecting the pricing, 

distribution, and sale of alcoholic and malt beverages, 

including beer, wine, and cider. On February 7, 1992, 

the GATT panel found against the U.S. federal excise 

tax credit for small producers of wine and beer and 

approximately 60 State-level alcoholic beverage 

practices.' 45 On June 19, 1992, the U.S. Government 

agreed to make efforts toward resolution of the 

Canadian complaints. In accepting most of the GATT 

report, U.S. delegate Ambassador Rufus Yerxa 

specified that the United States rejected the panel's 

interpretation of the balance between federal and state 

powers. 146He claimed that although changes to the 

federal tax scheme to comply with the GATT ruling 

were possible, the federal government in the United 

States lacks direct control over many of the state 

policies criticized by the GATT pane1. 147The United 

States has argued that the 21st amendment, ending 

prohibition, gave the states broad authority to regulate 

liquor trade. The GATT panel, however, citing a U.S. 

Supreme Court decision, maintained that the U.S. 

Federal Government has the power to override state 

laws in order for the United States to abide by 

international obligations. 148No further resolution of 

this dispute had emerged by yearend. 

In October of 1991 the Canadian International 

Trade Tribunal (CITT) ruled on a complaint brought 

by brewers in British Columbia that U.S. brewers 

were dumping beer in the Province. 149The CITT 

found that dumped U.S. beer was causing material 

injury to domestic producers, and duties as high as 50 

percent on U.S. beer entering the Province were 

authorized. The United States appealed the case to a 

binational trade dispute panel under the auspices of 

the CFTA. 15° 

At the end of 1992 the bilateral disputes involving 

beer on both sides of the border remained unsolved 

55 
despite ongoing negotiations, and retaliatory duties 

were still in effect. 

Lumber 

U.S.-Canadian trade in softwood lumber has been 

the subject of trade petitions and actions for nearly 

three decades. Actions have been pursued (1) under 

the U.S. countervailing-duty (CVD) law; (2) 

bilaterally, under the CFTA; (3) multilaterally, in the 

GAIT; and (4) under section 301 of the U.S. Trade 

Act of 1974. 

The latest series of actions began in 1986 when 

the U.S. lumber industry filed a complaint with the 

U.S. Department of Commerce, claiming the low 

stumpage fees (paid by Canadian loggers to the 

Provinces for the right to harvest trees on Provincial 

land) constituted a countervailable subsidy. 151The 

U.S. Department of Commerce ruled that the 

stumpage fees were countervailable and imposed a 

15-percent provisional duty on Canadian exports of 

softwood lumber to the United States. On December 

30, 1986, the United States and Canada entered into a 

memorandum of understanding (MOU) whereby 

Canada agreed to impose a 15-percent export tax on 

lumber exported to the United States. The MOU 

provided that if Canadian Provinces implemented 

changes in their forest policies so as to increase the 

costs to the industry, the tax would be offset by these 

increased costs. 

On September 3, 1991, Canada announced the 

termination of the MOU effective October 4, 1991. 152 

 The U.S. Department of Commerce self-initiated a 

CVD investigation under title VII of the Tariff Act of 

1930153and, in an effort to preserve the status quo, 

USTR, pursuant to an investigation initiated under 

section 302 of the Trade Act of 1974, directed U.S. 

Customs on October 4, 1991, to withhold liquidation 

and collect a bond, equivalent to the rates in the 

MOU, on entries of Canadian softwood lumber. 154On 

December 2, 1991, Canada requested that the GATT 

Committee on Subsidies and Countervailing Measures 

convene a panel to consider these actions, arguing that 

USTR's action and the self-initiation by Commerce of 

the CVD investigation, were inconsistent with the 

United States' obligations under the GATT. Canada 

maintained that the U.S. action was an improper limit 

on Canadian exports. 155On December 12, 1991, the 

U.S. International Trade Commission (ITC) voted 

affirmatively in a preliminary determination, finding 

that there was a reasonable indication that a U.S. 

industry was materially injured by reason of allegedly 

subsidized softwood lumber imports from Canada. 156 

The ITC vote served to continue the Department of 

Commerce's CVD investigation. 

On March 6, 1992, the Commerce Department 

announced "its preliminary finding that prices charged 

by Canada's provincial governments for the timber 

used in softwood lumber production provide 

countervailable subsidies to their lumber producers." 

The estimated net subsidy rate was determined to be 

14.48 percent ad valorem. 157This subsidy rate 

consisted of two components: the stumpage fees and 

the British Columbia log export ban. The Department 

of Commerce's analysis of stumpage programs 

resulted in a countrywide, net subsidy rate of 6.25 

percent ad valorem. The Department of Commerce 

also found that the Province of British Columbia, 

through a variety of measures, effectively banned log 

exports from that Province. The Commerce 

Department maintained that these "export restrictions 

distort prices both in British Columbia and other 

markets, and that there is a quantifiable benefit to 

Canadian lumber producers" equal to a countrywide, 

net subsidy rate of 8.23 percent ad valorem. 

On May 15, 1992, the Department of Commerce 

made its final ruling in the softwood lumber case. 158 

 The Commerce Department upheld its earlier ruling 

that two kinds of subsidies were being provided but 

significantly lowered its calculation of the net benefits 

of these subsidies. Commerce found that the subsidy 

for stumpage fees was 2.91 percent, and that the 

subsidy for log export restrictions was 3.6 percent. 

The total net subsidy rate was thus determined to be 

6.51 percent ad valorem. 159The proceeding 

continued under domestic law with a final 

investigation by the ITC to determine whether a 

domestic industry is materially injured or threatened 

with material injury by reason of such subsidized 

imports. The ITC made a final affirmative 

determination on June 25, 1992, finding that U.S. 

producers were being materially injured by reason of 

subsidized imports of softwood lumber from 

Canada. 160As a result, Commerce issued an order 

imposing a CVD of 6.51 percent ad valorem on 

imports of Canadian softwood lumber. 

On June 16, 1992, Canada formally requested 

review of the Commerce decision by a binational 

dispute resolution panel under the CFTA. On July 27, 

1992, Canada similarly requested review of the 

Commission's final determination. At yearend 1992 

both panel reviews were still in progress; the deadline 

for the panel's decision in the Commerce case was 

June 4, 1993 and the other panel's decision in the 

Commission case is due in late July 1993. 161 

On December 9, 1992 the GATT panel convened 

at Canada's request ruled that the U.S. Department of 

56 
Commerce had the right to self-initiate the CVD 

investigation consistent with the GATT, but that the 

interim bonding measures taken by the U.S. Customs 

Service at USTR's direction were improper. 162 The 

GATT panel thus ruled that the U.S. Government was 

required to refund to the Canadian lumber industry the 

amount it collected in bonds between October of 1991 

and March 1992, when Commerce made its 

preliminary determination. 163 

At yearend the appeal to the CFTA binational 

panel was still pending, but duties remained in effect 

against imports of softwood lumber entering the 

United States from Canada. 

Interprovincial Trade Barriers 

Although Canadian negotiators have been taking 

steps to open up trade between the United States and 

Mexico through the NAFTA, some 500 trade barriers 

still inhibit trade among Canada's Provinces. These 

barriers have existed for decades and include 

discriminatory Provincial procurement procedures, 

differing certification and licensing procedures, and 

restrictions on trade in agricultural products and 

alcohol. The barriers also affect foreign trade. The 

Canadian Provinces have recognized the detrimental 

effects of these barriers, estimated by the Canadian 

Manufacturers' Association to cost Canadian 

consumers close to $6 billion a year. 164 A Statistics 

Canada summary released in the spring of 1992 

showed the relative weakness of interprovincial trade 

links by demonstrating that Ontario, Canada's 

industrial heartland, trades more with the United 

States than with the rest of Canada. 165 

In the fall of 1991 as part of a long, 

federationwide, self-examination process, Prime 

Minister Mulroney proposed a broad package of 

constitutional reforms. One element of the package 

was the removal of interprovincial trade barriers. 166 

 This impetus from the Federal Government led to 

review of such liberalization at the Provincial level. 

Some Provinces even took concrete measures to 

address the problem. On June 30, 1992, for example, 

the Province of Newfoundland signed the Maritime 

Procurement Agreement, originally created in April 

1990 by New Brunswick, Nova Scotia, and Prince 

Edward Island. The pact is designed to reduce 

regional trade barriers, starting with government 

practices of awarding contracts to local businesses. 167 

While elimination of barriers within Canada was 

being considered, the second examination of Canadian 

trade policies by the GATT Trade Policy Review 

Mechanism (TPRM) took place in June 1992. The 

TPRM and the GATT Council took note of the 

continuance of the interprovincial barriers and their 

effect on trade flows. 168 

The U.S.-Canadian beer dispute 169also drew 

attention to interprovincial trade barriers and put 

considerable pressure on Provincial Governments to 

eliminate the policy of permitting Canadian brewers 

to sell beer only in the Province where it was brewed. 

Early in the year Canadian Provincial trade ministers 

reached an agreement that would strike down this and 

other Provincial trade barriers against beer, effective 

on July 1, 1992. 170 

In July 1992 9 of the 10 Canadian Provinces 

agreed to the phased removal of barriers to goods, 

services, and capita1. 171They also agreed to a broadbased range of exemptions to this commitment for 

specific kinds of laws and policies. These laws and 

policies include those related_ to public safety, security, 

or health; protection of the environment and 

consumers; labor practices including pay equity, 

affirmative action, and "minimum and fair" wages; 

creation and maintenance of government-owned 

monopolies; marketing and supply management of 

agricultural products; and articles with artistic, 

historic, or archaeological value. "Reasonable" public 

sector investment programs, subsidies, or tax 

incentives to promote investment, Federal laws aimed 

at promoting regional development, and Provincial or 

territorial policies to reduce economic disparities 

among jurisdictions are also exempted from the 

commitment to a phased removal of interprovincial 

barriers. 172In short, the agreement was a step toward 

free trade among the Provinces, but the large number 

of exceptions that accompanied the package resulted 

in its being viewed as less than significant. 173 

An attempt was made in negotiations toward the 

Charlottetown Constitutional Accord to remove a 

significant portion of the interprovincial trade barriers 

by July 1, 1996. 174Given the list of exemptions that 

came out of the first ministers' conference in July, the 

difficulty of reaching a consensus in Charlottetown 

was evident. The economic union proposal and the 

elimination of interprovincial barriers was not 

included in the Charlottetown Accord. An "agreement 

in principle" to eliminate interprovincial trade barriers 

was reached, however. 

Since the accord itself was defeated in the October 

26 national referendum, what began as an ambitious 

attempt at barrier reductions within Canada was 

further stifled. The dismantling of internal trade 

barriers thus remains unfinished business in 

Canada. 175 

57 
Automobile Content Dispute 

Throughout most of 1992 a dispute over the 

foreign content of automobiles produced in Canada 

and exported to the United States captured binational 

attention. This dispute followed the U.S. Customs 

decision of 1991 to audit the foreign content of Honda 

Civics assembled in Canada. The dispute centered 

around the local-content requirements necessary for 

eligibility for duty-free exports under the 1988 CFTA. 

Since the United States and Canada disagreed over the 

method for determining foreign content, the dispute 

ultimately was argued before a binational panel set up 

under chapter 18 of the CFTA. The dispute 

diminished in significance, however, when NAFTA 

negotiators settled upon specific content requirements 

for future automotive trade. 

Although the dispute began in 1991, it was not 

until January 6, 1992, that Canada requested the 

formation of a bilateral dispute-settlement pane1. 176 

 This request was made in response to temporary U.S. 

regulations not formally instituted until January 22, 

1992, 177outlining calculation methods for the foreign 

and domestic content of merchandise under the CFTA. 

Under the pact a product must have at least 50 percent 

of its value added in either the United States or 

Canada to be eligible for duty-free treatment. The 

dispute before the panel dealt with the treatment of 

interest as a direct cost of processing. The United 

States insisted on a strict interpretation of the 

free-trade agreement, limiting interest payments 

included in content calculations. Canada, meanwhile, 

claimed the U.S. content requirements reflected a 

misinterpretation of the CFTA, resulting in Honda's 

loss of eligibility for duty-free export. Canada argued 

that all forms of interest related to production of the 

product should be counted in content calculations. 178 

Using U.S. calculation methods, U.S. Customs 

announced on March 1, 1992, that Honda's Canadian 

exports of automobiles to the United States from 

January 1, 1989, to March 31, 1990, failed to meet the 

50-percent requirement. Automobile tariffs of 2.5 

percent were levied on roughly 69,000 

Canadian-assembled automobiles. 179The primary 

factor in this determination was the decision to count 

as foreign Honda engines assembled in Anna, OH, 

and installed in Alliston, Ontario. U.S. Customs 

claimed that these engines failed to meet the 

50-percent domestic-content requirement. The entire 

engine was counted as foreign during the U.S. 

calculation of the Civic's content. Revenue Canada, 

however, ruled that the Hondas did meet domestic 

content requirements, and Honda claimed that 69 

percent of the Civic's value was added in North 

America. 180As the United States was the importing 

country, the U.S. Customs ruling was the one that 

applied. Honda officials and the Canadian 

Government both claimed that the U.S. decision was 

in error, and the Canadian press argued that the 

decision was influenced by political motivations. 181In 

fact, many Canadians felt the United States was using 

the audits to deter auto firms considering investment 

in Canada and trying to pressure the firms to invest 

instead in the United States. 182 

At the same time, the five-member binational 

panel originally called for by Canadian Trade Minister 

Michael Wilson was investigating the matter. Oral 

arguments were heard on March 31, and the final 

report was issued on June 8, 1992. The panel 

unanimously decided that bona fide interest payments 

on debt of any form could be included in the direct 

cost of processing or direct cost of assembling set 

forth in article 304 of the CFTA. The panel in effect 

supported the Canadian position for a broader 

calculation of domestic content. 

The two sides used the NAFTA negotiations as a 

means of settling the dispute. Content requirements 

under NAFTA were drawn up with the automobile 

dispute in mind. The content requirement for 

consideration as North American was raised from 50 

percent to 62.5 percent for motor vehicles and some 

parts, phased in over two 4-year stages. The 

calculation process for content was more strictly 

defined, and new assembly plants were given a 5-year 

grace period, during which time the 50-percent 

content requirement would remain in effect. This 

compromise helped to settle the dispute. 183In 

October U.S. Customs announced an amendment to its 

content calculation process, reflecting the decision of 

the binational pane1. 184As the NAFTA content rules 

are expected to be made retroactive, Honda may be 

released from the fines levied by Customs upon 

NAFTA approval. 185At yearend, Customs was 

considering Honda's appeal. 

Japan 

The U.S.-Japan trade relationship in 1992 was 

marked by the continued trend towards bilateral 

agreements aimed at opening the Japanese market to 

U.S. products. The Bush administration pursued 

sector-specific market access agreements, on both the 

Government and private sector levels, and conducted 

followup talks on so-called "structural" issues. 

Agreements reached in 1992 on trade in automobiles 

and auto parts, semiconductors, and machine tools are 

demonstrative of this trend and are described more 

fully below. 

58 
Automobiles and Parts 

The United States and Japan continued to wrestle 

with the issue of bilateral trade in automobiles and 

auto parts in 1992. The U.S. deficit with Japan in 

automobiles and auto parts reached $31.2 billion in 

1992, amounting to roughly 62.8 percent of the 

overall bilateral trade deficit. U.S. imports of 

passenger vehicles from Japan totaled 1.6 million 

units, or $23.8 billion; imports of auto parts reached 

$10.8 billion. U.S. imports of automobiles from Japan 

took about 19.9 percent of the U.S. market. 186 

 Japanese nameplate automobiles, including those 

made in the United States, Canada, and other third 

countries, accounted for roughly 30.1 percent of the 

U.S. passenger car market in 1992. 

On December 4, 1991, President Bush invited the 

leaders of the "Big Three" U.S. auto companies (Ford, 

Chrysler, and General Motors (GM)) to accompany 

him on a trade mission to Japan. The President's trip 

to Japan and Southeast Asia had originally been 

scheduled as a goodwill tour to help shore up U.S. 

relations with the region. However, mounting concern 

over the U.S. recession and rising domestic 

unemployment led to the recasting of the visit as a 

mission to secure U.S. jobs through pressuring Japan 

to open its import market. 187 

During January 8 and 9, working-level meetings 

were held in conjunction with the Bush-Miyazawa 

summit in Tokyo. An agreement was reached on 

several measures to reduce the U.S. deficit in 

automobiles and auto parts. Japan announced that it 

would increase its purchases of U.S. auto parts from a 

level of $9 billion during Japanese fiscal year (JFY) 

1990 to $19 billion in JFY 1994. This target could be 

partially met through purchases from Japanese-owned 

parts suppliers in the United States. About $15 billion 

of the $19 billion in total procurement would result 

from purchases of U.S. parts by Japanese auto firms 

with production facilities in the United States 

(transplants), whose output was projected to increase 

by 50 percent during the period. 188Japanese imports 

of U.S.-made parts and vehicles were expected to 

increase from $2 billion to $4 billion. 

In addition to auto parts, Japan's major auto 

producers also made tentative commitments to boost 

sales of U.S.-made cars by 1994 through their 

distribution networks. Honda, which had been 

marketing part of Chrysler's Jeep line in 1991, 

indicated that it was targeting Cherokee and Wrangler 

sales at 1,200 units in 1994. Mitsubishi Motors also 

stated that it would help Chrysler raise its sales in 

Japan to an estimated 6,000 units. Mazda announced 

plans to import 4,500 Ford Probes, Tauruses, 

Thunderbirds, and Lincoln Continentals in the 

upcoming fiscal year. Additionally, Nissan said it was 

willing to handle Ford vehicles for the first time, and 

targeted sales at 3,000 units per year. Finally, Toyota 

stated that it was prepared to sell about 5,000 GM 

cars per year through its network. 189 

Reactions to the bilateral accord on automobiles 

and auto parts were mixed. President Bush and Prime 

Minister Miyazawa both hailed the overall summit as 

significant, 19° but top executives of the Big Three 

returned to the United States apparently unsatisfied 

with the pledges made by their Japanese counterparts 

to increase imports. 191Within a short time 

disagreement emerged over whether the Japanese auto 

companies' import goals were considered by the 

Japanese to be only "targets" and not the binding 

"commitments" the U.S. auto industry believed they 

represented. 192 

Partly in an effort to deflate some of the pressure 

on Capitol Hill for greater protection against imports 

of automobiles and auto parts, Japan's Ministry of 

International Trade and Industry (MITI) announced on 

March 19, 1992, a reduction in the ceiling on 

Japanese car exports to the United States. MITI 

Minister Kozo Watanabe declared that the 11-year old 

"voluntary" cap on auto exports would be lowered to 

1.65 million units at the start of April 1992 from 2.3 

million units—the annual export restraint level since 

JFY 1985. 193Reasons cited by Japanese officials for 

lowering the quota level included (1) the visit by 

President Bush and executives from the Big Three in 

January 1992, (2) the poor condition of the U.S. 

economy and the need to prevent increased layoffs of 

U.S. workers, and (3) the upcoming U.S. Presidential 

election. 194The new quota level was greeted with 

some skepticism in Washington and Detroit, with 

executives of the Big Three claiming that the reduced 

ceiling would have little substantive impact. 

Largely in response to U.S. Government pressure, 

as well as pressure from Japan's own MITI, 

executives from Japan's "Big Five" auto producers 

(Nissan, Toyota, Mitsubishi, Mazda, and Honda) 

agreed to meet with executives of Detroit's Big Three 

in Chicago on May 18, 1992. The meeting was 

regarded by both sides as a success and a frank 

exchange of opinions. Specific actions to be taken 

included the establishment of two working groups: 

one to cooperate to reach the goals for auto imports 

and parts purchases and the other to exchange views 

on environment and safety issues. The two sides also 

agreed to continue talks between the industries, 

although no concrete schedule was established. 195 

Auto and auto parts trade continued to figure 

prominently within the overall debate in Washington 

59 
over U.S. trade policy regarding Japan. However, 

progress in implementing the January 

industry-to-industry agreement to boost Japan's 

imports of U.S. automobiles and auto parts was slow. 

In October 1992 Toyota Motor Corp. acknowledged 

that it was still negotiating with GM over its plan to 

import 5,000 more GM cars a year. Other Japanese 

automotive companies, such as Honda and Nissan, 

stated that they were proceeding with plans to boost 

imports of U.S. automobiles, but no specific figures 

were provided as to how much purchases had 

increased in 1992. 196 

Semiconductors 

During 1992 the U.S. Government and the U.S. 

Semiconductor Industry Association (SIA) continued 

to monitor the share of the Japanese semiconductor 

market occupied by foreign suppliers. By the fourth 

quarter, the foreign share of Japan's semiconductor 

market had reached an unprecedented 20.2 percent, 

reaching the "target" set in the 1991 arrangement. 197 

The 1991 agreement stated that the 

Government of Japan—recognizes that the 

U.S. semiconductor industry expects that the 

foreign market share will grow to more than 

20 percent of the Japanese market by the end 

of 1992 and considers that this can be 

realized. The Government of Japan welcomes 

the realization of this expectation. The two 

Governments agree that the above statements 

constitute neither a guarantee, a ceiling nor a 

floor on the foreign market share. 198 

This particular clause of the agreement led to 

considerable friction between the two countries 

during 1992, as each side offered its own 

interpretation in the face of a stagnating foreign 

share of the Japanese semiconductor market. 

Controversy over the agreement began early in 

1992 when official U.S. estimates indicated that the 

foreign share of the Japanese semiconductor market 

was 14.4 percent in the fourth quarter of 1991, only 

0.1 percent higher than the estimate for the previous 

quarter. The slight increase in market share drew 

sharp criticism from the SIA, which voiced 

dissatisfaction with Japan's efforts to open its markets 

and predicted that the 20-percent market share goal 

would not be achieved by the end of I992. 1 " 

Japan's sluggish domestic economy was cited by 

some Japanese Government and industry officials as 

the cause of the near-stagnant foreign share of the 

semiconductor market. The Japanese economy entered 

a serious slowdown in 1991 that, according to 

Japanese Government officials, hampered efforts to 

increase-foreign-source chip purchases, as electronics 

firms cut back on production. This argument was 

largely rejected by U.S. Government and industry 

officials, however, who pointed out that foreign 

market share did not expand very much during the 

late 1980s, when the Japanese economy was booming 

and the semiconductor market was strong. 

Following further pressures from SIA and 

Congress, on May 26 USTR announced a formal 

interagency review of the implementation of the 

semiconductor agreement involving the Departments 

of State and Commerce, USTR, and other 

Government agencies 20° The review was to be 

completed by August 1, 1992. The announcement by 

USTR was quickly followed by a warning from 

Government officials in Japan that too much pressure 

for increased imports of semiconductors could lead 

Japan's electronics industry to reduce its foreign 

purchases 201The warning was accompanied by a 

statement from Minister Watanabe that the slowdown 

in the Japanese economy, not a lack of effort by 

Government and industry officials, was behind the 

stagnant sales of foreign semiconductors in Japan. 202 

The impending U.S. review of the semiconductor 

agreement and concern over possible U.S. sanctions 

sparked a flurry of effort to improve the market share 

of foreign semiconductor suppliers in Japan. During 

the first week of June representatives from the SIA 

and the Electronics Industry Association of Japan 

(EIAJ) met in Tokyo for their annual bilateral meeting 

to discuss ways in which Japanese firms could boost 

imports of U.S. chips. 203The two sides agreed on 

what the EIAJ termed "emergency special measures" 

to increase purchases of foreign semiconductors by 

Japanese firms. Under the EIAJ's plan, Japan's 10 

largest semiconductor users, who account for roughly 

half of the Japanese market, agreed to provide U.S. 

suppliers with confidential semiconductor purchase 

plans to aid their marketing efforts. The 10 companies 

also pledged to issue internal memoranda to all 

employees expressing a commitment to boost 

purchases of foreign chips. In return, the SIA 

promised to encourage smaller U.S. suppliers to 

ensure sufficient designers and engineers in Japan to 

handle increased demand, to promote the 

"designing-in" of foreign semiconductors in Japanese 

products and shorten the design-in cycle time, and to 

respond quickly to consumer complaints. 2°4 

Despite the progress made during the SIA-EIAJ 

meeting in Tokyo, the semiconductor agreement again 

came under criticism when official U.S. statistics for 

the first quarter of 1992 indicated that the foreign 

share of the Japanese market had risen only slightly, 

to 14.6 percent. Although applauding the SIA-EIAJ 

60 
agreement made roughly 1 week earlier, Ambassador 

Carla Hills announced that the U.S. Government 

would follow through with the interagency review of 

the bilateral semiconductor agreement. 2°5 

On August 4, 1992, the USTR announced that 

"the two-month U.S. inter-agency review of the 

U.S.-Japan semiconductor agreement revealed that 

since the agreement came into effect in August 1991, 

efforts by the Japanese Government and Japanese 

Industry to improve market access for foreign 

semiconductor suppliers have not, to date, resulted in 

sufficient progress." 206The interagency report also 

noted that the design-ins of foreign semiconductors 

and long-term relationships that had been entered into 

by foreign and Japanese firms had not yet resulted in 

the increased level of foreign sales and foreign market 

share that had been anticipated. Taking into account 

the disappointing 0.2-percent increase in foreign 

market share seen in the first quarter of 1992, 

Ambassador Carla Hills indicated that if substantial 

progress were not made in the coming months, 

"additional actions, as necessary, to fulfill the terms of 

the Arrangement" would be taken. 207 

A bright spot for the U.S.-Japan semiconductor 

agreement appeared on September 24, 1992, when 

USTR announced that the foreign share of the 

Japanese semiconductor market had grown by 1.4 

percent in the second quarter of 1992, to an estimated 

16.0 percent. This figure represented the largest 

quarterly increase to take place under the 1991 

semiconductor accord or its predecessor, the 1986 

U.S.-Japan semiconductor arrangement. 208 

 Government and industry officials in the United States 

hailed the progress made during the second quarter of 

1992 but also urged Japan to continue its efforts to 

expand purchases of foreign semiconductors. 

During the third quarter the foreign market share 

dipped to 15.9 percent. By the end of 1992, however, 

the expectation that the foreign market share would 

exceed 20 percent was apparently realized. 

Preliminary data released in 1993 indicated that 

during the fourth quarter of 1992, the foreign market 

share reached 20.2 percent. Ambassador Mickey 

Kantor said that the improvement in foreign market 

share— 

clearly demonstrates that U.S. semiconductor 

suppliers can compete effectively in the 

Japanese market when given a fair shot and 

that trade agreements with Japan can, if 

vigorously implemented, provide concrete 

benefits to American industry and workers. 2°9 

However, he also indicated that the United States 

expected "steady and gradual" increases in market 

share during the final 3 years of the agreement until 

July 1996. 

Machine Tools 

The 5-year voluntary restraint agreement (VRA) 

on Japanese exports of machine tools to the United 

States was scheduled to expire on December 31, 

1991.210 The U.S. machine tool industry, which 

began requesting an extension of the VRAs as early as 

March 1991, claimed that significant gains were made 

during the 5 years of protection allowed by the 1986 

agreement. Industry sources estimate that U.S. exports 

of machine tools (including those categories not 

covered by VRAs) rose from about $600 million in 

1986 to $1.1 billion in 1990 and 1991—an increase of 

about 83 percent. 211 

On December 27, 1991, President Bush, citing the 

national security basis for the 1986 agreements, 

directed the USTR to negotiate a limited extension of 

the machine tool VRAs with Japan and Taiwan. 

Restrictions on non-computer-controlled machine 

tools were eliminated in December 1991, and all 

remaining restrictions on machining centers, 

computer-controlled lathes, computer-controlled 

punching and shearing machine tools, and 

computer-controlled milling machine tools were to be 

phased out over a 2-year period beginning in January 

1992.212 

A new machine tool VRA with Japan was signed 

in Washington on June 30, 1992, by Ambassador 

Carla Hills and Japanese Ambassador Takakazu 

Kuriyama. It was the result of several rounds of 

negotiations and followed a tentative agreement 

reached by the two sides in late April 1992. The 

agreement applies retroactively to exports of machine 

tools since January 1, 1992, and is scheduled to run 

through 1993. Under the new VRA Japan agreed to 

restrict exports of four categories of machine tools to 

the U.S. market: numerically controlled (NC) lathes, 

NC milling machines, machining centers, and NC 

punching and shearing machines. Shipments of these 

products will be limited to the shares of apparent 

1992-93 U.S. consumption as indicated in table 4-1. 

This phased approach was designed to allow U.S. 

machine tool firms to gradually adjust to greater 

competition from Japanese suppliers .213 

As with the previous VRA the apparent 

consumption shares indicated in table 4-1 will be 

translated into ceilings for actual numbers of machine 

tools based on projections of U.S. apparent 

consumption supplied to Japan by the U.S. 

Government.214The agreement contains provisions 

for emergency consultations between the two sides if 

61 
Table 4-1 

Share of U.S. apparent consumption of Japanese machine tools for the period 1992-93, allowed 

under the 1992 U.S.-Japan VRA 

Category 1992 1993 

Percent Share 

NC Lathes 57.47 60.27 

NC Milling Machines 7.17 7.47 

Machining Centers 51.54 54.03 

NC Punching and Shearing Machines 19.25 21.56 

Source: U.S. Department of State. 

the Government of Japan considers that, as a result 

of participating in the VRA, Japanese suppliers are 

not receiving fair and equitable treatment in relation 

to non-VRA country machine tool exports to the 

United States. 215 

Paper and Paper Products 

Japan is the world's second-largest consumer and 

producer of paper and paperboard. However, 

according to U.S. industry estimates, imports 

accounted for only 4.1 percent of Japan's $27 billion 

paper and paperboard market in 1991, with the U.S. 

share totaling 2.1 percent. During 1991 the United 

States held three rounds of talks with Japan to 

increase foreign access to Japan's market for printing 

and writing paper and paperboard packaging products. 

U.S. paper manufacturers have experienced 

difficulties in marketing paper and paperboard in 

Japan. According to the Japan Fair Trade Commission 

(JFTC), distribution channels for paper are reportedly 

characterized by long-term, close relationships 

(including financial ties) between manufacturers, 

intermediaries, and customers. 

On January 9, 1992, the White House announced 

that the United States and Japan would agree by 

March 1992 on measures to substantially increase 

access to Japan's paper market for foreign producers 

and that the JFTC would initiate a study of 

competition in the paper sector to be completed 

during the same time period. 216On April 5, 1992, 

through an exchange of letters, the two countries 

agreed to "Measures to Increase Market Access in 

Japan for Foreign Products." The measures were 

incorporated in the "U.S.-Japan Market Access 

Agreement" signed by Deputy United States Trade 

Representative Michael Moskow and Japan's 

Ambassador to the United States, Takakazu Kuriyama 

on April 23, 1992. 217Among the measures agreed to 

were that the Government of Japan would encourage 

Japanese paper and paperboard producers, distributors, 

converters, and printers to implement internal 

programs to ensure compliance with the 

Antimonopoly Law. The Government also made a 

commitment to encourage major Japanese paper 

companies to promote "effective long-term 

buyer-supplier relationships with foreign producers of 

paper products to increase market access for 

competitive foreign paper products." In addition, to 

encourage major end users to increase purchases of 

foreign paper products, the Government of Japan 

agreed to urge them to adopt and implement open and 

nondiscriminatory purchasing for foreign and 

domestic paper products. The Government of Japan 

also agreed to assist foreign paper suppliers in 

obtaining information on Japanese import incentives 

and promotion programs. The two countries agreed to 

hold bilateral meetings twice each year to review 

implementation of the agreement. 218 

The American Paper Institute was very pleased 

with the agreement and called it a "major 

achievement."219At the same time, representatives of 

the U.S. paper industry noted that they would be 

closely monitoring whether the agreed-upon measures 

are implemented properly and whether they result in 

significantly increased access to the Japanese market. 

Mexico 

The progressive improvement that characterized 

U.S.-Mexican relations in the past few years in the 

wake of dramatic economic reforms within Mexico 

was capped in 1992 with the NAFTA, signed on 

December 17. 220Although economic relations 

focused on the negotiations during most of the year, 

some bilateral issues arose that were addressed outside 

of the NAFTA. Most important among these were 

Mexican measures to control the fast-growing tide of 

imports from the United States. The new Mexican 

measures—including the sudden implementation of 

labeling and certification requirements, imposition of 

new tariffs, and the recent aggressive enforcement of 

62 
importers' tax obligations—caused problems for U.S. 

exporters and led to bilateral discussions. 

In 1992, U.S.-Mexican trade expanded vigorously, 

despite a recession in the United States and an 

economic slowdown in Mexico. The reasons for the 

Mexican slowdown, and the fifth extension of the 

Salinas administration's economic program during the 

year, are covered below. A continued path of 

economic stabilization and structural reform was also 

signified by another 1992 landmark event, the 

replacement of Mexico's seven-decade-old agrarian 

system with a market-oriented system based on 

private property rights. The now defunct agrarian 

system was based on communal ("ejido") farming and 

originated in the Mexican revolution of the 1910s. 

The Pact for Stability, 

Competitiveness and 

Employment 

On October 20, 1992, Mexican President Salinas 

de Gortari extended his economic program, "The Pact 

for Stability and Economic Growth" (PECE), through 

the end of 1993. The extension marked a continuation 

of the Salinas administration's highly successful 

"Pact" with Mexican business and labor, originally 

launched in 1989 and since extended five 

times.221The program has been credited with great 

success in reducing inflation and shrinking public debt 

while simultaneously achieving growth. 

For the purposes of this latest extension, the 

administration retained the Pact's original Spanish 

acronym (PECE) but changed the program's full name 

to "The Pact for Stability, Competitiveness and 

Employment".222The substitution of the term 

"growth" in the program's earlier name with the terms 

"competitiveness and employment" conveyed, in 

addition to shifts in priorities, a subtle 

acknowledgement that the Mexican economy was 

losing steam in 1992. Growth, averaging 3.8 percent 

yearly in 1989-91, declined to 2.6 percent in 1992. 

For 1993 growth is projected at 2.7 percent. 223 

 Economic optimism was also shaken by the volatility 

of the Mexican stock index during the year. The index 

plummeted from a high of 1,907 points on June 1, 

1992, to a low of 1,252 points by the end of 

September, although it recovered to 1,759 points by 

the end of the year.224 

In his "INFORME" (state-of-the-nation address) 

delivered on Nov. 1, 1992, President Salinas 

emphasized the themes of competitiveness and 

employment. He said that in addition to striving for 

cometitiveness through macroeconomic policies, 

authorities will focus on boosting employment and 

productivity in small and medium-sized companies in 

industries such as textiles, clothing, leather tanning, 

and footwear. 225 

Mexico's slackening 1992 growth rate can be 

attributed in large measure to the Government's 

tightening fiscal and monetary policies aimed at 

reducing inflation. 1 he average short-term interest 

rate, which declined steadily from almost 26 percent 

in December 1990 to 11 percent in mid-March 1992, 

rose again to some 18 percent by October 1992 and 

closed 1992 at 16.8 percent. 226The Government's 

inflation-containing tight-money policy combined 

with some other developments in slowing Mexico's 

economic growth. For example, foreign borrowing 

was restricted once again to control Mexico's 

climbing foreign debt. In December 1991 the Bank of 

Mexico had estimated Mexico's external debt at 

$105.8 billion, up from - its lowest point of $95.1 

billion in 1989 after the debt crisis of 1982. The rise 

induced the Salinas Government in April 1992 to limit 

foreign borrowing by commercial banks to 10 percent 

of their total liabilities. In November this limit was 

relaxed to 20 percent227even though yearend external 

debt, at an estimated $105.0 billion, was only slightly 

lower than in December 1991. Recessions in the 

United States and other major' Mexican export 

markets were additional factors depressing the growth 

of the economy.228 

The Government's fight against inflation 

continued to be effective, however. From the 

beginning of its tenure in December 1988, the Salinas 

administration has pursued a consistent and very 

successful policy of inflation control. From triple-digit 

levels in 1987, inflation was reduced to an annual 

average of 18.8 percent in 1991, and 11.9 percent in 

1992.229The administration still considers such 

inflation excessive at a time when Mexico is planning 

to team up in the NAFTA with two advanced 

industrial countries possessing relatively stable 

currencies. Mexico aspires for competitiveness on a 

global scale. 230Reducing inflation remained 

therefore the overriding macroeconomic priority in the 

extended "Pact," and in the Salinas administration's 

1993 budget proposal submitted to the Mexican 

Congress in November 1992. 231The officially 

targeted inflation rate for 1993 is 7.0 percent. 232 

 However, Mexico's worsening trade balance 

compelled the administration to take a mildly 

inflationary step during the year and accelerate the 

peso's daily devaluation rate starting in October. 233 

Reduction of internal debt—another major 

accomplishment of the Salinas administration63 
continued in 1992. As a result of fiscal discipline, a 

dynamic economy, and large state revenues from the 

privatization process, Mexico's internal debt as a ratio 

of gross domestic product (GDP) fell from 24.1 

percent in 1989 to 21.2 percent in 1990, 17.9 percent 

in 1991, and an estimated 14.5 percent in 1992. 234 

Unemployment and underemployment continued 

to be a pressing problem. 235According to data from 

the National Statistical Institute, only 30 percent of 

the Mexican population was economically active as of 

1990—the most recent comprehensive data 

available 236The 1992 slowdown of economic growth 

reduced job creation. 

Efforts to Control the Trade 

Deficit 

In his November 1992 state of the nation address 

President Salinas defended Mexico's current account 

deficit and trade deficit in the following words: 

. . . the current account situation is a result of 

the structural change now taking place in our 

economy, and it reflects the large amounts of 

capital that have entered the country in recent 

years. This capital has provided financing to 

import the intermediate and capital goods 

needed to embark promptly on the 

reconversion process required by the new 

economic environment. These goods represent 

85 percent of all imports. 237 

The data below show Mexico's merchandise trade 

flows in recent years, and the steady deterioration of 

the country's trade balance since 1987. In 1989, the 

first full year of the Salinas administration, a trade 

deficit replaced the positive balances attained before 

1988. Subsequently, the deficit rapidly widened each 

year (in billion of dollars), as reported in Comercio 

Exterior, July and September 1992, and by the U.S. 

Embassy, Mexico, Economic and Financial Report, 

April 1993, p. 

Merchan- Merchandise Oil dise Trade 

Year exports products imports balance 

1987 20.5 8.6 13.3 7.2 

1988 20.5 6.7 20.3 0.2 

1989 22.8 7.8 25.4 (2.6) 

1990 26.8 10.1 31.3 (4.5) 

1991 27.1 8.7 38.2 (11.1) 

1992 27.5 ( 1 ) 46.1 (18.6) 

1Not available. 

Because corporate and individual demand for 

foreign goods had not been met for many years in the 

formerly highly protectionist Mexico, the removal of 

barriers in the late 1980s sparked an import surge. 

Mexican exports continued to perform well, but they 

could not keep pace with the rapid rate of import 

growth. Although faster growth in imports over 

exports had several causes unrelated to the 

liberalization of trade in Mexico (notably recessions 

in the United States and other important markets,) 

pent-up import demand freed by liberalization was a 

major factor. 

Despite defending the current account deficit and 

the import surge as necessary to attain 

competitiveness, it became apparent in 1992 that the 

Salinas administration was trying to control the 

growing trade imbalance, especially in the second half 

of the year. The October 1992 acceleration of the 

peso's daily depreciation mentioned earlier (which, in 

effect, amounted to the slowing of the peso's 

inflation-driven real-term appreciation) 239was one of 

these moves 240This act responded to a widespread 

concern that the peso was overvalued to the detriment 

of Mexican export-competitiveness. 241The raising of 

the peso's depreciation from 20 centavos to 40 

centavos daily rendered exports more competitive, but 

it made imports somewhat more expensive. A widely 

expected major devaluation of the peso has yet to 

materialize, however, apparently because of the high 

priority still being accorded to inflation control. A 

significant devaluation, which is still considered a 

possibility,242would slow down the rapid growth of 

U.S. exports to Mexico. 

Actions with purely import-containing effects 

were also indicative of the Salinas administration's 

desire to control the trade imbalance. These moves 

included the sudden enforcement of labeling and 

certification requirements; imposition of new duties; 

and more vigorous efforts to hold importers to their 

obligations under tax laws. 

Import Labeling and Certification 

Requirements 

On July 1, 1992, an amendment to Mexican rules 

on labeling imported apparel and leather products 

became effective. This amendment provided that prior 

to the products' entry into Mexico, it must be labeled 

by the exporter, not by the importer as had been the 

case. Rules on labeling had been on the books in 

Mexico since 1987.243In 1990 authorities required 

that importers attach Spanish-language labels to the 

products at their own facilities in Mexican customs 

territory. Subsequently, article 127 of a decree 

amending the Federal Customs Law and published in 

December 1991 244shifted the obligation of labeling to 

the exporter. 

3: 238 

64 
In mid-1992 Mexico also began border inspection 

of imported consumer products for compliance with 

the Mexican Official Standard (NOM), and started to 

require certification of such compliance. In August 

and November 1992, the Mexican Government 

published decrees identifying additional product 

categories that would henceforth be subject to labeling 

or certification of compliance. 245The affected 

categories were apparel and leather products for 

labeling246and electric household appliances, radio 

and television, and rubber products, including 

automobile tires, for certification. Certificates were to 

be issued to importers by laboratories accredited by 

the Mexican Secretariat of Commerce and Industrial 

Development. Only laboratories in Mexico are 

presently eligible for such accreditation, although 

recognition of foreign bodies for purposes of NOM 

certification is being considered. Imported products 

subject to labeling and certification requirements 

could enter Mexico only at the border zone or a 

free-trade zone. On September 24 the Mexican 

Customs Bureau began to halt all imports that had not 

met the new requirements, causing huge customs 

delays. This delay resulted in part from a shortage of 

independent Mexican facilities accredited for testing, 

causing problems to U.S. exporters of automobile 

tires, electrical transformers, electrical appliances, and 

cable and wire, among others. Another problem for 

exporters was lack of clarity in the labeling rules for 

products such as those made of leather. 

The Mexican side, while recognizing the 

disruption caused to U.S. exporters, argued that the 

new regulations were designed with the sole purpose 

of protecting against substandard merchandise. 

Mexican officials denied that a new policy to limit 

imports was in effect. They pointed out that the 

labeling and certification requirements in question 

applied to domestic products as well as imported ones. 

Mexico conceded, however, that imported products 

lend themselves better to the enforcement of standards 

at the point of entry than do domestic products, which 

are spread out across the country. 247Mexican 

officials held out no hope for an extended suspension 

but were reportedly cooperative in clarifying and 

easing the technical problems that U.S. exporters had 

with the new regulations. With regard to its own 

limited testing capacity, Mexico stated that a crash 

course for speedy accreditation of testing facilities 

was already under way. 248 

Tariff Actions 

In late 1992 Mexico took "temporary" tariff 

actions that, although not in violation of Mexico's 

commitment to the GATT, nevertheless disrupted U.S. 

exports. (Going beyond its GATT commitment of a 

50-percent maximum tariff rate, Mexico unilaterally 

maximized its applied tariff rate at 20 percent in 1987. 

Most Mexican tariffs are between 10 and 20 percent, 

and the trade-weighted average tariff is about 10 

percent.) 

On September 21, 1992, Mexico increased its 

tariff on polypropylene from zero to 10 percent, 

effective immediately. In response, on November 23, 

President Bush withdrew Mexico's eligibility for 

duty-free treatment under the Generalized System of 

Preferences for imports of Mexican polypropylene. 249 

 The imposition of "temporary" tariffs on live cattle 

and beef products on November 10, effective 

immediately, was another new "temporary" tariff 

action.250In this case Mexico conceded that the 

move was a safeguard action to restrict imports that 

surged by 513 percent between January 1989 and July 

1992, causing near-depression in the domestic 

industry.251The measure places a 15-percent duty on 

live cattle and fresh and frozen beef carcasses, a 

20-percent duty on fresh beef cuts, and a 25-percent 

duty on frozen beef cuts. 

In both the polypropylene and beef cases, affected 

U.S. interests expressed considerable concern about 

the Mexican action. In the words of Rick Perry, Texas 

Agriculture Commissioner, "[The tariffs on beef] 

violate the spirit of the NAFTA agreement, and could 

make congressional approval of the accord more 

difficult."252 

Enforcement of Mexican Importers' 

Tax Obligations 

In November 1992 Mexico's Ministry of Finance 

issued a regulation requiring Mexican importers to 

prove that they have complied with Mexican tax laws 

in the prior 4 years before Mexican customs 

authorities will clear an import shipment. 253The 

rules were not officially published but instead were 

communicated to customs brokers, who then 

instructed importers on their obligations. To prove that 

they are up to date, habitual importers must register 

with the Ministry of Finance and obtain tax 

identification numbers. The registry is managed by 

Mexican customs authorities, who are part of the 

Finance Ministry. The lack of transparency concerning 

these new importer obligations, the long wait before 

importers could get registered, and the unpreparedness 

of Mexican customs for enforcement caused delays 

and disruptions for U.S. exports to Mexico.254 

 Mexican officials claimed that the verification of 

importers' tax payments was intended to deter 

smuggling and tax evasion. Yet U.S. analysts felt that 

65 
the timing of this and other recent actions disrupting 

importation was more than coincidental in the light of 

Mexico's rapidly widening trade deficit. 255 

Agricultural Reform 

In January 1992 the Mexican Congress adopted 

the Salinas administration's proposed amendment to 

article 27 of the Constitution of 1917, 256launching a 

comprehensive agrarian reform program that 

amounted to the reversal of more than seven decades 

of farming dominated by communal land ownership. 

This event was followed in February 1992 with 

implementing agrarian legislation 257and in December 

1992 with legislation concerning forestry and 

water. 258These laws laid the legal foundations for a 

market-oriented agrarian system based on private 

ownership and more receptive to foreign investment. 

Article 27 of the Constitution had been 

responsible for creating a network of cooperative 

farms in Mexico based on communal land tenure. 

Known as "ejidos," these farming units increasingly 

displaced private farming since Mexico's 1910-17 

revolution. The article conferred on all citizens the 

right to land, and obliged the Government to provide 

it by authorizing the expropriation of all land deemed 

"unused or underused." The subsequent expropriation 

of the large, privately owned "haciendas" ended the 

prerevolutionary feudal system of land tenure, 

replacing it with the "ejido system." This 

revolutionary land reform code aimed at improving 

the standard of living for Mexicans, a large majority 

of whom were then peasant farmers. At the time the 

reform was perceived as necessary social justice, and 

it became a prominent symbol of the Mexican 

revolution of 1910-17. 

Over the next seven decades, successive Mexican 

administrations divided nearly 260 million acres into 

28,000 ejidos. The Government retained the 

ownership of the land but conferred on the ejidos the 

right to use it. In some cases the ejidos were 

cultivated collectively, but generally farmers were 

allotted individual parcels, which their families then 

held for generations. In its first decades the ejido 

system had a beneficial effect on Mexican agriculture 

by bringing vast expanses of fallow land under 

cultivation. 259In the longer term, however, the ejido 

system proved to be less than effective. Prohibited 

from selling or mortgaging land, the farmers were 

prevented from obtaining private credit and were 

deprived of the incentive to make improvements. The 

system thus severely hampered the modernization and 

mechanization of Mexican farming. Ongoing 

redistribution of land by the Government could not 

keep pace with the farming population's rapid growth, 

and as a result, the ratio of people to farms increased 

steadily. Ejido land was frequently subdivided into 

ever smaller plots, severely depressing farmers' 

income and productivity. 

Government control gradually extended to other 

aspects of the Mexican agricultural system, from the 

regulation of farm prices to the establishment of 

monopolies in the area of purchasing produce and 

distributing farming supplies. In 1991, agricultural 

production represented only 9 percent of Mexico's 

GDP, yet it absorbed 26 percent of its labor force, 

attesting to the weakness of the farm sector in the 

econom y. 26° 

Prior to 1992 the Salinas administration reduced 

the influence of parastatal companies operating in 

agriculture. In 1991, officials reduced the power and 

budget of the National Company for Food 

Distribution (CONASUPO), the Government's 

food-marketing parastatal. CONASUPO currently 

supports prices for only two staple commodities: 

beans and corn. In the same year the Government 

ended the state's monopoly on fertilizer distribution 

by privatizing FERTIMEX. 261 

The new laws adopted in 1992 provide that 

individual ejido farmers should be given title to the 

land they cultivate. The farmers' right to lease or sell 

land or use it as collateral for loans was also codified. 

The new laws removed a Mexican citizen's automatic 

right to land and the Government's obligation to 

provide it to landless individuals. The Government's 

authority to expropriate land it deems "unused or 

underused" was withdrawn, thereby making safer the 

investment of private individuals or corporations into 

farm land. The new laws also relaxed earlier limits on 

acreage, so corporations and associations could reap 

economies of scale from operating large parcels of 

land.262The transition period for implementing the 

entire agrarian program is expected to take a 

significant amount of time—possibly 10 years or 

longer.263 

After a year in operation, the agrarian reform has 

yet to show its impact. Widespread concerns that 

farmers in large numbers would rush to sell or lease 

their land and abandon the countryside have proven 

unfounded. Observers think that one of the reasons for 

such inaction is the lengthy process of obtaining land 

titles for 10 million individual ejido farmers. Such a 

task requires extensive land survey work and legal 

preparation. 264Analysts estimate that only about 50 

percent of the titles will be issued by the end of the 

Salinas administration's tenure in December 1994. 265 

 More importantly, interviews conducted with the 

farmers themselves indicate that they are less 

66 
interested in selling their newly acquired land than in 

renting it or in locating partners or funds that would 

help them cultivate it. 266 

Expectations that domestic and foreign investors 

in agrarian enterprises would eagerly respond to the 

Salinas agrarian reform have not materialized. 

Analysts attribute this "wait-and-see" attitude of 

potential investors to the unclear tax implications of 

the new laws and to the current high domestic interest 

rates.267Some limited, high-profile Mexican 

corporate investments have nonetheless taken place. 

For example, AGRAMEX (a Mexican food company) 

invested in former ejido land in Tamaulipas and 

arranged for ejido farmers to produce wheat for the 

company.268 

Although the new farm law seeks to facilitate 

agricultural investment, such foreign investment 

remains hampered by foreign land ownership 

restrictions, which continue. Foreigners are still not 

allowed to own land within 100 kilometers of 

Mexico's frontiers or 50 kilometers of either coast. 

These out-of-limit areas constitute a large portion of 

Mexico's cultivable land and include some of the 

country's prime vegetable-producing land in Baja 

California and Sinaloa, as well as good crop and cattle 

land in Tamaulipas and Veracruz. Besides, even in 

nonrestricted areas, foreigners may not own more than 

49 percent of land holdings. However, in farm-related 

production, such as food processing and distribution, 

foreign ownership of up to 100 percent is allowed. 269 

Potential U.S. and Canadian investors are believed 

to be reluctant to commit to new investment or 

expansion until the NAFTA is ratified. The Salinas 

farm reform is ultimately expected to help U.S. and 

Canadian companies already in Mexico—most of 

whom are agricultural processors of frozen vegetables, 

grains, oilseeds, citrus, poultry, and distilled 

spirits—to expand their operations. 270It is also 

believed that the NAFTA's U.S.-Mexican bilateral 

chapter on agriculture271will further strengthen the 

impact of the reform by encouraging U.S. investment 

in the above sectors, and possibly to a minor extent in 

the fish and alcoholic beverages sector. Further U.S. 

investments in Mexico's vegetable, citrus, other fruit, 

and cut rose industries, with a focus on the U.S. 

market, are also seen as distinct possibilities. 272 

China 

The United States and China signed two major 

agreements during 1992 that laid the foundation for a 

significant improvement in bilateral economic and 

trade relations. An agreement committing China to 

provide for the adequate and effective protection of 

U.S. intellectual property rights (IPR) was concluded 

in January 1992, and the Chinese Government took a 

series of steps to comply with its requirements during 

the course of the year. The second agreement, reached 

in October, commits China to expand access to its 

markets for U.S. exports by undertaking the scheduled 

elimination of most of its nontariff import barriers and 

by reducing prohibitively high tariffs on certain 

imports. Although the import reforms provided for 

under the market-access agreement specifically 

address U.S. concerns, they are also among the 

changes that China must make in its trade policies and 

practices to meet the requirements for membership in 

the GATT—a distinction China sought with renewed 

vigor in 1992. 

Agreement on Intellectual 

Property Rights 

On January 17, 1992, the United States and China 

signed a memorandum of understanding 273that 

commits China to provide significantly improved 

protection for U.S. inventions and copyrighted works, 

including computer software and sound recordings, 

and to adopt rules and regulations for the protection 

of trade secrets. The agreement resulted from several 

years of bilateral negotiations on methods for 

improving China's protection of IPR. After little 

progress had been made in earlier talks, the USTR 

identified China as a priority foreign country under 

section 301 of the Trade Act of 1974 and initiated an 

investigation of China's IPR practices on May 26, 

1991.274When the two countries were unable to 

resolve a number of principal IPR issues by 

November 26, 1991, the date the investigation was 

scheduled to end, the USTR extended the 

investigation to January 16, 1992, and issued a list of 

Chinese products, consisting of about $1.5 billion in 

annual U.S. imports from China, to which 

significantly higher tariffs might be applied if 

negotiations during the almost 3-month extension 

were not successful. 275The United States and China 

reached agreement during the final hours of January 

16. The investigation was terminated, and the list of 

proposed punitive tariffs was withdrawn. 276 

Despite the difficult negotiations leading to the 

agreement, China made considerable progress during 

1992 toward meeting its commitments in the 

memorandum of understanding. To improve the level 

of protection afforded copyrighted works, China 

joined the Berne Convention for the Protection of 

Literary and Artistic Works in October 1992 and 

made a commitment to join the Geneva Phonograms 

Convention by June 1, 1993. It agreed to issue new 

67 
regulations to implement these conventions and to 

amend its 1991 copyright law to make it fully 

consistent with them. 277Under the Berne Convention 

China will extend protection to existing as well as 

new copyrighted works and sound recordings and will 

protect computer programs as literary works for a 

term of 50 years. 278China further promised to ensure 

that copyright owners of computer programs and 

sound recordings have control over the rental of their 

works.279 

To meet its commitments to improve protection 

for U.S. inventions, China amended its 1984 patent 

law during 1992. Among the key amendments were 

changes to protect chemical processes in addition to 

products and to extend the term of patent rights to 

inventions from 15 to 20 years from the date of filing. 

The Chinese Government also issued regulations to 

provide administrative protection for patented 

pharmaceuticals and agrichemicals. The amended law 

and new regulations became effective on January 1, 

1993. 

China still has no trade secrets law. However, the 

Chinese Government has made a commitment to pass 

an unfair competition law that will improve protection 

for trade secrets by January 1, 1994. 

Market-Access Agreement 

On October 10, 1992, the United States and China 

signed a memorandum of understanding 280that 

commits China to open its markets to U.S. exports by 

undertaking major reforms of its trade regime. The 

agreement ended a yearlong investigation under 

section. 301 of the Trade Act of 1974 to determine 

whether specific market-access barriers in China were 

unreasonable or discriminatory and burdened or 

restricted U.S. commerce. The investigation, which 

was initiated by the USTR at the direction of the 

President, 281 focused on those practices of the 

Chinese Government that were considered to cause 

the greatest harm to major U.S. export interests: 

import prohibitions and quantitative restrictions; 

restrictive import-licensing requirements; technical 

barriers to trade, including standards, testing, and 

certification requirements, especially in the 

agricultural area; and unpublished or unclear 

regulations governing China's imports. Other U.S. 

concerns were China's excessively high tariff rates 

and an import-substitution policy that effectively 

prohibited the entry of many products. 282 

Some progress was made toward resolving these 

issues during a series of bilateral meetings that 

followed the initiation of the investigation on October 

10, 1991, but the two sides were still unable to reach 

agreement after more than 10 months of negotiations. 

On August 21, 1992, the United States took the first 

step toward imposing punitive trade sanctions against 

China should it fail to make the required 

commitments to improve market access. The USTR 

released a list of Chinese products that were targeted 

for possible tariff rate increases of up to 100 percent 

ad valorem. 283In response to the list, which 

accounted for $3.9 billion in U.S. imports from China 

during 1991, the Chinese Government threatened to 

increase tariffs to prohibitive levels on U.S. exports 

amounting to about $4 billion annually. Although the 

two countries appeared to be on the brink of a trade 

war, negotiations intensified, and the October 10 

deadline for concluding the market-access agreement 

was met.284 

The agreement commits China to phase out most 

of its nontariff barriers, such as licensing 

requirements, quotas, and bans, on imports of specific 

commodities and to eliminate regulations that severely 

restrict imports in certain sectors of the Chinese 

economy. The scheduled phaseout of the 

product-specific restrictions began on December 31, 

1992, and will continue on a once-a-year basis until 

December 31, 1997. 285 

Barriers to the importation of only four 

products—telephonic or telegraphic switching 

equipment, instant cameras, instant print film, and 

cathode-ray oscilloscopes and oscillographs—were 

scheduled to be lifted at the end of 1992, but 

approximately 75 percent of China's nontariff import, 

restraints are to be removed within 2 years. For 

example, licensing requirements restricting imports of 

airplanes and helicopters and import controls on some 

industrial machinery are scheduled to be eliminated 

on December 31, 1993. This step will be followed by 

the lifting of restrictions on imports of electrical 

appliances, medical equipment, most computers, and 

various auto parts on December 31, 1994. Nearly all 

of the restrictions that apply to pharmaceuticals and to 

other chemical products, consisting mainly of quotas, 

will remain in effect until the end of 1995. 

In addition to its commitments to gradually 

remove numerous product-specific nontariff barriers, 

the Chinese Government promised to immediately lift 

quantitative restrictions on imports of automobiles and 

auto parts needed by U.S. joint ventures in China to 

meet their production requirements. In response to 

another key concern to U.S. investors in China, the 

Chinese Government agreed to take appropriate steps 

by March 31, 1993, to ensure that the procurement of 

digital switching systems equipment is conducted on 

the basis of internationally accepted procedures of 

68 
open tender and bidding without discrimination as to 

the source of the equipment. In turn, the U.S. 

Government agreed to liberalize export controls on 

telecommunications and to apply these changes to 

China.286 

The agreement further commits China to liberalize 

import controls on some major U.S. agricultural 

products, including wheat and other grains, edible 

oils, and fruits. China agreed to remove most of the 

licensing requirements and quotas that apply to these 

commodities during 1993 or 1994. China also agreed 

to eliminate standards and testing requirements that 

apply to foreign agricultural products but not to 

domestic products and that therefore serve mainly as 

trade barriers. In addition, China agreed to resolve 

within 12 months all U.S. concerns about 

phytosanitary restrictions on imports of fruits, wheat, 

and tobacco that the United States claims are 

scientifically unjustified and to negotiate within a year 

a veterinary protocol to the agreement that will 

eliminate arbitrary import barriers and establish sound 

scientific standards for the importation of 

animal-breeding stock. 

The agreement also commits China to 

significantly reduce its tariffs on certain imports. The 

products scheduled for duty reductions by December 

31, 1993, include edible fruits and nuts, vegetable 

oils, photographic goods, miscellaneous chemical 

products, articles of iron and steel, machinery, 

electrical equipment and parts, cosmetics, and games. 

Tariffs on these products were raised to prohibitively 

high levels during an economic retrenchment program 

that the Chinese Government initiated in late 1988. 287 

In addition, the agreement confirms that China has 

eliminated all import-substitution regulations and 

policies, as it had agreed to do during bilateral 

negotiations in July 1992. The Chinese Government 

further pledged not to require in the future as a 

condition for granting import licenses either the 

transfer of technology to China or investment in 

China. In the past China has used import-substitution 

measures mainly as a means to force U.S. and other 

foreign companies to transfer technology to gain entry 

into the Chinese market. 

Another key provision commits the Chinese 

Government to publish on a regular and prompt basis 

all laws, regulations, policies, and decrees dealing 

with the operation of its import and export system. 

China further promised to issue regulations, to go into 

effect within 12 months, stipulating that only those 

documents that have been published and made readily 

available to other governments and to foreign traders 

can be enforced. These regulations will end China's 

longtime practice of using mainly secret directives to 

govern trade. 

China and the GATT 

In early 1992 China launched an all-out effort to 

attain membership in the GATT. As the year began, 

Chinese officials stated that their aim was to qualify 

by the end of 1992 or early 1993. At yearend, 

however, both the United States and the European 

Community were asking for more clarification of 

China's trade policies and practices, and China's 

discussions with the GATT on the terms of its 

membership had barely begun. China was an original 

contracting party to the GATT in 1948, withdrew in 

1950 after the Communists came to power, and 

reapplied for membership in 1986. The meetings of 

the GATT working party considering China's 

application for reentry were suspended as a result of 

the Chinese Government's military suppression of the 

prodemocracy movement in June 1989 and the 

slowdown in economic reforms that followed. They 

were not resumed until February 1992. 

Accession to the GAIT could offer China 

important benefits. Chinese officials have repeatedly 

indicated that the main motivation for wanting to 

rejoin is to take advantage of the most-favored-nation 

tariff status that GAIT members offer one another. 

This basic principle of the international trading system 

under GATT would protect China from the U.S. 

threat, made annually since 1989, either to deny its 

MFN status or to impose conditions that China must 

meet to ensure the continuation of MFN treatment.. 

Readmission to the GATT would also serve to shelter 

China from other member-country restrictions on its 

exports and would provide a forum for China to 

defend itself against dumping charges. 

China's drive for GATT membership was 

provided further impetus in November 1992 when 

formal negotiations were begun on Taiwan's protocol 

,of accession, putting it well ahead of China in the 

process of becoming a member. Taiwan, which China 

regards as an overseas Province, applied to join GATT 

in January 1990 as a separate customs territory under 

the shorthand designation of "Chinese Taipei." China 

accepted the entry of Taiwan on this basis rather than 

as a full member. China insisted, however, that 

Taiwan not be allowed to join until after it does, 

although recently it has softened its position and 

indicated it would accept the admission of Taiwan at 

the same time as its accession to the GATT. 

To regain membership in the GATT, but also as a 

result of the pressure exerted by the United States in 

the bilateral market-access negotiations, China 

69 
launched a series of trade reforms during 1992. To 

bring its method of reporting trade into conformity 

with that used by most trading nations, it implemented 

the Harmonized Commodity Description and Coding 

System, commonly referred to as the Harmonized 

System or HS, on January 1, 1992. Chinese Customs 

cut tariffs on 125 commodities on the same date and 

reduced import duties on another 3,371 commodities 

at yearend. The reductions were made because 

China's tariffs were, and still are, excessively high 

compared with those of GATT-member countries. The 

most recent duty-rate cuts reduced China's overall 

nominal rate by 7.3 percent, but, according to Chinese 

Customs figures, left the average rate on a range of 

6,000 products at approximately 42 percent. 

Acting mainly under U.S. pressure, China also 

began to dismantle its complex system of nontariff 

barriers, the Government's primary means of 

controlling the country's imports, and committed itself 

to a timetable for continuing the process. 288In 

addition, the number of export commodities subject to 

license and quota control was halved during 1992, and 

trade in all but 16 export products, whose domestic 

use was regarded as being too important to permit 

their decontrol, was freed from Government 

monopoly. Among other reforms, China began 

publishing previously secret trade directives over the 

course of the year—its first steps toward complying 

with the GATT requirement that members maintain 

trade transparency as well as with a commitment to 

the United States under the bilateral market-access 

agreement. 

The GATT working party charged with the review 

of China's trade regime and with drafting its protocol 

of accession held three meetings during 1992. The 

decision on whether China should be readmitted to the 

GATT was postponed at the February meeting and 

again at the meeting held in October 1992. The delay 

in making a decision during the October meeting 

reflected doubts about its qualifications for admission 

raised by several delegations, including the United 

States, the European Community, Canada, Brazil, and 

Japan. At the same time, the working party accepted a 

proposal made by India and Pakistan and adopted a 

two-tier approach at the meeting held in December. 

The working party continued to examine recent 

reforms in China's trade regime but also began to 

tentatively discuss the terms of its GATT accession 

protocol.289 

Taiwan 

The U.S.-Taiwan bilateral relationship was marked 

by friction in the first half of the year over protection 

of intellectual property rights in Taiwan but 

strengthened in the second half with the visit of 

Ambassador Carla Hills, the first U.S. Cabinet 

member to visit since the withdrawal of political 

recognition in 1979. Throughout 1992 Taiwan 

continued its drive toward GATT accession. This 

effort advanced somewhat with creation of a GATT 

working party to consider Taiwan's membership 

application. The year ended with ongoing negotiations 

to establish a Trade and Investment Framework 

Agreement with the United States. 

Protection of Intellectual 

Property Rights 

U.S.-Taiwan trade relations soured in early 1992 

when Ambassador Carla Hills named Taiwan a 

"priority" country under the Special 301 provision of 

the 1974 Trade Act. This designation was a result of 

complaints by U.S. companies that Taiwan was not 

sufficiently protecting IPR, and it represented the 

culmination of an ongoing dispute over the past 

decade. As with earlier disputes, 290negotiations 

continued, and an understanding was reached leading 

to the repeal of the priority designation, but at yearend 

the dispute still continued to simmer. 291 

In so naming Taiwan, the USTR stated that 

although Taiwan authorities had worked steadily to 

improve IPR protection and to bring its IPR laws up 

to international standards by considering a host of 

new legislation in areas such as semiconductors, 

industrial designs, and cable television, there was still 

a serious lack of enforcement. 292USTR cited several 

complaints about Taiwan's IPR protection. A key 

problem centered on the piracy of computer software, 

compact discs (CDs), and videotapes. The United 

States maintained that a revision of Taiwan's 

trademark law was necessary, and whereas it 

commended enforcement efforts at the national level, 

it criticized the lack of enforcement by local police 

and courts.293USTR also criticized Taiwan's patent 

law for not covering micro-organisms, foodstuffs, new 

plant and animal varieties, etc. The United States 

strongly criticized the provision that the holder of a 

patent for a product imported into Taiwan was 

responsible for proving patent infringement, whereas 

the burden of proof was reversed for goods produced 

domestically. The United States also criticized 

compulsory licensing arrangements and called for 

quick implementation of revised patent laws. 294 

A video reproduction law regulating video 

programs, commercials, and enterprises such as 

videotape viewing parlors (known as MTVs) was 

debated in early 1992. 295U.S. officials considered 

70 
the draft law vague, however, with little relevant 

discussion of IPR protection and weak 

enforcement. 296 

Complaints about IPR violations by private 

industry increased in early 1992. The Asia-Pacific 

Council of American Chambers of Commerce 

(APCAC) said that "speedy" passage of many of the 

new bills was necessary for Taiwan to demonstrate its 

willingness to protect IPR. The APCAC also called 

for increased enforcement and the establishment of 

standards for trade secrets protection. 297 

In April 1992 Taiwan was officially cited as a 

priority foreign country, one whose "acts, policies, 

and practices are the most onerous . . ." and that is 

"not making significant progress" in negotiations. A 

priority country is one whose protection of IPRs is 

deemed inadequate. 298Taiwan was specifically cited 

as a center for piracy of copyrights and trademarks?" 

Shortly after Taiwan was named a priority 

country, the United States and Taiwan began a series 

of negotiations on IPR. 30° Taiwan's National Bureau 

of Standards invited IPR experts from the U.S. Patent 

and Trademark Office to a seminar in Taiwan."' On 

June 5, after 2 weeks of negotiations, the United 

States and Taiwan reached an understanding that met 

all the U.S. requirements and that, according to 

USTR, would achieve full IPR protection in 

Taiwan.302 

Taiwan Authorities agreed to amend patent and 

trademark laws and to institute new laws consistent 

with the Dunkel proposal on Trade Related Aspects of 

Intellectual Property from the Uruguay Round. 

Taiwan also agreed to establish an export licensing 

system to prevent the export of infringing products. 

An increase in criminal penalties and fines was also 

promised, plus aggressive prosecution of unauthorized 

MTV parlors and cable stations. A detailed list of 

requirements and possible signs of piracy was issued 

to inspectors, to help them spot and prevent the export 

of counterfeit goods. 03Inspectors will examine 30 

percent of all CDs and computer software and 100 

percent of a violator's products for 1 year. 304 Finally, 

the United States and Taiwan will review statistics on 

penalties against violators of IPR regulations. 305 

As USTR expected full implementation of the 

agreement, it rescinded Taiwan's status as a priority 

country and ended the investigation that began on 

May 29, while noting that the U.S. Government was 

"committed to rigorously monitoring . . . [its] 

implementation." 306 Vice Economic Minister Chiang 

said the agreement was a good opportunity to increase 

IPR protection and would facilitate Taiwan's technical 

upgrading and help its reputation abroad. 

While these reforms helped allay immediate U.S. 

concerns over IPR, the topic figured prominently in 

discussions during Ambassador Carla Hills' visit to 

Taiwan in December. The U.S. IPR agenda included 

computer software inspection, copyright laws, 

differing versions of the bilateral agreements, 

retroactive protection for pharmaceuticals, a review of 

the many IPR laws before Taiwan's legislature, 

trademark and patent protection issues, and a review 

of criminal enforcement. 307 

At year's end Taiwan continued to debate major 

IPR legislation and implement the reforms outlined in 

the July agreement. 308Prosecution increased, 

especially in the Taipei area, but Taiwan authorities 

said that a lack of manpower prevented wider 

enforcement, and large-scale piracy of CDs and 

computer software continued. Domestic sales of 

pirated goods declined sharply after revisions to the 

Copyright Law in June, but the export of pirated 

goods continued. Although IPR laws in Taiwan 

moved toward international standards, both trademark 

and patent infringement remained bilateral issues at 

yearend. The U.S. sought to ensure that all of its 

concerns would be addressed in the legal revisions 

under consideration. 3" 

GATT Application 

Taiwan's bid to accede to the GATT gained 

momentum in 1992 when the GATT created a 

working party to examine Taiwan's application.310 

Given that Taiwan is among the leading exporters in 

the world, support among members for its entry into 

GATT was generally favorable. Entry into the GATT 

will require Taiwan authorities to bring Taiwan's 

regulatory regime in line with international standards, 

thereby removing many restrictions that currently face 

U.S. businesses operating in Taiwan. 311In addition, 

GATT membership would bring the world's 

13th-largest trading nation into the system of world 

trade rules. 312Although Taiwan's overall tariff rate 

has declined to 5 percent, its agricultural tariffs 

remain high, and it maintains many nontariff 

barriers.313 

On September 29, 1992, the GATT established a 

working party to study and negotiate Taiwan's 

application. The accession process could take 1 to 2 

years, depending on, among other things, the pace of 

China's accession. 314The working party includes 

several GATT members who will examine Taiwan's 

trade regime and will submit to the GATT Council a 

recommendation, possibly including a Draft Protocol 

of Accession. The working party will follow the 

customary method of examining an applicant's trade 

71 
regime, including Taiwan's treatment of imports, 

licensing requirements, quantitative restrictions, 

subsidies, nontariff charges and taxes, customs 

valuation and classification system, transparency in 

regulations and administration, and state trading 

practices and monopolies. The United States is 

expected to play a key role in the working party and 

will also negotiate bilaterally (as will other countries) 

on Taiwan's tariffs and other trade restrictions. 315 

The United States has voiced support for Taiwan's 

GATT application. During her December visit, 

Ambassador Carla Hills signaled U.S. support for 

Taiwan's GATT application, saying "Taiwan's 

prospective GATT membership offers opportunities 

too good to miss and responsibilities too important to 

ignore."316The United States considers Taiwan's 

possible accession a positive step for the global 

trading system and a way to increase trading 

opportunities for U.S. businesses. 317After formation 

of the working party, the USTR began to solicit 

private sector priorities for the negotiating process. 318 

The GATT working party held its first meeting in 

November.319The working party received Taiwan's 

application and solicited views and questions from 

members for a 6-week period. The GATT Secretariat 

then analyzed the material for an additional 6 weeks. 

Taiwan then received an edited version of the 

Secretariat's report for a 6-week review. After this 

18-week process, direct negotiations between Taiwan 

and various Contracting Parties began in 1993. 

Trade and Investment 

Framework Agreement 

The United States and Taiwan established a 

framework for future trade and investment 

negotiations during Ambassador Hills' December 

1992 trip to Taiwan. A formal agreement 

incorporating the framework was ready for signing in 

early 1993.320The agreement creUtes a permanent 

structure for bilateral trade negotiations and an "action 

plan" outlining key issues for discussion. The 

framework is designed to improve and regularize 

bilateral trade relations. 

The United States has signed framework 

agreements with many countries, including Australia, 

New Zealand, members of the Association of 

Southeast Asian Nations, and 31 countries of Latin 

AmeriCa. 321 Ambassador Hills told a business 

conference that "the Framework Agreement serves as 

a constructive vehicle to encourage trade 

liberalization. The Framework Agreement is a natural 

extension of our longstanding economic ties." 322 

The agreement has several broad goals. They 

include enhancing friendship and cooperation, 

increasing trade and investment, further liberalizing 

trade, and fostering an open trading environment. The 

agreement also establishes several key principles that 

will guide future policy: the importance of private 

investment (regardless of domestic or foreign origin), 

the importance of services, the need to eliminate 

nontariff barriers, the need for adequate IPR 

protection and adequate workers' rights, the need for 

a quick and fair dispute-settlement procedure, and 

finally, the importance of a regularized mechanism for 

dialog on trade and investment matters. 323 

At the heart of the agreement is a Council on 

Trade and Investment, a joint U.S-Taiwan body. The 

Council will hold consultations on trade and 

investment areas of interest and will negotiate 

agreements when necessary. It will identify and work 

toward the removal of trade and investment barriers 

that distort trade flows in either country. 324 

It is possible that the framework agreement could 

be a precursor to a comprehensive bilateral free-trade 

agreement (FTA). Many in the Taiwan press have 

hinted at this possibility, and officials on both sides 

have suggested potential interest. Franklin Lavin, 

Deputy Assistant Secretary of Commerce for East 

Asia and the Pacific, called the agreement an 

important step, one that could lay the foundations for 

FTA talks once NAFTA is approved and Taiwan is in 

the GATT.325Either way, the TIFA is expected to 

lead to a new level of cooperation between the United 

States and Taiwan on a variety of trade and 

investment matters. 

Republic of Korea 

In 1992 the United States and Korea signed two 

major agreements designed to stimulate bilateral trade. 

In February the two countries settled a longstanding 

dispute over Korean procurement of telecommunications equipment. tinder the agreement, U.S. 

providers of telecommunications equipment are 

expected to find improved market access in Korea. In 

addition, the United States and Korea signed a 

comprehensive trade and investment agreement. The 

aim of the accord is to reduce nontariff barriers to 

trade in Korea and increase bilateral investment. Also 

of interest to U.S. officials and exporters, Korea began 

implementing its seventh 5-year economic plan, which 

calls for extensive upgrading of Korea's infrastructure. 

72 
Telecommunications 

In 1989 Korea was named as a priority country 

under section 1374(a) of the 1988 Omnibus Trade and 

Competitiveness Act (OTCA) for allegedly engaging 

in unfair trade practices regarding U.S. 

telecommunications goods and services. 326The 

section establishes an initial 1-year negotiating period 

to rectify such problems, which period may be 

extended at the President's discretion for two 

additional 1-year periods. Negotiations took place 

from 1989 until conclusion of a bilateral 

telecommunications market-access agreement. 327 

During the negotiations the United States sought 

liberalization of Korea's trade policies (i.e., standards, 

government procurement, and tariffs) regarding 

telecommunications goods and services. In particular 

the United States was concerned about Korea's 

alleged restrictions on the sale of value-added 

telecommunications services by foreign vendors and 

standards, tariffs, and government-procurement 

policies regarding telecommunications goods.328 

Korea agreed to liberalize value-added services, 

streamline registration, eliminate investment 

restrictions in enhanced services by 1994, improve 

access to the standards-setting process, open up 

government procurement practices, and cut key tariffs 

by 40 percent. USTR Carla Hills said that the 

agreement would "give U.S. firms a fair shot at the 

fastest growing sectors of a market now estimated to 

be worth $5 billion annually."329 

Trade and Investment 

Agreement 

On September 18, 1992, the United States and 

Korea reached final agreement on a set of measures 

aimed at reducing nontariff barriers to trade and 

increasing bilateral investment. The two countries had 

been involved in extensive discussions on trade and 

investment liberalization since January 1992, when 

President Bush, during his visit to Seoul, asked 

Korean President Roh to open negotiations on 

market-opening measures. The Korean Government 

agreed to the negotiations under the auspices of the 

Presidents' Economic Initiative (PEI), and an agenda 

was set to work towards resolution of trade barriers 

within 12 months.33° 

The talks focused on "informal" obstacles to trade 

and investment and resulted in a report presenting 

agreed-upon actions that could be taken to liberalize 

two-way trade. The PEI report focused on standards 

and regulatory procedures, customs procedures, 

technology, and investment. Although Korea made 

few new concrete obligations, the PEI report does set 

the stage for closer bilateral cooperation on these 

structural barriers to trade and investment. Each of the 

areas covered in the PEI report is examined in more 

detail below. 

Standards and Regulatory 

Procedures 

Standards and regulatory procedures are an area of 

great concern to U.S. exporters, who claim that 

unclear standards and regulations have been used to 

block the sale of their merchandise in Korea. The 

report recommends that both Governments, in line 

with their obligations as members of the GATT 

Agreement on Technical Barriers to Trade (TBT), 33 I 

move toward a system that ensures clear public 

notification of the adoption of new standards. In 

December Korea promulgated regulations to ensure 

that the Korean Government -adheres to the principles 

and obligations of the PEI and TBT. 

. The United States and Korea also reaffirmed that 

they should allow a "reasonable period of time" 

between the introduction of a proposed standard or 

technical regulation and its final adoption to allow 

exporters to comment on and adjust to the new 

requirements of the TBT. In addition, the two sides 

also agreed to a regularized exchange of technical 

information. Finally, the PEI report recommended that 

technical regulations be based on sound scientific 

information and legitimate public policy objectives. 332 

In addition to reaffirming their obligations under 

the GATT TBT, the two sides broke new ground in 

the PEI report with respect to bilateral cooperation. 

The two sides agreed to establish regular contact 

between the Korean Ministry of Health and Social 

Affairs and the U.S. Food and Drug Administration; 

between the Korean Ministry of Agriculture, Fisheries 

and Forestry and the U.S. Department of Agriculture; 

and between the Korean Industrial Advancement 

Administration and the U.S. National Institute for 

Standards and Technology. The United States and 

Korea agreed to consult on standards related to 

telecommunications equipment, manufacturing 

practices for pharmaceuticals, and the importation of 

biological products—all areas of U.S. export 

interest. 333 

Customs and Other 

Import-Clearance Procedures 

The Korean customs and clearance system was 

another area of discussion in the PEI report. Customs 

73 
procedures in Korea may delay transfer of imports 

from the port of entry to distribution channels. The 

PEI report calls for the two countries to ensure that 

customs and other clearance procedures are not so 

burdensome or lengthy as to make imported 

merchandise uncompetitive with domestic goods. 

Further, the report recommends closer bilateral 

cooperation between the relevant U.S. and Korean 

Government agencies, greater transparency of customs 

regulations and procedures, and efforts to make 

customs information more accessible to members of 

the international trade community. 334 

Technology 

Technology transfer and cooperation were also 

taken up during the PEI discussions. The working 

group on technology made recommendations in four 

areas: information exchange, promotion of 

commercial technology cooperation, intellectual 

property rights, and science and technology 

cooperation. The PEI report calls for the two countries 

to intensify their efforts to coordinate existing national 

programs to promote the expansion of trade among 

firms in technology-intensive industries, with special 

attention to new-to-market small and medium-sized 

businesses. Both sides agreed to make "best efforts" 

to strengthen IPR enforcement activities. Further, 

Korea pledged to (1) review and limit its information 

requirements regarding potential commercial 

technology cooperation, transfer, and investment by 

foreign firms, (2) limit the review of business 

information supplied with applications and approvals 

to Government research institutes, and (3) further 

enhance its efforts to protect the confidentiality of 

such business information. 335 

In return for Korea's agreement to the above 

measures, the United States indicated in the PEI report 

that, upon meeting certain export control requirements, 

Korea could receive preferential licensing status 

otherwise reserved for members of the Coordinating 

Committee for Multilateral Export Controls 

(COCOM).336In the PEI report, the United States 

affirmed that those full 5(k) benefits, including 

intra-COCOM trade, could be granted if Korea were to 

achieve a COCOM-comparable control system and 

demonstrate an ability to implement the COCOM 

common standard level of effective protection. 

Granting intra-COCOM trade benefits, however, would 

not be a strictly bilateral matter and would require a 

consensus among COCOM member states that Korea 

has met the common standard. 337 

Investment 

The Korean Government prohibits foreign 

investment in 57 industrial sectors and restricts 

investment in another 181 categories. In other sectors, 

joint venturesare required for foreign firms to enter the 

Korean market. Since the start of the PEI discussions, 

Korea has liberalized investment restrictions in certain 

sectors and has dropped some joint-venture 

requirements. 338Further, Korean officials have 

promised to draft legislation that would rescind many 

of the approval requirements for foreign investment. 

The working group on investment met in late 1992 to 

discuss restrictions on land acquisition by foreign 

firms, financing for foreign firms, further liberalization 

of sectoral restrictions on foreign investment, and 

improvements in notification and approval 

procedures. 339 In early 1993 Korea liberalized some 

restrictions pertaining to land acquisition by 

foreigners34° and relaxed restrictions on financing. 34 

Korean 5-Year Plan 

Korea adopted its seventh 5-year economic plan 

on November 12, 1991. 342The plan covers the 

period 1992 to 1996 and outlines modernization of 

Korea's infrastructure and advancement of its 

technological base. To fkilitate these various goals, 

the Korean Government plans to invest in a variety of 

social projects. Plans are under way to upgrade roads, 

build a new international airport, establish a 

high-speed rail, and expand port facilities. To boost 

domestic telecommunications capabilities, the 

government intends to construct a national computer 

network. Several environmental projects are planned, 

including the building of waste water treatment 

facilities, incinerators, and sewage plants. The Korean 

Government hopes to expand energy capacity by 

building new power plants, possibly allowing foreign 

investment in such plants. Finally, the Korean 

Government plans to create new industrial zones, 

high-tech complexes, and office parks. 343 

The U.S. Department of Commerce said that the 

5-year plan showed that the Korean Government 

recognized that longer term measures are necessary 

for continued export competitiveness, increased 

market liberalization, and the speedy development of 

Korea's technological capabilities. 344Commerce's 

Office of International Major Projects identified U.S. 

export opportunities presented by the plan. These 

opportunities include electronics equipment, 

computers, pollution control equipment, construction 

materials and equipment, transportation, 

communication, medical and scientific instruments, 

industrial machinery, telecommunications equipment, 

and electric power equipment. 345The U.S. trade 

center in Korea has held conferences and seminars on 

exporting to Korea. 346Finally, the Trade Center has 

held matchmaker and post-initiated programs to help 

U.S. business find partners in Korea and to ease entry 

into the market.347 

74 
ENDNOTES 

1 The U.S. International Trade Commission 

received a congressional request to monitor the EC 

92 program in a series of reports. The fifth and most 

recent report provides detailed coverage of 

developments in 1992 and reviews the Community's 

overall progress in accomplishing single-market 

objectives in particular issue areas. USITC, The 

Effects of Greater Economic Integration Within the 

European Community on the United States: Fifth 

Followup Report (investigation No. 332-267), USITC 

publication 2628, Apr. 1993. 

2For a detailed description of the background to 

the dispute on oilseeds, see USITC, Operation of the 

Trade Agreements Program (OTAP), 40th Report, 

1988, USITC publication 2208, July 1989, p. 88. 

3For a report on USIA Worldnet Broadcast with 

Carla Hills, see "United States Will Have To Take 

Action on Oilseeds Absent a Solution, Hills Says," 

International Trade Reporter, Sept. 9, 1992, p. 1546. 

4"Proposed Determination of Action Concerning 

the European Community's Oilseeds Subsidy 

Regime; Request for Public Comment and Public 

Hearing," No. 301-63A, of June 12, 1992, 57 F.R. 

25087. 

5Office of the United States Trade 

Representative (USTR), "USTR Factsheet: Oilseeds," 

press release supplement, Nov. 5, 1992. 

6Under GATT article III, imported products are to 

receive no less favorable treatment than that 

accorded to like products of national origin. GATT, 

Text of the General Agreement on Tariffs and Trade, 

Geneva, July 1986.. For an explanation of the U.S. 

position, panel views and, conclusion, see "Sidebar 

US/EC: Payments and Subsidies Paid to Processors 

and Producers of Oilseeds and Related Animal-Feed 

Proteins," GATT Focus, newsletter No. 68, Feb. 

1990, p. 3. 

7For background on the GATT panel's actions, 

see USITC, OTAP, 42d Report, 1990, USITC 

publication 2403, July 1991, p. 169. 

8USTR, "USTR Factsheet: Oilseeds." 

9For further explanation of the July 1991 

oilseeds reform package proposed by the EC, see 

USITC, The Year in Trade: OTAP, 1991, USITC 

publication 2554, Aug. 1992, pp. 88-89. 

USTR, 1993 National Trade Estimate Report 

on Foreign Trade Barriers, 1993, p. 88. 

11 "EC/U.S. Oilseeds Dispute Taken Up Again," 

European Report, No. 1778, (June 20, 1992), 

External Relations, p. 9. 

12"Proposed Determination of Action Concerning 

the European Community's Oilseeds Subsidy 

Regime: Request for Public Comment and Public 

Hearing No. 301-63A, of June 12, 1992," 57 F.R. 

25087. 

13USTR, "U.S. To Withdraw Trade Concessions 

in Oilseeds Dispute With EC," press release 92-62, 

Nov. 5, 1992. 

14USTR, "USTR Factsheet: Oilseeds." 

15"EC, US To Negotiate Compensation on 

Oilseeds," GATT Focus, newsletter No. 90, May-June 

1992. 

16Keith M. Rockwell, "U.S. Rejects Latest EC 

Offer in Oilseeds Row," Journal of Commerce, July 

30, 1992. 

17"EC/U.S. Oilseeds Dispute Taken Up Again," 

P. 9 . 

18U.S. Department of State, "Uruguay Round: 

MacSharry Oct. 9 Speech," telegram, message 

reference No. 05623, Dublin, Oct. 9, 1992. 

19"EC/U.S. Oilseeds Dispute Taken Up Again," 

P. 9. 

20"U.S. Rejects EC Offer of Compensation in 

Oilseeds Dispute," European Report, No. 1789, (July 

29, 1992), External Relations, p. 3. 

21"Trade War Over Oilseed Put on Hold," 

European Report, No. 1791, Sept. 3, 1992, External 

Relations, p. 5. 

22USTR, "USTR Factsheet: Oilseeds." 

23"Trade War Over Oilseeds Put on Hold," p. 5. 

24USTR, "USTR Factsheet: Oilseeds." 

25"Determination of Action Concerning the 

European Community's Oilseeds Subsidy Regime, 

Request for Public Comment and Public Hearing," 

No. 301-63A of November 12, 1992, 57 F.R. 53801. 

26USTR, "U.S. To Withdraw Trade Concessions 

in Oilseeds Dispute With EC." 

27Peter Doyle, European Community 

Spokesman, "Oilseeds," transcript of television 

interview, CNN International Hour, Nov. 20, 1992, 

Federal Information Systems Corp., LEGI-SLATE, No. 

891154. 

28Ambassador Carla Hills was quoted in 

Washington after the breakthrough in oilseeds was 

jointly announced in "Breakthrough in GAIT 

Negotiations as EC and U.S. Clinch Deal," European 

Report, No. 1815, (Nov. 25, 1992), supplement, p. 1. 

29U.S. Department of Agriculture, News Division, 

Office of Public Affairs, "U.S.-EC Agreement on 

Oilseeds and the Uruguay Round," USDA 

Backgrounder, Nov. 20, 1992. 

30Ibid. 

31The EC produced 13.3 million tons of oilseeds 

in crop year 1991/92, according to the USDA. 

75 
32The United States has been demanding 

increased access to the EC market, but differences 

between the two sides remained principally over 

whether cuts would be in volume or acreage terms, 

as the CAP reform plan operates by limiting the 

areas of oilseeds cultivated. "Details of GATT Deal 

and Compatibility With CAP Reform," European 

Report, No. 1815 (Nov. 25, 1992), Document, p. 3. 

33"EC/US Oilseeds Accord Confirmed, but 

National Positions Still Unclear," European Report, 

No. 1818 (Dec. 5, 1992), External Relations, p. 8. 

34USDA, News Division, Office of Public Affairs, 

"U.S.-EC Agreement on Oilseeds and the Uruguay 

Round," USDA Backgrounder, Nov. 20, 1992. 

35The White House, "Statement by the President 

in Announcement of Agreement on GATT," press 

release, Nov. 20, 1992. 

36 Ibid. 

37Corn gluten feed is a feedstuff ingredient for 

livestock derived as a residue from the corn 

wet-milling process. 

38Malt sprout pellets are screenings and 

cleanings of barley and the sprouts and rootlets 

removed from barley during the malting process. 

39Office of the U.S. Trade Representative, 1993 

Trade Policy Agenda and 1992 Annual Report of the 

President of the United States on the Trade 

Agreements Program, 1993, p. 69. 

4° "EC/US Oilseeds Accord Confirmed, but 

National Positions Still Unclear," p. 8. 

41"Details of GATT Deal and Compatibility With 

CAP Reform," p. 3. 

42 Doyle, "Oilseeds," transcript. 

43EC Ambassador to the United States Andreas 

van Agt, address to the Library of Congress 

presenting an assessment of EC enlargement, Mar. 

4, 1993. 

44Edward Madigan, U.S. Secretary of 

Agriculture, "Oilseeds Accord," transcript of television 

interview, CNN International Hour, Nov. 20, 1992, 

Federal Information Systems Corp., LEGI-SLATE, No. 

891155. 

45"Petition for Relief Under Section 301 of the 

Trade Act of 1974, as Amended," filed on behalf of 

National Pork Producers Council and American Meat 

Institute, Nov. 28, 1990. 

46 For more information on meat plant closings 

due to the TCMD, see USITC, The Year In Trade: 

OTAP, 1991, USITC publication 2554, p. 89. 

47Delegation of the Commission of the European 

Communities, Office of Press and Public Affairs (EC 

Delegation), "EC and U.S. Resolve Meat Inspection 

Differences," European Community News, Nov. 13, 

1992. 

48 USTR, "Hills Initiates Investigation of European 

Community Meat Rules," press release 91-1, Jan. 10, 

1991. 

49 USTR, "U.S./EC Resolve 3rd Country Meat 

Directive Dispute," press release 92-63, Nov. 13, 

1992. 

5° "Petition for Relief Under Section 301 of the 

Trade Act of 1974, as Amended." 

51USTR, "Hills Initiates Investigation of European 

Community Meat Rules." 

52USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 69. 

53USTR, 1993 National Trade Estimate Report 

on Foreign Trade Barriers, p. 90. 

54USTR, "Hills Initiates Investigation of European 

Community Meat Rules." 

55"EC/US: Commission Proposal on 3rd 

Country Meat Trade Directive," European Report, No. 

1804 (Oct. 17, 1992), External Relations, p. 5. 

56 The United States maintains that its standards, 

although not identical, provide an equal degree of 

protection. 

57"Determination Concerning European 

Community Third County Meat Directive No. 301-83, 

of October 16, 1992," 57 F.R. 201, 47508. 

58 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 69. 

59"Determination Concerning European 

Community Third County Meat Directive No. 301-83, 

of October 16, 1992." 

60 U.S. Department of State, "U.S.-EC 

Discussions on Third Country Meat Directive," 

telegram, message reference No. 239246, prepared 

by U.S. Department of State, Washington DC, July 

25, 1992. 

61"Determination Concerning European 

Community Third County Meat Directive No. 301-83, 

of October 16, 1992." 

82USTR, "U.S./EC Resolve 3rd Country Meat 

Directive Dispute." 

63 U.S. Department of State, "U.S.-EC 

Discussions," telegram, message reference No. 

239246. 

64 USTR, "U.S./EC Resolve 3rd Country Meat 

Directive Dispute." 

65 The United States agreed to enhance the role 

of the U.S. Department of Agriculture's Food Safety 

and Inspection Service concerning the procedures for 

U.S. meat plant approval for export of meat to the 

Community. 

66 EC Delegation, "EC and U.S. Resolve Meat 

Inspection Differences." 

87USTR, "U.S./EC Resolve 3rd Country Meat 

Directive Dispute." 

76 
68 USTR, "United States Requests GATT Panel 

on German Subsidies to Airbus," press release 91-4, 

Feb. 14, 1991. 

69 In December 1991 the EC commissioned a 

report that attempts to counter U.S. complaints in the 

GATT concerning subsidies to Airbus by charging 

that the U.S. aircraft industry is also indirectly 

supported through Department of Defense spending, 

NASA spending, and tax programs. The United 

States rebuts the report's claims on all three 

charges, pointing out the European industry's own 

dependence on governmental research and 

development spending and military procurement. 

European Commission, news conference, press 

transcript, ID: 780364, Dec. 4, 1991. 

70 For the details of 1991 negotiations see 

USITC, The Year in Trade: OTAP, 1991, USITC 

publication 2554, pp. 92-94. 

71 "Airbus/GATT: U.S. Complaint To Be Examined 

by Subsidies Committee," European Report, No. 

1661, (Mar. 15, 1992), External Relations, p. 12. 

72 U.S. Department of State, "Revision of 1991 

National Trade Estimate Report," telegram, message 

reference No. 017253, prepared by U.S. Department 

of State, Washington, DC, Jan. 18, 1992. 

73 "Subsidies Panel to Examine US/EC Airbus 

Dispute," GATT Focus, newsletter No. 80, Apr. 1991, 

p. 8. 

74 USTR, 1992 Trade Policy Agenda and 1991 

Annual Report, p. 51. 

76 The GATT panel report must be adopted by 

consensus, which signifies unanimous agreement. 

One party may block its adoption, even if it is the 

losing party. 

76 USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 68. 

77 U.S. Department of State, "Airbus: Delivery of 

U.S. Response to EC Indirect Support Report," 

telegram, message reference No. 081563, prepared 

by U.S. Department of State, Washington, DC, Mar. 

16, 1992. 

78 USTR, "Fact Sheet: Airbus Agreement," press 

release 92-44, July 17, 1992. 

79 U.S. Department of State, "U.S.-EC Agreement 

on Trade in Civil Aircraft," telegram, message 

reference No. 09531, prepared by USEC, Brussels, 

July 20, 1992. 

80 U.S. Department of State, "Airbus Info and 

Talking Points," message reference No. 052387, 

telegram, prepared by U.S. Department of State, 

Washington, DC, Feb. 20, 1993. 

81 U.S. Department of State, "U.S.-EC Agreement 

on Trade in Civil Aircraft," telegram, message 

reference No. 09531. In the ITC instituted a section 

332 investigation on large civil aircraft. The report is 

due to be published in Aug. 1993. See USITC, 

Global Competitiveness of U.S. Advanced-Technology 

Manufacturing Industries: Large Civil Aircraft, Inv. 

332-332, forthcoming. 

82 U.S. Department of State, "Airbus: U.S. and 

EC Sign Agreement," telegram, message reference 

No. 229592, prepared by U.S. Department of State, 

Washington, DC, July 17, 1992. 

83 USTR, "U.S. and EC Sign Trade Agreement 

on Commercial Aircraft," press release 92-44, July 

17, 1992. 

84 U.S. Department of State, "Airbus: U.S. and 

EC Sign Agreement," telegram, message reference 

No. 229592. 

86 U.S. Department of State, "USTR Requests 

Consultations With EC on Airbus," telegram, 

message reference No. 058445, prepared by U.S. 

Department of State, Washington, DC, Feb. 26, 

1993. On April 1, 1993, early consultations were held 

over U.S. concern that the Airbus agreement would 

not hold, but both parties reconfirmed their 

commitment to the agreement. U.S. Department of 

State, "U.S./EC Consultaticins on Airbus: EC 

Briefing," telegram, message reference No. 04107, 

prepared by USEC, Brussels, Apr. 2, 1993. 

86 USTR, "U.S. and EC Sign Trade Agreement 

on Commercial Aircraft," press release 92-44, July 

17, 1992. 

87 In 1993 the United States and the EC 

continue to support a multilateralization of the 

bilateral agreement through GATT, noting that the 

bilateral deal could only be amended by agreements 

of both sides and that a unilateral withdrawal was not 

possible before July 1993 with a 1-year notice. U.S. 

Department of State, "EC Commission Sticks to 

Agreement on Civil Aircraft," telegram, message 

reference No. 02414, prepared by USEC, Brussels, 

Feb. 1993. 

88 U.S. Department of State, "U.S.-EC Agreement 

on Trade in Civil Aircraft," telegram, message 

reference No. 09531. 

89 EC Commission, DG III A2, "Internal Market 

Brief," Jan. 6, 1993. 

9° European Council, Conclusions of the 

Presidency, Edinburgh, Dec. 12, 1992. For more 

information on priority proposals awaiting adoption by 

the EC Council, see USITC, EC Integration: Fifth 

Followup, USITC publication 2628. 

91 EC Commission, DG III A2, "Internal Market 

Brief." 

92USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 65. For a detailed discussion of 

these issues, see USITC, EC Integration: Fifth 

Followup, USITC publication 2628. 

93Ibid. 

94 The United States threatened to impose 

sanctions on April 22, 1993, but a partial agreement 

was reached between the United States and the EC 

77 
on energy. Sanctions directed at the 

telecommunications sector have since been imposed. 

USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 66. 

96"Fact Sheet: European Community," U.S. 

Department of State Dispatch, Feb. 15, 1993, p. 90. 

97EC Commission, From Single Market to 

European Union, pamphlet, (Luxembourg: Office for 

Official Publications of the European Community, 

1992). 

" Although both houses of the German 

parliament ratified the Maastricht Treaty in December 

1992, the instruments of ratification have not been 

deposited, pending a court ruling. Most importantly, at 

issue is whether the treaty "lacks provisions for 

adequate democratic control of EC decision-making 

bodies," and that therefore a transfer of sovereign 

powers to these bodies from the democratically 

elected German parliament would be unconstitutional. 

The final ruling is expected in September 1993. U.S. 

Department of State, "Court Ruling on Maastricht 

Could Be Delayed Until the Fall," telegram, message 

reference No. 13477, prepared by U.S. Embassy, 

Bonn, May 24, 1993. 

99U.S. Department of State, "What Is Thing 

Called Subsidiarity?" telegram, message reference 

No. 09023, prepared by USEC, Brussels, July 9, 

1992. 

too Ibid. 

101EC Council and EC Commission, Treaty on 

European Union (Luxembourg: Office for Official 

Publications of the European Communities, 1992) 

("Maastricht Treaty"), art. 3b. EC Commission 

President Jacques Delors stated that subsidiarity 

means that decisions should be taken "by cities 

instead of regions, regions instead of member states, 

and member states instead of the Community; but 

the Community must act if necessary." U.S. 

Department of State, "Danes Adopt Wait-and-See 

Attitude on EC Union," telegram, message reference 

No. 03868, prepared by U.S. Embassy, Copenhagen, 

June 1992. 

102"European Union: Danes Anxious To Get 

Back on Board," European Report, No. 1790 (Aug. 1, 

1992), Institutions and Political Cooperation, p. 1. 

103 Denmark and the Treaty of European Union, 

Official Journal of the European Communities (OA 

No. C 348 (Dec. 31, 1992), pp. 1-4. 

104 "Edinburgh Summit Puts Community Back on 

Track," European Report, No. 1821 (Dec. 21, 1992), 

Document, p. 3. 

105Denmark subsequently voted in favor of the 

Maastricht Treaty on May 18, 1993. 

106The United Kingdom's House of Commons 

voted in favor of the Maastricht Treaty in May 1993 

and awaits action in the House of Lords. "Treaty of 

Maastricht in the Hands of the House of Lords," 

European Report, No. 1861 (May 26, 1993), 

Institutions and Political Cooperation, p. 1. 

107The second phase of EMU, from 1994 to 

1997, will provide an opportunity for member states 

to bring their economic performances into line with 

the best performing members, will incorporate a 

Cohesion Fund for the development of poorer 

regions, and will establish the European Monetary 

Institute for monetary management. Phase three will 

start on January 1997 if a majority of members meet 

convergence criteria and the narrow fluctuation 

margins of the current exchange-rate mechanism 

(ERM) for 2 years without devaluation. In phase 

three, the European Central Bank and a single 

currency will be established. If a majority of members 

do not meet the criteria of low inflation, low long-term 

interest rates, a budget deficit under 3 percent of 

national GDP, a public debt ratio of less than 60 

percent of GDP, and 2 years of currency stability 

within the ERM, phase three will be postponed until 

1999. 

108"Fact Sheet: European Community," U.S. 

Department of State Dispatch, p. 91. As of February 

1993 only Denmark, which opted out of the single 

currency, and Luxembourg meet all EMU 

convergence criteria. 

109U.S. House of Representatives, Committee 

on Foreign Affairs, Subcommittee on Europe and the 

Middle East, Developments in Europe, 102d Cong., 

2d sess., testimony of Assistant Secretary of State 

Thomas Niles, Sept. 29, 1992. 

110 The EFTA countries are Austria, Finland, 

Sweden, Norway, Switzerland, Iceland, and 

Liechtenstein. 

111The revised agreement rescheduled the start 

of the EEA. In addition, the agreement contains a 

provision that allows Switzerland to join the EEA if it 

so chooses in the future. The new agreement 

focuses on the traditional customs union between the 

principality of Liechtenstein and Switzerland, which 

must be resolved for Liechtenstein to operate in the 

wider context of the EEA. Of greatest controversy is 

the effect of the Swiss rejection of the EEA on the 

Cohesion Fund, the ECU 2 billion originally agreed 

by the EFTA countries to support the development of 

the poorer EC member states, in which the Swiss 

contribution is 27 percent of the total. 

112"EFTA: Ministerial Meeting Set for June 

15/16." European Report, No. 1863 (June 1, 1993), 

External Relations, p. 2, and EC Delegation official, 

telephone conversation with USITC staff, June 14, 

1993. 

113U.S. Department of State, "EC Commission 

Issues Favorable Opinion on Norwegian EC 

Membership Application," telegram, message 

reference No. 03691, prepared by USEC, Brussels, 

Mar. 24, 1993. 

78 
114 Ibid. 

115 According to an EC official, the feeling is that 

if Switzerland cannot agree to ratify the EEA, then 

Switzerland will not be able to ratify membership in 

the EC. EC Commission official, telephone 

conversation with USITC staff, Washington, DC, Apr. 

7, 1993. 

116 As a membership condition, EFTA must 

accept Maastricht's specific objectives, which are 

balanced and sustainable economic and social 

progress; the establishment of economic and 

monetary union; a common foreign and security 

policy; the introduction of citizenship of the union; 

and cooperation on justice and home affairs. U.S. 

Department of State, "February 1 EC General Affairs 

Council," telegram, message reference No. 01633, 

prepared by USEC, Brussels, Feb. 5, 1992. 

117 "Enlargement: Candidate Countries," 

European Report, No. 1778 (June 20, 1992), Dossier, 

supplement, p. 1. 

118 "EC/Cyprus: Commission Report Soon on EC 

Membership Bid," European Report, No. 1826 (Jan. 

23, 1993), External Relations, p. 9. "EC/Malta: No 

Opinion on Accession Before March 1993," European 

Report, No. 1832 (Feb. 3, 1993), External Relations, 

P. 9 . 

119 At the beginning of January 1993, Turkey 

announced the introduction of a new customs regime 

for imports from the EC. A new tariff structure will 

give preference, for the first time, to imports from the 

Community and EFTA. The new Turkish import 

system is expected to stimulate imports from the EC. 

U.S. Department of State, "International Market 

Insight Report-1993," telegram, message reference 

No. 00493, prepared by U.S. Embassy, Ankara, 

Jan. 13, 1993. 

12° Romania officially signed an association 

agreement with the EC on February 1, 1993, and 

Bulgaria signed a similar agreement on March 8, 

1993. "EC/Bulgaria Association Agreement Initialled," 

European Report, No. 1823 (Dec. 24, 1992), External 

Relations, p. 9. 

121 The EC finalized association agreements with 

Hungary, Poland, and Czechoslovakia in December 

1991. Renegotiation of the agreement with the former 

Czechoslovakia began in February 1993, after 

Czechoslovakia split into the two separate countries 

of the Czech Republic and Slovakia. "EC/Former 

Czechoslovakia: Negotiating Mandates for New 

Agreements To Be Proposed," European Report, No. 

1835 (Feb. 13, 1993), External Relations, p. 4. 

122 "EC/Bulgaria/Romania: Bulgarian Association 

Agreement Signing Ceremony Postponed," European 

Report, No. 1831 (Jan. 30, 1993), External Relations, 

p. 4. 

123 EC Delegation, "EC Commission Envisages 

Eventual Free Trade Area With Russia," European 

Community News, Mar. 24, 1993. 

124 "Negotiations for EC/Russia Agreement 

Continue," European Report, No. 1824 (Jan. 6, 

1993), External Relations, p. 2. 

125 "EC/Russia: Russians Move Forward to 

Partnership Agreements," European Report, No. 1823 

(Dec. 24, 1992), External Relations, p. 10. 

126 In March 1993 the EC decided to speed up 

negotiations. The EC Commission proposed 

amendments to the existing negotiating mandate, so 

that the EC can negotiate with Russia on a new, 

broader basis, envisaging an eventual free-trade 

agreement. EC Delegation, "EC Commission 

Envisages Eventual Free Trade Area With Russia." 

As of April 5, 1993, EC Foreign Ministers agreed to 

offer Russia the prospect of eventual free trade 

under a partnership and cooperation agreement. "EC 

Ministers Agree To Start Talks on Partnership 

Agreement," European Report, No. 1850 (Apr. 8, 

1993), External Relations, p. 5. 

127 The third round of accelerated elimination of 

duties under the CFTA is scheduled for 1993. These 

reductions result from mutual agreement on the part 

of industries in both countries. President, The United 

States-Canada Free Trade Agreement: Biennial 

Report, a Report from the President to the Congress, 

under Section 304 (f) of the U.S. Canada FTA 

Implementation Act, Apr. 1993. 

128 For background on the CFTA see USITC, 

The Year in Trade: OTAP, 1991, USITC publication 

2554, p. 98. 

129 The Charlottetown Accord—focus of the 

referendum—was a political attempt to bring together 

the interests of the Canadian Federal Government, 

the Provincial Governments, and the ethnic, linguistic, 

and special interests within Canadian society in a 

single statement of Canadian unity. The referendum 

failed to achieve consensus on the accord. See 

Thomas Jennings, "National Referendum Held on 

Canadian Constitutional Reform," International 

Economic Review (IER), USITC, Nov. 1992, pp. 6-8. 

130 55 F.R. 27731. 

131 USTR, "United States Announces Action on 

Canadian Beer," press release 91-61, Dec. 27, 1991. 

132 See following section on interprovincial trade 

barriers. 

133 USTR, "United States To Increase Duties on 

Ontario Beer," press release 92-45, July 24, 1992. 

134 Based on comments by Chris Soften, senior 

vice president of Stroh Brewing Co., quoted in the 

Journal of Commerce, p. 1 A, and the Globe and 

Mail, p. B3, Apr. 2, 1992. 

135 USTR, "United States To Increase," press 

release, July 24, 1992. 

79 
136Minister of Industry, Science and Technology 

and Minister for International Trade, "Canada 

Responds in Kind to U.S. Retaliation on Ontario 

Beer," news release, No. 157, July 24, 1992. 

137 USTR, "United States and Canada Hold 

Negotiations on Canadian Provincial Beer Practices," 

press release 92-24, Apr. 14, 1992. 

136 USTR, "United States and Canada Reach 

Agreement in Principle on Removal of Discriminatory 

Canadian Provincial Beer Practices," press release 

92-25, Apr. 25, 1992. 

139"Trade Battle Flares Up," Globe and Mail, 

May 2, 1992, p. B1. 

140 U.S. Department of State, "Alberta Complying 

With GATT Beer Panel Findings," telegram, message 

reference No. 00211, prepared by U.S. Consulate, 

Calgary, Alberta, Mar. 24, 1992. 

141 "Ontario Beer Offer Unlikely To Satisfy U.S. 

Trade Threat," Journal of Commerce, June 29, 1992, 

p. 1A. 

142 U.S. Department of State, "Canada Beer 

Dispute - GATT Council Statements," telegram, 

message reference No. 05781, prepared by U.S. 

Mission, Geneva, July 21, 1992. 

143 USTR, "United States To Increase," press 

release, July 24, 1992. 

144 U.S. Department of State, 'Canada Beer 

Dispute in GATT - Canadian Communication to GATT 

Contracting Parties," telegram, message reference 

No. 06009, prepared by U.S. Mission, Geneva, July 

29, 1992, and USTR, Report to Congress on Section 

301 Developments Required by Sec 309(a)(3) of the 

Trade Act of 1974, Jan.-June 1992. 

145 "Canada/U.S.: U.S. Measures Affecting 

Alcoholic and Malt Beverages," GATT Focus, 

newsletter No. 90, May-June 1992, p.2. 

146 U.S. Ambassador Rufus Yerxa, opening 

statement to GATT Council, July 14, 1992. 

147 This line of reasoning is similar to the 

Canadian Federal authorities' response to U.S. 

criticism of certain Provincial practices. 

148GATT United States - Measures Affecting 

Alcoholic and Malt Beverages, panel report (DS23/R), 

derestricted by GATT Council, Apr. 30, 1992. 

149CITT, Certain Beer Originating in or Exported 

From the United States of america by or on Behalf 

of Pabst Brewing Company, G. Heileman Brewing 

Company Inc. and the Stroh Brewery Company Inc. 

and the Stroh Brewery Company, Their Successors 

and Assigns, for Use or Consumption in the Province 

of British Columbia, Canadian Internatiional Trade 

tribunal, Inquiry No. NQ-91-002, Oct. 2, 1991. 

150 Following a remand of the case by the panel 

to the CITT, the Tribunal determined on November 9, 

1992, that the said breweries did cause material 

injury by dumping beer in British Columbia. 

"Specifically, the Tribunal finds that the price 

suppression caused by the dumping of the subject 

imports supports a determination that the subject 

imports have caused, are causing and are likely to 

cause material injury to" the Canadian breweries in 

question. Certain Beer Originating in or Exported 

From the United States of America by or on Behalf 

of Pabst Brewing Company, G. Heileman Brewing 

Company Inc. and the Stroh Brewery Company, Their 

Successors and Assigns, for Use or Consumption in 

the Province of British Columbia, Canadian 

International Trade Tribunal, Inquiry No. NO-91-002 

Remand, Nov. 9, 1992. On Feb. 8, 1993, the panel 

affirmed the CITT's determination on remand. 

151GATT, GATT Activities 1991, Geneva, July 

1992, p. 62. A detailed description of the evolution of 

the softwood lumber issue is contained in prior 

reports in this series. USITC, OTAP, 38th Report, 

1986, USITC publication 1995, July 1987, pp. 4-17 -

4-20; USITC, OTAP, 39th Report, 1987, USITC 

publication 2095, July 1988, p. 5-9; USITC, The Year 

in Trade: OTAP, 1991, USITC publication 2554, pp. 

151-2. 

152For Canada's justification for the termination 

of the Memorandum of Understanding, see Canadian 

Embassy, "Canada Terminates Softwood Lumber 

Memorandum of Understanding," press release, 

Washington, DC, Oct. 4, 1991. 

153U.S. Department of Commerce, "Self-Initiation 

of Countervailing Duty Investigation: Certain Softwood 

Lumber Products from Canada," 56 F.R. 56005, Oct. 

31, 1991. This was only the second time the 

Department of Commerce self-initiated a 

countervailing-duty investigation. 

154USTR, "United States Announces Action on 

Canadian Lumber Imports," press release 91-44, Oct. 

4, 1991, p. 2. 

155Canadian Embassy, "Canada Terminates 

Softwood Lumber Memorandum of Understanding." 

156USITC, "USITC Votes to Continue Case on 

Softwood Lumber from Canada," press release 

91-070, Dec. 12, 1991. See USITC, Softwood 

Lumber from Canada, Determination of the 

Commission in In 701-TA-312 (Preliminary), USITC 

publication 2468, Dec. 1991. 

15757 F.R. 8800 

15957 F.R. 22570. 

159Ibid. 

160USITC, "Softwood Lumber from Canada 

Inquires U.S. Industry, Says ITC," press release 

92-039, June 25, 1992. 

161The final panel decision was delivered on 

May 6, 1993. In the decision the panel remanded the 

case to the Commerce Department, giving it 90 days 

to reconsider its previous CVD determination. 

80 
162Drew Fagan and Kimberly Noble, "U.S. Had 

Right To Initiate Softwood Probe, Panel Rules," 

Globe and Mail, Dec. 9, 1992, p. B3. 

163"GATT Panel Upholds U.S. Rights in 

Investigating Canadian Lumber Subsidies," Inside 

U.S. Trade, Dec. 18, 1992, p. 10. 

164The Canadian Manufacturers' Association, 

"'Canada 1993' A Plan for the Creation of a Single 

Economic Market in Canada," monograph, Apr. 1991. 

166U.S. Department of State, "New Data on 

Canadian Interprovincial Trade," telegram, message 

reference No. 02875, prepared by U.S. Embassy, 

Ottawa, May 11, 1992. 

166For a discussion of interprovincial trade 

barriers and constitutional developments in 1991, see 

USITC, The Year in Trade: OTAP, 1991, USITC 

publication 2554, p. 96. 

167U.S. Department of State, "Quarterly Catch: 

Sailing Through Rough Waters," telegram, message 

reference No. 00018, prepared by U.S. Consulate, 

Halifax, Jan. 9, 1992. 

168"Council Examines Trade of Bangladesh and 

Canada," GATT Focus, newsletter No. 91, July 1992, 

P. 7. 

169See separate section, above. 

17° Leo Ryan, "Moosehead Beer Crashes 

Barriers To Rest of Canada," Journal of Commerce, 

May 14, 1992, p. 3A. See also "Canadian 

Submission to the GATT on Provincial Beer 

Marketing Practices," contained in Minister of 

Industry, Science and Technology and Minister for 

International Trade, "Canada Responds to GATT 

Panel Report on Beer," news release, No. 62, March 

31, 1992. 

171"More Work To Do on Trade Barriers," 

editorial, Financial Post, Aug. 25, 1992. 

172Bureau of National Affairs, Inc., International 

Trade Reporter, July 29, 1992, p. 1317. 

173". . . the positive features [of the proposal] 

are overwhelmed by a long list of exemptions that 

erect more impediments to internal trade than already 

exist." Leo Ryan, "Trade Within Canada Seen as 

One Step Up and Two Steps Back," Journal of 

Commerce, July 28, 1992, p. 5A. 

174The Accord was reached in Charlottetown, 

Prince Edward Island, on August 28, 1991. 

175In March 1993 the 10 Provinces, 2 territories, 

and the Federal Government agreed to a 

comprehensive round of negotiations to eliminate 

interprovincial trade barriers. The round was 

scheduled to begin July 1, 1993, with a completion 

date of June 30, 1994. U.S. Department of State, 

"Canadian Economic and Financial 

Developments—For the Week Ending March 24, 

1993," telegram, message reference No. 01798, 

prepared by U.S. Embassy, Ottawa, Mar. 24, 1993. 

176Minister of Industry, Science and Technology 

and Minister for International Trade, "Canada 

Requests FTA Panel in Interest Cost Dispute," news 

release, No. 3, Jan. 6, 1992. 

17757 F.R. 2447. 

178 In the Matter of: Article 304 and the Definition 

of Direct Cost of Processing or Direct Cost of 

Assembling, final report of the Binational Panel, 

Secretariat Case No. USA-92-1807-01, June 8, 1992, 

pp. 36-37. 

179U.S. Customs official, conversation with 

USITC staff, Apr. 29, 1993. 

18° "US, Canada Wrangle Over Honda Content 

Case," Washington Trade Daily, Mar. 3, 1992, p. 1. 

181U.S. Department of State, "Further Canadian 

Reaction to Honda Audit," telegram, message 

reference No. 01028, prepared by U.S. Embassy, 

Ottawa, Feb. 14, 1992. 

182U.S. Department of State, "NAFTA and Autos: 

Wilson Downplays U.S. Customs Audits of Ford and 

Toyota," telegram, message reference No. 04247, 

prepared by U.S. Embassy, Ottawa, July 16, 1992. 

183U.S. Department of State, "NAFTA's Rules of 

Origin for Automobiles," telegram, message reference 

No. 329363, prepared by U.S. Department of State, 

Washington, Oct. 8, 1992. 

18457 F.R. 46502. 

185"The new NAFTA definition of North American 

origin all but ensures that the preliminary customs 

finding will be reversed." Eric Hartman, "NAFTA 

Rules: Made in Canada," Detroit Press, Feb. 4, 1993, 

p. All. See also Clyde H. Farnsworth, "Trade Accord 

May Help Resolve Fight Over Honda Cars Shipped 

From Canada," New York Times, Aug. 15, 1992, p. 

34. 

186Official statistics of the U.S. Department of 

Commerce. 

187"Japan Irked as Bush Visit Turns Into Trade 

Quest," New York Times, Dec. 22, 1991. 

188The White House, "Fact Sheet on U.S.-Japan 

Achievements on Auto and Auto Parts," press 

release, Tokyo, Japan, Jan. 9, 1992. 

189Susan MacKnight, "President's Asian Trade 

Offensive Leaves Japan's Automotive Makers on 

Defensive," Japan Economic Institute Report, No. 2B, 

Jan. 17, 1992. 

190Takashi Kitazume and Hisane Masaki, 

"Japan-U.S. Pact Draws Criticism; Bush Visit Marks 

Fundamental Shift in Bilateral Relations," Japan 

Times Weekly, Jan. 20-26, 1992. 

191Paul Blustein and Stuart Auerbach, "$10 

Billion Trade Goal, but Executives Skeptical of Import 

Pledges, Washington Post, Jan. 10, 1992. 

81 
192"U.S. and Tokyo Scramble To Clear Up 

Confusion on Language of Trade Pact," Wall Street 

Journal, Jan. 22, 1992. 

193Susan MacKnight, "Tokyo Cuts Car Export 

Quota," Japan Economic Institute Report, No. 12B, 

Mar. 27, 1992. 

194U.S. Department of State, "OECD: Trade 

Committee Working Party, October 29-30, 1992," 

telegram, message reference No. 30655, prepared by 

U.S. Embassy, Paris, Nov. 31, 1992. 

195U.S. Department of State, "Chicago Auto 

Summit: JAMA's View," telegram, message reference 

No. 07887, prepared by U.S. Embassy, Tokyo, May 

22, 1992 

196Ibid. 

197On June 11, 1991, the United States and 

Japan finalized a new 5-year semiconductor 

agreement designed to increase foreign market 

access in Japan. For detailed information on the 

1991 U.S.-Japan semiconductor agreement, see 

USITC, The Year In Trade: OTAP, 1991, USITC 

publication 2554, p. 107. 

198 Arrangement Between the Government of 

Japan and the Government of the United States of 

America Concerning Trade in Semiconductor 

Products, June 11, 1991, p. 4. 

199"Foreign Share of Japan's Semiconductor 

Market Remains Stagnant; SIA Praises Statement by 

U.S. Trade Representative," SIA News, press 

release, Mar. 30, 1992. 

200 USTR, "USTR Launches Review of 

Implementation of the U.S.-Japan Semiconductor 

Arrangement," press release, May 27, 1992. 

201Robert Thomson, "Japan Warns US Chip 

Makers Over Imports Pressure," Financial Times, 

May 29, 1992. 

202 "Slow Foreign Chip Sales in Japan Blamed 

on a Slumping Market," Investor's Business Daily, 

June 1, 1992. 

203Schlesinger, "Japanese Firms Pledge to 

Boost Chip Imports." 

204 U.S. Semiconductor Industry Association, 

"SIA/EIAJ Joint Statement Regarding Plans for 

Market Access Expansion," press statement, June 4, 

1992. 

205 USTR, "Foreign Share of Japanese 

Semiconductor Market," press release, June 12, 

1992. 

206 USTR, "Review Reveals Insufficient Progress 

on U.S.-Japan Semiconductor Arrangement," press 

release, 92-47, Aug. 4, 1992. 

207 Ibid. 

- 208 USTR, "Foreign Share of Japanese 

Semiconductor Market Grows to 16.0%," press 

release, Sept. 24, 1992. 

209 USTR, "Foreign Market Share Reaches 20 

Percent in Japanese Semiconductor Market," press 

release, Mar. 19, 1993. 

210 The VRA with Japan was initialed in 1986, 

and implementation began on January 1, 1987. The 

VRAs with Japan covered machining centers, 

numerically controlled (NC) lathes, noncomputerized 

NC punching and shearing machines, and three other 

products. A VRA was also negotiated on machine 

tool exports from Taiwan in 1986. This VRA was 

scheduled to expire at the end of 1991. 

211As reported in Nancy Dunne, "Taiwan Agrees 

To Restrain Sales of Machine Tools in US," Financial 

Times, June 22, 1992. 

212 "Statement by Press Secretary Fitzwater on 

Extension of the Voluntary Restraint Agreements With 

Japan and Taiwan," Weekly Compilation of 

Presidential Documents, Dec. 27, 1991, pp. 

1895-1896. 

213 Arrangement Between the Government of 

Japan and the Government of the United States of 

America Concerning Trade in Certain Machine Tools, 

June 30, 1992. 

214The U.S. Department of Commerce has 

contracted the task of estimating U.S. apparent 

consumption to Data Resources Inc., a private 

research firm. Estimates will be made on a yearly 

basis with quarterly updates. 

215Ibid. 

216The White House, "Fact Sheet on Paper," 

press release, Tokyo, Japan, Jan. 9, 1992. 

217 The White House, "Remarks of President 

Bush and Japanese Ambassador to the U.S. 

Takakazu Kuriyama at Signing Ceremony of 

U.S.-Japan Paper Market Access Agreement," press 

release, Washington, DC, Apr. 23, 1992. 

218 Takakazu Kuriyama, Ambassador to Japan, 

letter to Michael Moskow, Acting United States Trade 

Representative, Apr. 5, 1992, and Michael Moskow, 

letter to Ambassador Kuriyama, Apr. 5, 1992. 

219American Paper Institute, "Agreement for 

Greater Access to Japan's Market Hailed as Major 

Achievement by U.S. Paper Industry," press release, 

New York, Apr. 5, 1992. 

220See chapter 1 of this report. 

221USITC, OTAP, 42d Report, 1990, USITC 

publication 2403, p. 126. 

222U.S. Department of State, "Mexico's 

Economic Pact Is Extended Through the End of 

1993," telegram, message reference No. 25764, 

prepared by U.S. Embassy, Mexico City, Oct. 22, 

1992. 

82 
223U.S. Embassy, Mexico City, Economic and 

Financial Report, Apr. 1993, p. 3. 

224 By March 18, 1993, the stock market 

declined further to 1,667 points according to U.S. 

Embassy, Mexico City, Economic and Financial 

Report, p. 56. 

225 U.S. Department of State, important 

Numbers and Economic Policy Messages in Mexican 

President Salinas' Fourth State of the Nation Address 

(Informe)," telegram, message reference No. 27035, 

prepared by U.S. Embassy, Mexico City, Nov. 6, 

1992. 

226 Interest rates continued to rise in 1993, 

reaching some 17.4 percent in March. U.S. Embassy, 

Mexico City, Economic and Financial Report, p. 6. 

227 Ibid. 

228 See following section on Mexico's trade 

deficit. 

228 U.S. Department of State, "Mexican Inflation 

for 1992," telegram, message reference No. 00352, 

prepared by U.S. Embassy, Mexico City, Jan. 8, 

1993, and U.S. Embassy, Mexico City, Economic and 

Financial Report, p. 6. 

238 U.S. Department of State, "Mexico's 

Economic Pact Is Extended Through the End of 

1993," telegram, message reference No. 25764. 

231 Ibid., and U.S. Embassy, Mexico City, 

Economic and Financial Report, p. 24. 

232 U.S. Embassy, Mexico City, Economic and 

Financial Report, p. 6. 

233 See next section on the trade deficit. 

234 U.S. Embassy, Mexico City, Economic Trends 

Report, Aug. 1992, p. 38. 

235 No nationwide data comparable to U.S. 

unemployment statistics are available. 

236 U.S. Embassy, Mexico City, Economic and 

Financial Report, p. 20. 

237 President Salinas, Foreign Broadcast 

Information Service, "Salinas Gives State of the 

Nation Address," Daily Report: Latin America, 

FBIS-LAT-92-214, Nov. 4, 1992, p. 14. 

238 Data for 1987-91 are from the Mexican 

balance of payments. Data do not include 

transactions under the maquiladora program. 

238 In real terms the peso has steadily 

appreciated against the dollar since late 1989. In 

nominal terms, despite the acceleration of nominal 

devaluation, the peso devalued less than 2 percent 

between November 10, 1991, and March 18, 1993. 

U.S. Embassy, Mexico City, Economic and Financial 

Report, p. 7. 

248 For more background on the Mexican 

exchange-rate policy and earlier changes in the rate 

of daily appreciation, see USITC, The Year in Trade: 

OTAP, 1991, USITC publication 2554, p. 115. 

241 Mexican Forecast, July 10, 1992, p. 4. 

242 These views were expressed orally by 

analysts at the U.S. Embassy in Mexico City and in 

U.S. Department of State, "Mexico's Economic Pact 

Is Extended Through the End of 1993," telegram, 

message reference No. 25,764. They also have 

frequently cropped up in press reports to date. 

243 A decree with labeling regulations on 

imported products was published in the Diario Oficial 

on June 17, 1987. This was amended on March 10, 

1988, indicating that the name and address of the 

exporter in the country of origin should be included. 

The amendment was followed by a textile-labeling 

decree on Oct. 23, 1990, and amended on March 

19, 1991. 

244 Diario Oficial, Dec. 20, 1991. 

245 Diario Oficial, Aug. 3, 1992, and Nov. 5, 

1992. 

246 The labeling requirements for apparel and 

leather products are spelled out in the August 1992 

decree. 

247 Ibid. 

248 On February 7, 1993, SECOFI published a 

list of accredited testing laboratories. U.S. 

Department of State, "Mexico Trade Irritants," 

telegram, message reference No. 03096, prepared by 

U.S. Embassy, Mexico City, Feb. 12, 1993. 

249 USTR, 1993 National Trade Estimate Report, 

p. 185, and 57 F.R. 55439. 

25° Diario Oficial, Nov. 10, 1992. 

251 Ibid. and Houston Chronicle, "Beef With 

Mexico," Nov. 19, 1992, p. 5. 

252 "Tariffs Prove Need for NAFTA," Houston 

Post, Nov. 28, 1992. 

253 U.S. Department of State, "Additional 

Information on New Mexican Regulation for Tax 

Registration of Importers" telegram, message 

reference No. 29693, prepared by U.S. Embassy, 

Mexico City, Dec. 8, 1992, and USTR, 1993 National 

Trade Estimate Report, p. 186. 

254 USTR, 1993 National Trade Estimate Report, 

p. 186. 

255 U.S. Department of State, "USTR Discusses 

Trade Irritants With the GOM," telegram, message 

reference No. 30451, prepared by the U.S. Embassy, 

Mexico City, Dec. 17, 1992. 

256 Diario Oficial, Jan. 4, 1992. 

257 Ley Agraria, Diario Oficial, Feb. 26, 1992. 

258 Ley Forestal, Diario Oficial, Dec. 22, 1992, 

and Ley de Aguas Nacionales, Diario Oficial, Dec. 1, 

1992. 

258 Between 1940 and 1960, agricultural 

production in Mexico grew at an average rate of 4.6 

83 
percent, compared with 2.7 percent for all Latin 

America. Backgrounder, The Heritage Foundation, 

Oct 1, 1992, p. 3. 

260U.S. Department of State, Profile of Mexican 

Agriculture, U.S. Embassy, Mexico City, Mar. 20, 

1992, p. 2. 

261 Backgrounder, The Heritage Foundation, p. 9. 

262 Corporations are now permitted to own up to 

25 times the amount of land allowable to individual 

farmers. 

263See USITC, Potential Impact on the U.S. 

Economy and Selected Industries of the North 

American Free-Trade Agreement (investigation 

332-337), USITC publication 2596, Jan. 1993, p. 

22-2. 

264At a January 1993 meeting with rural leaders, 

Mr. Salinas promised that the "certification of ejido 

rights" process will take place throughout the country 

in 1993. 

265 Kenneth Shwedel, American Chamber of 

Commerce, Mexico City, "A Game of Wait and See," 

Business Mexico, Dec. 1992, p. 7. 

266 Ibid. 

267U.S. Embassy, Mexico City, Economic and 

Financial Report, p. 80. 

268 Ibid. 

269U.S. Embassy, Mexico City, Economic Trends 

Report, Apr. 1993, p. 80, and Kenneth Shwedel, "A 

Game of Wait and See," p. 6. 

270 U.S. Embassy, Mexico City, Foreign 

Investment Report, Aug. 1992, p. 28, and U.S. 

Embassy, Mexico City, Economic Trends Report, p. 

72. 

271Under the NAFTA, Mexico has separate 

agricultural accords with the United States and 

Canada. See chapter 1 of this report for a fuller 

explanation. 

272USITC, Potential Impact of NAFTA, USITC 

publication 2596, p. 22-4. 

273The full name of the agreement is 

"Memorandum of Understanding Between the 

Government of the United States of America and the 

Government of the People's Republic of China on 

the Protection of Intellectual Property." 

27456 F.R. 24878. The so-called "Special 301" 

provisions on IPR were added to section 301 of the 

1974 Trade Act, as amended in the Omnibus Trade 

and Competitiveness Act of 1988 (19 U.S.C. 2242). 

These provisions direct the USTR to identify foreign 

countries that lack adequate and effective protection 

of IPR or that deny fair and equitable market access 

to U.S. persons and firms relying on IPR protection. 

They further direct that the designation of priority 

foreign country, which automatically triggers a 301 

investigation, be accorded those countries whose 

policies and practices have the greatest actual or 

potential adverse impact on U.S. products and who 

have not made significant progress in negotiating the 

issues involved. 

275 56 F.R. 61278 and 56 F.R. 61447. Under the 

Special 301 provisions, the USTR may impose 

punitive trade sanctions against the country under 

investigation if it does not agree to make the 

designated changes in its IPR practices. Public 

hearings were held in early January 1992 to assist 

the USTR in preparing a final list of products 

targeted for tariff increases that would amount to 

approximately $400 million, the estimated loss to 

U.S. industries during 1991 as a result of China's 

inadequate IPR protection. 

27657 FR. 3084. For more information on the 

Special 301 investigation and the proposed retaliatory 

tariffs, see USITC, 69th Quarterly Report on Trade 

Between the United States and China, the Former 

Soviet Union, Central and Eastern Europe, the Baltic 

Nations, and Other Selected - Countries During 1991, 

USITC publication 2503, Apr. 1992 (69th Quarterly 

Report), p. 10. 

277USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 56. 

279China's copyright law, which became effective 

June 1, 1991. had provided no protection for foreign 

books, films, songs, or computer software not first 

published in China. 

279USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, p. 56. 

280The full title of the agreement is 

"Memorandum of Understanding Between the 

Government of the United States and the 

Government of the People's Republic of China 

Concerning Market Access." 

29156 F.R. 51943. 

292For more background information, see 

USITC, 69th Quarterly Report, USITC publication 

2503, pp. 10-11. 

283 57 F.R. 38912. 

29457 F.R. 47889. 

296The provisions described below summarize 

major sections of the agreement, cited by full title at 

the beginning of this section and available from the 

USTR. 

296According to the U.S. Department of 

Commerce's Bureau of Export Administration, 

bilateral restrictions imposed on certain technically 

advanced exports to China, including some 

telecommunications equipment, following the Chinese 

Government's military repression of the prodemocracy 

movement in June 1989 were lifted during the final 

months of the Bush administration. In late 1992 the 

United States also adopted changes made by the 

84 
Coordinating Committee for Multilateral Export 

Controls (COCOM) that applied to China, among 

other countries, and included the lifting of controls on 

more advanced telecommunications equipment. 

COCOM negotiations under way during 1993 are 

expected to result in the further liberalization of 

controls on telecommunications. 

287 For a description of China's tariffs and other 

import charges, see USTR, 1993 National Trade 

Estimate Report on Foreign Trade Barriers, 

pp. 51-52. 

288 See the section on the market-access 

agreement between the United States and China, 

above. 

289 China's prospects for attaining GATT 

membership in the near future dimmed during 

bilateral talks between the United States and China 

held in early March 1993. During this meeting 

Assistant USTR Douglas Newkirk named the 

minimum conditions that China must meet for U.S. 

support of its accession to GATT a single national 

trade policy common to all Provinces and regions of 

the country; full transparency of trade regulations; the 

continuing gradual removal of nontariff import 

barriers; a commitment to move to a full market 

economy; and, until the transition to a market 

economy is completed, the acceptance of a 

safeguard system to protect GATT member countries 

from possible surges in Chinese exports. GATT 

article XIX provides GATT member countries with 

safeguard protection against import surges, but 

involves the payment of compensation and other 

complications that arise because of imports of the 

same products from other GAIT members. The 

proposed safeguard system applying only to China 

would be in addition to article XIX and presumably 

would not require other countries to meet certain 

obligations to China. 

During a meeting of the GATT working party that 

followed on March 15 to 17, 1993, the European 

Community joined the United States in demanding a 

safeguard clause. China at that time refused to 

accept a system of safeguards that would enable 

other GATT members to unilaterally enact emergency 

quotas and tariffs to restrict the importation of 

Chinese goods, but during a GATT working party 

meeting held May 24 to 28, 1993, adopted a more 

flexible approach to the issue. 

290 USITC, OTAP, 41st Report, 1989, USITC 

publication 2317, Sept. 1990, p. 117. 

291 Taiwan was first named to the priority 

watchlist under the Special 301 provision in 1989, 

the year the provision went into effect. Taiwan was 

promoted to the watchlist on November 1, 1989, after 

liberalizing several trade practices and negotiating 

new copyright and IPR agreements with the United 

States. U.S. House of Representatives, Committee 

on Ways and Means, testimony of Ambassador Carla 

Hills, June 8, 1989, in USTR, Identification of Priority 

Practices and Countries Under Super 301 and 

Special 301 Provisions of the Omnibus Trade and 

Competitiveness Act of 1988, serial 101-28 

(Washington: GPO, 1989), pp. 10-11. Also see 

USITC, The Year in Trade: OTAP 1991, USITC 

publication 2554, p. 126. 

292 Ibid, p. 9. 

293 Ibid., p. 10. The drop in enforcement was 

demonstrated in the statistics on police raids: the 

number of raids on both videotape viewing parlors 

and rental shops dropped by more than one-half for 

the first 5 months of 1992 as opposed to the first 5 

months of 1991. The number of cases brought to 

trial, except for trademark infringement, also dropped 

during the period. Taiwan authorities claimed the 

number of infringements was dropping, but U.S. 

officials argued that lax enforcement was the key. 

Taiwan Government Information Office, Comparison 

of Unauthorized Video Tapes (VTS) Seized, Jan. to 

May, 1991 and Jan. to May, 1992, in U.S. 

Department of State, "Intellectual Property 

Enforcement," telegram, message reference No. 

05567, prepared by American Institute in Taiwan 

(AIT), Taipei, Aug. 7, 1992. 

294 Ibid. 

295 Taiwan Government Information Office, Draft 

Video Reproduction Law, in U.S. Department of 

State, "Taiwan's Video Reproduction Law," telegram, 

message reference No. 02971, prepared by AIT, 

Taipei, Apr. 29, 1992. 

296 Ibid. 

297 Asia-Pacific Council of American Chambers of 

Commerce, "Intellectual Property Rights (IPR) 

Resolution," Apr. 24, 1992, in U.S. Department of 

State, "APCAC Assesses Intellectual Property Rights 

in Asia," telegram, message reference No. 10904, 

prepared by U.S. Embassy, Manila, Apr. 28, 1992. 

298 USTR, "Notice of Trading Partners Identified 

as Priority Foreign Countries," 57 F.R. 19329. 

299 American Institute in Taiwan, Arlington, VA, 

"American Institute in Taiwan and Coordinating 

Council for North American Affairs Sign 

Understanding on Intellectual Property Rights Issues," 

press release, June 5, 1992, and U.S. Department of 

State, "Taiwan Reactions to Special 301 Designation," 

telegram, message reference No. 03066, prepared by 

AIT, Taipei, May 1, 1992.. 

300 AIT press release, June 5, 1992. 

301 Taiwan National Bureau of Standards, letter 

to AIT, in U.S. Department of State, "Taiwan Invites 

AIT Experts to Intellectual Property Rights Seminar," 

telegram, message reference No. 03349, prepared by 

AIT, Taipei, May 13, 1992. 

302 AIT press release, June 5, 1992. 

333 Taiwan Ministry of Economic Affairs, 

"Provisional Standards for Inspection of Computer 

Software Program Exports," translated by AIT, in U.S. 

85 
Department of State, "Taiwan's Provisional Standards 

for Inspection of Computer Software Program 

Exports," telegram, message reference No. 07103, 

prepared by AIT, Taipei, Oct. 6, 1992. 

304 Directorate General of Customs, letter to 

Taiwan Customs Bureaus, translated by AIT, in U.S. 

Department of State, "Customs Implements May 

1992 Bilateral IPR Understanding," telegram, 

message reference No. 05246, prepared by AIT, 

Taipei, July 24, 1992. 

305 AIT press release, June 5, 1992. 

"6Ibid. 

307 "U.S. Presents Eight Issues for IPR Talks 

Beginning Dec. 4," Commercial Times, Nov. 30, 

1992, in U.S. Department of State, "Taiwan Media 

Reaction on Visit by USTR Carla Hills," telegram, 

message reference No. 08418, prepared by AIT, Nov. 

30, 1992. 

308 U.S. Department of State, "Revision of 1992 

National Trade Estimate Report: Taipei," telegram, 

message reference No. 004245, prepared by the AIT, 

Taipei, Washington, DC, Jan. 7, 1993. 

309 Ibid. 

310 For more background, see USITC, The Year 

in Trade: OTAP, 1991, USITC publication 2554, p. 

125. 

311U.S. Department of State, "Economic Trends 

Report for Taiwan," telegram, message reference No. 

06224, prepared by AIT, Taipei, Sept. 1, 1992. 

312Carl Goldstein and Julian Baum, "Outside 

GATT's Door," Far Eastern Economic Review, (Oct. 

22, 1992), p. 58. 

313"Possible Impact of Re-accession to GATT on 

Taiwan's Industries," in Industry and Commerce 

Monthly, translated by AIT, reproduced in U.S. 

Department of State, "Possible Impact of 

Re-accession to GATT on Taiwan's Industries," 

telegram, message reference No. 02302, prepared by 

AIT, Apr. 2, 1992. 

314Goldstein and Baum, "Outside GATT's Door," 

p. 58. For a discussion of China's GATT application, 

see the China section of this chapter. 

315USTR, "Trade Policy Staff Committee: Public 

Comments on U.S. Negotiations With Taiwan in the 

Context of the Accession of the Separate Customs 

Territory of Taiwan, Penghu, Kinmen, and Matsu to 

the GATT," 57 F.R. 47890. 

316Ambassador Carla Hills, "Text of Keynote 

Address at 16th Joint Business Conference by Carla 

Hills, U.S. Trade Representative," Taiwan Economic 

News, Jan., 1993, p. 28. 

317 The AIT considers the following industries to 

offer best prospects for U.S. investment and exports: 

pollution control, computers and peripherals, scientific 

instruments, integrated circuits, and medical 

equipment. U.S. Department of State, "Economic 

Trends Report for Taiwan," telegram, message 

reference No. 06224. 

318Ibid. 

319USTR, 1993 Trade Policy Agenda and 1992 

Annual Report, 1992, p. 54. 

320 The Trade and Investment Framework 

Agreement (TIFA) was formally announced on 

January 15, 1993. 

321Hills, "Text of Keynote Address," pp. 27-28. 

322"Carla Hills Speaks at Joint Business 

Conference," China Times, translated by AIT in U.S. 

Department of State, telegram, message reference 

No. 08508, prepared by AIT, Taipei, Dec. 3, 1992. 

323"Agreement Between the American Institute in 

Taiwan and the Coordination Council for North 

American Affairs Concerning a Framework of 

Principles and Procedures for Consultations 

Regarding Trade and Investment," Jan. 15, 1993. 

P. 1 . 

324Ibid., p. 2. 

325"Lavin: Framework Agreement to be Basis for 

Future FTA Discussions," United Party News, Dec. 5, 

1992 reported in U.S. Department of State, "Taiwan 

Media Reaction on Visit by USTR Carla Hills's Trip to 

Taiwan," telegram, message reference No. 08477, 

prepared by AIT, Taipei, Dec. 2, 1992. 

326Pub. L. 100-418, title I, sec. 1372-1374, Aug. 

23, 1988. This provision directs the President to 

eliminate discriminatory practices by foreign 

governments toward the U.S. telecommunications 

industry. USTR was required to conduct an 

investigation within 5 months of August 23, 1988, 

identifying priority countries. Priority countries are 

defined in part as those whose acts, policies, and 

practices deny mutually advantageous market 

opportunities to telecommunications products and 

services of U.S. firms. USTR's findings are updated 

in a semiannual report to Congress. 

327For more background see USITC, The Year 

in Trade: OTAP, 1991, USITC publication No. 2554, 

p. 123. 

328For more background see USITC, OTAP, 42d 

Report, 1990, USITC publication 2403, July 1991, p. 

147, and USTR, Foreign Trade Barriers, 1990, p. 

135. 

329USTR, "Hills Announces Telecommunications 

Agreement With Korea, Other Trade Act Decisions 

on Government Procurement and Telecommunications," press release, Feb. 21, 1992; USTR, 

"Fact Sheet: Negotiations With the European 

Community and the Republic of Korea Under Section 

1384 of the 1988 Trade Act," press release, Feb. 21, 

1992, p. 1.; and USTR, Foreign Trade Barriers, 1992, 

p. 166. 

In early 1993 USTR undertook a review of the 

effectiveness of all U.S. telecommunications trade 

86 
agreements reached pursuant to provisions of the 

OTCA. In April 1993 USTR announced that Korea 

had agreed to rectify certain aspects of 

noncompliance with the telecommunications 

agreement that came to light during the review. 

According to USTR Korea agreed to ensure "a 

completely transparent and non-discriminatory 

procurement system for Korea Telecom." USTR, 

"USTR Corrects Telecommunications Market Access 

Problem in Korea," press release, Apr. 1, 1993. 

338U.S. Department of State, Bureau of East 

Asia and Pacific Affairs, Presidents' Economic 

Initiative: Report of Senior Officials to Korea-U. S. 

Economic Consultation, publication 10009, Sept. 18, 

1992, p. 1. 

331For more information on the Agreement on 

Technical Barriers to Trade (commonly known as the 

Standards Code), see USITC, The Year in Trade: 

OTAP, 1991, USITC publication 2554, p. 43. 

332U.S. Department of State, Presidents' 

Economic Initiative, Sept. 18, 1992, pp. 11-12. 

333Ibid., pp. 12-14. 

334Ibid., pp. 2-3. 

335Ibid., pp. 37-40. 

336Under section 5(k) of the U.S. Export Control 

Act, the Secretary of State, in consultation with the 

Secretaries of Commerce and Defense, is authorized 

to negotiate with non-COCOM countries regarding 

the control of strategic products and technology 

related to national security. In return for the adoption 

of effective export control measures by non-COCOM 

countries, the Secretary of Commerce may grant 

some or all of the preferential licensing benefits that 

are otherwise reserved for COCOM partners. Korea, 

along with Austria, Ireland, and Sweden, received 

partial 5(k) benefits in 1991. The current members of 

COCOM are the United States, Australia, Belgium, 

Canada, Denmark, France, Germany, Greece, Italy, 

Japan, Luxembourg, the Netherlands, Norway, 

Portugal, Spain, Turkey, and the United Kingdom. 

337U.S. Department of State, Presidents' 

Economic Initiative, p. 41. 

338The following sectors are now open to foreign 

investment: maritime freight forwarding and brokerage 

services, the import and wholesaling of alcoholic 

beverages, securities businesses, and data 

communications services. 

338U.S. Department of State, "Seoul Daily Press 

Translations, Nov. 9, 1992," telegram, message 

reference No. 11889, prepared by U.S. Embassy, 

Seoul, Nov. 9, 1992. 

340U.S. Department of State, "Daily Seoul Press 

Translations, Dec. 9, 1992," telegram, message 

reference No. 12890, prepared by U.S. Embassy, 

Seoul, Dec. 9, 1992. 

341U.S. Department of State, "Daily Seoul Press 

Translations, Dec. 31, 1992," telegram, message 

reference No. 00029, prepared by U.S. Embassy, 

Seoul, Jan. 4, 1993. 

342USITC, The Year in Trade: OTAP, 1991, 

USITC publication 2554, pp. 120-121. 

343Paul Carroll and Balbina Y. Hwang, "Export 

Opportunities for U.S. Firms in Korea and Taiwan," in 

Business America, Aug. 24, 1992, pp. 2-3. 

344Daniel Duvall, "Seoul Summit Underlines U.S. 

Economic Partnership," Business America, Oct. 23, 

1992. 

345Carroll and Hwang, "Export Opportunities for 

U.S. Firms," p. 3. 

346Ibid., p. 4. 

347Duvall, "Seoul Summit Underlines U.S. 

Economic Partnership," p. 2. 

87 

CHAPTER 5 

Administration of U.S. Trade Laws 

and Regulations 

This chapter reviews activities related to the 

administration of U.S. trade laws during 1992. It is 

subdivided into sections on (1) import-relief laws (the 

escape-clause, market disruption, and adjustment 

assistance provisions of the Trade Act of 1974); (2) 

unfair trade laws; and (3) certain other trade 

provisions. These other provisions include the U.S. 

Generalized System of Preferences (GSP), the 

Caribbean Basin Economic Recovery Act (CBERA), 

and the Andean Trade Preference Act (ATPA). 

Import Relief Laws 

Safeguard Actions 

Section 201 of the Trade Act of 1974, 1commonly 

referred to as the U.S. "escape clause" law, is based 

on article XIX of the General Agreement on Tariffs 

and Trade (GATT). Article XIX permits a country to 

"escape" from its obligations under the agreement 

with respect to an article when certain conditions 

exist. The U.S. International Trade Commission 

conducts investigations under section 201 upon receipt 

of a petition from an entity such as a trade 

association, firm, certified or recognized union, or 

other group of workers that is representative of an 

industry; upon request from the President or the 

United States Trade Representative; upon resolution 

of the House Committee on Ways and Means or the 

Senate Committee on Finance; or upon its own 

motion. 

The Commission conducted one investigation 

under section 201 in 1992. That investigation, which 

was instituted in June 1992 by the Commission 

following receipt of a petition filed by two domestic 

firms, concerned whether extruded rubber thread was 

being imported into the United States in such 

increased quantities as to be a substantial cause of 

serious injury, or the threat thereof, to the domestic 

industry producing an article like or directly 

competitive with the imported article? 

In December 1992 the Commission reported to the 

President that it was equally divided on the question 

of injury to the domestic industry. Section 330(d) of 

the Tariff Act of 1930 provides that when the 

Commission is equally divided on the question of 

injury, the President may consider either side as the 

determination of the Commission. In January 1993 

President Bush announced that he was considering the 

negative determination to be the determination of the 

Commission. Consequently, no import relief was 

provided.3 

Market Disruption 

Under section 406 of the Trade Act of 1974, 4the 

Commission conducts investigations to determine 

whether imports of an article produced in a 

"Communist country" are causing market disruption 

with respect to an article produced by a U.S. industry. 

"Market disruption" is defined to exist whenever 

imports of an article like or directly competitive with 

an article produced by a domestic industry are 

increasing rapidly, either absolutely or relatively, so as 

to be a significant cause of material injury or threat of 

material injury to the domestic industry. This 

provision is similar procedurally to section 201. 

In June 1992 the Commission commenced an 

investigation under section 406 concerning oscillating 

fans from the People's Republic of China, 5following 

receipt of a petition by a domestic firm. This 

investigation—the only market disruption case active 

in 1992—was terminated in July 1992 at the request 

of the petitioner. 6 

Adjustment Assistance 

The Trade Adjustment Assistance (TAA) Program, 

provided for in title II of the Trade Act of 1974, 

authorizes the provision of economic assistance to 

89 
workers, firms, and industries dislocated as a result of 

Federal policies to reduce barriers to foreign trade. 

Initially authorized by the Trade Expansion Act of 

1962, the current program is scheduled to expire on 

September 30, 1993. In 1992 the TAA was again 

modified to allow weeks of active military duty in a 

reserve status (including service during Operation 

Desert Storm) to qualify toward the minimum number 

of weeks of prior employment required for TAA 

eligibility.? 

The TAA system of readjustment allowances to 

individual workers is administered by the U.S. 

Department of Labor through its Office of 

Employment and Training Administration (ETA) in 

the form of monetary benefits for direct trade 

readjustment allowances and for service benefits that 

include allocations for job search, relocation, and 

training. Industrywide technical consultation provided 

through Commerce-sponsored programs is designed to 

restore the economic viability of U.S. industries 

adversely affected by international import 

competition. 8 

Assistance to Workers 

The Department of Labor instituted 1,465 

investigations in fiscal year 1992 (October 1, 1991, 

through September 30, 1992) on the basis of petitions 

filed for trade adjustment assistance. This figure 

represents a small decrease from the 1,509 

investigations instituted in fiscal 1991. The results of 

investigations completed or terminated in fiscal 1992 

including those in process from the previous fiscal 

year, are shown in the following tabulation: 9 

Number of Estimated 

investigations number of 

Item or petitions workers 

Completed certifications 700 49,543 

Partial certifications 3 560 

Petitions denied 680 60,997 

Petitions terminated 

or withdrawn 59 5,182 

Total 1,442 116,282 

The number of completed and partial certifications 

in fiscal 1992 increased to 703 from 549 in fiscal 

1991. Preliminary figures for fiscal 1992 indicate that 

Labor expenditures for direct trade readjustment 

allowances (TRAs) to certified workers decreased to 

$42.7 million, significantly below the $115.7 million 

expenditures in fiscal 1991. According to the 

Department of Labor, fiscal 1992 expenditures for 

TRA were abnormally low because extended 

unemployment compensation payments were made to 

workers in lieu of TRA payments. 

In addition, Labor provided training, job search, 

and relocation services valued at a preliminary 

estimate of $70.2 million in fiscal 1992 for worker 

activities in the areas shown in the following 

tabulation: 

Estimated 

number of 

Item part icipantslo 

Training 18,600 

Job search 600 

Relocation allowances 750 

Total 19,950 

Preliminary data for fiscal 1992 indicated that an 

estimated 19,950 workers used available service 

benefits, representing a decrease of 6.6 percent from 

the workers receiving such services in the previous 

fiscal year. 

Assistance to Firms and Industries 

Through its Trade Adjustment Assistance Division 

(TAAD), the U.S. Department of Commerce's 

Economic Development Administration (EDA) 

certified 182 firms as eligible to apply for trade 

adjustment assistance during fiscal year 1992. This 

figure represents a 17.4-percent increase from the 155 

firms certified in the previous fiscal year. The TAAD 

administers its firm assistance programs though a 

nationwide network of 12 Trade Adjustment 

Assistance Centers (TAACs). Technical services are 

provided to certified firms through TAAC staffs and 

independent consultants under direct contract with 

TAACs. Funding for the TAACs during fiscal 1992 

totaled $13.4 million for technical services to 838 

firms adversely affected by international import 

competition. 

In addition to the technical assistance for firms, 

Commerce funded four industry development projects, 

valued at $565,000. The industries receiving such 

funding represented fabricators of engines and 

automotive equipment and producers of 

semiconductors and electronics. 

Laws Against Unfair 

Trade Practices 

The U.S. Department of Commerce issued 16 new 

antidumping orders during 1992, following 

completion of investigations by Commerce and the 

U.S. International Trade Commission. In addition, 

90 
Commerce issued four new countervailing-duty orders 

following completion of investigations by Commerce 

and, in two of the four instances, by the Commission. 

(In the other two instances, no Commission 

investigation was required)." During 1992 the 

Commission completed 12 investigations under 

section 337 of the Tariff Act of 1930 involving 

allegations of patent, trademark, or copyright 

infringement or other unfair methods of competition. 

In three of those investigations, the Commission 

issued exclusion orders prohibiting the importation of 

merchandise and cease-and-desist orders enjoining 

further violation of section 337. 

In 1992 one section 301 investigation was 

instituted on the basis of a petition filed by private 

parties and one investigation was self-initiated under 

section 302(b)(2)(A) by USTR pursuant to the 

"special 301" provisions contained in section 182(a) 

of the Trade Act of 1974. Bilateral settlements were 

reached in several pending section 301 investigations. 

Antidumping Investigations 

The present antidumping law is contained in title 

VII of the Tariff Act of 1930. 12The antidumping law 

provides relief in the form of special additional duties 

that are intended to offset margins of dumping. 

Antidumping duties are imposed when (1) Commerce 

(the administering authority) has determined that 

imports are being, or are likely to be, sold at less than 

fair value (LTFV) in the United States, and (2) the 

Commission has determined that a U.S. industry is 

materially injured or threatened with material injury, 

or that the establishment of an industry in the United 

States is materially retarded, by reason of such 

imports. 

In general, imports are considered to be sold at 

LTFV when the U.S. selling price is less than the 

foreign market value, which is usually the 

home-market price, or, in certain cases, the price in a 

third-country or a "constructed" value, as adjusted by 

statute. 13The antidumping duty equals the difference 

between the U.S. price and the foreign market value. 

Most investigations are conducted on the basis of a 

petition filed with Commerce and the Commission by 

or on behalf of a U.S. industry. 

Commerce and the Commission each conduct 

preliminary and final antidumping investigations in 

making their separate determinations. In 1992 the 

Commission completed 85 preliminary and 20 final 

antidumping injury investigations. 14The 

disproportionately large number of preliminary 

investigations was primarily attributable to 

antidumping investigations involving the U.S. steel 

industry commenced in June 1992. Antidumping 

orders were imposed as a result of affirmative 

Commission determinations in 16 of the 20 final 

investigations on products imported from 13 different 

countries. Details of antidumping actions and orders, 

including suspension agreements, 15in effect in 1992 

are presented in tables A-24 and A-25. The following 

tabulation summarizes the number of antidumping 

investigations between 1990 and 1992: 16 

1990 1991 1992 

Petitions filed 19 24 24 

Preliminary Commission 

determinations: 

Negative 6 22 13 

Affirmative (includes 

partial affirmatives) 27 31 72 

Terminated17 1 2 11 

Final Commerce 

determinations: 

Negative 0 0 2 

Affirmative 16 28 24 

Terminated 0 1 2 

Suspended 0 0 7 

Final Commission 

determinations: 

Negative 2 13 4 

Affirmative (includes 

partial affirmative) 14 19 16 

Terminated 1 0 1 

Countervailing-Duty 

Investigations 

The U.S. countervailing-duty law is set forth in 

section 303 and title VII of the Tariff Act of 1930. It 

provides for the levying of special additional duties to 

offset foreign subsidies on products imported into the 

United States. 18In general, procedures for such 

investigations are similar to those under the 

antidumping law. Petitions are filed with Commerce 

(the administering authority) and the Commission. 

Before a countervailing-duty order can be issued, 

Commerce must find a countervailable subsidy, and in 

most cases, the Commission must make an affirmative 

determination of material injury, threat of material 

injury, or material retardation by reason of the 

subsidized imports. 

Investigations are conducted under section 701 of 

the Tariff Act if the subject article is imported from a 

country that has signed the GATT Code on Subsidies 

and Countervailing Duties 19or has otherwise been 

designated a "country under the Agreement." 20 

 Investigations with respect to imports from other 

countries are conducted under section 303 of the 

Tariff Act. Such imports are subject to an injury 

investigation by the Commission only if (1) they 

normally enter free of duty or (2) international 

91 
obligations of the United States require an injury 

investigation.21For imports not falling under this 

category or under section 701, a countervailing-duty 

order may be issued under section 303 on the basis of 

an affirmative subsidy determination by Commerce 

alone. 

Two new countervailing-duty orders—on 

magnesium and softwood lumber, both from 

Canada—were imposed in 1992 as a result of 

investigations involving both Commerce and the 

Commission. Two new countervailing-duty orders 

were imposed on products following investigation by 

Commerce alone under section 303 of the Tariff Act. 

In 1992 the Commission completed 49 preliminary 

and two final injury investigations.n As with 

antidumping investigations, the disproportionately 

large number of preliminary investigations was 

primarily attributable to investigations involving the 

U.S. steel industry commenced in June 1992. Details 

of countervailing-duty actions and outstanding orders, 

including suspension agreements 23in effect in 1992, 

are presented in tables A-26 and A-27. The following 

tabulation summarizes the number of 

countervailing-duty investigations between 1990 and 

1992:24 

1990 1991 1992 

Petitions filed 5 8 4 

Preliminary 

Commission 

determinations: 

Negative 2 1 6 

Affirmative (includes partial 

affirmatives) 3 6 43 

Terminated 0 1 0 

Final Commerce 

determinations: 

Negative 2 2 2 

Affirmative 2 4 4 

Terminated 0 1 2 

Suspended 0 0 0 

Final Commission 

determinations: 

Negative 0 2 0 

Affirmative (includes 

partial affirmatives) 0 1 2 

Terminated 0 0 3 

Reviews of Outstanding 

Antidumping and 

Countervailing-Duty Orders 

Section 751 of the Tariff Act of 1930, as amended 

(19 U.S.C. 1675), requires that Commerce conduct, if 

requested, annual reviews of outstanding antidumping 

and countervailing-duty orders to determine the 

amount of any net subsidy or dumping margin and 

that it review suspension agreements to determine 

compliance. Section 751 also authorizes Commerce 

and the Commission, as appropriate, to review certain 

outstanding determinations and agreements after 

receiving information or a petition that shows changed 

circumstances. The party seeking revocation or 

modification of an antidumping or countervailing-duty 

order or suspension agreement has the burden of 

persuading the Commission that circumstances have 

changed sufficiently to warrant review and revocation. 

Based on either of the reviews above, Commerce may 

revoke a countervailing-duty or antidumping order in 

whole or in part and may terminate or resume a 

suspended investigation. 

The Commission did not complete any 

investigations under section 751 in 1992. However, as 

a result of reviews conducted by Commerce in 1992 

based on a party's request, Commercegartially 

rescinded one countervailing-duty order and 

partially or completely -revoked six antidumping 

orders, including two antidumping orders revoked 

pursuant to court remand. 26Commerce did not 

revoke any antidumping or countervailing-duty orders 

or findings based on a determination that the orders or 

fmdings were no longer of interest to interested 

parties in 1992. Further, Commerce did not terminate 

any investigations that had previously been suspended. 

Enforcement of Trade 

Agreements and Response to 

Unfair Foreign Practices 27 

Chapter 1 of title III of the Trade Act of 1974, as 

amended (sections 301 through 310), gives USTR,29 

 subject to any direction by the President, the authority 

and means to enforce U.S. rights under trade 

agreements or to respond to "unjustifiable," 

"unreasonable," or "discriminatory" acts by a foreign 

country or instrumentality that burden or restrict U.S. 

commerce.3° If USTR finds that the foreign practice 

is "unjustifiable" and that it burdens or restricts U.S. 

commerce or finds that U.S. rights under a trade 

agreement are being violated, USTR must take all 

appropriate and feasible action to enforce such rights 

or to eliminate such act, policy, or practice. 

For "unreasonable" or "discriminatory" acts, 

USTR has discretion over whether to take action. 31 

 An interagency committee headed by USTR conducts 

the investigations, including hearings if requested. 

Section 301 investigations are usually initiated on the 

basis of petitions by interested parties alleging 

practices inconsistent with section 301, but an 

92 
investigation may also be initiated by USTR even if a 

petition is not filed. 

If the foreign entity does not agree to change its 

practices, USTR is empowered to (1) deny it the 

benefits of trade-agreement concessions; (2) impose 

duties, fees, or other import restrictions on products 

and services, when appropriate; and (3) enter into an 

agreement with the subject country to eliminate the 

practice or to provide compensatory benefits for the 

United States. USTR monitors compliance of foreign 

countries with the steps they have agreed to take 

under these provisions and may modify or terminate 

action under section 301 in certain circumstances. 

In 1992 USTR initiated two new section 301 

investigations. No petitions filed in 1992 with USTR 

were rejected or withdrawn. In addition to new 

investigations, further developments occurred in 15 of 

the investigations initiated prior to 1992. Table 5-1 

summarizes USTR activity in 1992; it was compiled 

from USTR's Report to Congress on section 301 

developments .32 

Section 337 Investigations 

Section 337 of the Tariff Act of 1930, as amended 

(19 U.S.C. 1337), authorizes the Commission, on the 

basis of a complaint or on its own initiative, to 

conduct investigations with respect to certain unfair 

practices in import trade. Section 337 declares 

unlawful the importation, sale for importation, or sale 

after importation of articles that infringe a valid and 

enforceable U.S. patent, registered trademark, 

registered copyright, or registered mask work, for 

which a domestic industry exists or is in the process 

of being established. Also unlawful under section 337 

are other unfair methods of competition or unfair 

acts33in the importation of articles into the United 

States or in the sale of imported articles, the threat or 

effect of which is to destroy or substantially injure a 

domestic industry, to prevent the establishment of an 

industry, or to restrain or monopolize trade and 

commerce in the United States. 

If the Commission determines that a violation 

exists, it can issue an order excluding the subject 

imports from entry into the United States or can order 

the violating parties to cease and desist from engaging 

in the unlawful practices.34The President may 

disapprove a Commission order within 60 days of its 

issuance for "policy reasons." 

In 1992, as in previous years, most complaints 

filed with the Commission under section 337 alleged 

infringement of a U.S. patent by imported 

merchandise. The Commission completed a total of 12 

investigations under section 337 in 1992, including a 

formal enforcement proceeding, compared with 13 in 

1991. These investigations pertained to products in a 

number of industries, such as semiconductors, medical 

equipment, pharmaceuticals, industrial machinery, and 

various consumer products. Exclusion orders were 

issued in three investigations and cease-and-desist 

orders were issued in one of those three 

investigations. Several investigations were terminated 

by the Commission without determining whether 

section 337 had been violated. Generally, these 

terminations were based on settlement agreements or 

consent orders. As a result of an informal enforcement 

proceeding in which allegations of a section 337 

consent order violation were investigated by the 

Office of Unfair Import Investigations, a respondent 

agreed to pay a civil penalty to the United States in 

the amount of $100,000. At the close of 1992 13 

section 337 investigations, including an advisory 

opinion proceeding, were pending before the 

Commission. Commission activities involving section 

337 actions in 1992 are presented in table A-28. 

As of December 31, 1992, a total of 51 

outstanding exclusion orders based on violations of 

section 337 were in effect. Thirty-three of these orders 

involved patent violations. Table A-29 also lists the 

investigations in which these exclusion orders were 

issued. 

93 
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See footnoteatend of table. 

Intellectual property, India

—Continued 

a) co O 

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Toll equ ipment, Norway 

Enlargement,EC 

Canned fru it,EC 
Other Import 

Administration Laws and 

Programs 

The United States now administers three distinct 

preferential programs as part of its overall program of 

import administration: the Generalized System of 

Preferences, the Caribbean Basin Economic Recovery 

Act, and the Andean Trade Preferences Act, whose 

first year of operation was 1992. Over 40 percent of 

the overall imports entering the United States in 1992 

entered free of duty. Of that amount, 8.6 percent 

benefited from the duty-free privileges of the three 

programs described in this section, as shown in the 

following tabulation (in millions of dollars): 

U.S. Imports for consumption— 1991 1992 

Total 483,778 523,326 

MFN duty-free 167,641 193,863 

GSP 13,663 16,735 

CBERA 1,121 1,499 

ATPA N/A 97 

This section of the report will also cover two 

other U.S. import programs—the series of bilateral 

agreements that results from the Arrangement 

Regarding International Trade in Textiles and the steel 

import program. 

Generalized System of 

Preferences 

The concept of offering preferential tariff 

treatment to developing countries was developed 

under the auspices of the United Nations Conference 

on Trade and Development during the 1960s. The 

underlying rationale was that free trade would 

promote economic development more effectively than 

foreign aid. The U.S. GSP program was originally 

enacted in the Trade Act of 1974 and was renewed in 

the Trade and Tariff Act of 1984. 35It gives the 

President the authority, subject to various conditions 

and requirements, to grant duty-free treatment to some 

imports from developing countries 36 

The U.S. GSP program grants duty-free treatment 

to more than 140 beneficiary countries37for imports 

that are classified in more than 4,300 tariff 

categories.38As shown in table 5-2, $16.7 billion in 

imports from GSP -beneficiary countries actually 

received duty-free treatment under the GSP program 

in 1992, out of $35.7 billion in eligible imports. This 

figure compares with $109.7 billion in total imports 

from GSP beneficiaries in 1992 and $523.3 billion in 

total imports from the world. Table 5-3 shows the top 

10 beneficiary countries of the GSP program in 1992. 

Table A-30 shows the top 20 GSP products or product 

categories in 1992, and table A-31 shows the overall 

sectoral distribution of GSP benefits. 

Table 5-2 

U.S. Imports for consumption' from GSP beneficiaries and the world, 1992 

(Millions of dollars) 

Item 

All GSP 

beneficiaries World 

Total 109,656 523,326 

GSP eligible products 2 35,709 205,701 

Duty-free under GSP 3 16,735 16,735 

GSP program exclusion 8,086 8,086 

Other 10,888 180,880 

Noneligible product imports 73,947 317,625 

1Customs value basis. 

2 The import data show total imports from all beneficiary countries and from the world that are eligible for duty-free 

treatment under GSP. For a variety of reasons, all imports from beneficiary countries that are "eligible" for GSP do 

not always and necessarily actually receive duty-free GSP treatment. Such "eligible" imports may not actually receive 

duty-free treatment under GSP for at least 4 types of reasons: (1) the importer fails to claim GSP benefits 

affirmatively; (2) the imports are from a beneficiary country that has lost GSP on that product or category for 

exceeding the so-called competitive need limits; (3) the imports are from a beneficiary country that has lost GSP on 

that product because of a petition to remove that country from GSP for that product; and (4) the imports fail to meet 

the rules of origin or direct shipment requirement in the GSP statute. 

3These import data show total imports from all GSP beneficiary countries that actually received duty-free 

treatment under the GSP program. 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

97 
Table 5-3 

U.S. Imports for consumption under the GSP from leading beneficiaries, and total, 1992 

(Millions of dollars) 

Rank Beneficiary 

Total 

Imports 

Imports of GSP articles 

GSP-eligible' GSP duty-free2 

1 Mexico 33,933 15,567 4,832 

2 Malaysia 8,176 3,891 2,538 

3 Thailand 7,485 3,025 1,862 

4 Brazil 7,557 2,368 1,559 

5 Philippines 4,312 1,276 1,054 

6 Indonesia 4,424 1,151 643 

7 India 3,752 749 637 

8 Israel 3,810 1,447 492 

9 Venezuela 7,533 321 304 

10 Argentina 1,216 444 291 

Top 10 82,199 30,240 14,213 

Total 109,656 35,709 16,735 

1These import data show total imports of the top 10 beneficiary countries that are eligible for duty-free treatment 

under GSP. For a variety of reasons, all imports from beneficiary countries that are "eligible" for GSP do not always 

and necessarily actually receive duty-free GSP treatment. Such "eligible" imports may not actually receive duty-free 

treatment under GSP for at least 4 types of reasons: (1) the importer fails to claim GSP benefits affirmatively; (2) the 

imports are from a beneficiary country that has lost GSP on that product or category for exceeding the so-called 

competitive need limits; (3) the imports are from a beneficiary country that has lost GSP on that product because of a 

petition to remove that country from GSP for that product; and (4) the imports fail to meet the rules of origin or direct 

shipment requirement in the GSP statute. 

2 These import data show the total imports from the top 10 GSP beneficiary countries that actually received 

duty-free treatment under the GSP program. 

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

Source: Compiled from official statistics of the U.S. Department of Commerce. 

Each year, the Trade Policy Staff Committee 

(TPSC) conducts a review that leads to modifications 

in product eligibility and country eligibility. In 1992 

the TPSC completed the 1991 Annual GSP Review 

and the Special GSP review for Central and Eastern 

Europe. The Special GSP Review was conducted 

pursuant to the President's Trade Enhancement 

Initiative for that region. As a result of these reviews, 

the President added about 100 new products to the 

GSP program and removed one product from the 

program. 39The President also suspended Syria as a 

GSP beneficiary after determining that Syria "has not 

taken and is not taking steps to afford internationally 

recognized worker rights" as required by sections 

502(b)(7) and 502(c)(7) of the Trade Act of 1974. The 

following countries were designated as beneficiary 

developing countries for purposes of the GSP program 

in 1992: Estonia,40Ethiopia,41 Latvia,42 Lithuania,43 

and each of the former republics of the Socialist 

Federal Republic of Yugoslavia other than Serbia and 

Montenegro (i.e., Bosnia-Herzegovina, Croatia, 

Macedonia, and Slovenia). 44 

The President also removed two products from 

GSP on an expedited basis in 1992 under the GSP 

program's escape-clause procedure: (1) Malaysia lost 

GSP on extruded rubber thread in HTS heading 

4007.00.00;45and (2) sulfanilic acid in HTS 

subheading 2921.42.28 was removed from GSP for all 

beneficiary countries. 46 

A final noteworthy modification of product and 

country eligibility in 1992 was when the President 

partially suspended India's GSP benefits after taking 

into account the adequacy and effectiveness of India's 

protection of intellectual property rights, as required 

by section 502(c)(5) of the GSP statute. 47This action 

followed a determination by the USTR, under the 

"Special 301" provisions of the 1974 Trade Act of 

1974, that India's denial of adequate and effective 

patent protection was unreasonable and burdens or 

restricts U.S. commerce. 

Lastly, the GSP program is scheduled to expire on 

1993 .4s July 4, The TPSC has initiated its 

98 
consideration of the renewal of the GSP program by 

holding hearings and inviting public comment. 

Caribbean Basin Economic 

Recovery Act 49 

The CBERA provides duty-free and reduced-duty 

entry into the United States for eligible products from 

designated Caribbean Basin countries. The CBERA 

became operative on January 1, 1984 (Public Law 

98-67, title II, as amended) and has no statutory 

expiration date. 

There were 24 designated eligible beneficiaries 

("CBERA countries") during calendar year 1992: 

Antigua and Barbuda, Aruba, the Bahamas, Barbados, 

Belize, the British Virgin Islands, Costa Rica, 

Dominica, the Dominican Republic, El Salvador, 

Grenada, Guatemala, Guyana, Haiti, Honduras, 

Jamaica, Montserrat, the Netherlands Antilles, 

Nicaragua, Panama, St. Kitts-Nevis, St Lucia, St. 

Vincent and the Grenadines, and Trinidad and Tobago. 

No countries have been added to the list of CBERA 

beneficiaries since 1990. 50 

Most imports under the CBERA are admitted into 

the United States duty-free. In 1992 duties on 

handbags, luggage, flat goods (such as wallets, change 

purses, and eyeglass cases), work gloves, and leather 

wearing apparel began to be reduced under the 

program by 20 percent per year for 5 years. 51 

 Specifically excluded from benefits under the CBERA 

are most textiles and apparel, canned tuna, petroleum 

and petroleum products, certain footwear, certain 

watches and watch parts, and sugar from 

"Communist" countries.52 

In addition to receiving CBERA benefits, the 

countries of Costa Rica, Dominican Republic, 

Guatemala, Haiti, Jamaica, and Trinidad and Tobago 

also benefited from the special Guaranteed Access 

Levels (GAL) program during 1992. The GAL 

program was established in 1986 to improve access 

for Caribbean Basin products within the context of 

overall U.S. textile policy implementing the Multifiber 

Arrangement. Under the program the United States 

sets flexible quotas on a case-by-case basis for textile 

and apparel items assembled in eligible CBERA 

countries that have signed GAL agreements. GAL 

imports, which must be made from fabric formed and 

cut to pattern in the United States, receive treatment 

similar to that of imports under HTS subheadings 

9802.00.60 and 9802.00.80.53U.S. customs duties, 

otherwise payable at the normal duty rate, are 

assessed only on the value added to the U.S. 

components as a result of processing or assembly in 

the foreign location; the U.S. content is duty-free. 

Both the dutiable and the duty-free components of 

GAL imports are reported under HTS statistical 

reporting number 9802.00.8010. 

In 1992 total U.S. imports from CBERA countries 

were $9.4 billion, or 1.8 percent of all U.S. imports. 

Approximately 65 percent of U.S. imports from 

CBERA countries in 1992, valued at $6.1 billion, 

entered duty-free under various U.S. programs or 

provisions (table 5-4). In contrast, only 48 percent of 

U.S. imports from CBERA countries, valued at $4.1 

billion, entered duty-free in 1984. 

A record high of over 16 percent of imports from 

beneficiaries, valued at $1.5 billion, entered duty-free 

under the CBERA during 1992 (table 5-4). The 

leading CBERA duty-free imports in 1992 were cane 

sugar ($193.6 million), footwear uppers ($132.1 

million), aromatic drugs ($78.6 million), and frozen 

beef ($68.6 million). (See table A-32.) 

Handbags, luggage, flat goods, work gloves, and 

leather wearing apparel that entered under the 

CBERA's reduced-duty provision accounted for less 

than 1 percent of imports, or about $29 million. 

Imports of textile and apparel articles subject to 

GAL agreements increased significantly during 1992. 

Dutiable GAL imports (the Caribbean Basin value 

added) increased from $146 million in 1991 to over 

$226 million in 1992, and duty-free GAL imports (the 

U.S.-origin component) increased from $411 million 

to $618 million during the same period. Imports from 

both designated CBERA beneficiaries and other 

Caribbean Basin countries are shown in table A-33. 

Andean Trade Preference Act 

In December 1991 the ATPA was establishedM for 

the South American Andean countries of Bolivia, 

Colombia, Ecuador, and Peru 55The ATPA, a 

modified version of the CBERA, was the trade 

component of President Bush's program to expand 

economic opportunities for, and to provide viable 

alternatives to, the Andean countries as they try to 

curtail the growth and production of illegal drugs. 56 

Colombia and Bolivia were designated as 

beneficiaries by the President on July 2, 1992 

(retroactive to January 1, 1992). 57Ecuador58and 

Peru were not so designated during 1992. 59U.S. 

imports under the ATPA from Bolivia and Colombia 

totaled $97 million in 1992. Chrysanthemums, 

standard carnations, anthuriums, and orchids were the 

largest import ($46 million), followed by fresh cut 

roses ($21 million), and cellular plastics of polymers 

of vinyl chloride ($7 million). (See table A-34.) 

99 
Approximately 50 percent of U.S. imports from 

the Andean countries of Colombia and Bolivia in 

1992, valued at $1.5 billion, entered duty-free under 

various U.S. programs. Items entering duty-free under 

the ATPA program accounted for 6 percent ($97 

million) of the total duty-free entry of imports. In 

comparison, 66 percent ($1 billion) of these imports 

entered duty-free under most-favored nation (MFN) 

status, and 15 percent ($237 million) entered duty-free 

under GSP. (See table 5-5.) 

Arrangement Regarding 

International Trade in Textiles 

The Arrangement Regarding International Trade 

in Textiles, known as the Multifiber Arrangement, has 

governed world trade in textiles and apparel since 

1974. In general the GATT-sanctioned MFA is 

designed to prevent market disruption in the importing 

developed countries while allowing the exporting 

developing countries to increase their share of world 

trade in these products. Under the MFA developed 

countries negotiate bilateral agreements with 

exporting developing countries for the purpose of 

setting quantitative limits (quotas) on particular 

products or groups of products. In the absence of an 

agreement, developed countries are able to impose 

unilateral quotas for up to 2 years to prevent market 

disruption. The quotas are a departure from the GATT 

as they are applied on a country-specific basis in 

contradiction to the nondiscrimination principle that 

all GATT member countries be treated equally when 

quotas or other trade restrictions are applied. 

In December 1992 the GATT announced an 

extension of the MFA, for a fifth time, for 1 

Table 5-4 

U.S. Imports for consumption from countries designated under CBERA, by duty treatments, 

1990-92 

(1,000 dollars, customs value) 

Item 1990 1991 1992 

Total imports 7,525,208 8,229,366 9,425,609 

Dutiable value1 2,573,813 2,869,880 3,269,148 

HTS 9802.00.60 and 9802.00.802 520,107 691,052 863,225 

HTS 9802.00.80.10 112,770 

HTS 9802.00.80.50 406,235 637,023 

146,307 

544,695 

226,200 

Other dutiable 2,053,706 2,178,828 2,405,923 

Duty-free value's 4,951,395 5,359,486 6,156,467 

MFN5 1,968,007 1,912,824 2,097,079 

CBERA6 1,020,717 1,120,697 1,498,556 

HTS 9802.00.60 and 9802.00.807 1,153,325 1,418,075 1,777,260 

HTS 9802.00.80.10 318,106 410,905 618,245 

HIS 9802.00.80.50 815,542 1,007,115 1,158,839 

GSP9 472,303 410,439 340,666 

Other duty-frees 337,042 497,451 442,904 

CBERA reduced duty 3 0 0 29,418 

1Reduced by the duty-free value of imports entering under HTS subheadings 9802.00.60 and 9802.00.80 and 

increased by the value of ineligible items that were reported as entering under the CBERA and GSP programs. 

2Caribbean Basin-origin value added. 

3Imports of handbags, luggage, flat goods, work gloves, and leather wearing apparel subject to 20-percent duty 

reductions under the CBERA between 1992 and 1996. 

4Calculated as total imports less dutiable value. 

5Value of imports that have a col. 1-general duty rate of zero. 

6 Reduced by the value of MFN duty-free imports and ineligible items that were misreported as entering under the 

CBERA program and the value of reduced-duty items (handbags, luggage, flat goods, work gloves, and leather 

wearing apparel) reported separately above as dutiable. 

7Value of nondutiable exported and returned U.S.-origin products or components. 

8Reduced by the value of MFN duty-free imports and ineligible items that were misreported as entering under 

the GSP program. 

9Calculated as a remainder and represents imports entering free of duty under special rate provisions. 

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

Source: Compiled from official statistics of the U.S. Department of Commerce. 

100 
Table 5.5 

U.S. Imports for consumption from countries designated under the Andean Trade Preference Act, 

by duty treatments, 1992 

(1,000 dollars, customs value) 

Item Imports 

Total imports 3,049,595 

Dutiable valuer 1,508,821 

HTS 9802.00.60 and 9802.00.80 96,454 

HIS 9802.00.80.10 0 

HTS 9802.00.80.50 96,454 

Other 1,412,367 

Duty-free value2 1,540,774 

ANDEAN3 97,117 

MFN3 1,011,633 

GSP4 236,657 

HTS 9802.00.60 and 9802.00.80 122,048 

HIS 9802.00.80.10 0 

HTS 9802.00.80.50 122,048 

Other duty frees 73,319 

1Reported dutiable value has been reduced by the duty-free value of imports entering under HTS subheading 

9802.00.60 and 9802.00.80 and increased by the value of ineligible items that were reported as entering under the 

ATPA and GSP programs. 

2 The total duty-free value is calculated as total imports less dutiable value. 

3 Figures for MFN duty-free imports represent the value of imports that have a col. 1-general duty rate of zero. 

4 Values for ANDEAN and GSP duty-free imports have been reduced by the value of MFN duty-free imports and 

ineligible items that were misreported as entering under the programs. 

The value for other duty-free imports was calculated as a remainder and represents imports entering free of 

duty under special rate provisions. 

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

Source: Compiled from official statistics of the U.S. Department of Commerce. 

additional year through 1993. This extension, like 

the preceding one that went into effect in August 

1991, was intended to bridge the expiration of the 

MFA with the anticipated implementation of a 

Uruguay Round agreement on textiles and apparel. A 

draft Uruguay Round agreement released in 

December 1991 calls for a phaseout of the MFA 

over 10 years and a return of textile and apparel 

trade to normal GAIT rules.60 

Bilateral agreements negotiated by the United 

States under the MFA govern most U.S. imports of 

textiles and apparel. In 1992 the United States had 

bilateral agreements or quotas in place with more than 

40 countries,61as shown in table 5-6. These countries 

supplied almost 80 percent of the import volume that 

year 

The United States in 1992 renegotiated or 

extended expiring pacts with Mexico and several 

Caribbean Basin suppliers—Costa Rica, the 

Dominican Republic, El Salvador, Guatemala, and 

Jamaica; secondary Asian suppliers—Malaysia, 

Pakistan, and Sri Lanka; and smaller 

sources—Mauritius and Uruguay. 

New agreements were signed with Colombia and 

Bulgaria and, for the first time, with newly emerging 

suppliers—Bahrain and Lesotho. The United States 

also recently imposed unilateral restraints on several 

types of garments from Laos, Lebanon, Oman, and 

Qatar. The agreements with Argentina, the 

Commonwealth of Independent States (the former 

U.S.S.R.), Fiji, Guam, Myanmar (Burma), Nigeria, 

and the former Yugoslavia were allowed to expire 

during 1992. 

U.S. imports of MFA products resumed 

double-digit growth in 1992, rising by 14 percent over 

the 1991 level, to a record 14.5 billion square meter 

equivalents (SMEs) valued at $34 billion. The growth 

in these imports, which averaged about 11 percent 

annually in the 1980s, had slowed to less than 1 

percent in 1990 and to just under 5 percent in 1991. 

Almost 80 percent of the total value of the MFA 

imports in 1992 consisted of apparel, imports of 

which advanced by 15 percent in quantity and by 18 

101 
Table 5-6 

Countries with U.S. textile and apparel agreements or quotas in 1992: U.S. general Imports under the 

Multifiber Arrangement, 1992, and expiration dates of bilateral agreements or quotas as of 

Mar. 2, 1993 

Country 

MFA 

signatory1 

Value of 

Imports 

Expiration 

date 

Million 

(V or M dollars 

Argentina2 Y 9.9 Mar. 31, 1992 

Bahrain N 28.7 Dec. 31, 1995 

Bangladesh Y 725.7 Jan. 31, 1995 

Brazil Y 321.4 Mar. 31, 1994 

Bulgaria N 17.0 Dec. 31, 1995 

China Y 4,584.0 Dec. 31, 1993 

Colombia Y 325.6 Dec. 31, 1993 

Commonwealth of Independent States3 N 8.8 Dec. 31, 1992 

Costa Rica Y 595.6 Dec. 31, 1992 

Czech Republic and Slovakia Y 44.1 May 31, 1993 

Dominican Republic4 Y 1,255.8 Dec. 31, 1993 

Egypt Y 154.3 Dec. 31, 1993 

Et Salvador Y 182.7 Dec. 31, 1993 

Fiji Y 37.1 Dec. 31, 1992 

Guam5 N (6) July 31, 1992 

Guatemala Y 474.1 (7) 

Haiti N 65.1 Dec. 31, 1993 

Hong Kong Y 4,319.2 Dec. 31, 1995 

Hungary Y 67.3 Dec. 31, 1993 

India Y 1,116.6 Dec. 31, 1993 

Indonesia Y 935.6 June 30, 1994 

Jamaica Y 295.9 Dec. 31, 1993 

Korea Y 2,426.7 Dec. 31, 1993 

Laos8 N 5.4 Oct. 29, 1993 

Lebanon8 N 5.1 Oct. 29, 1993 

Lesotho Y 51.7 Nov. 30, 1994 

Macau Y 515.3 Dec. 31, 1993 

Malaysia Y 671.0 Dec. 31, 1994 

Mauritius N 115.0 Sept. 9, 1993 

Mexico Y 1,117.0 Dec. 31, 1993 

Myanmar (Burma)2 N 27.3 Sept. 30, 1992 

Nepal N 68.1 Dec. 31, 1993 

Nigeria2 N 1.7 Dec. 31, 1992 

Oman8 N 83.5 (9) 

Pakistan Y 632.7 Dec. 31, 1993 

Panama Y 51.3 Mar. 31, 1994 

Philippines Y 1,240.6 Dec. 31, 1993 

Poland Y 72.6 Dec. 31, 1993 

Qatar8 N 60.4 

Romania Y 13.1 Dec. 31, 190 

Singapore Y 651.2 Dec. 31, 1995 

Sri Lanka Y 656.1 June 30, 1994 

Taiwan N 3,034.1 Dec. 31, 1995 

Thailand Y 989.7 Dec. 31, 1993 

Turkey Y 419.1 Dec. 31, 1993 

United Arab Emirates N 158.9 Dec. 31, 1993 

Uruguay Y 48.1 June 30, 1993 

Former Yugoslavia2 N 66.8 Dec. 31, 1992 

1 "Y" indicates this country is a signatory to the MFA Protocol that went into effect on Aug. 1, 1991. 

2 The agreement with this country was allowed to expire without being renewed. 

3 The agreement with the former Soviet Union, which expired in 1992, was applied cumulatively to the 12 

successor states during 1992 (57 F.R. 33494). No agreements currently exist with the 12 successor states: Armenia, 

Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and 

Uzbekistan. In addition, no agreements currently exist with the Baltic nations: Estonia, Latvia, and Lithuania. 

4 Subsequent to the original agreement, a quota was negotiated on an additional MFA category through a 

self-implementing Memorandum of Understanding (MOU), which is scheduled to expire Dec. 31, 1994. 

102 
Table 5-6 

Countries with U.S. textile and apparel agreements or quotas in 1992: U.S. general imports under 

the Multifiber Arrangement, 1992, and expiration dates of bilateral agreements or quotas as of 

Mar. 2, 1993—Footnotes Continued 

5 The agreement with Guam, a U.S. territory, was a "quota exception" for sweaters classified as products of 

foreign countries but assembled in this insular area. Quota-free entry was allowed for a specified number of 

sweaters. Imports in excess of the specified amounts were charged to quotas established for the country of origin, 

usually the country where the sweater parts were knitted. 

6 Not applicable. 

7 Quotas were established on certain product categories under 3 separate self-implementing MOUs, two of which 

expire Dec. 31, 1994 and one of which expires Dec. 31, 1993. 

8 The restraints established with this country were imposed unilaterally. 

9 Unilateral restraints on several product categories were imposed on this country. These restraints are 

scheduled to expire at different times during 1993. 

Source: Trade data compiled from official statistics of the U.S. Department of Commerce. Other information from the 

Office of the United States Trade Representative, Office of the Chief Textile Negotiator; and U.S. Department of 

Commerce, International Trade Administration, Office of Textiles and Apparel. 

percent in value that year, to 7.1 billion SMEs ($27 

billion). U.S. imports of textiles 62rose by 12 percent 

in quantity and by 15 percent in value, to 7.4 billion 

SMEs ($7 billion). 

The traditional "Big Three" suppliers—Hong 

Kong, Korea, and Taiwan—continued to lose U.S. 

market share in 1992. Their shipments to the U.S. 

market fell for the 3rd consecutive year, by about 2 

percent, to 3.1 billion SMEs ($10 billion) in 1992. As 

a result, the Big Three's share of the U.S. import 

market declined to 22 percent in 1992, as shown in 

figure 5-1, from 25 percent in 1991 and from 30 

percent as recently as 1987. Faced with rising 

production costs at home and limited quota growth in 

the U.S. market (roughly 1 percent annually), the Big 

Three have been exporting higher value-added 

products to the United States and moving production 

of inexpensive goods to lower cost countries such as 

China, Indonesia, and Thailand. 

Imports from China rose by 14 percent, or by 

almost 244 million SMEs, to almost 2 billion SMEs 

($4.6 billion). China remained the largest supplier of 

textiles and apparel to the U.S. market in 1992, 

although its share of total imports was unchanged 

from the 1991 level of 13.5 percent. Imports from 

Thailand in 1992 accelerated by 51 percent, or by 209 

million SMEs, to almost 620 million SMEs ($990 

million), making it the sixth-largest supplier. 

Contributing to this increase from Thailand was a new 

bilateral agreement signed in 1991 that provided 

greater certainty to U.S. importers on the level of 

imports that would be allowed into the United States. 

Increases of about 100 million SMEs were recorded in 

U.S. imports from Bangladesh, the Dominican 

Republic, Pakistan, India, Canada, Indonesia, and 

Brazil in 1992. 

Regionally the member countries of the 

Association of Southeast Asian Nations (ASEAN), 

Thailand, Singapore, Malaysia, Indonesia, Philippines, 

and Brunei, along with Mexico and beneficiaries of 

the Caribbean Basin Economic Recovery Act 

(CBERA), generated a significant amount of the 

growth in U.S. textile and apparel imports in 1992. 63 

 Largely as a result of shifting trade from the Big 

Three to lower cost producers, U.S. imports from 

ASEAN members (in addition to Thailand, also 

Brunei, Indonesia, Malaysia, the Philippines, and 

Singapore) rose by 378 million SMEs. U.S. imports 

from Mexico and the Caribbean Basin Initiative (CBI) 

countries, led by the Dominican Republic, Costa Rica, 

Guatemala, Jamaica, and Honduras, rose by 261 

million SMEs. Most of the imports from Mexico and 

the CBI countries consisted of apparel assembled from 

U.S. components, which are assessed duties only on 

the value added offshore and which benefit from 

preferential quota and duty access to the U.S. market. 

Steel Import Program 

In 1984, following an investigation under section 

201 of the Trade Act of 1974, the U.S. International 

Trade Commission found that increased imports of 

certain steel products were a substantial cause of 

serious injury, or threat of serious injury, to the 

domestic steel industry. The Commission 

recommended a 5-year program of import quotas and 

tariffs on certain steel mill products. On September 18 

of that year, however, the President determined that 

the Commission's recommended import relief for the 

steel industry was not in the national economic 

interest.64Instead, the President outlined a program 

specially designed to help the domestic 

103 
ASEAN 

28% 

ASEAN 

22% 

OECD 

Big 

Three 

10% 

Other 

Asia 

10% 

Mexico/ 

CBERA 

14% 

Figure 5-1 

U.S. Imports of textiles and apparel by major suppliers, 1989 and 1992 

1989 1992 

Total 12.1 billion square meter equivalents Total 14.5 billion square meter equivalents 

Note.—Other Asia consists principally of the following countries: Bangladesh, India, Pakistan, Sri Lanka, Macau, and 

Nepal. 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

steel industry to compete with imports.° The 

President directed the Office of the United States 

Trade Representative (USTR) to negotiate "surge 

control arrangements or understandings" with 

countries whose steel shipments to the United States 

had increased significantly. 66These understandings 

took the form of voluntary restraint agreements 

(VRAs) on the exports of steel from these countries. 

In exchange, the domestic industry was required to 

invest substantially all net cash-flow from steel 

operations into modernization of steel works and to 

spend at least 1 percent of net cash-flow on worker 

training and retraining. 

On July 25, 1989, the President announced a Steel 

Trade Liberalization Program, under which the VRAs 

were extended for 2-1/2 years, until March 31, 

1992.E Under this program the President also 

directed USTR to negotiate bilateral consensus 

agreements (BCAs) with VRA countries. The BCAs 

included commitments by countries to prohibit most 

subsidies for steel production and to work to keep 

markets open for steel through the reduction of tariff 

and nontariff measures. The BCAs were envisioned as 

providing a framework for a Multilateral Steel 

Agreement (MSA) with similar goals. 68USTR was 

charged with leading an effort to develop the MSA. 

On March 31, 1992, the VRAs terminated. Also 

on March 31, 1992, negotiations on the MSA were 

suspended without agreement, although bilateral and 

multilateral discussions resumed near the end of the 

year. The proposed MSA calls for the elimination of 

steel tariffs, the elimination of most subsidies and 

other nontariff measures, and establishment of an 

effective dispute-settlement mechanism. 

104 
ENDNOTES 

119 U.S.C. 2251 and following. 

2 U . S . International Trade Commission, Extruded 

Rubber Thread (investigation No. TA-201-63), USITC 

publication 2563, Oct. 1992; 58 F.R. 4717. 

358 F.R. 6317. 

419 U.S.C. 2436. 

5See 57 F.R. 26876, instituting investigation No. 

TA-406-12. 

657 F.R. 30232. 

7Pub. L. 102-318, sec. 106. 

8Trade Act of 1974, title II, Trade Adjustment 

Assistance Program, secs. 251-264. 

9Derived from official statistics of the U.S. 

Department of Labor, Employment and Training 

Administration, Office of Trade Adjustment 

Assistance, Management Information System. 

10Preliminary figures provided by the U.S. 

Department of Labor, Office of Trade Adjustment 

Assistance. 

11See discussion of section 303 of the Tariff Act 

of 1930, below. 

12 19 U.S.C. 1673 and following. 

1319 U.S.C. 1677b. 

14The figures set forth in this section do not 

include court-remanded investigations on which new 

votes were taken or investigations terminated before 

a determination was reached. 

15An antidumping investigation may be 

suspended through an agreement prior to a final 

determination by the U.S. Department of Commerce. 

An investigation may be suspended if exporters 

accounting for substantially all of the imports of the 

merchandise under investigation agree either to 

eliminate the dumping or to cease exports of the 

merchandise to the United States within 6 months. In 

extraordinary circumstances an investigation may be 

suspended if exporters agree to revise prices to 

completely eliminate the injurious effect of the 

imports. A suspended investigation is reinstituted if 

LTFV sales recur. 19 U.S.C. 1673c. 

16When a petition alleges dumping (or subsidies) 

with respect to more than one product or by more 

than one country, separate investigations generally 

are instituted for imports of each product from each 

country. For this reason the numbers of investigations 

instituted and determinations made may exceed the 

number of petitions filed. Moreover, an investigation 

based on a petition filed in one calendar year may 

not be completed until the next year. The numbers 

set forth in this table do not include determinations 

made following court-ordered remands made based 

on petitions filed in previous years. 

17These figures include petitions withdrawn 

voluntarily by petitioners. 

18A subsidy is defined as a bounty or grant 

bestowed directly or indirectly by any country, 

dependency, colony, Province, or other political 

subdivision on the manufacture, production, or export 

of products. 19 U.S.C. 1303(a)(1), 1677(5), and 

1677-1(a). 

19Officially referred to as the Agreement on 

Interpretation and Application of Articles VI, XVI, and 

XXIII of the General Agreement on Tariffs and Trade. 

20 19 U.S.C. 1671. 

21Section 303(a)(2) provides that "[i]n the case 

of any imported article or merchandise which is free 

of duty, duties may be imposed under this section 

only if there are affirmative [injury] determinations by 

the Commission . . . except that such a 

determination shall not be required unless a 

determination of injury is required by the international 

obligations of the United States? 19 U.S.C. 

1303(a)(2). 

22The figures set forth in this section do not 

include court-remanded cases on which new votes 

were taken or investigations terminated prior to a 

determination being reached. 

23A countervailing-duty investigation may be 

suspended through an agreement prior to a final 

determination by Commerce if (1) the subsidizing 

country or exporters accounting for substantially all of 

the imports of the merchandise under investigation 

agree to eliminate the subsidy, to completely offset 

the net subsidy, or to cease exports of the 

merchandise to the United States within 6 months or 

(2) extraordinary circumstances are present and the 

government or exporters described above agree to 

completely eliminate the injurious effect of the 

imports of the merchandise under investigation. A 

suspended investigation is reinstituted if subsidization 

recurs. 19 U.S.C. 1671c. 

24The number of investigations instituted and 

determinations made generally exceeds the number 

of petitions filed. The number of petitions filed does 

not include three investigations self-initiated by 

Commerce in 1992. The above numbers do not 

include determinations made following court-ordered 

remands. 

25"Steel Wire Nails From Thailand: Final Results 

of Countervailing Duty Administrative Review and 

Rescission of Countervailing Duty Order, in Part," 57 

F.R. 11065. 

26 "Dicholoro Isocyanurates From Japan: 

Remanded Final Results of Review and Revocation 

105 
of Antidumping Duty Order," 57 F.R. 55223; "Red 

Raspberries From Canada: Final Results of the 

Antidumping Duty Administrative Review, and 

Revocation in Part of the Antidumping Duty Order," 

57 F.R. 49686; "Tubeless Steel Disc Wheels From 

Brazil: Revocation of Antidumping Duty Order," 57 

F.R. 28829; "Industrial Phosphoric Acid From Israel: 

Final Results of Antidumping Duty Administrative 

Review and Revocation in Part of the Antidumping 

Duty Order," 57 F.R. 10008; "Elemental Sulphur From 

Canada: Final Results of Antidumping Duty 

Administrative Review and Revocation in Part of 

Antidumping Duty Order," 57 F.R. 1452; "Titanium 

Sponges From Japan: Final Results of Antidumping 

Duty Administrative Review and Revocation in Part," 

57 F.R. 557. 

27 Significant portions of this section were taken 

from two reports published by USTR and one 

published by the USITC: USTR, Report to Congress 

on Section 301 Developments Required by Section 

309(a)(3) of the Trade Act of 1974, Jan.-June 1992; 

USTR, Report to Congress on Section 301 [draft], 

July-Dec. 1992; USITC, The Year in Trade: 

Operation of the Trade Agreements Program, 43d 

Report, 1991, USITC publication 2554, Aug. 1992. 

28 19 U.S.C. 2411, and following. 

29 Prior to the enactment of the Omnibus Trade 

and Competitiveness Act of 1988, authority to act 

under section 301 resided with the President, 

whereas USTR was effectively responsible for 

administration of the investigations. The new trade 

law placed section 301 authority directly in the hands 

of USTR. 19 U.S.C. 2411. 

" Within this context, "commerce" includes 

services associated with international trade, whether 

or not such services are related to specific goods, 

and foreign direct investment by U.S. persons with 

implications for international trade in goods or 

services. 19 U.S.C. 2411(d). 

31 The statute provides a number of procedures 

and time limits for action by USTR. USTR has 45 

days from receipt of a petition to determine whether 

or not to initiate an investigation. 19 U.S.C. 2412. In 

all investigations consultations are requested with the 

foreign country or instrumentality involved. 19 U.S.C. 

2412. If an investigation involves issues arising under 

a trade agreement, the United States employs the 

dispute-settlement provisions of the agreement. 19 

U.S.C. 2413(a). The period for a determination by 

USTR concerning the practice in question and any 

action to be taken varies according to the type of 

practice alleged. 19 U.S.C. 2414(a). 

32 USTR, Report to Congress on Section 301, 

Jan.-June 1992 and USTR, Report to Congress on 

Section 301, July-Dec. 1992. 

33 Examples of "other" unfair acts are common 

law trademark or copyright infringement, false 

advertising, false designation of origin, and trade 

secret misappropriation. Unfair practices that involve 

the importation of dumped or subsidized merchandise 

must be pursued under antidumping and CVD 

provisions and not under section 337. 

34 Section 337 proceedings at the Commission 

are conducted before an administrative law judge in 

accordance with the Administrative Procedure Act, 5 

U.S.C. 551 and following. The administrative law 

judge conducts an evidentiary hearing and makes an 

initial determination, which is transmitted to the 

Commission. The Commission may adopt the 

determination by deciding not to review it, or it may 

choose to review it. If the Commission finds a 

violation, it must determine the appropriate remedy, 

the amount of any bond to be collected while its 

determination is under review by the President, and 

whether certain public interest considerations 

preclude the issuance of any remedy. 

36 Trade Act of 1974, title V (Pub. L. 93-618, 88 

Stat. 2066 and following); and Trade and Tariff Act of 

1984, title V (Pub. Law 98-573, 98 Stat. 3018 and 

following), as amended (19 U.S.C. 2461 and 

following). For general background information about 

the GSP program, see USTR, A Guide to the 

Generalized System of Preferences, Aug. 1991, and 

U.S. House, Committee on Ways and Means, The 

President's Report to the Congress on the 

Generalized System of Preferences as Required by 

Section 505(B) of the Trade Act of 1974, as 

Amended, WMCP 101-23 (Washington: GPO, 1990). 

36 Because the GSP program offers developing 

countries market access that is better than 

most-favored-nation (MFN) treatment, the Contracting 

Parties to the General Agreement on Tariffs and 

Trade (GATT) had to agree to a waiver of the MFN 

obligation. See GATT Decision of June 25, 1971 

(L/3545), Basic Instruments and Selected Documents 

(BISD), Eighteenth Supplement, page 24, and GATT 

Decision of November 28, 1979 (L/4903), BISD, 

Twenty-sixth Supplement, page 203. 

37 •The countries designated as "beneficiary 

developing countries" for purposes of the GSP 

program are set forth in general note 3(c)(ii)(A) of the 

Harmonized Tariff Schedule of the United States 

(HTS). 

38 The HTS subheadings that have the letter "A 

or A*" in the special subcolumn of column 1 are 

designated "eligible articles" for purposes of the GSP 

program. The "A" indicates that all beneficiary 

countries are eligible for duty-free treatment on all 

imports classified in that subheading. The "A"" 

indicates that all imports in that subheading are 

eligible for duty-free treatment, but that one or more 

beneficiary countries are not eligible for duty-free 

treatment on those imports. General note 3(c)(ii)(D) 

of the HIS sets forth the beneficiary countries that 

are not eligible for duty-free treatment under 

particular subheadings. 

106 
39 President, "Proclamation 6446—To Modify 

Duty-Free Treatment Under the Generalized System 

of Preferences," 57 F.R. 26969, and President, 

"Proclamation 6447—To Modify Duty-Free Treatment 

Under the Generalized System of Preferences and 

for Other Purposes," 57 F.R. 26981. 

48 President, "Proclamation 6402—To Amend the 

Generalized System of Preferences," 57 F.R. 4833. 

41 President, "Proclamation 6517—To Amend the 

Generalized System of Preferences," 57 F.R. 61757. 

42 Presidential Proclamation 6402. 

43Ibid. 

44 President, "Proclamation 6465—To Amend the 

Generalized System of Preferences," 57 F.R. 39095. 

45 President, "Proclamation 6411—To Amend the 

Generalized System of Preferences," 57 F.R. 9041. 

46 Presidential Proclamation 6517. 

47 President, "Proclamation 6425—Amending the 

Generalized System of Preferences," 57 F.R. 19067. 

4857 F.R. 9340. 

49 For a more detailed description of the CBERA, 

see USITC, Annual Report on the Impact of the 

Caribbean Basin Economic Recovery Act on 

U.S.lndustries and Consumers: Seventh Report, 

1991, USITC publication 2553, Sept. 1992. 

50 Anguilla, Cayman Islands, Suriname, and 

Turks and Caicos Islands are potentially eligible for 

CBERA benefits, but they have neither requested 

designation nor have been so designated by the 

United States. 

51 CBERA, sec. 213(h)(1), as amended. 

52 CBERA, sec. 213(b) and sec. 231, as 

amended. Restrictions on textiles and apparel apply 

to articles subject to the Multifiber Arrangement. 

Restrictions on footwear apply to articles not eligible 

for GSP duty-free entry as of August 5, 1983, but do 

not apply to disposable items and footwear parts 

such as uppers. 

53 HTS subheadings 9802.00.60 (imported 

products containing certain metal of U.S. origin 

processed abroad and returned for further 

processing) and 9802.00.80 (imported assembled 

products containing U.S. components) provide for 

reduced duties for certain U.S. products processed or 

assembled outside of the United States and 

subsequently returned. 

54 The U.S. Congress approved the ATPA on 

November 27, 1991 (H.R. 1724, originally H.R. 661) 

and legislation to enact the ATPA was signed by 

President Bush on December 4, 1991 (Public Law 

102-82). In February 1992 the United States 

requested—and ultimately obtained—a waiver from 

article I of the GATT (which requires that MFN tariffs 

be applied to all GATT members) to provide ATPA 

tariff preferences. U.S. Department of State, "GATT 

Waiver for ATPA: Request for Assistance," telegram, 

message reference No. 004246, prepared by U.S. 

Department of State, Washington, DC, Jan. 7, 1992, 

and U.S. Department of State, "Agenda for February 

Meeting of GATT Council," telegram, message 

reference No. 01176, prepared by U.S. Embassy, 

Geneva, Feb. 11, 1992. 

55 Venezuela, although technically an "Andean" 

country, was ineligible to be a beneficiary of the 

ATPA because (1) its per capita GDP is significantly 

higher than that of the other Andean countries, (2) 

petroleum (excluded from duty-free entry under the 

ATPA) is Venezuela's leading export, and (3) the 

United States is concerned that Venezuelan industrial 

exports under the ATPA would compete with 

sensitive sectors of the U.S. economy. U.S. 

Department of State, "GATT Waiver for ATPA: 

Responses to Questions," telegram, message 

reference No. 023987, prepared by U.S. Department 

of State, Washington, DC, Jan. 25, 1992. 

56 Ambassador Carla A. Hills, "Statement Before 

the Subcommittee on Trade, Committee on Ways 

and Means," U.S. House of Representatives, July 25, 

1991. 

57 "Proclamation 6445—To Implement the Andean 

Trade Preference Act and to Designate Colombia as 

a Beneficiary Country and Other Purposes," and 

"Proclamation 6456—To Designate Bolivia as a 

Beneficiary Country for Purposes of the Andean 

Trade Preference Act," Weekly Compilation of 

Presidential Documents, July 6, 1992, pp. 1198-1199. 

58 Ecuador was designated as a beneficiary 

country under the ATPA on April 13, 1993. 

"Proclamation 6554—To Modify Duty-Free Treatment 

Under the Andean Trade Preference Act, To Modify 

the Generalized System of Preferences, and for 

Other Purposes," Weekly Compilation of Presidential 

Documents, Apr. 19, 1993, pp. 583-586. 

59 For more information on the ATPA designation 

criteria see U.S. Department of Commerce, 

International Trade Administration, Guidebook to the 

Andean Trade Preference Act (ATPA), July 1992, p. 

44. 

60See chapter 2 for further discussion of the 

Dunkel text. 

61 Agreements with non-MFA countries are 

negotiated under section 204 of the Agricultural Act 

of 1956 (7 U.S.C. 1854) and generally are similar to 

those with MFA signatories. 

62 Primarily includes yarns, fabrics, carpets, and 

home furnishings. 

63For a discussion of the CBERA, see ch. 5, 

above. 

" President, memorandum to USTR, Sept. 18, 

1984, 49 F.R. 36813. For additional details on the 

steel import program, see USITC, OTAP, 36th 

Report, 1984, USITC publication 1725, p. 16. 

65 On July 19, 1983, the President had 

announced his decision to grant import relief to the 

107 
specialty steel industry for a period of 4 years (53 

F.R. 52897). The relief program was scheduled to 

expire on July 19, 1987. Under the relief program, 

quotas were placed on imports of stainless steel 

bars, stainless steel wire rod, and certain alloy tool 

steel products and increased duties were imposed on 

stainless steel plates and stainless steel sheets and 

strips. On July 16, 1987, the President extended the 

import relief program in the form then in effect for a 

period from July 20, 1987, through September 30, 

1989. Since the import relief program was not 

extended after its expiration on September 30, 1989, 

product coverage of the VRAs was broadened to 

include specialty steel products that were previously 

subject to import relief. Countries that signed the 

VRAs agreed to limit their exports of stainless steel 

plates, sheets and strips to their market-share level. 

All but one of these countries were exempted from 

having to pay additional duties; Finland was not 

exempt, because its VRA did not include stainless 

steel flat-rolled products. Permitted shipment levels 

for these products were unaffected by the VRAs for 

all countries except the EC-10, which negotiated 

limits on rods, bars, and alloy tool steel as part of 

their VRA, and Austria, which included alloy tool 

steel in its VRA. 

66 President, memorandum to USTR, Sept. 18, 

1984, 49 F.R. 36813. 

67Ibid. USITC, Quarterly Report on the Status of 

the Steel Industry, USITC publication 2486, Mar. 

1992, p. xv. 

88For more detailed discussion of the VRA 

program extension, see USITC, OTAP, 42d Report, 

1990, USITC publication 2403, pp. 180-183, and 

USITC The Year in Trade: OTAP, 1991, USITC 

publication 2554, p. 68. 

108 
APPENDIX 

STATISTICAL TABLES 
Table A-1 

U.S. merchandise trade with Canada, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 3,764,648 4,204,056 4,512,079 

1 Beverages and tobacco 125,874 140,741 143,439 

2 Crude materials, inedible, except fuels 2,923,638 2,747,873 2,849,700 

3 Mineral fuels, lubricants and related materials 2,154,800 1,240,336 1,359,462 

4 Animal and vegetable oils, fats and waxes 57,414 63,507 72,684 

5 Chemicals and related products, n.e.s. 6,650,274 6,555,248 7,284,821 

6 Manufactured goods classified chiefly by material 9,822,800 10,266,449 10,845,220 

7 Machinery and transport equipment 42,746,260 42,289,120 44,272,250 

8 Miscellaneous manufactured articles 7,508,083 8,122,351 8,960,464 

9 Commodities & transact not class elsewhere in SITC 3,064,167 3,082,109 2,917,410 

Total all commodities 78,217,958 78,711,789 83,217,528 

U.S. imports 

0 Food and live animals 3,755,819 3,934,951 4,508,403 

1 Beverages and tobacco 654,845 692,695 827,120 

2 Crude materials, inedible, except fuels 7,335,834 6,253,552 7,044,778 

3 Mineral fuels, lubricants and related materials 9,810,313 10,240,523 10,562,904 

4 Animal and vegetable oils, fats and waxes 92,340 132,576 174,257 

5 Chemicals and related products, n.e.s. 4,282,363 4,348,228 4,942,655 

6 Manufactured goods classified chiefly by material 15,774,898 15,316,044 16,261,686 

7 Machinery and transport equipment 40,753,015 40,548,726 43,246,884 

8 Miscellaneous manufactured articles 3,588,667 3,635,340 4,381,359 

9 Commidities & transact not class elsewhere in SITC 5,150,214 5,821,188 6,292,454 

Total all commodities 91,198,308 90,923,823 98,242,500 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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Table A-4 

U.S. merchandise trade with Mexico, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 1,917,947 2,085,619 2,664,676 

1 Beverages and tobacco 23,440 44,384 75,449 

2 Crude materials, inedible, except fuels 1,395,064 1,625,918 1,833,323 

3 Mineral fuels, lubricants and related materials 826,113 865,401 1,233,034 

4 Animal and vegetable oils, fats and waxes 119,493 142,289 164,120 

5 Chemicals and related products, n.e.s. 2,299,225 2,624,402 3,120,866 

6 Manufactured goods classified chiefly by material 3,488,357 4,419,172 5,433,071 

7 Machinery and transport equipment 12,938,173 15,059,415 18,418,563 

8 Miscellaneous manufactured articles 2,894,371 3,693,571 4,770,636 

9 Commodities & transact not class elsewhere in SITC 1,565,413 1,719,047 1,891,161 

Total all commodities 27,467,595 32,279,218 39,604,899 

U.S. imports 

0 Food and live animals 2,565,454 2,503,296 2,299,990 

1 Beverages and tobacco 259,762 246,484 277,487 

2 Crude materials, inedible, except fuels 769,406 685,441 670,306 

3 Mineral fuels, lubricants and related materials 5,191,617 4,623,646 4,580,704 

4 Animal and vegetable oils, fats and waxes 8,649 16,956 16,580 

5 Chemicals and related products, n.e s 646,598 699,532 820,082 

6 Manufactured goods classified chiefly by material 2,463,605 2,229,692 2,467,022 

7 Machinery and transport equipment 13,235,230 14,492,027 16,985,900 

8 Miscellaneous manufactured articles 3,033,724 3,559,289 4,292,654 

9 Commodities & transact not class elsewhere in SITC 1,331,918 1,388,770 1,523,838 

Total all commodities 29,505,962 30,445,131 33,934,561 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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115 
Table A-7 

U.S. merchandise trade with the European Community, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 3,721,335 3,980,441 3,930,729 

1 Beverages and tobacco 2,663,483 2,227,635 2,142,823 

2 Crude materials, inedible, except fuels 6,307,491 5,795,031 6,081,290 

3 Mineral fuels, lubricants and related materials 3,724,002 3,931,703 3,129,617 

4 Animal and vegetable oils, fats and waxes 162,349 193,553 273,299 

5 Chemicals and related products, n.e.s 10,509,932 11,259,314 12,051,070 

6 Manufactured goods classified chiefly by material 5,576,705 5,885,721 5,890,748 

7 Machinery and transport equipment 44,897,866 47,882,280 46,021,812 

8 Miscellaneous manufactured articles 11,489,275 12,425,687 13,313,176 

9 Commodities & transact not class elsewhere in SITC 4,007,087 4,016,226 4,510,170 

Total all commodities 93,059,526 97,597,591 97,344,734 

U.S. imports 

0 Food and live animals 2,079,649 2,094,190 2,103,250 

1 Beverages and tobacco 2,483,583 2,311,302 2,708,783 

2 Crude materials, inedible, except fuels 1,032,586 975,435 1,003,778 

3 Mineral fuels, lubricants and related materials 4,486,507 3,115,671 3,475,755 

4 Animal and vegetable oils, fats and waxes 254,828 271,770 299,492 

5 Chemicals and related products, nes 9,504,611 10,095,234 11,600,370 

6 Manufactured goods classified chiefly by material 13,264,779 12,218,659 12,398,982 

7 Machinery and transport equipment 39,326,294 36,913,844 39,932,333 

8 Miscellaneous manufactured articles 13,999,036 12,950,665 13,606,893 

9 Commodities & transact not class elsewhere in SITC 4,367,075 4,151,303 4,695,932 

Total all commodities. 90,798,948 85,098,074 91,825,568 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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118 
Table A-10 

U.S. merchandise trade with Japan, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 7,323,076 7,408,330 8,446,926 

1 Beverages and tobacco 1,839,113 1,797,777 1,911,274 

2 Crude materials, inedible, except fuels 6,877,590 6,076,825 5,815,326 

3 Mineral fuels, lubricants and related materials 1,454,548 1,305,916 1,161,517 

4 Animal and vegetable oils, fats and waxes 66,215 71,579 64,023 

5 Chemicals and related products, n.e.s. 4,583,401 5,047,738 4,709,782 

6 Manufactured goods classified chiefly by material 3,725,479 4,004,656 3,045,443 

7 Machinery and transport equipment 14,301,567 14,312,851 14,477,190 

8 Miscellaneous manufactured articles 5,184,408 5,199,331 5,217,572 

9 Commidities & transact not class elsewhere in SITC 783,039 919,065 1,000,522 

Total all commodities 46,138,436 46,144,069 45,849,575 

U.S. imports 

0 Food and live animals 303,088 287,884 287,408 

1 Beverages and tobacco 31,904 31,552 34,094 

2 Crude materials, inedible, except fuels 165,006 163,823 187,115 

3 Mineral fuels, lubricants and related materials 89,489 _94,685 190,457 

4 Animal and vegetable oils, fats and waxes 19,185 20,277 16,172 

5 Chemicals and related products, n.e.s. 2,387,213 2,738,844 3,217,698 

6 Manufactured goods classified chiefly by material 6,599,900 6,362,098 6,111,902 

7 Machinery and transport equipment 69,511,593 71,161,148 74,298,218 

8 Miscellaneous manufactured articles 9,144,734 8,991,581 9,534,476 

9 Commodities & transact not class elsewhere in SITC 1,360,103 1,367,352 1,642,036 

Total all commodities 89,612,215 91,219,246 95,519,576 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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121 
Table A-13 

U.S. merchandise trade with Korea, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 1,194,519 946,960 1,060,635 

1 Beverages and tobacco 118,513 124,320 121,808 

2 Crude materials, inedible, except fuels 2,939,527 2,558,595 2,399,858 

3 Mineral fuels, lubricants and related materials 719,503 670,952 696,576 

4 Animal and vegetable oils, fats and waxes 51,773 44,689 47,820 

5 Chemicals and related products, n.e.s. 1,689,953 1,658,079 1,493,929 

6 Manufactured goods classified chiefly by material 978,844 1,275,991 882,462 

7 Machinery and transport equipment 5,156,907 6,523,301 6,106,253 

8 Miscellaneous manufactured articles 1,052,163 1,116,161 1,141,932 

9 Commidities & transact not class elsewhere in SITC 172,182 292,050 269,159 

Total all commodities 14,073,883 15,211,098 14,220,431 

U.S. imports 

0 Food and live animals 176,012 177,140 155,711 

1 Beverages and tobacco 5,452 4,942 5,560 

2 Crude materials, inedible, except fuels 47,834 58,562 97,404 

3 Mineral fuels, lubricants and related materials 9,572 31,460 101,808 

4 Animal and vegetable oils, fats and waxes 947 1,254 856 

5 Chemicals and related products, n.e.s. 251,971 240,866 265,537 

6 Manufactured goods classified chiefly by material. 2,101,079 2,018,764 1,980,098 

7 Machinery and transport equipment 7,446,226 7,194,489 7,508,524 

8 Miscellaneous manufactured articles 8,153,540 6,963,738 6,242,633 

9 Commidities & transact not class elsewhere in SITC 144,326 171,167 165,030 

Total all commodities 18,336,960 16,862,383 16,523,160 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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124 
Table A-16 

U.S. merchandise trade with Taiwan, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 1,002,667 1,148,075 1,199,541 

1 Beverages and tobacco 166,530 163,992 135,892 

2 Crude materials, inedible, except fuels 1,263,611 1,396,601 1,225,482 

3 Mineral fuels, lubricants and related materials 491,209 440,709 404,828 

4 Animal and vegetable oils, fats and waxes 5,308 4,235 8,584 

5 Chemicals and related products, n.e.s. 1,529,445 1,839,906 1,988,599 

6 Manufactured goods classified chiefly by material 821,177 1,053,593 860,247 

7 Machinery and transport equipment 4,818,055 5,482,287 6,866,740 

8 Miscellaneous manufactured articles 793,870 859,115 1,042,887 

9 Commidities & transact not class elsewhere in SITC 250,085 329,562 800,680 

Total all commodities 11,141,956 12,718,074 14,533,478 

U.S. imports 

0 Food and live animals 309,222 296,515 280,181 

1 Beverages and tobacco 3,996 4,489 5,843 

2 Crude materials, inedible, except fuels 87,341 94,011 82,749 

3 Mineral fuels, lubricants and related materials 102 67 100 

4 Animal and vegetable oils, fats and waxes 1,678 1,315 2,434 

5 Chemicals and related products, n.e.s. 348,785 394,278 404,902 

6 Manufactured goods classified chiefly by material 3,122,376 3,130,832 3,382,932 

7 Machinery and transport equipment 9,037,344 9,404,296 10,907,426 

8 Miscellaneous manufactured articles 9,404,559 9,337,661 9,132,046 

9 Commidities & transact not class elsewhere in SITC 250,712 278,103 332,175 

Total all commodities 22,566,115 22,941,568 24,530,788 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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127 
Table A-19 

U.S. merchandise trade with China, by SITC Nos. (revision 3), 1990-92 

(1,000 dollars) 

SITC 

section 

No. Description 1990 1991 1992 

U.S. exports 

0 Food and live animals 526,183 401,837 322,892 

1 Beverages and tobacco 7,595 8,949 11,081 

2 Crude materials, inedible, except fuels 721,627 817,333 664,609 

3 Mineral fuels, lubricants and related materials 4,564 54,794 200,139 

4 Animal and vegetable oils, fats and waxes 1,697 1,327 9,275 

5 Chemicals and related products, n.e.s. 1,053,517 1,670,797 1,208,356 

6 Manufactured goods classified chiefly by material 243,835 411,787 448,444 

7 Machinery and transport equipment 1,924,106 2,491,628 3,946,461 

8 Miscellaneous manufactured articles 244,066 331,387 437,590 

9 Commidities & transact not class elsewhere in SITC 48,545 48,216 89,745 

Total all commodities 4,775,734 6,238,054 7,338,594 

U.S. imports 

0 Food and live animals 540,012 469,487 638,941 

1 Beverages and tobacco 9,267 12,611 19,410 

2 Crude materials, inedible, except fuels 221,173 213,696 190,797 

3 Mineral fuels, lubricants and related materials. 668,980 607,766 511,602 

4 Animal and vegetable oils, fats and waxes 1,447 1,342 1,572 

5 Chemicals and related products, n.e.s. 335,335 386,970 501,000 

6 Manufactured goods classified chiefly by material. 1,470,132 1,718,761 2,258,495 

7 Machinery and transport equipment 2,386,998 3,196,838 4,413,961 

8 Miscellaneous manufactured articles 9,329,185 12,058,633 16,547,364 

9 Commidities & transact not class elsewhere in SITC 157,322 188,936 431,187 

Total all commodities 15,119,852 18,855,041 25,514,328 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

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134 
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135 
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c; ci 0- co - Nrco c‘s N c‘i N O 

CO . a) 

c c Cc 

= co mm —3 —3 --o-3 

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CV CV 

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cn N Ch cn Ch 

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cn 

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m mM Nm M mM0M06 m OSM

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mm a mm a a mmwo m momm -s m memm mw 

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136 
C "■1 0 0) a)cs) 

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Ow w 

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.... 0 („ 0 S 51c Cl. a U) Cn .- ._. CD z. ,, t STD 0- lil -C - - 0.---- - - -C Ch r_ = 

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Mar.05,1992-PU/A 

Seefootnotesatend of table. 

137 
00 D p 0 00 I?- 0 0 Z 0 

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v-N 

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owz-w-mm-mmomem , mmm t 00=000,..,10..-00200..m.0. 0 1.)00_.0 =01-01.,_00000 00 0(100 iza5u_a_ a. =m1.4..00L, 

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cc 

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See footnotesatend of table. 

138 
C = 

Dateand final outcome3 

0) 

CO 

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a 

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mm mm m m mmm 

am m a) o N g.10 N oc:INSIc:1 oR N o 08 Eg c\j oc:J ,_ RgW,m

000)0;000

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mm mmmmmm m 

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mmm 000 m0 / wI m0 m mr7immom 

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v commalm m , 00 o ,-700m'- - oomm__ 0 mmmm mm cc.- - c 22.bemc ==>,_ m._.... .tco 01 01., 

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Seefootnotesatend of table. 

139 
Q 

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as as w cc 

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Feb. 02,1992 

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See footnotesatend of table. 

140 
Mex ico—Continued 

N 

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147 
Table A-25 

Antidumping orders and findings In effect as of Dec. 31, 1992 

Effective date of 

Country and commodity original action .' 

Argentina: 

Silicon metal Sept. 26, 1991 

Rectangular tubing May 26, 1989 

Carbon steel wire rods Nov. 23, 1984 

Barbed wire Nov. 13, 1983 

Armenia: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Australia: Canned bartlett pears Mar. 23, 1973 

Austria: Railway track equipment Feb. 17, 1978 

Azerbaijan: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Bangladesh: Shop towels Mar. 20, 1992 

Belarus-Baltic: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Belgium: 

Phosphoric acid Aug. 20, 1987 

Sugar June 13, 1979 

Brazil: 

Circular welded non-alloy pipe Nov. 2, 1992 

Silicon metal July 31, 1991 

Nitrocellulose July 10, 1990 

Orange juice May 5, 1987 

Brass sheet and strip Jan. 12, 1987 

Butt-weld pipe fittings Dec. 17, 1986 

Pipe fittings May 21, 1986 

Construction castings May 9, 1986 

Canada: 

Magnesium Aug. 31, 1992 

Steel rail Sept. 15, 1989 

Color picture tubes Jan. 7, 1988 

Fresh cut flowers Mar. 18, 1987 

Brass sheet and strip Jan. 12, 1987 

Oil country tubular goods June 16, 1986 

Construction castings Mar. 5, 1986 

Raspberries June 24, 1985 

Paving equipment Sept. 7, 1977 

Racing plates Feb. 27, 1974 

Elemental sulphur Dec. 17, 1973 

Steel jacks Sept. 13, 1966 

Chile: Standard carnations Mar. 20, 1987 

Colombia: Fresh cut flowers Mar. 18, 1987 

Dominican Republic: Portland cement May 4, 1963 

Ecuador: Fresh cut flowers Mar. 18, 1987 

France: 

Ball bearings May 15, 1989 

Cylindrical roller bearings May 15, 1989 

Spherical plain bearings May 15, 1989 

Brass sheet and strip Mar. 6, 1987 

Nitrocellulose Aug. 10, 1983 

Sorbitol Apr. 9, 1982 

Anhydrous sodium metasilicate Jan. 7, 1981 

Sugar June 13, 1979 

Large power transformers June 14, 1972 

Germany: 

Sodium thiosulfate Feb. 19, 1991 

Nitrocellulose July 10, 1990 

Industrial belts (except synchronous and V-belts) June 14, 1989 

Ball bearings May 15, 1989 

Cylindrical roller bearings May 15, 1989 

Spherical plain bearings May 15, 1989 

Crankshafts Sept. 23, 1987 

See footnote at end of table 

148 
Table A-25-Continued 

Antidumping orders and findings in effect as of Dec. 31, 1992 

Country and commodity Effective date of 

original actions 

Germany-Continued: 

Urea July 14, 1987 Brass sheet and strip Mar. 6, 1987 Barium carbonate June 25, 1981 Sugar June 13, 1979 Animal glue Dec. 22, 1977 Drycleaning machinery Nov. 2, 1972 Greece: Electrolytic manganese dioxide Apr. 17, 1989 Hong Kong: 

Manmade-fiber sweaters Sept. 24, 1990 

Photo albums Dec. 16, 1985 Hungary: Tapered roller bearings June 19, 1987 India: 

Pipes and tubes May 12, 1986 

Certain iron-metal castings Oct. 16, 1980 

Iran: Pistachio nuts July 17, 1986 

Israel: 

Phosphoric acid Aug. 19, 1987 

Oil country tubular goods Mar. 6, 1987 

Italy: 

Synchronous industrial belts and V-belts June 14, 1989 

Ball bearings May 15, 1989 

Cylindrical roller bearings May 15, 1989 

Granular polytetrafluoroethylene resin Aug. 30, 1988 

Tapered roller bearings Aug. 14, 1987 

Brass sheet and strip Mar. 6, 1987 

Brass fire protection equipment Mar. 1, 1985 

Woodwind pads Sept. 21, 1984 

Spun acrylic yarn Apr. 8, 1980 

Pressure sensitive tape Oct. 21, 1977 

Large power transformers June 14, 1972 

Japan: 

Lenses Apr. 15, 1992 

Active matrix LCD flat-panel displays Sept. 4, 1991 

Electroluminescent flat-panel displays Sept. 4, 1991 

Personal word processors Aug. 28, 1991 

PET film June 5, 1991 

Cement May 10, 1991 

Benzyl paraben Feb. 13, 1991 

Laser light-scattering instruments Nov. 19, 1990 

Nitrocellulose July 10, 1990 

Mechanical transfer presses Feb. 16, 1990 

Drafting machines Dec. 29, 1989 

Small business telephone systems Dec. 11, 1989 

Industrial belts June 14, 1989 

Ball bearings May 15, 1989 

Cylindrical roller bearings May 15, 1989 

Spherical plain bearings May 15, 1989 

Electrolytic manganese dioxide April 17, 1989 

Microdisks April 3, 1989 

Granular polytetrafluoroethylene resin Aug. 24, 1988 

Brass sheet and strip Aug. 12, 1988 

Nitrile rubber June 16, 1988 

Forklift trucks June 7, 1988 

Stainless steel butt-weld pipe fittings Mar. 25, 1988 

Color picture tubes Jan. 7, 1988 

Tapered roller bearings over 4 inches Oct. 6, 1987 

Silica filament fabric Sept. 23, 1987 

Cast-iron pipe fittings July 6, 1987 

Butt-weld pipe fittings Feb. 10, 1987 

64K dynamic random access memory chips June 16, 1986 

Cellular mobile telephones Dec. 19, 1985 

Neoprene laminate July 19, 1985 

Calcium hypochlorite Apr. 18, 1985 

See footnote at end of table 

149 
Table A-25--Continued 

Antidumping orders and findings in effect as of Dec. 31, 1992 

Effective date of 

Country and commodity original action 1 

Japan-Continued. 

Titanium sponge Nov. 30, 1984 

Pagers Aug. 16, 1983 

High powered amplifiers July 20, 1982 

Large electric motors Dec. 24, 1980 

Portable electric typewriters May 9, 1980 

Spun acrylic yarn Apr. 8, 1980 

Steel wire strand Dec. 8, 1978 

Impression fabric May 25, 1978 

Melamine Feb. 2, 1977 

Acrylic sheet Aug. 30, 1976 

Tapered roller bearings 4 inches and under Aug. 17, 1976 

Steel wire rope Oct. 15, 1973 

Synthetic methionine July 10, 1973 

Roller chain Apr. 12, 1973 

Bicycle speedometers Nov. 22, 1972 

Cadmium Aug. 4, 1972 

Large power transformers June 14, 1972 

Fishnetting June 9, 1972 

Polychloroprene rubber Dec. 9, 1971 

Ferrite cores Mar. 13, 1971 

Television receiving sets Mar. 10, 1971 

Tuners Dec. 12, 1970 

Kazakhstan: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Kenya: Standard carnations Apr. 23, 1987 

Kyrgyzstan: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Latvia-Baltic: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Lithuania: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Korea: 

Welded stainless steel pipes Dec. 30, 1992 

Circular welded non-alloy pipe Nov. 11, 1992 

PET film June 5, 1991 

Manmade-fiber sweaters Sept. 24, 1990 

Nitrocellulose July 10, 1990 

Small business telephone systems Feb. 7, 1990 

Color picture tubes Jan. 7, 1988 

Stainless steel cookware Jan. 20, 1987 

Brass sheet and strip Jan. 12, 1987 

Pipe fittings May 23, 1986 

Photo albums Dec. 16, 1985 

Television receiving sets Apr. 30, 1984 

Malaysia: Extruded rubber thread Oct. 7, 1992 

Mexico: 

Circular welded non-alloy pipe Nov. 2, 1992 Cement Aug. 30, 1990 Fresh cut flowers Apr. 23, 1987 Cookware Dec. 2, 1986 Moldova: 

Urea July 14, 1987 Titanium sponge Aug. 28, 1968 

Netherlands: Brass sheet and strip Aug. 12, 1988 

New Zealand: 

Kiwifruit June 2, 1992 Brazing copper wire and rod Dec. 4, 1985 

Norway: Atlantic salmon Apr. 12, 1991 

See footnote at end of table 

150 
Table A-25-Continued 

Antidumping orders and findings in effect as of Dec. 31, 1992 

Effective date of 

Country and commodity original action 1 

People's Republic of China: 

Sulfanilic acid Aug. 19, 1992 

Butt-weld pipe fittings July 6, 1992 

Ceiling fans Dec. 9, 1991 

Tungsten ore concentrates Nov. 21, 1991 

Lug nuts Sept. 20, 1991 

Sparklers June 18, 1991 

Silicon metal June 10, 1991 

Sodium thiosulfate Feb. 19, 1991 

Hammers/sledges Feb. 19, 1991 

Picks/mattocks Feb. 19, 1991 

Bars/wedges Feb. 19, 1991 

Axes/adzes Feb. 19, 1991 

Nitrocellulose July 10, 1990 

Tapered roller bearings June 15, 1987 

Cookware Dec. 2, 1986 

Candles Aug. 28, 1986 

Construction castings May 9, 1986 

Paint brushes Feb. 14, 1986 

Barium chloride Oct. 17, 1984 

Chloropicrin Mar. 22, 1984 

Potassium permanganate Jan. 31, 1984 

Shop towels Oct. 4, 1983 

Printcloth Sept. 16, 1983 

Romania: 

Ball bearings May 15, 1989 

Urea July 14, 1987 

Tapered roller bearings June 19, 1987 

Russia: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Singapore: 

V-belts June 14, 1989 

Ball bearings May 15, 1989 

Color picture tubes Jan. 7, 1988 

Rectangular pipes and tubes Nov. 13, 1986 

South Africa: Brazing copper wire and rod Jan. 29, 1986 

Spain: Potassium permanganate Jan. 17, 1984 

Sweden: 

Ball bearings May 15, 1989 

Cylindrical roller bearings May 15, 1989 

Seamless stainless steel hollow products Dec. 3, 1987 

Brass sheet and strip Mar. 6, 1987 

Staples Dec. 20, 1983 

Staplers Dec. 20, 1983 

Stainless steel plate June 8, 1973 

Taiwan: 

Welded stainless steel pipes Dec. 30, 1992 

Circular welded non-alloy pipe Nov. 2, 1992 

Lug nuts Sept. 20, 1991 

Manmade-fiber sweaters Sept. 24, 1990 

Small business telephone systems Dec. 11, 1989 

Rectangular tubing Mar. 27, 1989 

Stainless steel cookware Jan. 20, 1987 

Butt-weld pipe fittings Dec. 17, 1986 

Cookware Dec. 2, 1986 

Oil country tubular goods June 18, 1986 

Pipe fittings May 23, 1986 

Circular pipes and tubes May 7, 1984 

Television receiving sets Apr. 30, 1984 

Fireplace mesh panels June 7, 1982 

Carbon steel plate June 13, 1979 

Clear sheet glass Aug. 21, 1971 

See footnote at end of table 

151 
Table A-25---Continued 

Antidumping orders and findings in effect as of Dec. 31, 1992 

Effective date of 

Country and commodity original action1 

Tajikistan: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Thailand: 

Butt-weld pipe fittings July 6, 1992 

Ball bearings May 15, 1989 

Pipe fittings Aug. 20, 1987 

Circular welded pipes and tubes Mar. 11, 1986 

Turkey: 

Aspirin Aug. 25, 1987 

Pipes and tubes May 15, 1986 

Turkmenistan: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Ukraine: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

United Kingdom: 

Sodium thiosulfate Feb. 19, 1991 

Nitrocellulose July 10, 1990 

Ball bearings May 15, 1989 

Cylindrical roller bearings May 15, 1989 

Crankshafts Sept. 21, 1987 

Uzbekistan: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Venezuela: 

Circular welded non-alloy pipe Nov. 2, 1992 

Aluminum sulfate Dec. 15, 1989 

Electrical conductor aluminum redraw rods Aug. 22, 1988 

Yugoslavia: 

Nitrocellulose Oct. 16, 1990 

Tapered roller bearings Aug. 14, 1987 

Suspension agreements in effect: 

Canada: Potassium chloride Jan. 19, 1988 

Hungary: Truck trailer axles Jan. 4, 1982 

Japan: 

Erasable programmable read-only memory chips Aug. 1, 1986 

Small motors Nov. 6, 1980 

Kazakhstan: Uranium Oct. 16, 1992 

Kyrgyzstan: Uranium Oct. 16, 1992 

Russia: Uranium Oct. 16, 1992 

Tajikistan: Uranium Oct. 16, 1992 

Ukraine: Uranium Oct. 16, 1992 

Uzbekistan: Uranium Oct. 16, 1992 

Venezuela: Cement Feb. 27, 1992 

1 The U.S. Department of Commerce conducts a periodic review of outstanding antidumping duty orders and 

suspension agreements, upon request, to determine if the amount of the net margin of underselling has changed. If a 

change has occurred, the imposed antidumping duties are adjusted accordingly. The results of the periodic review 

must be published together with a formal notice of any antidumping duty to be assessed, estimated duty to be 

deposited, or investigation to be resumed. 

Source: U.S. Department of Commerce, International Trade Administration. 

152 
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154 
Table A-27 

Countervailing-duty orders and findings in effect as of Dec. 31, 1992 

Effective date of 

Country and commodity original action 1 

Argentina: 

Leather Oct. 2, 1990 

Welded carbon steel pipe and tube products Sept. 27, 1988 

Textiles and apparel Mar. 12, 1985 

Textile mill products Mar. 12, 1985 

Oil country tubular goods Nov. 22, 1984 

Cold-rolled flat products Apr. 26, 1984 

Wool Apr. 4, 1983 

Leather wearing apparel Mar. 18, 1983 

Nonrubber footwear Jan. 17, 1979 

Woolen garments Nov. 16, 1978 

Brazil: 

Brass sheet and strip Jan. 8, 1987 

Castings May 15, 1986 

Agricultural tillage tools Oct. 22, 1985 

Pig iron Apr. 4, 1980 

Cotton yarn Mar. 15, 1977 

Certain castor oil products Mar. 16, 1976 

Canada: 

Alloy magnesium Aug. 31, 1992 

Pure magnesium Aug. 31, 1992 

Lumber July 13, 1992 

Steel rail Sept. 22, 1989 

Standard carnations Mar. 12, 1987 

Live swine Aug. 15, 1985 

Chile: Standard carnations Mar. 19, 1987 

Ecuador: Fresh cut flowers Jan. 13, 1987 

European Community: 2Sugar July 31, 1978 

France: Brass sheet and strip Mar. 6, 1987 

India: Certain iron-metal castings Oct. 16, 1980 

Iran: 

Roasted pistachios Oct. 7, 1986 

Pistachios (nonroasted) Mar. 11, 1986 

Israel: 

Industrial phosphoric acid Aug. 19, 1987 

Oil country tubular goods Mar. 6, 1987 

Fresh cut roses Sept. 4, 1980 

Korea: Stainless steel cookware Jan. 20, 1987 

Malaysia: 

Extruded rubber thread Aug. 25, 1992 

Carbon steel wire rod Apr. 22, 1988 

Mexico: 

Porcelain cookware Dec. 12, 1986 

Textile mill products Mar. 18, 1985 

Ceramic tile May 10, 1982 

Leather wearing apparel Apr. 10, 1981 

Netherlands: Standard chrysanthemums Mar. 12, 1987 

New Zealand: 

Steel wire nails Oct. 5, 1987 

Steel wire Sept. 2, 1986 

Carbon steel wire rod Mar. 7, 1986 

Lamb meat Sept. 17, 1985 

Brazing copper rod and wire Aug. 5, 1985 

Norway: Atlantic salmon Apr. 12, 1991 

Pakistan: Cotton shop towels Mar. 9, 1984 

Peru: 

Pompom chrysanthemums Apr. 23, 1987 

Rebars Nov. 27, 1985 

Cotton sheeting and sateen Feb. 1, 1983 

Cotton yarn Feb. 1, 1983 

Saudi Arabia: Carbon steel wire rod Feb. 3, 1986 

Singapore: Antifriction bearings May 3, 1989 

South Africa: Ferrochrome Mar. 11, 1981 

Spain: Stainless steel wire rod Jan. 3, 1983 

See footnotes at end of table 

155 
Table A-27--Continued 

Countervailing-duty orders and findings in effect as of Dec. 31, 1992 

Effective date of 

Country and commodity original action"' 

Sweden: 

Certain carbon steel products Oct. 11, 1985 

Viscose rayon staple fiber May 15, 1979 

Taiwan: Stainless steel cookware Jan. 20, 1987 

Thailand: 

Steel wire rope Sept. 11, 1991 

Butt-weld pipe fittings Jan. 18, 1990 

Ball bearings May 3, 1989 

Malleable pipe fittings Feb. 10, 1989 

Steel wire nails Oct. 2, 1.987 

Rice Apr. 10, 1986 

Pipes and tubes Aug. 14, 1985 

Certain apparel Mar. 12, 1985 

Turkey: 

Acetylsalicylic acid (aspirin) Aug. 26, 1987 

Pipe and tube Mar. 7, 1986 

Uruguay: Leather wearing apparel July 17, 1982 

Venezuela: 

Circular welded nonalloy steel pipe Sept. 17, 1992 

Aluminum sulfate Dec. 19, 1989 

Electrical conductor redraw rods Aug. 22, 1988 

Zimbabwe: Wire rod Aug. 15, 1986 

1 The U.S. Department of Commerce conducts a periodic review of outstanding countervailing-duty orders and 

suspension agreements, upon request, to determine if the amount of the net subsidy has changed. If a change has 

occurred, the imposed countervailing duties are adjusted accordingly. 

2Includes Belgium, Denmark, France, Ireland, Italy, the United Kingdom, Germany, Luxembourg, the 

Netherlands, and Greece. 

Source: U.S. Department of Commerce, International Trade Administration. 

156 
Table A-28 

Section 337 Investigations completed by the U.S. International Trade Commission during 1992 and 

those pending on Dec. 31, 1992 

Status of 

Investigation Article Country1 Commission Determination 

Erasable 

programmable read 

only memories, 

components thereof, 

products containing 

such memories, and 

processes for making 

such memories 

Self—inflating 

mattresses 

Plastic encapsulated 

integrated circuits 

Rotary printing 

apparatus using 

heated ink 

composition, 

components 

thereof, and 

systems 

containing said 

apparatus 

and components 

Monoclonal antibodies 

used for 

therapeutically 

treating humans 

having gram negative 

bacterial infections 

Acid—washed denim 

garments and 

accessories 

Bathtubs and other 

bathing vessels and 

materials used 

therein 

Computer system state 

save/restore software 

and associated backup 

power supplies for use 

in power outages 

Microcomputer memory Japan 

controllers, components 

thereof and products 

containing same 

Translucent ceramic Germany, 

orthodontic brackets Japan 

Dynamic sequential England 

gradient compression 

devices and component 

parts thereof 

Single in—line Japan 

memory modules and 

products containing 

same 

Fans with brushless Japan 

DC motors 

Italy 

Second formal enforcement proceeding 

instituted; Commission vacated civil 

penalties imposed in first formal 

enforcement proceeding and dismissed 

second formal enforcement proceeding. 

Ancillary proceeding terminated 

on basis of no violation of Commission's 

Interim Rule 210.5. 

Issued a limited exclusion 

order and cease and desist orders. 

Issued a limited exclusion 

order. 

Terminated on basis of a settlement 

agreement. 

Issued a general exclusion order. 

Terminated on basis of a consent 

order. 

Terminated on basis of a settlement 

agreement. 

Terminated on basis of a settlement 

agreement. 

Terminated on basis of a settlement 

agreement and a consent order. 

Terminated with prejudice based on 

withdrawal of complaint. 

Terminated with prejudice based on 

withdrawal of complaint. 

Advisory opinion proceeding 

suspended pending final judgement 

of U.S. district court. 

Pending before the AU. 

Completed: 

337—TA-276 

337—TA-302 

337—TA-315 

337—TA-320 

337—TA-323 

Republic of 

Korea 

Taiwan 

No foreign 

respondents 

France, 

Spain 

The Netherlands 

Brazil, Chile, 

Hong Kong, 

Taiwan 

Germany 

Hong Kong 

337—TA-324 

337—TA-328 

337—TA-330 

337—TA-331 

337—TA-332 

337—TA-335 

337—TA-336 

Pending: 

337—TA-228 

337—TA-317 Internal mixing 

devices and 

components 

See footnote at end of table. 

157 
Table A-28 -Continued 

Section 337 investigations completed by the U.S. International Trade Commission during 1992 and 

those pending on Dec. 31, 1992 

Investigation No. 

Completed: Article Country 1 Commission Determination 

Pending—Continued: 

337—TA-333 Woodworking Taiwan Pending before the Commission. 

accessories 

337—TA-334 Condensers, parts Japan Pending before the ALJ. 

thereof and products 

containing same, 

including air 

conditioners for 

automobiles 

337—TA-337 Integrated circuit Taiwan Pending before the ALJ. 

telecommunication 

chips and products 

containing same, 

including dialing 

apparatus 

337—TA-338 Bulk bags and Brazil, Canada, Pending before the ALJ. 

process for making Philippines 

same 

337—TA-339 Commercial food Denmark Pending before the ALJ. 

portioners, components 

thereof, including 

software, and process 

thereof 

337—TA-340 Specimen container Canada Pending before the ALJ. 

systems and components 

including alignment 

indicator Libels, 

and method of use 

337—TA-341 Static random access Taiwan Pending before the ALJ. 

memories, components 

thereof and products 

containing same 

337—TA-342 Circuit board testers The United Kingdom Pending before the ALL 

337—TA343 Mechanical gear Canada Pending before the ALJ. 

couplings and 

components 

thereof 

337—TA-344 Cutting tools for Taiwan Pending before the ALJ. 

flexible plastic 

conduit and 

components 

thereof 

337—TA-345 Anisotropically Korea Pending before the ALJ. 

etched one 

megabit and greater 

DRAMs, components 

thereof, and products 

containing such DRAMs 

1 This column lists the countries of the foreign respondents named in the investigation. 

Source: U.S. International Trade Commission, Office of Unfair Import Investigations. 

158 
Certain roller units 

Certain flexible foam sandals 

Certain novelty glasses 

Certain pump—top insulated containers 

Certain rotary scraping tools 

Certain airtight cast—iron stoves 

Certain rotatable photograph and 

card display units 

and components thereof 

Certain adjustable window shades and 

components thereof 

Certain coin—operated audio—visual 

games and components thereof 

Certain coin—operated audio visual 

games and components thereof 

Certain cube puzzles 

. Certain miniature plug—in blade fuses 

337—TA-44 . . . 

337—TA-47 . . . . 

337—TA-55 

337—TA-59 . . . . 

337—TA-62 . . . . 

337—TA-69 . . . . 

337—TA-74 . . . . 

337—TA-83 . . . . 

337—TA-87 . . . . 

337—TA-105 . . . 

337—TA-112 . . . 

337—TA-114 . . 

Table A-29 

Outstanding section 337 exclusion orders as of Dec. 31, 1992 

Investigation 

No. Article Country1 

Date patent 

expires 

Certain softballs and polyurethane 

cores therefor 

Certain cloisonne jewelry 

Certain compound action metal cutting 

snips and components thereof 

Certain fans with brushless DC motors 

Certain nut jewelry and parts thereof 

Certain soft sculpture dolls, popularly 

known as "Cabbage Patch Kids," related 

literature, and packaging therefor 

Certain laser inscribed diamonds and 

the method of inscription thereof 

Certain dynamic random access 

memories, components thereof, 

and products containing same 

Certain small aluminum flashlights 

and components thereof 

Certain reclosable plastic bags and 

tubing 

Certain sneakers with fabric uppers 

and rubber soles 

Certain heavy—duty staple gun tackers 

Certain caulking guns 

Certain personal computers and 

components thereof 

Certain amorphous metal alloys and 

amorphous metal articles 

Certain canape makers 

 Certain processes for the manufacture 

of skinless sausage casings and 

resulting products 

Certain plastic food storage containers 

Certain trolley wheel assemblies 

Certain single handle faucets 

Certain bag closure clips 

Certain glass tempering systems 

Certain woodworking machines 

337—TA-118 . . . 

337—TA-137 . . . 

337—TA-139 . . . 

337—TA-140 . . . 

337—TA-143 . . . 

337—TA-146 . . . 

337—TA148/169 

337—TA-152 ... 

337—TA-161 . . . 

337—TA-167 . . . 

337—TA-170 . . . 

337—TA-171 . . . 

337—TA-174 . . . 

337—TA-190 . . . 

337—TA-195 . . . 

337—TA-197 . . . 

337—TA-228 . . . 

337—TA-229 . . . 

337—TA-231 . . . 

337—TA-240 . . . 

337—TA-242 . . . 

337—TA-254 . . . 

337—TA-266 .. . 

No foreign respondents 

Taiwan 

Hong Kong 

Korea, Taiwan 

Taiwan 

Taiwan, Korea 

Hong Kong 

Taiwan 

Japan, Taiwan 

Japan, Taiwan 

Taiwan, Japan, Canada 

Taiwan 

Korea 

Taiwan, Hong Kong, Korea 

Taiwan, Korea 

Taiwan, Hong Kong, 

Singapore, Switzerland 

Japan, West Germany 

No foreign respondents 

Spain 

Hong Kong, Taiwan 

Korea 

Taiwan 

Israel 

Finland 

Taiwan, South Africa 

Taiwan 

Taiwan 

Taiwan 

Japan 

Philippines, Taiwan 

No foreign respondents 

Israel 

Japan, Korea 

Hong Kong, Taiwan 

Singapore, Taiwan, 

Korea, Thailand, 

Hong Kong 

May 24, 1994 

Sept. 7, 1993 

Nonpatent 

Sept. 12, 1995 

May 25, 1993 

Nonpatent 

Nonpatent 

Feb. 7, 1994 

Nonpatent 

Nonpatent 

Nonpatent 

Nonpatent 

Aug. 9, 1994 

Nov. 8, 1994 

Dec. 26, 1995 

Nonpatent 

Nonpatent 

Mar. 28, 1995 

Jan. 23, 1996 

July 14, 1998 

Sept. 9, 1997 

Mar. 22, 1997 

Nonpatent 

(Order expires 

Nov. 26, 1994.) 

Nonpatent 

Aug. 29, 1995 

Nonpatent 

Nov. 2, 1999 

July 26, 2000 

Nov. 30, 1993 

Nonpatent 

Nov. 13, 1996 

Mar. 13, 2001 

Sept. 24, 1993 

Nonpatent 

Nonpatent 

Jan. 15, 2002 

Nonpatent 

Nonpatent 

July 12, 2000 

Aug. 23, 1994 

Mar. 28, 1995 

Aug. 6, 2002 

Sept. 24, 2002 

Mar. 18, 2003 

Nonpatent 

Mar. 23, 1993 

159 
Table A-29 Continued 

Outstanding section 337 exclusion orders as of Dec. 31, 1992 

Investigation 

No. Article Country1 

Date patent 

expires 

337—TA-267 ... Certain minoxidil powder, salts Austria, Canada, Feb. 13, 1996 

and compositions for use in hair Finland, Italy, Mexico, 

treatment Switzerland 

337—TA-268 ... Certain high intensity retroreflective Japan May 24, 1994 

sheeting 

337—TA-275 ... Certain nonwoven gas filter elements Holland Nov. 1, 1994 

337—TA-276 ... Certain erasable programmable Republic of Korea Sept. 16, 1997 

read only memories, July 25, 1995 

components thereof, products July 12, 2000 

containing such memories, May 21, 2002 

and processes for making such Aug 4, 2004 

memories 

337—TA-279 ... Certain plastic light duty screw anchors Taiwan Nonpatent 

337—TA-285 ... Certain chemiluminescent compositions France Nonpatent 

and components thereof and methods Feb. 28, 1999 

of using, and products incorporating Feb. 2, 1999 

the same 

337—TA-287 ... Certain strip lights Taiwan Nonpatent 

Mar. 15, 2000 

337—TA-293 ... Certain crystalline cefadroxil Italy, Spain, Mar. 12, 2002 

monohydrate Switzerland 

337—TA-295 ... Certain novelty teleidoscopes Hong Kong Nonpatent 

337—TA-308 ... Certain key blanks for keys of Korea Jan. 13, 2004 

high security 

cylinder locks 

337—TA-314 ... Certain battery—powered ride—on Taiwan Sept. 22, 2001 

toy vehicles and Dec. 10, 2002 

components thereof Jan. 31, 2003 

Dec. 1, 2004 

Jan. 27, 2004 

337—TA-315 ... Certain plastic encapsulated No foreign respondents Aug. 23, 1994 

integrated circuits 

337—TA-319 ... Certain automotive fuel caps Taiwan Nonpatent 

and radiator caps Apr. 11, 1995 

and related packaging and May 30, 1996 

promotional materials Dec. 11, 1996 

June 30, 2004 

Aug. 23, 2005 

337—TA-320 ... Certain rotary printing apparatus France, Spain Dec. 24, 2002 

using heated ink composition, 

components thereof, 

and systems containing said 

apparatus and components 

337—TA-321 ... Certain soft drinks and their Colombia Nonpatent 

containers 

337—TA-324 ... Certain acid—washed denim Hong Kong, Taiwan Apr. 26, 2007 

garments and accessories Brazil, Chile 

1This column lists the countries of the foreign respondents named in the investigation. 

Source: U.S. International Trade Commission, Office of Unfair Import Investigations. 

160 
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163 
Table A-33 

U.S. imports for consumption, designated and nondesignated Caribbean Basin countries, 1988-92 

(1,000 dollars, customs-value basis) 

Country 1988 1989 1990 1991 1992 

Designated: 

Antigua 

Aruba 

Bahamas 

Barbados 

Belize 

British Virgin Islands 

Costa Rica 

Dominica 

Dominican Republic 

El Salvador 

Grenada 

Guatemala 

Guyana' 

Haiti 

Honduras 

Jamaica 

Montserrat 

Netherlands Antilles 

Nicaragua2 

Panama3 

St. Kitts and Nevis 

St. Lucia 

St. Vincent and Grenadines 

Trinidad and Tobago 

6,893 

268,328 

51,413 

52,049 

684 

777,797 

8,530 

1,425,371 

282,584 

7,349 

436,979 

50,432 

382,466 

439,504 

440,934 

2,393 

408,100 

(4) 

256,046 

20,822 

26,044 

13,950 

701,738 

647 

12,274 

1,156 

460,723 

38,725 

43,056 

1,112 

967,901 

7,664 

1,636,931 

243,922 

7,862 

608,280 

55,858 

371,875 

456,790 

526,726 

2,285 

374,358 

(4) 

(4) 

21,447 

23,985 

9,244 

765,265 

4,120 

967 

506,772 

30,898 

43,978 

1,999 

1,006,473 

8,345 

1,725,430 

237,538 

7,783 

790,900 

52,260 

339,177 

486,330 

563,723 

562 

421,789 

15,254 

226,555 

16,100 

26,920 

8,672 

1,002,661 

3,895 

100,246 

465,323 

31,457 

35,623 

2,567 

1,143,982 

5,877 

1,976,624 

302,449 

8,086 

892,280 

73,733 

284,264 

552,238 

561,205 

2,178 

620,783 

59,528 

242,580 

15,553 

21,731 

7,507 

8119,653 

5,414 

189,656 

580,699 

30,528 

58,509 

3,235 

1,402,041 

4,506 

2,366,509 

383,244 

7,475 

1,072,697 

87,064 

107,170 

780,637 

593,361 

1,095 

569,689 

68,609 

218,232 

22,857 

28,065 

4,530 

839,787 

Total 

Nondesignated: 

Anguilla 

Cayman Islands 

Guyana' 

Nicaragua 

Panama2 

Suriname 

Turks and Caicos Islands 

6,061,054 

497 

18,195 

(4) 

1,121 

(4) 

87,894 

3,517 

6,637,440 

348 

48,041 

(4) 

31 

258,319 

73,892 

2,507 

7,525,206 

227 

21,387 

(4) 

(4) 

(4) 

50,901 

3,547 

8,229,366 

1,407 

17,615 

(4) 

(4)1 

51,679 

4,210 

9,425,609 

268 

10,693 

(4) 

r4 

46,144 

6,065 

Total 111,224 383,137 76,062 74,911 63,170 

Grand total 6,172,278 7,020,577 7,601,268 8,304,278 9,488,788 

Guyana was designated as a CBERA beneficiary effective Nov. 24, 1988. 

2Nicaragua was designated as a CBERA beneficiary effective Nov. 8, 1990. 

3 Panama lost its designation as a beneficiary effective April 9, 1988, and was reinstated in Mar. 1990. 

Not applicable. 

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

Source: Compiled from official statistics of the U.S. Department of Commerce. 

164 
Table A-34 

U.S. Imports for consumption of leading Andean Trade Preference Act (ATPA) duty free imports, 

1992 

(1,000 dollars) 

HTS no. Commodity 1992 

0603.10.70 Chrysanthemums, carnations, anthuriums, and orchids 46,107 

0603.10.60 Roses, fresh cut 21,496 

3921.12.11 Certain cellular plastics 7,036 

2401.20.80 Tobacco, partly or wholly stemmed 3,165 

0603.10.80 Cut flowers and flower buds suitable for bouquets 3,117 

4202.91.00 Certain cases, bags, and containers nesi 2,507 

4202.11.00 Trunks, suitcases, vanity cases, etc. 2,290 

0603.10.30 Miniature (spray) carnations, fresh cut 1,716 

7113.19.50 Articles of jewelry and parts of precious metal 1,133 

6908.90.00 Glazed ceramic flags and paving or wall tiles 797 

0810.10.40 Strawberries, fresh, if entered during the period 733 

6908.10.50 Glazed ceramic tiles, cubes & similar articles 677 

4202.21.60 Handbags, with or without shoulder strap 610 

7312.10.30 Stranded wire of iron or steel (exc. stainless steel) 580 

7113.19.29 Necklaces and neck chains of gold, nesi 528 

4412.29.50 Veneer panels and similar laminated wood, nesi 508 

4202.21.90 Handbags, with or without shoulder strap 462 

4202.31.60 Articles of a kind normally carried in the pocket 426 

4818.10.00 Toilet paper 146 

4412.99.50 Plywood, nesi, surface covered, nesi 141 

Total of items shown 94,177 

Total other 2,940 

Total all commodities 97,117 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

165 

List of Frequently Used Abbreviations 

and Acronyms 

AD Antidumping 

ATPA Andean Trade Preference Act 

CAP Common Agricultural Policy 

CBERA Caribbean Basin Economic Recovery Act 

CBI Caribbean Basin Initiative 

CFTA U.S.—Canada Free Trade Agreement 

CVD Countervailing Duty 

EC European Community 

FTA Free—Trade Agreement 

GATT General Agreement on Tariffs and Trade 

GDP Gross Domestic Product 

GNP Gross National Product 

GSP Generalized System of Preferences 

HS Harmonized System 

MFA Multifiber Arrangement 

MOSS Market-Oriented; Sector—Selective 

MTN Multilateral Trade Negotiations 

NAFTA North American Free Trade Agreement 

NICs Newly Industrializing Countries 

NTMs Nontariff Measures 

OECD Organization for Economic Cooperation and Development 

SITC Standard International Trade Classification 

TAA Trade Adjustment Assistance 

TNC Trade Negotiations Committee 

TRIPs Trade—Related Aspects of Intellectual Property Rights 

TRIMs Trade—Related Investment Measures 

UNCTAD United Nations Conference for Trade and Development 

USITC U.S. International Trade Commission 

USTR United States Trade Representative 

VRA Voluntary Restraint Agreement 

167 

INDEX 

Airbus Industrie: dispute with EC, 47, 50-50; 

Aircraft: See Airbus Industrie. 

Alcoholic beverages: U.S./Canada 

beer dispute, 54-55; 

Andean Trade Preference Act (ATPA): activities in 

1992,99- 100; 

Antidumping law: description of, 

91; review of outstanding 

antidumping orders, 92; 

Apparel: See textiles. 

Arrangement Regarding International Trade in 

Textiles (Multifiber Arrangement): activities in 

1992, 100-104; 

ASEAN: free-trade agreement, xii; and GATT, 22; and 

textiles, 104; 

Automobiles: dispute with Japan, 59- 60; content 

dispute with Canada, 

58; and NAFTA, 2-3; 

Beef: dispute with EC, 49-50; Mexican tariffs, 65; 

Beer: See alcoholic beverages. 

Blair House agreement: description of, 20,47-49; 

Canada: automobile content dispute, 58; merchandise 

trade with the United States, xvi-xvii; dispute over 

beer, 54-55; dispute over softwood lumber, 56-57; 

economic overview, xvi-xvii; interprovincial trade 

barriers, 57; 

Caribbean Basin Economic Recovery Act 

(CBERA): activities in 1992, 99; eligible 

countries, 99; 

China: economic overview, xix-xx, 67; merchandise 

trade with the United States, xix-xx; attempts to 

rejoin GATT, 69-70 intellectual property rights 

(agreement on), 67-69; market access agreement, 

68; trade barrier reduction, 67-69; 

Cocoa: See International Cocoa Agreement. 

Coffee: See International Coffee Agreement. 

Copyright: See intellectual property. 

Countervailing-duty law: description of, 91-92; 

review of outstanding countervailing orders, 92; 

Dunkel Text: See GATT Uruguay Round. 

Eastern Europe: economic overview, xx-xxi; GSP 

eligibility, 98; and the OECD, 37; 

Enterprise for the Americas Initiative (EAI): 

activities in 1992,43-44; 

Environment: GATT activity addressing 

environmental issues, 29-31; GATT Group on 

Environmental Measures and International Trade, 

30-31; and NAFTA, 8; tuna/dolphin dispute 

(Mexico-U.S.), 30; UN Conference on 

Environment and Development (Rio 

Conference/Earth Summit), 30; 

European Community (EC): 

Common Agricultural Policy (CAP), 19,48-49; 

dispute over Airbus, 47, 50-51; dispute over corn 

gluten feed, 49; dispute over malt sprout pellets, 

49; dispute over meat inspection (Third Country 

Meat Directive), 47,49-50; dispute over oilseeds 

(Blair House agreement), 18-20, 47-49; Maastrict 

treaty, 52; merchandise trade with the United States, 

xvii; negotiations with EFTA forEuropean Economic 

Area, 53; 1992 program, 51-52; European Monetary 

Union (EMU), 52-53; integration and enlargement, 

49; Eastern Europe, relations with, 29, 53; 

membership, 53; utilities directive, 52; broadcast 

directive, 52; standards, 52; 

European Economic Area. See European 

Community and European Free-Trade Association. 

European Free-Trade Association (EFTA): 

negotiations for European Economic Area with EC, 

53; 

Fishing: See Mexico (dispute over tuna). 

Forest products: See lumber. 

GATT: activities in 1992, 15, 24-25; dispute 

settlement, 24,28; review of regional free-trade 

areas, 28-29; and the environment, 29-31; 

169 
GATT Agreement on Trade in Civil Aircraft: 

activities in 1992, 51; dispute with EC over Airbus 

Industrie, 51; 

GATT Antidumping Code: activities in 1992, 24, 

26; disputes under, 26; 

GATT Government Procurement Code: activities 

in 1992, 24, 26; and case with Norway (electronic 

toll collection equipment), 26; and case with EC 

(sonar mapping equipment), 26; disputes under, 26; 

GATT Group on Environmental Measures and 

International Trade: activities in 1992, 30-31; 

GATT Membership: China, 69-70; Taiwan, 69, 

71-72; new members, 15; 

GATT Subsidies and Countervailing Duties Code: 

activities in 1992, 24, 26, 50-51; dispute with EC 

over Airbus Industrie, 50; disputes under, 27; 

GATT Trade Policy Review Mechanism: activities 

in 1992, 29; 

GATT Uruguay Round: agriculture, 

18-20, 48; Dunkel draft text, 15, 18-20; services 

(MFN, financial, telecommunications, transport), 

20-22; market access, 22-23; yearend discussions, 

23; 

Generalized System of Preferences (GSP): 

administration of, 40, 97- 98; newly designated 

beneficiary countries, 98; Special committee on 

preferences, 40; trade analysis and information 

system (TRAINS), 40; lost eligibility, 98; 

Germany: and Airbus disputes, 50-51; economic 

overview, xvii- xviii; 

Grain: See wheat. 

Import relief laws: description of section 201, 89; 

description of section 406, 89; trade adjustment 

assistance program (TAA): description of assistance 

to workers, firms and industries, 89- 90; 

India: and intellectual property, 98; 

Intellectual property: and China, 67-68; and India, 

98; and Korea, 74; and Taiwan, 70-71; and 

NAFTA, 6; 

International Cocoa Agreement: activities in 1992, 

41; 

International Coffee Agreement: activities in 1992, 

41; 

International Jute Agreement: activities in 1992, 

41; 

International Natural Rubber Agreement: 

activities in 1992, 41, 43; 

International Sugar Agreement: activities in 1992, 

43; 

International Tropical Timber Agreement: 

activities in 1992, 43; 

International Wheat Agreement: activities in 1992, 

43; 

Japan: autos and parts, 59-60; Bush visit to Tokyo, 

59; economic overview, xviii-xix; merchandise 

trade with the United States, xviii-xix; 

semiconductor agreement, 60-61; VRAs on 

machine tools, 61-62; paper and paper products, 

62; 

Jute: See International Jute Agreement. 

Korea. See Republic of Korea. 

Latin America: financial services, 21; and Enterprise 

for the America's Initiative (EAI), 43- 44; 

Lumber: dispute with Canada, 56-57; 

Machine tools: VRAs on machine tools from Japan 

and Taiwan, 61-62; 

Meat imports: See Third Country Meat Directive. 

MERCOSUR: activities in 1992, 29; 

Mexico: dispute over tuna, 30; 

economic overview, 62-63; foreign investment, 5; 

and GSP, 65; intellectual property rights, 6; 

merchandise trade with the United States, xviii; 

removal of import-licensing requirements, 64; 

textile product labeling, 3; agricultural reform, 

66-67; imports and taxation, 65-66; import 

labelling and certification requirements, 64-65; Pact 

for Stability, Competitiveness and Employment 

(PECE), 63-64; trade deficit, 64; tariffs, 65; 

Multifiber Arrangement (MFA). See Arrangement 

Regarding International Trade in Textiles. 

Natural rubber: See International Natural Rubber 

Agreement. 

North American Free-Trade Agreement (NAFTA): 

agriculture, 6-7, 67; autos and auto parts, 23; recent 

chronology, 1; dispute settlement, 6; emergency 

actions 5-6; energy, 7; environmental concerns 

associated with, 8; financial services, 4; foreign 

investment, 5; government procurement, 5; 

170 
intellectual property rights, 6; labor issues associated 

with, 7; petroleum - see energy ; rules of origin, 2; 

standards, 3; supplemental agreements: labor, 

environment, 7-8; textiles and apparel,tariff and 

nontariff measures, 2; telecommunications services, 

5; transportation services, 4; 3; sanitary and 

phytosanitary measures, 3; 

Norway: and electronic toll equipment, 26; 

Oilseeds: dispute with EC, 18-20, 

47-49; see also Blair House agreement. 

Organization for Economic Cooperation and 

Development (OECD): and Central and Eastern 

Europe, 34; Export Credit Arrangement, 37-38; and 

investment codes, 38; overview of activities, 37; 

Paper and Paper Products: market 

access agreement with Japan, 62; 

Patents: See intellectual property. 

Pork: See EC Third Country Meat Directive. 

Republic of Korea: five- year economic plan, 74; 

economic overview, xix; and intellectual property 

rights, 74; telecommunications liberalization, 73; 

trade and investment agreement, 73; President's 

Economic Initiative (PEI): standards and regulatory 

procedure, customs procedures, technology, foreign 

investment liberalization, 73-74; merchandise trade 

with the United States, xix; 

Rubber. See International Natural Rubber agreement. 

Section 201: description of, 89; (no cases in 1992) 

Section 301: cases in 1992, 94-96 ; 

description of, 50, 54-55, 67, 90-93; 

Section 303: description of, 91; 

Section 337: cases in 1992,93; description of, 93; 

Section 406: description of 89; 

(no cases in 1992), 

Section 751: description of, 92; 

(no cases in 1992) 

Semiconductors: dispute with Japan, 60-61; 

Softwood lumber: dispute with Canada, 56-57; 

Soviet Union: economic overview, xx-xxi; 

Steel: Steel Import Program, 104; 

Sugar: See International Sugar Agreement. 

Taiwan: merchandise trade with the 

United States, xix; attempts to join GATT, 

69, 71-72; intellectual property rights protection, 

70-71; VRAs on machine tools, ; trade and 

investment framework agreement, 72; 

Telecommunications: Korean liberalization, 73; 

Textiles (see also Arrangement Regarding 

International Trade in Textiles): labeling of 

Mexican textiles, 3; 

Third Country Meat Directive. See 

European Community. 

Trade Adjustment Assistance program 

(Title II of 1974 Trade Act): 

90; assistance to firms and industries in 1992, 90; 

description of, 89-90; 

Trademarks: See intellectual property. 

Tuna: dispute with Mexico, 30 

Unfair trade laws: Summary of 1992 

actions, 90-91; see also antidumping law, 

countervailing duty law, section 301 and section 

337; 

United Kingdom: economic overview, xviii; 

United Nations Conference on Trade and 

Development (UNCTAD): activities in 1992, 30; 

and General System of Preferences (GSP) 

committee, 40; International Cocoa Agreement, 41; 

International Coffee Agreement, 41; International 

Jute Agreement, 41; International Natural Rubber 

Agreement, 41, 43; International Sugar Agreement, 

43; International Tropical Timber Agreement, 43; 

International Wheat Agreement, 43; and restrictive 

business practices, 40; UNCTAD VIII, 39- 40; 

international commodity arrangements, 40-41; 

Trade Points program, 39; 

United States: economic overview, xiv-xv; 

Uruguay Round: See GATT Uruguay Round. 

Wheat: See International Wheat Agreement. 

171